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President Carter announced the disastrous mission in a broadcast to the nation earlier today.
"I ordered this rescue mission prepared in order to safeguard American lives and protect America's national interests, and to reduce the tensions in the world that have been caused among many nations as this crisis has continued," he said.
He took full personal responsibility for the operation, and its cancellation, but did not rule out another attempt.
It was the first the American public, or the wider world, had heard of the mission, although it had been planned since shortly after the US embassy in Iran was seized last November by Islamic militants. They have held 53 US citizens hostage there ever since.
The dramatic attempt to free the hostages began yesterday when six Hercules C130 transport planes set off to rendezvous with a group of nine helicopters at a remote desert airstrip, south-east of Tehran.
But the mission ran into trouble almost as soon as it had started.
From farce to tragedy
Two helicopters went down with engine trouble, and a third was diverted to help.
Then another helicopter was damaged as it landed on the airstrip, leaving only five workable helicopters. The mission had become impossible.
President Carter ordered the operation to abort. It was then that the farce became a tragedy.
As the aircraft took off again, another helicopter crashed into one of the C130 aircraft and burst into flames. Eight soldiers died, and another four men suffered burns.
'An act of war'
In Tehran there were jubilant scenes as thousands of people celebrated the failure of the mission.
The Foreign Minister, Sadeq Qotbzadeh, condemned the rescue effort as "an act of war".
In Europe, there was shock and surprise that the mission had taken place without advance consultation of America's allies.
EEC governments have recently agreed to threaten sanctions against Iran in the hope of preventing the use of force.
The hostage crisis marked the lowest point in the Carter presidency. It was 444 days before intense diplomatic activity secured the release of the remaining 52 hostages.
The hostage crisis ended in January 1981, on the same day as Ronald Reagan was inaugurated as president.
The United States broke diplomatic relations with Iran in July 1980 over the hostage crisis.
There was a slight thawing of the frostiness between the two countries under the reformist regime which came to power in 1989.
But in 1995 the US imposed sanctions, accusing Iran of sponsoring terrorism. In early 2002, President Bush described the country as one of a global "axis of evil".
The remark caused outrage in Iran, and the Supreme Leader, the Ayatollah Khameini, said any move towards rapprochement with the United States would be "treason and stupidity".
Following the election of the hardliner Mahmoud Ahmadinejad in June 2005, Iran announced it had resumed its nuclear programme.
In April 2006 it said it had succeeded in enriching uranium. The UN Security Council has ordered it to stop.
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