Britain has reacted cautiously to a warning by Iran that it was considering downgrading diplomatic ties in the wake of continuing unrest over disputed presidential elections.
Iran's foreign minister Manouchehr Mottaki confirmed that the government in Tehran was looking at relations with the UK following Tuesday's tit-for-tat diplomatic expulsions.
Downing Street said the Government was aware of Mr Mottaki's reported remarks.
The Prime Minister's spokesman said: "We are monitoring the situation. We have noted these reports. We have always been clear that we seek a constructive bilateral relationship with Iran based on mutual respect.
"Iran's decision to try to turn what are clearly internal matters for Iran into a conflict with the UK and others is deeply regrettable and without foundation."
Britain expelled two Iranian diplomats on Tuesday in retaliation for the expulsion from Tehran of two British diplomats on Monday.
The Iranians accused the two officials of "activities inconsistent with their diplomatic status" - diplomatic language for spying - a charge flatly rejected by the Foreign Office.
The Iranian leadership, including the supreme leader Ayatollah Ali Khamenei, has repeatedly targeted Britain in recent days.
The attacks appear to reflect long-standing Iranian suspicions of Britain dating back to the UK's role in engineering a coup against the popular prime minister Mohammed Mossadegh in 1953.
The Tehran regime has also complained about the reporting of the elections by the BBC's new Persian language service.
