You’ve got a few problems in your outlook that lead to such confusion. First, you have the benefit of hindsight nearly 40 years later. Second, you’re framing the Soviet and American support for Iraq in a Cold War-centric viewpoint, which while reasonable, is going to lead you to incorrect conclusions. The proper framing device should be on two things that Russia has always valued most: economic security and predictability of states they interact with.

Let’s back up a bit and look a few pieces that fit together in 1980 in a way that made sense at the time.

#Ba’athist Iraq

If you’re looking at anything in Middle East history, you need to understand tribes. If you are looking at anything in the Middle East from 1968-2003, you need to really understand Saddam Hussein. There are certain people in world history whose personalities override everything else that could have made sense. Napoleon, Hitler, and Stalin are common examples, but Saddam may be the worst offender of them all. Saddam Hussein was an ultra-megalomaniac and his time in power only made him worse. Let’s discuss where he came from.

In 1958, General Abd al-Karim Qasim led a coup that established the Republic of Iraq (al-Humhuriyah al-Iraqiyah). This was the result of many things, but one of those key factors was a growing Pan-Arab Nationalism; something that is rather foreign to the mindset of many Arabs. Arab culture is extremely tribe-centered, so the idea of nations over those tribes is a pretty sharp change. The Ba’ath are one such Arab Nationalist Party. The Ba’ath started making themselves known during this Republican period. Qasim, however, was an Iraqi nationalist, not an Arab nationalist. Qasim strengthened his political position through an alliance with the Iraqi Communist Party. In 1959, Arab nationalists attempted an uprising in Mosul that failed. As reprisal, the Communist Party in Iraq orchestrated the murder of several hundred Iraqi Nationalists. That same year, Saddam took part in an attempted assassination of Qasim, but fled to Syria when it failed. In 1963, Qasim’s government was overthrow by the Ba’ath Party and Arab Nationalists in the Iraqi Army. The Ba’ath began a purge of Communists in Iraq, killing thousands. In 1966, the Ba’ath Party split into Syrian and Iraqi factions. Truncating the story as much as possible over this period, in 1968 the Iraqi Ba’ath Party took control of the Republic of Iraq.

#Saddam Hussein

Saddam was not the first ruler of Ba’athist Iraq; that was Hassan al-Bakr. Saddam spent the late 60s and 1970s climbing the ranks of the Ba’ath Party. In 1972 he orchestrated the seizing of control of the country’s oil sector and the following year’s energy crisis catapulted him to success. That same year, he established a 15 year “Treaty of Friendship” with the Soviet Union. Saddam put his hands in more pots and was given credit for completely revolutionizing the Iraqi economy. With the popular falls of Nasser, Anwar Sadat and the resulting diminished reputation of Egypt, Saddam had become a leading Arab personality and Iraq the marvel of the Arab world. By 1976, he was also officially the leading executor of the will of the Iraqi government. As al-Bakr aged, Saddam took over the leading role.

Al-Bakr was close to reuniting the Ba’ath Party, which also ruled Syria by now under Hafez al-Assad. This deal of reunification would unite the two countries and put Hafez into Saddam’s position; Saddam would be ousted. Naturally, Saddam being who he was, instead threatened al-Bakr into retirement and halted all possibility of unification. In July 1979, Saddam became the sole ruler of Iraq.

#Iranian Revolution

In 1952, Mohammad Mosaddegh was elected Prime Minister of Iran on the platform of strengthening the rule of the Shah and limiting control of foreign corporations over Iranian oil. With how important oil was becoming to the global economy at this point, this was naturally unacceptable to Britain. The United Kingdom’s MI6 and United States’ CIA orchestrated an operation (Operation Ajax & Operation Boot) to overthrow Mosaddegh, leading to the 1953 Iranian Coup. This did result in strengthening of the Shah, but also reduced the power of the Prime Minister, established an anti-Communist regime in Iran, and really set an anti-Western tone in Iran.

The Shah kept Iran very secular and became quite autocratic. Iranian secret police were used to crush opposition. Despite the constant flow of money into Iran, Iran’s economy suffered. By 1978, protests against the Shah were happening in the open and in 1979 the Islamic Revolution put Ruhollah Khomeini into power. The Islamists purged the Tudeh Party, a Communist party in Iran.

Other than the minor recession, this revolution lacked all known signs of potential revolution. It was fast, sudden, and thorough. It specifically disregarded any alliance of American or Soviet power. And it resulted in a Superpower’s citizens being held hostage for a long period of time. This terrified the world; this was not a good sign for any non-Islamic state, no matter which side of the Cold War they were on, and the implications for the economy of oil were grim.

#The First Persian Gulf War

Saddam had just risen to complete power, was head of the Arab world, and his neighbor had just defied a Superpower. This one-upsmanship was unacceptable to Saddam, personally. Politically, the Islamic revolutionaries had called for the overthrow of Monarchies and establishment of Islamic republics. This threatened the other Arab states, as Kuwait, Saudi Arabia, Bahrain, Qatar, the Emirates, and Oman were all Monarchies. It threatened Iraq and Syria as secular republics (though neither were true republics, either).

Given all of this, and a perception of revolutionary chaos, Saddam invaded Iran. If successful, he could smackdown the Islamic revolutionary movement, assert control over the Shia, protect the other Arab states, and make himself once again the center of the Arab world.

#Conclusion

The reasons why the Soviet Union did support Iraq ought to have been made clear by this point; the Iranian Revolution was bad news for everyone and they actually had an alliance with Saddam. The concurrent Soviet-Afghan War (which I wrote quite a bit about here) created more animosity between the Soviets and Islamists, as Islamists were their opponent in Afghanistan. The Soviets did not necessarily ask or hope for the war, but since it was happening they could capitalize on it; thereby weakening Iran, strengthening their ally in the region, and generating income for their weapons industry.

The reasons why America supported Iraq should also be relatively clear, but I’ll recap to be sure.

1). The Islamists in Iran had overthrown their allied Shah.

2). The Islamists in Iran were holding 52 Americans hostage from 1979-1981.

3). Iraq was the proxy ally of the Arab states, most of which were American allies.

4). The threat to the economy of oil was dramatic and the priority above all else for the Americans and Soviets was to keep the oil flowing.

#References

I don’t have time to fill this in at the moment. If you’d like, I can come back to this in the afternoon and fill in my usual references block.