VZCZCXYZ0004
OO RUEHWEB

DE RUEHRK #0205/01 1591628
ZNR UUUUU ZZH
O 081628Z JUN 06
FM AMEMBASSY REYKJAVIK
TO SECSTATE WASHDC IMMEDIATE 2818

UNCLAS REYKJAVIK 000205 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL MARR IC
SUBJECT:  Icelandic PM Halldor Asgrimsson to Leave Post; 
Progressive Party in Trouble 
 
REF:  Reykjavik 196 
 
¶1. (U) Summary:  In a move apparently designed to 
resuscitate his party's hopes of surviving 2007 
parliamentary elections, Halldor Asgrimsson announced 6/5 
that he would resign both as Icelandic Prime Minister and as 
Progressive Party (PP) Chairman.  The dates for his 
departure remain unclear while the governing PP-Independence 
Party (IP) coalition ponders options for shuffling the 
cabinet and while PP stalwarts duke it out for leadership of 
a party in crisis.  One thing is sure:  FM Geir Haarde will 
be Iceland's next PM.  Iceland's foreign policy will likely 
continue on its current liberal internationalist course, but 
a new Foreign Minister - as yet unnamed - could potentially 
appoint a new defense negotiator to replace Albert Jonsson. 
End summary. 
 
----------------------------- 
Problems for the Progressives 
----------------------------- 
¶2. (U) Following a mysterious press leak and several days of 
feverish speculation, Prime Minister Halldor Asgrimsson (PP) 
told a press conference June 5 that he would resign his 
government post in the coming days and his party 
chairmanship at the next Progressive Party conference.  He 
announced that the PP Vice Chair, Minister of Agriculture 
Gudni Agustsson, would also give up his party post; and 
touted Finnur Ingolfsson, a former PP minister of industry 
who now runs an insurance company, as his (Asgrimsson's) 
preferred party successor as well as a potential Minister of 
Finance. 
 
¶3. (SBU) While Asgrimsson, PM since September 2004, thus 
symbolically accepted responsibility for his party's poor 
performance in May 27 municipal elections (reftel), his 
noble gesture backfired in some quarters, as: 
 
-- Agustsson, who remains popular especially with the 
farmers who make up the PP's base, had second thoughts about 
stepping down, indicating he instead might prefer to succeed 
Asgrimsson as leader; 
 
-- Ingolfsson came under intense criticism from opposition 
politicians and media who recalled his reputation for 
cronyism and corruption while in public office in the 1990s; 
and 
 
-- PP rank-and-file objected to Asgrimsson's attempt 
effectively to choose his successor personally rather than 
permit selection by the membership at large. 
 
¶4. (SBU) Ingolfsson evidently read the tea leaves and, 
within days, announced he would not seek leadership in the 
PP.  Intense speculation continues in Reykjavik as to 
whether Agustsson is rightly Asgrimsson's heir.  Minister of 
Industry and Commerce Valgerdur Sverrisdottir (PP) said 
publicly that she thought not, thus incurring the wrath of 
self-appointed party unifiers but articulating the worries 
of the many who view Agustsson, with his archaic Icelandic 
and equine policy focus, as not up to the job.  Other 
contenders for the chairmanship include Minister of Health 
Siv Fridleifsdottir, who is also a former Environment 
Minister and known to be fiercely ambitious; and MP Jonina 
Bjartmarz, an experienced lawyer repeatedly passed over by 
Asgrimsson for ministerial slots - a history that led to a 
PP gender gap.  Bjorn Ingi Hrafnsson, Asgrimsson's protege 
and new Reykjavik City Council Chairman, is considered not 
yet ripe for the party chairman's job. 
 
¶5. (U) A decision on Asgrimsson's PP successor will go to a 
party conference originally scheduled for spring 2007, moved 
to fall 2006 as the party contemplated last month's 
disappointing results, and now tentatively scheduled for 
this summer as the party scrambles to restore order to its 
feuding ranks. 
 
------------------------------ 
Opportunities for Independence 
------------------------------ 
¶6. (SBU) In accord with the IP-PP 2003 coalition agreement, 
Asgrimsson's resignation puts the IP Chairman, now FM Geir 
Haarde, in the PM's chair.  As ministers have been tied up 
the week of June 5 hosting a Council of Baltic Sea States 
summit, the Government announced that the consequent cabinet 
reshuffle would not take place until the week of June 12. 
Reykjavik's rumor mill has meanwhile gone to work 
speculating on the likely replacement for Haarde at the 
Ministry for Foreign Affairs. 
 
¶7. (SBU) FM possibilities include: 
 
-- Minister of Justice and Ecclesiastical Affairs Bjorn 
Bjarnason, a former Minister of Education and son of a 
 
previous Foreign and Prime Minister (Bjarni Benediktsson, 
who negotiated the bilateral 1951 Defense Agreement on 
behalf of Iceland).  Bjarnason is a committed Atlanticist 
and acknowledged security expert but has been among the 
angriest members of the GOI about what he perceives as U.S. 
"unilateralism" in announcing the closure of Naval Air 
Station Keflavik. 
 
-- Minister of Education Thorgerdur Katrin Gunnarsdottir, 
who is vice chair of the Independence Party.  Gunnarsdottir 
has limited foreign affairs experience but is said to get 
along a lot better personally with Haarde than does 
Bjarnason. 
 
-- Minister of Finance Arni Mathiesen, a former Minister of 
Fisheries and another son of a cabinet minister.  Though 
respected for his brains and seriousness, Mathiesen is 
actually a veterinarian by profession. 
 
-- Minister of Fisheries Einar K. Gudfinnsson, known for his 
strong support of commercial whaling. 
 
Presumably none of these would owe the same debt of 
gratitude as Haarde did to former IP Chairman (and Prime 
Minister and Foreign Minister) David Oddsson.  Thus 
liberated, the new FM might feel free to replace Oddsson's 
close friend Albert Jonsson as defense negotiator.  Jonsson 
told the Embassy June 7 that he expects to stay on as 
Iceland's chief defense negotiator until he replaces Helgi 
Agustsson as Iceland's Ambassador to the United States in 
November 2006. 
 
van Voorst