Polar Foxes (Alopex lagopus) on Iceland live in a wide range of the Iceland island. As their main prey outside the coastal regions is the ptarmigan they follow these birds. However they also hunt prey amongst breeding bird colonies at the coast. A special area of interest regarding to the arctic fox on Iceland is the extreme north-western region of Iceland. Because it is a nature reserve, hunting arctic foxes is forbidden. As a result, they are far less shy toward humans and thus close encounters around Hornvik are possible. This elucidates a remarkable behavior characteristic that has been shown on many other regions of the (far) north of the globe: arctic foxes generally are at ease with human settlements. However, when hunting is severe, as is in most regions on Iceland that changes. It is a shame that foxes in the Hornstradir region (the natural reserve) are illegally hunted by poachers because they can earn easy money by showing fox tails to farmers on the main land of Iceland as a proof of hunted foxes on their farms.

Arctic foxes form close pair bonds for many years. A female has a litter of 5 to 10 cubs in spring. The male has a full role in bringing up the cubs. A special feature of this fox species is that they have fur under their paws during the wintertime, obviously for heat insulation. Also their round shaped small ears is an adaption to heat conservation.

In the meanwhile I can show you two photo's I took of Arctic foxes on Iceland-Hornvik in 2001:

Arctic Fox

Related sites are:
Lioncrushers Domain on arctic foxes
University of Michigan page on arctic foxes by Candice Middlebrook
International Union for the Conservation of Nature (IUCN) page on Arctic Foxes

I would like to add a paragraph/quote from the IUCN page on arctic foxes:
Iceland: Hersteinsson (1987a) summarizes the status of arctic fox in Iceland. Because of their suspected preference for eating lambs and sheep, legislation in Iceland has encouraged persecution of Alopex since 1295. Population levels have fluctuated since 1855 with possible causes of decline being distemper, strychnine poisoning, or changes in climate and perhaps prey availability (Hersteinsson 1987b). Recent evidence suggests that the protozoan parasite, Encephalitozoon cuniculi, may regulate population numbers (Hersteinsson pers. comm.). Where the parasite is common (40% infected), population levels remain low or decline; where the parasite is nearly absent (2% infected), population levels increase. From 1958 to 1981, population levels declined near towns and in densely populated rural areas. The species was hunted by various methods, many of which were aided by the use of snowmobiles. State-subsidized hunting encouraged continued persecution: despite an increase in hunting effort, offtake dropped from 1,590 individuals in 1958 to 456 individuals in 1978. The entire population was estimated at 700 to 800 in 1982. By 1985, the population appeared to have increased to 1,780 ± 70 individuals.