By Imogen Foulkes BBC, Bern

The Swiss food giant Nestle has come to an agreement with the Ethiopian Government over a long-standing claim for damages.

Only last month the company created a public relations disaster for itself when it claimed $6m from Ethiopia, a country which is facing widespread famine.

Now Nestle says it has agreed on a settlement of $1.5m, all of which will go directly to famine relief.

The agreement puts an end to a long-standing dispute over a Nestle-owned subsidiary which was nationalised by Ethiopia in 1975.

Food and water

The agreement amounts to a U-turn by Nestle, which only weeks ago was insisting that Ethiopia hand over $6m.

But the public outcry which greeted the news that one of the world's richest companies was demanding payments from a famine-stricken country led Nestle to back down.

In later December the company indicated it was looking for another solution, and now it says it has settled for only $1.5m - all of which will be donated immediately to famine relief.

Nestle has agreed to receive $1.5 m

In addition, Nestle says it plans to explore ways of helping Ethiopia create longer-term food security and better access to water.

As the world's largest food and bottled water company, it says, it has extensive experience in sourcing water.

But the agreement and the apparently good intentions behind it will not easily erase the memory of one of the world's most profitable companies attempting to get money from a country in which an estimated 11 million people are facing starvation.