Updated 8:42 p.m. EST.
The Iranian security forces unleashed a crushing sweep against opposition protesters on Thursday as President Mahmoud Ahmadinejad used the 31st anniversary of the Islamic revolution to defy the West and boast his country was now a "nuclear state."
The massive show of force appeared to give authorities the upper hand on the most important day of the Iranian political calendar. The state-backed rally dwarfed anti-government gatherings, which were far smaller than other outpourings of dissent in recent months.
CBS News correspondent Elizabeth Palmer reports that both sides had been preparing for a big showdown. Opposition activists and leaders have called for a huge show of force in the streets, and authorities warned them to stay home or face harsh measures.
Police clashed with anti-government protesters in several sites around Tehran, firing tear gas to disperse them and paintballs to mark them for arrest. Gangs of hard-liners also attacked senior opposition figures - including the wife of the head of the reform movement.
Plainclothes Basiji militiamen beat 65-year-old Zahra Rahnavard with clubs on her head and back until her supporters formed a human ring around her and whisked her away, according to the Web site of her husband, Mir Hossein Mousavi.
Still, the day's events showed that authorities must rely on full-scale pressures to keep a lid on demonstrations, and any breathing room may be limited. Opposition supporters are certain to regroup and look for weak spots in the ruling system.
The opposition turnout was dwarfed by the huge crowd at the state-run celebrations. Many were bused in to central Azadi, or Freedom, Square to hear an address by President Mahmoud Ahmadinejad, who proclaimed a new success inand dismissed new U.S. sanctions.
"The reaction from the U.N., the U.S., and Israel is frustration about how to stop Iran's defiance, when sanctions have done next to nothing," said CBS News foreign affairs analyst Pamela Falk from the U.N.
"At the U.N., negotiations are intense to impose new sanction, but the Obama Administration - knowing that China is not on board for any harsh measures - imposed its own freeze on Iranian assets in the U.S.," said Falk.
In his address to a crowd of hundreds of thousands - many bused into Tehran's Freedom Square - Ahmadinejad sought to shift attention from the nation's political troubles, boasting instead about Iran's advancements in nuclear technology. He also dismissed new U.S. sanctions and denigrated President Barack Obama's efforts to repair relations.
Iran has the capacity to make weapons-grade nuclear fuel if it chooses, the Iranian leader declared, adding that Iran had succeeded in enriching uranium to 20 percent and was now a "nuclear state."
"We have the capability to enrich uranium more than 20 percent or 80 percent but we don't enrich (to this level) because we don't need it," he said. "When we say we do not manufacture the bomb, we mean it, and we do not believe in manufacturing a bomb. If we wanted to manufacture a bomb, we would announce it."
The Obama administration dismissed Iran's contention it is enriching uranium at a higher level, adding that such claims were disturbing.
Even if untrue, Ahmadinejad's claim "further solidifies our impression and that of the international community that Iran's nuclear intentions are anything but peaceful," State Department spokesman P.J. Crowley said.
Ahmadinejad has been staunchly backed by Iran's ruling clerics since his disputed re-election in June touched off the worst internal turmoil in Iran since the 1979 Islamic revolution. Now many opposition groups are denouncing the entire Islamic system.
This is what deeply worried authorities preparing for Thursday's 31st anniversary of the Islamic state. Any significant protests or clashes would be seen as major embarrassment on a day intended to showcase national achievements and unity.
The New York Times reported Wednesday that in addition to opposition activists the government has also imprisoned photographers, artists, children's rights advocates, women's rights activists, students and journalists.
Authorities banned foreign media in Iran from covering the pro-reform protests, while allowing them to cover the official anniversary ceremonies, including Ahmadinejad's speech, but there is a ban on covering opposition protests. Tehran residents also reported Internet speeds dropping dramatically andin a common government tactic to foil opposition attempts to organize.
An array of riot police, undercover security agents and hard-line militiamen - some on motorcycles - fanned out across Tehran in what appeared to be the largest and most strategic deployment since the post-election mayhem.
Security forces were seen in nearly every neighborhood. They had one primary goal: to keep protesters from gaining momentum following weeks of arrests and warnings from authorities.
Opposition Web sites spoke of groups of protesters in the hundreds - compared with much larger crowds in past demonstrations.
One protester told The Associated Press she tried to join the opposition demonstrators but soon left in disappointment because they were overwhelmed by pro-government marchers.
"There were 300 of us, maximum 500. Against 10,000 people," she told an AP reporter outside Iran.
"It means they won and we lost. They defeated us. They were able to gather so many people," she said. "But this doesn't mean we have been defeated for good. It's a defeat for now, today. We need time to regroup."
Another protester insisted the opposition had come out in significant numbers, but "the problem was that we were not able to gather in one place because they (security forces) were very violent."
"Maybe people got scared," he said. "The idea wasn't to lose or win today ... But what is certain, today was not a good day."
Both spoke on condition of anonymity for fear of retaliation by authorities, who have jailed protesters for talking to foreign media.
Some analysts predict the opposition could move away from large street marches in favor of strikes and boycotts. "The crackdown has been very tough," said Meir Javedanfar, an analyst. "The lower turnout means either people are scared or, more likely, they will change tactics."
Despite the smaller opposition turnout, there were reports of clashes in Tehran. Foreign media is banned from street reporting under rules imposed by Iranian authorities.
At least one opposition leader was attacked, but not injured. Dozens of hard-liners with batons and pepper spray attacked the convoy of a senior opposition leader, Mahdi Karroubi, smashing his car windows and forcing him to turn back as he tried to join the protests, his son Hossein Karroubi told the AP.
Authorities also jammed the Internet and mobile phones to disrupt the opposition. In Tehran, Internet speeds dropped dramatically and e-mail services such as Gmail were widely blocked.
In his nationally televised address, Ahmadinejad said Iran has produced the first batch of 20 percent enriched uranium - sufficient strength to power Iran's research reactor, - though he did not say how much uranium had been enriched.
Such a process has been at the heart of a U.N.-drafted proposal to provide Iran with reactor-ready fuel in exchange for its stockpile of low-enriched uranium. Iran has repeatedly blocked the plan with conditions and caveats.
The announcement of the higher-enriched uranium adds to Western worries that Iran has long-term goals to develop nuclear arms - even though it is still below the 90 percent-plus level needed for a weapon. Iran insists it only seeks to produce energy and medical isotopes.
Ahmadinejad also criticized Obama for failing to shift U.S. policies.
"We expected Mr. Obama to make changes," Ahmadinejad said. "But he is losing the chance and not acting properly ... Obama's approach and behavior is disappointing."
The gathering was the biggest state-backed event since marches shortly after the June election, which opponents said was rigged. Many in the crowd waved Iranian flags and carried pictures of Ayatollah Ruhollah Khomeini, the founder of the Islamic state, and his successor as supreme leader, Ayatollah Ali Khamenei.
But in a sign of Iran's unruly political climate, security forces briefly detained Khomeini's granddaughter and her husband, who are both pro-reform politicians, according to the couple's son, Ali.
The granddaughter, Zahra Eshraghi, and her husband Mohammad Reza Khatami, who is the brother of a former pro-reform president, were held for less than an hour before being released, their son told the AP.
The opposition Web site Kaleme reported that security forces prevented opposition leader Mir Hossein Mousavi from reaching any rallies.
Plainclothes militiamen also beat Mousavi's wife, 65-year-old Zahra Rahnavard, with clubs on her head and back until her supporters surrounded her and whisked her away, according to the Web site.
For days ahead of the anniversary, anti-government Web sites and blogs called for a major turnout to display green emblems or clothes, the opposition's signature color. Some protesters heeded the appeals, brandishing green banners or wore green wrist bands.
Security forces fired tear gas to disperse a group of protesters who were trying to march toward Freedom Square as they chanted "death to the dictator," the opposition Web site Rahesabz said. It also reported a number of arrests.
The apparently isolated clashes contrast with the running street battles during protests over the past few months. In late December, at least eight people were killed during a Shiite holy day.