June 13 (Bloomberg) -- Supporters of President Mahmoud Ahmadinejad and his main challenger, former Prime Minister Mir Hossein Mousavi, both claimed victory in Iran’s presidential election as the first reported returns put Ahmadinejad ahead.

A Mousavi aide, Abdollah Ramezanzadeh, told Bloomberg News by phone from Tehran that the candidate’s camp estimated 25 million votes had gone for Mousavi, or 62.5 percent of the total of 40 million cast. The Islamic Republic News Agency reported that Ahmadinejad had won the election by a large margin, gaining 75 percent of the rural vote.

“The results are not there yet,” said Farideh Farhi, an expert on Iranian politics at the University of Hawaii, Manoa. “Mousavi is issuing a warning to the Ahmadinejad camp not to engage in any tricks; he is trying to make sure that his election victory is not stolen.”

With 21.17 million ballots counted, amounting to 46 percent of eligible voters, Ahmadinejad had 66.2 percent, Kamran Daneshjou, head of the election committee, said on state television. Mousavi had about 31 percent, followed by former Revolutionary Guards commander Mohsen Rezai’s 1.9 percent and former parliamentary Speaker Mehdi Karrubi with 0.9 percent.

The election pitted the president against challengers who say he’s hurt the economy and fueled tension with the West.

‘Certain Winner’

Polls were extended by at least four hours last night. Daneshjou called the turnout “unprecedented,” the Interior Ministry said. The final results may be ready by 8 a.m. Tehran time, he said in a press conference.

Mousavi claimed he was the “certain winner,” the state- run Mehr news agency reported. Speaking at a news conference in Tehran, he said his estimate was based on information obtained from different provinces.

He also alleged widespread voting irregularities, the Associated Press reported. He didn’t give specifics, AP said.

Majid Farahani, a campaign manager for Mousavi in Tehran, told Bloomberg News in a phone interview that Mousavi’s representative wasn’t allowed in election headquarters. He said the results are from rural voters, and not urban centers.

“Both sides are very anxious to announce victory,” said Ali M. Pedram, an expert on Iran at Durham University in the U.K.

Tommy Vietor, a spokesman for the Obama administration, declined to comment on the election or the competing claims of victory.

Mousavi’s Threat

Mousavi, whose supporters have been handing out mock economic charts drawn in a childish scrawl to ridicule the government’s performance, was seen by analysts as posing the greatest threat to the president. Ahmadinejad, seeking a second term, has accused the Mousavi campaign of “psychological warfare.”

A candidate needs to win more than 50 percent of the vote to clinch a first-round victory. If no one does, the contest will go to a runoff between the top two finishers June 19.

Mousavi the 71-year-old Karrubi, another candidate who favors easing tensions with the U.S. and allowing more social and political freedoms, have hinted that in any second round, their supporters will unite behind the one who gets more votes.

46.2 Million Eligible

Iran has 46.2 million eligible voters from a population of about 70 million. In the last election in 2005, many young people didn’t vote because they were disillusioned after eight years under former President Mohammad Khatami. His efforts to ease political and social restrictions and reach out to the West were blocked by institutions overseen by Supreme Leader Ayatollah Ali Khamenei, who has final say on affairs of state.

Ahmadinejad won on a turnout of 60 percent four years ago, compared with 67 percent in 2001 and 80 percent in 1997.

President Barack Obama said he hopes the election will advance U.S. efforts to engage with the country.

“Whoever ends up winning the election in Iran, the fact that there’s been a robust debate hopefully will help advance our ability to engage them in new ways,” Obama said in response to a reporter’s question at the White House. “We think there’s a possibility of change.”

Oil Revenue

Mousavi and other candidates have accused Ahmadinejad of wasting record oil revenue on a subsidy system that has boosted inflation, while unemployment has remained high. They say his confrontational stance over Iran’s nuclear program is thwarting a deal with Obama to assuage concern that Iran is seeking atomic weapons.

“A Mousavi victory would make a deal on the nuclear issue over the next 12 months more likely,” said Cliff Kupchan, a senior analyst at the New York-based Eurasia Group.

In an address on state television on June 10 to answer his critics, Ahmadinejad reeled off a list of his achievements, including what he said was Iran’s progress in nuclear and aerospace technology.

The other candidates “are losing the race and they want to create tension,” he said.

“Iran’s oil is not limitless,” said Hassan Sahabi, 67, after voting for the incumbent. Under Ahmadinejad “our country’s nuclear program progressed. His determination will allow Iran to secure clean energy for the future,” said the Tehran high school teacher. The Persian Gulf country holds the second-largest oil reserves in the world after Saudi Arabia.

Khamenei Votes

Khamenei, Iran’s highest authority, was shown on state television casting his ballot shortly after the opening of polls.

Khamenei urged Iranians to disregard “rumors” and vote in a calm atmosphere. “Do not give in to ill-intentioned movements who may seek to stir tension,” he said, without elaborating.

Long lines formed at polling stations in northern Tehran, which contain the capital’s richer neighborhoods, where backing for Mousavi’s campaign has been strong.

Mohsen Arefi, an industrial contractor, criticized Ahmadinejad’s “adventurous policies” both abroad and at home, adding that the president has harmed the country’s economy.

Mousavi is a good choice because of his “sound management of the country during the Iran-Iraq war years,” 53-year-old Arefi said after casting his ballot.

A win by Mousavi, who steered the economy through most of the 1980-1988 Iran-Iraq war when he was premier, may lead to a more disciplined economic policy and Iran accepting more international oversight of its nuclear activities, said Farhi.

Nuclear Negotiations

An Ahmadinejad victory would make nuclear negotiations with the U.S. and its European allies “more difficult and more unpredictable,” Farhi said. Iran’s economy would likely continue to suffer from high inflation and joblessness, she said.

Inflation was 15.5 percent in April, according to the Iranian central bank, while unemployment was 10.5 percent in February, the most recent month available.

Mousavi, 67, is counting on support from young people, the middle-class and women.

Ahmadinejad, 52, a former mayor of Tehran, who expanded a national subsidy system that keeps bread prices at 20 cents a loaf and gasoline at 38 cents a gallon, is popular among working-class voters.

The former Revolutionary Guards commander, Rezai, 54, appeals to many of the same voters Ahmadinejad is courting.

To contact the reporters on this story: Ali Sheikholeslami in London at alis2@bloomberg.net; Henry Meyer in Dubai at hmeyer4@bloomberg.net; Ladane Nasseri in Tehran at lnasseri@bloomberg.net.

Last Updated: June 12, 2009 18:41 EDT