TEHRAN - Iran's leadership has quelled mass protests over a disputed presidential poll two weeks ago, but the battle has moved off the street into a behind-the-scenes struggle splitting the clerical establishment into two camps.

EDITORS' NOTE: Reuters and other foreign media are subject to Iranian restrictions on their ability to report, film or take pictures in Tehran.

Hardline preacher Ayatollah Ahmad Khatami is expected to reinforce the government message when he leads Friday prayers that the June 12 election in which President Mahmoud Ahmadinejad was declared victor was legal and fair.

Supporters of defeated candidate Mirhossein Mousavi, who want the result annulled, plan to release thousands of balloons on Friday with the message: Neda you will always remain in our hearts, in memory of the young woman killed last week who has become an icon of the protests.

The last mass protests were on Saturday and a combination of warnings, arrests and the threat of police action have driven large demonstrations off Tehran's street with small gatherings dispersed with tear gas and baton charges.

The worst unrest since the Islamic Revolution of 1979 set off by the poll left about 20 people killed, prompting President Barrack Obama to say he was appalled and outraged by the security crackdown in the world's fifth largest oil exporter.

Group of Eight powers meeting in Trieste plan in a statement to deplore post-election violence, to urge Tehran to settle the crisis through peaceful, democratic means and to respect basic rights including freedom of expression, a diplomat said.

The condemnation by Obama, who had been trying to improve ties with Iran before the election, prompted Ahmadinejad to accuse Obama of behaving like his predecessor and say there was not much point in talking to Washington unless Obama apologized.

I tell (the United States) that all those people who voted and all the Iranian nation will stand against them, the Iranian president, who was elected for a second four-year term, said in response to Obama's comments.

Before the poll, Obama, aiming to change the policy of George W. Bush toward Iran, had hoped to persuade Tehran to drop what Washington suspects are plans to develop nuclear bombs, while seeking cooperation in Afghanistan and Iraq.

MOUSAVI UNDER PRESSURE

In what appeared to be further evidence of the government's determination to crush resistance, 70 professors were detained after meeting Mousavi and his campaign manager was arrested, his website said on Thursday. The semi-official Fars News Agency said that the professors were later released.

Mousavi said he was under pressure to stop challenging the election result and also complained about the closure of his Kalameh-ye Sabz daily newspaper and arrest of its staff.

Iran has jailed around 40 journalists and media workers in the post-election crackdown, New York-based media watchdog the Committee to Protect Journalists said on Thursday.

The row over the election has exposed an unprecedented public rift within Iran's ruling elite.

Mousavi has the backing of such influential figures as former presidents Akbar Hashemi Rafsanjani and Mohammad Khatami, and dissident cleric Grand Ayatollah Hossein Ali Montazeri.

Supreme Leader Ayatollah Ali Khamenei, who normally stays above the political fray, has sided strongly with Ahmadinejad.

Khamenei has upheld the result and Iran's top legislative body, the Guardian Council, has refused to annul the elections. State Press TV quoted a spokesman for the council as saying they were among the healthiest elections ever held in the country.

Mousavi said he was determined to keep challenging the election results despite pressure to stop.

A major rigging has happened, his website reported him as saying. I am prepared to prove that those behind the rigging are responsible for the bloodshed.

He called on his supporters to continue legal protests and said restrictions on the opposition could lead to more violence.

A statement by G8 foreign ministers, to be published on Friday, will deplore the post-election violence and urge Iran to respect fundamental rights, including freedom of expression, according to the diplomat who had seen a draft.

The statement will include a message that the crisis should be settled through democratic dialogue and peaceful means, the diplomat told Reuters.

Afghanistan Iraq New York George W. Bush