Iceland and the Faroe Islands face their "last chance" to end a mackerel quota war in negotiations next month, EU fisheries ministers said, otherwise the EU could impose sanctions.

European Union Fisheries Commissioner Maria Damanaki set out the proposal during two-day talks on fishing quotas running through Friday with important EU fishing states angered at unilateral high quotas set by these non-EU neighbours for precious stock in need of protection.

The sanctions Damanaki proposes would be designed to "eliminate" commercial advantages gleaned by these north Atlantic neighbours for "unsustainable" catch levels, and would be based on import restrictions or access to EU ports and facilities.

The proposal by the European Commission, seen by AFP, does not target these countries by name.

But Scotland's fisheries minister Richard Lochhead, who leads negotiations for Britain, said "the power to impose meaningful sanctions against states fishing unsustainably would be a progressive step."

The Scottish government in Edinburgh named the Faroe Islands and Iceland ahead of next month's negotiations, with talks also set for Norway.

Lochhead's support for Damanaki's position received further backing from Ireland, France, Germany and Denmark. The Faroe Islands are a Danish territory, but almost completely autonomous.

In January, Brussels said it would block fishing boats from Iceland -- which is negotiating to join the 27-nation block -- from unloading mackerel in the EU until a dispute over quotas was resolved.

About two months earlier, after quota talks failed, the North Atlantic island unilaterally raised its mackerel fishing quota to 146,000 tonnes for 2011, after allowing about 130,000 tonnes in 2010 -- an enormous level compared to 2,000 tonnes in previous years.

The increases came as Iceland's economy, which is now largely fishing-based, was trying to get back on its feet after its major banks collapsed in 2008.

Reykjavik and the Faroe Islands argue that global warming is pushing more mackerel further north into their waters.