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Following the experience of the surprise attack on Pearl Harbor, the U.S. Congress established the Central Intelligence Agency (CIA) in 1947. The CIA's role, as originally envisioned, was information gathering, intelligence analysis, and forecasting. The Cold War and the falling of the Iron Curtain over Eastern Europe following World War II soon provided the justification for the development and use of new capabilities by the CIA—covert action, paramilitary operations, and espionage/counterespionage operations—and provided the CIA with a larger, more encompassing mission of protecting the national security of the United States. Two major functions became the backbone divisions of the CIA: the Directorate of Intelligence (intelligence analysis) and the Directorate of Plans, later and currently called the Directorate of Operations (recruiting of foreign assets or agents, covert actions such as propaganda and political intrigue, and small-to large-scale paramilitary operations). In very short order, the Directorate of Operations eclipsed the Directorate of Intelligence and became the more preeminent and prestigious directorate.

Following the creation of the CIA, U.S. administrations were, to varying degrees, enamored of the CIA's covert action and paramilitary capabilities to further American government policy goals with secrecy or at least deniability. In the years after World War II, the currents of nationalism and anti-colonialism surged all across the world, especially in the former colonies. The rise of nationalism and anti-imperialism made it more difficult for the United States to justify the raw use of military force to achieve its policy goals.

During President Eisenhower's administration, the CIA worked covertly in the 1950s to overthrow two democratically elected governments (Iraq in 1953 and Guatemala in 1954) and thwart another election where the anticipated outcome was not acceptable to U.S. interests (Vietnam in 1954). President Kennedy inherited an ill-advised plan from Eisenhower for a secret army and attempted an invasion and coup in Cuba in 1961 at the Bay of Pigs. U.S. frustration with Vietnamese President Diem and his decreasing popularity and support caused Kennedy to support a CIA-assisted military coup against Diem on November 1–2, 1963. In 1970, President Nixon directly instructed the CIA to intervene in Chile to remove the democratically elected president, Salvador Allende.

In Iran, Prime Minister Mohammad Mossadegh, a passionate nationalist and democrat, came to power in 1951 and tried to secure greater government control of Iran's oil resources. Mossadegh was determined to renegotiate, expel, or nationalize the Anglo-Iranian oil company (later called British Petroleum), which paid Iran only 16% of what it earned in selling Iranian oil, and use the money generated to develop Iran. In Iran, nationalism meant taking control of the country's oil resources. Democracy meant vesting political power in the elected parliament and prime minister rather than in the monarch, Mohammed Reza Shah. In the spring of 1951, both houses of the Iranian parliament voted unanimously to nationalize the oil industry. Iran suggested to the British government that a 50/50 earning split, as American oil companies were negotiating in neighboring countries, would be acceptable. The British rejected this offer out of hand.

British oil interests and the British government began to undermine Mossadegh and finally decided that a coup to return the former monarch, Mohammed Reza Shah, to the Peacock Throne was the best course of action. Mossadegh caught wind of the British plot and, on October 16, 1952, ordered the British Embassy closed and all embassy employees to leave Iran. This action crippled the British intelligence services in Iran and effectively put a halt to British covert operations in Iran. British officials then asked the American government for assistance in overthrowing Mossadegh. The British understood that the easiest way to ensure America's help was to characterize Mossadegh and his government as sympathetic to socialism and communism. In a CIA-orchestrated coup in 1953 (Operation TPAJAX), Mossadegh's government was overthrown and replaced by the restoration of the royal monarchy under Mohammad Reza Shah Pahlavi. American investors then acquired a major slice of Iranian oil production. The Shah ruled Iran in an increasingly authoritarian and repressive manner. The role of the United States and its long association with the Shah's secular and repressive rule led to a wave of anti-Americanism and ultimately to the Islamic Revolution in Iran and to the rise to power of the Ayatollah Khomeini.

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