I had to cancel a transaction the other day because I stuffed up with a sale... long story but I went on live chat to check about cancelling the sale so I could relist it for this buyer.... this is pasted from the transcript: 

"Yes you can cancel the transaction without getting a defect as long as you don't use the out of stock option or don't post to buyer's location."

So I chose the option "Buyer and I disagreed over terms"  which was kind of true anyway, except it wasn't adversarial like "disagreed" implies... anyway, the buyer agreed to the cancellation and I didn't get a defect.  

In the OP's case, maybe this option is a much better choice than "Don't post to buyer's location" as I think this is just as true, and you won't get a defect you don't deserve.

It was also quite good having this in writing should I have needed to appeal for defect removal.

Also, I would do as Sheep has said.  To eliminate international postage, you need to do more than simply select the option of "No International Postage", you also need to go in and specifically select all the countries that you don't ship to, even if it's all of them.  Stupid, I know.