The Soviet bailout of Iceland

Following on from my post below about Russia’s bailout of Iceland, I found out today that Iceland has been bailed out of a tight economic corner by Russia before – well, to be more precise, by the Soviet Union.

In 1952, Iceland and Britain got into a row about fishing limits, and Britain banned all imports of Icelandic fish – a bitter blow to a small, growing economy that was 90% dependent on fish exports.

As today, the US was unwilling to help out its ally by boosting trade, so the Kremlin seized its opportunity to step into the breach.  The Soviet Union offered an oil for fish deal that pretty much single-handedly saved Iceland’s economy.

Here’s how the one of the locals remembers the episode (albiet, with the wrong dates):

“They’re talking about Russia bailing us out. I remember in the 60s, they saved us then too – oil for fish, it was. Except they gave us a lot of terrible Russian cars, too.”

The Icelandic Foreign Secretary Halldór Ásgrímsson echoed those sentiments in a 2001 speech, so I guess the oil for fish bailout has entered into Icelandic lore:

“…the USSR became overnight one of the largest buyer of Icelandic fish. This is well remembered in Iceland. Referring to Iceland a foreign reporter once noted that it was indeed a strange country that hosted American military bases but which cars and fishing fleet were driven by Soviet fuel.”

The scale of the deal was such that between 1956 and 1960, more than 30% of all of Iceland’s exports went to with COMECON countries.  A pretty similar proportion of Iceland’s imports in that period came from the Soviet Union and its allies – hence the funny cars, presumably.