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Eyeing a new, strategically important gateway to the Arctic, the European Union’s executive body on Wednesday encouraged Iceland’s
application to become a member despite disputes over liabilities from a
failed Icelandic bank.

The European Commission recommended the start of formal membership talks with Reykjavik, suggesting that the country could complete
negotiations in little more than a year, with a further 12 to 18 months
for formal ratification.

The recommendation, which needs to be approved by the 27 E.U. nations, comes ahead of a referendum due on March 6 over a law on the repayment
of €3.9 billion, or $5 billion, from the defunct Internet bank Icesave
to the governments of two E.U. countries.

A no vote in the referendum could destabilize the Icelandic government and derail its E.U. membership bid.

On Wednesday, the European Commission made no secret of its interest in Iceland as a foothold in the Arctic region. Its rich mineral resources
will, analysts suggest, be increasingly contested by global powers.

Stefan Fuele, the European commissioner for enlargement, said that there had been much discussion about the “strategic importance of the
Arctic.”

“I think this is where our partners from Iceland can be extremely helpful,” he said at a press conference in Brussels.

On Tuesday, Carl Bildt, the Swedish foreign minister, made a similar argument at a meeting held by the European Policy Center in Brussels,
saying that Icelandic membership would bring the Union into Arctic
issues where “the E.U. is virtually absent from the big play.”

An island of about 320,000 people, Iceland stayed aloof from the European Union for decades but applied for membership last year when
the global financial crisis engulfed its banking system.

Most of the Union’s recent expansions have been to take in poor, mainly ex-Communist nations from Eastern Europe, that have had to work hard to
match E.U. standards.

By contrast, Iceland is a member of the European Economic Area, giving it access to the bloc’s single market in exchange for matching many of
its laws and technical standards in commerce.

Though Mr. Fuele cited some areas where Iceland needed to adjust its laws, E.U. negotiations could be concluded within 14 months. Talks on
sharing Iceland’s fisheries are likely to prove difficult, and the
report Wednesday also expressed new concerns about the independence of
the judiciary and worries about “close links between the political
class and the business community.”

But the most difficult immediate problems surround the failure of Icesave’s subsidiaries in two E.U. nations, Britain and the
Netherlands, which compensated savers in their nations when the bank
failed and is seeking to recoup the money from Reykjavik.