03/18/2010 05:12 am ET Updated May 25, 2011

President Obama at the Crossroads: Freeing or Tying Up Iran's Opposition

It is 2010 and welcome to a new Iran. What a difference a year makes! Or does it?

Last year, on the eve of President Obama's inauguration, the key-note of Mr. Obama's foreign policy had already been set. "Engagement" was in. Bush's "saber rattling" was out. The Iranian regime - like it or not- was deemed the new "super power of the region". It was time to cut a deal with Tehran.

Now, the new regional "superpower" seems to be tottering. For some it is on a slippery downhill slope. For other Iran watchers, the regime seems too ruthless to give hope to revolution or reform.

On December 27th hundreds of thousands of Iranians in Tehran and other cities marked Ashura, one of Shiite Islam's holiest days, by expressing their outrage. Singularly targeted as unacceptable were the Supreme Leader, Ayatollah Ali Khamenei, and the principle of absolute clerical rule, "Velayat-e Faqih."

The protesters were more fearless, organized and politically astute than ever before. When security forces brutally attacked them, killing and maiming at will, women were in the forefront.

In one widely-circulated video, demonstrators forced almost two dozen armed agents into a corner and lambasted them for killing a protester. Such scenes reveal the extent of the Iranian people's anger.

Although at least 11 demonstrators were killed and hundreds more injured and arrested, the regime's security forces showed signs of fatigue and a palpable deficiency in morale. The number of reported defections and dissent in their ranks was more significant than ever in the past. But is this enough to turn the tide?

In these circumstances what Washington does is crucial. Will it still seek to shake hands with the Ayatollah's representatives? Will the Administration's would-be "deal-makers", realizing that the protests are no longer about electoral fraud but focused on democracy and popular sovereignty, seek to advance that program?

When thousands of Iranian protesters braved government bullets and batons last November, they chanted, "Obama, either you're with them [the regime] or with us [the people]." It took the President almost two months to issue a mild reply. His recent belated comments in Oslo and Hawaii urging restraint by the regime are both too little and too late.

Urgent action is now called for if the tide of history is to resolve itself in favor of a new Iran. This does not mean military action or direct involvement in regime change. It does mean recognizing that imposing new multilateral sanctions against the Iranian regime is not enough, although delay in their imposition will only encourage Khamenei to further suppress the march for freedom and the rule of law.

The Iranian people need internal organization and leadership to fend off the regime's brutal repression. But, inexplicably, the Administration insists on tying the hands of Iran's largest opposition movement (the Mujahedin-e Khalq, PMOI/MEK) by keeping it on the US terrorist entity list, thus stigmatizing the organization and criminalizing support for its operations.

In 1997, as a "goodwill gesture" to Iran's new ostensibly more democratic leader, Mohammad Khatami, President Clinton agreed to accommodate Iran's desire to constrain the MEK by labeling it a "terrorist organization." The mullahs reaped the dividends, using the terrorist label to clamp down on opposition figures.

After the Ashura protests, the regime claimed that the protests were organized by "terrorist" MEK members, acknowledging the role that MEK plays in the events unfolding in Iran. But, ironically, today the MEK is constrained because the State Department refuses to de-designate the MEK as a terrorist entity.

Yesterday, the US Court of Appeals for the District of Columbia heard argument challenging the State Department's assertion that it can designate at will who is and is not a terrorist entity by merely asserting that an organization has "capacity and intent". But, the MEK is disarmed and it has renounced any allegiance to terrorism. Still, the State Department claims intent exists, while refusing to publicly substantiate the claim. The judges will soon have to decide whether reliance on the skirt of "Classified" information-- inaccessible for challenge-- comports with American notions of fundamental fairness. Once the Court examines the State Department's "Classified" documents, it will have to decide whether it supports a reasonable finding of capacity and intent to engage in terrorism. Recently, the highest court in the UK ruled that its own examination of confidential classified materials (presumably similar to what the US government has produced) revealed that not a shred of evidence supported either MEK capacity (whatever that means) or intent to engage in terrorism.

Aside from narrow legal considerations, there is the question of political prudence, or common-sense. Does it make sense, as a practical matter, to continue to designate the MEK as a terrorist entity when doing so will only undermine Washington's desired outcome of a peaceful resolution to the Iranian nuclear crisis? Would it not strengthen America's hand in bringing a faltering regime to the negotiating table by letting Tehran know in no uncertain terms that we have taken off the kid-gloves?

Will President Obama demonstrate courage and political will? Or, will he be remembered by Iranians for his refusal to go beyond faint praise of the protestors to unshackle the legally dubious constraints imposed on Iran's main opposition group? The future of Iran may well hang in the balance.

Allan Gerson, a former senior State and Justice Department official, and Chairman of AG International Law in Washington D.C. is co-counsel to the MEK in its efforts at de-designation. He represented the PanAm 103 families in their suit against Libya and is the author of The Price of Terror: How the Families of the Victims of the PanAm 103 Bombing Brought Libya to Justice.