This is related to Iceland’s banking collapse. Apparently England wanted assutrance that Iceland could cover the insured amounts of deposits of collapsing Icelandic branches in Great Britain. Somewhat like the FDIC, all accounts in England are supposed to be insured so depositors don’t lose everything.
According to Iceland, they said they needed more time meet their obligation, as covering those costs amount to more than 60% of their GDP. According to England, Iceland said, “we have no intention of meeting our obligations”.
Anyway, it seems that declaring a country is supporting terrorism is a shortcut to seizing whatever assets it has in reach. Which is what England has now done with the banks on its territory.
And, the designation shuts down most of the remaining international banking transactions and credit available to Iceland. So all the sudden they are extra-fucked.