[Interview] Oligarchs could hijack Reykjavík’s EU referendum, Icelandic professor warns

The European Union could one day expand not only eastwards, but also westwards — or, more precisely, north-westwards. Iceland is set to hold an important referendum this Saturday (29 August), in which voters will decide whether to resume negotiations on joining the EU. The Icelandic government has framed the vote as a “now or never” opportunity. Either Icelanders embrace the prospect of EU membership, or the current status quo will be preserved — access to the European single market, but no say in shaping its legislation. “It is quite clear that this vote is about securing a mandate for negotiations,” prime minister Kristrún Frostadóttir said, adding that membership of the bloc would be decided in a possible subsequent referendum. Her government had originally planned to ask voters for their views only next year, but ultimately opted for an earlier date. The main reason was the changed geopolitical situation. Foreign minister Þorgerður Katrín Gunnarsdóttir wrote in a report published earlier this year that “the international system in which we have lived since the end of the Second World War is being shaken”, adding that closer cooperation with the EU was a “key variable” in protecting Iceland’s interests. The island is of interest to Europe because it lies in a strategic area that forms a gateway between the Arctic Ocean and the North Atlantic. It is also a country with the world’s fifth-highest GDP per capita. If Iceland were to embark on the path towards the EU, it would also represent a symbolic shift, showing that the bloc remains an attractive European project capable of drawing in even wealthier states. Icelandic society is, however, divided ahead of the referendum, and opinion polls suggest the result will be close. According to Thorvaldur Gylfason, an emeritus professor at the University of Iceland, local oligarchs have a strong interest in the outcome. In our interview with him, we discuss: what the mood is like in Iceland just days before the referendum; why the Icelandic government urged the European Commission not to interfere in the vote; who supports the referendum and who opposes it; how the camp opposing the resumption of negotiations is using pro-Russian rhetoric and a lawyer; who Iceland’s oligarchs are. What is the overall mood in Iceland ahead of the referendum, how do the Ja and Nei campaigns look, and what are their focal points? Well, the mood is a bit excited, more excited than I would have expected, because the referendum is really about a very simple question. People are offered to say either yes or no to the question: May the government of Iceland resume the negotiations about possible EU membership that were begun in 2009 immediately after the financial crash and were then discontinued by a new government four years later in 2013. Basically, those who plan to say no are trying to deny the rest of us the right to see what can come out of negotiations between Iceland and the EU—a deal that, if allowed to materialise, would surely be brought to a 2nd referendum where opponents could say no. So in other words, those who want to say no now are basically showing democracy the finger. I respect the right to say no in the 2nd referendum if it is held, but I find it difficult to respect people's motives when they plan to say no this time around. And this is a very general feeling. To this, I can add that there is a lot of heat being generated by the advocates of the no side, and they sputter a lot of disinformation whereas the yes side is not guilty of any such thing. They are much more moderate in their arguments. Probably we could speak about it a bit later, because you mentioned that the referendum is about restarting the negotiations rather than joining immediately. But do voters see it in this way? Isn't it, in fact, the referendum on joining the EU? Well, some voters see it the way I do and the way that the government invites the voters to this referendum. That's the way they see it and present it. But there are others who choose to argue that a yes now is a yes to full membership, which I think is the wrong way to look at it. The Icelandic authorities reportedly asked the European Commission not to intervene in the upcoming vote, according to the Euractiv website. How do you interpret this message to Brussels, and are there concerns about potential foreign interference in the referendum from Russia or the US? Yes. Well, I think the government is playing this fairly and squarely, and they want to send to the Icelandic voters a clear message that they do not seek help from the European Commission in any shape or form in the preparation for this referendum. But that is not true of the no side. Actually, the no side has brought to Iceland a Swiss lawyer who is known to have worked for the Putin regime in Moscow and is known to have represented a Russian oligarch who was trying to escape EU-imposed sanctions following Russia's invasion of Ukraine. Yes, and I can give you the name of the Swiss lawyer because he happens to be a former chief justice of the EFTA court. His name is Carl Baudenbacher. He had a lecture, invited by the no side to come to Iceland. He has this connection with Russian interests, which makes many people wonder what is going on on the no side, at a time when the yes side explicitly asks the European Union not to help out. Do these "no campaigners" use the rhetoric the Kremlin or Russia would use? Do you see similarities, do they attack the EU? I do. And indeed, those who are most visible among the leadership on the no side have one thing in common: they have never, as far as I know, criticised Putin or the invasion of Ukraine. Whereas the people who are most visible on the yes side are very much sympathetic to the Ukraine cause, as is true of 90-some percent of the Icelandic electorate according to opinion polls. When we speak about the "no campaign", who are they? In your article for the Georgetown Journal of International Affairs, you divided them into three groups. Could you describe these groups and their motivations? Let me talk about individuals to add something to what I wrote in the article where I divided these people into three groups. Leaders of the business association in Iceland, the Employers Association, are on the no side. Influential labor union leaders at the other end of the spectrum are also part of the no side. Why are they in bed together when the European Union issue comes up? They have very different motives. The business leaders basically fear that European Union membership will reduce their self-dealt privileges—oligopoly and all kinds of things. And that is indeed why the yes side wants to join the European Union: precisely to share sovereignty with the European Union and reduce the special privileges of the Icelandic elites, privileges that our domestic political situation has not allowed us to correct. The labor union leaders think completely differently. It is as if they don't care that European Union membership would probably advance the interests of ordinary wage earners, as has been the case in virtually all other European countries. Rather, they think it is more important to put their ideological opposition to capitalism and to the European Union as an instrument of international capitalism on top. That is why they come out on the no side. And then there are individuals, some of them are former ministers in governments, that were interested in little but the interests of the elites, the oligarchs. Iceland has become an oligarchy—much the same way as the US, as Paul Krugman writes about a lot, and Russia is a close case for comparison as well. So there are old-school former cabinet ministers and representatives of special interests that are very prominent on the no side. They tend to be older males; you see few women there and few young people, whether men or women. Whereas the yes side seems to be a much broader front: men and women alike, young people and old people alike. According to polls, there is one thing that is a bit worrisome: in the southwest corner of the country (the Reykjavik area), where something like two-thirds or three-quarters of the electorate resides, there seems to be a solid majority in favour of the yes side. But in the rural areas, where about one-third or one-fourth of the people live, there seems to be a pretty large majority in favour of the no side. Are they afraid as well to lose sovereignty, and are fishermen afraid of losing fishing rights? Yes, very much so. The reason why support is weak in rural areas but fairly strong in urban areas has to do with the fact that rural areas have been over-represented in political life in Iceland. Basically, when we elect a new parliament, each farmer has two votes, whereas I have only one. This is a result of an Icelandic version of gerrymandering in the United States. This has given rural areas political privileges that they are afraid to lose if Iceland joins the European Union. On top of that, the oligarchs are no longer in banking as they were before the financial crash 18 years ago, but are now concentrated in the fisheries. They are afraid that European Union membership will make it easier to reduce or eliminate their privileges. So they are almost certain to finance the no side, which seems to have much more money to organize meetings around the country. The yes side held no such meetings until middle of August, when the prime minister stepped into the battle by starting a modest trip holding meetings around the country. But the no side has been holding these meetings for some time now, inviting foreign experts, including this Russia-friendly Swiss lawyer that we talked about before. And the yes side has no financial resources to answer this in kind. So how prominent is this oligarch group? Is it really a relevant group, or is it just a small group?