China Eyes Investment in Iceland

By William Underhill

China has become famous in recent years for its ask-no-questions checkbook diplomacy, especially toward resource-rich nations in the developing world. Now it seems Beijing may have a new target: Europe. The latest object of Chinese interest is Iceland, which is teetering on the edge of bankruptcy, thanks to the excesses of its bankers. China's new embassy in Reykjavík will be the largest in the capital, and the Nordic country's official investment agency has noted a surge of inquiries from China. 

As ever, Chinese investment reflects long-term thinking. At issue in this case? According to a report this month from the Stockholm International Peace Research Institute, Beijing is interested in new trade routes across the Arctic as polar ice vanishes, slashing the journey time between the Middle Kingdom and its trading partners in Europe and North America. China already has an Arctic research station in Norway and plans to spend $300 million on a new icebreaker vessel.

Once the Arctic is navigable by commercial traffic year-round, Iceland could serve as a friendly and well-equipped way station for China in the North Atlantic (the U.S. military left some handy facilities in place when it quit the country in 2006). The idea is appealing to Iceland, as well. President Ólafur Ragnar Grimmson recently talked of his country's future as a logistics hub and cited Chinese interest. This comes just as an ongoing fight over a $5 billion debt to Britain and the Netherlands has soured Iceland's relations with Europe. So why not some new friends from Asia?