TEHRAN President Mahmoud Ahmadinejad has weathered a series of attacks from rivals within the conservative elite that runs the Islamic Republic and is under a renewed threat from parliament to answer questions that could lead to impeachment.
Splits at the top became very visible in April when Ahmadinejad's move to sack his intelligence minister was overturned by a rare intervention from Supreme Leader Ayatollah Ali Khamenei. A huge banking scandal has added to the pressure.
Sensing Ahmadinejad appears no longer to have the full backing from Khamenei he had immediately after his disputed 2009 re-election, his detractors are pushing their advantage before parliamentary elections in March and the 2013 presidential race.
Ahmadinejad's enemies are now hoping the $2.6 billion (1.6 billion pounds) bank fraud will taint his government, but he insists his is the 'cleanest' administration the country has ever had.
On the international front, U.S. allegations of an Iranian plot to assassinate the Saudi ambassador in Washington have further soured relations and lessened the likelihood of a return to nuclear negotiations any time soon.
RIFTS AT THE TOP
The bank fraud scandal which emerged in September has yet to claim any big political scalps. Parliament voted against removing the economy minister on November 1.
Hardline conservative newspaper Kayhan has said the mastermind behind the fraud had links with Ahmadinejad's closest aide, Esfandiar Rahim Mashaie, the main focus of verbal attacks on the president's camp.
Mashaie, once talked about as a possible successor to Ahmadinejad whose time in office ends in 2013, has been accused of heading a "deviant current" which the president's foes say intends to dilute Iran's Islamic character and undermine the role of the clergy.
Even before the bank scandal, the conservative judiciary had scrutinised Ahmadinejad's circle and made several arrests, but his closest aides have so far been spared. The president has said touching his cabinet members would cross a 'red line'.
Ahmadinejad's vulnerabilities -- and rifts among hardline factions -- have come to the fore since he crushed the opposition "green movement" in the months after its huge protests against his re-election.
With the reformists all but silenced after the 2009 protests and their leaders under unofficial house arrest, the main battles look set to be fought between conservative factions.
Khamenei has suggested Iran could scrap the position of an elected president, something which would end squabbles between government and parliament but which former President Akbar Hashemi Rafsanjani said would undermine "the republican aspect" of the Islamic Republic and certainly strengthen the already powerful position of the supreme leader.
Some commentators have said this could mean there will be no 2013 presidential election while others believe the suggestion was meant more as a warning to Ahmadinejad or other potentially headstrong presidential candidates.
WHAT TO WATCH:
-- Any parliamentary move to impeach Ahmadinejad
-- Prospects of election boycott by reformists
-- Conservative cohesion as electoral blocs are formed
THE 'PLOT', SANCTIONS PRESSURE AND ECONOMY
The United States is seeking support for tougher sanctions on Iran in response to the alleged Saudi ambassador assassination plot -- accusations dismissed as nonsense by Tehran.
With four rounds of U.N. sanctions already in force over Iran's nuclear programme and much tougher measures imposed unilaterally by Washington and Brussels, U.S. officials are talking of sanctioning the Central Bank of Iran -- a diplomatically difficult and potentially devastating move.
Iran already has some problems repatriating its petrodollars and a move against the central bank would cause much more.
Indian refiners built up debts of $5 billion in the first half of this year due to an Indian move to stop the previous method of payment. The debts were finally cleared by transferring euros to Iran via a Turkish bank and Iran says there are other conduits.
Tehran has shrugged off the political and economic impact of sanctions, which have also hit much-needed foreign investment in the oil and gas sector.
Before the plot emerged, Ahmadinejad had revived the possibility of a nuclear deal with world powers that formed the basis of a tentative deal brokered by the U.N. nuclear agency in 2009 but which fell apart.
EU foreign policy chief Catherine Ashton has told Tehran big powers are ready for "meaningful discussions" but talks look unlikely to resume in the current climate.
A report due from the U.N. International Atomic Energy Agency (IAEA) later this month may include intelligence pointing to military dimensions of Iran's nuclear activities, Western diplomats say. That would add fuel to Western calls to tighten sanctions although Russia and China will be hard to convince.
The increasing pressure comes as Iranians complain that consumer prices are soaring faster than official inflation, which has risen steadily over the last year to around 18 percent and the government appears split on how to handle it.
The removal of government subsidies that have held prices of
essentials like food and fuel artificially low for years is taking a toll on family budgets, although cash payments to families have offset some of the pain.
But fear of inflation was a main factor in prompting Iran to devalue the rial by 11 percent in June as Iranians rushed to convert their cash into dollars and gold, and continues to pressure the exchange rate.
WHAT TO WATCH:
-- More evidence about the Saudi ambassador 'plot'
-- IAEA report and reaction to it
-- Further inflation and foreign exchange rate pressures
Iran hopes to be a winner from the Arab uprisings it has described as an "Islamic awakening."
The fall of U.S.-backed autocrats could see Iran's influence in the region rise and perhaps rekindle relations with powerful Arab countries like Egypt and Libya. But tensions with main Gulf rival Saudi Arabia have increased due to unrest in Bahrain and Syria.
Tehran's staunch support for President Bashar al-Assad has been tempered with calls for him to respect the "legitimate demands" of his people, but Iran still hopes his government can survive the protests and has warned the West against military involvement.
WHAT TO WATCH:
-- How events in Syria unfold and impact on Iran
-- Tensions with Saudi Arabia, other Gulf Arab states
-- Moves to rebuild ties with Egypt, Libya
The world's number five oil exporter and home to its second-largest gas reserves, Iran needs foreign capital and technology to modernise and expand the energy sector, but sanctions have forced Western firms to pull out and made others wary.
Oil Minister Rostam Qasemi's view that Iran needs no foreign involvement is viewed with scepticism abroad.
Iran has reiterated its threat to revoke the contract of the China National Petroleum Corporation unless work goes ahead on the South Pars gas field and has told Russia's Gazprom it is "excluded" from a major oil field project.
But other reports suggest a continued desire for foreign investment, while a plan to sell off refineries shows an intents to raise funds beyond state coffers [ID:nL5E7JT0UI].
(Editing by Alistair Lyon)
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