Iceland's "no": three lessons for Ukraine and the next EU enlargement

A few reflections on Iceland and the EU after the discussions I had the chance to join recently in Dublin, at the EUSI Policy Dialogue organised by the European University Institute and Łukasiewicz-ITECH.

On 29 August, 52.8% of Icelanders said "no" to returning to negotiations on EU membership. The vote was not about accession as such, only about resuming talks. Had those talks succeeded, the final decision on membership would still have gone to a separate referendum.

Three lessons for Ukraine

In my view, there are three interesting conclusions here.

1. The EEA/EFTA model works

The EEA/EFTA model works for Iceland, and works well enough that EU membership does not look like the obvious next step.

Through the European Economic Area, Iceland is in effect part of the EU's Single Market: the four freedoms apply, that is, the movement of goods, services, capital and people. Much of the EU legislation governing the Single Market is gradually incorporated into the EEA Agreement and becomes binding on Iceland, Norway and Liechtenstein.

So Iceland already pays a certain price for integration: it applies a vast body of EU rules without voting on them in the Council or the European Parliament.

But full membership has a price for it too. The EEA does not cover the customs union, the EU's common commercial policy, the Common Agricultural Policy or the Common Fisheries Policy. Iceland remains a member of EFTA and keeps far greater autonomy in external trade and, most importantly, in fisheries.

Iceland's logic is therefore clear enough.

2. The next enlargement has lost a convenient construction

The second conclusion concerns not Iceland but the next EU enlargement: Iceland's return to negotiations could have changed the overall picture of enlargement policy considerably.

Iceland would not have started from scratch. Before the previous negotiations were halted, it had already made substantial progress. With a positive referendum, it could fairly quickly have found itself among the first countries to join the EU.

And Brussels did discuss a political logic in which Iceland would move in a notional "package" with Montenegro, as part of one political wave. In essence, the accession of wealthy Iceland could have made the next enlargement easier to accept in sceptical member states.

It is one thing when enlargement is sold in the old member states as the accession of Ukraine, Moldova and the less wealthy countries of the Western Balkans. It is somewhat different when the same wave includes Iceland: one of the wealthiest, most stable and institutionally strongest states in Europe.

After Iceland's "no", that construction is gone for now.

This means that Ukraine, together with Montenegro, Albania, Moldova and the other candidates, has to think even harder about how to sell the next enlargement inside the EU itself.

Ukraine has an answer: security, defence capabilities and industry, energy, a large market, human capital, the agricultural sector, critical materials and, ultimately, a much stronger geopolitical position for Europe.

But this has to be turned into a coherent, Europe-wide offer.

3. The limits of the EU's own appeal

The third conclusion is about the EU itself: the result in Iceland is, after all, a modest geopolitical loss.

Iceland matters because of the North Atlantic, the Arctic, maritime security, energy and the EU's geopolitical presence in the North. The security argument was one of those with which supporters of a return to negotiations tried to persuade voters.

But there is another, perhaps more important, problem. Iceland shows the limits of the EU's appeal for wealthy and stable European states. In practice, a resumption of dialogue with Norway, for one, is certainly not on the cards.

For Ukraine, Moldova or the Western Balkans, EU accession means an enormous strategic change: access to the market, funds, institutions, policies, security and development opportunities.

For a country that is already wealthy, stable and deeply integrated into the Single Market, the offer looks less clear-cut.