The competition, which is called Marg bar Amrika, ("Down with America" or "Death to America" in Farsi) invites Iranians to send in works on anti-US topics such as the "US and global Zionism," "why the US is not reliable" and of course "the US and oppression."
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The two part competition reflects poorly on the Iranian government's recent attempt to warm its relations with the West.
According to the Mail, the awards are sponsored by hardliner news agencies and conservative television stations. According to their report, a website promoting the competition exhibited the US's Uncle Sam clasping a medieval mace.
Meanwhile, Tehran city officials have ordered the removal of some posters featuring anti-American slogans, a sign that Iran is seeking better relations with the United States as the two sides hold talks over its nuclear program.
A Tehran municipal official said some anti-American billboards had been put up illegally and that the city had taken them down, state news agency IRNA said on Saturday.
"In an arbitrary move, without the knowledge or confirmation of the municipality, one of the cultural institutes installed advertising billboards," said Hadi Ayyazi, spokesman for the municipality, according to IRNA.
Ayyazi did not specify which posters had been taken down. According to IRNA, new anti-American posters questioning US honesty had been put up in busy Tehran thoroughfares since last week, ahead of the Nov. 4 anniversary of the taking of hostages in the US Embassy in 1979.
One such poster depicted an Iranian negotiator sitting at a table with a US official who is wearing a suit jacket but also army trousers and boots, with a caption that reads, "American Honesty".
The banners implied that the real US goal in negotiations is to attack Iran rather than find a diplomatic solution to the dispute over its nuclear program.
It is unclear who was behind the posters, but hard-liners have expressed skepticism of Iranian President Hassan Rohani's efforts to engage with the West and the United States.
Anti-American graffiti and posters in prominent areas of Tehran and other major Iranian cities are common. The site of the former US embassy in Tehran, for instance, depicts the Statue of Liberty with a skull for a face.
The city's move sparked protest from some hard-liners, including the influential conservative Kayhan newspaper, which criticized the decision in a Sunday editorial and is responsible for the aforementioned "Down with America" competition.
"Obviously, the posters only warned of America's dishonesty," the editorial said. "Therefore, their removal is unjustifiable for the people whose blood has been shed and who have suffered the bitter taste of America's hostility for more than 30 years."
Reuters contributed to this report
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