Iran stands to lose more than Britain by picking an argument — in commercial ties, and in its use of London as a base for diplomats and journalists. The regime may think that a small price to pay for the support it hopes to win by stirring up old suspicion of British motives. But it risks increasing the row to the point where Britain wants to call in the European Union and US.

Iran’s expulsion of two British diplomats yesterday is reflective of the regime’s handling of the turmoil: aggressive gestures that fall short of a full-scale brutal crackdown. By the expulsion, and the verbal attacks on the British Government, Iran has chosen to pick a fight. On its own the move is insignificant. But if Tehran goes farther down that road, its assets and strategic use of Britain come into play.

Why pick on Britain at all? The BBC’s new Persian language service is very likely one irritant. Perhaps it is inevitable that the BBC’s coverage of the election would seem provocative, and also that the Foreign and Commonwealth Office’s contribution to the service’s start-up costs would seem like firm evidence of government control. More broadly, the Iranian Government has not liked the coverage by the other British media and loathed Gordon Brown’s criticism of the election. However, these are merely new pretexts for evoking Britain’s reputation in the Iranian popular imagination for being behind every plot.

If the clash gets worse, the stakes look higher for Iran than for Britain. It is a poorer country; Britain is a useful base for it in dealing with other governments, far more than the converse, and the sanctions already in place have shrunk British activity in Iran. Iran has 27 diplomats here, compared with Britain’s 22 in Tehran. London’s Foreign Press Association lists 48 accredited Iranian journalists.

Britain has some commercial interests at stake in Iran, but they are slight, shrunken by years of uncertainty about sanctions, and skewed towards either big companies in the energy sector, which have hopes of future deals, or tiny ones with British-Iranian family ties. Banks have been deterred from financial links both by sanctions and by the US and EU governments. In contrast, the Iranian regime and leading Iranians have significant assets here.

The Government revealed last week in a written statement to Parliament that it had frozen a total of $1.6 billion of Iranian assets under three layers of United Nations sanctions since 2006, and separate European Union sanctions in 2008. The sanctions have been imposed in response to Iran’s refusal to curb its nuclear programme, which Iran insists is for power stations but which Western governments fear conceals weapons development.

The UN sanctions freeze the assets of companies and people alleged to be engaged in or supporting nuclear work or Iran’s ballistic missiles programme. These include the state-run Bank Sepah and companies controlled by leading members of the Revolutionary Guards. Separately, in June 2008, the EU froze the assets of Iran’s biggest bank, Bank Melli, a conduit for the Revolutionary Guards, and which is accused of handling the transactions for the purchases of sensitive technology.

The US has taken a much more aggressive line on its own, for far longer, and with rising frustration at the lack of EU response. In October 2007 it unilaterally slapped sanctions on banks Melli, Saderat and Mellat; the EU’s refusal to target the latter two (partly because of German opposition) has been a thorn in the US-EU relationship. Congress is now considering the Iran Refined Petroleum Act, which would penalise companies and people directly for helping Iran’s petroleum industry. The British response is that it has urged extreme caution in dealing with the banks, which are not subject of sanctions at the moment.

If the insults and threats from Tehran worsen, Iranians can be expected to move their money in anticipation of more curbs. In 2008 the Tehran press reported that Iranians, fearing new sanctions, moved $75 billion out of Iran. After Mahmoud Ahmadinajad’s 2005 election victory, Iranians moved assets to Dubai, helping to fuel its property boom. A new war of words between London and Tehran could be a boon for that financially stricken city-state.

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