They don't have an army, true, but the reason they don't need one is that they are a part of NATO, and are exempt from the requirements of contributing to NATOs standing forces in return for providing facilities and land to the alliance.

So Björk is being at bit disingenuous. It's not like the Icelanders are a shining beacon of pacifism and diplomacy, they're just part of a big military alliance.

See https://www.nato.int/cps/en/natohq/declassified_162083.htm