With Reykjavik, London and the Hague still disagreeing on how to repay the Icesave debt, a think-tank came up with an alternative solution aimed at circumventing the current impasse.
Gijs Graafland, an analyst at the Planck Foundation, suggests swapping part of the unlimited geothermal energy potential of the island against its foreign debt. He calls his initiative 'Energy for Debt'.
The 'Energy for Debt' option is about building a solid, sustainable economy in Iceland based on harvesting geothermal energy under the banner of boosting Europe's energy diversity and security, Graafland explains. "Then Iceland would become Europe's main energy supplier," he writes in a Planck foundation position paper.
According to the analyst, by linking the northern island with the UK via a high-voltage direct current (HVDC), Iceland would be poised to become not a major energy supplier to Europe, but would also be linked to its data hub since HVDC can also carry information.
The author argues that this would be a win-win situation for all three parties concerned. Iceland would receive massive foreign direct investment and would see its debt reduced or cancelled. Britain and the Netherlands would gain competitiveness and have their lending repaid.
Yet the main opposition is likely to come from Icelanders themselves.
"The suggestion that Iceland should allow access to its energy resources in order to avoid debt repayments would be met by a strong nationalistic backlash, irrespective of party lines," Baldur Arnarson, a journalist for the Morgunbladid daily newspaper, told EurActiv.
Arnason said the real debate about energy resources on the island is centered around the question of whether it is possible to sell energy produced by hydroelectric power stations at a higher price than currently negotiated in deals with the large-scale aluminum smelters on the island.
Aluminum smelting occupies a central position in the Icelandic economy, with two plants already in operation and three more planned. The high amount of energy needed for these plants to operate makes cheap Icelandic energy particularly palatable to investors in the aluminum sector, with companies such as Alcan and Alcoa investing heavily in the EU hopeful.
Yet, as indicated by the improving performance of local Green parties and the success of a local best-seller by Andri Snær Magnason ('Dreamland: A Self-Help Manual for a Frightened Nation'), aluminium smelting is encountering growing resistance in Iceland. This is the real bone of contention splitting the island, not swapping energy for debt, Arnarson stressed.
'Energy for Debt' thus does not appear to be on the menu for Icelanders, Arnarson said. Instead, he highlighted a particularly daunting debate on renewable energy, "in particular considering the upcoming emissions transmission scheme [...] in Europe," he added.