GenQ - For the not so straight individual

15 British sailors and marines have been released by Iranian President Mahmoud Ahmadinejad, making Britain a "gift" in a surprise announcement that ended a crisis which rattled world financial markets.

Ahmadinejad told a news conference broadcast round the world he was willing to forgive the sailors, seized in the Shatt al-Arab waterway on March 23, even though Britain was not "brave enough" to admit it had made a mistake and they had strayed into Iranian territory.

A presidential adviser said the 15 would be handed over to the British embassy on Thursday and would then leave for London, Iran's Mehr News Agency reported. The 15, now under the supervision of Iran's Foreign Ministry, were expected to arrive in Britain around 1100 GMT on Thursday.

"Under the influence of the Muslim Prophet, (Iran) forgives these 15 people and gives their freedom to the British people as a gift," Ahmadinejad said towards the end of an extraordinary 90-minute news conference.

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."

Ahmadinejad's announcement, made with a dramatic flourish, pulled oil prices down from recent highs. U.S. stock futures and the dollar rose on relief over the peaceful end to the crisis.

The dispute centered on where the Britons were when they were seized. Britain says they were in Iraqi waters on a routine U.N. mission. Tehran says they strayed into its territorial waters.

After his announcement, a smiling 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 Ahmadinejad, who appeared to relish the moment of political theatre. "I would like to thank yourself and the Iranian people."

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The White House said President George W. Bush welcomed the release, as did EU president Germany.

Nick Summers, the brother of Nathan Summers, one of the captives, was jubilant. "It is brilliant news. I am very happy with it," he told Sky News.

Relatives of other captives also expressed their joy.

Before making his announcement, Ahmadinejad awarded a medal to the naval commander who captured the sailors and strongly criticized Britain, making it look as if he might not free the Britons.

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 program, the subject of U.N. Security Council sanctions.

Ahmadinejad also said he was willing to consider reestablishing ties with the United States if that country "changed its behaviour", but did not expand on his remark.

He again defended his country's right to develop nuclear technology and threatened to retaliate for sanctions imposed on Iranian banks.

The United States said that if Iran wanted to change its relationship with Washington it would have to suspend uranium enrichment, part of its nuclear program.

Iran's official news agency said Blair's adviser Nigel Sheinwald had spoken to Ali Larijani, secretary of Iran's Supreme National Security Council, on Tuesday night, breaking high-level diplomatic ice.

The Shatt al-Arab waterway, where British and Iranian naval vessels operate daily, remains an area of potential conflict because the border between Iran and Iraq is poorly defined.

Analysts said that while Ahmadinejad may hope for praise in the West, Britain and the United States are likely to maintain diplomatic pressure, separating the sailors' freedom from issues like Iran's nuclear program.