Inside a waterfront factory, workers in hairnets and blue overalls are sorting freshly caught cod and haddock, and machines process the fish into fillets, mostly bound for Europe. Visir fishing boss Pétur Pálsson, who fears joining the European Union would cost Iceland jobs and drive factories abroad, says: "If we are in the EU, they will be the ones who make the policy." On Saturday, voters in this island nation of almost 400,000 people will decide whether their country should resume talks on joining the EU. It is a referendum that polls suggest is too close to call.
Supporters think closer European ties could help tame Iceland's volatile currency and soaring cost of living. Opponents say Iceland's sovereignty and control over "priceless" fishing waters are at stake, and would rather continue going it alone. It is a fault line that has divided Icelanders for decades, but after winning a snap election in 2024 Prime Minister Kristrún Frostadóttir's centre-left government pledged to hold a referendum by 2027.
Russia's war in Ukraine, sharpening Arctic rivalries and US President Donald Trump's tariff threats and designs on Greenland have accelerated that timetable. "Things have been moving very rapidly with respect to geopolitical challenges," Finance Minister Daði Már Kristófersson tells the BBC, pushing Iceland's place in the world "up the agenda". Iceland lies high in the North Atlantic, adjacent to a strategic stretch of sea called the GIUK gap, where Russian maritime activity is closely watched by the West.
It is a founding member of Nato, and yet has no military of its own. One poll this week put the Yes vote ahead by 51.3% to 48.7%; an earlier poll had the two camps neck and neck. "It's impossibly [hard] to predict," says Eirikur Bergmann, professor of politics at Bifröst University.
"Both camps are throwing everything they have at it." Kristoffersen's Liberal Reform party is a leading voice behind the Yes campaign. He argues that EU membership would strengthen Iceland's security and trade position, and shield it from much bigger powers. There's the economic case too.
"We see the opportunity of joining the EU and adopting the euro as a very significant benefit to Icelandic companies and to the Icelandic general public," he says. A Yes vote would kickstart negotiations with Brussels, but a second referendum would have to greenlight any final membership deal. The EU's 27 members would have to agree to it too.
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