Iceland today won formal backing from the European commission to open negotiations to join the EU, a green light for Reykjavik to moving the country towards membership.
European governments will still need to decide whether to support the EU aim. Some regard Iceland as a huge asset for the union and as Europe's gateway to the arctic, giving the EU a foothold in any future contest for the expected mineral and economic bonanza in the far north.
But Iceland's membership chances are clouded by its dispute with Britain and the Netherlands over billions in lost savings when the country's oversized banks collapsed in 2008.
"We fully support an Icelandic application to join the EU," said a British government spokesperson, but added: "It's essential they meet their international obligations under the deposit guarantee scheme."
The British and Dutch governments compensated their savers to the tune of almost €4bn when Iceland's online Icesave bank collapsed. Negotiations aimed at getting Iceland to pay back the money are at a stalemate and the government in Reykjavik could fall if, as expected, it loses a referendum next week on the Icesave issue.
If, however, European leaders agree at a summit next month to open membership talks, Iceland could race ahead to become the 28th or 29th EU state.
Stefan Fuele, the European commissioner for enlargement, indicated that the negotiations could be wound up within 14 months as Iceland has long been part of the European economic area and already applies much EU law and regulation.
"I don't see any dramatic problem," said Fuele. "I hope today's opinion boosts Iceland's aspirations to join the EU. It will make [the EU] stronger."
Despite the banking dispute, many leaders across Europe are keen to see Iceland in the union because of its strategic value and location in the north Atlantic.
"There [has been] a lot of discussion recently of the strategic importance of the Arctic area. This is where Iceland could be very useful," said Fuele.
Foreign policy analysts have long predicted a contest between the US, Russia, Canada, and Scandinavia for control of the mineral wealth and shipping lanes of the far north as global warming makes the frozen wastes more accessible.
"The EU is virtually absent from this big play," said Carl Bildt, Sweden's foreign minister. "Iceland will bring us more into arctic issues that will be big."
Iceland's population is about 306,000 representing about 0.06% of the EU population and producing 0.08% of the EU's economic output. But the country is seen as a disproportionately large prize in geopolitical terms.
The greater opposition to EU membership is in Iceland itself, which has jealously guarded its independence for decades. But the 2008 banking crisis wrought disaster and national insolvency, destroying the national currency, the krona, and prompting many to seek a safe haven in European integration.
While the government applied to join the EU last year, the population remains divided, not least because the main industry, fishing, would fall under Brussels' discredited common fisheries policy.
Stellvertretend für die EU-Kommission empfahl der EU-Kommissar für Erweiterung und europäische Nachbarschaftspolitik Štefan Füle, Verhandlungen über einen EU-Beitritt Islands einzuleiten. Nun liegt es an dem EU-Ministerrat, darüber zu entscheiden, ob und wann die Verhandlungen mit Island aufgenommen werden.

Im Ministerrat sind die Regierungen der EU-Mitgliedsstaaten vertreten. Jedes Land besitzt ein Veto-Recht gegen eine EU-Erweiterung. Dies ist vor dem Hintergrund eines Konflikts zwischen Großbritannien, Niederlande und Island um die Entschädigung von Kunden isländischer Banken interessant. Großbritannien und die Niederlande sind mit 5,3 Milliarden Euro in Vorleistung gegangen und haben ihre Staatsbürger entschädigt. Nun fordern die beiden Länder das Geld von Island ein. Ein Gesetz, das die Zahlungen regeln sollte, wurde vom isländischen Staatspräsidenten Ólafur Ragnar Grímsson gestoppt. Nun wird ein Referendum am 6. März über die Rückzahlung entscheiden.

Islands Regierung ist dennoch zuversichtlich, im Jahre 2012 Mitglied der EU werden zu können. Weitere Hindernisse dabei sind jedoch das isländische Fischereirecht, die Einsetzung der Richter durch den Justizminister und noch nicht umgesetzte EU-Vorschriften im Finanzsektor.