Going out on a limb, the word "volcanoes" may be part of why, I know I was particularly perturbed when I found out my bank's failover data centre was about 20km away from their main one in a city built on an active monogenetic volcanic field.
Also, not sure how important latency is, but Iceland is rather far from mainland Europe.
2016 worldwide sample https://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Ma...
100 year 5+ of Iceland https://earthquake.usgs.gov/earthquakes/map/?extent=62.319,-...
As for putting up with what one considers stupidity... depends just as much as what you are offered to do so and whether it actually makes sense for Europe to offer that in this case :).
https://www.ag.gov.au/international-relations/international-...
https://www.insideprivacy.com/cross-border-transfers/austral...
While their de jure status and allegiance may be intertwined with powers that govern them from afar, I would speculate that an island locale like Iceland enjoys a lot of de facto autonomy and they can do as they please, being so physically inaccessible.
The distance and political concerns may also be a disadvantage to tenants in their data centers. I can imagine that the inhabitants of Iceland would be reluctant to sell out like this. At the very least, what's going on in the Strait of Hormuz reminds us all that data centers are strategic quasi-military targets, and must be defended and protected by sophisticated military shields, because disabling or destroying them would be decidedly advantageous in wartime.
It's important to keep in mind that "data centers" are largely the aggregation and consolidation of "machine rooms" that used to take space in every corporate campus and every headquarters building (combined with network interchange points); there is a ton of commercial property that's sort of gutted now, as machine rooms migrated to the cloud: not only WFH/remote jobs are affecting the vacancies, but the machines and robots are moving in to live with "roommates" of their own kind nowadays!
Right now, different parties have the majority rule, and their interest in projects like these are not clear. I would suspect that a motivated investor could fairly easily get them built. The hurdles would be logistics and connectivity much more than red tape.
Iceland is culturally and politically scandinavian with some influence from the US. In august there will be a vote to start accession talks with the EU. This has been a heavily contested issue for years, largely due to Iceland's unique resources.
Iceland is not an EU member, and is remote. What happens if Trump decides Iceland should be a US state?
They're looking at how to put servers in Norway and Iceland specifically because they can figure out what the rules are, and in the EU, they cannot.
Every conversation about it very well demonstrates this fact.
Iceland and Norway win nothing, having giant data centers within their territories the only losers will be the common people of each country like having a strip mine on your land.
What is also interesting is that the tone death city slickers from other countries, particularly the United States, think they can waive money at Icelanders and Norwegians and have them jump to a tune of greed.
If Norway navigates this policy half as well as they've navigated their oil, this could be beneficial for the common people and help Europe detangle themselves from reliance on US or Chinese tech.
