- Iceland does have a tradition of granting asylum to good people persecuted by Uncle Sam, like Bobby Fischer.
- Iceland has a powerful political movement which supports civil rights and an open society.
- Iceland is not associated in the mind of the typical American with any Evil Empire like Russia.
- Iceland is populated by White, very often English speaking people.
Yup, most Americans are amazingly insular in their outlook, they do not know any foreign language, they have little or no interest for the non-Anglo world, and many of them actually fear it (-: hence the official term in the USA for folks like myself: a "legal alien"; makes me feel like I am from Mars or Alpha Centauri :-).
Anyway, is there anything wrong in the choice of Iceland? Oh yes!
First, as I said previously, Iceland has a huge US military presence. Worse, it is precisely because it is populated by White and often English speaking people that it would be relatively easy for any US operator or agent to hide in the crowd. Furthermore, Iceland is really a tiny island with only one "big" city (with a population of only 120'000!) and a scattering of small towns. Needless to say, its cold, grey, humid and desolate. It's very pretty too, in its own way. But for a young man from a huge country like the USA and who lived his latest years in Hawaii, this is going to be a big, big change of scenery, to put it mildly.
Then there is this: all defectors, repeat all, go through not only a culture shock, but usually a period of severe depression. This is well known in security and intelligence services and this is something which is a major problem which often resulted in re-defections, even practically suicidal ones.
I won't go here into this entire business of defector mental issues, but I assure you that I have personally known enough defectors myself, personally, and often very closely, to tell you that if Snowden did not have a major depression it would be something of a miracle. Well, being in a place like Iceland is hardly helpful in this context.
Finally, knowing the above, the US can easily snatch him off the street and make him admit that he is depressed and homesick (which he will be). To make him "voluntarily" re-defect is rather easy, really.
You might ask why the US would be so dead set on the idea of punishing him. It is not. What Uncle Sam wants is to get him back at all costs not at all to punish him, but to send its own intelligence and security establishment the following chilling message: if you run away form us, we will get you back.
This is also a major reason why I would urge Snowden to pick either Russia, or China or Cuba. All these countries have a great deal of experience with defectors (especially Russia), and they are acutely aware of the risks the mental condition of any and every defector presents and they have the psychological support services needed to help (and even that does not always fix the problem).
It would be heartbreaking for everybody to see a press conference with Snowden explaining that he is "voluntarily" returning to the USA. If he decides to pick Iceland, he will make that kind of outcome much more likely.