Iceland is an island country situated at the confluence of the North Atlantic and Arctic Oceans. Most of Iceland’s terrain is uninhabitable. The island's interior, known as the Icelandic Highlands, is a combination of glaciers, volcanoes and lava fields. Two thirds of Iceland’s 320,000 inhabitants live in the lowlands surrounding Reykjavik, the country’s capital and largest city. Protecting Reykjavik (Iceland’s core) is the country’s main strategic imperative. The Icelandic economy historically depended heavily on fishing, which still provides 40% of export earnings. In recent decades, Iceland's economy has diversified into manufacturing, service industries and finance. Balancing its isolation with external economic integration is Iceland’s primary geographic challenge. Iceland has especially strong cultural and political ties with the other Nordic countries such as Norway, Sweden, Denmark and Finland, because the island was under the rule of the Norwegian and Danish monarchies between the 13th and 20th centuries. Iceland became independent in 1918, and a republic was declared in 1944. Iceland's location also makes it geopolitically significant for Europe, particularly in light of the growing relevance of energy resources in the Arctic area. Moreover, Iceland’s location in the so-called GIUK (Greenland, Iceland and the United Kingdom) gap is strategic for naval military operations in the North Atlantic. Because of its geographic isolation, Iceland has to make a constant effort to keep strong economic ties with the rest of the world. The country therefore has to continuously reach a balance between maintaining independence and fostering deep ties with its eastern or western neighbors. The population's indecisiveness concerning Iceland's EU membership reflects that struggle.

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