Obama and Ahmadinejad in Political Dance

Barack Obama's election victory has won over many hearts and minds in Iran, softening some views of America and revising the tone of voices emerging from the Islamic Republic.

One such voice belongs to Iranian President Mahmoud Ahmedinejad, who sent an unprecedented public letter of congratulations to Obama last week -- the first ever from a leader of the Islamic Republic to an American president-elect.

Obama said he would consider the letter carefully, avoiding any "knee-jerk response."

If change has been Obama's call, the letter was Iran's agreeable response.

"May God Almighty ... bless the leaders of societies with the courage to learn from the mistakes of predecessors," Ahmedinejad wrote, according to a translation obtained by ABC News.

"I hope that you will be able to take fullest advantage of the opportunity to serve and leave behind a positive legacy."

Ahmedinajad's own legacy is under review as he approaches the end of his first term and the start of Iran's presidential election season, one in which clear competitors have begun to emerge.

Mehdi Karrubi, a reformist cleric who finished third in the 2005 presidential race, has announced he's running.

Mohammad Baqer Qalibaf, Tehran's popular mayor, is widely expected to run. A conservative and harsh critic of Ahmedinejad, Qalibaf is considered a more Western-friendly alternative within the conservative camp.

As Obama's presidential bid overlaps with Ahmedinejad's, it is having a powerful impact on Iran's electorate.

"News of Barack Hussein Obama's victory was met with elation here in Tehran. ... Many Iranians -- not just government officials -- followed the campaign religiously," Iranian journalist Fariba Pajooh wrote in the Tehran Bureau blog.

Nader Talebzadeh, a filmmaker who's airing a series about U.S.-Iran relations on Iranian national television, said, "There's new hope, fresh air. I think this election in the United States indicates that an era has ended and a new era has begun."

Obama's platform on Iran, which called for "tough, direct presidential diplomacy with Iran without preconditions," resonated with Iran's leadership and its urban, educated elite, most of whom favor dialogue and normalization with America. But his coming presidency also speaks to the rural, religious voter -- a group seen as the mainstay of Ahmedinejad's power base.

"When you write out 'Obama' in Persian it comes out meaning 'he is with us,'" said Bill Beeman, author of "The Great Satan vs. The Mad Mullahs," a book on how Americans and Iranians see each other. "It's a slogan, and it was very powerful in Iran. It was immediately noticed.

"For the less sophisticated, his name alone holds a great promise," Beeman told ABC News.

What's in a Middle Name?

"To have an American president with the [middle] name Hussein, for the Iranian population it means a huge amount. Hussein is the central religious figure in the twelver Shiite Islam. ... It is completely pervasive in Iranian life. And 'Barack' means God's grace or blessing [in Persian]. More sophisticated, urbanized people might dismiss this. But for the vast majority of Iranian people ... it can't help but resonate."

While Obama's popularity is at a peak within the Iranian electorate, analysts see approval of Ahmedinejad in decline.

"He's losing popularity increasingly," said Hooshang Amirahmadi of the American-Iranian Council, a Princeton, N.J.-based think-tank on U.S.-Iranian relations. "He's not very popular among the intellectuals, the political elite, the universities ... but he continues to be popular with the poor.

"One area where he has a winning card is ... to show to the Iranians that he's trying to mend relations with the U.S., because that cause is very popular with Iranian people. Eighty-five to 90 percent of Iranians, including those in government, want relations normalized. They're tired of sanctions, of hostility," Amirahmadi told ABC News.

It's Still the Economy, Stupid

If better relations with the United States is a political card, and warming to Obama is a way to play it, the issue may be trumped by a greater concern: an Iranian economy dragged down by falling oil prices and an estimated 30 percent inflation rate.

"In Iran, people don't vote on foreign policy. They vote on the economy," said Karim Sadjadpour, an Iran expert with the Carnegie Endowment for International Peace in Washington, D.C..

Sadjadpour sees a 50-50 chance of Ahmedinejad's re-election.

"Iran is the only major oil-producing country in which people feel worse off than they were three to four years ago," he said, noting that Ahmedinejad's economic policies are widely held accountable for the decline.

Based on data from investment bank Deutsche Bank, confirmed by U.S. government sources, Iran needs an oil price of $85 to $95 a barrel to balance its budget. With prices near $65 a barel, Sadjadpour and others say the global downturn is having a greater effect on Iran's economy than any U.S. sanctions.

The End of 'Death to American'?

Obama's win, analysts say, undermines the notion of "Death to America," a phrase made famous as the 1979 Iranian Revolution was broadcast worldwide.

"The 'Death to America' thing has just been a slogan. ... You'll trot out the crowds with 'Death to America' as a protest against the U.S. actions, " said Beeman, the expert on U.S. and Iranian mutual perception. "The whole business of the 'Great Satan' was largely a political posture that has to do with opposition to U.S. government actions in Iran. It has almost no salience in terms of people's attitudes toward Americans."

In other words, filmmaker Nader Talebzadeh says of Iranians, "They love Americans."

Amirahmadi of the American-Iranian Council said, "The Revolution decided from day one that the U.S. was an enemy, and when you wanted to make someone into an enemy you do it."

With Obama's victory, he said, an already hollow rhetoric has been dealt a body blow.

'Hawk in Dove's Clothing'

"The slogan of 'Death to America' is heard rarely now," he said. "The anti-Americanism has almost certainly lost its value."

But traces of rhetoric remain, a carrier of strong sentiment against the United States and skepticism of Obama's intentions. At government rallies, signs bearing "Death to America" and "Death to Israel" still wave. Keyhan, a conservative Iranian newspaper, called Obama "a hawk in dove's clothing."

The hard-line publication Hezbollah noted that "a yellow dog is a jackal's brother," using an Iranian proverb to suggest Obama is no different from those perceived as warmonger Republicans. Right-wing daily Jomhourie Eslami criticized Ahmedinejad's act of outreach through his congratulatory letter in an article titled "Falling in Love With a Mirage."

"For hard-liners in Iran, Obama's win presents much of a quandary," Carnegie's Sadjadpour said. "The narrative they want to paint of a racist, bloodthirsty, hegemonic government ... is undermined by Obama's persona.

"They'll continue to do it, but it'll be less resonant."

For the moment, Ahmedinejad and other conservatives -- including his rivals in the 2009 election -- suggest they want a better relationship with the United States.

Dawn of a New Era

Qalibaf, Tehran's popular mayor, has openly called for talks with U.S. officials. Meanwhile, expectations of Obama build on the Iranian street, across a country waiting to see what change will come through his presidency.

"A new era has dawned," said filmmaker Talebzadeh, who is close to the conservative camp. "I see a very close relationship between Iran and the U.S. one day."

Or as journalist Pajooh noted, "An Iranian president congratulating an American president? Perhaps change is really under way."