Iranian President Mahmoud Ahmadinejad freed 15 British sailors and marines today, offering Britain a "gift" in a surprise announcement that ended a 13-day crisis which rattled world financial markets.
Mr Ahmadinejad told a news conference broadcast round the world he was willing to forgive the sailors, seized off the Shatt al-Arab waterway on March 23rd, even though Britain was not "brave enough" to admit it had made a mistake and they had strayed into Iranian territory.
"Under the influence of the Muslim Prophet, (Iran) forgives these 15 people and gives their freedom to the British people as a gift," Mr Ahmadinejad said towards the end of the 90-minute news conference.
Iranian President Mahmoud Ahmadinejad at a press conference in Tehran
Speaking later in Downing Street, British Prime Minister Tony Blair welcomed the sailors' release and said Britain bore the Iranian people no ill will. "Throughout we have taken a measured approach, firm but calm, not negotiating but not confronting either," he told reporters. "To the Iranian people I would simply say this: we bear you no ill will... The disagreements we have with your government we wish to resolve peacefully through dialogue."
Mr Ahmadinejad's announcement, made with a dramatic flourish, pulled oil prices down from recent highs. US stock futures and the dollar rose on relief at the peaceful end to the crisis.
The dispute centred on where the Britons were when they were seized. Britain says they were in Iraqi waters on a routine UN mission. Tehran says they strayed into its territorial waters. After his announcement, a smiling Mr Ahmadinejad met several of the sailors, dressed in smart suits, shaking hands with them and exchanging a few words through an interpreter.
"We are very grateful for your forgiveness," one of the British sailors told a joking Mr Ahmadinejad, who appeared to relish the moment of political theatre. "I would like to thank yourself and the Iranian people."
The captives were expected to be taken to the British embassy in Tehran and an Iranian official source said they would leave the capital by plane tomorrow.
The White House said President George W. Bush welcomed the release, as did EU president Germany.
Before making his announcement, Mr Ahmadinejad awarded a medal to the naval commander who captured the sailors and strongly criticised Britain.
Iranian and British officials had negotiated over the past 48 hours to find a diplomatic solution to a crisis that had added to tension over Iran's disputed nuclear programme, the subject of UN Security Council sanctions.
Minister for Foreign Affairs Dermot Ahern said today he "warmly welcomed" the decision by Mr Ahmadinejad, describing it as "an extremely positive development".