The Shah of Iran had, by 1978, angered almost every Iranian in one way or another. The poor watched as the division between them and the rich grew wider and wider, devout Muslims were angered at the growing amount of bars, discotheques and rights women were granted, and intellectuals were upset with the widespread corruption and repression exhibited by the Shah's government.

The United States saw in the Shah a stable, valuable ally in a hostile region. However, protests and riots against the Shah finally forced him to leave Iran in the hands of a handpicked successor in late 1978. Soon thereafter, the Ayatollah Khomeini, leader of Iranian Muslims, had returned from exile and forced the Shah's successor to flee also. Because of Khomeini's hatred of the West, and America in particular because of its support of the Shah, students stormed the U.S. Embassy compound on November 4, 1979 and held 52 Americans inside hostage.

Following the takeover of the U.S. Embassy, the Carter Administration worked feverishly to free the hostages, but a sense of impotence had spread throughout the country. This frustration was compounded by a failed military rescue attempt on April 15, 1980 - all of which resulted in President Carter losing his bid for re-election in 1980.

It is interesting to note that the central figures involved in the rescue attempt were Richard Secord, Oliver North and Albert Hakim - all of whom resurfaced as key players in the Iran-Contra Scandal. It has been alleged that the rescue operation (known as Desert 1) was purposely sabotaged to bring about the election of Ronald Reagan. Of equal interest is the fact that President Carter was close to securing the release of the hostages before the November elections. This "October Surprise" would have quashed the hopes of candidate Reagan and his CIA friendly manager William Casey. Casey is purported to have set out to keep the hostages from being released until after the election. A deal, brokered by Vice Presidential candidate George Bush, was allegedly forged to release the hostages once Reagan took office. On January 20, 1981, the Iranian military had a plane waiting to send the hostages back to America; news footage clearly shows guards listening to a radio and upon hearing of Reagan's inauguration, the plane was signaled to leave.

After returning to private life former President Carter had this to say: "We� had reports since late summer of 1980 about Reagan campaign officials dealing with Iranians concerning delayed release of the American hostages. I chose to ignore the reports. Later, as you know, former Iranian president Bani-Sadr gave several interviews stating that such an agreement was made involving (Robert) McFarlane, George Bush and Bill Casey�I have never tried to obtain any evidence about these allegations but have trusted that investigations and historical records would someday let the truth be known."