When Graham Hall started out as a trawlerman, the port of Grimsby was crammed with so many boats local legend had it you could walk from deck to deck across the entire harbour.

But just three turquoise trawlers could be spotted last week – 60% of the town’s remaining fleet.

The Icelandic cod wars of the 1970s, when Iceland extended its fishing zones and excluded UK trawlers from territory it had previously harvested, obliterated what had, in the 50s, been the biggest fishing port in the world. Veteran skippers such as Hall, 57, have never forgiven or forgotten.

“Without the cod wars, we would still have a big, vibrant port, one that would be supplied by its own ships instead of Iceland’s,” he reflects sadly.

Now though 42 years after the trawlerman’s first foray into the North Sea, Hall has another crisis on his mind and a different fish – mackerel. And once again Grimsby’s fate is in the hands of the Icelandics.

Iceland’s decision to increase hugely its mackerel quotas has so incensed North Sea neighbours such as Scotland that the European Union is contemplating sanctions that could ban Icelandic fishing boats from landing any catch at EU ports. Last week, the row ratcheted up a notch when the Marine Conservation Society (MCS), taking note of the rapacious Icelandic fleet’s activities, decided to exclude the species from its list of sustainable fish that could be eaten with a clear conscience.

Hugh Fearnley-Whittingstall, who along with Jamie Oliver and Raymond Blanc has urged shoppers to eat mackerel as a sustainable alternative to cod, has described the plight of mackerel stocks as a “farce rapidly becoming a tragedy”.

Iceland’s fishermen, and their political leaders, vehemently disagree, arguing that the species can now be found in such vast numbers in its waters that it amounts to an “invasion” threatening to overwhelm its marine ecosystem. They suggest the mackerel has merely moved home, migrating north from Scottish to Icelandic waters. Hall says the mackerel movements are part of a wider pattern, adding: “The seas are definitely getting warmer, we see fish moving north.

As Europe’s mackerel wars begin in earnest, this time Grimsby is on the Icelandics’ side. If sanctions are imposed on Iceland, it is likely to be disastrous for Grimsby. Of the 18,000 tonnes of fresh fish sold at Grimsby’s port last year, almost 13,000 came from Iceland, mainly cod and haddock.

According to Hall, overall North Sea fish stocks are larger than he has ever known. During his last trip eight days ago he caught more than 500 boxes of large mature cod – each more than 30kg – in several days.

Chris Sparkes, managing director of Grimsby fish merchants Jaines & Son, said:

“The MCS decision is very divisive, it’s another negative story about fishing and ignores the fact that Icelanders have a fantastic reputation of sustainability and the EU does not.”

Since Iceland’s banking collapse of 2008 and its subsequent attempts to fish its way out of a crisis, Grimsby has boomed on the back of the surge of fresh white fish.

Were the supply line cut, 70% of the UK’s fish processing industry along with Europe’s biggest concentration of cold storage facilities would be at risk.

Hall, skipper of the Jubilee Quest, and whose teenage years were spent fishing Icelandic waters, said: “We need imports from Iceland to keep the market going. Grimsby doesn’t have ships anymore. Without Iceland, the fish market would collapse.”

Sparkes, whose firm employs 35 people and relies on 40% of fish from Iceland, said: “Icelandic fish are vital to our lifeblood, if we lose them it’d be a community killer, a catastrophe for the area.”

At risk too are an estimated 4,000 jobs, each vital in a post-industrial economy that has struggled to recover from the cod wars.

2013 Guardian News and Media Limited