Under Republican President Richard Nixon, Shultz served successively as secretary of labor (1969–1970), the first director of the Office of Management and Budget (1970–1972), and secretary of the treasury (1972–1974). He resigned in March 1974 to become vice president of the Bechtel Corporation, an international construction company, where he remained until 1982.
In June 1982 Shultz became Republican President Ronald Reagan's second and last secretary of state, replacing the forceful but divisive Alexander M. Haig and adopting a low-key, nonconfrontational style. Even so, Shultz's cautious readiness to negotiate arms control agreements with the Soviet Union brought repeated clashes with the more hawkish secretary of defense, Caspar Weinberger, who favored major increases in weapons systems.
Shultz's tenure in office saw the emergence in 1985 of Mikhail Gorbachev as Soviet general secretary. Gorbachev was a conciliatory leader who became increasingly committed to reducing his country's international military commitments and improving U.S.-Soviet relations. Shultz, initially somewhat skeptical and inclined to discountenance the more optimistic Reagan's readiness in his 1986 Reykjavík meeting with Gorbachev to consider abolishing all nuclear weapons, nonetheless negotiated the 1987 Intermediate-Range Nuclear Forces (INF) Treaty, designed to remove all such weapons from Europe. In 1988 the Soviets also concluded an agreement to withdraw all their forces from Afghanistan, where they had been at war since 1979 with U.S.-backed mujahideen guerrillas.
From the time Shultz took office, initiatives to resolve or at least ease the entrenched disputes dividing between Israel and its Arab opponents after Israel's June 1982 invasion of Lebanon were one of his major preoccupations. Except in Afghanistan, the warming in U.S.-Soviet relations had relatively little impact on the nearly intractable Middle Eastern situation. Shultz drafted the September 1982 Reagan Plan envisaging partial Israeli withdrawal from occupied territory in return for Arab acceptance and respect for Israeli security interests, proposals that the Israeli government strongly rejected. Throughout his years in office, Shultz repeatedly but unsuccessfully tried to broker similar schemes. In December 1988 he prevailed upon Palestine Liberation Organization (PLO) leader Yasir Arafat to renounce the use of terrorism, a stance enabling the United States to open direct talks with the PLO, but Arafat failed to force his more radical followers to respect this stance, and within a year the U.S.-PLO talks broke down.
Shultz was a determined opponent of international terrorism and of governments, including those of Libya and Iran, that sponsored such tactics. After a suicide bomber from the Iranian-sponsored radical Islamic Hezbollah group attacked the barracks of the U.S. Marine Corps peacekeeping force in Beirut, Lebanon, in October 1983, killing 241 American servicemen, Shultz began to press Reagan to respond forcefully to such attacks on Americans. Shultz supported the use of force as well as military and economic sanctions, not just against individual terrorists but also against states that sponsored terrorism. He applauded Reagan's readiness in 1985 to employ military personnel to capture Palestinian hijackers of the American cruise ship Achille Lauro and to mount bombing raids on Libya in April 1986.
Shultz opposed and was therefore deliberately left in ignorance of efforts by National Security Advisor Robert McFarlane and others based in the Reagan White House to sell arms to the fundamentalist Islamic regime in Iran and surreptitiously use the proceeds to fund the activities of anticommunist Contra guerrillas in Nicaragua. The ensuing scandal, which broke in 1986, damaged but did not destroy Reagan's presidency, and his final years in office saw further incremental warming in U.S.-Soviet relations, which came to full fruition under his successor, George H. W. Bush.
Shultz retired at the end of Reagan's presidency and became a senior fellow at the conservative Hoover Institution in Palo Alto, California. In retirement he has written lengthy memoirs.
Fitzgerald, Frances. Way Out There in the Blue: Reagan, Star Wars, and the End of the Cold War. New York: Simon and Schuster, 2000.; Laham, Nicholas. Crossing the Rubicon: Ronald Reagan and US Policy in the Middle East. Aldershot, UK: Ashgate, 2004.; Martin, David C., and John Walcott. Best Laid Plans: The Inside Story of America War against Terrorism. New York: Harper and Row, 1988.; Matlock, Jack F., Jr. Reagan and Gorbachev: How the Cold War Ended. New York: Random House, 2004.; Oberdorfer, Don. From the Cold War to a New Era: The United States and the Soviet Union, 1983–1991. Baltimore: Johns Hopkins University Press, 1998.; Quandt, William B. Peace Process: American Diplomacy and the Arab-Israeli Conflict since 1967. Washington, DC: Brookings Institution and University of California Press, 1993.; Shultz, George P. Turmoil and Triumph: My Years As Secretary of State. New York: Scribner, 1993.; Woodward, Bob. Veil: The Secret Wars of the CIA, 1981–1987. New York: Simon and Schuster, 1987.