With attention focused on the international row over the Islamic republic's alleged attempt at building an atomic bomb, the average observer might not notice the domestic side of the debate.
The new radical administration in Tehran, led by President Mahmoud Ahmadinejad, is doing all it can to make this an "us vs. them" issue, whipping up xenophobic sentiments and diverting attention from the country's real problems.
Nevertheless, Iran may be heading for its deepest crisis since the 1970s.
This crisis, related to the nuclear issue, has two aspects.
The first, and probably the most significant, is a moral one. There is a growing awareness that the regime may have played the game of "kitman" (dissimulation) on the nuclear issue. "Have we been given the full picture?" demanded the Tehran daily newspaper Sharq.
Suspicions that the regime might have lied not only to the International Atomic Energy Agency (IAEA) but also to the Islamic Majlis (Parliament) have received a boost with the circulation in Tehran and some provincial capitals of a document entitled "The final report" in samizdat form.
The document claims to be a summary of a talk given on Feb. 12 by Hassan Rouhani to the High Council for Islamic Cultural Revolution (HCICR), a body set up in 1979 to purge the country's universities of "un-Islamic" ideas.
It is not clear why Rouhani, a junior mulla who headed Iran's nuclear negotiations with the European Union trio for three years, should have spoken to the HCICR. His friends suggest that he wanted to counter Ahmadinjead's charge that Rouhani and his then boss President Muhammad Khatami had "sold out" to the Europeans.
"From the first day to the last, the Europeans danced to our tune," Rouhani is quoted in the document. "They were desperate to trust, and we encouraged them....Not for one moment did we slow down (work on the nuclear project) to satisfy the Europeans."
But the most damning revelation by Rouhani is that even the Council of Ministers, then chaired by Khatami, and the Majlis were never told the whole truth about Iran's nuclear program.
Whether or not the Rouhani document is genuine is hard to tell. In any case he has not denied its content. And several members of the Majlis have taken it seriously enough to demand a full briefing on the subject.
"There is a feeling that the nation is being led toward war on an issue about which only a handful of men were informed," says Ahmad Shirzad, a former member of the Majlis. "If we are being taken to the edge of the precipice we should at least be told the truth."
The feeling that a handful of "tasmimgran" (decision makers) may have deceived not only the gullible Europeans but also the Iranian people has been strengthened by two other events.
The first is the decision by President Ahmadinejad to suppress a report by the Tehran University's seismographic center calling for "broader studies" in the choice of locations for projected nuclear power stations. The report warns that Iran, located on the world's most active earthquake zone, may not be the best place for building nuclear stations which, with existing technology, might not resist tremors of over 7 on the Richter scale.
The report, parts of which have been leaked, caused concern in the Gulf province of Bushehr, where Iran's first nuclear station is located, and in Khuzestan where a second one is to be built by 2010.
The Tehran University report has been seized upon by those who argue that Iran, the owner of the world's second largest gas reserves, and with enough oil to cover its needs for at least 250 years, might have no need of costly and potentially dangerous nuclear energy.
The second event is the release of another report, almost certainly leaked by the entourage of former President Khatami, that shows Iran's uranium reserves will cover the needs of the Bushehr power station for fuel for no more than seven years.
But the same reserves, when processed and enriched, could help the Islamic republic build some 200 atomic bombs.
The report's message is clear: Iran cannot have a nuclear power industry without secure supplies of imported uranium. Thus the current enrichment program, using locally mined uranium, could be aimed at only one thing: Producing enough ingredients for bombs.
The second aspect of the crisis provoked by the nuclear issue inside Iran is political. Ahmadinejad has just presented his first annual national budget to the Islamic Majlis. By any standards, this looks very much like a war budget, increasing expenditure on security and defense by a whopping 17 percent.
It would be unfair to blame Ahmadinejad for a budget that reflects policies shaped at least a year before he was elected. The assumption behind those policies is that Iran may soon find itself involved in a military clash with the United States in Iraq and the Gulf. Many of the so-called "defense preparation" projects under way were launched in 2004 before Ahmadinejad took over, to be completed under his watch.
According to Ibrahim Yazdi, foreign minister under the late Ayatollah Khomeini, Ahmadinejad may be "sleepwalking toward war."
The new budget envisages effective cuts in government expenditure on social welfare, education, and health — contrary to promised by Ahmadinejad made in his election campaign last summer. Needless to say the cuts will hit the poorest sections of society — precisely those that voted for Ahmadinejad.
To make matters worse, talk of United Nations sanctions, and possibly even war, has led to the biggest outflow of capital that the Islamic republic has experienced since 1979. Many businessmen are preparing for a "free fall" of the Iranian currency, the rial, if and when international sanctions are imposed. The "war talk" has led to an economic slowdown that has already destroyed tens of thousands of jobs in the private sector and brought many commercial transactions to a halt.
All this may be translated into a political backlash that Ahmadinejad, despite his talent for appealing to emotions might not be able to counter, especially at a time that his enemies in the regime are sharpening their knives in the dark.
Notwithstanding Ahmadinejad's braggadocio, Iran is entering this new phase of its confrontation with the outside world over the nuclear issue from a position of weakness.
The Europeans no longer seem keen to be deceived.
The Americans may have begun understanding a fact that they had shunned for a quarter of a century: The trouble with Iran is not its behavior but the nature of its regime.
In the previous rounds, the Islamic republic could rely on some understanding, if not actual support, from its Gulf neighbors plus Russia and China. But they, too, are unlikely to be pleased by the increasing revelation that the Islamic republic has been lying to them, and to everyone else, all the time.
Last but not least, the domestic popular support that was undoubtedly there over the nuclear issue until recently, is fast evaporating. The reason is that the Iranian people feel that they have not been told the truth — at least not the whole truth.