VZCZCXRO5470
OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRK #0428 3251834
ZNR UUUUU ZZH
O 211834Z NOV 06
FM AMEMBASSY REYKJAVIK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3064
INFO RUEKJCS/SECDEF WASHDC IMMEDIATE
RUEHNY/AMEMBASSY OSLO IMMEDIATE 0282
RUEHNO/USMISSION USNATO PRIORITY 0235
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY 0040
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS REYKJAVIK 000428 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR P (BAME), EUR/NB (MIDDLETON, MAHER) 
SECDEF FOR OSD/RA (HALL), OSD/P (KELSO, HURSCH) 
OSLO FOR DATT 
 
E.O. 12958: N/A 
TAGS: MARR PGOV NATO IC
SUBJECT:  Iceland: Water Damage at former U.S. base poses first 
headache for new redevelopment corporation 
 
 
¶1. (SBU) Summary:  The newly-formed corporation overseeing 
redevelopment of the former U.S. Naval Air Station Keflavik (NASKEF) 
site is inheriting an additional problem in the form of serious 
water damage from frozen pipes in a number of residential buildings. 
 The Ministry for Foreign Affairs, which took ownership of the 
NASKEF site (less some properties retained by NATO) September 30 but 
had not gotten around to letting a maintenance contract, has 
confirmed that the Government of Iceland will bear the costs of 
repair, with early estimates ranging upwards from $150,000.  (In 
contrast only one NATO-owned building suffered damage - and that 
minimal - as the U.S. military had contracted with a local firm to 
maintain NATO facilities.) 
 
¶2. (SBU) Summary, cont'd:  The redevelopment corporation, which was 
to have taken over responsibility for the facilities this fall but 
in all likelihood will not do so until January 2007, claims the 
incident will not pose an obstacle to plans for use of the property. 
 Press coverage has been straightforward, with no implication of USG 
responsibility.  We believe the corporation will attempt to make the 
best of the incident by using it to press for quicker action.  End 
summary. 
 
¶3.  (SBU) Upon the closure of U.S. Naval Air Station Keflavik 
(NASKEF) on September 30, the Government of Iceland took ownership 
of roughly 500 structures, including 2000 housing units in 
multi-unit buildings.  Media on the evening of November 20 reported 
the discovery of serious water damage in a number of the buildings, 
stemming from frozen cold-water pipes during a recent cold snap. 
The water leakage resulted in damage ranging from minor wall damage 
to collapsed ceilings and warped floors in approximately 90 
individual apartment units, according to the director of the 
corporation overseeing redevelopment of the NASKEF site. 
 
¶4. (SBU) A member of Post's interim military detachment (on loan 
from EUCOM to wrap up transition issues) visited the base and 
confirmed that only one of the 67 NATO-owned buildings on the site 
was affected.  In that case, a burst pipe in a maintenance shed 
resulted in minimal damage.  (Note: the USG has responsibility for 
maintenance of the NATO-owned buildings through September 2007; 
local contractor ICG has monitored the buildings for any problems 
and is adjusting its procedures to ensure that similar water-leakage 
problems do not develop. End note.) 
 
¶5. (SBU) The Ministry for Foreign Affairs (MFA) was quick to note to 
the media that the Icelandic Government would have to bear the costs 
for any repairs.  MFA officials also noted that work is continuing 
on wrapping up the necessary legal maneuvers to transfer ownership 
to the redevelopment corporation.  Corporation director Kjartan 
Eriksson put a brave face on the damage, noting to Post that in any 
event there were plans for renovations in the apartment buildings 
and that the incident would simply accelerate those plans.  Eriksson 
estimated that the cost of repairs could be in the tens of millions 
of Icelandic kronur (10 million ISK = $150,000) but demurred from 
elaborating further until a final assessment is done. 
 
¶6. (SBU) Comment: the damage poses the first headache for the base 
redevelopment corporation (septel), which has watched in frustration 
as it has not legally taken ownership of the buildings and thus had 
not been able to arrange maintenance contracts for them.  We believe 
the corporation will attempt to make the best of the incident by 
using it to press for quicker action in seizing the development 
opportunities presented at the former NASKEF site. 
 
VAN VOORST