The actions of the US administration had a significant impact on the Iranian economy for a number of reasons. Firstly, the United States could not immediately and easily be replaced as a trading partner. As other capitalist countries bowed to the US-led sanctions, oil exports and foreign exchange reserves sank. Clearly, in conjunction with the sanctions imposed on the regime in Iran, the blocking of assets cut off access to much needed reserves and also dealt a severe blow to the state of the Iranian economy in the precarious post-revolutionary period. These difficulties were then exacerbated by the Iraqi invasion of post-revolutionary Iran on 22 September 1980. The release of the US hostages may not have been a direct result of the Iraqi attack. Nevertheless, the latter made a significant contribution to the urgency for the Iranian regime of the revocation of sanctions and other economic measures.
Though there is no evidence of direct encouragement from Washington for the move by Baghdad, within a context of heightened hostility with revolutionary Iran in the midst of the hostage crisis there was a clear confluence of interests between Iraq and the United States. US–Iraqi relations began to improve, signalling a rapprochement between the two countries. The initial US strategy of fostering Arab nationalism as an ‘indigenous force’ against communism in Iraq had backfired, with the breaking of diplomatic relations and the Iraqi Treaty of Friendship with the Soviet Union. Diplomatic relations between the United States and Iraq had not improved, and in December 1979 the Carter administration listed Iraq as a ‘country that supports terrorism’.
Nonetheless, the strategic position and policies of the Ba’th Regime fitted in with the broader and long-term goals of successive US administrations. The Carter administration began to make moves for closer relations in the 1970s and high-ranking officials were sent to Baghdad in 1976 and 1977.20 This was partly motivated by strategic interests of limiting Soviet influence, and also partly by economic interests in exporting US goods and services during the proliferation of rapid economic development programmes in the 1970s. But from November 1979 onwards, the US attitude to Iraq was also inevitably shaped by the hostage crisis and Washington’s ensuing hostile relations with revolutionary Iran. In an official memorandum in March 1980, National Security Advisor Zbigniew Brzezinski, despite voicing concerns about Iraq’s increasing naval power in the region, stressed: the situation in Iran has changed the nature of our relations with Iraq somewhat. The hostage situation and the Afghanistan problem make it highly desirable to maintain correct relations with the Iraqi regime for the moment.
US turned down Russia’s offer to lift diplomatic restrictions: Russian envoy
