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Iceland fuel protests heat up

  • Story Highlights
  • Police clash with truck drivers protesting high cost of fuel in Reykjavik, Iceland
  • Almost half the cost of a tank of gas due to value-added tax, special fuel tax
  • Falling krona, rising crude prices contributing to higher petrol prices in Iceland
  • President Grimsson tells CNN he's "relaxed and optimistic" about economy
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By Hilary Whiteman
CNN
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LONDON, England (CNN) -- The shaky video shows Icelandic police repelling protestors with riot shields and batons.

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A viewer iReport shows police in Reyjkavik, Iceland clashing with truck drivers protesting the high cost of fuel.

Behind the police barricade, someone sprays a can of fluid onto the crowd. It's not clear whether it's CS Gas, but a short time later some protestors are seen rubbing their eyes.

The video was shot on Wednesday morning in Reykjavik, Iceland by retired truck driver Halldor Sigurgson and submitted to CNN's iReport. watch the iReport

"This is the first time in a long time we have seen in Iceland violence against protestors," Halldor Sigurgson told CNN, adding "we are not used to violence against groups of people at all."

The group of people in this case is truck drivers who have been blocking major roads in the Icelandic capital to protest against the rising cost of fuel. They're also objecting to EU regulations on how long they can drive without resting.

Earlier this month, nearly 300 cars, trucks, vans and jeeps sounded their support for the truck drivers' campaign by beeping their horns as they passed Iceland's national parliament, Althingi.

Currently, almost half the cost of a tank of gas in Iceland is made up of government taxes, including a value-added tax and a special tax on fuel.

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While local taxes haven't increased, the rising cost of crude on world oil markets is driving prices higher. A sharp decline in the Icelandic krona is also adding to the cost of imported fuel.

Protestors are calling on the government to reduce taxes to ease the burden on local motorists.

Like many Icelanders, Thrandur Arnthorsson is wedded to his 4x4. In his spare time the software project manager runs a Web site dedicated to off-roading. Recently, he has noticed it is becoming more expensive to fill his tank.

"Yesterday I filled it up for 12,000 kronas," Thrandur Arnthorsson says. That is about $161.

"It has risen with the fall of the krona against other currencies and the rising price of oil at the same time so people are frustrated about how high the taxes are on fuel."

The discontent over high fuel prices is being exacerbated by a sharp decline in Iceland's economy.

The Central Bank of Iceland has hiked interest rates to 15.5 percent to staunch a steep slide in the Icelandic krona. Inflation is nearing 10 percent and, after years of impressive growth, the country's economy is forecast to expand just one percent this year.

Iceland's biggest banks -- Kaupthing, Glitnir and Landsbanki -- have been borrowing from abroad to finance their international expansion making them particularly vulnerable to the global credit crunch.

In a recent interview with CNN's Principal Voices, Iceland President Olafur Grimsson said he's relatively calm about the country's current economic challenges.

"While I'm concerned I'm both relaxed and optimistic because fundamentally the Icelandic economy is very strong," he said.

He says the present fluctuations were created by the "extraordinary" growth of the Iceland banking sector coupled with difficulties in global financial systems.

It's interesting when you look at the international discussions about Iceland," Grimsson said.

"The more knowledgeable people are about Iceland the less alarmist they are about looking at our present situation."

For truck drivers, the present situation of high fuel costs is all too real.

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Halldor Sigurgson says the majority of Icelanders support the recent protests.

"I stand by them because I was on it this morning," he told CNN. "I went out there to take photos and video. There is a lot of public support for them here in Iceland." E-mail to a friend E-mail to a friend

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