By Dominic Evans and Fredrik Dahl
TEHRAN (Reuters) - Iran's top legislative body said on Tuesday it was ready to carry out a partial recount in a disputed presidential election that has prompted the biggest street protests since the 1979 Islamic revolution.
Iranians outraged by Mirhossein Mousavi's defeat in what they viewed as a stolen election were planning another rally later in the day, even though seven people were killed on Monday on the fringes of a huge march through the streets of Tehran.
President Mahmoud Ahmadinejad's supporters called for a counter-rally at the same Tehran square, setting the scene for more confrontation in the turmoil that has riveted attention on the world's fifth biggest oil exporter since Friday's poll.
Iranian state television said on Tuesday the "main agents" in post-election unrest had been arrested with explosives and guns, without elaborating.
U.S. President Barack Obama, who has sought to reach out to Iran asking its leadership to "unclench its fist," said he was deeply troubled by post-election violence in Iran and protesters who had taken to the streets had inspired the world.
In what appeared to be a first concession by the authorities to the protest movement, the 12-man Guardian Council said it was ready to re-tally votes in the election in which the hard-line Ahmadinejad was declared a runaway winner.
But a spokesman for the council said only that it was "ready to recount the disputed ballot boxes claimed by some candidates, in the presence of their representatives."
"It is possible that there may be some changes in the tally after the recount," spokesman Abbasali Kadkhodai was quoted as saying by the official IRNA news agency.
A senior reformist ally of Mousavi and another losing candidate, Mehdi Karoubi, said they wanted a fresh election to be held, rather than a partial recount.
Mousavi has asked the Guardian Council to annul the vote, but has said he was not optimistic about its verdict.
Ahmadinejad was endorsed as "the new president" by the Russian government on Tuesday during his first foreign trip since official results showed he had won re-election.
Iran's English-language Press TV said seven people were killed and several wounded at the end of Monday's rally -- a mainly peaceful gathering attended by many tens of thousands -- when "thugs" tried to attack a military post in central Tehran.
It gave no details of how the seven deaths occurred.
An Iranian photographer at the scene had said Islamic militiamen opened fire when people in the crowd attacked a post of the Basij religious militia.
Tehran has already seen three days of the biggest and most violent anti-government protests in three decades and Mousavi supporters have pledged to keep up the pressure.
Further protests, especially if they are maintained on the same scale, would be a direct challenge to authorities who have kept a tight grip on dissent since the 1979 overthrow of the U.S.-backed shah after months of demonstrations.
"Tomorrow at 5 p.m. (1:30 p.m. British time) at Vali-ye Asr Square," some of the crowd chanted at Monday's march, referring to a major road junction in the sprawling city of 12 million.
Ahmadinejad supporters plan a rally at the same square just an hour earlier, the semi-official Fars News said. It quoted an organisation affiliated to the government as saying the gathering would be "in protest against the recent agitation and destruction of public property."
Press TV said Mousavi had called for calm at what it called his supporters' "illegally" planned rally.
LEADING REFORMIST ARRESTED
Leading Iranian reformist Mohammad Ali Abtahi, a former vice-president who backed pro-reform candidate Mehdi Karoubi in the election, was arrested early on Tuesday, his office said.
Reformist sources said another prominent reformer and Mousavi ally, Saeed Hajjarian, was arrested on Monday.
Obama said on Monday he was concerned by the violence.
"The democratic process, free speech, the ability of people to peacefully dissent -- all those are universal values and need to be respected," he told reporters.
The United States and its European allies have been trying to engage Iran and persuade Iran to halt nuclear work that could be used to make an atomic bomb. Iran says it wants nuclear energy only to generate electricity.
Obama said he would continue pursuing tough, direct dialogue with Tehran but urged that any Iranian investigation of election irregularities be conducted without bloodshed.
Demonstrators filled a broad avenue in central Tehran for several kilometres on Monday, chanting "We fight, we die, we will not accept this vote rigging," in support of Mousavi.
Mousavi was "ready to pay any price" in his fight against election irregularities, his website quoted him as saying.
"Tanks and guns have no use any longer," chanted the protesters in a deliberate echo of slogans used leading up to the 1979 revolution.
Members of Iran's security forces have at times fired into the air during the unrest and used batons to beat protesters who have pelted police with stones.
The Basij militia is a volunteer paramilitary force fiercely loyal to Supreme Leader Ayatollah Ali Khamenei who has the final say on all matters of state.
Gunfire was heard in three districts of wealthy northern Tehran late on Monday and residents said there had been peaceful pro-Mousavi demonstrations in the cities of Rasht, Orumiyeh, Zahedan, and Tabriz on Monday.
(Writing by Dominic Evans; editing by Peter Millership)
