Not only does politics make for strange bedfellows, but so does desperation. Iceland is looking to borrow over $5 billion from Russia to shore up its banks. Um, Iceland is a member of NATO, or at least is now. As reader Jørgen commented,

Russia backstopping Iceland? What is the pay-back? Keflavik? I guess this resembles blackmail of EU: If you don’t rescue us, Putin will.

Reading the Reuters story on this surprising turn of events, it appears that Iceland is not willing to seek assistance from the IMF, since in the Asian crisis, it imposed reforms that were seen as draconian (and many believe contained counterproductive elements).

Update 7:15 PM. I thought Jørgen was kidding. Even if he was, he was spot on. The Spectator confirms the idea (hat tip reader RB):

But what price will the Russians demand for their bailout? A highly-placed source in Reykjavik tells Coffee House that Iceland might look kindly on requests from Russia’s military to use America’s former military base in Iceland. America closed its Naval Air Station at Keflavik Airport two years ago, handing back the Nato facility to the Icelandic government.

From Reuters:

Iceland took over its second largest bank, propped up a battered currency and sought on Tuesday a 4 billion euro ($5.44 billion) loan from Russia to help tackle a crisis threatening to overwhelm the island nation. Russian Finance Minister Alexei Kudrin said Moscow viewed positively the request from Iceland, whose premier said it had faced a risk of “national bankruptcy.” “The result will be announced after negotiations,” Kudrin said. Prime Minister Geir Haarde said Icelandic officials would travel to Moscow on Tuesday or Wednesday to discuss terms for the loan to bolster the country’s foreign reserves. “With this, like everything else, nothing is certain until it’s certain,” Haarde told a news conference. He said Iceland would not default on its sovereign debt…..

Yves here. If you believe that, I have a bridge I’d like to sell you.