In Iran the opposition leader Mirhossein Mousavi is still defiant, and the fissures within the ruling elite of the Iranian system are still there. This may yet, with the possibility of further demonstrations, create serious problems for Supreme Leader Khamenei and his favoured president Ahmadinejad. But for the time being the security forces appear to have faced down the pressure from popular unrest.
This means the international community and in particular President Obama now have the problem of how to handle an Iranian regime which many of its own people believe to have faked an election and to have effectively staged a coup in order to maintain themselves in power. Khamenei and Ahmadinejad continue to blame most of the recent unrest on foreigners, and Ahmadinejad has an unpalatable record of provocative rhetoric on the nuclear issue, coupled with threats to Israel and remarks that have appeared to endorse Holocaust deniers. So Ahmadinejad's attack on Obama's recent statements yesterday was a reversion to form.
All of this sharpens Mr Obama's predicament. But the logic of engaging Iran in discussions about her role in the Middle East and about nuclear weapons never depended on the Iranian regime being a friendly, wholesome partner.
The next steps – as they would have been with a government led by Mousavi – will be to develop existing contacts over Afghanistan and Iraq, and to test the Iranians' readiness to discuss the nuclear problem realistically in face-to-face talks with senior US representatives. Such moves would in themselves be a challenge to the Iranian leadership: a challenge to enter the real world (at least in this respect) or face the consequences.
It would have been preferable and much easier if a less hostile president had emerged from the election of 12 June; if the Iranian leadership had not opted to impose the fantasy of a landslide Ahmadinejad victory. But the need to address the Iranian problem is no less pressing now than it was previously, and negotiation is still the only real option.
Even before Obama, the Bush administration examined the case for military action and (perhaps reluctantly) rejected it. The reasons for rejecting it still stand. Engagement with a country like Iran should not be seen as a reward for good behaviour, but rather as a necessity, albeit now a more unpalatable one.
The writer is director of the centre for Persian and Iranian studies at Exeter University and author of 'Iran: Empire of the Mind'Reuse content