The breakthrough came after contacts were stepped up following the election in May last year of moderate Iranian President Mohammad Khatami and the Labour government in the UK.

Blaspheming Islam

In March 1989 Tehran broke off diplomatic ties with London after the UK refused to denounce Mr Rushdie's book, The Satanic Verses, which was accused of blaspheming Islam.

It had only been a year since Britain's embassy had re-opened in Tehran since its closure after the 1979 Iranian Revolution, when London transferred its diplomats to a British interests section at the Swedish embassy.

The Satanic Verses was attacked as blasphemous

Eighteen months later, in September 1990, the two countries re-established diplomatic relations, but this was limited to the level of charge d'affaires.

Repeated efforts to mend relations foundered on Iran's refusal to reverse the decree, handed down by the late Iranian spiritual leader Ayatollah Khomeini.

But Iran's withdrawal of support for a $2.5m dollar bounty on the head of Mr Rushdie paved the way for the UK to agree to upgrade its relations with Iran to ambassador level.

The first few years after the fatwa were marked by open hostility.

Iranians expelled

In 1992, the Rushdie affair so poisoned the atmosphere that the two countries engaged in a series of tit-for-tat diplomatic expulsions.

In July that year Britain also expelled three Iranians, including a student and two employees at the Iranian embassy without diplomatic status, for allegedly plotting to assassinate Mr Rushdie.

He has been living under 24-hour police protection since the 1989 fatwa.

In 1993, relations thawed, only to be soured again when the UK Government gave explicit support to Mr Rushdie, who was received at the Foreign Office and met with then Conservative Prime Minister John Major.

Tehran angrily suspended talks aimed at restoring full ties, and cancelled a visit to Iran by a UK trade delegation.

Hopes dashed

In December 1993 a positive sign emerged when Iran re-opened its embassy in London, while the UK continued along the path of a new "critical dialogue" with Iran agreed by the European Union a year earlier.

But hopes of an end to the affair were again dashed in 1994 when positive signals were made by Iran ahead of a meeting between then Foreign Secretary Douglas Hurd and a senior Iranian minister. It ended in failure.

In spring that year relations plunged to a new low after London accused Tehran of providing money and weapons to the Irish Republican Army (IRA).

Robin Cook: Praised Iran

The arrival in power in May 1997 of the Labour government and Khatami's election in Iran gave new impetus to the efforts to end the impasse.

In April this year British Foreign Secretary Robin Cook went out of his way to heap praise on the "pragmatic approach" of Iranian foreign policy under Mr Khatami.