While it appears that the unrest in Iran continues, it seems to have died down a bit from previous days. It's beginning to seem possible for an armchair analyst to make some predictions about what's going to happen.
Before guessing about the future, let's correct the record about the present: the temptation to use the word "revolution" has to be ignored. The protesters in Iran aren't trying to overthrow a government; they're trying to get their votes counted. The candidate they support isn't some wild-eyed radical; he's a former prime minister who's been a fixture in Iranian politics for a long time. He was an early supporter of the nuclear program and the taking of American hostages in 1979, and was a protege of the founding theocrat of modern Iran.
It's also worth pointing out that, for the moment, President Obama is taking exactly the right course of action. Anything he says in praise of the opposition will be seized upon and exploited by Ahmadinejad's supporters, and will help discredit Mousavi as just a Western puppet. Imagine what would have happened in 2008 if bin Laden had endorsed Obama, and you get a sense of how much good the President is doing by keeping relatively quiet.
Now, when paroxysms of anger hit the streets, they usually follow one of three distinct paths: they escalate; they simmer; or they die out (or get crushed). At the moment, it appears that the protests are getting smaller, not larger, and the Iranian government is doing relatively little to inflame them. True, they've killed some protesters and continue to suppress contact with the outside world, but there haven't been any large-scale clashes, and they've mostly had the Basij militia commit some small-bore acts of violence and vandalism. Bad all around, but not the kind of attempt to crush the protesters that either succeeds, or fails spectacularly.
This would all seem to suggest that the resistance will neither be crushed, nor explode into something that takes down the regime (which isn't even something the protesters want). It's possible it could die out over time, especially if some large chunk of the protesters are mollified by the Guardian Council investigation and recount. I don't think they will be, directly, but if the regime continues to make similar minor concessions, and bides its time until the anger in the streets mostly subsides, I think they could ride this out. The key test of this strategy will come over the next few days: if the rallies keep getting smaller, the diminution will feed on itself. On the other hand, if something major or at least iconic transpires, to give new life to the protests, that would be dangerous. A few days of protests is one thing; a few weeks is an entirely different story.
But for now, let's operate under the assumption that the regime doesn't do anything dramatic, that protests continue to dwindle, and that a few weeks from now, the anger in the streets will be replaced with a far more benign opposition to Ahmadinejad. In that scenario, how should the United States deal with Iran?
First, by attempting to engage with Ahmedinejad (and, perhaps, with Ayatollah Khomeini, who's really in charge) and offering an easing of international sanctions in return for IAEA inspections of Iran's nuclear facilities. An Ahmedinejad weakened by days or weeks of mass protest in support of a candidate who pledged to create better relationships with the West should be more willing to make a deal.
Second, by making clear that the United States has no problem with Iran's development of nuclear technology, so long as it exists under international supervision and acts consistent with its obligations under the Nuclear Non-Proliferation Treaty (NPT) to which it's a signatory.
Third, by organizing a regional security conference to which Iran would be a key invitee. It's important to remember that Iran is bordered by Iraq on one side, and Afghanistan on another, and Pakistan (where America is bombing Taliban targets semi-covertly) on yet another. Iran has a real (and justified) feeling of American encirclement, and its efforts to develop a nuclear weapon are in large part due to the rational supposition that, were it to possess such a device, it wouldn't be next on the invasion list.
Ultimately, the reality is that there's not a lot that the United States can do to positively impact Iran's internal affairs. We're too high-profile, and too much of a villain, to be able to take that approach. We need to soften our image, establish what relationships we can, and largely stay out of the way of Iranians interested in solving their own problems. As the events of the last week demonstrate amply, Iran is the opposite of a monolithic society, and the elements more favorable to a less hostile engagement with the West are, at the moment, on the ascent. The best thing we can do for them is not make them look like our puppets.