Hundreds of regular and riot police were on the streets as civil unrest continued for the second straight day. But it was non-uniformed activists, on foot and on motorcycles, who appeared to be behind the most violent incidents.

CNN reporters in Tehran witnessed men, dressed in plain clothes, combing through streets and alleys for anti-Ahmadinejad protesters. Armed with clubs, metal batons and baseball bats, they chased protesters, in some cases beating them.

The BBC's Jon Leyne, in Tehran, says he understands plain-clothed militias had been authorised to use live ammunition for the first time.

a smaller demonstration has been taking place at Tehran University - the main centre of tension.

n Sunday Mr Mousavi's website carried a statement saying he had formally called on Iran's Guardian Council, which must certify the counting, to annul the election. He added: "I urge you, Iranian nation, to continue your nationwide protests in a peaceful and legal way."

Mr Ahmadinejad dismissed the unrest as "passions after a soccer match".

Yesterday, Pyongyang threatened war on any country that dared to stop its ships under the new sanctions approved by the UN security council on Friday.

In yesterday's statement, Pyongyang said it has been enriching uranium to provide fuel for its light-water reactor. It was the first public acknowledgment that the North is running such a programme in addition to its known plutonium one.

But the White House called the policy outline an "important step forward", as did French Foreign Minister Bernard Kouchner.

Mr Erekat added: "The peace process has been moving at the speed of a tortoise. Tonight, Netanyahu has flipped it over on its back."

In Gaza, Hamas spokesman Sami Abu Zuhri described the speech as "racist" and called on Arab nations to "form stronger opposition" towards Israel.

A White House statement said Mr Obama "believes this solution can and must ensure both Israel's security and the fulfilment of the Palestinians' legitimate aspirations for a viable state, and he welcomes Prime Minister Netanyahu's endorsement of that goal".

In his own keynote Middle East speech in Cairo on 4 June, Mr Obama stressed that he wanted all settlement activity to stop. But Mr Netanyahu said settlers were not "enemies of peace" and did not move from his position of backing "natural growth" in existing settlements.

The settlers group Yesha condemned Mr Netanyahu's speech: "We deplore that the prime minister has agreed to the creation of a demilitarised Palestinian state after he has said for years that such a state, even demilitarised, would be a threat to Israel."

I turn to you, our Palestinian neighbors, led by the Palestinian Authority, and I say: Let’s begin negotiations immediately without preconditions.Israel is obligated by its international commitments and expects all parties to keep their commitments. We want to live with you in peace, as good neighbors.

I do not want war.  No one in Israel wants war.

to our regret, this is not the case with the Palestinians. The closer we get to an agreement with them, the further they retreat and raise demands that are inconsistent with a true desire to end the conflict. Many good people have told us that withdrawal from territories is the key to peace with the Palestinians. Well, we withdrew. But the fact is that every withdrawal was met with massive waves of terror, by suicide bombers and thousands of missiles. We tried to withdraw with an agreement and without an agreement.  We tried a partial withdrawal and a full withdrawal.  In 2000 and again last year, Israel proposed an almost total withdrawal in exchange for an end to the conflict, and twice our offers were rejected. We evacuated every last inch of the Gaza strip, we uprooted tens of settlements and evicted thousands of Israelis from their homes, and in response, we received a hail of missiles on our cities, towns and children.  The claim that territorial withdrawals will bring peace with the Palestinians, or at least advance peace, has up till now not stood the test of reality.

Territorial withdrawals have not lessened the hatred, and to our regret, Palestinian moderates are not yet ready to say the simple words: Israel is the nation-state of the Jewish people, and it will stay that way.

But we must also tell the truth in its entirety: within this homeland lives a large Palestinian community. We do not want to rule over them, we do not want to govern their lives, we do not want to impose either our flag or our culture on them.

The Palestinian leadership must arise and say: “Enough of this conflict. We recognize the right of the Jewish people to a state of their own in this land, and we are prepared to live beside you in true peace.”  I am yearning for that moment, for when Palestinian leaders say those words to our people and to their people, then a path will be opened to resolving all the problems between our peoples, no matter how complex they may be.

Therefore, a fundamental prerequisite for ending the conflict is a public, binding and unequivocal Palestinian recognition of Israel as the nation state of the Jewish people.  To vest this declaration with practical meaning, there must also be a clear understanding that the Palestinian refugee problem will be resolved outside Israel’s borders.  For it is clear that any demand for resettling Palestinian refugees within Israel undermines Israel’s continued existence as the state of the Jewish people.

Tiny Israel successfully absorbed tens of thousands of Jewish refugees who left their homes and belongings in Arab countries.  Therefore, justice and logic demand that the Palestinian refugee problem be solved outside Israel’s borders.

the connection between the Jewish people and the Land of Israel has lasted for more than 3500 years.  Judea and Samaria, the places where Abraham, Isaac, and Jacob, David and Solomon, and Isaiah and Jeremiah lived, are not alien to us.  This is the land of our forefathers. The right of the Jewish people to a state in the land of Israel does not derive from the catastrophes that have plagued our people. True, for 2000 years the Jewish people suffered expulsions, pogroms, blood libels, and massacres which culminated in a Holocaust - a suffering which has no parallel in human history.  There are those who say that if the Holocaust had not occurred, the state of Israel would never have been established.  But I say that if the state of Israel would have been established earlier, the Holocaust would not have occured. 

our right to build our sovereign state here, in the land of Israel, arises from one simple fact: this is the homeland of the Jewish people, this is where our identity was forged. 

the simple truth is that the root of the conflict was, and remains, the refusal to recognize the right of the Jewish people to a state of their own, in their historic homeland.   In 1947, when the United Nations proposed the partition plan of a Jewish state and an Arab state, the entire Arab world rejected the resolution. The Jewish community, by contrast, welcomed it by dancing and rejoicing. The Arabs rejected any Jewish state, in any borders. Those who think that the continued enmity toward Israel is a product of our presence in Judea, Samaria and Gaza, is confusing cause and consequence. The attacks against us began in the 1920s, escalated into a comprehensive attack in 1948 with the declaration of Israel’s independence, continued with the fedayeen attacks in the 1950s, and climaxed in 1967, on the eve of the six-day war, in an attempt to tighten a noose around the neck of the State of Israel.  All this occurred during the fifty years before a single Israeli soldier ever set foot in Judea and Samaria .

In my vision of peace, in this small land of ours, two peoples live freely, side-by-side, in amity and mutual respect.  Each will have its own flag, its own national anthem, its own government.  Neither will threaten the security or survival of the other.

This policy must take into account the international situation that has recently developed.  We must recognize this reality and at the same time stand firmly on those principles essential for Israel.

Palestinians must clearly and unambiguously recognize Israel as the state of the Jewish people.  The second principle is: demilitarization. The territory under Palestinian control must be demilitarized with ironclad security provisions for Israel.  Without these two conditions, there is a real danger that an armed Palestinian state would emerge that would become another terrorist base against the Jewish state, such as the one in Gaza. 

In order to achieve peace, we must ensure that Palestinians will not be able to import missiles into their territory, to field an army, to close their airspace to us, or to make pacts with the likes of Hezbollah and Iran.

It is impossible to expect us to agree in advance to the principle of a Palestinian state without assurances that this state will be demilitarized.

Therefore, today we ask our friends in the international community, led by the United States, for what is critical to the security of Israel:  Clear commitments that in a future peace agreement, the territory controlled by the Palestinians will be demilitarized: namely, without an army, without control of its airspace, and with effective security measures to prevent weapons smuggling into the territory – real monitoring, and not what occurs in Gaza today.  And obviously, the Palestinians will not be able to forge military pacts.

Without this, sooner or later, these territories will become another Hamastan. And that we cannot accept.

Regarding the remaining important issues that will be discussed as part of the final settlement, my positions are known: Israel needs defensible borders, and Jerusalem must remain the united capital of Israel

The territorial question will be discussed as part of the final peace agreement.  In the meantime, we have no intention of building new settlements or of expropriating additional land for existing settlements. But there is a need to enable the residents to live normal lives, to allow mothers and fathers to raise their children like families elsewhere.  The settlers are neither the enemies of the people nor the enemies of peace.  Rather, they are an integral part of our people, a principled, pioneering and Zionist public.

Unity among us is essential and will help us achieve reconciliation with our neighbors.

If the Palestinians turn toward peace – in fighting terror, in strengthening governance and the rule of law, in educating their children for peace and in stopping incitement against Israel - we will do our part in making every effort to facilitate freedom of movement and access, and to enable them to develop their economy.  All of this will help us advance a peace treaty between us. 

Above all else, the Palestinians must decide between the path of peace and the path of Hamas. The Palestinian Authority will have to establish the rule of law in Gaza and overcome Hamas.  Israel will not sit at the negotiating table with terrorists who seek their destruction.   Hamas will not even allow the Red Cross to visit our kidnapped soldier Gilad Shalit

If we receive this guarantee regarding demilitirization and Israel’s security needs, and if the Palestinians recognize Israel as the State of the Jewish people, then we will be ready in a future peace agreement to reach a solution where a demilitarized Palestinian state exists alongside the Jewish state. 

Nabil Abu Rdainah, a spokesman for Mahmoud Abbas, the Palestinian president, dismissed the speech, saying: "Netanyahu's remarks have sabotaged all initiatives, paralysed all efforts being made and challenges the Palestinian, Arab and American positions."

Saeb Erekat, the Palestinians' senior negotiator, called on Obama to intervene to force Israel to abide by previous interim agreements that include freezing settlement activity in the West Bank. "The peace process has been moving at the speed of a tortoise. Tonight, Netanyahu has flipped it over on its backm," he said.

This is the first occasion that Netanyahu has endorsed the creation of a Palestinian state, but many see a disarmed Palestinian state as handing too much power to Israel. "Netanyahu did not accept the principle of a two-state solution," Lamis Andoni, Al Jazeera's Middle East analyst, said. "He reduced the concept of a Palestinian state to that of a demilitarised entity that would remain under Israeli control. 

"This is at best a formula to establish a Palestinian Bantustan that will not end the Israeli occupation but would legitimise Israeli control."

The Palestinians have said that they will not restart negotiations unless Netanyahu publicly backs the two-state solution and stops the building of Jewish settlements on Palestinian land.

He said there would be an end to new settlement building, but vowed that Jerusalem would remain undivided. Addressing Palestinian, Netanyahu urged them to recognise Israel as a Jewish state. "Israel is the nation state of the Jewish people and so it shall remain," he said.

Netanyahu, in an address seen as his response to Obama, refused to heed the U.S. call for an immediate freeze of construction on lands Palestinians claim for their future state. He also said the holy city of Jerusalem must remain under Israeli sovereignty.

''I call on you, our Palestinian neighbors, and to the leadership of the Palestinian Authority: Let us begin peace negotiations immediately, without preconditions,'' he said, calling on the wider Arab world to work with him. ''Let's make peace. I am willing to meet with you any time any place -- in Damascus, Riyadh, Beirut and in Jerusalem.''

''Our right to form our sovereign state here in the land of Israel stems from one simple fact. The Land of Israel is the birthplace of the Jewish people,'' he said.

''In my vision, there are two free peoples living side by side each with each other, each with its own flag and national anthem,'' he said.Netanyahu has said he fears the West Bank could follow the path of the Gaza Strip -- which the Palestinians also claim for their future state. Israel withdrew from Gaza in 2005, and Hamas militants now control the area, often firing rockets into southern Israel.''In any peace agreement, the territory under Palestinian control must be disarmed, with solid security guarantees for Israel,'' he said.

'If we get this guarantee for demilitarization and necessary security arrangements for Israel, and if the Palestinians recognize Israel as the state of the Jewish people, we will be willing in a real peace agreement to reach a solution of a demilitarized Palestinian state alongside the Jewish state,'' he said.

Netanyahu gave no indication as to how much captured land he would be willing to relinquish. However, he ruled out a division of Jerusalem, saying, ''Israel's capital will remain united.''

''We have no intention to build new settlements or expropriate land for expanding existing settlements. But there is a need to allow residents to lead a normal life. Settlers are not the enemy of the nation and are not the enemy of peace -- they are our brothers and sisters,'' he said.

Netanyahu also said the Palestinians must recognize Israel as a Jewish state. The Palestinians have refused to do so, fearing it would amount to giving up the rights of millions of refugees and their descendants and discriminate against Israel's own Arab minority.Although the Palestinians have agreed to demilitarization under past peace proposals, Erekat rejected it, saying it would cement Israeli rule over them.

The Israeli leader offered to talk to the Palestinians immediately and with "no preconditions".

"We want to live with you in peace as good neighbours," he said.

Agreeing the principle of a Palestinian state, he said Israel would "be prepared for a true peace agreement [and] to reach a solution of a demilitarised Palestinian state alongside the Jewish state". But only if "we receive this guarantee for demilitarisation and the security arrangements required by Israel, and if the Palestinians recognise Israel as the nation of the Jewish people".

the issue of Palestinian refugees who fled or were forced from their homes in what is now Israel in 1948 and 1949. The Palestinians say they and their millions of descendants have the right to return to Israel - which would mean an end to its Jewish majority - but Israel has consistently rebuffed that demand.

Mr Netanyahu stuck to a similar line, saying: "The Palestinian refugee problem must be resolved outside the borders of the state of Israel. "Any demand to resettle refugees within Israel undermines Israel as a state for the Jewish people."

Another key issue the two sides have failed to agree on is the status of Jerusalem. Mr Netanyahu insisted the city must be the "united capital of Israel", although Palestinians want it divided to allow them to locate the capital of a future state there.

Mr Netanyahu also said he was willing to go to Damascus, Riyadh and Beirut in pursuit of a Middle East peace deal.

Nabil Abu Rdainah, a spokesman for Palestinian Authority President Mahmoud Abbas, said the Israeli leader's speech "torpedoes all peace initiatives in the region".

Another Abbas aide, Yasser Abed Rabbo, told the AFP news agency that recognition of Israel's Jewish character was a demand for Palestinians "to become part of the global Zionist movement".

While the militant Hamas movement, which controls the Gaza Strip, said the speech reflected Mr Netanyahu's "racist and extremist ideology".

Last night saw violent clashes after Ahmadinejad was confirmed as the winner of the presidential election on Friday, barely an hour after the polls had closed.Protesters set fire to rubbish bins and tires, creating pillars of black smoke among the apartment blocks and office buildings in central Tehran. An empty bus was engulfed in flames on a side road.

More than 100 reformists, including Mohammad Reza Khatami, the brother of former president Mohammad Khatami, were arrested last night, according to leading reformist Mohammad Ali Abtahi. He told Reuters they were members of Iran's leading reformist party, Mosharekat.

A judiciary spokesman denied they had been arrested but said they were summoned and "warned not to increase tension" before being released.

In a sign of the anger among Mousavi's supporters, they chanted "the president is committing a crime and the supreme leader is supporting him", highly inflammatory language in a regime where the supreme leader, Ali Khamenei, is considered irreproachable.

But Khamenei replied that the election had been conducted fairly. He ordered the three defeated candidates and their supporters to avoid "provocative" behaviour. "All Iranians must support and help the elected president," he warned.

Israel reacted immediately by demanding intensified efforts to stop Iran acquiring nuclear weapons.

"The regime is making a decision to shape the direction of Iran for the next decade," Saeed Laylaz, a political analyst, said. "I'm sure they didn't even count the votes. I do not accept this result. It is false. It should be the opposite. If Ahmadinejad is president again, Iran will be more isolated and more aggressive. But he is the choice of the regime."

Laylaz had warned before the result that a second presidential term for Ahmadinejad could create a "Tiananmen-type" situation in Iran. Ominously, as three weeks of campaigning drew to a close last Wednesday, an official of the powerful Revolutionary Guard Corps warned that any attempt at a popular "revolution" would be crushed.

Overt signs of repression included the failure of phone lines for hours after the polls closed and the blocking of the English and Persian-language websites of the BBC and Voice of America - which are regularly attacked by the Iranian authorities as "imperialist". Text messaging also failed.

But outside analysts said the suspicions surrounding Mr. Ahmadinejad’s re-election would create new problems. “This is the worst result,” said Thomas R. Pickering, a former under secretary of state. “The U.S. will have to worry about being perceived as pandering to a president whose legitimacy is in question. It clearly makes the notion of providing incentives quite unappetizing.”

Many analysts and Middle East officials asserted that the outcome reinforced the reality that ultimate power resides not in the democratically elected president, but rather in Iran’s supreme religious leader, Ayatollah Ali Khamenei.“We should be clear about what we’re dealing with,” said Karim Sadjadpour, an Iran expert at the Carnegie Endowment for International Peace. “Just as we deal with Assad’s Syria and Mubarak’s Egypt, we now have to deal with Khamenei’s Iran,”

In Israel, which has hinted that it might launch a military strike on Iran to disable its nuclear capability, officials said Mr. Ahmadinejad’s victory underscored the threat from Tehran and the need for a tough response rather than patient diplomacy.Vice Prime Minister Silvan Shalom said in Tel Aviv that the victory “sends a clear message to the world” that Iran’s policies have broad internal support and will be continued. The results, he added, also “blow up in the faces of those” who thought Iran was ready for “a genuine dialogue with the free world on stopping its nuclear program.”

“It is easy to insult and confront and have Iran as a foe when Ahmadinejad is president,” said an Egyptian diplomat, speaking on condition of anonymity in keeping with diplomatic protocol. “A lot of people would have been inconvenienced if someone else had become president.”

Mr. Obama, officials said, has long said he was willing to negotiate with whoever would respond, including Ayatollah Khamenei. “The administration will deal with the situation we have, not what we wish it to be,” another senior official said.

For the United States, the larger problem is that while the election has frozen the dialogue, Iran’s nuclear program has speeded ahead. This month, the International Atomic Energy Agency reported that by May’s end, Iran had built and installed 7,200 centrifuges to enrich uranium and was quickly adding to its stock of nuclear fuel.

Now, the administration faces a vexing choice. It can continue to demand that Iran give up all of its enrichment capability — still the official position of the United States, but considered an all but impossible goal. Or it can tacitly accept that Iran is not going to stop enriching.

Unusually the resolution was unanimous, reflecting the extent of anger within the Chinese government over last month's nuclear test. Normally it is difficult for the US, Britain and France to persuade China, and to a lesser extent Russia, to take a tough line against North Korea.

The regime is believed to have enough plutonium for at least six nuclear bombs. It has around 8,000 spent fuel rods that if reprocessed could allow the country to harvest 6-8kg of plutonium – enough for at least one nuclear bomb, according to analysts.

The UN resolution authorises all countries to stop and search North Korean ships for weapons. The US, Britain and France wanted to make such inspections mandatory for all states, but China and Russia watered this down. The final resolution "calls on" states to carry out weapons searches.

Even so, the resolution risks standoffs between US and North Korean ships – a danger underlined by North Korea's response. "An attempted blockade of any kind by the US and its followers will be regarded as an act of war and met with a decisive military response," the regime said.

There was no attempt to expand the sanctions to exports and imports of non-military goods. This is partly because China and Russia would have been opposed, but also because of fears a collapse of the North Korean economy would result in a flood of refugees into South Korea.

The North says it will view any US-led attempts to "blockade" it as an "act of war".

On Friday, the United Nations Security Council voted unanimously to impose tougher sanctions on the communist North, after its nuclear test on 25 May. The UN sanctions include the inspection of North Korean ships, a wider ban on arms sales and other financial measures.

Korea analyst Aidan Foster Carter told the BBC Pyongyang's process was "out of control" and that nothing seemed able to persuade North Korea to stop its nuclear ambitions - neither sanctions nor financial incentives.

He said the nuclear stand-off may be part of internal ructions as Pyongyang's leader Kim Jong-il decides which of his three sons will take over from him.

North Korea is thought to possess enough reprocessed plutonium for between six and eight nuclear weapons.

However, analysts say Pyongyang has not yet mastered the technology to make a nuclear warhead small enough to place on a missile.

Mr Ahmadinejad is due to hold a news conference on Sunday before attending what is expected to be a huge victory rally. In a TV address on Saturday, he condemned the outside world for "psychological warfare" against Iranians during the election, which he called "totally free and fair". "This is a great victory at a time and condition when the whole material, political and propaganda facilities outside of Iran and sometimes... inside Iran, were totally mobilised against our people," he said.

The streets of the Iranian capital were reported to be calm on Sunday morning, but concrete barriers are being erected in the city centre.

Senior Iranian political figures have offered their backing to Mr Ahmadinejad, among them parliamentary Speaker Ali Larijani and the head of the judiciary.

The president already has the backing of the country's Supreme Leader, Ayatollah Ali Khamenei, who endorsed his election win on Saturday.

World reaction has been muted, with major powers slow to welcome the Iranian result. The European Union and Canada have voiced concern about allegations of irregularities, while US Secretary of State Hillary Clinton said only that Washington hoped the result reflected the "genuine will and desire" of Iranians. Long-time allies such as Venezuela and Syria, as well as neighbours Iraq and Afghanistan, are among those who have recognised Mr Ahmadinejad as the winner.

Thousands of supporters of the reformist former prime minister took to the streets of Tehran shouting "Down with the Dictator" as it became clear that Mousavi had lost.

"There are so many inconsistencies, they are even reporting that Ahmadinejad won the city of Tabriz, which is Mousavi's home town, with 57 per cent. That seems extremely unlikely.

"How come the votes were counted so quickly, even though the polls were open six hours extra?" he asked.

Al Jazeera's Teymoor Nabili, reporting from Tehran, said that the results declared by the interior ministry would still need to be signed off by the state audit body and the audit commission of the supreme leader. "Mousavi has the option of going to these two bodies and saying 'look I want definitive proof from you that these are clean numbers'," he said.

Karroubi added his voice to those criticising the result, saying it was "illegitimate and unacceptable".

Mr Obama has said he wants to broker a peace deal with Syria and Israel to end decades of regional conflict. Improved relations with the US could mean a lifting of sanctions and many new business deals - something many ordinary Syrians are hoping for.

Damascus, where the United States still does not have an ambassador, remains a key regional player, says the BBC's diplomatic correspondent Jonathan Marcus. It has an influence over events in Lebanon; it shares a crucial border with Iraq; it has a significant relationship with the Islamist Palestinian movement Hamas which controls the Gaza Strip; and it is a close ally of Iran, he says. But above all it wants Syria to push Hamas along the road to Palestinian unity - and ultimately Washington would like to woo Damascus away from Tehran.