In 1980 the United States broke off diplomatic relations with Iran and imposed severe economic sanctions against it. When Khatami took power in 1997 the United States and Iran still had not reestablished diplomatic relations. The United States saw Iran as supporting terrorism that was directed against the United States and its allies and therefore did not seem interested in reestablishing ties.
In 1983 the U. S. embassy in Beirut, Lebanon, was destroyed by a bomb; the terrorists who claimed responsibility for this action were Iranian nationals. From 1985 onward the Shiite Muslim group Hezbollah formulated attacks to protest Israeli forces in southern Lebanon. Hezbollah received support from the government of Iran.
Hezbollah was especially troublesome to the United States because it opposed efforts to bring about a Middle East settlement between the Palestinians and the Israelis, which the administration of U. S. president Bill Clinton desired. Hezbollah's attitude toward Israel and the Middle East peace process reflected the attitudes of the leaders of Iran.
In the fall of 1998 Osama bin Laden was indicted by a U. S. grand jury for murder in the August, 1998, bombings that killed 224 people, including 12 Americans, in Kenya and Tanzania. The U. S. Department of Justice offered a $5 million reward for bin Laden and charged that he and the group he led, al-Qaeda, had alliances with Iran and Hezbollah.
On September 11,2001, terrorists who apparently belonged to Osama bin Laden's al-Qaeda group hijacked American airplanes and flew them into the Pentagon and the New York World Trade Center, destroying the latter's towers. There was no evidence of Iranian involvement in these attacks, but the two wings of the Iranian establishment responded in markedly different ways. President Khatami publicly condemned the attacks. The Ayatollah Ali Khamenei's reaction was yet another strongly anti-American speech.
On November 4, 1998, the anniversary of the 1979 seizure of the U. S. embassy was marked, as it had been in the past, as an Iranian holiday. However, at ceremonies celebrating the holiday the rhetoric was less inflammatory than in the past. An amazing outcome of the 1998 celebration was that former student leaders who had held the fifty-two Americans hostage invited the hostages to return to Iran as their guests. At least two former hostages accepted.
At times members of the European Union conducted trade with Iran during the 1980's and 1990's, but U. S. economic sanctions against Iran hurt the Iranian people and the Iranian economy. In the fall of 1998 the British foreign secretary renewed ties with Iran. Iranian foreign secretary Kamal Kharrazi had announced that Iran would not seek to enforce the fatwa, a death sentence (said to be made by God) that Khomeini had issued against English author Salman Rushdie in 1989.
As Iran began to make more overtures to the West, the United States found it harder to press its position on economic sanctions against Iran. For example, to the displeasure of the Clinton administration, in late 1998 Great Britain and France seemed poised to invest a great deal of money in a pipeline that would carry Iranian oil from the Caspian Sea to the Persian Gulf. The pipeline was opposed by the United States because it would benefit the economy of Iran.
Western investment in Iran could lead to an increase in Western influence in the country, the same social conditions that had originally precipitated the Islamic Revolution. Such a situation could lead to much strife and conflict within Iran itself.