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It has probably gone almost unnoticed, but this week the International Whaling Commission has been meeting in Chile. Led by Peter Garrett, Australia has promoted a permanent whaling ban in the Southern Ocean and eventually worldwide. Some IWC members are totally opposed to this idea. They want limited whaling within the coastal waters of any IWC member nation. Enter sparsely populated North Atlantic Iceland - a pivotal member of the pro-whaling camp. Last year, the Icelanders actually defied the global ban and hunted whales for profit. But, at the same time, whale watching has become a major tourist attraction. Here's Nick Lazaredes.


REPORTER: Nick Lazaredes

Icelanders have always considered the ocean that surrounds their small island as sacred and the bounty that it contains has been their life-blood. But while fishing has long been the country's economic driver, a new industry is fast gaining attention here. Whale-watching is now one of Iceland's biggest tourist drawcards with well over 100,000 foreign visitors a year eager to catch a glimpse of the ocean's giants. It's evidence of the continuing fascination with these creatures and the emotional attachment many people have to them.

EVA THORARINSDOTTIR, WHALE WATCHING OPERATOR: The minke whales that we are watching, they are coming back year after year. Unfortunately these are the same minke whales that the hunters hunt.

The growing tension between Iceland's new whale watching industry and its age-old whaling tradition is nowhere more apparent than on the main jetty at Reykjavik's central harbour.

EVA THORARINSDOTTIR: We have a kind of a strange situation here at the harbour, because on this side we have our whale watching operation. We have been here for 10 years now and the whale watching in Iceland has been growing year per year. On the other hand we have the whale hunting boats, which is kind of strange, actually, because this is what maybe we would like to call the past, and this is the present, but they are still hunting here in Reykjavik.

In fact what's really alarming Iceland's whale watching industry is the fact that the country's best viewing area has been designated by the Government as the central hunting ground for whales. It's a decision that Eva says may well kill off the local whale watching industry and damage Iceland's environmentally sound image abroad.

EVA THORARINSDOTTIR: The whale hunters have told that they're going to hunt 80% of them here in Flaxafloi Bay, which is our whale watching area. Iceland is supposed to be an environmental friendly destination and I think the whale hunting doesn't go well together with that.

KRISTJAN LOFTSSON, WHALE HUNTER: This is when you are out looking for whales – you go up to this upper bridge, and start to look for the blows.

Kristjan Loftsson makes no apologies for growing rich off the back of dead whales.

KRISTJAN LOFTSSON: And then you approach it and shoot it and bring it to shore and process it into very good food with no added hormones.

This multi-millionaire businessman operates Iceland's only whaling conglomerate and the four vessels in Reykjavik's harbour are his.

KRISTJAN LOFTSSON: The gun is put here and then you have a harpoon here.

In an effort to be open about an industry he believes is much maligned, Kristjan has agreed to show me around his flagship, named 'Whale 9', including its deadly tools of trade.

KRISTJAN LOFTSSON: So here we have a harpoon – it's a 90mm harpoon which we use for fin whales.

REPORTER: So you aim for the guts rather than the head?

KRISTJAN LOFTSSON: Yeah - when the whale comes up you try to shoot into the cavity, to the heart, and everything is there – then that explodes inside and...

REPORTER: Everything stops?

KRISTJAN LOFTSSON: Yeah, they just sink, you know.

For most of the last 20 years, pressure from anti-whaling nations, like Australia, has kept these boats tied up and out of commission. Throughout that time Iceland has been putting its case for sustainable whaling, based on the large increases in local whale stocks. But even though the International Whaling Commission's own scientists have approved the concept, sustainable whaling has been repeatedly rejected by a majority of the IWC's members.

KRISTJAN LOFTSSON: But this is nothing to do with reality or science or anything, it's just politics. All along you know those countries that were whaling, like Australia. When they stopped in 1978, they went quite overboard into the anti-whaling camp, and got really one of the most fanatic ones and still are, you know. Here we have a processing facility at the bottom of this fjord – here we have Reykjavik.

Fed up with being ignored, Iceland upped the ante in 2002 by re-starting its scientific whaling program and in late 2006 they raised the stakes again by issuing quotas for commercial whaling. That was met with a barrage of international protests but the Government decided it was time to stand firm. The quota set for this year's hunting season - 40 minke whales – is relatively small but it's also clear that Iceland wants to send a firm message – that it's quite prepared to risk pariah status alongside Norway and Japan to defend its right to continue what it sees as sustainable whaling.

STEFAN ASMUNDSSON, ICELAND IWC REPRESENTATIVE: For us that's absolutely an unfortunate situation – we were hoping to be able to conduct this in a normal way within the management framework of the IWC but the reality has proved to be different.

Stefan Asmundsson is Iceland's representative on the International Whaling Commission. He shares the whaling industry's bitterness and frustration with the IWC system.

STEFAN ASMUNDSSON: People who oppose sustainable whaling usually try to present as being because they are environmentalists or whatever. They don't like to say, ‘it's simply because I think some animals are more equal than others'. They don't like to say that, simply, 'I have this emotional feeling about whales and I want to impose that on others'.

While the Icelandic Government claims that it was forced to proceed with its rebel whaling program after years of deadlock at the IWC, it has already received some high-level rebukes.

INGIBJORN GISLADOTTIR, ICELAND FOREIGN MINISTER: : Secretary Rice's visit takes place at a significant time point in Icelandic history.

One of the first to give Iceland a diplomatic dressing-down was the US Secretary of State, Condoleezza Rice.

INGIBJORN GISLADOTTIR: We discussed Afghanistan and cooperation on defence issues and then we exchanged some views on whaling.

Condoleezza Rice's reprimand was delivered to Iceland's Foreign Minister, Ingibjorn Gisladottir.

INGIBJORN GISLADOTTIR: I mean her view was that - she said that she was disappointed that we were still catching those whales, and she hoped that we would reconsider the issue, and that was it.

With its exemplary human rights record, Iceland is currently seeking a seat on the UN Security Council. And while the Foreign Minister prefers to play down the diplomatic fallout, some say the rebel whaling program is damaging its chances.

INGIBJORN GISLADOTTIR: First of all I would like to say that human rights are more important than animal rights. But when it comes to whaling, I think it's important that we bear in mind that the minke whales is not an endangered species. We do not look at the whale as a scared creature - it is a marine resource just like any other. It's just a question if you can catch it in a sustainable way or not.

ASBJORN BJORGVINSSON, WHALE CONSERVATIONIST: And this little map of Iceland here shows all killed minke whales.

Asbjorn Bjorgvinsson is perhaps the main counterpoint to Iceland's powerful whaling lobby and from his whale museum at Husavik in the north of the country he continues to try and keep them in check.

ASBJORN BJORGVINSSON: And the whalers of course go for the easy target, which are the friendly ones, who are our main selling point, and that's how this is depleting the numbers of friendly whales in whale watching areas.

Asbjorn transformed the poor fishing town of Husavik into the whale watching capital of Europe in just 10 years. His remarkable effort won him a major UN environment award and the admiration of many Icelanders.

ASBJORN BJORGVINSSON: When we started this business, we became a laughing stock - people laughed at the idea. 'No-one is going to come to Husavik to see whales - that's ridiculous'. But it's changed the whole community in just over a decade. Now there are around 100 people working in whale watching. It's bringing in thousands and thousands of tourists, bringing a lot of revenue into the economy.

But while eco-tourism is his business, Asbjorn's real objective is to try and force a fundamental change in Icelander's attitudes towards whales.

ASBJORN BJORGVINSSON: When you sit down with an Icelander, you can go through all the arguments but they always come to this end conclusion – ‘but they eat all the fish away' – and that is not true. And that is something that's very hard to change, because it's brought up with the mother-milk, that whales are a problem to the ecosystem. And that's been sort of pushed on by scientists of the marine research institute and the fisheries industry in Iceland as well.

The reliability of scientific data from Iceland's Marine Research Institute has often been challenged and Asbjorn says its recent admission that its minke whale estimations were wildly wrong demonstrates how serious the problem is.

ASBJORN BJORGVINSSON: They have over-estimated the minke whale stock, probably by 30,000 animals. Which we always criticised – we said there's no chance there's 40,000 minke whales around the waters of Iceland – where are they? We are not seeing them. We are seeing a few - 10, 15, 20 animals in this bay, maybe 30, 40, 50 around Reykjavik area. There's just no way you can find 40,000 minke whales in Icelandic waters.

Asbjorn has a surprising ally in his opposition to whaling. Although as Foreign Minister Ingibjorn Gisladottir is compelled to defend Iceland's whaling decision, as a member of the junior party in Iceland's ruling coalition she has also openly spoken out against it.

INGIBJORN GISLADOTTIR: It has no economic importance for us to catch those 40 whales. And I am of the opinion, my personal opinion, that we are taking minor interests instead of looking at major interests, which is our tourism, and I think we might be hurting our tourism by catching those 40 whales.

Although some people might well be appalled by the offer of a minke whale kebab, it's actually quite popular in Reykjavik's seafood restaurants. Whale watching tourists queue up to try it just minutes after getting off their whale cruises. Although most people find the dark red meat very chewy, this visiting couple from Denmark had a positive reaction.

WOMAN: Delicious!

REPORTER: You like it?

MAN: Yes? It's much better than I thought.

But while whale meat might pass the taste test it hardly seems essential to the national diet. But Iceland's whaling representative says that's irrelevant.

STEFAN ASMUNDSSON: Actually this is one of my favourite arguments because it is actually quite ludicrous – you can take any particular food item and - say, 'we don't eat pork'. There's not a nation in the world that could not live without pork. Does that mean that we should therefore ban pork?

At this week's IWC meeting in Chile Stefan Asmundsson has once again put Iceland's case for sustainable whaling in its coastal waters, a position to which Australia is adamantly opposed.

STEFAN ASMUNDSSON: The thing is, to make a big decision in the IWC you need a majority of three-quarters – and, as I said before, we are more or less 50-50 split.

To break that deadlock, yesterday the IWC agreed to defer voting for a year while newly formed working groups investigate the key issues. It's a decision which effectively sidelines Australia's hard-line stance and gives new hope to countries like Iceland that a compromise solution based on sustainable quotas can be found.

KRISTJAN LOFTSSON: We are ready, and the whales are waiting for us.

Back on-board his flagship, Kristjan Loftsson is still hoping that someday soon whalers like him will be welcomed back into the world's oceans, including around Australia. He says our abundant population of sperm and humpback whales are ripe for the picking.

KRISTJAN LOFTSSON: You're not talking about hundreds of thousands of whales in one year - it's a few hundred, depending on the population size and you can carry on forever.

REPORTER: So you would recommend that Australia should carry on with whaling?

KRISTJAN LOFTSSON: Sure, and I'm sure also they could do some humpback whaling out of Brisbane and that area, yeah – 50 whales a year or something like that. You know, do the science as well - you have whale watching - at the same time, people eat the whale meat. It's not one against the other - you can have both.

For now in Iceland, both whale watching and whale killing coexist in an uneasy balance.