In the Cold War, Gorbachev was our best ally -- because he utterly failed to prevent his country from disintegrating.
In our war against Terrorism, Saddam was our best ally -- because ...
"In our war against Terrorism, Saddam was our best ally -- because ..."
Saddam's Iraq was never formally allied with the US, but during the 1980's Iran-Iraq war, the Reagan admininstration invested significant efforts in helping Iraq fend off complete defeat at the hands of the Iranians, and vice versa. This is well documented and indisputable. It is also well documented that the US sought to funnel help to the Iranian government when Iraq seemed to be prevailing (e.g., the contacts which led to the Iran-Contra kerfluffle).
In short, there was no particular affection for either of these governments (indeed, Henry Kissinger reportedly expressed this as "Too bad they can't both lose!"), but a strategy of letting them grind each of their respective countries down, whatever the cost to the inhabitants of those countries.
Now, if you were either an Iranian or an Iraqi, it seems quite reasonable that you might not be all that pleased with how the US engaged in such a "divide and rule" strategy. This is a good thing to keep in mind as we observe current events. Neither the Iraqis nor the Iranians have forgotten this history. It would be best that we not forget it either (or persist in a state of invincible ignorance about it).
The following are not the best of sources (indeed, if others can find some sources with more conservative ties, I would appreciate seeing them here), but are an OK place to start gathering references to this period of US "power diplomacy" in the Middle East.
http://www.zmag.org/zmag/articles/ShalomIranIraq.html
http://www.zmag.org/content/showarticle.cfm?SectionID=40&ItemID=2292
http://www.globalsecurity.org/military/library/report/1985/SRE.htm
http://coat.ncf.ca/our_magazine/links/issue51/articles/51_30-31.pdf
http://www.amazon.com/gp/product/0415904072/102-2137063-1808902?v=glance&n=283155&v=glance
In the late 1990's, there were assessments of the US policy towards Iran and Iraq such as:
http://www.washingtoninstitute.org/templateC05.php?CID=1169
http://www.ndu.edu/inss/Strategic%20Assessments/sa97/sa97ch7.html
And now, the Great Game continues, with increasing focus on Iran and Syria:
http://www.payvand.com/news/03/sep/1030.html
http://www.aei.org/publications/pubID.20947/pub_detail.asp
http://www.israpundit.com/archives/2005/10/syria_iran_and.php