Iceland is a Nordic European island country in the North Atlantic; with an area of 103,000 km2, and a population of 315,000 in 2008. Population density is extremely low, but increased from 1.7 to 3.0 cap/km2 between 1961 and 2008. Because of the cold climate, Iceland is barely suitable for agriculture. Iceland's vast inland glaciers are the origin of large glacial rivers, and Iceland is geologically highly active. As a consequence, Iceland is highly endowed with hydropower and geothermal heat. Iceland has developed from one of the poorest countries in Europe to one of the highest-income countries. It had a per capita GDP of US$33,200 PPP in 2008.

Iceland has no military forces. The country has never had an army and military maneuvers are alien to most Icelandic citizens. However, unknown military aircraft have been known to fly through Icelandic airspace, and people still want to know who is coming to visit. So how does a country without an army defend itself?

The US and Iceland signed a bilateral agreement in 1951 stipulating that the US would make arrangements for Iceland's defense on behalf of NATO and provide for basing rights for US forces in Iceland. In March 2006 the US announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after half a century. The Government of Iceland expressed disappointment, and even opposition politicians opposed to the US military presence criticized the manner of the closing, but bilateral discussions ensued to explore new ways of ensuring the country's security, with an emphasis on a "visible defense."

Negotiations concluded with a technical agreement on base closure issues (e.g., facilities return, environmental cleanup, residual value) signed on September 29, 2006, and a "Joint Understanding" on future bilateral security cooperation (focusing on defending Iceland and the North Atlantic region against emerging threats such as terrorism and trafficking) signed by the Secretary of State and Icelandic Prime Minister and Foreign Minister in Washington on October 11, 2006. The United States also cooperated with local officials to mitigate the impact of job losses at the Air Station, notably by encouraging US investment in industry and tourism development in the Keflavík area. The Government of Iceland formed a public corporation to oversee redevelopment of the former base site. In fall 2007 the university-level "Keilir Atlantic Center of Excellence" began its operations with a focus on aviation, science and energy technology, and innovation. Former base housing is now rented by roughly 1,100 university students (at Keilir as well as institutions in Reykjavik) and commercial redevelopment of other areas of the former base is proceeding.

Cooperative activities in the context of the new agreements began almost immediately after the closure of the base, with the arrival of the amphibious ship USS Wasp in October 2006 as the first US Navy port visit since 2002. Subsequent activities have included joint search and rescue, disaster surveillance, and maritime interdiction training with US Navy and US Coast Guard units, a port call by the US-led NATO Standing Maritime Group 1, and US deployments to support the NATO air surveillance mission in Iceland. The US and Iceland jointly led planning and execution of Northern Viking air defense exercises in 2007 and 2008, and planning for subsequent joint endeavors is underway. Additionally, the US Coast Guard's First District (Boston) and the Icelandic Coast Guard signed an agreement in 2008 to develop a joint training and exchange program, with the first activity--a joint search and rescue exercise--taking place in August 2008.

In 2008, the Government of Iceland passed its first defense budget ($20 million) and on June 1, 2008 established the Icelandic Defense Agency (IDA), under the direction of the Ministry for Foreign Affairs. The IDA oversees support of cooperative defense activities, military exercises in Iceland, and maintenance of defense-related facilities, including the operation of the Iceland Air Defense System radar sites, which the United States handed over to Iceland on August 15, 2007. Defense spending in the 2009 budget was reduced to roughly $13 million, due to government-wide budget cuts as well as considerable devaluation of the krona. The Government of Iceland announced that the short lived IDA would be closing in 2010. It offered assurances, however, that all of the IDA's functions and responsibilities would continue.

The Government of Iceland contributes financially to NATO's international overhead costs and recently has taken a more active role in NATO deliberations, planning, and peacekeeping. Iceland hosted the NATO Foreign Ministers' Meeting in Reykjavík in June 1987 and again in May 2002. Iceland hosted the NATO Military Committee in April 2007 and the NATO Parliamentary Assembly in October 2007.

Notwithstanding its status as an unarmed nation, Iceland has been eager to do its part to contribute to the maintenance of international peace and security. One of the niches it is helping to fill is in civilian peacekeeping and crisis management. It took a significant step forward in this area in 2001 by launching its Icelandic Crisis Response Unit (ICRU). In setting up the ICRU, the Ministry for Foreign Affairs established a roster of over 100 experts in various occupations (police officers, nurses, doctors, lawyers, engineers, journalists, etc.) who will be specially trained and prepared to deploy to trouble spots abroad on short notice. Iceland, due to financial constraints, has had to dramatically reduce the number of deployed peacekeepers serving worldwide.

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