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

266. Memorandum From Secretary of State Vance and Secretary of Defense Brown to President Carter¹

Washington, March 23, 1978

SUBJECT

• Assistance to Iceland

The Issue

The United States must respond on an urgent basis to a request from the highest levels of the Icelandic Government for assistance in the construction of a dual-purpose, military/civilian air terminal at the vital US-manned NATO base at Keflavik.²

Essential Factors

You will recall that during Vice President Mondale’s January 1977 stop in Iceland, Prime Minister Hallgrimsson asked for a US financial contribution to the construction of a new civilian air terminal building at Keflavik airport.³ Following an interagency examination of the request, you agreed with a State recommendation that we not provide assistance to Iceland for the civilian terminal.⁴

In November 1977, the Icelandic Government submitted a new proposal for a dual-purpose, military/civilian facility.⁵ Under the revised request, the new Keflavik air terminal would be reserved for the exclusive use of the US armed forces during times of crisis, while Icelandic civil aviation authorities would utilize the facility in peacetime. In submitting the new proposal, the Icelandic Foreign Minister stressed the longstanding US commitment to pursue a separation of military and civilian facilities at Keflavik.

The present Icelandic Government of Prime Minister Hallgrimsson is as pro-American as any we could ever hope to see in power in Iceland. Hallgrimsson is convinced that he badly needs American support on the terminal issue to fend off vocal opponents of the American presence during the campaign period culminating in the June 1978 national elections.⁶

Conclusions

— The Joint Chiefs of Staff and the Supreme Allied Commander Atlantic consider the US-manned NATO base at Keflavik as critical to US security, particularly in view of the rapid growth of the Soviet Northern Fleet.

— Failure to respond favorably to the Icelandic request for financial assistance will cause a deterioration in relations and could jeopardize our continued access to the military facilities at Keflavik.

— The Departments of State and Defense believe we should agree in principle to assist Iceland and be prepared to contribute a maximum of $30 million toward the construction of the dual-purpose facility.

Recommendations:

That you authorize the Department of State to inform the Icelandic Government:

— The United States Government agrees in principle to assist the Government of Iceland in the construction of a dual-purpose, military/civilian air terminal at Keflavik.

— The precise amount, form and timing of the US contribution will be resolved through subsequent bilateral negotiations.

— Any agreement with respect to the US contribution arrived at in the course of bilateral negotiations will be subject to Congressional authorization and appropriation. In the light of the unique circumstances of this case, Congressional approval cannot be presumed.

That you authorize the Departments of State and Defense to initiate the necessary measures to secure up to $30 million for the terminal from a combination of $15 million in Military Construction (MILCON) funds and $15 million in Security Supporting Assistance (SSA) funds (Congressional approval is far from assured and we will have to work hard to get it).

SSA funds have been used for base-related or security purposes in Spain, the Philippines and Malta. However, the AID Administrator is opposed to the use of SSA funds in Iceland and his dissenting memorandum is attached.⁷

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Box 17, Iceland. Confidential. A stamped notation beneath Brown’s initials reads “21 Mar 1978.”
2. In a December 14, 1977, memorandum to Brown and Vance, Brzezinski wrote: “I am concerned about the possibility of deterioration in our defense relations with Iceland and the prospect that our presence at Keflavik becoming a major issue in the next Icelandic elections. I therefore hope that the recent Icelandic suggestion of converting the planned civilian terminal into a dual-use facility might be given careful consideration.” In a February 13 memorandum to Brown and Vance, Brzezinski noted that he understood that Brown would consult with Congress and asked them to “forward a joint recommendation to the President as soon as possible.” (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 27, Iceland: 1/77–1/81)
3. See Document 259.
4. See Document 261.
5. Telegram 1598 from Reykjavik, November 7, 1977, reported that in a November 7 meeting with Blake, Agustsson discussed the idea of redesigning the proposed civilian air terminal to allow its use for military purposes and asked if the United States would be willing to help pay for construction. (National Archives, RG 59, Central Foreign Policy Files, D770410–0889)
6. In parliamentary elections held on June 25, 1978, the Independence Party won 20 seats (a loss of five seats) and the Progressive Party won 12 seats (also a loss of five seats). The People’s Alliance won 14 seats (a gain of nine seats) and the Social Democrats won 14 seats (a gain of three seats). The Liberal and Leftist Union lost its two seats. That same day Hallgrimsson announced that his government, based on a coalition between the Independence and Progressive Parties, would resign. (“Iceland’s Cabinet to Resign After Election Losses,” New York Times, June 27, 1978)
7. A memorandum from Gilligan to Vance, March 7, is attached but not printed. In his memorandum, Gilligan wrote: “Is there any justification whatever for using economic aid to pay for construction of an air terminal in an economically developed NATO-related country?”