Iran's parliament voted on Sunday to downgrade the Islamic Republic's diplomatic ties with the United Kingdom.
As part of the measures, meant to "punish" Britain for imposing financial sanctions on Iran, over its refusal to suspend its nuclear program.
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Last week, Chancellor of the Exchequer George Osborne announced that London was terminating all contacts between the British financial system and the entire Iranian banking system.
A majority of 179 lawmakers voted in favor of reducing diplomatic relations to the more junior level of charge d'affaires. Four lawmakers voted against, and 11 abstained.
Ahmadinejad in the Iranian parliament (Photo: EPA)
The Iranian parliament also stands to order the expulsion of the British ambassador to Tehran.
Tehran also raised the possibility of "punishing" other countries "that behave in a manner similar to that of Britain."
"This (bill) is only the beginning," parliamentary speaker Ali Larijani warned.
Britain's Foreign Office on Sunday said the decision to order the country's ambassador, Dominick John Chilcott, to leave Tehran was regrettable.
"This unwarranted move will do nothing to help the regime address their growing isolation, or international concerns about their nuclear program and human rights record," the ministry said in a statement. "If the Iranian government acts on this, we will respond robustly in consultation with our international partners."
Earlier, Iranian President Mahmoud Ahmadinejad accused the West of hindering the nuclear negotiations with the Islamic Republic.
Ahmadinejad said that the decision to impose further sanctions on Iran "hurts the chances for negotiations on Iran's nuclear program... (The West) imposes sanctions on us and uses many means against us – and then they expect us to be willing to negotiate?"
The sanction, he said, are only impeding the negotiations: "They always seem to make it harder on themselves to negotiate with us… they create the limitations."
AFP and Reuters contributed to this report