In recent years, the Arctic has become an arena for geostrategic competition between key global powers, including the United States, Russia, and China. Iceland, although a non-member of the European Union, plays an important role in the EU’s strategic regional initiatives.
Icelandic membership of the European Economic Area and close ties with Scandinavia and other Nordic countries make Iceland a key partner for the EU in the Arctic.
Iceland and the European Union: Particularities of the Partnership
As a member of the EEA, Iceland participates in many EU programmes and agencies covering areas such as business, environment, education, research and social policy.
Such cooperation allows Iceland to integrate into the European economic and social space while maintaining its political independence.
In 2018, a bilateral trade agreement between the EU and Iceland came into force, aimed at liberalising trade in agricultural products, demonstrating the parties’ desire to deepen economic ties.
Iceland’s Geostrategic Importance in the Arctic
Iceland’s geographical location between Greenland and the United Kingdom makes it strategically important for the defence of the sea lanes connecting the Arctic Ocean and the Atlantic.
Historically this region, known as the GIUK Gap (Greenland-Iceland-United Kingdom), is key to controlling sea lanes. As the Arctic ice melts and new shipping routes open up, Iceland’s importance in ensuring security and stability in the region is growing.
The EU & the Arctic: Strategic Priorities
The EU is aware of the growing geopolitical importance of the Arctic and seeks to strengthen its presence in the region.
The updated EU Arctic Strategy, presented in October 2021, underlines the Union’s commitment to maintaining the Arctic as an area of peaceful cooperation, slowing down the effects of climate change and supporting the sustainable development of the Arctic regions.
The implementation of this policy contributes to the objectives of the European Green Deal and is in line with the EU’s geopolitical interests.
Competition: World Powers in the Arctic
The Arctic is becoming an arena for competition between the U.S., Russia, and China. Russia is actively developing the Northern Sea Route and increasing its military presence in the region.
China, which has declared itself a “near-Arctic state”, is seeking to consolidate its influence through investment in infrastructure and scientific research.
The U.S., in turn, is strengthening cooperation with allies such as Canada and Finland to counter the growing influence of Russia and China.
Iceland’s Role in EU Arctic Policy
Despite not being a member of the EU, Iceland is actively involved in shaping the Union’s Arctic policy.
Its membership in the EEA and participation in the Northern Dimension – a joint policy of the EU, Russia, Norway and Iceland – allows it to contribute to regional cooperation.
Iceland supports the EU’s efforts to ensure sustainable development of the Arctic and maintain it as an area of low tension.
Energy Cooperation
Iceland has unique potential in the field of renewable energy, especially in the geothermal sector.
More than 70% of the country's energy comes from geothermal sources, which contributes to a significant reduction in greenhouse gas emissions and energy independence.
Although geographic restrictions prevent direct export of electricity, Iceland is actively involved in international projects aimed at transferring expertise and technology in the field of geothermal energy.
In 2012, the Icelandic Energy Authority, together with the GEORG cluster, led a research program in eight EU countries, receiving a $2.6 million grant from the European Commission.
In February 2025, Iceland and Poland strengthened their cooperation in the Geothermal Synergy project, involving the exchange of knowledge and technology for the development of geothermal energy in Poland.
Initiatives such as these highlight the EU’s commitment to sustainable energy sources and position Iceland as a strategic partner in the energy transition and the reduction of dependence on fossil fuels.
Iceland’s strategic location, renewable energy potential, and deep ties with the EU make it a vital partner in promoting sustainable development, regional security, and cooperation in the Arctic in the coming years.
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