The outcome of Iran's presidential election on Friday 12 June is anxiously awaited across the greater Middle East. It is of considerable importance to Riyadh, Cairo and the Gulf, to Beirut and Tel Aviv, to Baghdad and Damascus, and also to Kabul and Islamabad. Officials in Washington – as well as the half million Iranians in California – are also very much on the alert. Whoever wins the election, whether it is the incumbent, President Mahmoud Ahmadinejad, or one of his three challengers, the crucial question, which will have to be addressed almost immediately, is Iran's relations with Barack Obama's America. How this relationship develops will have a major incidence on a host of problems and conflicts in the region, including the stability of Iraq and Lebanon, the Arab-Israeli conflict, the security of the Gulf, and the wars in Afghanistan and Pakistan. Ahmadinejad's rivals for the presidency are Mir-Hussein Moussavi, 68, a former premier during the 1980-88 Iran-Iraq war; Mehdi Karoubi, 72, a former president of the Parliament; and Mohsen Rezaie, 54, a former commander of the 300,000-strong Revolutionary Guard Corps. Moussavi, the front-runner among them, has won the backing of young people and of the educated middle class. But Ahmadinejad continues to have massive support in the countryside and among the poor, due to his cash handouts, cheap bank loans and attention to rural areas. Next Saturday the world will learn whether he has won a second four year term of office. After 30 years of sterile hostility between the U.S. and Iran, President Barack Obama has called for a dialogue without preconditions on the basis of mutual respect. He has thus given the ancient stalemate a decisive shake. All the states in the region will want to know what this radically new approach means for them. What is clear to everyone is that the policies of former President George W Bush have been a lamentable failure. The invasion and destruction of Iraq overturned the balance of power in the Gulf, boosting Iran as a major regional power. Attempts to isolate Tehran have been ineffective: on the contrary, Iranian influence over Syria, Hizballah and Hamas has increased, and has even extended to the Gulf state of Qatar. Iran's trade with Dubai remains lively in spite of attempts over the years by neo-cons in the U.S. Treasury to undermine it. Sanctions may have hurt Iran economically, but they have not persuaded it to change its policies. The explicit, often- repeated threat of an Israeli or American military strike against Iran's nuclear facilities has failed to persuade Iran to halt uranium enrichment. On the contrary, it has entrenched in Iranian thinking the paramount need for a nuclear deterrent. Obama's has now reached out to Iran in several ways. He has agreed for the U.S. to take part in multilateral nuclear talks. He has encouraged U.S. embassies around the world to invite Iranians to America's national day celebrations on 4 July. He has acknowledged America's role in the overthrow of Iran's Prime Minister Muhammad Musaddiq in 1953. Although, in his Cairo speech, he linked that episode to Iran's later role in hostage-taking and in its violence against American civilians and soldiers, he insisted that the two countries should not be prisoners of the past. This approach will go some way to healing long-standing Iranian resentment. In his speech, Obama recognised Iran's right to the peaceful uses of nuclear energy. His remarks were notable for their absence of threats. Indeed, Washington has told Israel very firmly that the U.S. will not countenance an attack on Iran. Obama was also very firm, however, in affirming his determination to prevent a nuclear arms race in the Middle East. In remarks which have been interpreted as directed at Israel, he expressed the hope that all the countries of the region would subscribe to the Nuclear Non-Proliferation Treaty – Israel has not done so, whereas Iran has -- adding that no country should be able to decide or choose who has the right to have nuclear weapons. He would work hard, he said, to build a world free from nuclear weapons altogether. The prospects for a fruitful U.S.-Iranian dialogue look pretty good. Iran's Supreme Leader, Ayatollah Khamenei, seems to welcome one. Meanwhile, Ahmadinejad's rivals -- such Mir-Hussein Moussavi, backed by the reformist camp -- have attacked the Iranian president's confrontational foreign policy as an embarrassment, which has turned Iran into an international pariah. Contributing to the prospects for a detente are the substantial interests which the United States and Iran have in common. Both want a stable Iraq; both would like to prevent a Taliban victory in Afghanistan; and both would like to check the flow of narcotics across the Afghan border. The recent summit meeting in Tehran of Ahmadinejad with President Hamid Karzai of Afghanistan and Pakistan's President Asif Ali Zardari did not go unnoticed in Washington. The stage is set for a dialogue which could have profound repercussions in the entire region, and might even result, in the longer term, in Iran being drawn into a regional security system.. A striking feature of the Iranian elections – and indeed of Lebanon's recent elections also – was their democratic character. Each country has special features which distinguish its ‘democracy' from the Western model. In Iran, the Council of Guardians – a sort of constitutional council – vetted all 475 candidates for the presidency and allowed only four to stand. One could argue that this was an infringement of democracy. But there is no denying the vigour of the election campaigning and of the public debate. Tens of thousands of people have turned out in support of their respective candidates. Lebanon's democracy, although admirably lively and pluralistic, is flawed by the over-representation of Christians in relation to their demographic weight, by the persistence of ‘feudal' loyalties to certain political families, and by the widespread resort to the buying of votes. But the election victory of Lebanon's pro-Western majority led by Saad Hariri coupled with the relative failure of Hizballah to improve its position might, paradoxically, contribute to easing the way for a U.S.- Iranian dialogue. Chastened by electoral defeat, the Lebanese opposition and its external backers, notably Syria and Iran, might now be more inclined to grasp the hand which Obama has stretched out to them. The American president's eloquent advocacy of dialogue and reconciliation is catching. No one will want to be excluded from the new and pacified Middle East he is attempting to forge. end