During the dark days of 2008 as its banking system and economy was collapsing, the cash-strapped government of Iceland asked the United States for a $1-billion loan, according to a WikiLeaks document.
According to U.S. diplomatic cables, in October 2008, Iceland's central bank governor, David Oddsson wrote a letter to Timothy Geithner, then president of the U.S. Federal Reserve Bank of New York seeking a loan of a medium term maturity, preferably in an amount of $1 billion.
As you are no doubt well aware of, the Icelandic banking system has now shrunk significantly, Oddsson wrote.
The American embassy in Iceland’s capital Reykjavik recommended that Washington provide such a loan, arguing that the desperate island nation would seek out Russia for help.
U.S. officials in Iceland were apparently concerned that if Iceland took cash from the Russians, Moscow might seek to use the former U.S,. air bade at Keflavik or get access to Iceland’s offshore oil and gas fields.
Carol van Voorst, the American ambassador to Iceland, told Washington officials that we have long-term national interests in the North Atlantic that a negative response would jeopardize. It may be more important than we can yet suppose to have the Icelanders remember us as the kind of friend who stands by in fair weather and foul.
(Iceland did indeed seek a $5.4-billion euro loan from Russia, but failed to secure it).
The U.S. also did not grant the loan to Iceland, which eventually received a $2.1 billion loan from the International Monetary Fund, and billions more from other countries.
Palash has worked as a business journalist for 21 years in New York.