Ahmadinejad Boosted by Vote as Iran Faces ‘Return to the Past’: Via Bloomberg.com .

June 15 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad vowed defiance against external “threats” as he defended his disputed re-election. He may have vanquished for now the internal threats to his authority.

The president’s victory and its endorsement by Iran’s Supreme Leader, Ayatollah Ali Khamenei, sidelines those in the Islamic republic’s theocracy who favor easing tensions with the West, according to analysts. While his main opponent, former Prime Minister Mir Houssein Mousavi, says the vote was rigged and demands its annulment, his complaints and protests by his supporters are unlikely to shake the regime, said the analysts.

The election results mean leaders who still adhere strictly to the principles of the 1979 Islamic Revolution have beaten back a challenge to their dominance, said Geneive Abdo, an Iran analyst at the Century Foundation, a New York research group.

“There is a return to the past, a return to the days right after the revolution,” Abdo said. “A very small core of revolutionaries are running the state.”

Ahmadinejad’s re-election is a setback for President Barack Obama, who has offered dialogue with Iran in the hope of ending three decades of hostility and agreeing on ways to verify Iran’s nuclear program is peaceful. The U.S. and its allies say they suspect Iran is developing nuclear weapons; Iran says it instead is designed to generate electricity.

Tougher Task

“Obama is committed to diplomacy,” said Cliff Kupchan, a senior analyst at New York-based Eurasia Group. “This election will make that effort more difficult.”

U.S. Vice President Joe Biden said yesterday “there is some real doubt” about the election results. Still, he said the Obama administration will proceed with the plan to engage with Iran. “The decision has been made to talk,” irrespective of the election’s outcome, Biden said on NBC’s “Meet the Press” program.

“Ahmadinejad’s victory could pose an insurmountable challenge to the Obama administration’s engagement strategy,” said Karim Sadjadpour, an analyst from the Washington-based Carnegie Endowment for International Peace. “It will likely be a cold, hard-nosed dialogue.”

Police fired tear gas at protesters in Tehran yesterday, in the second day of clashes since authorities declared Ahmadinejad, 52, the winner in the June 12 vote. More than 100 people in Tehran were arrested, including political leaders.

Don’t Kill

As long as protests don’t start spreading to multiple cities and security forces don’t kill demonstrators, the authorities should be able to contain the situation, said Ali Pedram, an Iran expert at Durham University in the U.K.

The clashes of the past 48 hours came after Ahmadinejad took almost 63 percent of the vote, according to official results, with Mousavi wining around 34 percent.

The president said the vote was fair and said Iran would not tolerate outside pressure. “Our nation is not afraid of threats,” he told a news conference in Tehran yesterday. “It will stand up to those who want to prevent its progress.”

Mobile telephones were functioning sporadically yesterday. The Internet was either down or working slowly in Tehran. Social networking sites such as Facebook and Twitter weren’t operational in the country and Mousavi-supporting Web sites didn’t work. It wasn’t clear whether government agencies were involved in blocking services.

Mousavi wrote yesterday to the Guardian Council, urging the election’s supervisory body to annul the outcome. He called on supporters to continue “civil and legal opposition throughout the country peacefully” in a statement on his Web site.

Assembly of Experts

He had allied with former president Akbar Hashemi Rafsanjani, 75, one of Iran’s most powerful political figures and the head of the Assembly of Experts, charged with overseeing the supreme leader.

Iran is under three sets of United Nations sanctions over its refusal to halt uranium enrichment. The country increased uranium production during the past three months and continued to stonewall inspectors investigating whether it is concealing a weapons program, the UN’s nuclear agency said on June 5.

While key policy issues including Iran’s nuclear plans are ultimately decided by Khamenei, Mousavi, 67, had said he was open to talks with the U.S. and promised unspecified confidence- building measures to allay international concerns about the atomic program while continuing the nuclear effort.

The world’s fourth-largest oil producer, Iran is starved of investment to boost crude production by U.S. and UN sanctions.

Inflation, Unemployment

In addition, Ahmadinejad will have to deal with an economy suffering from the decline in oil prices to $72 a barrel from the July peak of $147. The president’s opponents accused him of squandering windfall oil gains on spending programs that helped boost his support among low-income voters. They argued that the government’s handouts and subsidies fueled inflation that reached 24 percent in January, and helped push the unemployment rate to 10.5 percent.

Iran, holder of the second-largest oil reserves in the world after Saudi Arabia, needs oil prices of $85 to $90 to stop running budget deficits, the International Monetary Fund says.

“The economy will be a source of dissatisfaction. We might see public protest in the future because of economic problems such as inflation,” Pedram said.

To contact the reporter on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net.

Last Updated: June 14, 2009 19:14 EDT

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