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Iceland signs BRIC agreement in bid to deliver geothermal expertise to China

Agreement brings six years of talks to a close as European country is first to sign free trade pact with China

The deal is set to increase interest among Chinese and Icelandic companies that are cooperating in geothermal power

Iceland has signed an agreement with China in a bid to deliver its expertise in geothermal energy to the BRIC country, according to reports. The deal brings six years of talks to a close and makes Iceland the first European country to sign a free trade agreement with China, Bloomberg had said.

The deal has been made in a bid for Iceland to sell its expertise in geothermal energy to the USD 7.3 trillion Asian economy and help the country strengthen trade following its economic collapse in 2008.

Iceland's Foreign Minister Ossur Skarphedinsson signed the deal with Commerce Minister Gao Hucheng in Beijing. Iceland's Foreign Ministry said the agreement brings to a close six years of talks.

Iceland's Prime Minister Johanna Sigurdardottir has started a three-day visit to China, meeting her Chinese counterpart Premier Li Keqiang and President Xi Jinping.

Sigurdardottir said the free trade agreement will "increase the soundness of business transactions and the interest among Chinese and Icelandic companies that are cooperating" in geothermal power, Bloomberg reports.

As a volcanic island, Iceland gets about 25 per cent of its power from geothermal sources and the rest from hydropower. It wants to sell that expertise to diversify sales, given marine products now account for 90 per cent of Iceland's exports to China.

China is already benefiting from Iceland's expertise after 80 Chinese students graduated from the United Nations University Geothermal Program in Reykjavik, making them the "most populous" foreign alumni, according to Sigurdardottir.

Strengthening Chinese ties

Iceland is working on deepening ties with China that could help speed up efforts to emerge from its 2008 economic collapse, when its three-largest banks defaulted on USD 85bn in debt, Bloomberg said.

The north Atlantic nation is seeking to resuscitate its USD 14.4bn economy by returning to the industries it once relied on for growth, including energy.

"It's important for Iceland to conclude pacts like this to strengthen trade following the economic collapse," Sigurdardottir said.

The agreement follows news that more than 450 geothermal projects are now under development around the world, according to Pike research.