As we go to press, Iran is poised on a knife-edge between continued demonstrations by outraged supporters of presidential candidate Mir-Hossein Moussavi and brutal repression and the re-establishment of order by Mahmoud Ahmadinejad’s Basij militia and Revolutionary Guard. The world is watching in suspense as the next chapter in the future of the Islamic Republic unfolds.

Only a few hours after the close of polling in Iran’s tumultuous election season, it seemed evident that the fix was in. The regime shut down blogs, e-mail and text-messaging services, the streets were filled with security forces and incumbent hardliner Ahmadinejad was declared the landslide winner.

It was difficult not to see this hasty announcement, as well as Supreme Leader Ayatollah Ali Khamenei’s public congratulations to Ahmadinejad only a day later, as a clumsy cover for blatant fraud. How could so many millions of votes in a record turnout be counted so quickly, in a country that has always taken days to announce initial results? How could challenger Moussavi, an Azeri, have been so soundly defeated in his own ethnic region? How could fourth-place finisher Mehdi Karroubi–who received more than 5 million votes in the 2005 election–have received less than 1 percent this time and failed to take his home province of Lorestan?

Ahmadinejad does seem to retain broad support, especially among Iran’s poor voters and civil servants, the beneficiaries of government largesse stemming from windfall oil revenues. He has a strong base among social conservatives, voters fed up with government corruption and those suspicious of an opening to the West. And he seems to have a lock on the huge cohort of Revolutionary Guard troops, Basij militia and police. So it’s conceivable that he might have edged out Moussavi in a fair count or a runoff. But in the absence of any independent election observer–the Interior Ministry, controlled by Ahmadinejad, has a record of tampering–it’s impossible to know for sure. Ahmadinejad’s arrogant assertion of raw power has torn the mask off what were always deep, systemic limitations on popular participation and decision-making in the Islamic Republic.

It was that arrogance and contempt that helped fuel the rage of hundreds of thousands of Iranians, who poured into the streets of Tehran and other cities, demanding that their votes be counted and chanting “Marg bar dictator!” (Death to the dictator!) and “Allah-o-akbar!” It has been the greatest upsurge of popular protest since the 1979 revolution. It may be over-hyped, but Twitter and other new technologies have sharpened solidarity among the opposition and have been a crucial source of information to the outside world. The regime’s revocation of foreign press credentials and ban on reporting from the streets make this guerrilla journalism all the more important.

What accounts for the extraordinary spirit of opposition among a population that until recently seemed to have given up on electoral politics? Part of the answer lies in the peculiar nature of Moussavi’s coalition. One wing of it consists of key sectors of the business community and veterans of the Islamic Revolution, many of them former stalwarts like Moussavi himself, or establishment figures like former president Ali Akbar Hashemi Rafsanjani, who have lost patience with Ahmadinejad’s belligerent posturing on the world stage and his incompetent management of the economy. They fear the fundamentalist clique centered around Ahmadinejad and the security forces, whose growing power poses a threat to sectors of the clerical establishment and who make a rapprochement with the West–desired by business interests that crave foreign investment–harder to achieve. These fissures at the very center of power have created space for another wing of the coalition, consisting of liberals, women’s rights activists and a growing middle class that had backed former president Mohammad Khatami. The energy in the streets is powered by the large demographic of younger, well-educated Iranians eager to cast off the shackles of clerical rule and establish democracy.

Another source of the new inspiration in Iran comes from Washington. As Nation contributing editor Robert Dreyfuss has pointed out (see “Talking to Ahmadinejad” and other recent online dispatches he filed from Iran during and just after the election), Iran’s reformers have been heartened by President Obama’s conciliatory approach to Tehran and his disavowal of foreign interference in Iranian politics. This has enabled them to challenge both the clerical establishment and the growing power of the security forces without opening themselves to charges that they are the pawns of Washington. Like millions throughout the Muslim and Arab worlds, Iranians listened closely to Obama’s Cairo speech and applauded his strong support for democracy and for a new US administration that “does not presume to know what is best for everyone.”

Obama’s response to the election crisis has been a model of restraint and realism and a relief from the ham-handed, threatening posture of the Bush administration. Obama accurately observed that “the easiest way for reactionary forces inside Iran to crush reformers is to say it’s the US that is encouraging those reformers,” and that even if Moussavi had won, Iranian policy on the key issues affecting US relations, including Tehran’s nuclear program and its support for Hezbollah and Hamas, would not be all that different. If repression of the opposition intensifies in Iran, Obama will come under growing pressure from hardliners here to interfere in that country’s politics. Nothing could be more damaging to the cause of Iranian democracy and freedom.