Iceland looked for help from new partners on Monday to dig it out of a crisis that has overwhelmed its once-flourishing financial sector.
A central bank and finance ministry delegation left for Russia to begin talks on an emergency loan worth potentially billions of euros, a central bank staffer said.
Ministers said the north Atlantic island nation should now consider joining the European Union to safeguard the economy — a step that in the past has been blocked by the country's influential fishing sector.
Officials have also signalled it might turn to the International Monetary Fund for help to pull through a financial storm that has brought its economy to the brink of collapse.
Iceland was forced over the past week to take over three big banks, shut down its stock market and abandon attempts to defend its free-falling currency.
Trading in Icelandic shares was due to begin again on Monday but the exchange said it would now restart on Tuesday.
In the past decade, the country had built a financial sector that brought unprecedented prosperity to its 300,000 people and made it a favourite with overseas savers and investors.
That came crashing down last week as Iceland fell victim to the crisis sweeping the world.
A five-person delegation left Reykjavik for Moscow on Monday for loan talks, a move that has raised questions about Russia's motives and what price it might extract from Iceland, a NATO member.
A figure of 4 billion euros ($5.5 billion) was mentioned previously but the government says no deal has been nailed down.
Ministers also talked about embracing the EU, a relationship Iceland has long been wary of.
Fisheries Minister Einar Gudfinnsson, who has opposed EU membership, said on local radio: "It's no secret, I've been against membership. However, the current turmoil means we have to look at every option."
Foreign Minister Ingibjorg Solrun Gisladottir said joining the EU and adopting the euro must now be a long-term ambition.
"In the short term, our defence is cooperation with the International Monetary Fund and in the long term EU membership, adoption of the euro and backup from the European Central Bank," she wrote in the daily Morganbladid.
A European Commission spokeswoman said that as a European country, Iceland was entitled to apply for EU membership.
"Negotiation with Iceland, theoretically speaking, could go fast because as a member of the European Economic Area, it has already adopted many EU laws," a commission official said.
The process could still take several years though.
Diplomats said Iceland sent a delegation to Brussels last month to plead for a link between its currency and the euro but they were told only member states were entitled to protection."
"BULLYING A SMALL NEIGHBOUR"?
Many islanders have wanted Iceland to adopt the euro but politicians have been cautious as that would mean joining the EU, forcing the vital fishing sector to make concessions and running contrary to Icelanders' independent streak.
Prime Minister Geir Haarde has voiced disappointment that other nations did not come to Iceland's aid in the past week, particularly in Europe. The cool reponse may have helped pushed Iceland towards Russia despite questions about the pay-off.
Haarde attacked the British government in a report published on Monday, accusing Prime Minister Gordon Brown's government of "bullying a small neighbour".
Britain last week used anti-terror legislation to seize billions of pounds of failed Icelandic banks' British assets and accused the Reykjavik of acting irresponsibly.
"The UK authorities have said they will sue us," Haarde told the Financial Times. "Well, both countries can sue if they see fit. Going to court is one way of settling disputes in a civilized way."
