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Arctic  Sovereignty   –   Russia  &  Iceland  –   Financial  Crisis  –   October  2008 When  Russia  offers  Billions  of  Dollars  to  Iceland, Canada  should  pay  close  attention  to  the  Terms Edited  excerpts  of  an  article  first  published  in  the  Financial  Times  ( UK )   [1] On  14  October  2008 ,  Iceland  turned  to  Russia  for  a  loan  totalling  US $ 5.5 B "We have not  yet  received  the kind of support  that  we  need  from our  NATO friends,"  said  the  Prime  Minister,  Geir Haarde.  "Thus,  in a  situation  like  that, one has to go looking  for  new  friends." Would this new  friendship extend as far as military co-operation?  Prime Minister Haarde  quickly  denied  the  suggestion that  Russia  might  be  given  access  to an air base, vacated by the US Air Force. Officials also denied any such  trade-off. "We are a  founding member of  NATO." Alexei  Kudrin,  Russia's  Minister  of  Finance,  confirmed  that  Russia  had  indeed  received a  request  from  the  Icelandic  government  for  credit.  "We  will  examine  it ,"   Kudrin  said. "Iceland  is  well  known  as  a  country  with  tough  budgetary  discipline  and  a  high  rating of  reliability.  We  view  such  an  application  positively." Chris  Weafer,  Chief  Strategist  at  Uralsib  investment  bank  [ was  more  blunt: ]  "Lending money  to Iceland  is a very  strong  and  very clear statement  from  Russia  that it  is solvent and  that it  has  spare  cash."  He  added:  "This  is  going  to  make  a  big  difference  to  the Icelandic  economy ... it  builds up political  goodwill  which  could  be  helpful  when  Russia gets  into  difficult  negotiations  over  territorial  disputes  in  the  Arctic,"  said  Mr.  Weafer. Iceland  noted  that  Western  Allies  failed  to  offer  the  assistance  needed  to  avert  crisis Iceland  needs  to  bolster  its  foreign  exchange  reserves  in  an  attempt  to  shore  up  its krona.  Depreciation  had  caused  sharp  price  rises  in  imported  goods ,  such  as  fuel. The  central  bank  said  that  it  had  begun  intervening  in  currency  markets  to  try  to strengthen  the  krona ,  helping  it  to  rise  thirteen  percent  ( 13 % )  against  the  euro. Mr  Haarde declined  to say  which  countries  had  refused  to offer  help.  He did say that the Nordic  central  banks  were  the  only  ones  to  come  forward  before  Russia.   In  the spring [ of  2008 ,  these  nordic  countries ]  had  agreed  to  a  loan  of   US  $ 2 B ,  but  the Icelandic government  decided  that  it  needed  even  more  funds  to  shore  up  its  currency. When finalized,  the Russian package will  almost double Iceland's  foreign currency reserves. Mr Haarde said  that  the  funding  would  be used only to shore  up  the  Icelandic  currency, the  krona.  Foreign  loans  would  not  be  extended  to  bail  out  the  commercial  banks.  [2] "Iceland  has  never  defaulted  on  its  national  debt  –  and  it  never  will." said  Mr  Haarde. There  was  some  confusion  over  the  status  of  the  Russian  loan.  Iceland's  central  bank said  that  the  US  $ 5.5 B  loan  was  secured.  Later,  however ,  Iceland  acknowledged  that the loan  had  not yet been  finalized.  Iceland is continuing  to look  abroad  for  other  funds.   [1]   Written  by  Tom  Braithwaite  in  Reykjavik  and  Catherine  Belton  in  Moscow.           First  published  by  Financial  Times  in   London ,  UK ,  on   07  October  2008.   [2]   As of  10  October  2008,  Iceland  had  nationalized  its three  (3)  top commercial  banks.