The British government is hoping this week to obtain a concrete gesture from Tehran on the decree sentencing Salman Rushdie to death 10 years ago for his book, The Satanic Verses.
The British Foreign Secretary, Mr Robin Cook, is to meet the Iranian Foreign Minister, Mr Kamal Kharazi, at the UN in New York today following an "encouraging" signal from the Iranian President, Mr Mohammad Khatami, a Foreign Office official said.
Mr Cook would be seeking "clarification" of Iran's position after Mr Khatami's comments in New York on Tuesday that the Salman Rushdie issue should be considered "completely finished".
Mr Khatami ruled out an official reversal of the fatwa or religious decree handed down by the late Ayatollah Ruhollah Khomeini in February 1989.
Tehran says it has no intention of carrying out the fatwa, but insists it has no authority to interfere with a religious edict. But London is hoping that Tehran will agree to dissociate itself from the $2.5 million bounty on Mr Rushdie's head offered by an Iranian religious organisation, Khordad-15.
"This is one of the things we have to review together," the Foreign Office official said.
The Guardian newspaper reported yesterday that the Iranian Foreign Minister plans to make an explicit commitment during his meeting with Mr Cook.
The Foreign Office, however, remains cautious as similar positive signals were made in advance of a meeting in 1994 between the then foreign secretary, Mr Douglas Hurd, and a senior Iranian minister.
On Tuesday Iranian sources said that, while there was no change in the official position, Mr Khatami, a moderate, did have a change of tone compared to earlier statements.
The London-based International Rushdie Defence Committee, which sent a delegation accompanied by Mr Rushdie to meet Foreign Office officials yesterday, said in a statement it remained "cautiously optimistic".
The meeting between the two foreign ministers marks the highest-level talks since 1994 between Britain and Iran, whose relations have been bedevilled by the Salman Rushdie affair. Diplomatic representation is still at its absolute minimum despite relations becoming "warmer" in the past year, the British official said.
Britain is only represented at the level of charge d'affaires in Iran, which broke off diplomatic relations with London entirely for a year after the fatwa was declared.
But Britain and the rest of the EU have voiced great interest in normalising relations with the Islamic republic since the election victory of Mr Khatami in May 1997.
Iran is also seeking to break out of a 20-year isolation from the West. European countries have long pressurised the Iranian government to revoke the 1989 decree, and the issue has been a major obstacle to improving relations.
Mr Rushdie, who has been living for nine years in fear of his life, is protected by British police at a cost of £1 million a year.