Hello,

This edition opens with Sweden’s first NATO air-policing deployment to Keflavík under Arctic Sentry. The rest covers the EU referendum question, the foreign minister’s call for tougher action on Russia’s shadow fleet, Iceland–US relations and new polling on the US, plus Türkiye’s planned embassy and new Ukraine funding. We close with a translation of a recent op-ed by former foreign minister (and Varða advisory board member) Þórdís Kolbrún R. Gylfadóttir, widely shared and discussed in Reykjavík.

Sweden has deployed six Gripen fighters to Keflavík to conduct NATO air policing over Iceland for the first time since joining the Alliance. The deployment falls under NATO’s new Arctic Sentry activity, which frames NATO’s Iceland Air Policing mission as “a key pillar of the Alliance’s air domain presence” in the High North. German Eurofighter jets and Danish F-35 fighters are also operating from Keflavík Air Base, supported by the Multinational Multirole Tanker Transport Unit.

Sweden’s Supreme Commander of the Armed Forces, Michael Claesson, was in Reykjavík last week for discussions as the rotation got under way. Speaking to RÚV, Iceland’s state broadcaster, he said: “It is going very well. The situation in the North Atlantic is such that nations bring their air forces here, which means we can train together, and that benefits the Alliance.” 

In another interview, Claesson argued that “a threat is taking shape in the High North” and put particular weight on hybrid threats, describing Russia’s relationship with the West as a systemic conflict beyond the war in Ukraine. Asked what the air policing mission would focus on over the next six to twelve months, he pointed to “increased military presence” and “attempts to affect critical infrastructure on the seabed.” Iceland’s counterpart, Jónas G. Allansson stressed deterrence: “We are, first and foremost, sending a message to Russia… It is very important that the Allies make clear that presence and deterrence are in place here as elsewhere, even if the main emphasis is on the eastern border.”

The authorities have not publicly spelled out whether Arctic Sentry changes the logic of Iceland Air Policing. However, if Keflavík-based air policing is now treated as part of a coordinated activity spanning both Iceland and Greenland, it will make the Keflavík base even more central to air defence across the GIUK gap.

Politico reported on Monday that Iceland may hold a referendum on resuming EU accession talks as early as August, with Alþingi expected to decide the timing in the coming weeks. The reporting frames the acceleration as part of a broader shift in how the file is being read in Reykjavik and Brussels: less as a technical integration question and more as a question of where Iceland anchors itself in the new security environment.

Speaking to the Icelandic press, Foreign Minister Þorgerður Katrín Gunnarsdóttir did not confirm or deny Politico’s August timeline, and instead reiterated that the only firm point is that the referendum will be held no later than next year, and that any decision on actual membership would come later, through a second referendum, if talks are reopened. “In the end, it comes down to an assessment of the national interest, and when such a referendum should be held. We know the framework runs to 2027, and we are working within it,” the minister said.

Politico reported that support for EU accession is rising, but Gallup’s latest tracking poll shows a straight split: 42% in favour and 42% against, compared with 44% in favour and 35% against in 2025.

At the Munich Security Conference, Foreign Minister Þorgerður Katrín Gunnarsdóttir urged Europe to take a firmer line on Russia’s so called shadow fleet, arguing that “we have been too polite.” Speaking at a Council of the Baltic Sea States side event on hybrid threats and Baltic Sea security, she called for a more coordinated approach, including joint engagement with the flag states.

Speaking to Icelandic press afterwards, she noted that Iceland has aligned with the existing sanctions package targeting the shadow fleet, around twenty measures, with additional EU steps in preparation, and said Iceland is ready to use all available tools to stop the fleet. She framed the issue as one of European resolve: “In general, we have been too polite. Europe has a lot going for it… but sometimes there is simply a lack of self confidence when it comes to the shadow fleet and that applies to other areas too, economic policy, security policy and more. We in Iceland remain ready to use every means to stop the shadow fleet.”

Iceland will take over the chairmanship of the Council of the Baltic Sea States from Poland this summer. Þorgerður said the forum has gained renewed weight as the threat environment has sharpened. She also welcomed Germany and Poland stepping more strongly into Nordic Baltic formats, and said this is already drawing more German attention to the North Atlantic. 

The Greenland dispute has produced a run of unhelpful noise around Iceland. In Davos, President Trump repeatedly referred to “Iceland” while speaking about Greenland, prompting Reykjavík to seek a clarification from US authorities. Earlier in January, Trump’s nominee for ambassador to Iceland, Billy Long, joked that Iceland would become the “52nd state” and that he would be its governor.

Politico, citing a US Embassy cable, reported that Iceland’s PermSec summoned the US chargé d’affaires to demand a high-level apology and underline that such talk “has no place in international discourse.” The cable reportedly says the chargé stressed that making Iceland a state is not US policy and pointed to Long’s apology for the remark, with no indication that a high-level apology was delivered. Iceland’s ambassador in Washington is in the cable stated to have said the government had received a “satisfactory clarification” and “considers the matter closed.”

Alongside these clarifications, Iceland has moved to strengthen its presence in Washington. A Foreign Agents Registration Act filing shows the government retained Brownstein Hyatt Farber Schreck from 1 February 2026 on a six month term to provide “strategic advice on navigating engagements” with the US government.

A new Maskína poll finds 40% of Icelanders describe the United States as an adversary, 32% as an ally, and about a quarter say they do not know. The question mirrors a recent Danish poll commissioned by DR, Denmark’s public broadcaster, fielded in early February after Trump’s repeated threats against Greenland, where 60% of Danes described the US as an adversary and 17% as an ally. Within Iceland, the split is structured: 49% of women, versus 32% of men, see the US as an adversary, and party differences are stark, with only 10.6% of Centre Party voters using that label compared with 57% of Social Democratic Alliance voters.

Türkiye plans to open an embassy in Reykjavík by end-2026, a step Turkish reporting links to a wider effort to engage more directly on the High North and Arctic agenda as it rises in salience. Iceland’s foreign minister has indicated the request will be accepted, while also noting that Iceland does not plan to open an embassy in Ankara in the coming years. The move aligns with the wider uptick in allied attention to the High North, where presence and access increasingly matter.

Following the NATO Defence Ministers meeting in Brussels earlier this month, Foreign Minister Þorgerður Katrín Gunnarsdóttir confirmed further defence-linked support to Ukraine: ISK 1.0 billion (about USD 8 million) to NATO’s PURL for procurement of priority defence equipment, and ISK 300 million to NSATU, NATO’s coordination set-up for Ukraine. In a country without an army, taxpayer-funded weapons purchases remain politically sensitive. Þorgerður said the government is united in implementing Parliament’s resolution on supporting Ukraine and that the contribution sits within the approved budget framework. She noted the gap in per-capita support across the Nordics: “Per-capita contributions are ten times lower in Iceland than in Denmark. So we are clearly the lowest [among the Nordics] in this support.”

Our translation of an op-ed in Viðskiptablaðið, published 15 February 2026. By Þórdís Kolbrún R. Gylfadóttir, MP (Independence Party), former minister for foreign affairs and member of Varða’s advisory board.

In the uncertain times now upon us, Icelandic society needs to reckon with how decisively the landscape of world affairs will shape us. 

Over the past few years, I have drawn attention to the threats to Iceland’s security in a world where the laws and rules of the international system are under damage. Now the warning lights of the global system are flashing, and this brings dangers no less serious for our ability to safeguard the continued prosperity of Icelandic society. 

Great volatility has characterised international markets in recent weeks and months. Prices for precious metals have reached record highs and then fallen sharply, and the swings are almost without precedent. The same can be said of cryptocurrencies.

The large US technology companies are generating strong profits, but sceptical voices warn that, beneath the surface, doubts remain about the profitability of the investments now being set in motion. Prominent investors have speculated that disruption in currency markets may be in the making, not least due to the US government’s excessive debt burden and the complete uncertainty over the Trump administration’s policy on the US dollar, but many of the president’s advisers believe that a significant depreciation will serve the interests of domestic producers.

Most governments in Western countries are struggling to piece together budgets, and the effects of demographic change are gradually becoming real, bringing corresponding pressure on public finances and infrastructure. In many countries, laws have been passed to ensure that benefits and pensions rise automatically in line with calculated indicators in the economy, and the cost of health care rises in step with longer life expectancy and the steadily growing share of older people in society. Added to this is that investment in AI data centres has now reached a level comparable with the largest infrastructure investments in history, even though it remains unclear whether, how, or when revenue streams will cover the investment.

All of the developments mentioned here are cause for concern, and they are systemic across most Western countries.

Part of this development can be traced to a change in the nature of the financial environment. In a recent piece in The New York Times, the economist Oren Cass (who works at the conservative think tank American Compass) advances the claim that financialisation in the US economy has, in effect, transformed the purpose of the financial system from a forum for directing capital to profitable projects into a kind of simulation model, where profits are generated through ingenious transactions and wagers that resemble gambling.

Cass states that financial markets, which were originally established in order to channel money efficiently through the economy in support of value creation, have turned into their opposite. Instead of nourishing the real economy, they feed on it. This, Cass says, reduces the economy’s ability to adapt and innovate. 

In other words, as capitalism has developed over recent decades, its original purpose has eroded. Too little remains of the idea Theodore Roosevelt put into words at the beginning of the last century: that the aim of a free market is, among other things, to make it gradually possible for those who work with the tools to come to own them 

The ideology of the free market rested in part on as many people as possible having the opportunity to take responsibility for their own enterprises and compete in a fair environment to meet the needs of their fellow citizens. Instead, more and more types of business are being brought under the ownership of deep-pocketed funds. Even small-scale enterprises that thrive in local communities, such as neighbourhood pubs, restaurants, hair salons, bakeries, and so on, are being sold to anonymous investors. This involves a fundamental change in whether, and how, the gains of free enterprise translate into improved living standards for the public.

This development has taken place across Western countries, but it has gone furthest in the United States, and it is also in charge in the United Kingdom. Those countries, for example in Europe, where financialisation is less advanced often do not post the same growth figures, but when looking at people’s actual quality of life it is hard to say that they stand far behind the United States. People in Europe live longer in good health, more people receive better health care at far lower cost, people can allow themselves longer holidays, and in most ways enjoy greater security.

It is more common in Europe than in the United States that restaurants are still run where the entrepreneur works there in person, shops where the owner serves customers, and cafés where the sole shareholder of the management company sweeps the floor before opening in the morning. This kind of business may not make anyone a billionaire, but it can still embody great value and gains in quality of life. There is more to society than calculations that promise citizens the best living standards, and it is impossible to look only at one or the other. The foundation is always that real freedom and active competition prevail.

The investor Ray Dalio, known for his writing on long cycles in the economy and markets, has also warned against excessive financialisation of the economy, and argues that it can, among other things, lead to dangerously high inequality. 

Dalio says that the West, not least the United States, is now approaching the sixth and final stage in the life of the current financial system. That entails that social problems in the United States will soon become insurmountable, the strength of the US dollar will ebb, America’s leadership role will run its course, and a new global economic order will take over, one whose form is too early to predict. Whether this will prove true, I do not trust myself to predict, but it is clear that the uncertainty and volatility in the global economy we are now witnessing have often been a harbinger of major changes, unfortunately often painful ones.

At the same time as all of these systemic problems loom large, an old spectre in international trade has resurfaced: the weaponisation of trade policy. The leading advocate of this is US President Trump, who imposes tariffs and threatens tariffs to force his will through (or simply to avenge personal slights). Iceland has not been exempt from this any more than others.

The impact of the Trump administration’s tariff policy (or lack of policy) seems not to have fully materialised, and in addition the United States Supreme Court has yet to rule on whether the Trump administration’s weaponisation of tariffs is consistent with the constitution. 

Others than Dalio have recently spoken in terms of a watershed in the international system. Warren Buffett warns against the weaponisation of U.S. trade policy, where tariffs are used in attempts to strong-arm other states into submission on whatever suits the Trump administration at any given moment.

Jamie Dimon, CEO of JPMorgan Chase, struck a similar note in Davos, where he said, among other things, that “America First” must not mean “America alone” (and this moderate criticism of the US president’s policy appears to have led Trump to announce a ten-billion-dollar lawsuit against the bank because it had dropped him as a client after the 6 January unrest). Bill Ackman, CEO of the Pershing Square hedge fund, has warned that the world is heading for a “self-induced, economic nuclear winter” if the trajectory on tariffs continues along the same path. 

And then, finally, to the question of how all of this relates to export-driven Iceland, our interests, and our position in a world undergoing fast and unfavourable change.

In fact, the parallels with traditional defence and security policy are strong. In the case of defence, Iceland relies on three main pillars. The first is international law itself, which forbids states from using violence or threats to seize territory from others or violate their jurisdiction. The second pillar is that international institutions are in place, foremost the United Nations, with means to resolve disputes and punish those who do not abide by the rules. If neither is sufficient, what remains are alliances of individual states that have decided to stand together to defend against unlawful aggression.

In the case of Iceland and most European countries, this primarily means NATO. As is well known, the idea behind NATO is that the moment one is attacked, all member states interpret it as an attack on themselves. One for all and all for one. Hopefully, that will not change. 

Icelanders are also part of a Joint Expeditionary Force of ten countries (the United Kingdom, the Netherlands, the Nordic countries and the Baltic states), which can also project deterrence and provide defence. If all of this is disrupted, then the position of a small and unarmed country like Iceland becomes highly vulnerable (and in fact the same applies to almost all states except the very largest). In a world where each and every one has to defend itself, Iceland’s best hope would lie in no one having any interest in getting involved with us, but that is unlikely in a modern world where Iceland’s location is truly valuable in strategic terms.

When it comes to international trade, the post–Second World War order has also been aimed at establishing rules that make it difficult for states to use economic “weapons” to get their way. As far as Iceland is concerned, the pillars are similar in nature to those I mentioned above. International standards and agreements are in place, and international institutions have been established to adjudicate disputes. Although this system has never worked exactly as intended, it has nonetheless set clear benchmarks and reduced the weaponisation of international trade. The Trump administration has broken this peace in international trade.

But just as with security, there are additional pillars, as individual states have come together on common defences against economic attacks. This takes the form of alliances that in reality are of the same nature as institutions such as NATO. If someone intends to use economic weapons to punish, for example, Denmark, then that is not possible unless the same is applied to all EU states, and countermeasures would likewise come from all 27 member states. In the same way, it would be unthinkable to wage trade warfare against a particular US state. You cannot impose a special tariff on imports from Nebraska. In other words: if one is attacked, all are attacked.

The Swiss authorities, by contrast, were alone in the boat when the president of the United States decided to impose a particularly high tariff, among other things because Switzerland’s president got on his nerves. That sequence of events then reached a certain high point, or low point, when a Swiss delegation presented Trump with a gold bar as a present. 

Just as with defences against military threats, the position of a small state like Iceland is fragile in a world where general rules do not apply. If what Jamie Dimon says is true, that America should not be alone in the boat, what then can be said of Iceland?

The countries that are closest to us and are outside the European Union; Norway, the United Kingdom, and even Canada, all want to avoid ending up between a rock and a hard place if the global trading system continues to crumble. Other countries around us are also beginning to think seriously about these questions; the leadership of Norway’s employers’ federation has recently started to argue for exploring the possibility of forming a customs union with the European Union. 

A similar discussion is taking place in the United Kingdom, where there is interest in closing ranks again with the European Union when it comes to customs. It is important to follow this debate, and also whether anything comes of the ideas now being discussed that Ukraine could be granted some form of associate membership of the European Union. It is clear that Ukraine will add significant defence capacity to the EU, which would be welcome (as its states are committed to defend together), but a number of countries fear that an inflow of Ukrainian agricultural production could threaten farming interests. Even Canada has floated ideas about linking its economic defences to the European Union. All of these explorations and speculations can matter for us, and are worth tracking from the standpoint of our interests.

In the uncertain times now upon us, Icelandic society needs to reckon with how decisively the landscape of world affairs will shape us, whether in defence or in trade, and whether we like it or not.

In this changed world, it is unthinkable that Iceland can get away with playing a free hand if disputes harden. Just as in defence, we cannot rely on being so small and remote that no one can be bothered to shoot at us in a trade war. And for those who believe that such a situation holds great opportunities, I assert that this idea is wholly unrealistic. Iceland has no scope to negotiate complex trade agreements on its own, around the world. Even countries many times larger have long since reached the same conclusion, in their own interests. Just as in defence and security, we need economic allies.

Thank you for reading the Varða Briefing, a monthly newsletter on security-related developments in Iceland, by Varða.