Ronald Reagan, Carter's successor, took a hard-line stance toward the Soviet Union, characterizing the USSR as "the focus of evil in the modern world." He believed in negotiating with the Soviets, but only from a position of overwhelming strength. Reagan's view that self-determination was being constantly threatened by what he saw as the revolutionary hand of the Soviet Union seemed to be clearly demonstrated in Poland. Challenged by a popular trade union movement called Solidarity, the government of Poland imposed martial law. Relations with the Soviet Union nosedived, with Reagan imposing economic sanctions on Poland and the Soviet Union alike.
In the backyard of the United States, Central America rumbled menacingly. A leftist revolution deposed the longtime dictator of Nicaragua in 1979. President Carter tried to ignore the anti-American rhetoric of the revolutionaries, known as the Sandinistas, and to establish good diplomatic relations with them, but Reagan took their words at face value and hurled back at them some hot language of his own. He accused the Sandinistas of turning their country into a forward base for Soviet and Cuban penetration of all of Central America, and more specifically of shipping weapons to revolutionary forces in tiny El Salvador. Reagan sent military "advisers" to prop up El Salvador's pro-American government. He also provided covert aid to the contra rebels opposing the Sandinista government. In the Caribbean, Reagan—convinced that a military coup in Grenada had brought Marxists to power—dispatched a heavy invasion force to that tiny island in October 1983.
In his second term, Reagan found himself contending for the world's attention with the charismatic new Soviet leader, Mikhail Gorbachev, installed in March 1985. Gorbachev was committed to allowing greater political liberty and the "restructuring" of the moribund Soviet economy by adopting many of the free-market practices of the capitalist West. Both these policies required great reductions in the size of the Soviet military that, in turn, necessitated an end to the Cold War. Gorbachev accordingly made warm overtures to the West. He sought without success the complete elimination of intermediate-range nuclear forces in Europe when he met Reagan at summit meetings in Geneva in November 1985 and Reykjavik, Iceland, in October 1986. However, it was at a third summit, in Washington, D.C., in December 1987, that they agreed on such a ban. Reagan, the consummate cold warrior, had been flexible and savvy enough to seize a historic opportunity to join with the Soviet chief to bring the Cold War to a kind of conclusion. History would give both leaders high marks for this.
The two most difficult foreign policy problems for Reagan were the continued captivity of a number of American hostages seized by Muslim extremist groups in civil war–torn Lebanon, and the continuing grip on power of the left-wing Sandinista government in Nicaragua. When Congress repeatedly rejected the president's request for aid to the contras, the administration grew increasingly frustrated, even obsessed, in its search for a way to help them. In 1985 American diplomats secretly arranged arms sales to the embattled Iranians in return for Iranian aid in obtaining the release of American hostages held by Middle Eastern terrorists. At least one hostage was eventually set free. Meanwhile, money from the payment for the arms was diverted to the contras. These actions brazenly violated a congressional ban on military aid to the Nicaraguan rebels, not to mention Reagan's repeated vow that he would never negotiate with terrorists.
In November 1986 news of these secret dealings broke and ignited a firestorm of controversy. President Reagan claimed that he was innocent of wrongdoing and ignorant about the activities of his subordinates, but a congressional committee condemned the "secrecy, deception, and disdain for the law" displayed by administration officials and concluded that if the president did not know what his national security advisers were doing he should have. The Iran-Contra affair cast a dark shadow over Reagan's record in foreign policy.