MoD: seized personnel were in Iraqi waters
Here's the proof
Of course, HMS Cornwall could have sunk the Iranian vessels before, during, or after the events alongside the anchored merchantman. The British warship mounts a 4.5-inch gun turret and Harpoon ship-killers. She could easily blast gunboat-class opponents to wreckage from beyond the horizon. In fact, her helicopter could do so on its own using Sea Skua missiles. But before the Pasdaran arrived, there would have been no adequate justification for vapourising them; and after, any use of serious firepower would have killed the British boarding party and probably innocent merchant seamen as well. It's easy to see why the Cornwall's captain held his fire, quite apart from the fact that nobody wants a war with Iran just now.
It's less easy to see why the Coalition command had lightly-armed boarding parties operating close to Iranian waters and distant from their ship. This is especially so given that the Iranians have already tried this caper once – successfully, from their point of view – and were known to be smarting after US forces in Iraq recently seized Iranians whom the Americans claimed were members of the Pasdaran's undercover al-Qods force.
Still, it's always easy to be clever with hindsight. Coalition naval forces have been operating in the Shatt al' Arab without trouble for a while now, carrying out boardings as a routine matter. The Royal Navy, indeed, has been doing board-and-search against the smuggling trade into Iraq ever since 1991. This is the first time they've had any serious trouble.
In many ways Iran doesn't seem to have a whole lot to gain here. This move by the Pasdaran isn't going to draw in the investment that the Iranian oil and gas fields deperately need; it isn't going to ease the largely-unseen but very damaging financial stranglehold the US is putting on the Iranian economy. Anybody who would see it as evidence of Iranian military puissance is probably a friend of Iran already.
But this action wasn't necessarily initiated by the Iranian government as a whole. The Pasdaran don't always ask permission for this kind of thing. The operation may have been planned well in advance – Admiral Sir Alan West, former head of the Royal Navy, thinks so. However, the MoD says that when the Iranians were asked just where they had seized the Navy people, the first answer they gave was actually in Iraqi waters. It was only when this was pointed out to them that they offered another position on their own side of the line.
This does suggest that planning and coordination may not have been exactly immaculate, and that the whole caper may have been a bit of a bright idea on the part of the Pasdaran. It should be noted that the Pasdaran have long been reportedly heavily involved in profit-motive smuggling into Iraq, and they might want to back off Coalition coastal patrols for no other reason than protection of their own revenues.
All in all, it may not just be the British government that's pushing for an early release of the imprisoned marines and sailors. There may be quite a lot of Iranians on their side as well. ®