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The movie opens with a narration describing the plight of French refugees during World War II. Once the Germans invaded France, most French citizens and resident foreigners tried to flee to America through Lisbon. The quickest route was to go directly to Lisbon, but once that route was blocked by the Nazis, the only escape route left was through North Africa, specifically Casablanca. Because of the high cost of travelling, however, many refugees were trapped in Casablanca, desperately trying to find a way to Lisbon, and then from Lisbon, to America.
As the actual story opens, it is revealed that two Nazi couriers have been murdered for their travel permits - permits that could easily gain a person a ticket out of Casablanca. Soon, a shady character (Peter Lorre) enter's Rick's American Café and talks with owner Rick (Humphrey Bogart) about a couple of travel permits that he has just acquired. He gives the two permits to Rick for safekeeping. Rick hides them in the piano of his piano-player, Sam.
The Casablanca chief of police, Loius Renault (Claude Rains), soon pays Rick a visit. He is a corrupt French official who has known Rick for some time, and he informs Rick that a Nazi commander will be coming by Rick's café later that day to confront French sympathizer Victor Lazlo, who has escaped from a German concentration camp. The Nazis can't do anything against Lazlo legally, as Casablanca is still considered unoccupied French soil, but they at least want to stop Lazlo from getting to America, and it is suspected that the Nazi couriers were murdered for their travel permits in order for the underground resistance to help Victor Lazlo and his wife get out of Casablanca. Rick denies knowing anything about the permits. The Nazis arrive soon afterwards, and the shady character who gave Rick the permits is arrested. Rick is introduced to the Nazi commander but continues to keep his cool about the permits. He is determined to remain neutral about the whole Lazlo affair.
While Rick is back in his office, Victor Lazlo and his wife, Ilsa Lund (Ingrid Bergman) arrive. As they are seated, Sam, the piano-player, recognizes her, and she recognizes him, too. He is very nervous about her being there. Once they are seated, Ilsa asks that Sam come over, and she requests that he play, "As Time Goes By". Sam reluctantly agrees, and Rick soon storms down from his office because he'd told Sam never to play that song. As he's chewing out Sam, he sees Ilsa and is stricken with memories. He, she, and Victor exchange some polite conversation, then Rick goes back to his office.
Later that evening, Sam enters Rick's office to find Rick getting drunk. Rick demands that Sam play "As Time Goes By" for him, and as Sam plays, Rick flashes back to years ago in France, just when the Germans were about to invade, when he and Ilsa were madly in love. They were supposed to leave France together for Casablanca, but Ilsa left him waiting at the station with a note, not explaining herself but swearing to him that she really did love him. Rick travelled on to Casablanca alone, heartbroken, thinking he'd never see her again.
When Rick is done reminiscing, Ilsa suddenly appears, wanting to talk with him, but Rick can't hold back the hurt he still feels because of what she did to him in Paris years ago, leaving him like that. A few harsh words drive her away, and Rick is left miserably alone.
The next day, Victor Lazlo is subtly threatened by the Nazi commander: he can either give up the names of the underground resistance leaders, or he can have an unfortunate "accident". Victor and Ilsa desperately need to get out of Casablanca, but to do that, they need the permits that, according to rumor, Rick has. Victor asks Rick for the permits, but Rick denies his request on account of the harsh feelings he still holds toward Ilsa, so Ilsa returns to Rick's office and begs him, even threatens him at gunpoint, for the permits, but Rick won't budge. Ilsa can't shoot him. Instead, she confesses that she still loves him. They reconcile, and she explains to him how she was married to Victor before Rick and she had met in Paris, but she thought he'd been killed by the Nazis. Then, right before Rick and she were to leave for Casablanca, she learned that Victor was still alive, and she had to go find him. Now, however, all she wants to do is stay with Rick and let her husband go on to America without her, but because she's so confused about her feelings, she begs Rick to do the thinking for her, and he agrees.
Rick begins planning what appears to be Ilsa and his escape from Casablanca. He sells his bar to a local competitor, then goes to see police chief Renault and works up the following plan: Victor and Ilsa will come to Rick's bar for the papers, and Renault can arrest Victor, leaving Rick and Ilsa free to use the travel permits to leave Casablanca. When the plan is put in action, however, Rick double-crosses Renault and uses Renault to guarantee Victor and Ilsa's safe passage to the plane which will take them to Lisbon. Ilsa thinks at first that she's staying behind with Rick, but Rick convinces her that the right thing to do is for her to go to Lisbon with Victor and continue to support his work. Besides, Rick has plans of his own now to carry on the fight against the Nazis in his own way, as a mercenary. Ilsa and Rick are both saddened that they can't be together, but they know they will always love each other, and so Ilsa leaves with Victor.
Right as the plane is about to leave, the Nazi commander, having been warned discreetly by Renault about Victor Lazlo's departure, arrives at the airfield and dashes to a nearby phone to call for a stop to Lazlo's plane. Rick shoots the Nazi commander, but when Renault's police officers arrive, Renault protects Rick by directing his officers to "round up the usual suspects". It seems Renault has himself had a change of heart about the Nazis, and he and Rick plan to leave Casablanca together (under Renault's authority) so that they can join the fight against the Nazis somewhere else.
In the final scene, Rick and Renault walk off together into the dense fog covering the airfield.
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