British Prime Minister Tony Blair said yesterday the next two days would be "critical" in efforts to resolve the stand-off with Iran amid signs of progress towards freeing the 15 British captives.

But he warned that Britain would not shirk from taking "increasingly tougher decisions" if its sailors were not released as soon as possible.

Britain had seemed to be taking a softer approach towards Tehran 12 days into the crisis after a week of pushing for Iran's international isolation, expressing outrage and disgust at videos of the 15 navy personnel and cranking up the pressure.

However, Blair insisted the ball was back in the Iranians' court and

reiterated that Britain was ready to turn up the heat again if a new wave ofdiplomacy failed.

"The next 48 hours will be fairly critical," he told Glasgow-based Real Radio, while cautiously welcoming comments Monday by top Iranian official AH Larijani, who envisaged a diplomatic solution.

Blair maintained that there are two possible outcomes: one of "peaceful, calm negotiation... the other is to make it clear that if that's not possible, then we have to take increasingly tougher decisions.

"I'm not going to say any more at the moment - it's for the Iranian government now to come back with their response."

Larijani's comments seem to offer "some prospect," Blair said. "We very much hope the Iranian

government realises that the best way to deal with this is in a diplomaticway.

His comments came after Iran and Britain started talks Tuesday described as a first step towards resolving the row that has further strained relations between Tehran and the West.

Larijani said Tuesday the new contacts could create the conditions for ending the stand-off.

"The British government has started diplomatic discussions with the foreign ministry to resolve the issue of the British military personnel," Larijani told state television's central news agency.

"It is at the beginning of the path. If they continue on this path then logically conditions can change and we can go towards ending this issue."

The eight sailors and seven marines, on a routine antismuggling job under a United Nations mandate, were seized at gunpoint in the northern Gulf on March 23 by Revolutionary Guards. Britain insists they were in Iraqi waters, not Iranian waters.

Britain initially relied on quiet diplomacy to get the captives released, but its patience snapped five days into the crisis.

After a week of Britain expressing its outrage and disgust at videos of the captives and efforts to isolate Iran internationally, both sides seem ready for talks.

The Foreign Office said negotiations now have a "more positive feel."

Though "there do remain some differences," London shares Tehran's "preference for an early bilateral discussion to find out a diplomatic solution to the problem," a spokesman told AFP.

Richard Dalton, a former British ambassador to Tehran, said it seemed both sides were now looking for a way to solve the crisis soon.

"The negotiation will have to concentrate on how to avoid such incidents in the future... that could create a kind of better understanding that would oblige Iranians to conclude that they can't keep qoinq any longer," he told the BBC.