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This weekend is all about Christmas and its aftermath in many parts of the world, but in the lands of Shia Islam, this is the time of Ashura.

Ashura falls tomorrow, and is a day of mourning for the death of Hussein Ali, grandson of Mohammed, in the Battle of Karbala in 680 AD. For Shia believers, it is a time of remorse, remembrance, penitence and, for some, literally self-flagellation to feel Hussein's pain.

The world's largest Shia country is, of course, Iran, on which the eyes of policy-makers will be fixed in 2010.

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Early in his term, U.S. President Barack Obama extended an olive branch to Iran, saying he wanted to talk directly to that country. Engagement with enemies or difficult countries, after all, was among Mr. Obama's hallmarks while campaigning for the White House.

A low-level contact was made between the countries, and inconsequential and inconclusive discussions were held. Since then, Tehran has rebuffed Mr. Obama's appeal, denouncing him and the West at every opportunity, while continuing to defy the international community's demands for a truthful examination of the Iranian nuclear program. It would appear, therefore, that Mr. Obama's deadline of the end of 2009 for serious talks will expire without anything constructive having happened.

What has happened, however, makes next year more fraught with challenges and danger than ever in dealing with Iran.

First, Iran was caught (again) cheating and lying about its nuclear program, especially when U.S. and other intelligence agencies revealed a new undeclared uranium enrichment facility near Qom, an installation the Iranians had tried to keep secret. So persistent has been the Iranian policy of deceit and of on-again, off-again co-operation that Mohamed ElBaradei, the outgoing head of the International Atomic Energy Agency, lost his legendary patience with Iran and denounced the country's approach.

Second, President Mahmoud Ahmadinejad's election was obviously a rigged affair. The result has been an even greater grip on government and the economy of the Revolutionary Guards and the special police, the Basij, both under the control of the Supreme religious leader Ayatollah Ali Khamenei. A mixture of political thuggery, institutionalized corruption, religious inflexibility and a morbid suspicion of the West now permeates the Iranian government.

On the streets, however, episodic signs of genuine opposition to the regime flourished in the aftermath of the rigged election, and after the death a week ago of dissident cleric Grand Ayatollah Hossein Ali Montazeri, whose death at age 87 launched sizable street demonstrations of support for his critique of the regime.

Bubbling beneath the surface, therefore, are significant elements of Iranian society fed up with their government, embarrassed by its foreign policy, and angry at its authoritarian ways. The dissident citizens are mostly young, urban and educated; the regime's supporters are mostly old, rural, poor and badly educated. Exceptions, of course, would include the business people who get rich on government contracts, and those employed in the various security services and the pro-government press or ministries.

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Tehran denies this intention, but it would seem completely logical that its nuclear program is designed some day to produce nuclear weapons. Iranians, after all, think of themselves as heirs to the Persian empire now surrounded by Sunni Muslims (Pakistan), Hindus (India), Jews (Israel), Christians (U.S., Europe and Russia) and Han Chinese with nuclear weapons. If them, why not us? reasons the Iranian government. Moreover, the Americans did not invade North Korea, which has nuclear weapons, but did invade Iraq, a country without them. What better way to deter the Great Satan in Washington than having a few nukes?

Since Mr. Obama's deadline is expiring, what next? The logical next step is more and tougher sanctions. These sanctions the Americans and Europeans are willing to employ, but will the Russians and Chinese go along? Russia has sounded increasingly exasperated with Iran, but China gets a lot of oil from Iran and rather enjoys seeing the Western countries in a stew about yet another international problem. As we witnessed in 2009, China can be a constructive force in world affairs (tackling the economic crisis) or a spoiler when it does not (the World Trade Organization talks and the Copenhagen climate summit).

Watching developments is Israel, with its very right-of-centre government giving instructions to its diplomatic corps around the world, and to its many friends in the United States, to highlight incessantly the Iranian danger and to warn that it will not stand by and allow Iran to gain nuclear weapons.

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