Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

260. Memorandum From the Acting Assistant Secretary of State for European Affairs (Hartman) to President Carter¹

Washington, February 21, 1977

SUBJECT

• U.S. Assistance to Iceland

As directed by the National Security Council, an interagency working group has conducted a comprehensive study of U.S. assistance to Iceland. The central question before the U.S. Government is how to respond to Icelandic requests for assistance—both those already tabled and those that may develop in the future. The purpose of the attached study² is therefore to formulate a set of principles which could facilitate general and specific U.S. responses to Iceland, consistent with U.S. national interests, established policy priorities in U.S.–Icelandic relations and the 1974 U.S.–Icelandic Memorandum of Understanding.³ This covering memorandum summarizes the study, its conclusion and makes specific recommendations for U.S. policy.

The study of U.S. assistance to Iceland was basically completed before Vice President Mondale’s January 29 stop at Keflavik.⁴ For that reason, Prime Minister Hallgrimsson’s request to the Vice President for a financial contribution to the construction of a new civilian air terminal at Keflavik is not specifically addressed. The paper does, however, recommend the establishment of an interagency mechanism and a policy framework which would deal with this and future Icelandic proposals. Interagency action is, of course, underway on the air terminal request and an analysis with specific recommendations will be the subject of a subsequent memorandum.⁵

The U.S. Military Presence

Iceland’s membership in NATO and the presence of a U.S.-manned NATO military facility at Keflavik (whose personnel are known as the Iceland Defense Force—IDF) form the basis for the assistance requests. A bilateral defense agreement was signed in 1951 wherein the United States, on behalf of NATO, agreed to develop the facilities at Keflavik and provide personnel for the IDF. Since that time, the Keflavik complex has served Western defense and continued to furnish essential intelligence data otherwise unavailable. The retention of our military presence in Iceland was reaffirmed as a primary U.S. policy objective in NSDM 137 of October 13, 1971.⁶

In 1974, the U.S. concluded a Memorandum of Understanding with Iceland which provided for the continuation of the 1951 agreement and committed us to assist in certain specific projects and study further cooperation in other areas.

Icelandic Requests for Assistance

The Icelandic Government has indicated several priority areas it considers appropriate for U.S. assistance—civil aviation, including the training of personnel and the improvement of airport facilities, the provision of vessels for the Icelandic Coast Guard and adoption by the base of a geothermal heating system.

Implications for the U.S.

General responsiveness to Icelandic assistance requests will help maintain or improve an atmosphere conducive to the continued functioning of the Keflavik facilities. Failure to respond could have the opposite effect. Whatever our decision, it is clear that we will never secure guaranteed tenure for the base. On the other hand, a refusal to satisfy reasonable Icelandic requests could stimulate demands for a closure of the base or Icelandic withdrawal from NATO. Any action on our part that could precipitate such a reaction from the Icelanders before we had the opportunity to re-examine and implement a contingency plan for relocating these important facilities with a minimum of operational interruption would be decidedly unwise. Our objective remains pursuit of a political environment in Iceland favorable to keeping the Keflavik facilities at the lowest possible cost.

U.S. Legal Obligation

No agreement in force between the United States and Iceland commits the United States to furnish economic or military assistance to Iceland with the exception of paragraph 5 of the 1974 Memorandum of Understanding which calls for the upgrading of Keflavik airfield to ICAO Category II standards subject to the availability of appropriated funds.

In the absence of some legal obligation other than that cited above to furnish either economic or military assistance to Iceland, whether or not to seek to do so becomes an entirely political decision. The agreements relating to our facilities in Iceland and Article 3 of the North Atlantic Treaty nevertheless offer a partial basis upon which to justify such assistance (especially to Congress) insofar as assistance could be pointed to as being not only consistent with those agreements but in furtherance of the cooperative and mutually beneficial relationship which they evince.

Policy Conclusion

The following options were developed:

Option 1: Furnish no assistance whatsoever except that which may coincidentally result from USG projects routinely programmed.

Option 2: Furnish only that assistance which can be directly tied to the base and related defense functions consistent with the 1974 MOU and Agreed Minute.

Suboption: (To be exercised in addition to but not instead of the main option) Seek to broaden the financial responsibilities of maintaining the NATO facility at Keflavik by asking Allies to share costs for defense-related assistance over and above routine operating and maintenance expenses.

Option 3: Attempt to meet Icelandic requests, whether agreement-related or not, which can be judged to improve the atmosphere for the base.

The members of the interagency working group conclude that, in light of the fundamental, unchanged tenets of our policy toward Iceland and the political situation existing in Iceland today, the USG would best appear to achieve its primary objective—retention of the U.S.-manned facilities at Keflavik—through pursuit of Option 2 and its sub-option. This is essentially a political decision designed to create an atmosphere conducive to continued defense cooperation with the Icelandic Government consistent with the 1974 MOU and Agreed Minute. Promotion of an ongoing U.S. military presence at Keflavik, with all that entails in terms of American and Allied security interests, could thus become a source of mutual benefit and satisfaction rather than a periodic irritant in U.S.–Icelandic relations.

Recommendations

The members of the interagency working group recommend:

1) That we adopt Option 2 and the sub-option as the framework for U.S. policy on assistance to Iceland.

2) That within the above framework we:

— Respond promptly and positively to Icelandic requests for air controller training since this falls within the Option 2 policy guidelines and both training and civil aviation are specifically identified as areas for further cooperation in the 1974 Agreed Minute. The International Military Education and Training (IMET) Program could be used to fund air controller training and the necessary steps to secure such funding should be taken.

— Continue to fulfill U.S. obligations under the 1974 MOU to upgrade Keflavik International Airport to ICAO Category II standards in accordance with the recommendations of the joint FAA/DOD study.

— Continue to explore the feasibility of acquiring a geothermal heating system from the Icelandic authorities.

— Undertake discreet, low-key discussions with the Northern Tier NATO Allies to explore multilateral financial support for assistance to Iceland.

— Encourage closer cooperation between the U.S. and Icelandic Coast Guards through a modest cruise exchange program and examine the possibility of funding the enrollment of an Icelandic Coast Guard cadet at the USCG Academy.

— At Icelandic initiative, discuss the availability of surplus U.S. Coast Guard cutters no longer in the active inventory which could be made available under an FMS cash sales program, having clarified in advance that no vessels can currently be provided on a grant or FMS credit basis.

3) That the Department of State inform the Icelandic Government at an appropriately high level of the general results of the above study. The Department should also ascertain Icelandic willingness to share the financial burden of the assistance programs and, if appropriate, negotiate toward this end in future discussions of U.S. assistance to Iceland.

4) That the Departments of State and Defense, in consultation with the Office of Management and Budget, the National Security Council Staff and other agencies as appropriate, coordinate implementation of the decisions on the above requests for assistance, and within the policy guidelines established for future requests:

— review each request for assistance from Iceland to determine the USG response based on the merit of the request, its relevance to the 1974 MOU and its benefit to the IDF;

— decide upon a course of action responding to each request and implement that decision. This would include determining the funding source and ensuring expeditious processing if the decision were positive, and monitoring follow-up actions.

1. Source: Carter Library, National Security Affairs, Brzezinski Office File, Box 17, Iceland. Secret.
2. A memorandum on “U.S. Assistance to Iceland” from the NSC Under Secretaries Committee to President Carter, January 18, NSC–U/DM–114A, is attached but not printed.
3. See footnote 4, Document 259.
4. See Document 259.
5. Not found.
6. NSDM 137, “Policy Toward Iceland,” October 13, 1971. (Nixon Library, National Security Council Institutional Files, Policy Papers, National Security Council Decision Memorandums, Box H–208)