This chapter documents the final collapse of detente, focusing in particular on events in the Middle East, where the Iranian Revolution, and then the Soviet invasion of Afghanistan, reshaped the regional order. The chapter argues that the superpowers' differing perceptions of what constituted their legitimate interests led to conflicts in the third world. Linkage, the belief that improved Soviet–American relations would dissuade the Soviets from exporting revolution to the third world, failed as it did not align with the Soviet self-perception as America's equal. The decline of detente is traceable to multiple factors, including the Soviet appetite for maintaining a third world clientele and the twists and turns of US domestic politics. By the time the Soviets invaded Afghanistan, detente was already on the rocks and the Soviet–American relationship continued to worsen. The vision, once entertained by the now-senile Brezhnev, of a world co-managed by the United States and USSR as equals faded, leaving in its wake an uncertain and hostile environment.

Despite promises to the contrary, Jimmy Carter largely continues the same policy toward Iran and the authoritarian Shah as in years past. However, with the outbreak of large protests just weeks after his visit to Tehran at the end of 1977, US policymakers find themselves poorly informed and positioned to react to the changing situation in Iran. The documents in this chapter map the process of Washington’s initial misjudgment of the near future for its ally through the slow realization that the Shah is not going to see out the year, let alone the decade. In his place rises a new force, utterly unfamiliar to the White House, and led by an enigmatic figure, Ayatollah Ruhollah Khomeini, whose fiery rhetoric and anachronistic beliefs leave Carter and his advisors scrambling for a response. After the US agrees to take in the ailing Shah for medical treatment, students acting in Khomeini’s name storm the US Embassy in Tehran and forever alter the world's perception of the nascent Islamic Republic. The chapter ends by documenting the scramble in the White House to free the American hostages and Carter handing over the presidency to Ronald Reagan as the hostages finally return home.