Jimmy Carter had promised during his campaigning to reduce the defense budget and arms sales overseas, however both continued to increase heavily. Nonetheless Carter's presidency was generally conciliatory in foreign affairs. In the year of 1977 the United States and Panama agreed on two new treaties to overlook those of the 1903 treaties about control of the Panama Canal. These treaties recognized Panamas control over the Canal Zone, and control of the Panama Canal itself. However beginning in 2000; they left the United States the right to defend the Panama Canal's neutrality.
Carter was a very able negotiator; in 1978 he met at the presidential retreat in Camp David, Maryland with the Israeli prime minister and the Egyptian president to discuss the framework for peace between Egypt and Israel. This framework, which was agreed on by all three leaders, led to a peace treaty between the two nations and was signed in Washington D.C. in 1979. Carter also signed the second Strategic Arms Limitation Treaty with the USSR. This set specific limits on the amounts and types of strategic arms each nation could maintain.
The Islamic revolution, which took place in Iran, created the first major foreign policy problem for Carter. In 1979 angry militant Iranians who greatly opposed all western influences, especially the United States, assaulted the U.S. embassy in Tehran, which is the capital of Iran, taking 66 Americans hostage. Thirteen of the American hostages were released soon after, however for the release of the remaining hostages, Iran demanded a U.S. apology for the acts committed in support of Iran's previous leader, his returning to the country to face trial, and the return of billions of dollars that he was said to have stashed. Negotiations between Iran and the United States did not succeed in releasing the hostages. The U.S. launched a commando raid on Tehran a few months later; this also was not successful.