The Shah was favored because he was friendly to the west. He started to build the nuclear program and had great plans for building a great and armed nation. We feared that the Iranian oil would get into Soviet hands, that they would just march into Iran and take over the oil wells; and we wanted a western friendly nation. Pakistan and Bhutto had the dream of a nuclear third bloc of muslim nations to counter the west and soviets. It was Pakistan that sent them Dr. Khan? We could never get Pakistan to give up its nukes and we tried hard. They recently came close to a feared nuclear war with India, but they called it off.
Pakistan air strikes against Taliban kill at least 25 (Reuters)
from the article: Israeli row with Iran triggers memories of one-time ally