New Foreign Affairs Minister Bob Carr has issued a humiliating backdown from his threat to impose sanctions on Papua New Guinea if the politically troubled country's midyear elections were cancelled.

The Labor senator's comments sparked a diplomatic incident and elicited a furious reaction from Papua New Guinea's top diplomat in Australia, Charles Lepani.

Senator Carr says his PNG comments were ‘‘misunderstood and used out of context’’ . Credit:Simon Schluter

PNG Foreign Minster Ano Pala also took the rare step yesterday of calling in acting Australian high commissioner Margaret Adamson to complain about Senator Carr's warning that any delay to midyear elections in PNG would leave Australia "no alternative but to organise the world to condemn and isolate Papua New Guinea".

But Senator Carr today said his comments had been "misunderstood and used out of context" and that he now fully accepted that PNG's elections would be held on time.