In an open letter to a key Iranian MP, released by the Foreign Office in London late on Monday, envoy Simon Gass blasted as "absurd" allegations that Britain offered cash to bribe demonstrators during post-election protests.

"I am writing to you about the recent calls made by several members of the Majlis (parliament), including you and other members of the National Security and Foreign Policy Committee, to downgrade relations with the United Kingdom," he wrote in the letter to the commission's chairman, Alaeddin Borujerdi.

"Such an action would be regrettable. It would be in neither side's interest, and would have a severe impact on the ability of Iranians to retain business and personal links with the UK," he added in the letter.

In the letter -- which comes amid a spike in tension between Tehran and the West over the Islamic republic's nuclear plans -- Gass blasted charges "that the United Kingdom and its embassy is interfering in Iran's domestic affairs."

"As I have previously made clear, these allegations are entirely untrue," he wrote.

"It is disappointing to hear them being repeated. Neither the embassy nor its staff have been involved in any activity to undermine the Islamic Republic of Iran."

He noted the Vienna Convention gives foreign embassies certain powers, including "ascertaining by all lawful means conditions and developments in the receiving state, and reporting thereon to the government of the sending state."

"The wild allegations reported in some newspapers, for example that British embassy employees bribed demonstrators with pound notes, are simply absurd," added the British ambassador.

The letter was released as Iran declared it has started the process of producing 20 percent enriched uranium, defying world powers who have warned of new sanctions unless the Islamic republic halts its sensitive nuclear drive.

Hardline President Mahmoud Ahmadinejad's disputed re-election last June plunged Iran into one of its worst political crises, with the opposition refusing to take the fight off the streets despite often deadly crackdowns.

Iran has accused Britain of fomenting the post-election riots and detained nine local British embassy staff.

On Thursday, Iran will hold nationwide marches to mark the 31st anniversary of its Islamic revolution which toppled the pro-Western shah, as the opposition looks set to hijack yet another state-sponsored event to protest.

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