As Iceland teetered on the precipice of a complete financial meltdown Tuesday, the country's central bank reported that Russia was coming to its rescue with a loan of 4 billion euros ($5.4 billion).

The report turned out to be premature, as negotiations are in the early stages, but Moscow did receive an official request late Tuesday and is considering the loan, a gesture that may be motivated more by politics than economics.

"We will consider it," Finance Minister Alexei Kudrin said Tuesday, Interfax reported. "Iceland has a reputation for strict budget discipline and has a high credit rating," Kudrin said. "We're looking favorably at the request."

In a last-ditch effort Tuesday to save its banking sector, the government of the tiny country, with a population of just 310,000, nationalized its second-largest bank, Landsbanki, and loaned Kaupthing, its largest bank, 500 million euros ($680 million). The measures …