Russia has agreed to lend Iceland €4 billion to help the country through the financial crisis.

The loan – over three to four years – is designed to help bolster Iceland’s foreign exchange reserves as its currency suffers a fall against the euro.

Today the Icelandic Financial Services Authority (IFSA) was forced to nationalise Landsbanki – which owns UK saving provider Icesave – as its banking sector has found itself overstretched by global financial crisis.

As well as taking over the nation’s second largest bank, the Icelandic government has also lent €500 million to its largest lender Kaupthing.

News of the nationalisation of Landsbanki had led a 35 per cent fall in the Icelandic krona.

However, the Russia loan pushed up the currency.

Yesterday the krona dropped ten per cent against the euro. Sine the start of the year it has fall 46 per cent against the euro.

Iceland is now trying to prompt its financial sector to sell off foreign assets and bring capital back to the country.

Currently Icelandic investors own large swathes of the UK high street, with stakes in chains such as House of Fraser, Oasis, Warehouse and Hamleys, but not Iceland.

Bjorgolfur Thor Bjorgolfsson who held 40 per cent of Landsbanki, also owns West Ham.