Iceland turns to Russia after IMF deal

By Omar Valdimarsson

REYKJAVIK (Reuters) - Icelandic officials are in Moscow on Tuesday for talks on an emergency loan that could be worth billions of euros, the country's latest attempt to raise cash to help save its economy from collapse.

Iceland has tapped the International Monetary Fund for financing to help ease the crisis and some ministers have raised the possibility of membership of the European Union, long resisted by its fishing sector, to safeguard the economy.

An official from Iceland's central bank said a delegation from the bank and government left for Russia on Monday to begin talks on the emergency loan, a move that has raised questions about Russia's motives and what price Moscow might extract.

Iceland's once-flourishing economy has come close to collapse as the global financial crisis froze credit markets. Policy-makers are struggling to get the banking system functioning again.

The state has been forced to take over three of the country's largest banks, shut down stock trading and abandon attempts to defend its free-falling currency.

The stock exchange, which was closed on Monday, was due to reopen on Tuesday.

Late on Monday, the central bank said it was working with institutions to get foreign currency activity on track and that former number two bank Landsbanki had been able to conduct some currency deals during the day.

Iceland's crown currency was essentially untradeable on Monday and its value was impossible to calculate.