British forces occupied the Faeroes during World War II, both to prevent Germany from capturing them and to aid Allied operations in the North Atlantic. A Loran-A (Long-Range Navigation) communications station was built on the Faeroe Islands during the war. Danish authorities maintained it following the end of the war.
When the North Atlantic Treaty Organization (NATO) was formed in 1949, the United States concluded that Danish membership was crucial in part because the Faeroe Islands would be included. Yet in the first few years after the war, the islands were not deemed to be of great strategic importance. That changed by 1950, however, because various technological advances made them important in communications, radar, and advanced-warning system applications. Fear that the Soviet Union might wish to gain a foothold there also made them strategically vital.
In 1959, the United States funded and oversaw the construction of a Loran-C station on the Faeroe Islands in connection with the planned introduction of the submarine-launched Polaris missiles. The station was operated by Danish personnel and was used for both civilian and military aviation and navigation. It also served as a master station for other Loran-C installations in Iceland, Norway, and later on the island of Jan Mayen. In addition, a NATO-operated radar station was built in the Faeroe Islands.
Immediately after World War II, Faeroe Islanders narrowly defeated a bid to gain full independence from Denmark, settling instead for home rule that kept foreign affairs and defense in Danish hands. During the Cold War, Copenhagen and Washington sometimes worried that nationalist tendencies in the Faeroes might lead to calls for secession from Denmark and even a claim of official neutrality. Friction with Britain over fishing limits (fishing is the chief industry of the Faeroe Islands) also caused concern. While a number of Faeroe Islanders did at times protest against military installations on the islands, the danger of secession was never that great. Throughout the Cold War, the Faeroe Islands remained an important surveillance and communications post for the United States and NATO.
Wylie, Jonathan. The Faroe Islands: Interpretations of History. Lexington: University of Kentucky Press, 1987.