Iceland - When economics meets environment
Karahnjukar Hydro Electric Project

In Iceland it is easy to be environmentally correct. The country has a small population, large tracts of uninhabited land, almost no polluting industry, and the ability to live off geothermal and hydroelectric power without using fossil fuels except for automobiles. The lack of natural resources also means that there is very little to export except for products that come out of the ample surrounding ocean. You cant export hydro-electricity if you are an island nation. The next best option is to bring in industries that are thirsty for electricity. That has set economics and environmental issues on a collision course like everywhere else in the world. The Karanjukkar hydroelectric project is building a dam across two glacial rivers Jokulsao a Dal and Jukulsa i Fljotsdal flooding a remote part of the already remote Eastern Highlands. The power from the project will be used exclusively by the American aluminum company Alcoa in nearby Reydarfjordur creating jobs in an economically deprived area dependent mostly on fishing. The week before I got there angry environmentalists had camped out near the site and chained themselves to the construction equipment to protest the dam.

I cannot comment on the issues as I had not researched them. But to my untrained eye it looked like in the barren, desolate, cold, windswept, mountain side and valley that was being flooded there was really no life to protect – no trees, no animals, no plants, not even grass, or birds. The nearby town of Reydarfjordur, population 650, could do well with the 1000 new jobs expected to be created.

The dam is being constructed by the Italian company Impreglio and we are guests of some engineers working on the project. It is the fourth largest, earth fill dam in the world, possibly at the highest elevation, and definitely the one closest to the north pole. Nothing screams globalization like what I see here. The project site is one of the most remote, desolate, barren, and inhospitable work locations I have been to. All of a sudden it has created a new reverence inside of me every time I flick a light switch because I realize that someone gave a big chunk of their working life, living on a harsh project site to pipe electricity into my house. Toiling away on the project site are professionals from 43 countries. In the club house and dining halls I hear Icelandic, English, Italian, Chinese, Portuguese, Hindi, Urdu, Russian, Spanish, Arabic, French, Nepali, Malayalam. To my delight there is even a Malayalam speaking procurement specialist called Babu from the Indian town of Trissur where my parents live. We unleash verbal volleys in the machine gun style rapid fire exchange of our mother tongue. “Babu, ivade vannu yetra kallum aayi?”

During a visit to the restricted construction site I stand in awe outside the cavernous water intake tunnel. The tunnel will be submerged below the waters and carry massive quantities of water down a 500 foot drop to the bottom of the mountain that will power the giant turbines. Emerging out of the tunnel driving various kinds of earth moving equipment in an ant like fashion are workers of various nationalities, a lot of them Chinese. I am told that there are over 300 Chinese working on this project. Given the number of hydro-electric projects in China it is one of the best sources of skilled workers experienced in operating complex dam construction equipment such as tunnel boring machines. The Chinese ambassador to the region is visiting the project site to acknowledge their contribution and the Chinese flag is flying on the flag mast outside the dining hall. I had always imagined the Chinese economic power to mean simple things like the toys in Toy’R Us to be manufactured in Guangdong or the washing machines in Circuit City to come from Shenzhen. In more complex examples it meant to me that US Government bonds are being increasingly held by Chinese investors and that the Baltic Shipping Index is at an all time high because the Chinese are buying up all available shipping capacity. But this is stretching the limits of my imagination. Globalization is at work in remote eastern Iceland highlands unseen by the editors of The Economist and the Wall Street Journal. Chinese labor working for an Italian company is generating Icelandic electricity to fuel an American aluminum plant to boost the Icelandic economy. This would make the editor of Mother Jones spill his coffee in outrage.

To beat the loneliness and monotony of the project site the project team has found interesting deviations. The Indians, Pakistanis, and the Nepalese have a cricket club and I am invited to join a game. It is a surreal sight to be playing cricket at 10PM at night under the artic sun, in the shadow of a glacier, in cold windswept conditions, close to the artic circle. The founders of the game had intended the game to be played during the English summer wearing white flannels on a grassy field with a break for tea. Later they exported the game to their warm tropical colonies. But Wisden would never have thought that the sounds of “Howzaat” would be heard near the north pole.



Late at night, after a post-game chat session with some of the cricket players, I am trying to find my way to the guest rooms reserved for us in one of the living quarters, I stumble across a raging party. The gym where I had exercised earlier is now the scene of strobe lights and dance music. The people working on the project are kicking up a fuss on the dance floor. Two young men, who look to me of Latin American extraction and in their twenties stop to chat with me. They tell me that the party is hopping but there are not enough girls to dance with. Apparently, they had invited the “Sodexho girls” – the Icelandic girls who work for the catering and cleaning services contractor Sodexho on the project site. But most of them did not show up. I reassure them that some problems are universal. Their friends attending parties at the Copacabana in New York city or the Velvet Lounge in San Francisco would be bemoaning similar gender ratios at their parties. I encourage them to get back on the dance floor and work their salsa, mergengue magic.

(photo credit: Iceland Tourist Board, Linknot.com)

Iceland - Fire and Ice
Volcanoes, Glaciers, Farms

The power of nature and the magnificence of a land being actively shaped is most visible to me as I circle the island along the ring road, leaving from Reykjavik and driving along the south coast from west to east.

Driving past the moody volcano Hekla, ‘the hooded’, almost always shrouded in clouds and the horse-breeding area of Hella we are headed to Fellsmork. Sigurlaug “Silla” Gudmundsdottir, a friend of Pramod’s has invited us to stay in her summer house. Tucked away in beautiful settings around the island these are popular getaways for all Icelanders. Silla’s summer house is a cozy wooden cabin tucked into a fold on a mountain side. It is off the grid and has no electricity, running water, or telephone. The soft light of Icelandic candles adds to the soothing effect although the artic summer nights don’t need me to light them till close to midnight. Looking out of the bedroom window you can see the giant Myrdalsjokull, Iceland’s fourth largest icecap. Tongues of ice extend down from the glacier and the melt water streams converge into a roaring river to the right of the cabin. From the living room I look out to a vast glacial pain, flat as a pancake, fringed by a black sandy beach deposited by volcanic activity in the past. Just beyond sit the icy cold waters of the North Atlantic ocean with a jelly like constituency. And in the middle of the flat plains is a small mountain shaped like a loaf of bread sitting all by itself. It makes you scratch your head wondering what geological activity could have caused this formation. I conclude that one of the lesser gods must have been hurrying back from the grocery store when he dropped a loaf of bread which fell to the earth and turned to stone.

As we drive into south eastern Iceland the next day the most dominant geographic feature is the Vatnajokull icecap on the left. It is the third largest in the world after Antarctica and Greenland. Huge glacier tongues reach menacingly down the steep-sided valleys towards the sea. The road winds its way through a sandur - flat sandy plains of glacial deposits. The most dramatic of these is the Skeidararsandur that stretches some 25 miles between icecap and ocean from Nupustadur to Oraefi. The scene is one of a flat deposit of black volcanic gravel, sand, and silt, fierce winds, and fast flowing glacial rivers the color of beer. Travelers on bicycles pedal furiously across the bleak stretch to getaway before the winds whip up a stinging cloud of talcum powder like sand dust. The Sandurs are a result of Jokulhlaup – glacial floods. The Vatanajokull icecap actually sits on top of an active volcano, Grimsvatn, and acts as a tight lid. Occasionally Grimsvatn erupts in anger as it did in 1996 shooting a six mile column of steam. The ice began to melt creating a massive lake trapped under the icecap. Scientists waited with bated breath. Over a month after the eruption had started, the trapped lake lifted the entire icecap, peered out from below towards the faraway ocean, and drained in a massive Jokulhalup releasing 3000 billion cubic feet of water in just a few hours. A river, five times the volume of the Amazon, flowed towards the Atlantic ocean dragging with it icebergs the size of multi-storey buildings, snapping bridges and roads along the way like matchsticks. It was Iceland’s natural fire and ice show at its best.

Things are a lot mellow now as we approach a bend in the ring road and see luminous blue icebergs floating in a lake right next to the highway in Jokulsarlon (Glacial River Lagoon). The lagoon is a crammed with icebergs with interesting shapes creating an arctic scene. It is a breathtaking scene that has also drawn James Bond to film “Die Another Day” and Angelina Jolie to film, “Lara Croft: Tomb Raider”.

Iceland can also present a stark scene with almost no trees anywhere. It is so bereft of trees that when I drive past Hallormsstadur what I see is a small collection of native trees – dwarf birch, mountain ash, and Alaskan poplars - reminding me of the wooded area behind my old house in North Carolina. I am told that this is the Icelandic forest. Icelanders flock here over the weekends, to camp in a quiet forest and throw raucous parties in the night.


The best person to tell me about Iceland’s lack of trees is Haraldour “Hallie” Antonson. Hallie is Pramod’s landlord and neighbor who has invited us to visit his farm house in Lambleikstadir near Hopn. He used to work in a soil conservation and tree planting program for the forestry commission and now spends his retired life during the summer months on the farm raising horses. Hallie walks me through his farm with his sheep dog Loki sniffing my travel worn shoes picking up foreign scents. The horses look at us briefly with a snobbish half-interest before going back to their grazing. The grandkids Karin, Byarki, and Egitl are building a house and campfire under the watchful eye of their German nanny Kathleen who speaks no Icelandic. But that is no hurdle for the kids who communicate naturally and un-selfconsciously as children do and get what they want. Kathleen, herself is a well worn traveler, who although in her 20s tells me tales from Mongolia, the Trans-Siberian express, riding in army trucks across Afghanistan, and biking down the ring road of Iceland.

The Sagas record that when Iceland was discovered it was covered by trees from seas to the mountains. If that were indeed true the early inhabitants did a pretty efficient job cutting down the trees for fuel and allowing their sheep to finish up by devouring young shoots. Hallie explains to me that sheep are super efficient destroyers of vegetation, if grazing is not managed, chewing plants and young shoots down to the roots and leaving the underlying soil vulnerable to erosion by water and fierce winds. Once the top soil is blown away it is almost impossible to restart vegetation. The reforestation program has been quite successful and new clumps of trees are beginning to dot the country. I explain to Hallie proudly that my grandfather was a rice farmer in a village called Chittliencherri in Southern India although his total landholding was the size of a couple of football fields. I ask Hallie about the size of his farm and he waves to the distance towards the Vatanajokull icecap where his farm ends. I had read that the lack of humidity in the Icelandic air makes everything much closer than it is. I realize with a gasp that Hallie’s farm which has four adults and three children is about the size of my home village Chittilencherri itself where 20,000 people live and farm. Standing on a mound we spot a group of sheep grazing in the distance that had strayed over from the neighboring farm. “Woof, woof “ barks Hallie pointing them out to Loki. “Woof, woof” responds Loki excitedly as he spots the sheep. Curling himself into a tight ball, he explodes into a charging, sprint towards the sheep. From a mile away they smell danger and scatter clumsily in different directions towards their farm in a fine demonstration of sheep dog skills. “Yau (yes), Yau”, Hallie,acknowledges proudly.

(Photo credits: Iceland Tourism Board)

Iceland - Sticker stock in Reykjavik and touring the Golden Circle.

Why everything is so expensive and how Icelanders manage to live here is not so clear. Of course island nations from Tahiti to Iceland have to deal with importing most everything from somewhere else. Other than fishing, some cattle raising, and plenty of energy from geothermal and hydroelectric sources Iceland has to depend on other countries from produce to cars and computers. Add a hefty 25% tax on goods and cost of living can be frightfully high stripping clean your precious US dollar travel budget.

My simple comparative economic analysis makes it all very clear. A no frills meal at Shalimar, a down to earth, Indian-Pakistani restaurant costs $100 for three. A similar dinner at the Shalimar in downtown San Francisco (same name, similar food, similar ambience, similar Pakistani owners) would cost $45. As the average price for a gallon of gas in the US crossed $2.20 it set off a flurry of angst ridden calls on radio talk shows. In Iceland I pumped gas for $6.43 a gallon. I checked out the most trusted of benchmarks that The Economist uses everywhere in the world – the health-unconscious Big Mac. The MacDonald’s in Palo Alto, California serves it up for $2.90. The MacDonald’s in Aukereryi, Iceland will hit you for $7.40.

So how do Icelanders cope on what looks to me like modest salaries I ask many people. The explanations I get leave me unconvinced. Many people live off two or more jobs. Living off credit cars and other forms of debt are common. That sounds like a reasonable short term solution. I am baffled about how this model has been sustained over the years.

The economy is tiny, compact, and quaint. The Iceland Stock Exchange trades 15 stocks, Market capitalization is at $22 billion thanks to a threefold rise in three years making it one of the hottest but mite-sized markets in Europe. The market rose a stunning 58% in 2004 alone. Nevertheless the market is thin with seven companies accounting for 71% of the total equity trading last year. The big three – Iceland’s three largest banks – alone have assets three times the GDP of the country and account for two-thirds of market capitalization.

What makes Iceland really, really interesting lies outside Reykjavik and its stock exchange. Pramod and Aroma, an Indian family living in Iceland indulge me by driving full circle around the island over a few days. I have never met them before and only had a few email exchanges after an introduction through a mutual acquaintance. Their hospitality for a complete stranger leaves me very touched. Their Icelandic friends in turn extend their hospitality by inviting us to stay in their homes, summer houses, farms, and guest rooms. Add to that the delight of a precocious five year old called Vibhu with intelligent questions and jokes delivered fluently in three languages – English, Malayalam, and Icelandic – and I had the trip of a lifetime. By the end I am chanting nursery rhymes in Icelandic, “Ullen, Thullen, Thol, Pike, Pane, Gol…..”

Iceland and Greenland urgently require a name swap. Iceland is actually quite green with endless rolling hills and green plains. Greenland, as I flew over it, looked formidable and forbidden with its huge desolate snow plain, scarred by mighty glaciers, massive icebergs creaking in the ocean, and soaring snow covered peaks. Although massive compared to Iceland the frozen plains of Greenland are a land of snow and silence and home to only 56,000 people and some polar bears, reindeer, and artic foxes.

Iceland also needs a giant construction sign over it. Sitting on top of active volcanoes and geothermal hotspots, you almost want to check the weather report before venturing out in case your day is interrupted by rattling earth, stampeding lava, or showering ash. As recent as 1963 a volcano erupted in the waters off Iceland. TV cameras hovered overhead and people around the globe watched in fascination on television the creation of a brand new island called Surtsey named after the Norse God Surtur who has the duty of setting fire to the earth at the end of the world.

Vestmannaeyjar (the Westman Islands) is one of the friendliest places in Iceland due to its relative isolation; Vestmanaeyjar was hosting an annual festival the weekend I arrived in Iceland. The festival sounded like a cross between Burning Man and the Bonnaroo festival. One night in 1973, a volcano erupted on the island spewing 30 million tones of lava over the town of Heimaey. TV viewers around the world watched the chillingly compelling and morbidly fascinating footage of residents fleeing their homes against a background of angry, boiling lava.

Most visitors to Iceland will experience its natural beauty as they drive around the golden circle close to Reykjavik. Just outside the airport the Hitaveita Sudurnesja geothermal plant uses superheated water pulled out from a over a mile below to produce electricity. The water is then piped into one of Iceland’s most visited attractions – The Blue Lagoon. Throngs of tourists bob around in the waters wearing masks of silica. The eponymous lake gets its name because of its surreal pearly blue glow under a hazy, steamy pall created by the steam rising from the piping hot water into the frigid air. At Thingvellir, you can see the 2.5 mile gap between the European and North America tectonic plates. The gap is widening by about two inches each year as America and Europe drift away from each other tearing apart the heart of Iceland. Pingvellir is also the site of the Althingi, the Viking parliament from 930 AD. The Vikings had a fairly, sophisticated parliamentary process for far-flung settlements that gathered here once a year to settle disputes and ratify laws. Even as the rest of us were still clubbing each other to death over issues like “your cow strayed into my pasture”.

A little beyond is the community of Geyser with the original Geysir discovered in 1294 that can spout scalding hot water 250 feet. Every other Geysir in the world derives its name from the original one here. Alas, Geysir stopped spouting in the 60s after being bunged in by rock, dirt, and soap tossed in by tourists trying to set it off. Now it only comes to life after an earthquake and so the last spout off was in 2000. But right next to it is the little cousin Strokkur (the churn) which erupts faithfully every 10 minutes as the geothermally superheated water and steam trapped in a fissure and seeking an escape blasts out the cooler water on top shooting up about a 100 feet. The Golden Circle rounds off at Gullfoss, Iceland’s most photographed waterfall, where the Hvitao (white) river tumbles 90 feet into a steep canyon kicking up a fuss and lots of spray creating shimmering rainbows over the gorge. The falls almost disappeared in the 1920s when the Government accepted a proposal from investors to dam the river for a hydroelectric project. The landowner Tomas Tomasson refused to sell and his daughter Sigridur Tomasdottir walked all the way to the capital in protest and threatened to throw herself into the falls. The Government ignored her anyway and approved the project. Sigridour stayed dry on the side of the waterfall. The investors defaulted on the lease. The Government canceled the project. Where environmental activism did not triumph basic economics did – no pay, no way. The laws of economics are immutable even in Iceland, even if they are inconvenient.

Iceland – Small place, Big Soul

Iceland is a small pace with a big soul. It is designed to startle you all the time. Driving out of Keflavik airport you pass a barren lava field that looks like a lunar landscape. Steam hisses out from geothermal springs underground reminding you that this is a land forged literally out of fire and ice. It is also frightfully expensive and can suck up your devalued dollars out of your wallet like an industrial vacuum cleaner. A 20 minute cab ride from the airport to the center of Reykjavik the capital will set you back $150. Dotted by steaming lava fields, icecaps, glaciers, hot pools, and geysers, the Icelandic landscape has an elemental rawness that makes you aware of the awesome creative power of the earth. Reykjavik, the northernmost capital in the world has a raging nightlife earning it the title of the coolest capital of Europe

Iceland has always held a fascination for me. Tom Clynes had written in the National Geographic about a dramatically lit, ghost-brown place, peppered with lava flows and geysers, populated by farmer-poets and fair beauties. He called it the last great wilderness in Europe with no castles or palaces.

But Icelanders have a strong sense of history and myth woven through the Icelandic sagas. Written by anonymous authors between 1200 and 1400AD, these stories are a mix of real life incidents and glorious exaggerations, that Icelanders use as a key to comprehending their extraordinary environment, their countrymen, and themselves. The sagas are all wild eyed tales of Viking valor and treachery, love and destroyed hopes, soaring heroes and brutal violence. Romantic, fairly tales they are not. Impossible epics of gore, grit, and greatness they are. The Grettis Saga, for example, is the tale of a superhuman outlaw, Grettir the strong, who was on the run for 20 years. Armed with a sword and reciting poetry he roamed the land, plundering travelers, helping widows, and had an occasional tryst with saucy farm girls and the daughters of a giant. In one episode he has an argument with a farmhand named Skeggi which ends when Grettir strikes Skeggi with Skeggi’s own axe through to his brain. He finally holes up on the tallest peak on Dragney island and lives there for several years. The saga ends when local farmers who wanted him to leave storm his hut and with Grettir’s own sword cut off his head

With only 270,000 inhabitants – less than a third of the population of San Francisco living on an island the size of Kentucky - Iceland has emerged as a high-tech welfare state with one of the highest standards of living in the world. Iceland sits remote and mysterious just a few hundred meters south of the Arctic Circle. The sun never sets in the summer and people live in daylight for 24 hours. During winter there is almost no sun and most of the day seems like night. When he is told to get ready for bed, a common question I hear from Vibhu, my host’s five year old is. “Is it night or day?” As far as he can tell, it is bright outside, and he could be out there still playing with Hringur, Byarki, and Ulli.

Reykjavik is small, compact, and very walkable. Modern buildings with interesting architecture live in peace with clapboard house that feature colored tin roofs. Although a small town by world standards and a teeming metropolis compared to other Icelandic towns (Akureyri, the next biggest has 15,000 people) it is packed with restaurants, cafes, museums, theaters, and music venues. The feel is that of an upbeat, fashionable, expensive, youth-oriented small city with a vibrant, art, culture, and music scene.

Reykjavik has an ultra-trendy club scene earning itself titles like the capital of cool and the hippest city on the planet. The nightlife rages mostly around Laugavegur street. On Friday and Saturday nights all the impossibly good looking people in Scandinavia seem to have received the big summons for The Runtur, the great Icelandic pub crawl where party goers go from club to club with names like NASA, Pravda, and Hverfisbarinn progressively getting louder and less inhibited. The Sun is a natural ally. Even at 3AM, Laugavegur street can feel like an Icelandic Times square on New Year’s eve. Why go home yet because the Sun has not set for three months now?

Every Icelander you meet in a bar seems to either perform in a band, writes songs, or is otherwise connected to poetry, writing, or art. Iceland publishes the greatest number of books per capita in the world. And this is the land that gave birth to Bjork, Sugarcubes and Quarashi.