Saga - 2006, Page 63

Abstract
ÞÓ R W H I T E H E A D
ICELAND'S NEUTRALITY IN A STATE OF FLUX, 1918–1945
In 1918 Iceland declared its “permanent neutrality” in the Act of Union with
Denmark, which established Icelandic sovereignty. In this way Icelanders
expressed their strong nationalism and desire for independence, though their
political leadership also believed that neutrality was ensured by British naval
supremacy in the Atlantic, along with the island’s remoteness from the
European Continent.
After the Nazi Party seized power in Germany, Icelandic authorities feared
that British control over the Atlantic was weakening due to developments in avi-
ation, and that the Germans were gaining a hold on the country’s economy
through barter trade. Iceland was entirely dependent on exporting fish and
importing essentials, while her traditional markets had collapsed due to the
Great Depression. The Icelandic government tried to forge a stronger relation-
ship with the United States in hopes of gaining an added export market,
strengthening the country’s security regarding Germany and obtaining a secure
line of supply in case of war. However, these efforts met with little success.
After the outbreak of the Second World War, the British successfully sought
cooperation with Iceland in imposing an economic blockade on Germany.
Subsequently, in 1940, British forces occupied Iceland. While the government
protested against the occupation, it cooperated with the British, often in secret due
to fears of German retaliation and an internal, nationalist backlash. Through this
cooperation, the Icelandic government managed to ensure profitable fish exports
to Britain and thus to solve the economic and financial crisis of the Depression
years. The government also wanted, however, to use the growing revenues from
fish to increase imports, particularly from the United States, and feared that local
British forces were not strong enough to defend the country adequately.
When the president of the United States secretly offered military protection in
1941, the Icelandic government accepted his offer, but only upon a number of
economic, military and political conditions, which then formed the basis of the
Icelandic-U.S. defence agreement. This agreement soon proved a solution to all
the major problems of trade and security with which the Icelandic government
had been grappling for years. The agreement also amounted to a major step
away from traditional neutrality, as Icelandic cooperation with U.S. and British
military forces in the country grew steadily closer from 1941 to 1943. Iceland
became one of the associated nations of the United Nations, even if its acceptance
of this non-neutral status appears to have been motivated by economic reasons.
Moreover, successive Icelandic governments reaffirmed their adherence to the
principle of neutrality, while admitting that it had become impossible to adhere
to strict neutrality in practice. Nevertheless, Germany continued to recognise
Iceland’s neutrality until the end of the war.
hlutleysi íslands á hverfanda hveli 63
Saga vor 2006-NOTA-2 26.4.2006 17:26 Page 63