Think tank urges clarity on Iceland’s defence spending
Monday 12th October 2026 on 10:01 in
Iceland
Iceland’s proposed budget does not clearly identify which public spending counts as security and defence expenditure, according to a submission by Varða, a think tank on national security and resilience, reported by mbl.is.
The budget puts spending in the area at between 10 billion and 49 billion Icelandic krónur. Iceland has committed to spending 1.5% of gross domestic product on defence-related projects by 2035, equivalent to about 77 billion krónur a year based on projected 2026 GDP.
Varða says the lack of clarity weakens parliamentary oversight and makes it difficult to prioritise spending. It could also damage Iceland’s credibility with its allies. The think tank says the government should speed up work on long-term plans for security and defence funding, as Nordic countries base such spending on plans with broad parliamentary support.
Varða recommends funding the development of strategic reserves, with fuel as the priority. It says funding should be provided next year rather than after another year of analysis. The Ministry of Industries has described oil as the most important imported input for Icelandic food production, according to the submission.
Environment, Energy and Climate Minister Jóhann Páll Jóhannsson has announced a bill to require 90 days of emergency fuel reserves, but the budget does not include the cost.
The think tank also proposes funding preparations for an agreement with the Faroe Islands to operate an Icelandic ship registry. More than 90% of Iceland’s trade in goods is carried by sea, but no merchant ships are registered in Iceland. Icelandic shipping companies’ vessels sail under foreign flags, which their flag states could call into service during a crisis.
Under Varða’s proposal, Iceland would set the legal framework and retain jurisdiction and emergency powers, while the Faroese Maritime Authority would handle day-to-day operation of the registry. The arrangement would not require the Icelandic state to acquire ships or establish a new agency.
Varða further calls for funding positions in the National Commissioner of Police’s special unit that have already been authorised. The Justice Ministry’s estimates put the annual cost at 300 million to 400 million krónur.