British Prime Minister Tony Blair says the next few days are critical to see if Britain and Iran can diplomatically resolve their dispute over 15 British sailors and marines, seized by Iranian forces nearly two weeks ago. At the same time, an Iranian diplomat held hostage in Iraq is freed and Iran is reported seeking the release of five of its citizens detained by American forces in Iraq in January. VOA's Sonja Pace has the story from London.

Speaking to a local radio station in Scotland, Prime Minister Tony Blair said he welcomed indications that Tehran is ready to end the standoff over the detained naval crew.

"I think the next 48 hours will be fairly critical. I mean, I have read the transcripts of the interviews that Mr. Larijani gave and that seems to offer some prospect, but you know we need to hear from them [The Iranians] direct," said Mr. Blair.

On Monday, senior Iranian official, Ali Larijani told Britain's Channel 4 news that the issue could be resolved through diplomatic means and that he saw no need to put the sailors on trial, as he had previously indicated. He spoke through a translator.

"Definitely, our priority would not be a trial, except that [if] the U.K. government would insist on not solving the problem through diplomatic channels. Our priority is to solve the problem through diplomatic channels," he said.

Speaking to reporters Tuesday, Mr. Blair said two possible tracks remain to resolve the issue.

"To try and settle this by way of peaceful and calm negotiation to get out people back as quickly as possible, the other is to make it clear that if that is not possible then we have to take an increasingly tough position," he explained.

Mr. Blair said the choice was up to the Iranian government. 

At the center of the crisis is exactly where the British sailors were when they were seized at the mouth of the Shatt al Arab waterway on March 23. Britain insists they were in Iraqi territorial waters, conducting a routine U.N.-sanctioned, anti-smuggling search operation. Iran insists the boats had strayed into Iranian waters.

Iran initially demanded a British apology for straying into its waters, but Larijani stopped short of such demands on Monday and indicated it might suffice for Britain to "guarantee" that such a violation not be repeated.

Iranian President Mahmoud Ahmadinejad was scheduled to hold a news conference in Tehran Tuesday, where he was expected to talk about the detention of the British naval crew. The news conference was postponed, possibly until Wednesday.

Meanwhile, Tehran has confirmed that Iranian diplomat Jalal Sharafi returned home from Iraq, after being released by his Iraqi captors. Sharafi was seized by armed men in Iraqi uniforms in the Karradah district of Baghdad February 4.

Iran insisted he was held by an Iraqi military unit commanded by the Americans. The United States denied any role in the diplomat's kidnapping.

At the same time, an Iranian Foreign Ministry official is quoted as saying Tehran is "intensively" seeking the release of five Iranians who were detained by American forces in northern Iraq earlier this year.

The U.S. military said it seized the men because they were suspected of providing money and weapons to Iraqi militants. Officials said at least one of the men was a senior officer in the elite Iranian Revolutionary Guards.

Speaking at a news conference in Washington, President Bush said he supported British efforts to secure the release of the British captives held in Iran, but there would be no "quid pro quos when it comes to hostages."