According to Morgunblaðið, US military personnel at the base in Keflavik numbered 1,450 at the end of last year, down from 3,100 two decades ago.
During the cold war, Iceland played a crucial role in guarding the North Atlantic against Soviet intrusion. Following the implosion of the Soviet Union and its satellite countries, military presence in Iceland was scaled down in line with many other key cold war deployments.
Two years ago, a rare diplomatic row ensued between Iceland and the US when the Pentagon unilaterally gave notice that the US would withdraw the few remaining fighter aircraft stationed at Keflavik and redeploy them to the Middle-East. The Icelandic government objected to this measure, calling it a breach of the defense agreement between the two nations. After Icelandic the Prime Minister and Foreign Minister appealed to President Bush, the decision was rescinded.
Concomitant to the scale-down of the military presence at the base in Keflavik, its economic significance, both for Iceland and the neighboring communities, has diminished. The base now accounts for 1.3 per cent of GDP and 2.7 per cent of exports, after topping at 3 per cent and 8 per cent, respectively, during the early nineteen-eighties.