Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

S/S–NSC files, lot 63 D 351, NSC 5426 Series

No. 705
Memorandum by the Executive Secretary of the National Security Council (Lay) to the National Security Council¹

top secret
NSC 5426

Washington, July 12, 1954.

Statement of Policy Proposed by the National Security Council on Iceland

general considerations

1. Iceland is strategically important to the West as a base area for offensive operations in conjunction with NATO, for air and naval defense of the approaches to North America, and for staging aircraft and maintaining sea communications between the United States and Europe. Iceland’s membership in NATO greatly enhances NATO military capabilities in the North Atlantic. Conversely, Soviet control and use of Iceland as an air and submarine base would pose a threat to the North Atlantic defense system.

2. Consequently, it is in the security interest of the United States and the North Atlantic area that facilities in Iceland be available for use in the event of emergency by the military forces of the United States and its allies, and that Iceland continue to be denied to unfriendly or potentially hostile forces.

3. NATO has delegated to the United States responsibility for the defense of Iceland, which has no armed forces of its own and a police force of only 320 men. Pursuant to this arrangement, the United States and Iceland on May 5, 1951 signed a Defense Agreement under which the United States has stationed forces and is developing military facilities in Iceland. Additional U.S. rights and facilities were obtained by supplementary understandings concluded in May, 1954.^*

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5. However, U.S. defense activities in Iceland have produced considerable tension and dissatisfaction among Icelanders. Agreement to the stationing of foreign troops in the country was an unprecedented peace-time step, taken when it was feared that the Korean war might lead to general war. Since then nationalism and neutralism have reasserted themselves; in the eyes of many Icelanders lessened international tension obviates the need for foreign troops and military activities. Icelanders have complained of the alleged disruption of their small community (150,000 population) by U.S. troops and construction workers and U.S. relations with local labor. Communists and neutralists have exploited these attitudes against the U.S. The 1954 understandings supplementing the Defense Agreement were designed to assist in alleviating Icelandic dissatisfaction.^†

6. The internal political situation in Iceland is marked by conflicting attitudes toward the 1951 Defense Agreement. The coalition government, which commands 37 of the 52 votes in the parliament, is composed of the Conservatives (the largest party) which supports the Agreement, and the Progressive Party (the second largest), which is split by strong neutralist sentiment. The Communists, the third strongest party, polled 16.5 percent of the vote in the 1953 election.^‡ In the next few months they may substantially increase their strength by gaining control of the Labor Federation, which has 26,000 members and represents 85% of organized labor. The Social Democrats (the fourth largest party) are weak and divided and in 1953 shifted from a pro-defense to an anti-defense position as a result of left-wing control. The recently-formed National Defense Party, a nationalistic left-wing group holding two seats, has become a rallying point for non-Communist xenophobes and shows increasing political strength. The next general election is scheduled for 1957.

7. The Icelandic economy is primarily dependent upon the fishing industry, but initially the construction, and subsequently operation and maintenance, of U.S. facilities provide a secondary source of income of considerable significance. Curtailment of U.S. military activities could reduce foreign exchange earnings by an amount sufficient to create serious economic difficulties.

8. Over 90 percent of Iceland’s exports consist of fish and fish products, and traditionally some 35 percent of the total has been marketed in the UK and 20 to 25 percent in the U.S. However, since mid-1952, when Iceland refused to permit British fishing vessels to operate off Icelandic shores, UK fishing interests have maintained an unofficial, almost complete embargo on Icelandic fish. The U.S. domestic industry has repeatedly pressed for Governmental action to curtail imports, and in May 1954, the Tariff Commission recommended imposition of quantitative restrictions which would require a reduction of 10 to 20 percent in Icelandic shipments to the U.S. Even though this recommendation has since been rejected by the President, the constant pressure for restrictions continues and is a source of great concern in Iceland.

9. In August 1953, the Soviet Government, moving to take political advantage of Iceland’s difficulties in Western markets, agreed to take large quantities of fish from Iceland and in return supply Iceland’s total requirements of petroleum and cement plus substantial quantities of grain, iron and steel. Other Soviet bloc countries also have agreements with Iceland, and a new, broader agreement with the USSR is about to be signed. Thus, the Icelandic economy is becoming increasingly dependent on the Soviet bloc, and the contrast between the attitude of the bloc and of the UK and U.S. toward Icelandic trade has serious political implications, causing many Icelanders to question the value of membership in NATO.

10. The USSR has recently been actively seeking to strengthen its political and cultural, as well as economic, relations with Iceland. The Soviets make no “military demands,” they support the Icelandic position in the UN on fisheries and territorial waters, and at considerable expense they send artists and other entertainers to Iceland. By contrast the U.S. in its relations with Iceland has been forced to emphasize questions which tend to offend and irritate Icelanders, such as vigilance against Communist subversion, maintenance of U.S. military rights, and Iceland’s obligations and interest in NATO. In addition, because of our interest in maintaining freedom of the seas, it is likely that the U.S. will oppose Iceland’s position in a UN discussion of territorial waters this fall.^§

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objective

12. Maintenance of Iceland as an independent and economically viable nation with a stable government friendly to the United States and actively cooperating in NATO defense efforts.

courses of action

13. Interpret the Defense Agreement in 1951 in the broad spirit of the supplementary understandings of 1954, which take into account the special circumstances of Iceland and the provincial and nationalist sensibilities of its people.

14. In carrying out U.S. military activities in Iceland endeavor to promote harmonious relations with Icelanders, including employment of indigenous personnel so far as consistent with the success of the operation.

15. Encourage as appropriate more active Icelandic participation in and understanding of NATO defense activities relating to Iceland.

16. Continue U.S. technical assistance, with special emphasis on the labor education and labor relations.

17. Maintain the intensified USIA program in Iceland.

18. Continue to strengthen U.S.–Icelandic cultural relations through such means as exchanges of persons, particularly in the field of education and labor; stop-over visits by U.S. concert artists and leaders; and appropriate utilization of Americans of Icelandic origin.

19. Seek to develop means of increasing U.S.–Icelandic trade, including the possibility of U.S. governmental purchases of Icelandic fish and fish products for foreign consumption,² and to avoid trade actions which would adversely affect Iceland.

20. Seek to increase free world markets for Icelandic fish and fish products, particularly in the UK, in order to reduce Iceland’s dependence on trade with the Soviet bloc.

21. To prevent or counteract any deterioration in Iceland’s economy which might have political consequences adverse to U.S. interests, be prepared to take feasible measures, including if necessary provision of economic assistance.

22. As appropriate, assist Iceland in obtaining credit in the U.S., including support for Icelandic applications to the International Bank for credit required for sound capital investment consistent with Iceland’s ability to finance repayment.

23. Be prepared to provide such basic civilian requirements of the Icelandic population in the event of war as will not be met from local sources.

24. In maintaining a U.S. position opposed to that of Iceland on territorial waters in UN or other discussion, take all feasible steps to insure that the matter is handled in such a way as to mitigate to the greatest possible extent adverse effects on U.S.–Icelandic relations (e.g., by acting with others rather than alone, keeping the discussion on a broad, global basis, and refraining as much as possible from appearing to lead an attack on the Icelandic position).

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1. Drafted by the NSC Planning Board on the basis of an earlier draft by the Department of State and transmitted under a note by Lay, dated July 12, to the National Security Council for consideration at its meeting on July 22. In addition to the Statement of Policy printed here, NSC 5426 consisted of a cover sheet, the note by Lay, a table of contents, a financial appendix, five background memoranda, and a map. The background memoranda were entitled as follows: I. The U.S.–Iceland Defense Agreement of 1951 and Supplementary Understandings of 1954; II. Political Situation in Iceland; III. Iceland’s Foreign Policy and Attitudes Toward Other Countries; IV. Iceland’s Economic and Financial Situation; V. Iceland and the Territorial Waters Question. According to the memorandum of discussion at the 207th meeting of the National Security Council, July 22, the Policy Statement was approved, subject to the inclusion of a phrase designated in footnote 2 below, by the NSC on July 22. (Eisenhower Library, Eisenhower papers, Whitman files) President Eisenhower approved NSC 5426 on July 23 and it was referred to the Operations Coordinating Board for implementation.
2. See Memorandum I attached. [Footnote in the source text. Memorandum I, not printed, contained the text of the May 5, 1951, Defense Agreement and a very brief summary, similar to that in Document 703, of the Supplementary Agreement of May 25, 1954.]
3. See Memorandum I attached. [Footnote in the source text. See footnote * above.]
4. A decline from 19.5% in 1949. [Footnote in the source text.]
5. See Memorandum V attached. [Footnote in the source text. Memorandum V briefly reviewed the course of the conflict over fishing rights between Iceland and the United Kingdom. It noted that the position taken by the British in this question was in accord with the U.S. position.]
2. According to the memorandum of discussion at the 207th meeting of the National Security Council, July 22, the preceding phrase was inserted at the specific request of the President. (Eisenhower Library, Eisenhower papers, Whitman file)