Iceland turns to Russia for €4bn loan


SEEKING CREDIT:ICELAND HAS expressed disappointment that western allies have failed to provide support to help ease the country's financial crisis, forcing it to turn to Russia for a €4 billion loan.

"We have not received the kind of support that we were requesting from our friends," said prime minister Geir Haarde. "So in a situation like that, one has to look for new friends."

Mr Haarde said Iceland did not extend to military co-operation, refuting the suggestion Russia might be given access to an airbase vacated by the US air force in 2006. "We are a founder member of Nato," said an official, "categorically denying" any such deal.

There was confusion over the status of the Russian loan, with the central bank first saying it had secured € 4 billion on a four-year deal, at between 30 and 50 basis points above the London interbank offered rate, before acknowledging that the pact had yet to be finalised.

Alexei Kudrin, Russia's finance minister, confirmed Russia had received a request from the Icelandic government for credit. "We will examine it," he said. "Iceland is well known as a country with tough budgetary discipline and a high rating of reliability. We see such an application positively."

Iceland needs to bolster its foreign exchange reserves in an attempt to shore up the krona, whose depreciation has caused sharp price rises in imported goods such as fuel. The central bank said yesterday it had begun intervening in currency markets to try to strengthen the krona.

- ( Financial Timesservice)