Malta was supplied for a time exclusively by submarines, an Icelandic U-boat base could do the same. Several hundred Diesel JU 86 were available, and the Icelandic fishing fleet operated on diesel, 1000 coastal vessels & 22 ocean going. Iceland had 40.000 horses in 1940, & the one RAF base at Faeroes had a dirt strip & had little success against the Luftwaffe.
The Luftwaffe in Spain was up and running in 1 day, He 115 planes were assembled & operated without hangars in 1 day. German plank wood runways also can be set up in a very short time. German cargo ships could have 6 or 8 inch guns set up aft to give an instant welcome to the Royal Navy when it arrived.
The British airbase at the Faeroes
Two Spitfires were stationed here in 1943 but again with the Luftwaffe flying in low level, radar would not pick them up so success from this station was non-existant. http://www.crashsiteorkney.com/page35.htm