By Mia Shanley

REYKJAVIK (Reuters) - Few suspicions are raised by the sight of another geologist pottering around Iceland's natural wonders of rock, fire and ice - unless that geologist is also the Chinese premier.

Wen Jiabao put on his hiking boots and donned a windbreaker in communist red at the weekend for time in Iceland's wilds at the start of a visit to Europe. As admiringly as any tourist, he gave a thumbs up as the force of the Strokkur geyser blew water and steam meters into the air.

But in Iceland, the visit of the bespectacled "Grandpa Wen" has given rise to some unease over what his rising power, the world's second-biggest economy and most populous nation, really seeks from the determinedly independent island.

Worries centre on China's economic clout and its lack of democracy in a state that boasts the world's oldest parliament.

"Don't forget that we have been isolated on the margins of the rough Atlantic for centuries. Iceland is always a bit apprehensive about other nations," Foreign Minister Ossur Skarphedinsson told Reuters.

China's interest in ties to resource rich lands is no secret. Its businesses have also been on the lookout for opportunities in a Europe weakened by the global financial crisis - a crisis felt nowhere more sharply than Iceland.

Global warming also has the potential to redraw the geopolitical map near Iceland as melting ice could one day allow for trans-Polar traffic, opening up speedy new routes to Europe for Chinese exporters.

Iceland sees a place for itself on those routes, developing its sparsely populated north.

Iceland rolled out the red carpet for its first visit by a Chinese premier, making clear its satisfaction that Wen would start his European visit in the country whose population of 320,000 would barely qualify as a small city in China.

Business leaders have been upbeat on the visit. Local firm Orka Energy signed a deal with China's Sinopec on geothermal energy. Coverage in Icelandic media has generally been positive.

But some Icelanders are not in such welcoming mood.

"Free Iceland!" someone wrote in giant letters outside the gleaming new music hall where the premier had dined with his 100-strong entourage, the words echoing the "Free Tibet" slogan.

Wen was unable to visit a vast lake-filled volcanic crater on his geological tour because the landowners didn't want him there.

"TOXIC DOLLARS"

Birgitta Jonsdottir, a member of parliament who joined anti-China protests by about 100 people at the weekend, voiced concern at possible Chinese infrastructure purchases.

"They pump toxic dollars into poor countries. The nation gets too dependent on these large sums of money and then they get to set the policies," she said.

In a sign of the prevailing caution, Iceland rejected an offer by a Chinese multimillionaire to buy a chunk of land in the northeast, blaming restrictions on foreign ownership.

Suspicion isn't reserved for Chinese interests. Although Iceland started negotiations on joining the European Union last year, the bid has been losing support.

China's embassy dismissed any concerns at ulterior motives for Wen's visit as well as the misgivings of some Icelanders, whose country gained independence from Denmark only in 1944.

"He's a geologist, and he said if he didn't come to Iceland it would be a pity," said Su Ge, China's ambassador to Iceland.

The 69-year-old Wen did not talk politics as he asked about the rock types and the formation of grey-black basalt rock from volcanic lava.

"It is beautiful," Wen said slowly in English, after climbing off his mini bus on the spot where the North American and Eurasian tectonic plates collided and where the Althing parliament once met.

"He was not talking in political jargon but as a person, a scientist, who knows what he's saying," said Oddur Sigurdsson, a geologist who was Wen's tour guide.

Wen graduated from the Beijing Institute of Geology after majoring in geological structure, his official biography says.

He greeted tourists and chatted with locals in Iceland. At one point, he hugged a two-year-old Icelandic girl in a puffy pink jumpsuit. He ate traditional Icelandic pancakes rolled in sugar at a farm and admired sheep and horses.

On his last stop, a geothermal power plant on an active volcanic ridge, he told students in a spontaneous 10-minute speech that more needed to be done about global warming. Those who attended said they could really relate to Wen.

Not all Icelanders are convinced.

"I'm sorry to say there is some fear," Halldor Johannsson, Executive Director at the Arctic Portal Said.

Bernt Berger, senior researcher at the SIPRI China and Global Security Programme, agreed that mistrust was clear.

"The problem of a rising power is that no-one really knows where they are going, or what their goals are," he said.

Wen flies to Germany to open a trade fair with Chancellor Angela Merkel on Sunday. He then travels to Sweden and Poland, two of Europe's best-performing economies.

(Editing by Matthew Tostevin)