Iceland's blue chip stocks plunged 77 percent when trading reopened on Tuesday after a near week-long suspension and an official delegation from the island sought Russian help in saving the economy from collapse.
Iceland has already tapped the International Monetary Fund for help with the crisis that has overwhelmed its once buoyant financial sector and brought the economy close to collapse.
All stock trading had been suspended since Thursday with the last official trade coming on Wednesday. The blue chip index tumbled although trading in six financial stocks — Kaupthing, Landsbanki, Glitnir, Straumur-Burdaras, Reykjavik Savings Bank (SPRON) and Exista — remained suspended.
Iceland last week took control of the operations of Kaupthing, Landsbanki and Glitnir and has been forced to take abandon attempts to defend its free-falling currency.
Icelandic officials held talks with Russian Finance Ministry officials on Tuesday. The delegation, which did not include any ministers or the central bank chief, was led by Sigurdur Sturla Palsson, director of the international and market operations department, which manages the central bank's market activities.
"We had an excellent reception here," Palsson told Reuters as the delegation took a break in a branch of the Coffee House chain outside the Finance Ministry. He added the talks were in their early stages.
Iceland initially mentioned a 4 billion euro ($5.45 billion) loan — around one percent of Russia's gold and forex reserves. Russian officials say no details have been agreed, although they are looking on the loan request favourably.
"We haven't actually discussed an amount yet, but that figure (4 billion euros) has been mentioned elsewhere. We are just discussing the general financial affairs in Iceland," Palsson said, adding that on the Russian side the talks were chaired by deputy finance minister Dmitry Pankin.
The delegation will fly back to Iceland on Thursday.
Russia's Finance Ministry said Iceland would lay out its wishes at the first round of talks. If agreement is reached more negotiations are likely to follow, at a higher level.
IMF
On Monday, an IMF official who asked not to be identified, told Reuters the fund's executive board discussed Iceland's official request for finance at the weekend but that no amount had been agreed.
An Icelandic government spokeswoman said she could not confirm that an official request had been made.
Moscow has already unveiled a rescue package for the Russian market worth over $210 billion, but analysts say capital flight may not stop until global financial markets stabilise.
Helping Iceland could be a small way of making that happen, though Russia's move is widely seen as politically motivated.
Some ministers have also raised the possibility of membership of the European Union, long resisted by the island's fishing sector, to safeguard the economy.
Late on Monday, Iceland's 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 Tuesday and its value was impossible to calculate.
