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TEHRAN (Reuters) - Iran's Supreme Leader Ayatollah Ali Khamenei declared on Wednesday a disputed election result would stand, despite street protests that Iranian officials say Britain and the United States have incited.
EDITORS' NOTE: Reuters and other foreign media are subject to Iranian restrictions on their ability to report, film or take pictures in Tehran.
The opposition refused to be bowed. Reformist cleric Mehdi Karoubi, who came last in the June 12 presidential vote, called the new government "illegitimate" and about 200 protesters braved the security crackdown near parliament.
Riot police later used teargas to break up the protest.
Police and militia have largely succeeded in taking back control of the streets this week after the biggest anti-government protests since the 1979 Islamic revolution. The hardline leadership is refusing to give ground.
"I had insisted and will insist on implementing the law on the election issue," said Khamenei, the most powerful figure in Iran. "Neither the establishment nor the nation will yield to pressure at any cost."
The unrest has exposed unprecedented rifts within the establishment with moderate former Prime Minister Mirhossein Mousavi insisting the election was stolen from him in favor of hardline President Mahmoud Ahmadinejad.
Khamenei normally stays above the political fray, but has come down strongly on the side of Ahmadinejad, while Mousavi is backed by powerful former President Akbar Hashemi Rafsanjani, a pragmatist who favors a less confrontational foreign policy.
Mousavi and Rafsanjani met a group of senior parliamentarians on Wednesday. The semi-official Fars news agency said only that the election and latest developments were discussed, and it was not clear whether the pair were trying to make peace with the hardline-dominated parliament or trying to win over support.
Ahmadinejad's government blames the discontent on foreign powers, accusations rejected by London and Washington.
"Britain, America and the Zionist regime (Israel) were behind the recent unrest in Tehran," Interior Minister Sadeq Mahsouli said, according to Fars.
Foreign Minister Manouchehr Mottaki said Iran was weighing whether to downgrade ties with Britain after each country expelled two diplomats this week. He also announced he had "no plans" to attend a G8 meeting in Italy this week on Afghanistan.
His remarks, a day after U.S. President Barack Obama said he was "appalled and outraged" by the clampdown in Iran, provided more evidence of rising tension with the West.
The White House said on Wednesday the United States had withdrawn invitations for Iranian diplomats to attend U.S. Independence Day celebrations on July 4 at U.S. embassies around the world.
The decision to invite Iranian diplomats had been a break with long-standing practice as part of Obama's outreach to Tehran, but the cancellation of the invitations was largely symbolic because no Iranian diplomats had responded to them.
Western diplomats had viewed the June 25-27 Group of Eight talks as a rare chance to discuss with regional powers such as Iran shared goals for Afghanistan and Pakistan.
The unexpected upheaval in Iran has also thrown a spanner into Obama's plans to engage the Islamic Republic in a substantive dialogue over its nuclear program, which Tehran says is peaceful but which the West suspects is for bomb-making.
Up to 20 people have been killed in the protests, according to Iran's state English-language Press TV. Amateur footage of clashes with security men, and of some of the deaths, has been posted on the Internet and viewed around the world.
The image of 'Neda', a young Iranian woman killed in the protest, has become an icon for the demonstrators.
Mousavi supporters said they planned to release thousands of green and black balloons imprinted with the message "Neda you will always remain in our hearts" on Friday.
Mousavi's wife, Zahra Rahnavard, demanded the immediate release of people detained since the election -- who include 25 employees of her husband's newspaper -- and criticized the presence of armed forces in the streets, his website reported.
"It is my duty to continue legal protests to preserve Iranian rights," Rahnavard, who actively campaigned with her husband before the election, was quoted as saying.
Intelligence Minister Gholamhossein Mohseni-Ejei said some British passport-holders had been involved in "riots," Fars news agency reported. One detainee was "disguised as a journalist" and had been "collecting information needed by the enemies."
Iranian allegations of foreign meddling were regarded in Britain as an attempt to deflect blame for the unrest.
"I think it's a lot to do with trying to create national unity by creating a common external enemy which is traditionally the British," Claire Spencer, head of the Middle East and North Africa program at the Chatham House think tank, told Reuters.
Additional reporting by Parisa Hafezi, Fredrik Dahl and Hashem Kalantari; Writing by Jon Hemming; Editing by Matthew Jones