The Faroe Islands don’t play by EU rules

Despite belonging to the Kingdom of Denmark, the Faroe Islands is not a member of the EU and its sanctions against Russia. With exports to Russia now booming, they stand accused of using the situation to cash in

When international activists took issue with the traditional whale hunt on the Faroe Islands this summer, many directed their protests at Denmark. MPs were inundated with emails, and celebrity Pamela Andersen even wrote to the Danish Prime Minister, pleading for his intervention.

This belied a common misconception about the relationship between the Faroe Islands and Denmark. For while the island territory belongs to the Kingdom of Denmark, it stands outside the EU and enjoys a high level of autonomy from lawmakers in Copenhagen. While Denmark retains a mandate over the Faroes’ foreign affairs, the territory negotiates its own trade agreements.

It’s a position the Faroe Islands are now cashing in on. In 2014 Russia introduced a retaliatory trade ban on food imports from the EU in response to Western sanctions over the Ukraine crisis. The trade ban has hit the EU bloc and the West, but left the Faroe Islands free to capitalise on Russia’s appetite for salmon.

Russian exports boom
According to the Wall Street Journal, salmon exports to Russia between September and December 2014 totalled around 528 million kroner, representing more than 40 percent of the Faroes’ total salmon exports. Total exports to Russia have rocketed since 2009, according to Statistics Faroe Islands, from 163 million kroner to 1,059 million kroner in 2014.

Faroese salmon giant Bakkafrost has seen sales soar, leading their stock to rise almost 270 per cent on the Oslo stock exchange since early 2014. However CEO Regin Jacobsen downplays the impact of the ban.

“The Russian import ban only hurts a very small percentage of the EU’s exports to Russia. Exports from the Faroes to Russia are business as usual,” he says, deflecting claims that the islands are capitalising on political instability.

While the sanctions have affected exports to Russia, the Faroese Fish Producers Association sees their incursion into the Russian market as the result of a gradual and decades-long strategy.

They argue that the Western narrative, which paints the Faroese as sudden prizewinners in a sanctions lottery, ignores the wider context of the archipelago’s developing trade relationships.
“If you look at the salmon industry, there has been a boost as a result of the import ban,” says Niels Winther, advisor to the Faroese Fish Producers Association.

“But in terms of our overall exports of fish there’s nothing revolutionary to report.”

The Faroe Islands recently opened their fifth consulate, this time in Moscow, revealing a continuing commitment to strengthening trade relations between the eastern giant and the small archipelago.

“The Faroes are keenly aware of the need to strengthen the Faroese capacity to deal with the challenges of a globalised world,” reads the Faroe Islands’ government website.

Pushed away by the EU
While the Danish government has made no official suggestion that political instability is being exploited, there have been hints of concern from Copenhagen. After the Faroese prime minister visited Moscow, then-Danish foreign minister Martin Lidegaard urged the Faroes, “to refrain from exploiting the situation by significantly increasing their export of goods to Russia that are subject to embargo”.

Karin Gaardsted, a Danish MP representing the Social Democrats, and the party’s spokesperson for the Faroe Islands, confirms the paarty was wary of the territory’s developing relationship with Russia.

“When we were in power we told the government of the Faroe Islands to be aware of not becoming overly relaxed in regards to their relation ship with Russia,” she says.

The Faroes looking east can, at least in part, be explained by the territory’s strained relationship with the EU. In 2013 the territory unilaterally increased its quota of herring, citing an increasing abundance of the fish in their waters. This followed a similar increase of its mackerel quota in 2010.

The EU urged the Faroes to desist, arguing that the quotas were unsustainable, and banned Faroese fishing vessels from docking in EU harbours and exporting herring and mackerel to the EU.

The conflict was resolved in 2014, when the Faroes agreed to decrease their quota. But the conflict only served to remind the territory of how vulnerable they were if they remained entirely reliant on one export market.

“We learned the hard way that we had to access other markets,” says Winther.

Not Denmark, Not in the EU
Despite being a small country with a population of 50,000 residents, its 2008 per capita GDP was a relatively high $33,700. According to consultant Bírita í Dali, who specialises in North Atlantic and Arctic relations, the high standard of living in the Faroe Islands is possible because of the export of fish, which accounts for 95 percent of its exports.

The EU ban put the Faroes in a tight spot, before it was lifted. í Dali says there was a point when Faroese politicians weren’t sure whether the Faroe Islands would be hit by an export embargos from both the EU and Russia. Taking the EU’s side would have cornered the archipelago:

“The Faroese could not have joined the embargo against Russia while being simultaneously hit by embargo from the EU. That would have made the Faroe Islands subject to Russian embargos, too.”

Instead, the Faroe Islands shook off the EU embargo and found themselves free of Russia’s sanctions against the EU, enabling them to emerge with a distinct economic advantage.

“We are dealing with the grey zones between foreign relations and trade. Being so dependent on fish exports, would it even be possible to stop exporting to Russia or curb it – without Russia then interpreting that as a political move?” asks í Dali.

Despite remaining outside the EU, the Faroe Islands are not yet in a position to break its ties to Denmark. In 2015, their annual block grant from Denmark amounted to 650 million kroner. 27.2 percent of their goods were also imported from Denmark in 2015.

The blurring of economic and foreign policy that has emerged with the Russian import embargo, however, may signal that the Faroes will adopt a more independent foreign policy in the future.

“It’s not unusual for Faroese diplomats to encounter, on the international stage, the false impression that the Faroes are in the EU because they belong to the Kingdom of Denmark,” says í Dali, who adds that it is important for the Faroes to separate themselves from Denmark on the international arena.

“The Faroese have the task of branding themselves as different from Denmark and the EU – especially because Denmark is a member of the EU. The Faroe Islands and Denmark are not in the same boat and they don’t have the same trade challenges.” M


By Lena Rutkowski

Politics & Society Editor. Lena is a journalist and translator from Australia. @Lenarutski

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