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Chronologically, Chapter Two focuses on the 1980s, but the main theme of the chapter is the development of mutual antipathy between Iran and the United States. This development is traced through an examination of their interactions from the 1953 coup to the Iran-Iraq War. The chapter emphasizes how the experiences of the 1953 coup in Iran, the Iranian Revolution and subsequent hostage crisis and the Iran-Iraq War contributed to the development of a profound and widespread mutual hostility between the two countries that would subsequently come to act as a major constraint on policy-makers on both sides. The chapter also examines the origins of the IRI's nuclear programme and its connection to the emerging conflict with the USA.

As long as the Americans remained abducted in the mountains, Batista's forces and planes were down. “One American is worth an anti-aircraft battery,” a rebel lieutenant stated. The Batista administration once again appeared weak and powerless, not to mention helpless. It was again made manifest that the government of Cuba could not protect the foreigners working in their country. Nor could Havana help but allow the U.S. to negotiate with the government's enemies. The crisis drew attention to U.S. armaments deliveries, destroying U.S. claims to neutrality. The hostage crisis also forced Washington to stop delivery of the T-28 airplanes.

Issues of foreign policy were central to presidential politics in 1980. Not only did the Iran hostage crisis and the Soviet invasion of Afghanistan raise disturbing questions about America’s strength in the world, but, crucially, Jimmy Carter identified foreign policy as a way to salvage his political fortunes. The strategy, which reflected the bleakness of his domestic record, managed to score some successes. But these successes were incomplete. Impatience with limits on American power overseas was pushing public opinion toward hawkish skepticism of negotiation, assisting the late 1970s Republican revitalization, and allowing Ronald Reagan to unlock an anti-Carter mandate in which malaise about America’s standing overseas was as significant as the malaise about the domestic situation.

This chapter focuses on the incomplete information that players may have about each other’s preferences, which may induce them to try to seek out additional information, misperceive an opponent’s interests, or try to deceive an adversary. It also considers the circumstances when the possession of information may backfire, creating a “paradox of omniscience.” The discussions cover information revelation in Hamlet; incomplete information in the Magnanimity Game (MG); misperception in the Iran hostage crisis; deception in the Cuban missile crisis; and the paradox of omniscience.

This chapter discusses the violence and unrest ensuing in the weeks following the hostage issue at Fort Prince George. Using violence and siege tactics in place of in effective diplomacy, Cherokee villagers burst into action against the British. The hostage crisis did not create a singular Cherokee nation, however. Cherokees still identified first with their villages or clans, then with their settlement clusters. But the hostage crisis did alter Cherokees' sense of themselves. It galvanized villages throughout the Cherokee settlements. And it pushed them toward unified stands not just on retributive justice but on other matters as well. Henceforth, they tolerated neither betrayal nor imperial arrogance.

This chapter begins by detailing Ambassador vanden Heuvel's role as co-chair of Jimmy Carter's New York state presidential campaign. An early supporter of Carter, vanden Heuvel helped in Carter's transformation from a little-known Georgia governor to the Democratic nominee. After Carter's election, he was appointed Ambassador to the United Nations in Geneva. He became Deputy Permanent Representative to the UN in New York in late 1979. His tenure in New York coincided with the Iranian hostage crisis, the Soviet invasion of Afghanistan and increasing tensions in the Middle East. He discusses the marginalisation of the UN in the approach to the 2003 Iraq War, as well as his work with Senator Ted Kennedy and President Bill Clinton on UN issues. The accompanying speech argues for the importance of the UN in the international order and America's responsibility to support it, despite hostility from Congress and neo-conservatives.

Having overthrown the pro-Washington Shah, Khomeini set out to purge the Iranian state and society of American influence. He was aided by the surprise occupation of the United States Embassy in Tehran in November 1979 by militant students. The capture of secret CIA reports on the Middle East by the Iranian occupiers gave credibility to the regime’s description of the Embassy as a “nest of spies,” and created a rationale for taking 52 US diplomats as hostage. The crisis lasted 444 days and ended with Ronald Reagan’s inauguration as president in January 1981 after his defeat of the incumbent Jimmy Carter, a Democrat. Quite independently, Saudi King Khalid faced an unprecedented challenge to the legitimacy of the House of Saud when on the eve of .the Islamic New Year of 1400 – 20 November 1979 – hundreds of armed militant Wahhabis, led by Juheiman al Utaiba seized the Grand Mosque in Mecca. Utaiba called for the overthrow of the royal family for deviating from Wahhabism. Aided by the American and French intelligence agencies and Pakistani soldiers, the government regained control of the Grand Mosque. It then took remedial action by imposing strict Wahhabi rules on the social-cultural life of citizens.