No American who was alive and alert in the early 1980s will ever forget the Iran hostage crisis. Militants stormed the U.S. embassy in Tehran, captured American diplomats and staff and held 52 of them captive for 444 days. In the United States, the television news program "Nightline" emerged to give nightly updates on the crisis, with anchorman Ted Koppel beginning each report by announcing that it was now "Day 53" or "Day 318" of the crisis. For Americans, still recovering from defeat in Vietnam, the hostage crisis was a searing ordeal. It stunned the nation and undermined Jimmy Carter's presidency. Many Americans see it as the pivotal episode in the history of U.S.-Iranian relations.

Iranians, however, have a very different view.

Bruce Laingen, a career diplomat who was chief of the U.S. embassy staff, was the highest-ranking hostage. One day, after Laingen had spent more than a year as a hostage, one of his captors visited him in his solitary cell. Laingen exploded in rage, shouting at his jailer that this hostage-taking was immoral, illegal and "totally wrong." The jailer waited for him to finish, then replied without sympathy.

"You have nothing to complain about," he told Laingen. "The United States took our whole country hostage in 1953."

Few Americans remembered that Iran had descended into dictatorship after the United States overthrew the most democratic government it had ever known. "Mr. President, do you think it was proper for the United States to restore the shah to the throne in 1953 against the popular will within Iran?" a reporter asked President Carter at a news conference during the hostage crisis. "That's ancient history," Carter replied.

Not for Iranians. "In the popular mind, the hostage crisis was seen as justified by what had happened in 1953," says Vali Nasr, an Iranian-born professor at Tufts University's Fletcher School of Law and Diplomacy in Massachusetts. "People saw it as an act of national assertiveness, of Iran standing up and taking charge of its own destiny. The humiliation of 1953 was exorcised by the taking of American hostages in 1979."

This chasm of perception reflects the enormous gap in the way Americans and Iranians viewed—and continue to view—one another. It will be hard for them to reconcile their differences unless they begin seeing the world through each other's eyes.

Iran's assertiveness on the global stage—especially its defiant pursuit of what it sees as its sovereign right to a nuclear program—is in part the product of traumatic events that have shaped its national consciousness over the course of generations. In fact, all of 20th-century Iranian history can be seen as leading to this confrontation. That history has been dominated by a single burning passion: to destroy the power that foreigners have long held over Iran.

Many countries in the Middle East are modern inventions, carved out of the Ottoman Empire by victorious European powers following the end of World War I. That is not the case with Iran, one of the world's oldest and proudest nations. Half a millennium before the birth of Christ, the great conquerors Cyrus, Darius and Xerxes built the Persian Empire into a far-reaching power. When Europe was descending into the Dark Age, Persian poets were creating works of timeless beauty, and Persian scientists were studying mathematics, medicine and astronomy. Over the centuries, the nation that would become Iran thrived as it assimilated influences from Egypt, Greece and India.

Persian armies were not always victorious. They failed to turn back invading Arabs who conquered Persia in the seventh century, decisively reshaping it by introducing Islam. But the Persians turned even this defeat into a kind of victory by adopting their own form of Islam, Shiism, which allowed them to maintain the distinct identity they have always cherished. Shiite Muslims broke ranks with the majority Sunnis as a result of a succession dispute following the death of the Prophet Muhammad in A.D. 632.

While Sunnis believe that Muhammad's friend and adviser, Abu Bakr, was the legitimate successor, Shiites believe that 'Ali ibn Abi Talib, the Prophet's first cousin and son-in-law, was the rightful heir, and that the Prophet's legitimate lineage ended with the "occultation" of Muhammad al-Mahdi around A.D. 874. This Twelfth Imam is believed to have been hidden by God and is destined to return before the Last Judgment. Shiite religious scholars argued that they should take on some of the Imam's responsibilities in the meantime. (Ayatollah Ruhollah Khomeini further expanded this concept to justify the clerical rule he imposed on Iran after 1979.) Shiite rulers brought Persia to another peak of power in the 16th and 17th centuries, creating a magnificent capital at Isfahan, where spectacular buildings like the Imam Mosque still testify to the empire's grandeur.

From this rich heritage, Iranians have developed a deep-rooted sense of national identity. The pride they take in their achievements, however, is mixed with resentment. Beginning in the 18th century, Persia descended from glorious heights to appalling depths. Weak and corrupt leaders allowed foreign powers to subjugate the nation. Afghan tribesmen overran and looted Isfahan in 1722. During the early 19th century, Russia seized large Persian territories in the Caspian provinces of Georgia, Armenia, Dagestan and Azerbaijan. In 1872, a British company bought a "concession" from the decadent Qajar dynasty that gave it the exclusive right to run Persia's industries, irrigate its farmland, exploit its mineral resources, develop its railway and streetcar lines, establish its national bank and print its currency. The British statesman Lord Curzon would call this "the most complete and extraordinary surrender of the entire industrial resources of a kingdom into foreign hands that has ever been dreamed of, much less accomplished, in history."

Public outrage in Iran led to the withdrawal of the British concession in 1873, but the incident reflected Iran's new status as a vassal state and a pawn in great-power rivalries. For nearly 150 years, Russia and Britain dominated Iran's economy and manipulated its leaders. This history still stings. "Nationalism, the desire for independence, is a fundamental theme," says Shaul Bakhash, who teaches Iranian history at George Mason University in Virginia. "The memory of foreign intervention in Iran runs very deep. It is playing itself out again in today's stand-off with the United States over the nuclear program. Iranians think, ‘Once again the West wants to deny us technology and modernism and independence.' It's a very powerful history. Iran is extraordinarily sensitive to any indication of foreign influence or foreign direction."

A series of uprisings shaped modern Iranian nationalism. The first erupted in 1891, after the British Imperial Tobacco Company took control of Iran's tobacco industry, which reached deep into the national life of a country where many people survived by growing tobacco and many more smoked it. The morally and financially bankrupt Qajar leader, Nasir al-Din Shah, sold the industry to British Imperial for the laughably small sum of £15,000. Under the terms of the deal, Iranian tobacco farmers had to sell their crops at prices set by British Imperial, and every smoker had to buy tobacco from a shop that was part of its retail network. This proved one outrage too many. A national boycott of tobacco, supported by everyone from intellectuals and clerics to Nasir al-Din's own harem women, swept the country. Troops fired upon protesters at a huge demonstration in Tehran. After a series of even larger demonstrations broke out, the concession was canceled. "For a long time Iranians had been watching other people take control of their destiny," says John Woods, a professor of Middle Eastern studies at the University of Chicago. "The tobacco revolt was the moment when they stood up and said they'd had enough."

That revolt crystallized the sense of outrage that had been building in Iran for more than a century. It also laid the groundwork for the Constitutional Revolution of 1906, in which reformers chipped away at the power of the dying Qajar dynasty by establishing a parliament and a national electoral system. Over the century that followed, many Iranian elections were rigged and many constitutional provisions were violated. Nonetheless, democracy is not a new idea for Iranians. They have been struggling toward it for more than 100 years. That makes Iran fertile ground for democratic transition in ways that most nearby countries are not.

"The ingredients are all there," says Barbara Slavin, recently a senior fellow at the United States Institute of Peace and author of Bitter Friends, Bosom Enemies: Iran, the U.S., and the Twisted Path to Confrontation. "Iran has an established history of elections that has put people in the habit of going to the polls. Iranians are used to hearing different opinions expressed in parliament and in the press. They turn out to vote in great numbers, and hold elected officials accountable for their actions."

Although the Constitutional Revolution of 1906 weakened the Qajar dynasty, it did not end it. That was fine with the Russians and British, who continued treating Iran like a colony. In 1907, the two nations signed a treaty dividing Iran between them. The British assumed control over southern provinces, guaranteeing them a land route to India, and Russia took over the north, ensuring it control over the region adjoining its southern border. No Iranian representative attended the conference in St. Petersburg at which this extraordinary treaty was signed.

Moscow's interest in Iran waned as Russia was consumed by civil war and then, in 1917, fell under Bolshevik rule. Britain moved to fill the vacuum. In 1919 it assumed control over Iran's army, treasury, transportation system and communications network through imposition of the Anglo-Persian Agreement, ensuring its approval through the simple expedient of bribing the Iranian negotiators. In a memorandum to his British cabinet colleagues, Lord Curzon defended the agreement, arguing that Britain could not permit the frontiers of its Indian Empire to descend into "a hotbed of misrule, enemy intrigue, financial chaos and political disorder." He garnished Britain's traditional rivalry with Russia with fears of Communist conspiracies: "If Persia were to be alone, there is every reason to fear that she would be overrun by Bolshevik influence from the north."

The Anglo-Persian Agreement, which all but ended Iran's status as an independent state, sparked a second uprising in 1921. The Qajar dynasty was removed from power and replaced by a fiercely reformist dictator—an illiterate former stableboy who came to call himself Reza Shah (shah being the Persian word for "king"). In appearance Reza was an intimidating figure, "six foot three in height, with a sullen manner, huge nose, grizzled hair and a brutal jowl," the British chronicler Vita Sackville-West wrote after attending his coronation in 1926. "He looked, in fact, like what he was, a Cossack trooper; but there was no denying he was a kingly presence."

That aptly captured Reza Shah's dual nature. He resorted to brutal tactics to crush bandits, tribal leaders and everyone else he saw as blocking his drive to re-establish Iran as a great power, but he also deserves credit for creating the modern Iranian state. He built the country's first railway, established a national bank and stripped clerics of much of their power. Shockingly, he banned the veil for women. The decree was so radical that many women refused to leave their homes.

Although many Iranians were appalled by Reza Shah, they admired and supported him because they believed a strong central government was needed to fight back against foreign domination. It was during this period that the modern idea of what it meant to be Iranian began to take shape. "Before the beginning of the 20th century, if you asked a villager where he was from, he would say he was from such-and-such village," says Janet Afary, a professor of history at Purdue University who has written extensively about the Constitutional Revolution. "If you pressed him about his identity, he would say he was a Muslim. National identification, in the sense of everyone in the country calling themselves Iranian, started with the intellectuals of the Constitutional Revolution and was institutionalized under Reza Shah."

The Iranian government developed close economic and political ties with Germany, the European rival to Iran's traditional enemies, Britain and Russia. That relationship prompted the Allies to invade Iran in 1941. They crushed Iran's pitiful army in a campaign that lasted less than a month. This showed Iranians that despite all Reza Shah had accomplished, Iran was still too weak to resist foreign powers. It was yet another national humiliation, and led to Reza Shah's forced abdication in September 1941. His 21-year-old son, Mohammad Reza, took his place.

The winds of nationalism and anti-colonialism that swept across Asia, Africa and Latin America in the years after World War II whipped up a sandstorm in Iran. Since the early 20th century, the immeasurably rich Iranian oil industry had been under the control of a British monopoly, the Anglo-Iranian Oil Company, which was owned principally by the British government. Iranian oil powered the British economy and made possible the high standard of living Britons enjoyed from the 1920s through the 1940s. It also fueled the Royal Navy as it projected British power around the world. Most Iranians, meanwhile, lived in wretched poverty.

Anger over this glaring inequality triggered the next Iranian revolution, a peaceful but deeply transformative one. In 1951, Iran's parliament chose as prime minister one of the most highly educated men in the country, Mohammed Mossadegh, whose degree from the University of Neuchâtel in Switzerland made him the first Iranian ever to earn a doctorate in law from a European university. Mossadegh championed what had become the nation's transcendent goal: nationalization of the oil industry. Even before taking office, he proposed a nationalization law that both houses of parliament passed unanimously. The British, to no one's surprise, refused to accept it. They withdrew their oil technicians, blockaded the port from which oil was exported and asked the United Nations to order Iran to withdraw the plan. Mossadegh's popularity at home skyrocketed; as a British diplomat wrote in a report from Tehran, he had done "something which is always dear to Persian hearts: he flouted the authority of a great power and a great foreign interest."

Mossadegh's daring challenge to Britain also turned him into a world figure. Time magazine chose him as its 1951 Man of the Year. In October he traveled to New York City to plead his case at the United Nations. It was the first time the leader of a poor country had mounted this august stage to challenge a great power so directly.

"My countrymen lack the bare necessities of existence," Mossadegh told the U.N. Security Council. "Their standard of living is probably one of the lowest in the world. Our greatest national resource is oil. This should be the source of work and food for the population of Iran. Its exploitation should properly be our national industry, and the revenue from it should go to improve our conditions of life." Most American newspapers, however, were unsympathetic to Mossadegh's plea on the grounds that he was defying international law and threatening the flow of oil to the free world. The New York Times, for instance, decried Iran as a "defiant scorner" of the United Nations, and further blamed "Iranian nationalism and Islamic fanaticism" for carrying the dispute "beyond the field of legality and common sense."

The epic struggle for control of the oil industry helped transform Iranian nationalism from an abstract idea into a movement. "While Reza Shah crafted the vessel, it was Mossadegh who filled it," says Iranian-British scholar Ali Ansari. "Between 1951 and 1953, Persian nationalism became truly Iranian—inclusive, broad-based and with increasing mass appeal." During this period, many Iranians came to hope the United States would emerge as their friend and protector. Most of the Americans who had come to Iran during the first half of the 20th century were teachers, nurses and missionaries who had left highly positive impressions. That view changed abruptly in the summer of 1953, when the United States took a step that made it an object of deep resentment in Iran.

After trying every conceivable way to pressure Mossadegh to abandon his nationalization plan, Prime Minister Winston Churchill ordered British agents to organize a coup and overthrow him. When Mossadegh learned of the plot, he closed the British Embassy in Tehran and expelled all British diplomats, including the agents who were plotting his overthrow. In desperation, Churchill asked President Harry S. Truman to order the newly formed Central Intelligence Agency to depose Mossadegh. Truman refused. "The CIA was then a new agency, and Truman saw its mission as gathering and collecting intelligence, not undermining or overthrowing foreign governments," says James Goode, a historian at Grand Valley State University in Michigan who was a Peace Corps volunteer in Iran and later taught at the University of Mashhad. "He was almost as frustrated with the British as he was with the Iranians."

After President Dwight D. Eisenhower took office in 1953, however, U.S. policy changed. Secretary of State John Foster Dulles was eager to strike back against growing Communist influence worldwide, and when the British told him that Mossadegh was leading Iran toward Communism—a wild distortion, since Mossadegh despised Marxist ideas—Dulles and Eisenhower agreed to send the CIA into action.

"The intense dislike that Dulles and Eisenhower had toward Mossadegh was visceral and immediate," says Mary Ann Heiss, a historian at Kent State University who specializes in early cold war history. "They were not interested in negotiation at all. For Dulles, coming from a corporate law background, what Mossadegh had done seemed like an attack on private property, and he was bothered by what he saw as the precedent that it might be setting. He was also worried about the possibility that the Soviet Union might gain a foothold in Iran....It was all very emotional and very quick. There was no real attempt to find out who Mossadegh was or what motivated him, to talk to him or even to respond to letters he was sending to Washington."

In August 1953, the CIA sent one of its most intrepid agents, Kermit Roosevelt Jr., grandson of president Theodore Roosevelt, to Tehran with orders to overthrow Mossadegh. Employing tactics that ranged from bribing newspaper editors to organizing riots, Roosevelt immediately set to work. From a command center in the basement of the U.S. Embassy, he managed to create the impression that Iran was collapsing into chaos. On the night of August 19, an angry crowd, led by Roosevelt's Iranian agents—and supported by police and military units whose leaders he had suborned—converged on Mossadegh's home. After a two-hour siege, Mossadegh fled over a back wall. His house was looted and set afire. The handful of American agents who organized the coup were, as Roosevelt later wrote, "full of jubilation, celebration and occasional and totally unpredictable whacks on the back as one or the other was suddenly overcome with enthusiasm." Mossadegh was arrested, tried for high treason, imprisoned for three years, then sentenced to house arrest for life. He died in 1967.

The 1953 coup put an end to democratic rule in Iran. After Mossadegh was deposed, the CIA arranged to bring Mohammad Reza Shah back from Rome, where he had fled during the pre-coup turmoil, and returned him to the Peacock Throne. He ruled with increasing repression, using his brutal secret police, Savak, to torture opposition figures. No independent institutions—political parties, student groups, labor unions or civic organizations—were tolerated during his quarter century in power. The only place dissidents could find shelter was in mosques, which gave the developing opposition movement a religious tinge that would later push Iran toward fundamentalist rule.

Throughout the cold war, relations between Washington and Tehran were exceedingly close, largely because the Shah was, as former Secretary of State Henry Kissinger wrote in his memoir, "that rarest of leaders, an unconditional ally." Iranians, for their part, came to see the United States as the force that propped up a hated dictatorship. "Iranians traditionally believed that the United States was not a colonial power, and older people remembered [President] Woodrow Wilson's anti-colonial views," says Mansour Farhang, who was the revolutionary government's first ambassador to the United Nations and now teaches history at Bennington College. "Even Mossadegh initially had great goodwill toward the United States. But during the 1950s and '60s, largely as a result of the 1953 coup and concessions the Shah made to the Americans, a new generation emerged that saw the United States as imperialist and neo-colonialist. As time went by, this perspective became completely dominant."

Flush with money from oil revenues, the Shah sought to transform Iran into a regional military power. The United States sold him tens of billions of dollars' worth of advanced weaponry, which brought huge profits to U.S. arms manufacturers while securing Iran as a powerful cold war ally on the Soviet Union's southern border. In the long run, though, this policy would have dire repercussions.

"Some of the things the Shah purchased from us were far beyond his needs," notes Henry Precht, an American diplomat who served in Tehran during the 1970s and later became the State Department's desk officer for Iran. "Prestige and his fascination with military hardware played a great part. There was no rational decision-making process. It was the same way on the civilian side. There was tremendous waste and corruption. Shiploads of grain would arrive and there were no trucks to offload them, so they would just heap the grain in mountains and set it afire."

Anger at the U.S. military presence and the Shah's dictatorial rule culminated in a national uprising in 1979. It was Iran's last modern revolution, like previous ones, a rebellion against a regime that was seen to have sold out to a foreign power. Nearly every important group in Iranian society joined the anti-Shah uprising. Muslim clerics were prominent among its leaders, but so were others ranging from pro-Soviet communists to democrats who had supported Mossadegh in the 1950s. In one of the most astonishing political turnarounds of the 20th century, the Shah, who many in Washington and elsewhere had come to see as invulnerable, was overthrown and forced to flee. He left Iran on January 16, 1979, and after stays in Egypt, Morocco, the Bahamas and Mexico, was admitted to the United States for medical treatment on October 22 of that year. Many Iranians saw this as evidence that the Carter administration was plotting to place him back in power. Thirteen days later, militants seized the U.S. Embassy in Tehran. Fundamentalist Shiite clerics used the crisis to crush moderate factions, consolidate control over the new government and transform Iran into a theocratic state under Ayatollah Khomeini, who had returned from exile in Paris on February 1, 1979.

The deepening hostility between Tehran and Washington led to a catastrophe that no one in Iran had anticipated. Saddam Hussein, dictator of neighboring Iraq—which had been a rival of Iran since the two countries were the kingdoms of Persia and Mesopotamia—saw that Iran suddenly lacked a powerful ally and that its military was in disarray. Seizing this chance, he launched an invasion of Iran in September 1980. The ensuing war lasted eight years, devastated the Iranian economy and cost Iran as many as one million casualties, including thousands who were killed or incapacitated by chemical weapons. Iraq saw between 160,000 and 240,000 killed.

The United States, still fuming over the hostage crisis, sided with Iraq, which it saw as a bulwark against Shiite militancy that threatened perceived U.S. interests such as the stability of the Sunni monarchies in oil-producing countries. President Ronald Reagan twice sent a special envoy, Donald Rumsfeld, to Baghdad to discuss ways the United States could help Saddam. In the wake of his visits, Washington provided Iraq with aid, including helicopters and satellite intelligence that was used in selecting bombing targets. "The war had two profound effects," says Fawaz Gerges, a professor of international relations and Muslim politics at Sarah Lawrence College. "First, it deepened and widened anti-American feeling in Iran and made anti-American foreign policy a fundamental raison d'être of the Iranian government. Second, Iraq's use of chemical weapons, and the American role in preventing an investigation [of them] and shielding Saddam from criticism, convinced the [Iranian] mullahs that they needed to pursue a program to develop unconventional weapons of their own."

The hostage crisis, the Iran-Iraq War and the religious regime's intense efforts to undermine U.S. power in the Middle East and elsewhere have turned Iran and the United States into bitter enemies. To many Americans, the blame seems to lie only with a radical, aggressive and almost nihilistic regime in Tehran, which has threatened Israel, opposed U.S. efforts to resolve Middle East conflicts and has been linked to terrorism in cities from Berlin to Buenos Aires.

Iran's current leaders—conservative Supreme Leader Grand Ayatollah Ali Khamenei and the provocative, incendiary president, Mahmoud Ahmadinejad—skillfully exploit the country's nationalist sentiment, citing threats and demands from Washington to justify harsh crackdowns on students, labor unions, women and other dissatisfied groups. Sometimes Ahmadinejad even defends these draconian measures while sitting in front of a photo of majestic Mount Damavand, a traditional nationalist symbol.

"The regime feeds off American hostility," says Robert Tait, who spent nearly three years in Iran as a correspondent for the Guardian until he was forced to leave last December when the government refused to renew his visa. "Every time there's another threat from Washington, that gives them more oxygen. They won't be able to use this threat indefinitely. There's a widespread feeling in Iran that the way things are isn't the way they should be. People believe that too much isolation has not been good for them. But as long as there seems to be a clear and present danger, the government has what it sees as a justification to do whatever it wants."

This justification is especially convenient at a time when growing numbers of Iranians are expressing their unhappiness with the government. Low wages, spiraling inflation, high prices for gasoline, discrimination against women, suffocating social controls, religious-oriented university curricula and the spread of social ills like prostitution and drug abuse have angered much of the population. Some of this dissent hovers just beneath the surface of everyday life—as in Tehran, where a bus has been converted into a mobile discothèque to evade religious authorities. Other forms of dissent are more overt, and even go so far as to co-opt government idioms. Last fall, striking workers at a sugar factory chanted "Our salary is our absolute right!"—a play on the government slogan "Nuclear energy is our absolute right."

The rhetoric of nationalism no longer satisfies Iranians. Their country has finally achieved independence, but now most wish for more: freedom, prosperity and engagement with the outside world. Iran will not be truly stable until its leaders offer them those great prizes.

Former New York Times correspondent Stephen Kinzer wrote All the Shah's Men and, most recently, A Thousand Hills, which documents the rebuilding of Rwanda after the 1994 genocide.