TEHRAN - Britain said on Wednesday it had held talks with a senior Iranian official about 15 captured British sailors and Syria said it was mediating in the crisis, fuelling hopes that a diplomatic solution can be found.

A video grab from footage shown on Iranian television on April 2, 2007, shows members of the group of 15 detained British sailors and marines after media reported the whole group had admitted to entering Iranian water illegally. [Reuters]

The high-level contact marks a step forward in attempts by both countries to resolve the 13-day stand-off that has heightened Middle East tensions and spooked world oil markets.

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The dispute centers on where the Britons were when they were seized. Britain says they were in Iraqi waters on a routine UN mission. Tehran says they had strayed into its territory.

Iran's official news agency said British Prime Minister Tony Blair's adviser Nigel Sheinwald had spoken directly to Ali Larijani, secretary of Iran's Supreme National Security Council, on Tuesday night.

Blair's office said there had been direct talks with Larijani but declined to confirm Sheinwald was involved.

Sheinwald, set to be Britain's ambassador to Washington later this year, has been heavily involved in Blair's drive for Middle East peace and last year became the first high-level British official to visit Syria in years.

Iran's regional neighbor Syria said on Wednesday it had stepped in to try and mediate in the dispute, which erupted when Iranian Revolutionary Guards seized the 15 sailors in the northern Gulf on March 23.

"This solution requires calm diplomacy and Syria is currently undertaking such calm diplomacy between the two states," Syrian Foreign Minister Walid al-Moualem told Kuwaiti newspaper Al-Anbaa in an interview.

A senior Iranian official said on Wednesday Britain was taking "appropriate action" to end the row over Tehran's detention of 15 British military personnel.

IRANIAN NEWS CONFERENCE

The crisis has developed at a time when Iran is also embroiled in a row over its nuclear ambitions. The West says Iran wants atomic bombs but Tehran denies this.

Iran's President Mahmoud Ahmadinejad, who regularly rails against the West, was due to hold a news conference on Wednesday, in which he is expected to talk about the captured 14 men and a woman.

The sailors and marines were part of a British navy team searching shipping in the area to try to prevent smuggling into Iraq. Iran state television said he would "explain Iran's view."

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