Unfortunately, PayPal has integrated an erroneous setting for one of the blocked payments options.
Please log into your PayPal business account and go to:
Account Settings => Payment Preferences
For the option "Blocked Payments" click on the "Update" link (see image 2).
Now, for the option "Block non-U.S. shipping addresses" choose the setting "Yes".
This solution is counter-intuitive, as you would expect the opposite to be true.
Please test your new settings by starting the payment process via ConfTool and PayPal.