The arrest of nine Iranians working for the British Embassy in Tehran takes the abuse and insults heaped on Britain by Iran’s embattled clerical rulers to a new level. The regime has now embarked on a policy of harassment and intimidation. The clear aim is not only to lend spurious veracity to the ridiculous charge of British incitement of the riots on Tehran’s streets; it sets the scene for a diplomatic showdown which, the Iranian Government hopes, will deflect attention from its own repressions and mendacity.

It is not a cost-free tactic. Britain has responded swiftly, denouncing the arrests, calling for the men’s release and insisting that accusations that the embassy was somehow behind the demonstrations were “wholly without foundation”. The Foreign Office has plainly learnt the lesson of the Iraqi interpreters: that it must stand by its staff, whether they are British citizens or not. David Miliband noted that he would discuss the arrests with his EU colleagues. They are as appalled as he is at the blatant flouting of the Vienna Convention and this attempt to silence foreign criticism of a fraudulent election by intimidation. Were the EU ministers collectively to target Iranian interests in response, Tehran would suffer immediate and far-reaching consequences.

The threat to Britain is clear. Iran’s hardliners, including the bully-boys among the Revolutionary Guard and the Basij militias, would like nothing better than physical violence against Western targets. They have already beaten heads and smashed enough bones to restore a sullen calm to the streets. But their envy of Iran’s privileged middle classes and hatred of Western values is not assuaged. They want a return to the revolutionary zeal of 30 years ago, when they were saluted as heroes for storming the US embassy and seizing the diplomats as hostages. If enough popular anger can be whipped up against the “Little Satan”, the British embassy might once again find itself the target of a mob intent on violence.

Britain’s response must be clear, measured and effective. The first concern must be for British citizens. In the embassy, only essential staff should remain. Businessmen, Iranians holding British passports and visitors should be advised to leave. Britain should then warn Iran that the continued detention of its embassy employees or any further official harassment will be met with reciprocal restrictions on Iranian missions, not just in Britain but, if all 27 EU partners agree, across Europe. A carefully calibrated series of other measures should also be prepared, ranging from further restrictions on trade, including aviation, to the downgrading of diplomatic ties. Iran has already threatened this last step; it is not one that should cause Britain any sleeplessness. If Tehran wishes to pick a quarrel, Britain does not need to stick around to be abused and insulted.

A punitive response is never the best; it plays into the hands of those now seeking to cast the West as the enemy to justify a further domestic crackdown, the sabotage of peace efforts in Iraq and the Middle East, and the acceleration of the programme to build a nuclear bomb. Britain, together with its Western partners, must keep up the pressure for nuclear talks and normalised relations. Nothing so unsettles the hardliners and galvanises the younger generation as the prospect of an end to Iran’s pariah status.

This prospect is not on offer as long as foreigners are made scapegoats for the fury on the streets. The Guardian Council is looking for a face-saving way of holding a partial recount. But it is too late. The fissures within the regime have been exposed, the authority of President Ahmadinejad weakened, the integrity of the Supreme Leader compromised. None can be salvaged by an attack on a foreign embassy. That is the message Britain must send today.