The hostage crisis ended in January 1981, but the bad blood between America and Iran continued.
First there was the Iran-Iraq war. Iraq started the war in 1980, hoping to capitalize on Iran's internal chaos. But by 1982, Iran had regained its footing. The Iranian military retaliated, striking deep into Iraq.
Washington went on the alert, according to Ken Pollack, the author of "The Persian Puzzle: The Conflict between Iran and America."
"The Reagan Administration became very concerned that the Iranians would be able to defeat the Iraqis, overthrow Saddam Hussein's regime and then continue to march either on Israel or down into the southern Persian Gulf states, into our allies Kuwait, Saudi Arabia, the rich Gulf oil sheikdoms upon whom the entire world depended for energy," says Pollack.
The Reagan Administration decided to help Iraq push the Iranians back. It provided Baghdad with intelligence, and agricultural credits so Iraq could free up money for weapons.
Nasser Hadian, a professor of political science at Tehran University, says the US decision to back Iraq is still a bitter memory for Iranians.
"We lost a lot of people in that war, a lot of people became handicapped, you would see them everyday. This is not something distant from you. In my classes in Iran, in the streets I would see many of these war veterans, who do not have eyes, who do not have hands, who do not have legs, who are totally paralyzed and that would be really hard to witness them, to see them, and not to wonder why the US supported such a brutal dictator like Saddam in the war," Hadian says.
The US continued to back Iraq even as Saddam Hussein unleashed chemical weapons on the Iranians.
Hadian still shudders when he thinks about it.
"We all thought that using chemical weapons would be a red line which never would be crossed. We thought the international community never would let that happen. But to our surprise and our sorrow, deep sorrow, we found out that's not the case," he says.
At the time the State Department condemned the use of chemical weapons, but the United States took no punitive action. US policy makers from that era still defend their decision to help Iraq.
Nicholas Veliotes was Assistant Secretary of State for Near Eastern and South Asian Affairs in the early 1980s. He says Washington backed Iraq out of fear the Iranian revolution would spread.
"At that time the greatest threat came from this surging Islamic fundamentalist expansionism. There were also grave concerns in the Gulf that the Iranians were seeking to disrupt, if not overthrow, many of the governments," he says.
Those fears were not unfounded. Right after the revolution, Iran began supporting radical Shia groups in Iraq, Bahrain, Kuwait and Saudi Arabia. When Israel invaded Lebanon in 1982, Iran helped create organizations like Hizbollah there. When US forces were drawn into Lebanon too, they quickly became targets for such Iranian-backed groups.
The first big attack was at the US embassy in Beirut on April 18, 1983. 63 people were killed, including 17 Americans. The next target was a US Marine barracks. 241 Americans were killed. In September 1984, another US embassy building was bombed. Iranian-backed groups also took Americans hostage, including the head of the American University of Beirut, and the CIA's Lebanon station chief.
President Reagan, who had seen a hostage crisis hobble his predecessor, now had one of his own. He resorted to desperate measures to resolve it. The year was 1985. The Iran-Iraq war was still on. The United States had an arms embargo against Iran called Operation Staunch. But Reagan told a small circle of advisors to implement a different policy, of secretly swapping arms sales for hostages. Publicly Reagan kept up his tough guy rhetoric.
"The United States gives terrorists no rewards and no guarantees," he said. "We make no concessions, we make no deals."
But behind closed doors, the covert action went ahead. US officials flew to Tehran with shipments of anti-tank missiles. They then diverted profits from the sales to the right wing Contra rebels in Nicaragua. When the Iran-Contra affair leaked it was a huge scandal.
Malcolm Byrne of the National Security Archive at George Washington University says the arms for hostages deal didn't even achieve its aims.
"It did bring three hostages home, but during the same time period three more hostages were taken. So if you are going strictly by the numbers, then it was a wash. It also had some very damaging effects on US policy and US standing in the region," Byrne says.
The Iran-Iraq war finally ended in 1988. It had been horribly destructive, and ultimately pointless. And while US policy in the 1980s may have helped contain Iran, it had only emboldened Iraq. In 1990, Saddam Hussein invaded Kuwait, triggering the Gulf War.
In 1993, incoming Clinton Administration officials like Martin Indyk took the lesson to heart.
"What we learned from that experience was that the whole notion of using one of the regional powers in the gulf to balance the other was basically a bankrupt policy," Indyk says.
So President Clinton launched a new policy called dual containment. Iraq would be contained by the sanctions, arms inspections and no fly zones that followed the Gulf War. Iran would be watched closely for any false move. At the same time, Clinton Administration officials pursued a comprehensive settlement to the Israeli-Palestinian conflict.
"The whole point was there seemed to be a symbiotic relationship between dual containment and pursuing peace. The more we succeeded in making peace the more Iran and Iraq would find themselves isolated and the more we succeeded in containing and isolating them the easier it would be to make peace. And in fact that's what happened for the first four years," Indyk says.
As time went on though, the Iranians helped sabotage the peace process by supporting terrorist groups that opposed it, according to Indyk.
Groups like Hezbollah, Islamic Jihad and Hamas.
Iran considers those groups freedom fighters, not terrorists.
Mostafa Zahrani of the government-affiliated Institute for Political and International Studies in Tehran says the United States uses a double standard when it accuses Iran of supporting terrorism. Zahrani says Israeli prime minister Ariel Sharon is guilty of terrorism against the Palestinians.
"If terrorism is bad, why you accept Sharon terrorism and then you condemn all those people you know let's say Hezbollah, Jihad, Hamas? People in the region never believe that those people are terrorists. They say okay their land has been taken. They don't have house, they don't have humanity, they don't have security, they don't have food, they don't have anything," he says.
But that's not how the United States sees Hezbollah, Islamic Jihad and Hamas.
In the mid-1990s, fed up with Iran's support for such groups, and its opposition to the Mideast peace process, the Clinton Administration cranked up economic sanctions on Tehran.
But then, in 1997, there were signs of change in Iran. In May, the reformist cleric Mohammed Khatami was elected President. The dynamic immediately showed signs of shifting. President Clinton called Khatami's election "hopeful." President Khatami gave an interview on CNN. He said he regretted the pain caused by the hostage crisis two decades earlier and called for a dialogue with the United States.
"When I speak of dialogue I intend dialogue between civilizations and cultures. Such discourse should be centered around thinkers and intellectuals. I believe that all doors should now be opened for such dialogue and understanding and possibilities for contact even between American and Iranian citizens should become available," Khatami said.
Secretary of State Madeline Albright responded in kind.
"As the wall of mistrust comes down, we can develop with the Islamic Republic, when it is ready, a roadmap leading to normal relations," she said.
Reformers in Iran continued to make gains in elections. In January 2000, Albright made another gesture.
"Today I am announcing a step that will enable Americans to purchase and import carpets and food products such as dried fruits, nuts and caviar from Iran," Albright said.
Albright's speech that day was groundbreaking. She acknowledged the US role in the 1953 coup that overthrew Iran's then-prime minister, Mohammed Mossadegh. She noted that the US had backed the Shah even as he brutally repressed his own people. And she said US support for Saddam Hussein in the Iran-Iraq war had been shortsighted.
But Albright also made a strategic error, according to Iranian political scientist Hadi Semati, when she referred to Iran's clerical leaders as "unelected."
"The speech was perfect really, in the sense it had a lot of groundbreaking statements in terms of American policy and acceptance of Iran as it was, but just the symbolic impact of that phrase was so much and so hard in Tehran especially with the conservatives that it blew out every possibility," Semati says.
Semati says Iran's ruling clerics believe they represent popular sentiment. He says Albright was publicly questioning the very essence of their identity and their power. The hardliners in Tehran rejected Albright's overture. The Clinton initiative fizzled out.
The current Bush Administration inherited all the problems of the US-Iranian relationship, and little of the hope.
In June 2001, Attorney General John Ashcroft unveiled an indictment implicating the Iranian government in the 1996 terrorist bombing at the Khobar Towers complex in Saudi Arabia.
Then came September 11. Suddenly, US and Iranian interests converged.
The results were remarkable, according to Ken Pollack.
"Very quickly after September 11, the Bush Administration was able to develop a backchannel relationship with the Iranians that was extremely good. The United States was determined to destroy al Qaeda and take down the Taliban regime in Afghanistan. And the Iranians were among the oldest and most vicious foes of the Taliban regime in Afghanistan and had been arguing for a global effort against the Taliban for years," Pollack says.
As a result, Iran gave the United States a lot of quiet help in its war in Afghanistan. But then, in January 2002, President Bush lumped Iran with Iraq and North Korea in his State of the Union address.
"States like these, and their terrorist allies, constitute an Axis of Evil, arming to threaten the peace of the World."
"A whole variety of sources have made clear that Iran to some extent was roadkill when it came to that speech," Pollack says. "The speech was not written about Iran; the Iranians were just kind of there and got run over by this truck of rhetoric that the administration had come up with. And Iran's inclusion in the Axis of Evil speech immediately soured the cooperation between Iran and the US."
It's not clear how long that cooperation would have lasted anyway. By the end of 2002, revelations about Iran's nuclear program had underscored Washington's worst fears about its longtime foe. International inspections confirmed Iran had enriched some uranium.
The Bush Administration's top arms control official, John Bolton, accused the Iranians of developing nuclear weapons.
"There is no question about it. The Iranians have a country that largely floats on a sea of oil and natural gas, and their argument that they need a nuclear power program for their own internal energy needs is ludicrous...In addition to that we have very substantial evidence that the Iranians are engaged across the entire nuclear fuel cycle concealing what they have done in a way that is only consistent with a clandestine nuclear weapons program," Bolton said.
Iran denies it is building nuclear weapons. It says it wants to enrich uranium to make nuclear fuel to generate electricity. Despite that rhetoric, Semati says, there is support in Iran for a nuclear deterrent.
"If you put the Iranian sense of threat in perspective, the only way that they can possibly come to a parity level with the US is nuclear, at least nuclear option, if not nuclear weapons," he says.
Iran has reason to feel threatened. Powerful voices in Washington want regime change there. There's talk of preemptive military strikes against its nuclear facilities. Iran is sandwiched between US interests in Iraq and Afghanistan. It has seen Iraq, which had no nuclear weapon, invaded, and North Korea, believed to have several, left untouched. Iran's leaders may well calculate they're safer with nuclear weapons than without.
There's still hope for a diplomatic fix. But the nuclear clock is ticking. And the history of US-Iranian relations doesn't offer much solace.
Semati says he thinks Washington and Tehran have reached a crossroads. That they must finally come to terms with each other, or collide.