TEHRAN (Reuters) - Iranian authorities said they would teach an exemplary lesson to “rioters” held in the worst unrest since the birth of the Islamic Republic, and accused Western powers on Tuesday of inciting the violence.

(EDITORS’ NOTE: Reuters and other foreign media are subject to Iranian restrictions on their ability to report, film or take pictures in Tehran.)

Riot police and Basij militia on Tehran’s main squares warded off the mass protests that have marked the 11 days since disputed elections. Iran’s hardline leadership appeared to have gained the ascendancy, at least for the moment.

The conflict, which has revealed unprecedented division in the religious leadership, began to play out on the diplomatic arena, with Britain so far bearing the brunt of Iran’s anger.

But that was before President Barack Obama, whose comments on Iran had been highly restrained, on Tuesday said the United States was “appalled and outraged” by Iran’s crackdown.

The United States would not interfere in the protests over Iran’s contested election, and accusations it was instigating them were “patently false and absurd,” Obama said.

“I strongly condemn these unjust actions, and I join with the American people in mourning each and every innocent life that is lost,” he told a news conference.

“We must also bear witness to the courage and dignity of the Iranian people, and to a remarkable opening within Iranian society. And we deplore violence against innocent civilians anywhere that it takes place.”

Iran’s top legislative body, the Guardian Council, rejected demands for a vote rerun from former prime minister Mirhossein Mousavi, who says the election was rigged and he is the rightful victor, and pro-reform cleric Mehdi Karoubi.

EXTENSION GRANTED

But in an apparent concession, Supreme Leader Ali Khamenei, who holds all the key levers of power in Iran, accepted a request from the 12-man council for a five-day extension to the deadline for candidates to make complaints over the election.

The troubles have erupted against a background of tension between the West and Iran, a major oil and gas producer and pivotal factor in regional stability. Tehran’s hardline leadership is locked in dispute with Western powers over its nuclear program, which it says is intended for generating electricity but which the West suspects could yield nuclear weapons that could destabilize the region.

London said two of its diplomats had been expelled from Iran and it had ordered out two Iranians in retaliation. About 100 hardliners gathered in front of the British embassy in Tehran, chanting “British embassy should be closed.”

Supporters of hardline anti-Western President Mahmoud Ahmadinejad held a news conference in the building of the old U.S. embassy that was seized by students after the Islamic Revolution in 1979 and held with 52 U.S. hostages for 444 days.

“We don’t need to have such useless relations with Britain,” said one of the student leaders. “If Britain continues its interference...we will destroy their houses over their heads.”

Mousavi, himself a scion of the religious establishment, says he does not seek to undermine the Islamic Republic but to purge it of what he calls lies and deceit.

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FOREIGN BROADCASTS BLAMED

Iranian state television, in broadcasts clearly intended to discredit opponents defying a ban on protests, paraded people it said had been arrested during weekend violence.

“I think we were provoked by networks like the BBC and the VOA (Voice of America) to take such immoral actions,” one young man said. His face was shown but his name not given.

A woman whose face was pixilated said she had carried a “war grenade” in her hand-bag. “I was influenced by VOA Persian and the BBC because they were saying that security forces were behind most of the clashes.

“I saw that it was us protesting ... who were making riots. We set on fire public property, we threw stones ... we attacked people’s cars and we broke windows of people’s houses.”

Slideshow ( 25 images )

At least 10 protesters were killed in the worst violence on Saturday, and about seven more early last week.

Mousavi was quoted by an ally on Saturday as calling for a national strike if he was arrested and Karoubi signaled on Tuesday opposition would continue, calling on Iranians to hold ceremonies on Thursday to mourn those killed at protests.

The official IRNA news agency quoted senior judiciary official Ebrahim Raisi as saying on state television late on Monday: “Those arrested in recent events will be dealt with in a way that will teach them a lesson.”

He said a special court was studying the cases.

“The rioters should be dealt with in an exemplary way and the judiciary will do that,” Raisi said.

Iran’s Foreign Ministry accused U.N. Secretary-General Ban Ki-moon of interfering in Tehran’s affairs “under the influence of some powers” -- an apparent reference chiefly to Britain and the United States.

Iranians on social networking sites called for mourning for “Neda,” a young woman shot dead on Saturday. Footage of her death has been watched by thousands on the Internet.

Iranian TV, quoting an unnamed source, said Neda was not shot by a bullet used by Iranian security forces. It said filming of the scene, and its swift broadcast to foreign media, suggested the incident was planned.

Her fiance Caspian Makan told BBC Persian TV that Neda Agha-Soltan had been caught up accidentally in the protests.

“She was near the area, a few streets away, from where the main protests were taking place, near the Amir Abad area. She was with her music teacher, sitting in a car and stuck in traffic,” it quoted him as saying. “She was feeling very tired and very hot. She got out of the car for just a few minutes.”