Iran has signalled it is ready to release British servicewoman Faye Turney after Tony Blair vowed to "ratchet up" the pressure on Tehran over the seizure of 15 sailors and marines.
As Foreign Secretary Margaret Beckett announced a "freeze" on government-to-government relations with Tehran, the Ministry of Defence set out the evidence which, it said, showed that they were captured in Iraqi waters.
The Iranians continued to insist that the Royal Navy boarding party had crossed into Iranian territorial waters in the northern Gulf when they were captured by Republican Guard patrol boats on Friday.
However, in the first sign that Tehran was prepared to give ground in the crisis, foreign minister Manouchehr Mottaki said that Leading Seaman Turney - the one woman in the party - would be set free.
"The issue is under consideration. I think it will be solved soon based on rules and regulations. I think I have informed you that the lady will be released very soon," he told reporters during an Arab summit in the Saudi capital, Riyadh.
The Foreign Office said it had received no confirmation from the Iranians that she would be released.
Earlier, Deputy Chief of the Defence Staff, Vice Admiral Charles Style, gave detailed co-ordinates which he said showed that the party had been seized 1.7 nautical miles inside Iraqi waters.
He also disclosed that the Iranians had changed their account of where the incident had taken place after it was pointed out that the first set of co-ordinates they were given by the Iranian Ambassador in London on Friday were in Iraqi waters.
"It is hard to understand a reason for this change of co-ordinates. We unambiguously contest both the positions provided by the Iranians," he said.
The MoD backed up its assertion by releasing a photograph of a handheld global positioning satellite (GPS) device in HMS Cornwall's Lynx helicopter as it overflew the ship, confirming its position.
