The only candidate to oppose incumbent Iranian President Mahmoud Ahmadinejad in the upcoming June elections has withdrawn from the race.
A close associate Mohammad Khatami told the Reuters news agency, however, that "he will back another moderate candidate who will be announced shortly in a statement."
Khatami, a moderate who served as president of Iran from 1997 to 2005, was largely responsible for the improvement in the Islamic Republic's warming of ties with Western nations.
Those relations have gone cold with the ascension of Mahmoud Ahmadinejad, whose defiance of the United Nations Security Council ban on Iran's nuclear development has resulted in sanctions being levied against the country.
Ahmadinejad has been facing difficulties on the domestic front as well, including charges that he has frittered away windfall profits from the oil industry with his battle for nuclear independence.
On Sunday the Iranian president protested a Parliament decision to scrap his demand to hike fuel prices for heavily subsidized energy and utilities in the $298 billion budget approved for the 2009 fiscal year, according to the IRNA news agency.
The move would have generated some $20 billion for the government in this fiscal year, but several Iranian economists had urged legislators to ditch the plan, saying fuel prices could as much as quadruple if it were carried out. Moreover, they said, such a plan could send inflation soaring even higher than it already is, and increase poverty.
Ahmadinejad slammed the lawmakers in a letter in which he said they "did not respect different provisions of the Constitution." The angered president charged that "the budget adopted is not what the government had proposed."
Khatami, who won his election more than ten years ago on a platform of social and political reforms, found that many of his attempts to make changes were stymied by conservatives who held the power in key areas of government.
At present, the country's Supreme Spiritual Leader, the Ayatollah Ali Khamenei, wields absolute power over all matters of state and holds sway over the votes of millions of supporters.
Khamenei has expressed his support publicly for Ahmadinejad.