Pressure in the Arctic: China-Iceland Relations in the Era of U.S-China Rivalry

China-Iceland relations have remained stable through the years, with cooperation in the development of green energy, Arctic affairs, and scientific cooperation. Recent high-level diplomatic visits from U.S. Vice-President Mike Pence, and U.S. Secretary of State, Mike Pompeo, have put pressure on Icelandic politicians not to participate in the Chinese infrastructure and investment project the Belt and Road Initiative (BRI) via the Polar Silk Road in the Arctic. The Chinese ambassador to Iceland says that the U.S. wishes to damage Sino-Icelandic relations by pressuring Iceland. The small island in the North-Atlantic finds itself in a new political situation when it comes to the Arctic, seemingly stuck between the U.S. and China.

Iceland Willing to Enhance Economic Ties with China

China-Iceland relations have remained stable through the years with diplomatic relations being established in 1971, around 21 years later that the other Nordic states. Official priorities between the two nations have been in recent years on maintaining regular high-level exchanges, Arctic affairs, as well as geothermal energy, as listed in a joint statement in 2013.

Iceland has been extremely willing to enhance its economic relations with China. In 2005, when Iceland became the first Western-European country to acknowledge China as a fully developed market economy, and another instance was when Iceland became the first European country to enter into FTA negotiations with China in 2007.

During the financial crises, the Central Bank of Iceland and the People’s Bank of China even signed a bilateral currency swap agreement of 57 billion ISK (470 million USD) in 2010 and renewed the agreement in 2013 and 2016.  

Arctic Relations

Both Iceland and China are especially interested in increased shipping via the Arctic which could benefit both nations economically. Icelandic companies are also highly interested in China as a possible market for their products.

Iceland and China have steadily increased their scientific cooperation in the Arctic. Two of the greatest examples of enhanced cooperation is the arrival of the Chinese icebreaker R/V Xuelong (雪龙) to Iceland in 2012 as well as the establishment of the Kárhóll Arctic Observatory in North-Eastern Iceland. Xuelong completed its first full transit as a Chinese-flagged vessel through the Arctic, from China to Reykjavík. The former President of Iceland, Ólafur Ragnar Grímsson, became the first Head of State to embark the vessel.

Kárhóll, or the China-Iceland Arctic Observatory (CIAO) is a collaboration project between the Icelandic Center for Research and the Polar Research Institute of China (PRIC). The observatory is research center on the Arctic with focus on natural sciences. China and Iceland are also furthering their scientific cooperation within the framework of the China-Nordic Arctic Research Center (CNARC). It is thus evident that scientific cooperation is at the forefront of China-Iceland relations in the Arctic.

As the BRI has been extended with the “Polar Silk Road” through the Arctic, China has invited Iceland to sign an MoU on cooperation within the framework of BRI. The Icelandic government has not yet made up its mind about participation within the framework.

And Then There Were Three

The U.S. have until recently not been very active in the Arctic region. Nonetheless, general Arctic affairs and regional security in the region were the two main aims of two unprecedented high-level visits from the U.S. to Iceland in 2019. The visitors were U.S. Vice President, Mike Pence, and Secretary of State, Mike Pompeo.

In February 2019, Pompeo announced to local media that Iceland was an important friend of the U.S. and that he was aiming to speak to Icelandic officials about a broad range of security issues, as Iceland is strategically placed in the North-Atlantic. In that context, the Secretary of State emphasized the Arctic being “a security matter” and that Russian and Chinese presence would be specifically addressed in his visit.

Mike Pence also caused quite the stir with his comments about China and the Arctic during his official visit to Iceland in September 2019. The visit was, according to the Icelandic government, business related, but according to the U.S. Vice President, the purpose of the visit was enhanced security cooperation in the face of increased Chinese and Russian influence in the Arctic.

Thankful for Iceland Rejecting the BRI

The U.S. Vice President, in his first statement to the Icelandic media, said that “the United States is grateful for the stand Iceland took rejecting China’s Belt and Road financial investment in Iceland […] for Iceland to take that stand was an important step and one that we greatly welcome.” This was quite confusing as no statement had been published by the Icelandic government that the country had rejected to participate in the BRI.

Furthermore, Mike Pence said that at a time when the Arctic region is becoming more important virtually by the day, and “we see more Russian activity in the region, and we see more Chinese ambitions across the Arctic region” that positive U.S.-Iceland relations are more essential than ever. He also declared that there was no question that China had become more active in the Arctic.

The U.S. “Wants to Damage Iceland-China Relations”

During a joint press conference with Katrín Jakobsdóttir, the Icelandic Prime Minister, Mike Pence emphasized yet again the importance of the strategic relationship between the U.S. and Iceland. Moreover, he repeated how grateful the U.S. was to Iceland for ostensibly rejecting participation in the BRI, as well as “concerns about 5G.”

In her response, Jakobsdóttir corrected the Vice-President and said that the Icelandic government had been considering the BRI but had not yet “opened up for it.” After Pence’s visit the Minister for Foreign Affairs also stated in a televised interview that the Vice-President’s statements about Iceland rejecting participation in the BRI were “not exactly accurate” and that Iceland was still considering participation.

In an interview with the Icelandic National Television (RÚV), the Chinese ambassador to Iceland, Jin Zhijian, said that Pence’s statement that the Icelandic government had rejected participation in the BRI was “fake news” and that the purpose of the Vice-President’s comments were to interrupt and damage the bilateral relationship between China and Iceland.

What will the Future Bring for China-Iceland Relations?

It is evident from the two high-level visits that the U.S. is signaling to China that they are watching their every action in the Arctic. Only time will tell whether or not Iceland decides to participate in the BRI and what impact U.S. pressure will have on bilateral relations between China and Iceland.