Bush says Iran must release British "hostages"

CAMP DAVID, Maryland (Reuters) - President Bush said on Saturday that Iran's detention of 15 British sailors and marines was inexcusable and called on Tehran to release "the hostages" immediately.

The standoff, which has helped push oil prices to six-month highs at a time of heightened Middle East tensions over Iran's nuclear program, showed no signs of easing.

Iranian President Mahmoud Ahmadinejad accused London of mishandling the aftermath of the March 23 capture of the British personnel in the northern Gulf after Britain expressed concern over Iranian "saber rattling."

Iran's ambassador to Moscow said the 15 Britons could face punishment if found guilty of illegally entering the Islamic republic's territorial waters.

Britain, the biggest ally of the United States in the war in Iraq, insists its sailors were seized well within Iraqi waters while on a U.N.-backed mission to search for smugglers.

Bush said he supported British Prime Minister Tony Blair's efforts to resolve the matter peacefully and rejected the idea of swapping Iranians held by the United States in Iraq for the detained Britons.

"The Iranians must give back the hostages. They're innocent," Bush told a news conference at the Camp David presidential retreat with visiting Brazilian President Luiz Inacio Lula da Silva.

"The Iranians took these people out of Iraqi waters. It's inexcusable behavior."

Britain's Sunday Telegraph newspaper quoted a defense official as saying London was prepared to give Iran a guarantee that Royal Navy ships would never knowingly enter Iranian waters without permission.

But it would not apologize or say that the British boats were in Iranian waters, the paper said.

'NOT THE LEGAL AND LOGICAL WAY'

Suggesting no solution was imminent, Ahmadinejad underlined Iranian displeasure that Britain turned to the U.N. Security Council and the European Union for support.

"The British government, instead of apologizing and expressing regret over the action taken, started to claim that we are in their debt and shouted in different international councils," state radio quoted Ahmadinejad as saying.

"But this is not the legal and logical way for this issue."

After a meeting of EU foreign ministers in Germany, Britain's Margaret Beckett said she was worried by the Moscow ambassador's words about potential punishment.

"It is not the first person to have made sabre-rattling noises," she told reporters in Bremen. "The message I want to send is I think everyone regrets that this position has arisen. What we want is a way out of it."

Beckett said Britain had sent Iran a written reply to its diplomatic note on the detention of the sailors but had received no response.

Iranian Foreign Ministry spokesman Mohammad Ali Hosseini said Tehran was "waiting for the British government to correct its behavior," the state broadcaster's Web site reported.

He also defended showing some of the detainees on television -- a move sharply criticized by London -- and said Iran's aim was to reassure their families, the official IRNA news agency reported.

Iran's Moscow ambassador, Gholamreza Ansari, told Vesti-24 television on Friday, according to a Reuters translation from the original Farsi, "If there is no guilt they will be freed but the legal process is going on and has to be completed and if they are found guilty they will face the punishment."

It was not clear on what authority Ansari was speaking and IRNA said on Saturday he had denied making the comments.

Foreign Minister Manouchehr Mottaki said on March 25 Iran might charge the sailors with illegally entering its waters.

Iran displayed three of the Britons on television on Friday and released a letter from one saying she was being held because of "oppressive" British and U.S. behavior in Iraq.

London and Washington accuse Iran of allowing sophisticated weapons used to target their forces to be brought into Iraq.

(Additional reporting by Caren Bohan in Washington, Edmund Blair and Fredrik Dahl in Tehran, and Adrian Croft in London)