Iran severed diplomatic relations with Britain Tuesday, citing London's hostile stand toward Ayatollah Ruhollah Khomeini's death decree against author Salman Rushdie.

The official Islamic Republic News Agency said the Foreign Ministry announced the complete severance of diplomatic ties with Britain Tuesday morning, exactly one week after the country's parliament, or Majlis, issued an ultimatum demanding that London clarify its position on Rushdie's novel, "The Satanic Verses."In London, a Foreign Office spokesman said the Iranian announcement came as no surprise. "We can't have a sensible relationship with Iran while that death threat is still in existence," he said.

Iran gave Britain seven days from Feb. 28 to reconsider its "hostile stance" toward Khomeini's death warrant against the Indian-born British author or face a break in diplomatic relations.

Iranian Prime Minister Mir Hussein Musavi, who opposes closer ties with the West, said, "Moslems have awakened and are no longer ready to accept that anything sacred to them should be insulted by the superpowers."

Friends and relatives of British hostages believed held in Lebanon by Iranian-inspired extremists said the break dimmed hopes of their early release, along with a businessman jailed in Tehran for the past three years.