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22 Harvard International Law Journal 525 (1981)


During the 1960s and 1970s, the imperial government of the Shah of Iran encouraged foreign investment in Iranian domestic industries. United States firms, attracted by the incentives that the government offered and the friendly political climate, helped organize, finance, and operate Iranian corporations in several sectors of the economy, including banking, insurance, oil drilling, and pharmaceuticals. This mutually advantageous relationship, however, was disrupted by the turmoil which followed the fall of the Shah in early 1979. The new Islamic government nationalized certain major domestic industries and reversed Iran's previously pro-investment policies. In addition, the seizure in November 1979 of the United States Embassy in Teheran precipitated a prolonged crisis in diplomatic relations between the two states.

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