Back in 1997, the United States and its Western allies thought they saw an opportunity for their first meaningful dialogue with Iran since the 1979 revolution. In the newly elected president, Mohammad Khatami, they saw someone whom they could deal with, a man who could bring about change from within the established system.
But the mullahs who ruled in Tehran had a price - the West had to blacklist the People's Mujahedin of Iran (PMOI) by adding it to the list of "terrorist" organizations. It seemed like a small price to pay in the world of realpolitik.
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