The Financial Feud Follows the Fish of Fury

For almost forty years, the United Kingdom and the Republic of Iceland have had a peaceful co-existence along the North Atlantic. The infamous Cod Wars - a parody of the term Cold War possibly emanating from the British press - that began in the 1950's, may rekindle their vicious feud because of the current financial crisis. There is a history of animosity between these two countries that could transform the latest exchange of insults between their Prime Ministers into another round of conflict similar to the Fish of Fury they engaged in almost 4 decades ago.

Iceland has declared bankruptcy, and its internet Bank Icesave had been closed. The UK sought assurances that equal treatment of British investors would be honored via a legal agreement. But Iceland was not prepared to compensate these investors; seeking to protect its domestic savers first. In retaliation the British Government iced all the assets of Icesave's parent company Landsbanki in the UK. Prime Minister Gordon Brown declared Iceland's actions to be "effectively illegal and unacceptable", while Icelandic Prime Minister Gier Haarde expressed annoyance at the UK's use of anti-terrorism legislation to seize the Icelandic Bank's assets. He feels perhaps insulted being in the same category as Osama Bin Laden.

The Cod Wars were a lot of fury over fish. It began when the new Icelandic law was implemented on the midnight of September 1, 1958, expanding the Icelandic fishery zone from 7.4 to 22.2 kilometers around the country. The rationale' was that with the diminishing fish stocks around the world, the scope for confrontation had increased, where incursions of a country's fishing fleet in the territorial jurisdiction of another - some of which being considered "protected" - would deplete the resources relied upon by the affected state. At the time, Iceland relied only on its fishing industry to support its 250,000 population. The British government did not recognize this claim on the grounds that it would set a precedent that could be followed by other nations in the North Atlantic, which would destroy the British fishing industry.

What followed was a series of confrontations at sea between British frigates and Icelandic gunboats, including tearing up of fish nets, ramming of boats, seizing of catch and countless intrusions in what became a battle of wits and endurance. The Icelanders however emerged slightly ahead. The 1958 clash was repeated in 1973, 1975, and 1976. Despite the protectionist efforts, fish stocks diminished nonetheless, and Iceland transformed its economy into manufacturing, finance and tourism. Presently, it has one of the world's highest levels of economic and civil freedoms; ranked one of the most developed country with a per capita income of over $58,000 for its 320,000 population. Fishing however, still accounts for roughly 40 % of its economy.

But just like the 50's, Iceland's response to the economic crisis is to protect its interests and its population. It does not intend to take over any of the nationalized banks' foreign debts or assets; and the domestic operation of these banks will be separated from its foreign transactions. It comes as a complete surprise to learn that the UK had invested so much money, through public and private investors, in Iceland. Should this feud escalate, we may see these two countries resurrect their old grudges and tit-for-tat petty political mischief. This is no longer just about about fish, but something "fishier". And the British government is making sure it does not slip away this time. The only thing they should avoid is formaline laced fish or melamine laced tea. Otherwise, they can bash each other to their heart's content.

Haaaarrrrwwwwwk...Twoooooooph...Ting!