The situation you describe was one of the low points of the Reagan administration. The decision to let Kuwaiti tankers operate as U.S.-flagged vessels in 1987 and 1988 was made to circumvent U.S. law — which forbids the use of military assets to protect foreign civilian ships.
If I was a member of Congress at the time I would have introduced articles of impeachment against Reagan over that. And if I was a Senator I would have voted to throw his ass out of office.