After Secretary Haig resigned in late June 1982, citing a recent shift from the "careful course" of the Administration’s foreign policy, Reagan turned to George P. Shultz, who would serve as Secretary of State for 6-1/2 years—the longest tenure since Dean Rusk in the 1960s. An economist by training, Shultz had held three cabinet-level posts during the Nixon Administration and brought to the job of Secretary of State long experience in government and economic diplomacy. Despite his frequent clashes with Secretary of Defense Casper Weinberger over major issues of foreign policy, Shultz forged an effective partnership with President Reagan by the end of the President's first term. Shultz deferred to Reagan on major foreign policy decisions, while Reagan delegated to Shultz the details of diplomacy.

Secretary Shultz

Shultz relied primarily on the Foreign Service to formulate and implement the Reagan’s foreign policy. However, he believed that the Deputy Secretary of State should be a political appointee, as familiar with senior officials in the White House as with those in the Department. He first selected Kenneth W. Dam, a law professor, to serve as his alter ego; in June 1985, Shultz recruited John C. Whitehead, an investment banker, to fill the post. Many of the principal officers appointed by Haig remained to serve under the new Secretary. Eagleburger, for example, stayed as Under Secretary for Political Affairs until May 1984, when another career appointee, Michael H. Armacost, replaced him. By the summer of 1985, Shultz had personally selected most of the senior officials in the Department, emphasizing professional over political credentials in the process.

In his farewell address to the Department, Shultz commented that the decision to surround himself with Foreign Service officers had been “one of the smartest things I’ve done.” The Foreign Service responded in kind by giving Shultz its “complete support,” making him one of the most popular Secretaries since Dean Acheson.

From 1982 to 1989, Shultz was the driving force behind the Administration’s effort to promote peace between Israel and its neighbors. In response to the escalating violence in the region, Reagan sent a Marine contingent to protect the Palestinian refugee camps and support the Lebanese Government. After a year of sustained diplomatic effort, the October 1983 bombing of the Marine barracks in Beirut killed 241 U.S. servicemen, the most serious foreign policy reversal of Reagan’s first term.

Reagan’s decision to give the National Security Council staff operational responsibility in the Middle East led to the most serious setback of his second term, the Iran-Contra affair, when Administration officials devised a complicated covert plan to raise money for the anti-government “contra” forces in Nicaragua through the sale of missiles to Iran. The resulting controversy allowed the Department of State to resume control of Middle East policy. By December 1987, Shultz had assembled a strong team of professionals when the Intifada, or Palestinian uprising, challenged Israeli authority in the West Bank and Gaza Strip. After six months of shuttle diplomacy, Shultz had established a diplomatic dialogue with the Palestine Liberation Organization in December 1988, laying the groundwork for further negotiations during the next administration.

The United States in Europe

Shultz believed that the Department’s most important task was the conduct of its Soviet and European diplomacy. By the summer of 1982, relations were strained not only between Washington and Moscow but also between Washington and key capitals in Western Europe. In response to the imposition of martial law in Poland the previous December, the Reagan administration had prohibited U.S. companies as well as their European subsidiaries or licensees from involvement in the construction of a natural gas pipeline from Siberia to West Germany. European leaders vigorously protested sanctions that damaged their interests in the pipeline but not U.S. interests in grain sales to the Soviet Union. Shultz finally resolved this “poisonous problem” in December 1982. The Americans agreed to abandon sanctions against the pipeline, and the Europeans agreed to adopt stricter controls on strategic trade with the Soviets.

A more controversial issue was the NATO Ministers’ 1979 “dual track” decision: if the Soviets refused to remove their SS-20 medium range ballistic missiles within four years, then the Allies would deploy a countervailing force of cruise and Pershing II missiles in Western Europe. When negotiations on these intermediate nuclear forces (INF) stalled, 1983 became a year of the protest. Shultz and other Western leaders worked hard to maintain allied unity amidst popular anti-nuclear demonstrations in Europe and United States. In spite of Western protests and Soviet propaganda, the allies began deployment of the missiles as scheduled in November 1983.

As the missiles were installed, Shultz thought the time was right “to resume a dialogue with the Soviets if we could.” But Secretary Schultz was out of sync with the President and his hard-line advisers. In March 1983, the President announced the Strategic Defense Initiative and called the Soviet Union an “evil empire”—without consulting the Secretary of State beforehand.

Gorbachev and Perestroika

The policy struggle in Washington further intensified when a new Soviet leader, Mikhail Gorbachev, emerged in March 1985. In order to restructure the Soviet economy and reform domestic society, Gorbachev needed to reduce military spending at home and political tensions abroad. His goal was a fundamental change in the relationship between the superpowers and his method was arms control agreements. Shultz encouraged Reagan to develop a personal relationship with Gorbachev. Reagan and Gorbachev held four summit meetings between November 1985 and May 1988 in Geneva, Reykjavik, Washington, and Moscow.

Their personal relationship produced its most practical result in December 1987, when the two leaders signed the Intermediate Range Nuclear Forces (INF) Treaty. The treaty, which eliminated an entire class of missiles in Europe, was a milestone in the history of the Cold War. Although Gorbachev took the initiative, Reagan was well prepared to adopt a policy of negotiations. Shultz and the Department of State played a key role in this diplomatic approach.

Funding Diplomacy

The Department of State faced additional challenges in managing its budget and personnel. “Reaganomics”—the effort to cut government expenditures and revenues despite a dramatic increase in defense spending—left little money to improve the state of the nation's diplomatic machinery. During the Reagan Administration, the Department of Commerce was the only cabinet-level agency to receive a smaller portion of the budget than the State Department. From 1981 to 1988, spending for State Department operations and programs decreased as a percentage not only of the federal budget but also of the gross domestic product. The financial situation deteriorated in particular when Congress passed the so-called Gramm-Rudman-Hollings Act in 1985, which mandated spending cuts to reduce the federal budget deficit. Under Gramm-Rudman, the Department endured what one high-level official called “its worst budget crisis in modern times.” Shultz pleaded for budgetary relief every year and some cuts were restored, but the Department’s infrastructure and employee morale were damaged by the forced economies.

Excerpted from the Department of State history archives. Hyperlinks have been added.