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The Future of the Arctic: A New Global Playing Field

Speaker: Ólafur Ragnar Grímsson, President, Republic of Iceland
Presider: Scott G. Borgerson, Co-Founder and Managing Director, CargoMetrics
April 16, 2013
Council on Foreign Relations

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SCOTT BORGERSON: Well, good afternoon, everyone, and thank you for coming to this afternoon's meeting with the president of Iceland on the Arctic. It's near and dear to my heart as a former CFR fellow who worked on this issue for several years, so I'm thrilled to see that the council is still sort of involved in this sort of critically important and increasingly important part of the world. It's dynamic and it's changing. As you'll hear from the president, quite a bit is going on.

So before we begin our conversation, I'd like to remind everyone that this meeting is on the record. And I also like to specifically acknowledge the former premier of Greenland, Kuupik Kleist, who is with us today until just two weeks ago. So we not only have one but two heads of state here. And the president has a packed agenda in Washington, which he'll tell you about, but he's going immediately from lunch with us to a meeting with both the Senate majority and minority leaders at the same time on the Hill. So he's quite busy. And we're very pleased that he made time in his schedule to join us at the Council on Foreign Relations.

So his full bio is in the program that you have, so I won't go through it, but I'd like to maybe highlight just sort of a few really interesting sort of facts from there. President Grimsson is serving his fifth term as president of Iceland, and he is the longest-tenured democratically elected head of state in the world, actually, which is quite a distinction. He is also the only European leader to still have his job since the financial crisis -- (laughter) -- which makes him unique. And given sort of that prestigious and long tenure, he is probably the world leader who has met more leaders of India and China than any other head of state in the world, which is sort of really quite extraordinary and will make more sense, perhaps, as we sort of talk about the Arctic.

So thank you, Mr. President, for joining us today. And with that introduction, maybe I'll place the first question as why is the president of Iceland in Washington, D.C.? What are -- what are you doing on your trip? And sort of why are you here?

PRESIDENT OLAFUR RAGNAR GRIMMSON: Well, first of all, let me thank you for inviting me to come here and have this opportunity to talk about the Arctic.

Why am I here? Well, the core of my mission is to try to wake this town to the fact that the Arctic should be among the top priorities for the United States' foreign policy in the first half of the 21st century. In two years' time the United States will take on the chairmanship of the Arctic Council, the formal organization where Russia, the U.S., Canada and the five Nordic countries sit together in an area where China, India, South Korea, Singapore, France, Germany are all knocking on the door and want to be a part of the action.

This has historically been America's backyard. During the second half of the 20th century, you made it the core of your military territory in terms of your extensive military buildup, ranging from Alaska over to Greenland and also my country, Iceland, and elsewhere. And given the important resources in the Arctic, perhaps the biggest reservoir of untapped resources in the world for the 21st century economy, and the unfortunate -- and I say unfortunate because it's due to the melting of the Arctic Sea ice -- opening up of new sea routes linking Asia to America and Europe in a revolutionary way like the Suez Canal did in its time, it is of primary importance, not just for the United States, to become a very engaged partner in this future. But it's also important for my country and for Greenland and others that in addition to having Russia and China and India involved in Arctic issues, we have the U.S. engaged in a formidable way in the coming years.

BORGERSON: When you speak about the Arctic, you often talk about an ice-dependent world which, in some ways, is sort of the impetus for the change that's happening there. Why do you mean by that when you say sort of an ice-dependent world?

GRIMSSON: What I mean by that is that if we take the ice sheet in Greenland and the Arctic Sea ice and we take the glaciers in the Himalayas and Antarctica, these three ice-covered areas in the world and what is happening there in terms of the melting of the ice in all of three territories is already having fundamental consequences for extreme weather patterns like storm Sandy here in the United States, like the extremely cold winter weather in China this year, which was more destructive in terms of economic damage in China than probably storm Sandy was here in the United States, and also due to the rising sea levels; if you go to Greenland, you will see new lakes and rivers being former due to the melting of the ice. The glaciers in my country -- Iceland has the largest glaciers in Europe -- indicate very clearly that climate change is not a theory; it's happening at a very aggressive rate. With the rising sea levels, this will become a great problem for our cities and our economies everywhere in the world.

It was quite remarkable last summer when the Chinese icebreaker Snow Dragon sailed from Shanghai to Iceland across the northern route, the first time in history a Chinese vessel goes across the North pole to visit an Arctic country, a ship organized and run by the Chinese polar institute with 60 scientists onboard.

And they demonstrated to us in an open public forum at the university in Iceland how the melting of the Arctic sea ice is the primary cause of extreme weather patterns in recent years in China. But they also demonstrated how the melting of the ice in Greenland and Antarctica would sink a great number of Chinese cities, starting with Shanghai, in not the worst-case scenario but in a bad-case scenario.

So if China is already so preoccupied by our ice-dependent world and what's happening to our ice-dependent world, it is of paramount importance for us in Europe and the United States to be also engaged in this. And whether we like it or not, the ice is melting. Ask the premier of Greenland; ask me. There's another reason both of us are here in this town is because the ice is aggressively melting in our countries and in our neighborhood. This will have a greater impact on the United States than any other single development in the coming decades.

BORGERSON: Speaking of China, some interesting news this week that Iceland and China have agreed to a free trade arrangement, which was surprising to me, but maybe it shouldn't have been given China's interest in the region. How might you explain sort of why China would want a free trade agreement with Iceland?

GRIMSSON: Because we are not an economic power -- (inaudible). (Laughter.) No, you're right, it's an interesting question. It's an interesting question.

If -- I have had the privilege to observe the Chinese (up front ?) throughout my presidency in the last 17 years. And it has been a very interesting journey, and also to see how they operate, because they usually start in a small way. Whether it's building a geothermal urban heating system, they start with a district in one town and see how it operates, and then they scale it up if it is successful.

So maybe making a free trade agreement with a small, highly advanced European country which is also recovering pretty effectively from a financial crisis could serve as an interesting model for China with respect to other countries. This is not the end of the story of Chinese free trade agreements with European countries.

But we have been fortunate -- and I say "fortunate" very deliberately -- by enjoying such a cooperation with China on geothermal clean energy in terms of urban heating systems, in terms of exploring a number of IT and high-tech technologies.

And I believe the free trade agreement is one way for China to demonstrate that they want a positive engagement with Europe and the rest of the world and they want to play by the rules. I know this is a strong statement. But by making a free trade agreement with as transparent and open country as Iceland is -- it would be difficult for you to find a more transparent and open country than Iceland due to the smallness and our democratic traditions. It'll be a test case for China how they follow the rules. And as an appendix to this agreement, we had a document on human rights and a dialogue on some social issues. So it will be interesting not just for us but for everybody else to watch how China will perform on the basis of this agreement.

BORGERSON: Great answer. The United States, of course, has made many strategic investments in the Arctic, especially during the Cold War, when it was the central point between U.S. and Soviet Union from an intercontinental ballistic missile perspective. But lately it seems our strategic priorities have been elsewhere, for a number of reasons. China, South Korea, Japan, Singapore, Russia and Canada, of course, and others are taking notice of the Arctic, but the U.S. seems slow so far. But we will assume chairmanship of the Arctic Council in just a few years. Canada has just assumed the chair, and in two years from now the United States will assume the chair. From your perspective as the president of Iceland, what does that mean? What's the sort of relevance and significance of that for an American audience?

GRIMSSON: Well, it will be an extraordinary testing time for the United States because while the Arctic Council was, in the beginning, a rather weak organization, it has grown in strength and effectiveness due to the leadership of a number of the Nordic countries within the Arctic Council but also due to the influence of Russia and the direction that Russia has given.

So when Canada becomes the chair of the Arctic Council, and then the U.S. in 2015, it will be the first time in the history of this extraordinary Arctic cooperation that North America takes on the leadership. And what will be the priorities of the U.S. during that leadership period? How will they conduct the operations of the council, and how will they deal with many of the issues, like the interest of South Korea, Singapore, China and India and the others to be part of the Arctic dialogue, as well as France and Germany?

How will they deal with the terms of investments by companies and corporations in terms of the utilization of the resources? What will they do in terms of emphasis on the research on the disappearing ice? And all these issues will be watched by all of us, and not just by small countries like mine but by the leading economic powers of Asia, by the leading economic powers of Europe, as well as a host of other political communities all over the world.

And the U.S. comes to that chairmanship from a period where your interest on engagement has been elsewhere -- you know that better than I. Whereas this territory, my country, Greenland, the Arctic, is the U.S.' backyard. And while you put billions and billions and hundreds of billions or even thousands of billions of dollars into military investment in the second half of 20th century in to this backyard, you basically left it 10 years ago.

You closed down the military base in Iceland. When George Bush and Dick Chaney and Donald Rumsfeld were telling all of you the world was now such a dangerous place there was need to go to war in Iraq and Afghanistan, they told us it was now such a safe place that they could close down the base in Iceland, which they did. But this lack of military interest, which basically is a good thing in my opinion, in the Arctic, has also meant that other interests have also given away.

And in the meantime, as my friend the former premiere of Greenland knows very well from his period of four years of running Greenland in the first period of self-government, there's a long queue of other players -- starting with China, India, South Korea, Singapore, Germany and France and others -- who want a -- who want a piece of the action and want to sit at the table, and are coming with a basket of investment finance as well as -- as well as other agenda.

When you throw into that how the melting of the Arctic sea ice is having an impact on climate and oceans and extreme weather patterns in the U.S. and elsewhere, I tell you as a great friend of this country, I don't know of any other international position in the second term of the Obama administration which will be of such consequences in terms of a formal chair position, as the U.S. chairmanship of the Arctic Council from 2015 to 2017.

And part of my mission here -- part of why we are establishing this new venue, an assembly, The Arctic Circle, together with Scott and Alice Rogoff and many others -- Lisa Mikulski (sp) and others here in the United states, is to an international coalition, with Kuupik Kleist and me and some people from Europe as well as Russia, in order to engage the U.S. policymaking establishment into a needed dialogue on what are the priorities, what are the tasks and what will be the decisions that we need all of us to take in the next four years?

BORGERSON: I was hoping you'd mention The Arctic Circle.

GRIMSSON: Oh yeah, of course.

BORGERSON: When and where will we meet?

GRIMSSON: Well, this is an attempt to create a much broader assembly of players on Arctic issues than has ever been attempted before. Experts, scientists, activists, the corporations, political leaders -- not just from the Arctic countries but also from those countries in Asia and Europe that I have mentioned.

It will, for example, be a testing ground where South Korea can justify, why is it so interested in the Arctic? Why does the leadership of South Korea visit Greenland? Why does the prime minister of China talk about the Arctic when he comes to Iceland? What is the agenda? I was in India a few weeks ago. The first item on the meeting with the foreign minister of India was India's desire to be a member of the Arctic Council. It's kind of crazy, paradoxical, that now I have to discuss in Delhi their membership in the Arctic Council.

So in order to take the pressure off the Arctic Council membership, so to speak, this gathering -- which we call The Arctic Circle, is partly a play of words of geographical location and having everybody sitting around the table, irrespective of protocol of power position -- to broaden this dialogue and make it more inclusive and more effective. And we have been preparing this now for about a year. And the first meeting will be in Reykjavik in our new Concert and Conference call from the 12th to the 14th of October.

And we are not only expecting, but encouraging and inviting broadly based U.S. participation in this dialogue because I think it will be a uniquely helpful forum for the decision making that has to take place in this country if your chairmanship of the Arctic Council is going to meet the expectations that all of us have with respect to that -- (inaudible).

BORGERSON: Arcticcircle.org, if you'd like to learn more. And may I say that everyone here is invited to come?

GRIMSSON: Sure, absolutely.

BORGERSON: Come on. (Laughter.) So you've talked about sort of the climate change, which I think sometimes in the lower 48 we forget just how rapid it's happening. The ice is melting sort of radically, and that's a fact. And you've talked about sort of -- maybe not so much on the part of the United States, but on the rest of the world, growing interest in the region to include sort of a growing queue of other nations interested in joining the Arctic Council.

And when you read about -- and including some of the things, sort of, I've written about this region, sometimes there's a debate set up: Is it a rush to resources, is it sort of a wild West or do we need a new treaty or sort of what will be sort of the "great game" outcome of this new region? From where you sit in Iceland and your travels around the world, sort of, on this, talking about this issue, what's your perspective on sort of how the Arctic will unfold and develop as a new geostrategic region?

GRIMSSON: Well, the positive story is that it's not the wild West. The positive story is that this is not a new Cold War. The positive story is that we already have a structure for cooperation in the region. We have the Arctic Council, which has quite a remarkable track record of evolving from being a talking shop into becoming a treaty-making organization in a very effective way. I would even go so far as to say that in the last 15 years, there's no other example of such a positive international cooperation in a formal way.

And then we have the Law of the Sea, which, although the U.S.has not signed it, still governs the relationship, the territorial disputes between these countries. So we already have this double framework of the Law of the Sea, which hopefully you will sign one day and you will continue to follow. It is fundamentally in the U.S. interest that you do it. You're just killing your own interest by not being a formal part of it. While the rest of us treat the U.S. almost as if you are the part of it, but it doesn't give you the legal certainty that you would get if you actually signed it.

And then we have the track record of the Arctic Council, where, for example, Russia has been very constructive, very constructive. Ten years ago -- if I had come here 10 yeas ago, I probably would have gotten a lot of questions about the suspicions about Russia, what were the Russians' ulterior motives and so on. Similar kinds of questions we now get about China. But funnily enough, nobody in this town is suspicious of South Korea being in the Arctic, which to us is even stranger than China being there.

So we already have a legal framework, but that's not enough because time is running out. Time is really running out. The Chinese are already building ships to transport cargo across the northern sea route, probably the center route close to the North Pole, and they will start aggressively in this decade. When I go to Shanghai in June, they want to take me to the shipyards and to the headquarters of the shipping companies to demonstrate how serious they are.

But then you need to build harbors in order to deal with this new traffic. The premier of Greenland has been preoccupied during his period of office in the last four years with dealing with companies from Asia, from Europe or elsewhere, except, perhaps, the United States, who all want to be a part of this investment structure within his country and elsewhere in the Arctic.

So, hopefully we will be able to do this in a constructive way, but in order to do that, we need a body like the Arctic Circle (sic), where everybody who wants a stake in the Arctic, everybody who is interested, whether it's Greenpeace or the World Wildlife Fund or whether it's Exxon or whoever, or whether it's China or Iceland, could come to this round table and present their case and their interest and be tested -- that's the thing -- be tested by the others of their seriousness and their intentions in an open and transparent way. Because we cannot afford in the Arctic to make mistakes. That will be of such great consequences, not just for our future but for everybody's future, so we have to be very careful.

BORGERSON: You talked a lot about Asian interests and others, but not much about Russia so far, which, of course, has some prime real estate in the Arctic. What's your view on Russia and the Arctic?

GRIMSSON: Russia, of course, has more than primary estate in the Arctic. I mean, Russia is the predominant Arctic player, whether you like it or not. I mean, just look at the map. The only country that comes close to it is Greenland. And 10 years ago a lot of people were suspicious about what were the Russians' intentions in the Arctic. Would they play by the rules? Would it become a new imperial power in the Arctic? Would there be a military race in the Arctic?

When I made my first state visit to Russia more than 10 years ago and I put the Arctic issues on the table with Putin, he wasn't really interested. He said, you talk to the governors about that. You go up to (Yamalo-Nenets ?) and you to go Chukotka and you go up to Murmansk and you talk to the local governors about the Arctic. It was not on Moscow's agenda.

This has changed -- this has changed. Three years ago, the Russian Geographical Society, which is somewhat like the Council on Foreign Relations with respect to the Arctic within Russia -- a very distinguished body of scientists and experts -- was asked to host the first Arctic conference under the auspices of Putin. And it took place in Moscow.

And he came and made a very interesting speech -- very positive, very constructive speech. Then the second conference was a year and a half ago in Arkhangelsk. And he came again, which I found quite remarkable. They invited me to the first one, they invited me to the second one, but I said to the ambassador, sorry. I mean, I went to the first one; why should come to the -- why should I come to the second one? But then he sent Shili Kano (ph) as a special emissary. He flew to Iceland for 24 hours to induce me to come. So I did.

And it was quite remarkable that now it's moved so high on Putin's agenda that he came to the second conference as well -- back to Arkhangelsk, and gave a very constructive speech about the importance of the ice and the importance of securing the environment, of how risky and dangerous these northern territories can be for the rest of the world.

And in order to utilize the resources on the new sea routes, there was a need for a very broad cooperation. And when you look at the two agreements that have been negotiated within the Arctic Council -- the search and rescue agreement, which was signed in Nuuk two years ago, and Hillary came there and signed it on behalf of the United States -- and the oil spills agreement, which has been negotiated, but I don't think it has been signed yet. But it has been negotiated.

Both of these agreements were successful because of very positive engagement on behalf of the Russian negotiators together with their American and other Arctic partners. So my view of the Russian role in this -- of course they have their interests, of course they have their -- they have their national agenda, but so far, they have turned out to be a more constructive partner than I think most people expected.

BORGERSON: Thank you for those comments, Mr. President. Before opening the conversation to our members, I'd like to actually invite Premier Kleist, if you could, either -- maybe you'd like to ask the president or vice versa, or maybe even just comment on what your premiership was like. How have things changed in Greenland while you were the leader?

PREMIER KUUPIK KLEIST: First of all, thank you for having me by the invitation of the -- of the president. I'd like to comment on the climate change issue. And it's not only that -- I mean, attracting the world's interest in the Arctic in general, and especially focusing on Greenland and the mineral resources and so on. What I'd like to point out is that we are engaged in and very busy with adapting to the new situation which is created by the climate change.

And to me, in a setting -- in a prominent setting like this, it's always important to talk about the peoples of the Arctic. Not that the other issues are not relevant, but it is my role to point out that approximately 4 million people are living in the Arctic area, and 350,000 of those are indigenous peoples. And they're all engaged in adapting to the new situation, including how to handle this new and very rapidly growing interest from the outside.

Often, we have to tell representatives of governments and companies that you have to deal with parliaments and governments as well in the Arctic area. It's not the wild west. Actually, the Arctic is regulated by laws and agreement -- international agreements. So it's perfectly right when the president says that the cooperation in the Arctic area is a very good example of international cooperation within the last two decades.

Actually, I think that the cooperation within the Arctic Council also have inspired, for instance, the U.N. in the ways that the U.N. have included the indigenous peoples of the world in its work, and that the Arctic peoples have to be taken seriously when you discuss the Arctic issues.

Like the president, I think that the interest of the rest of the world is legitimate, because what's happening in the Arctic area today is affecting everyone on the rest of the globe. So with this, I think the creation of the Arctic circle is both timely and I would say a (genius strike ?) in terms of maybe taking a little bit of the pressure away from the Arctic Council, which is facing a very difficult task in handling the growing interests of the superpowers of the world to get involved with the Arctic agenda.

We see conflicts between Canada, European Union, Russia, China, U.S., Russia and the Swedish presidency, who got the task forming a common ground for decisions, whether to include those applicants, had a very difficult task. And I believe that, likewise, Canada and the U.S. will have the same kind of challenges to overcome during the presidency.

That will be my comments.

BORGERSON: OK, thank you, Premier.

So now is the opportunity where we can open up the conversation to the floor, see a few hands already. Before the microphone finds you, just a reminder, please stand and state your name and your affiliation. You may pose a question either to the president or to the premier. And a reminder, this meeting's on the record.

So I saw a first hand here for a microphone, please.

QUESTIONER: President, Steven Schwabel (sp). It's reassuring to --

BORGERSON: Your affiliation, sir, where are you from?

QUESTIONER: I am unaffiliated. (Laughter.)

BORGERSON: OK.

QUESTIONER: It's reassuring to hear that you will meet with members of Congress and that you regard your mission as one of awakening your interlocutors. What can you do to awaken them to the puzzlement of the world at the failure of the United States to become party to the U.N. convention on the Law of the Sea?

PRESIDENT GRIMSONN: Well, I think there is an awareness among many that this is in the U.S. interest. I was in Boston exactly a year ago, attending a conference on the Arctic where John Kerry, then Senator, made a very informed intellectually rigorous speech about why the United States should become party to the Law of the Sea. So I don't think he needs any education from me on that issue.

The question is the politics of it. Alice Rogoff who, together with us, is launching this Arctic Circle, hosted the conference up in Alaska last year, where Ronald Reagan's secretary of state gave a very interesting speech where he described that while they had opposed the Law of the Sea, it -- the treaty had now been amended to such an extent that it falls highly in the U.S. interest. And there was a broad Republican establishment and Democratic establishment position that it served the interests of the United States.

So you now have a very broad bipartisan, intellectual and high- level political support for the U.S. becoming formally a part of the Law of the Sea. And let's hope that John Kerry will stick to his statement in Boston a year ago or two, give it a priority in the Senate to push for such a ratification, because it would be kind of an embarrassment for the U.S. to take on the presidency of the Arctic council and not being a formal member of the Law of the Sea.

BORGERSON: CFR published a few years ago a special report on the national interest in joining the Law of the Sea, if you'd like to learn more. I know the author.

Sherri in the back, I saw your hand there.

QUESTIONER: Thank you very much, Scott. Sherri Goodman, CNA, former deputy undersecretary of defense.

Thank you, Mr. President, for your very eloquent and very compelling statement why it is in the American national interest to be more engaged in the Arctic.

Those of us who follow this area closely, like yourself, have been for the last several years, talking about whether there is going to be more cooperation or competition in the Arctic in coming years. And you've clearly painted a future that you hope will be fulfilled of cooperation, continuing now and hopefully into the future.

But what are the real risks about which you are concerned when you think about it? Is it an accident of some type? Or is it potential for competition among the various players in the Arctic of a different type?

PRESIDENT GRIMSONN: Well, the Arctic is already a territory which many people visit every year. They come on cruises. I remember when I was in Nuuk a year and a half ago attending a conference on Arctic law, there was this huge cruise ship outside the harbor.

And they're all over. They're in Alaska, they are in northern part of Iceland, they are around Greenland and so on. These are ships with thousands of people on board. And if there was an accident on some of these ships, it would be very difficult. That's why the search-and-rescue agreement was the first agreement that the Arctic Council made. And that's very indicative that the first agreement it makes, it's a search-and-rescue agreement, dividing the entire Arctic up into areas where each country is responsible for the search and rescue.

Fortunately, in terms of the oil companies, I think in the last 12 to 18 months, they have started to be more careful, more hesitant, more aware of the risks. That's why the second agreement is the oil spills agreement. Some people, like Greenpeace, say it doesn't go -- doesn't go far enough. But at least it's a -- it's an effort to indicate the priorities, the priorities. And in the Putin speech that he made last year, that was one of the key items that he actually talked about. So I think all of us are now pretty aware of the risk, but the cruise ship companies have an open sea. I mean, they have the freedom to travel up there with their passengers and hope that nothing happens.

With respect, however, to the melting of the Arctic sea ice, we could see cargo ships coming in great numbers. The Chinese are already planning 50 ships a year, or something, within this decade, I think, every year, bringing containers and cargo. And when you look at the statistics of what could go through the North Sea route in terms of European and Asia, European and American trade with China, even if it was just 20 or 25 percent of the annual trade, it's a formidable number.

So, there are all kinds of risk involved in this -- what we would call normal traffic, normal activity in this region. But I don't see any signs of sort of major conflict creating risk of the kind that our thinking in the Cold War period made us, sort of, used to. We will see.

BORGERSON: Yeah, this -- in the back, please.

QUESTIONER: Hi, Claire Casey, Garten Rothkopf. I'd be very interested to hear your views on the prospects for international cooperation around black carbon within the Arctic Council or perhaps this broader Arctic Circle. Thank you.

GRIMSSON: Well, this is a very good question because, as I said to the leadership of India last month when they were pushing the case for India being accepted as a member of the Arctic Council, I said, what's your scientific contribution? What will you contribute in terms of research and science on the environment on the ice?

And, fortunately, that is really the first question we ask these potential membership countries: What are you going to contribute in terms of our understanding of the environment, of the ice, of the risks, of the carbon or whatever within the Arctic? That's why the Chinese very cleverly have started with these scientific expeditions. There were 60 Chinese scientists on board the -- (inaudible) -- in this four months' journey -- most of them young. Highly impressive crowd. And now they have invited me to come in June to the Arctic conference hosted by the Chinese Polar Institute in Shanghai.

So, I think it indicates how aware we are of this problem that the first test we will make of countries that want to be formally engaged is their scientific contribution. And when the French and the Germans are explaining why they should be accepted as -- (inaudible) -- partners or when the European Union is arguing why they should be accepted as partners, they usually -- the first thing they highlight is their scientific funding, the scientific manpower involved in doing research on what's happening in the ice.

But since you mentioned black carbon, let me also say that the Arctic cooperation, and what's happening to the Arctic ice, is increasingly becoming a model for countries in the Himalayan region to look at. There, the black carbon question is even more acute than it is in our parts of the world. So, the success of our Arctic cooperation will, in my opinion, have implications of how far India, China, Pakistan, Nepal, Bhutan and the others go forward in a similar constructive cooperation in the Himalaya region, because like the Arctic was 20 years ago a highly militarized, conflict-ridden area, the Himalayas still are. And in addition, the water system the rivers which originate from the places in the Himalaya region, feed over a billion people in India, China, Bangladesh and elsewhere.

And I think it's very important for the United States, taking on the chairmanship of the Arctic Council, and for all of us in the Arctic cooperation to realize that there are people in other parts of the world seeing how we go forward in this and seeing if they can take that as a model in helping them. I was in India mainly to attend the so-called Third Pole Environmental Conference. The Third Pole is a very clever name given four years ago to a cooperation among Chinese, Indian, Pakistani, Nepalese, American and European scientists led, among others, by Lonnie Thompson of Ohio State University to get away from the political connotations of Tibet and all this. It's the North Pole, the South Pole and the Third Pole. And it's only beginning, and it's been so difficult that the first meeting was in China, the second meeting was in Nepal.

But then there was a problem, where should the third meeting be? It should have been in India. That would have been a logical place. India was not yet ready to host it. So I hosted it in Iceland a year and a half ago, although we are not a Himalayan country, as everybody knows. (Laughter.)

But the glaciers in Iceland are in many ways similar to the glaciers in the Himalayan region. So with respect to the carbon question, the black carbon question, what we do in the Arctic can also serve as an inducement and a model for the same kind of problem that is perhaps more acute in some areas of the Himalayan region.

BORGERSON: Yes, in the middle here, please. And I -- and we'll go next over here.

QUESTIONER: My name is James Turner from National Oceanic and Atmospheric Administration. One of the other important components for the Arctic is the current negotiations for a polar code under the International Maritime Organization to govern maritime operations in the polar regions. I was wondering if you could comment on that and where you see it going.

GRIMSSON: That is absolutely correct. And I found it interesting that when Michel Rocard, the former prime minister of France who was appointed by Sarkozy as the French president's special envoy on the polar regions, came at my invitation to Iceland two years ago, his main statement was that the first area of conflict and problems that would hit us in the Arctic would be the fisheries and the marine resources would be opened up to various fleets from other parts of the world. And we need to get agreements to cover the -- not only the fishing but the shipping and the cruise ships that I mentioned before is a part of that as well.

We are in an urgent need to establish code of conduct and a legal framework, which very vessel that comes into the Arctic observes. That is why I find what Google is doing, if I may say so here, in trying to bring the technology from Google Earth up to the northern oceans and the Arctic region, so all of us can sit in a taxi in Washington, D.C. and monitor on our cellphone what these vessels are doing up there and trace very vessel.

It's a combination of the information technology available or made possible by a great company and our hopes to get at a regime and a code of contact and then reinforce it because I believe the best reinforcement is the transparency that comes with everybody anywhere in the world with a cell -- with a -- with a phone of that nature can actually go online and check. But while we negotiate the code, we also need to use the information technology to be able to enforce it without too much difficulty.

But the problem for this country, if I may say so, is that in terms of infrastructure and ice breakers and airplanes and boats, given the vastness of Alaska and the U.S. Arctic territories, you don't have the machinery or the infrastructure to be able to monitor the code that would be agreed on. So while the code is good, you also have to examine how are we going to enforce it? And there, I think, what Google is doing could be the most important contribution.

BORGERSON: So, a contextual point for audience members who maybe struggle on your Alaskan geography, this was sort of new to me until I actually sailed it a few years ago. The distance from Dutch Harbor to Barrow is the same distance as Key West to Maine. Alaska is two and a half times the size of Texas. It's massive. And if you add up all the coastline of Alaska, it's as much as the lower 48 states combined in their aggregate. It's just -- it's a nation in some ways.

I saw a hand at this table here, if we could next.

QUESTIONER: Elmer Romanoff (sp) for the secretary of defense. Mr. President, from your perspective, as the U.S. continues engaging in this area, where did -- do the U.S. should put its priority or emphasis? I mean, would it be on trade? Would it be on infrastructure, commercial security? What would be that first starting point in our engagement in the Arctic?

GRIMSSON: Well, the first starting point should be to talk about the Arctic issues at all the high levels of the administration, of Congress, the media and the policymaking establishment, to realize that, like Iraq, Afghanistan, Syria, North Korea -- but for different reasons, thank God -- the Arctic should be up there among the long-term high priorities of the United States.

That is why I -- during this visit I'm talking to members of Congress, because I believe, from analyzing this political system and operating with it for a long time, that's where you should go before you talk to the administration -- because presidents come and go, but people stay up on the Hill.

(Laughter.)

And therefore, I think the first priority is to realize that then, everything else will follow. And then, the second priority, I think, would be to have an honest analysis by the Coast Guard, by the Defense Department, by the business community, by the information and high-tech community where you're actually lacking. And then start engaging.

I mean, it is crazy, given the fact that this is America's back yard, that I've had many times more meetings with Chinese leaders and Indian leaders and South Korean leaders on Arctic issues in the last five years than with any American leader. Same for my friend from Greenland, I am sure. I mean, there is something wrong with the priorities when those of us in Iceland or Greenland are talking more with South Korea about the Arctic than we are talking about with the United States.

BORGERSON: I saw a question here at that table, and we'll go back there next.

QUESTIONER: Thank you. Barbara Matthews with BCM International and Regulatory Analytics. Thank you very much for a tour de force presentation. I'd like to focus on an issue you haven't touched quite a lot on yet, and that would be the economic situation.

GRIMSSON: The economic -- yeah --

QUESTIONER: The economic situation in Iceland, and how the prospects for scientific and commercial development can help the country. You mentioned that you are coming out of the financial crisis, which is true. But there are a number of contingent liabilities that remain subject to judicial decision. And depending on how the courts go, it will either create significant liabilities for the country still or could erase them from the books. How do you view your economic prospects going forward in light of all the interest in the Arctic? Do you see this as an opportunity to develop sources of strength, make it possible to engage in different ways?

GRIMSSON: Well, I think it is the proof of how we have succeeded in dealing with the financial crisis, that I can come into this town and talk about the Arctic in one meeting after another, and it's only towards the end that people want to talk about the financial situation in Iceland. (Scattered laughter.) I certainly could not have done that four years ago, that's for sure.

Well, it was, of course, the most difficult part of my entire public career. We saw the democratic structures of our country being threatened because of the failure of the banks. We had riots and protests, and the police had to defend the parliament and the central bank and various other public institutions. It was a very dramatic demonstration that the failure of the financial system can pose a fundamental political and democratic threat to one of the most secure and open democracies in the world. So I imagine what it can do to countries -- other parts of Europe that experience military dictatorships during our lifetime.

So I think the first lesson of the Icelandic case is that the financial markets have to realize the extraordinary democratic and political responsibility they carry, because their failure is probably the greatest threat to our democracy, in my opinion. That's the lesson of Iceland and Europe in recent years.

But now, four years later, we are, perhaps, exhibit number one in Europe of a country which has succeeded in dealing with the financial crisis. And how did we do it? It's a -- somewhat a long story, but also a short one, because there are two dimensions to it. One was that we did not follow the traditional orthodoxies of the so-called Washington consensus led by the IMF and all Western administrations in the last 30 years. We did not follow the kind of orthodoxies that were recommended to the Asian countries in the Asian financial crisis a few decades ago. We let the banks fail. They were private banks; we allowed them to go bankrupt.

I have often asked the question, why are banks so holy that they can't go bankrupt? If we allow all other kinds of companies to go bankrupt, what's so special about those banks? We did not introduce austerity measures on the same scale as has been demanded in many other countries. We protected elements of our welfare system -- the health care and the education system. We introduced currency controls, which was an absolute taboo in the orthodox world until now; the European Union acknowledges it's perhaps necessary as well.

And we let the currency devalue. And I have to hand it to the IMF, that when the Icelandic program was finished -- it only took two years, and we held our so-called farewell to the IMF -- I think we are the only country to have a special celebratory farewell conference for the IMF -- (laughter) -- they were honest enough to recognize that maybe they had learned more from dealing with a highly-developed Western democratic country like Iceland.

But the other dimension was that we realized early on that this was not just a normal financial crisis. This was a profound political, democratic and even a judicial crisis. And in order to engage the people in a recovery and help them to recover from the shock and the hardship and the difficulties, you had to introduce broader democratic, political and even judicial reforms because an economy is not just a set of Wall Streets and corporations and banking networks. An economy is fundamentally a community of people. And unless you empower the people and give them vision and courage to go ahead despite the difficulties and the challenges, you are never going to recover the economy. So, it was, for us, absolutely necessary to have this very comprehensive approach.

So, while there are still problems, of course, while there are still difficulties for many people in my country, we are still -- we are already on the way to economic growth. We have about 5 percent unemployment, which many people would -- I won't say "kill for," but would be very happy to have -- and we have had many sectors of our economy, including the tourism sector, the high-tech sector, the IT sector, the fishing sector much more prosperous in the last three years than they were prior to it. So, while we still have to deal with the problems, as you indicated, on the whole we are now in a situation where we can be positively engaged in the long-term buildup of the Icelandic economy.

And I always found it very interesting as an indication of our long-term health that when Rio Tinto terminated all their global investment decisions after the fall of Lehman Brothers -- when Lehman Brothers fell, Rio Tinto decided they're not going to invest anywhere in the world for awhile. The first investment decision globally that Rio Tinto took after this pause was to modernize their aluminum smelter in Iceland for half a billion U.S. dollars. Why? Because they judged the country to have a long-term health partly due to our clean-energy economy and the fact that our aluminum produced by electricity in Iceland -- hydro and geothermal -- left less carbon footprint on aluminum produced by other resources -- and so has been the story of many others. And so if you trust the judgment of the big corporations with respect to our economy, I think Rio Tinto is a -- is a good example. But it also indicates that the transformation from a fossil fuel-based economy over to a clean-energy economy is also a very good insurance policy against future financial crisis.

BORGERSON: Thank you. We're about to run out of time. We only have five minutes left, and we pride ourselves here at CFR in ending our meetings on time. So, we have time for just one last question, but before we take it, let me just remind you that this meeting's been on the record.

The middle table here, please.

QUESTIONER: Thank you. Hi, Danny Freifeld (ph). I want to circle back to a comment you made about envisioning a world in which we could in a taxi cab in D.C. sort of understand geospatially and from a (monitoring ?) standpoint the Arctic better. What are some of the specific social, commercial or political dividends of greater mapping, greater understanding, greater monitoring ability in the Arctic? And I say this because it seems like the argument in favor of greater engagement for the United States in the Arctic is a mix of fear and greed. Fear of, you know, the Russians, the Chinese and others are ahead of us; and greed, well, there are all these natural resources and other opportunities (that are open ?) there. And both of those have negative externalities when you motivate the United States, at least, in my short experience in politics in this town.

So, in something more sustainable, like, that it comes with better technological understanding of the Arctic, what do you think are some of the bigger social, political and commercial opportunities that would come with that? Thank you.

GRIMSSON: Well, my first response would be that the United States is heavily engaged in far-away places in the world in terms of finance, manpower, political investment, military presence, and also business presence.

The northwest part of the Arctic is, as I have said, America's backyard. It is your geographical homeland. So, for all kinds of reasons, it makes sense for leading country to be engaged in its own homeland for all kinds of reasons -- democratic, political, scientific, commercial -- because if you don't care about your own homeland, your long-term presence in other parts of the world will look a bit strange. Why are you so concerned about far-away places if you're not fully engaged in your own homeland? I don't have to give this town lessons in homeland security, but Alice Rogoff can tell you that last summer, up in Alaska, you had an open border.

And anybody could come from anywhere in the world because the ice had disappeared. And ships came into towns and people went ashore. There was no passport control, no custom official. The next homeland official was maybe over 1,000 miles away.

So the melting of the ice in the Arctic is creating an open border for the United States in a territory, as Scott described, as a coastline, which is bigger than the East and the West Coasts combined.

If you are putting all this investment and political power into your homeland security, the Arctic and what's happening up in Alaska and the melting of the Arctic sea ice should be a top priority. You know, talk to your coast guards up there and let them tell you their story. They know it better than I, what's happening there.

So if it was only in terms of the fundamental elemental primary security of the United States, you should be fully engaged, not because of the Chinese or the Russians or the South Koreans, but because you care about your homeland. And then everything else follows. If you want to be a part of the 21st century economy, as Greenland is entering that world with its huge resources, you should perhaps help Greenland to break the monopoly that China has on precious metals in the world. That is also an economic security issue that the United States should have access to these fundamental elements in a high-tech, modern economy. And Greenland can tell you that so you don't have to go to China and ask for access to their resource.

So as I understand the politics of this town, security is the primary issue for a number of reasons, which I don't have to explain to this audience. So let's leave all this commercial stuff away and just simply concentrate on the fundamental, classical, long-term security interest of the United States. And it's only for that reason you should be fully engaged in Arctic -- not in the Cold War way, but in the way that the 21st century requires.

BORGERSON: What a poignant note to end on, Mr. President. Thank you for coming to lunch today. (Applause.)

PRESIDENT GRIMSONN: Thank you.

BORGERSON: Premier Kleist, thanks for dropping in and this concludes today's meeting. Have a very nice week, everyone. Thank you.

PRESIDENT GRIMSONN: Thank you.

KLEIST: Thank you.

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