Iceland

A sparsely populated North Atlantic island famous for its hot springs and geysers, Iceland has numerous active volcanoes. Much of it is made up of lava fields. Hot water is pumped from under the ground to supply a substantial proportion of the island's heat.

Iceland became an independent republic in 1944. Dominated over previous centuries by Norway and Denmark, it does not hesitate nowadays to defend its interests.

It has extended its territorial waters several times since the end of the 1950s to protect its fishermen and their main catch of Atlantic cod from foreign fleets.

Iceland remains outside the EU but, although it has no armed forces, it is a member of Nato. Icelanders are divided over the presence of US troops which have been stationed in the country without a break since World War II. In 1985 Iceland declared itself a nuclear-free zone.

Following the 1986 international moratorium on commercial whaling, Iceland abandoned the practice in 1989. Fourteen years later there was controversy over the government's decision to resume what it said was scientific whaling intended to investigate the impact of whales on fish stocks.

Iceland enjoys a standard of living among the highest in the world. For many years its prosperity was dependent on the fishing industry. While fish still makes up a substantial proportion of exports, it now accounts for less than 10 per cent of gross domestic product.

The country's economy is developing in new areas, not least tourism. Banking and finance reforms of recent years have helped to fuel a wave of economic growth. Icelandic business has made major investments abroad.

There has been substantial investment in a major industrial aluminium smelter project. Environmentalists have protested that the associated hydroelectric schemes, including the Karahnjukar dam, are being pushed through at the expense of fragile wildlife habitats.