STOCKHOLM - THE European Union is 'ready to take action' if Iran does not free British embassy staff still detained in Teheran, the Swedish EU presidency warned on Thursday.

European nations have been considering a proposal from Britain to recall their ambassadors from Iran in protest at the detention of the British embassy employees.

'We are ready to take action if we don't get a reaction' from the Iranian regime, a spokesman for Swedish Foreign Minister Carl Bildt told AFP.

According to the British government, seven of the nine local staff originally detained have now been released. They were also investigating reports that one of the two remaining detainees had also been freed.

The nine local employees from the British embassy were arrested by Iranian authorities on June 28.

Iran accuses Britain of having orchestrated the protests against the result of the country's recent presidential vote, which sparked the most violent protests in the history of the Islamic Republic.

According to Iran's chief of police, at least 20 people have lost their lives in the unrest.

The Iranian authorities allege the British embassy sent its staff into the midst of the opposition demonstrations to stir up trouble after Iran's President Mahmoud Ahmadinejad was re-elected.

Britain has vehemently denied the charge.

Mr Bildt's spokesman Irena Busic voiced hope that it would not be necessary to freeze diplomatic ties with Teheran.

'We are interested in maintaining relations with Iran. We are expecting further contacts with them regarding the British personnel,' she said.

'We take things step-by-step and wait for the Iranian reaction,' Ms Busic added. -- AFP