Britain says Iran forced a crew of eight British sailors and marines into Iranian territorial waters before capturing them last week.
The British defense minister has told parliament Iran apparently provoked the June 21 incident on the Shatt al-Arab waterway that divides Iran and Iraq.
In a written statement, Defense Minister Geoff Hoon said the eight British crewmen report the Iranians forced their three small patrol boats into Iranian waters before capturing them.
Mr. Hoon says the crew carried global position satellite equipment that would prove their version of events, but Iran has failed to meet British demands for the return of the gear, along with the boats and weapons that were confiscated.
The defense secretary also expressed concern that the captured men had been blindfolded and paraded on Iranian television, and he says Britain has told Iran there must be no other such incidents.
The foreign affairs spokesman for the opposition Conservative Party, Michael Ancram, told British radio the affair is setback in British-Iranian relations.
"If it's true that they were forcibly escorted into Iranian territorial waters, which is what the statement says, then that is absolutely outrageous,? he said. ?Remember, we were required to apologize for what appeared to be trespassing into Iranian waters. Our servicemen were paraded, blindfolded and humiliated. The equipment, which we are now told was due to have been returned on Tuesday, still hasn't been returned. This really does create an extraordinary strain on British-Iranian relations."
Foreign Secretary Jack Straw continues to defend Britain's policy of "constructive engagement" with Iran. He told British television diplomacy can be useful in settling differences, such as a territorial dispute last year between Iran and a British-occupied area in southern Iraq.
"Though our relationship with Iran is complicated, we have effective diplomatic relations, and I have a close relationship with my opposite number, Kamal Kharazi. We were able to resolve that matter, as we have all the other ones with Iran, by diplomatic means," Mr. Straw said.
British officials are playing down media reports that the U.S. commander in Iraq, Lieutenant General Ricardo Sanchez, ordered the British military to prepare to attack Iranian troops who had encroached inside Iraq's southeastern border last July.
The Foreign Office says the Americans were informed of, and accepted, the British diplomatic efforts that peacefully ended the Iranian incursion.