November 2, 2010 / 5:36 PM / in 7 years

Iceland sees "Icesave" talks ending in 2010

OSLO (Reuters) - Negotiations on repayment of $5 billion (3 billion pounds) lost by British and Dutch investors in Iceland’s 2008 banking crash are likely to be resolved by the end of this year, the island’s foreign minister said on Tuesday.

Asked in a Reuters interview whether the talks could continue into 2011, Ossur Skarphedinsson said: ”I find it unlikely.

“My experience of Icesave is that nothing can be excluded, (but) I honestly don’t think it is likely,” he added on the margins of an Arctic conference in Oslo.

British and Dutch savers lost money held in high interest Icesave accounts in the country’s Landsbanki when it collapsed in 2008. They were bailed out by their governments who are now trying to recover the money from recession-hit Iceland.

Repayment is highly unpopular on the island, whose people voted in a referendum in March to reject an agreement.

The minister said he expected the parties to be able to conclude the talks within a month, “In a manner that both sides will be, perhaps not happy with, but content.”

“A month ago, if you had asked me, I would have told you: ‘in two weeks’ time’. Now I think we hope to see some serious developments at least within a month, perhaps sooner,” he said, adding that talks were at a sensitive stage.

Negotiations were delayed by this year’s elections in Britain and the Netherlands.

The minister said he was confident that the Icesave negotiations would not disrupt accession talks with the EU started in July -- nearly two years after the island’s top banks collapsed, sending its economy into a tailspin.

“We trust the word of the leaders of the EU and they have resolutely, repeatedly said that Icesave has nothing to do with our application,” he said.

Skarphedinsson also said contacts between Reykjavik and Beijing had increased in the wake of the financial crisis. China had helped Iceland when other nations closer to home did not -- with measures including a currency swap agreement, he said.

“They have shown interest in the production of metals that need a lot of electricity,” the minister said. Iceland has abundant thermal power and had previously attracted large aluminium investments from Western companies.

Skarphedinsson said China was also interested in cooperating with Iceland on Arctic shipping routes, which would shorten travel times between the Pacific and the Atlantic.

Editing by Barry Moody

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