Britain scraps planned air patrols over Iceland

LONDON (Reuters) - Britain, embroiled in a diplomatic row with Iceland over the financial crisis, has suspended plans to send warplanes next month to patrol its NATO ally’s skies, the Defence Ministry said on Friday.

NATO members, including Britain, France and the United States agreed to resume regular patrols of Iceland’s airspace earlier this year following an increase in Russian military activity in the North Atlantic.

“Air policing for Iceland is a NATO task. The deployment, which was generated by NATO, was scheduled to be met by the U.K. for December. However, following consultations in NATO, and in agreement with Iceland, the deployment will not take place in December,” a Defence Ministry statement said,

The decision was taken after talks with the U.S.-led alliance and Iceland, although a ministry spokesman denied the move was linked to the banking crisis.

Britain and Iceland have been at loggerheads since the Reykjavik government was forced to take over three big banks last month as the economic turmoil battered its financial system and currency.

Britain prompted outrage in Iceland by using anti-terrorist legislation to seize the UK assets of Landsbanki, a bank that attracted many British customers with high-interest Internet savings accounts.

Iceland’s Prime Minister Geir Haarde said it was the right decision, although he added that the two sides were nearing a solution to their disagreement.

“This is a NATO decision and probably an appropriate one given the circumstances,” Haarde told a news conference.

(Additional reporting by Omar Valdimarsson in Reykjavik)

Reporting by Peter Griffiths; Editing by Richard Balmforth