Public demonstrations have become more common since June's disputed election
By Bahman Kalbasi
BBC News, Washington
In an apparent shift from the Bush administration's efforts to foster regime change in Iran by financing opposition groups, the Obama White House has all but dismantled the Iran Democracy Fund.
While the move has been criticised by neo-conservatives in the US, it has been welcomed by Iranian human rights and pro-democracy activists.
The controversial program was initiated by the Bush administration in an effort to topple the clerical regime in Tehran by financing Iranian NGOs.
While heralded by some in Washington, reactions in Iran to the program were overwhelmingly negative.
Critics like Iranian dissident and journalist Akbar Ganji have maintained that the program made virtually all Iranian NGOs targets of the hardline government in Iran:
"The US democracy fund was severely counterproductive. None of the human right activists and members of opposition in Iran had any interest in using such funds, but we were all accused by Iran's government of being American spies because a few groups in America used these funds."
The secretiveness around the program - the recipients of the funds remain classified - has added to the dilemma, Iranian human rights groups maintain. They say it has enabled the Iranian authorities to accuse any Iranian NGO of having received funds from the US government.
Human rights abuses
Abdolfattah Soltani is a well-known Iranian human rights lawyer, and spokesman for the Defenders of Human Rights Center, which was founded by the Nobel Peace Prize-winner Shirin Ebadi.
He welcomes the change in policy: "These US funds are going to people who have very little to do with the real struggle for democracy in Iran and our civil society activists never received such funds. The end to this program will have no impact on our activities whatsoever."
Critics of the Obama administration have accused him of cutting much needed funds for human rights activists at a time when the Iranian government's human rights abuses have sharply increased.
The director of one benefactor of the Iran Democracy Fund, the US-based Iranian Human Rights Documentation Center, told the Boston Globe that they never expected their funding to be cut under these circumstances.
Senator Joe Lieberman said in a statement: "It is disturbing that the State Department would cut off funding at precisely the moment when these brave investigations are needed most.''
'National security threat'
Human rights defenders in Iran, however, point to the Iranian Human Rights Documentation Center's activities as an example of exactly why the fund should be cut.
In 2005, the centre organised a seminar in Dubai. Though it was advertised as a human rights seminar, participants tell the BBC that they soon realised that the aim was to train Iranian human rights defenders on how to overthrow the Iranian regime through non-violent means.
Several of the participants were subsequently arrested and jailed in Iran.
Today, they bitterly complain that the Human Rights Documentation Center knowingly put them under immense risk by luring them to Dubai - a hub for Iranian intelligence services - under false pretences.
The episode is believed to have focused the attention of the Iranian regime on NGOs and political activists. The authorities began to regard them a as a potential national security threat, prompting a severe crackdown on Iranian civil society.