Iceland: Power Driven

Publisher Name: 
The Guardian

North of Vatnajokull, Europe's biggest glacier, lies Iceland's most
fascinating and varied volcanic landscape. Ice and boiling geothermal
infernos meet at the edges of the glacier, and then the largest
remaining pristine wilderness in western Europe begins - a vast
panorama of wild rivers, waterfalls, brooding mountains and mossy
highlands thick with flowers.

A large part of this is due to
disappear under 150m of water by 2006, when the Karahnjukar dam is
completed. Work has already begun on the $1bn mega-project designed to
power just one aluminium smelter, to be built by US multinational
Alcoa. Environmentalists in Iceland and abroad have looked on in
disbelief as the project has proceeded, sidestepping one obstacle after
another, driven by a government seemingly determined to push it
through, whatever the cost to nature or the economy.

The 190m high, 730m wide main dam, two smaller saddle dams and 53km of
headrace tunnels will be paid for by Landsvirkjun (the national power
company, owned jointly by the Icelandic government, the city of
Reykjavik and the town of Akureyri). The main dam will create a huge
reservoir, to be called Halslon, which will inundate a 57sq km swathe
of the highlands to the south before running on to the glacier itself.
The resulting hydroelectricity is contracted for sale for 50 years to
Alcoa, which is closing two smelters in the US and relocating to
Iceland as a cost-cutting measure.

August 2001, Iceland's National Planning Agency (NPA) rejected the
project on the grounds of "substantial, irreversible negative
environmental impact" - of 120 hydropower projects submitted for
approval, Karahnjukar is the only one it has opposed. Just four months
later, that decision was overturned by minister for the environment Siv
Fridleifsdottir, in a move that prompted a series of lawsuits and
raised concern about the nature of democracy in Iceland. Earlier this
year, lawyer Atli Gislasson and a group of 26 citizens brought separate
cases before the Icelandic high court and European Free Trade
Association surveillance authority, challenging the government's lack
of transparency and Fridleifsdottir's decision; both cases are expected
to be heard next month.

I joined Gudmundur Pall Olafsson,
Iceland's leading environmental activist, at Karahnjukar to see for
myself what will be lost. A charismatic man in his early 50s, Olafsson
was accompanied by 15 friends for the same "valedictory pilgrimage"
undertaken by several thousand Icelanders this summer. We gathered on
high ground overlooking the construction site. Bulldozers crawled
across the scarred sides of Karahnjukar mountain, their distant rumble
interspersed with birdsong. We could see the famous Dimmugljufur
canyon, Iceland's Grand Canyon, which will be partially destroyed by
the dam. The southern part has already been demolished and the northern
stretch, carved by the river through time, will become dry. The
dynamiting of the canyon began in March, some months before the final
finance was in place, and was broadcast on state television. "It was a
propaganda tactic," says Olafsson. "The general elections were on May
10 and the government did not want Karahnjukar to be an issue. The
message was, 'This is something you cannot stop'."

south from the site, the first part of our walk took us past
Saudarfoss, a breathtaking terraced waterfall, one of 60 that will be
lost. Last month, a farmer discovered remains nearby of a farm where
much of the action in Hrafnkel's Saga, one of the classics of Icelandic
literature, took place; archaeologists heralded this as a very
significant find. Crystal-clear waters tumbled into the grey silty
torrent of Jokulsa a Dal, the glacial river that will power the main
dam, and from there one of the largest continuously vegetated areas in
the highlands begins.

It was difficult to walk on the deep,
springy mattress of moss, grass and flowers, and the spot is so
inaccessible that few have been lucky enough to do so. This is one of
the main breeding grounds for the area's reindeer - according to Skuli
Sveinsson, a tracker, a cull of one third of the population has already
begun in anticipation of the drastic reduction in feeding grounds.
Thousands of pink-footed geese graze these uplands, a protected nesting
ground. It is also a favourite haunt of the snowy owl, ptarmigan and
the majestic gyrfalcon. Blood-red rocky gorges, vivid as raw steak,
give way to barren black sediment ledges. Moulded by glacial movement
and sensitive to atmospheric changes, the formations are a record of
10,000 years of geological and climatic change. Unique in the world,
they are of immense interest to scientists studying, among other
things, global warming. Specialists fear there is not time to unlock
even some of their secrets. Passing rapids of unimaginable violence, we
find the imposing stone head, sculpted by nature, which has become a
symbol of resistance to the dam project; its image was this summer's
top-selling postcard.

The environmental impact of the project
is by no means confined to the future shores of Halslon, nor to
unpopulated areas. In summer, when the water is low, strong eastern
winds will whip up dried silt at the edge of the reservoir, blowing
dust storms over the highlands towards farms further east. The
hydro-project will also divert Jokulsa a Dal at the main dam, hurtling
the river through tunnels into the slow-moving Jokulsa i Fljotsdal,
which feeds Iceland's longest lake, Lagarfljot. The calm, silver
surface of this tourist attraction will become muddy, turbulent and

In the Herardsfloi delta, home to a significant
seal population, heavy silt deposits from Jokulsa a Dal currently
prevent the sea from encroaching on the land. Once the silt is trapped
by the new dam, fields will be flooded and two established farms - one
an eco-tourism centre - almost certainly destroyed.

The most
alarming development for conservationists, however, is the violation of
an officially protected area. One third of Kringilsarrani at the foot
of the glacier will be submerged. In a radio interview in August, Siv
Fridleifsdottir said that, in her view, "protected" did not mean "for
ever protected". Fridrik Sophusson, Landsvirkjun's managing director,
supports her decision, and tells me the government "has the right to
change such a human decision".

But many people fear that these
statements herald hydropower projects in areas that would hitherto have
been unassailable. An example is Dettifoss, the most powerful waterfall
in Europe, officially protected and one of Iceland's great tourist
attractions. Professor Gisli Mar Gislason, who was part of a government
thinktank consulted on proposed power projects, says, "Landsvirkjun
intends to divert Jokulsa a Fjollum, cutting off the water to Dettifoss
for most of the year but turning it on for the tourist season."

believes the government's determination to start the project was
strategic. "It was the most controversial hydropower plan on the table.
The reasoning was that, if they could force Karahnjukar through, they
could get away with anything. It's already happening: in September, the
minister for industry overruled an environmental impact assess ment and
gave the go-ahead for a project on the Thjorsa river that will inundate
part of a protected area - a project that had already been rejected by
the local authority."

Iceland is small - the population numbers
around 290,000, and just 63 MPs constitute its parliament. A handful of
individuals and families, colloquially known as "the octopus", exerts
disproportionate power and influence. Writer and social commentator
Gudbergur Bergsson says, "Iceland is unique in being 80% middle
class... the easiest class to control, because they have the most to

There have been some grand gestures by individuals: this
summer, poet and activist Elisabet Jokulsdottir grabbed the microphone
during a domestic flight over Karahnjukar, giving passengers an
impassioned lecture on the dam project. But there is a lack of cohesion
and strategy when it comes to wider protest. A small grassroots
movement has regular "speak-outs" and demonstrations in Reykjavik,
drawing up to 1,000 people, but Icelanders are gentle and peace-loving
(Iceland has no military). Its protesters would struggle to orchestrate
the kind of action and concentrated opposition that halted construction
of the Santa Isabel dam in Brazil.

While much of the developed
world is busy dismantling dams, transplanting its heavy industry base
to the developing world, the people who govern Iceland hold fast to
their dreams of an industrialised nation. David Oddsson, the prime
minister and leader of the Independence party, has been in power for 12
years and is revered, feared and hated in equal measure. With Halldor
Asgrimsson, leader of the Progressive party, he heads the ruling
rightwing coalition. The opposition comprises a centre-left coalition
with 20 seats, five Left-Greens and four Liberals.

is officially the responsibility of the ministers for industry and
environment, appointed in 1999, but many Icelanders doubt their ability
to participate in informed debate on the relevant issues. Certainly
their CVs are not reassuring: in charge at the ministry of industry and
commerce is Valgerdur Sverrisdottir, whose only paper qualification
seems to be an English as a foreign language certificate awarded in
1972. Siv Fridleifsdottir, minister for the environment, is a qualified
physiotherapist. Neither minister cites any parliamentary or other
experience relating to their portfolios. When I requested an interview
with Fridleifsdottir, I was redirected to Sigurdur Arnalds, described
as "the government's finest expert on the Karahnjukar project". Arnalds
is Landsvirkjun's head of PR. (This is like being redirected to
Alastair Campbell as the British government's expert on the war with

Fridrik Sophusson, a former minister of finance in
Oddsson's cabinet and now Landsvirkjun's managing director, clearly
shares the ruling elite's appetite for mega-projects. Now 60, he
recalls the days when Iceland was impoverished and patronisingly known
throughout Scandinavia as "little Iceland". Today, it is one of the
most affluent nations in the world, having exploited its natural
resources, mainly fish, and Sophusson reasons that hydropower is a
logical step towards economic diversification. He dismisses
conservationists as "romantic".

Iceland's neighbours are not
impressed: lamenting its "democracy deficit", the Swedish Gothenburg
Post recently described Iceland as "a pariah among Nordic nations" for
its disastrous environmental policy, which it called "war against the

The government's utilitarian attitude would make more
sense if the dam project was in any sense viable. Its rationale is that
the dam and smelter will revitalise the local economy by creating jobs
in the eastern fjords and reversing the current depopulation trend. But
the area has little unemployment, and few Icelandic youngsters would be
tempted by the harsh conditions of the highland construction site or
one of Alcoa's 400 or so jobs. The two existing smelters in Iceland
have been obliged to import cheap foreign labour from eastern Europe.
The environmental damage caused by both smelter and dam looks set to
prompt a further exodus.

Aluminium smelters emit enormous
quantities of greenhouse gases. In 2001, super-clean Iceland was able
to negotiate a 10% increase in permitted emissions under the Kyoto
protocol - the biggest increase in the world. In effect, Alcoa is
buying Iceland's licence to pollute, as well as cheap electricity. The
ministry of environment also gave Alcoa a licence to emit 12kg of
sulphur dioxide (SO2) per tonne of aluminium produced - 12 times the level the World Bank expects from modern smelters. SO2;
and fluoride, the most dangerous pollutants in terms of public health
and land damage, will be pumped directly into the air via giant

Local opposition is limited. Gudmundur Beck, 53, is
the lone voice of resistance in Reydarfjordur, the eastern fjord where
the Alcoa smelter is to be built. He has lived in the fjord all his
life, but his farm will be decommissioned once the smelter opens in
2007. He believes that local people have been won over by a
concentrated spin campaign: "Landsvirkjun has spent millions of krona
on PR in this area, particu larly on the radio." Thuridur
Haraldsdottir, a local sailor's wife, is so enthusiastic that she has
had her car number plate re-registered to read Alcoa.

Landsvirkjun concedes that the Karahnjukar project will not be
sustainable, and that the heavy silt content of Jokulsa a Dal will
eventually fill the reservoir. Expert opinion is divided only on how
long the dam will remain operational. Estimates range from 50-400
years. But Landsvirkjun does not generally welcome adverse scientific
findings. Many geologists fear catastrophic flooding may result from
regular glacial surges and eruptions in Karahnjukar's catchment area.
They also question the consequences of building a colossal dam on a
substructure weakened by geothermal fissures. These concerns were
brought before parliament by scientists earlier this year, but the
Left-Green MP, Kolbrun Halldorsdottir, reports, "The minister for
industry advised the house that these scientists were politically
motivated and not to be listened to."

Thorsteinn Siglaugsson, a
risk specialist, prepared a recent independent economic report on
Karahnjukar for the Icelandic Nature Conservation Agency.
"Landsvirkjun's figures do not comprise adequate cost and risk
analysis," he says, "nor realistic contingencies for overruns." Had the
state not guaranteed the loans for the project, Siglaugsson adds, it
would never have attracted private finance. "Karahnjukar will never
make a profit, and the Icelandic taxpayer may well end up subsidising

In July, Barclays arranged the final $400m loan
required by Landsvirkjun, apparently in breach of the "Equator
Principles" it had signed up to only one month earlier, demanding
"sound environmental management practices as a financing prerequisite".
Barclays has denied it is in breach of this voluntary code of practice,
pointing to a "second opinion" it commissioned from Texan environmental
consultancy Stone and Webster. (Stone and Webster's report, which was
leaked, concluded, "Objection will continue from some NGOs with the
potential for some short-term negative publicity but this is likely to
diminish as the project moves forward, and can be controlled by ongoing
public relations activities.")

In 2001, the EU anti-corruption
group Greco found that "the close links between the government and the
business community [in Iceland] could generate opportunities for
corruption", and it is the closeness of these links that the government
has had to watch. This summer the police launched an investigation into
alleged price-fixing by a cartel of three oil companies, which is
proving particularly embarrassing - the director general of Shell
Iceland, one of the companies under investigation, is married to the
government's current Speaker (and a former minister for justice). The
Independence party has necessarily close links with the domestic
construction industry, which has benefited from most of the Karahnjukar
subcontracts. But the biggest slice of the cake - $500m - has gone to
Italian conglomerate Impregilo, which was awarded the construction
contract in March and is itself facing allegations of corruption in

Impregilo is currently embroiled in trials in Lesotho,
where South African consultant Jacobus du Plooy has pleaded guilty to
paying bribes of £225,000 to the Lesotho Highlands Water Project. A
decision as to whether to prosecute Impregilo alone, or together with
the two British firms also accused of corruption, has yet to be taken;
all three deny that they knowingly paid bribes. Impregilo was one of
the three principal firms contracted to the notorious Yacyreta dam
project in Argentina, which overran its projected costs by billions and
was subject to financial scandals throughout its construction. It was
also part of the consortium planning to build the Ilusu dam in Turkey
which, had it gone ahead, would have made 30,000 Kurds homeless and
drowned the world historic site of Hasankeyf.

When I asked
Sophusson if he was aware of the corruption charges faced by Impregilo,
he referred to an established culture of corruption in Africa and Asia
as a "cost". While he is not in a position to comment on Impregilo's
business practice, he was candid about Iceland's past experiences.
"Twenty years ago we had to bribe officials [in order to export] fish
to Nigeria," he said. "It was even stated on bank statements. It's a
cost we have to pay, and it's much better to be without paying." He
was, however, quick to emphasise that "we are not taking money from
Impregilo" - a question I had not asked.

Impregilo was the only
company to bid below the consultant's estimate for the job, and
substantially below its competitors in the final round. Asked about the
procedures involved, Sophusson volunteered the information that, in the
end, Impregilo's was "the only serious bid remaining... and we were a
little nervous about that". He may have good reason to be nervous, too:
Impregilo employs some of the best lawyers in Europe and has negotiated
1,100 exemptions in its contract - all of which are believed to leave
Landsvirkjun liable.

In Megaprojects And Risk, published
earlier this year, the Danish economist Bent Flyvbjerg examined
hundreds of multibillion-dollar mega-projects across five continents.
Promoters of mega-projects, Flyvberg and his co-authors write,
characteristically "misinform parliaments, the public and the media in
order to get projects approved and built", with "the formula for
approval an unhealthy cocktail of underestimated costs, overestimated
revenues, undervalued environmental impacts and overvalued economic
development effects".

It is too early to say whether
Karahnjukar qualifies as such a project but, according to Flyvbjerg,
the financial ramifications of such projects can "hinder the economic
viability of the country as a whole". This is something that deeply
concerns Thorsteinn Siglaugsson. "State-sponsored, unprofitable
industries harm the economy in general," he says. "That is why the USSR
went bankrupt." Siglaugsson fears that a boom during the construction
period, with attendant high interest rates, will be followed by a
recession. He knows of several Icelandic manufacturers who are already
planning to relocate abroad.

Polls show the nation to be more
or less divided on the subject of Karahnjukar. But how well-informed
are Icelanders? Many journalists speak of a media that is controlled
both directly and indirectly by the state. In August, the BBC World
Service lost its slot on Icelandic airwaves just as minke whale-hunting
was resumed after a 14-year ban. Veteran broadcast journalist Omar
Ragnarsson told me how he ran into trouble when he reported "both
sides" of the Karahnjukar debate on national television - "There were
calls for me to be fired." In order to make a "rational" film about
Karahnjukar, he has sold his flat and jeep to finance it independently.

Dr Ragnhildur Sigurdarsdottir, a highly regarded environmental
consultant, apparently fell foul of Landsvirkjun last autumn over a
report she had been commissioned to write on the Thjorsa hydropower
project (the report was commissioned by VSO, a consultancy contracted
by Landsvirkjun). "I was asked to falsify my report to justify the
larger-scale power plans Landsvirkjun wanted," she maintains. "When I
refused, it was altered anyway." She went to the press with her story,
and almost immediately, she says, found herself out of work. "All the
jobs I had in the pipeline were cancelled overnight." Landsvirkjun
dismisses Sigurdarsdottir's allegations as "unsubstantiated". "She was
unwilling to name the individuals she was accusing," saysSophusson,
adding that every employee who had contact with Sigurdarsdottir has
"signed and published a declaration that these grave allegations were
totally unfounded".

The "blue hand" is a slang term for the
shadow of influence the Icelandic ruling elite ("the octopus") casts
over the individual. Myth or reality, it is an effective force,
ensuring self-censorship and caution. Professor Gislason maintains that
Sophusson has telephoned him on several occasions, asking him to
reconsider his well-publicised opposition to various hydropower

The Icelandic Nature Conservation Agency, in
association with the International Rivers Network, recently produced a
highly informative brochure about Karahnjukar for which it commissioned
several independent studies. The result was a coalition of 120
international NGOs - including WWF and Friends Of The Earth - actively
campaigning against the project in June 2003. But the government seems
to care little for world opinion, as its resumption of whaling
demonstrates. Sophusson represents the view of many nationalistic,
conservative Icelanders when he mimes squashing a bug under his shoe
and says, "Nobody does this to Iceland." Tourism is the fastest growing
sector in the economy, the fishing industry the largest. Both stand to
be significantly affected if Iceland and its products are boycotted as
a means of global protest, as they were during the resumption of
whaling in the 1980s. Already, the tourist board speaks of "hundreds,
if not thousands" of potential cancellations as a direct result of the
whaling controversy: 80% of tourists go to Iceland to experience what
the government markets as "unspoilt nature". In a sense, that nature is
part of the world's heritage and little has been known about the
wholesale destruction about to take place in Karahnjukar and other
parts of the country.

What could stop what poet Jokulsdottir
describes as "a handful of men imposing their destructive dream on a
nation which seems half-asleep"?

For writer Gudbergur Bergsson,
the key lies in the national psyche. Icelanders, he says, are political
fashion victims, heavily under the spell of the US and oblivious to
criticism from activists at home. "What they perceive as 'in' right now
is globalisation, so they want to be part of that," says Bergsson,
adding that Icelanders hate to look ridiculous. "If the international
community can show them how truly ridiculous it is to destroy nature,
the very thing they love most, for one aluminium smelter, they may
start to think for themselves. They might finally have the guts to
speak up and tell their dictatorial government how absolutely they have
got this wrong. You have to shame us into change."

AMP Section Name:Natural Resources
  • 183 Environment