I've also today met with the Palestinian negotiators and I'm going to meet a little bit later with the Israeli negotiators just to hopefully help them get off to a good start, but the action now goes back to Jerusalem where they must negotiate.

QUESTION: You've also made an announcement about appointing General Jones. Explain what his role is going to be.

SECRETARY RICE: Well, the long pole in the tent for all of this will be to make certain that the establishment of a Palestinian state can really help the security environment for Palestinians, for Israelis, and for the region because the creation of a Palestinian state is a new factor in the Middle East. It will need its own security forces, but it will also need security arrangements that will have to, in part, be negotiated.

General Jones is the perfect person to look at this new circumstance of the creation of a Palestinian state and to say, how can Palestinians, Israelis, and the region cooperate now to make certain that the creation of this state enhances security rather than detracts from it. And I'm thrilled that he's agreed to do it. He is -- we're, of course, going to share him in his job with the Chamber of Commerce, but he is going to be able to bring to bear his experience as the former Marine Commandant, as the former Supreme Allied Commander of Europe. So it's a great, great appointment for us.

QUESTION: It is part of the issue. I mean, in order to move forward in a region where trust has been such an issue, feeling secure on both sides is important.

SECRETARY RICE: It's extremely important and it's important to citizens of the Palestinian territories, soon to be a Palestinian state, we hope; that they believe that they have the proper security forces to be able to provide security for the Palestinian people. We often talk about security for the region, but we have to start first with security for the Palestinian people and then, of course, Israelis who will be withdrawing from the West Bank when this agreement is done, have to be certain that they are not compromising their security. After all, their withdrawal from Lebanon, their withdrawal from Gaza, caused security problems for Israel and that's a memory that Israeli citizens have and that Israeli leaders must respond to. And so they will want to make certain that the creation of this Palestinian state will enhance the security of Israel.

QUESTION: And besides providing General Jones, will we also be providing military observers on the ground?

SECRETARY RICE: Oh, well, we're nowhere near any such decisions and I don't really think that American boots on the ground are going to make sense in this conflict. There may be international -- a role that international forces can play. There may be a role that international experts can play in the way that they are right now at various crossings, helping with customs, helping with border control. There are going to be very many things that the international community can do and of course, that's a part of providing for security.

QUESTION: So last night when you called the President, and I'm sure you did, what did you tell him and what did he say about the success, the progress of Annapolis?

SECRETARY RICE: Well, he's been very pleased and of course he's been a big part of making this happen. He was on the telephone with me this weekend. We were at Camp David together over the Thanksgiving weekend. He had to make a few phone calls himself to help us get all of this done and he was able to really kick this off in a good way. And everybody feels good about what happened at Annapolis, but everybody also knows that it's only a first step, that now the really hard work of negotiating a peace between Israelis and Palestinians needs to be done.

QUESTION: So you consider Annapolis a success as far as it went, defining success in what way?

SECRETARY RICE: Well, the key here over the last several months has been to restart talks between Palestinians and Israelis about the core issues between them, all of the great historic issues that have prevented the emergence of a two-state solution. I remember being with the -- with Prime Minister Olmert and President Abbas back in February and it was not too long after a Palestinian unity government had come into being, it raised questions about the relationship between Hamas and the Palestinian Authority.

And I held this trilateral at the David Citadel Hotel in Jerusalem; I can tell you it wasn't a very happy trilateral. And in fact, they were talking more about what they wouldn't talk about than what they would. So it's been a process of bringing the parties together to the point that yesterday, they were able to launch negotiations on the creation of a Palestinian state.

QUESTION: So we understand that that statement, which President Bush then read, is really a statement of intention, that by --

SECRETARY RICE: Yes.

QUESTION: -- 2008, there would be a Palestinian state; that even late in the morning yesterday before his 11 o'clock speech, there wasn't an agreed-upon statement. Is that true? And did he send you and the other two out of the room and said, I want a statement?

SECRETARY RICE: Well, there was a reason the President was reading it with his reading glasses. (Laughter.) That's right, it came about in the very last minutes, really, of their meeting together with the President.

And when people are about to do something hard, every word starts to mean something, even words that I would look at and I would say, "Well, that really doesn't matter." Well, it mattered. And they wanted to make sure that they were going to be exact in what they said about what they were committing to do, how they were committing to do it, what they were asking the United States to do. And yes, it took some work, but we felt very strongly that they needed to be able to say this jointly.

I mean, one of the options was that we would say it for them. Well, that wouldn't have been a good way to start a negotiation. And so this joint statement was important, but of course, it sometimes seems with everything in the Middle East, it always comes down to the wire.

QUESTION: Let's talk specifically about some of the issues that have dogged a peace in the region. First, on borders; is it the U.S. position that pre-1967 borders exempting Israel from -- Jerusalem from that, that pre-1967 borders are appropriate?

SECRETARY RICE: Well, our view has been that you're going to have to end the occupation that began in 1967 and that's going to require a negotiation on mutually-agreed borders and those mutually-agreed borders, of course, will have a security component; states have to be secure. It also has to create a contiguous and viable Palestinian state that is able to provide for its people. And so that's been our position on borders. But we want the parties to negotiate borders.

QUESTION: In terms of Jerusalem itself, the U.S. position?

SECRETARY RICE: Well, the most difficult issue and frankly, right now, the less said, the better, because this is going to be very hard for the parties. As you know, there is a lot at stake here. There is a lot that is not just territory and reality, but a lot that goes to the very core of these religions. But it's important that Jerusalem, of course, is a city where all are able to feel that they can get to their sites and the like. But this is one that, the less said, the better; let's let the parties deal with these very difficult issues.

QUESTION: But realistically, without trying to divide up monuments, the Palestinians are going to have to have a part of Jerusalem.

SECRETARY RICE: The parties will have to look at the whole range of issues and the issues are interconnected. And I think that once they have had a chance to look at what will give the Palestinians a state that can provide for its people, but where it does not compromise the security of Israel, once they've been able to look at that question, we'll see how all of these pieces fit together.

QUESTION: In terms of the right of return, which is -- Saudi Arabia said it would not come to this meeting, I understand, unless the right of return was on the table. The U.S. position has been, as I understand it, the right of return would be the right to return to the newly created Palestinian state and not to what will be the state of Israel. Is that the U.S. position at this point?

SECRETARY RICE: Well, the President has been very clear that this is also an issue that will need to be negotiated between the parties. I don't think it's helpful at this point for the United States to try and pre-negotiate this agreement. They're going to have to make a lot of decisions about very hard things.

Now what the President said yesterday is that the creation of a Palestinian state should create a homeland for the Palestinian people just as Israel is a homeland for the Jewish people. And I think that's an important principle; you will have two states for two peoples. Beyond that, I think they'll have to talk about the details of how this happens.

QUESTION: Do you see a right answer in all of this? I understand that you don't want to get in the middle of the negotiations right now, but you, in your own mind, do you know what the right answer is, do you think?

SECRETARY RICE: Oh, no, of course not. I mean, had there been a certain right answer, I think they might have come to it. I know that there are some elements of a right answer. It's very clear that this state is going to have to be viable. It's very clear that it's going to have to have contiguity. It's very clear that both states are going to have to feel secure. It's clear that they're going to have to overcome some of the hardest elements of the psychology that keeps these two peoples from solving their conflict and in that, of course, overcoming long years of suffering, long years of grievance.

I thought that Prime Minister Olmert spoke very effectively yesterday to the suffering of the Palestinian people, which was an extraordinary thing for an Israeli prime minister to say and to acknowledge. And there's going to have to be an acknowledgement that this conflict has caused a lot of suffering, a lot of deaths of a lot of innocent people, a lot of humiliation, a lot of depravation and that's why it's time to end it.

But for now, they need to get to the table and to look at -- many, many things have been discussed a lot over many, many years and they need to start to come to the realization that there is a solution. That's one thing the President said to them today. He said there are really hard issues here to solve, but there are solutions; find them. And that's what we want them to do.

QUESTION: Now this is the last year, of course, of the Bush Administration and many wonder why it's taken you this long to get to this point, whether there's been a lack of interest, commitment to this issue. You, at one point, said that there wasn't a viable peace possible earlier. Why have things changed now in your calculation?

SECRETARY RICE: Well, when we came in in 2001, it's -- you just have to remember, you can't be ahistorical about this. In 2001, the Camp David process, despite the extraordinary efforts of the Clinton Administration, had collapsed and a second intifada had begun, launched by Yasser Arafat. There was terrorism against Israelis everywhere. And Ariel Sharon had been elected not to bring peace, but to solve the problem of terrorism. That was not a condition in which you were going to sit Israelis and Palestinians down again and say, all right, let's create a two-state solution.

So what the President did was to declare the United States for a two-state solution, to declare that there should be a Palestinian state. Over the next several years, you saw two things change. You saw Israelis across the political spectrum, even from the conservative part of the spectrum -- Ariel Sharon himself the father of the settlement movement -- saying there should be a two-state solution; we're going to have to share the land, he told Israelis in his speech in 2003; we'll have to make painful compromises. This from someone who had always thought of a greater Israel and so there was a big change in what Israelis were prepared to do.

And on the other side, you had a couple of years later the election of a democratic president -- democratically elected president in Mahmoud Abbas, someone who was known throughout his life to reject terror and violence as a way to get to statehood -- very different, by the way, from Yasser Arafat, who always kept one foot in terror and one foot in politics.

And so by 2005 or 2006 you had leaders and populations that were prepared for a different course. And I think that is now what we're building on with Annapolis and with the launch of the negotiations.

QUESTION: I know you're a student of history. What mistakes did Bill Clinton make that you'd like not to repeat?

SECRETARY RICE: Well, it's not just the Clinton Administration. It's been tried many times. And, you know, I've talked to a lot of people who were involved during that period, and they made extraordinary efforts. And I just don't think that you -- I'm not one who believes that you go back and say, well, what could they have done differently.

I do think that one different circumstance today is the emergence of a strong Arab consensus -- at the beginning, not at the end -- a strong Arab consensus for a two-state solution, starting really with the very forward-looking Arab initiative that was the Crown Prince initiative launched by Saudi then Crown Prince, now Saudi King Abdullah. And that initiative offered an opening for the normalization of relations with Israel within a comprehensive peace. But also now the Arabs, having come by consensus en masse to Annapolis, I think will give some strength to the Palestinians, who will have to make hard choices.

QUESTION: The Arabs came en masse, but Hamas was not invited and of course did not come. Many feel this is the elephant that wasn't in the room, that in fact, without the duly elected representatives of Hamas present, no peace can either exist or be lasting.

SECRETARY RICE: Well, Abu Mazen is, of course, the head of the PLO, the Chairman of the PLO, and he is the president of all Palestinians. And it is actually his mandate to negotiate.

Now, the people in that room more or less discussed or believed in a two-state solution and accept a two-state solution. Hamas does not accept a two-state solution. It doesn't even accept the right of Israel to exist. How can you negotiate when you don't even accept the right of the other party to exist? How can you negotiate when you will not renounce violence as a way forward?

It is our strong view, and I think the view of many, that when there is a realistic prospect of a Palestinian state, when you can see its outlines, when you know that it is going to be viable, that that is something that the legitimate government of Salam Fayyad and the Presidency of Abu Mazen can take to the Palestinian people to unite them around that vision.

And then Hamas is going to have to make its choice. But Hamas cannot have it both ways, be a part of peace and continue to make terror and war.

QUESTION: As you know, there were riots widely across Gaza in anticipation of and throughout the Annapolis conference, 100,000 people it was estimated protesting. How is peace possible, though, without bringing them in some way into the process? Isn't the job of peace negotiators to make peace with your enemy, not with your friends?

SECRETARY RICE: Well, there will always be those who reject a peaceful way. But I don't believe that that represents the great majority of the Palestinian people. And again, Mahmoud Abbas was elected with more than 60 percent of the Palestinian people and he was very clear in his election that he would seek peace through a negotiated, two-state solution. So he has a mandate.

Now, there are those who are outside of that consensus: Hamas; apparently, Hezbollah; and clearly, Iran. I think people will have to ask, are Hamas and Hezbollah and Iran likely to bring a better life for Palestinians living side by side with the state of Israel than someone who has said the way to have a better life is to get our own state and to be able to deliver for our people in a democratic, peaceful and prosperous state.

QUESTION: You mentioned Iran. President Ahmadi-Nejad, as you know, called the Annapolis meeting a failure and said that Israel is, quote, "doomed to collapse."

SECRETARY RICE: Well, he says all kinds of things, and it's really a pity. You know, it's a pity that a great culture and a great people like the Iranians are represented somehow by someone who talks about wiping a fellow member-state of the United Nations off the map, someone whose policies are leading to widespread inflation and economic deprivation for the Israeli -- for the Iranian people, someone whose policies are isolating Iran so that it sits in Chapter 7 status along with other bad actors in the international community, someone who has led Iran on a course that means that the Iranian people are being deprived of their rightful place in the international system.

QUESTION: To those who say -- and there are many -- that the real impetus for the Annapolis conference was to further isolate Iran, you say?

SECRETARY RICE: I say that the reason for the Annapolis conference is to launch these peoples toward peace. We talk about the two-state solution and, you know, it sounds rather antiseptic -- the two-state solution. What we're really talking about is people, people whose lives will be better when there are two states living side by side in peace and freedom, when Israelis don't have to go to bed wondering if there are going to be bombs going off because of terrorism, when Palestinians no longer have to suffer the humiliations of occupation where they go to a checkpoint and they're told they can't go on that road just because they're Palestinians. That's what we're talking about, and that's why Annapolis was important. It takes place in the context of a greater struggle between extremism and moderation, but by no means will we lose sight of the fact that this is really about making life better for the Israeli people and the Palestinian people.

QUESTION: But would you agree that by inviting many of the Arab countries to sit at the table yesterday, by the appearance of Syria and Saudi Arabia there, there's a further attempt to try and move Iran out of the mainstream?

SECRETARY RICE: Well, this is the Arab League. Iran is not a member of the Arab League. And the Arab League voted by consensus to come. They voted by consensus to come because they want to support the legitimate Palestinian Authority, the people who represent Palestinians. I think they also recognize that it is important to support moderates, and Iran is an enemy of peace in the -- for the Palestinian people. Iran, by the way, is an enemy of peace for the Iraqi people and for the Lebanese people as well.

But they were not in that room because they are not a part of the two-state solution. They're trying to prevent one.

QUESTION: New York Congressman Gary Ackerman said yesterday, "Everybody at Annapolis has one thing in common, not a love of Israel or of the Palestinians. It's a fear of Iran. Everybody needs a relative to protect them from Iran."

SECRETARY RICE: Well, clearly, there's every reason to have a deep concern about Iran, about Iran's support for terrorism and against the peoples of Lebanon and of Iraq and of the Palestinian territories. There's a reason to worry about an Iran that is trying to gain the technology that could lead to a nuclear weapon because enrichment and reprocessing capability, which is what the world is trying to stop, is a technology that, if used in certain ways, can lead to a nuclear weapon. So there are reasons to worry about that.

Clearly, there are reasons to worry about Iranian aggression and ambition and what they're doing in the region. I think people were there at Annapolis because they want to support a Palestinian state. But of course, extremism in the region is something that threatens everybody in that room.

QUESTION: There have been a lot of questions raised about whether the primary actors in this are strong enough to pull together a peace. Prime Minister Olmert is at record low approval ratings, investigated for corruption even as we speak. Is he the right man to be able to bring Israel to the table?

SECRETARY RICE: He is the Prime Minister of Israel and he has a vision for how to lead his people to peace. In doing so, he's following in the footsteps of Yitzhak Rabin. He's following in the footsteps, for that matter, of Menachem Begin and of Ariel Sharon, who was -- with whom he helped to create the Kadima Party.

And I would really like to have commitment more than anything from a leader, and he's committed to this. And in that, I think he has the backing of the great majority of the Israeli people.

QUESTION: I want to just go back to the right of return for one moment, understanding that you're not going to tell me the right answer here, if you indeed know it. Compensation has to be part of this as well. One imagines that there's some sort of compensation to those who were removed from their land and their home. Has that portion of it been started to be thought out? Because one imagines this is billions of dollars.

SECRETARY RICE: Well, look, let me be very clear. The Palestinian state is, in fact, a homeland for the Palestinian people. What else is it but a homeland for the Palestinian people? And of course it therefore has an effect on the answer to the refugee issue. So I want to be very clearly understood that the refugee issue takes place in a different context now that you have a Palestinian state.

But of course, there have been international efforts, international discussions -- the Canadians have led a lot of those coming out of Madrid -- about how you would set up an international mechanism to deal with refugee issues, how you might think about issues of compensation. A lot of that work has gone over -- gone on over a long period of time. And I talked yesterday -- the Canadian Foreign Minister offered again to play Canada's historic role in thinking through these refugee issues, and I think at some point in time there will be, have to be, an international effort. And I believe that yesterday Prime Minister Olmert said that Israel would participate in an international effort to help deal with the refugee problem.

QUESTION: But we are talking about billions of dollars, which one assumes the U.S. will play a significant role in at some point?

SECRETARY RICE: Well, if we are so fortunate as to be at the point that we're talking about the Palestinian state and what now to do about the refugee problem, how to deal with people who were displaced, how to deal with people who may be in places that they cannot stay, I think the world is going to be responsive on that score.

QUESTION: So you answered that without me even having to ask you about the President's large type yesterday.

SECRETARY RICE: Yes.

QUESTION: The stakes are high. Failed efforts at peace in the Middle East have often bred, as you acknowledge, more violence. So you have to go into this with some sense of success or the very likely result of making the situation worse.

SECRETARY RICE: Well, I clearly understand that failure is not an option here. And I think that the parties understand that, more importantly. But inaction is also not an option. Doing nothing is also not an option. If you do nothing to try to resolve this conflict, if the parties don't try to resolve this conflict, you're going to have years and years more of the deprivation, the humiliation of the occupation and of the terror associated with this for the Israelis. And that's not an option, either.

And I will tell you I do -- I am concerned that the next generation of young Palestinians will no longer believe in the two-state solution. The people with whom I talk about the two-state solution are too often my age, and so we have to make the two-state solution a reality for Israelis and for Palestinians. And so yes, there are always potential downsides to acting, but there are really potential downsides to not acting.

QUESTION: Do you believe that the failure to come to some sort of peaceful settlement for the Palestinians, for the Israelis, has in fact really spurred radical Islam around the world?

SECRETARY RICE: Oh, no, I think the causes are many for the rise of the kind of radicalism and extremism that we've seen. Certainly --

QUESTION: You don’t think this bleeds over?

SECRETARY RICE: Well, I think it has an effect, yes. I'm not suggesting it doesn't have an effect. I think it does. And I think it especially has an effect on the radicalization of Palestinian populations. So yes, I think it has an effect.

But it's not the only cause of the rise of extremism. I think you also have a situation in which the absence of legitimate channels for political activity, the so-called freedom gap or the freedom deficit in the Middle East, has led to a situation in which political activity has taken on this rather virulent and malignant character, rather than having legitimate ways for people to deal with their differences.

And that's been the unfortunate effect of authoritarianism. So the President's freedom agenda, the desire in the Middle East as a whole to give people legitimate political ways to express their grievances and overcome them, is also an important part of fighting extremism.

QUESTION: In fact, that was really the theme of the second inaugural --

SECRETARY RICE: Yes.

QUESTION: -- was that we were going to see a transformed world, certainly a transformed Middle East through democracy.

SECRETARY RICE: Yes.

QUESTION: Many would say, and then when the Palestinians democratically elected Hamas, the U.S. said, well, we don't like that result.

SECRETARY RICE: Well, first of all, the President said that this is a generational issue, not one that would be solved on our watch. And democracy doesn't come easily. But as to Hamas, we immediately said that that was a legitimate election, that by all accounts it was free and fair. And then there was an international challenge to Hamas. All right, you've been elected, but now there comes a certain responsibility with election which is, you cannot have one foot in politics and one foot in violence. You know, the Hamas electoral campaign was about fighting corruption, was about providing services. Very few, as I remember, of the the Hamas slogans were: elect us, we'll keep you at war with Israel, and, we'll prevent you from having a state of your own.

And so Hamas had a chance, really, to accept international norms about governing, that you of course renounce violence, that you govern on the basis of, by the way, agreements that had been made by Palestinian leaders going back for decades -- leaders like Yasser Arafat who had made agreements that in effect recognize the right of Israel to exist. I didn't say recognized Israel, but just that a two-state solution was possible. And so that was the problem with Hamas and they were isolated for that reason.

QUESTION: So Syria came to the talks yesterday in Annapolis by all accounts because of a willingness to put the Golan Heights on the agenda. Is it in play?

SECRETARY RICE: Well, what we've put out in the agenda was something called Toward a Comprehensive Peace, and it was a future item. That meeting yesterday was to talk about how to support the Israelis and the Palestinians in their negotiations. But no one denies that eventually there has to be a comprehensive peace, and the Israeli-Syrian track is a part of a comprehensive peace, as is the Israeli-Lebanese track, and as the -- will be the effort to have normal relations between Israel and its Arab neighbors. So all of those issues were on the agenda. Everybody got to speak to them, the Syrian representative spoke, the Lebanese representative spoke. And so that was the nature of the engagement on the comprehensive peace.

QUESTION: As you looked around that room yesterday at those 49 nations -- there's 52 negotiating teams with 49 nations -- did you ever think to yourself, maybe we should have tried something like this before going into Iraq -- maybe this kind of world conference would have helped? Or not?

SECRETARY RICE: Well, it was -- the situation was so different. We had had so many UN Security Council resolutions demanding that Saddam Hussein do this and that he do that. We had had a final resolution in Resolution 1441 just in the fall of 2002, demanding that he do -- the credibility of the international immunity was at stake.

But you know, you mention international conferences. The last international conference that I was at just before this one was actually one in Istanbul where the important states, the regional states, as well as the UN Security Council Permanent Five and the G-8 all came together to support a democratic Iraq, a unified Iraq, talked with the Iraqi leadership about what they needed to do and what the international community would do, talking about borders and security and the need for diplomatic relations with Iraq. So yes, there were a lot of differences about the war. But when I go to an international meeting now and I see Iraq's neighbors sitting there all talking about supporting Iraq, I say we've overcome that. And now everybody recognizes that a stable Iraq that is unified and capable of fighting off extremism and terrorism is in their interests.

QUESTION: As you know, there's a new biography coming out about you next month by a New York Times reporter. One of the things that's been excerpted from that biography says that you and the President reviewed the CIA data about weapons of mass destruction in Iraq and were not impressed, but that you decided to go forward anyway.

SECRETARY RICE: Oh, no, I was plenty impressed, as was, by the way, the entire international community, which is why we had had so many Security Council resolutions demanding that Saddam Hussein disarm. I think that what is being referred there -- to there was a particular presentation about how you might make the final presentation before the UN Security Council. But what I --

QUESTION: So the implication that you didn't think that there were --

SECRETARY RICE: Oh, absolutely. Nobody wanted to go to war. If there is anything that I really resent it is the notion that somehow we were looking to go to war against Iraq. We would have gladly not gone to war against Iraq if Saddam Hussein had been willing to live up to the obligations that he undertook first in 1991, then in 1998, and again in 2002.

Now, what were we looking at? We were looking at key judgments by the intelligence community that he had indeed reconstituted his biological and chemical weapons programs, that he could have a nuclear weapon within one year to several years. And by the way, estimates that had been wrong in 1991 when he was much further along with a nuclear program than we had thought. But, Cynthia, nobody likes to go to war. Nobody wants to go to war. You go to war when you really have not very good options. And with Saddam Hussein, with whom we were still in a state of conflict after 1991, who was shooting at our pilots in the no-fly zones that were there to keep him from attacking his neighbors and attacking his own people, who was continuing to defy the international community, that's why we went to war.

QUESTION: There's a brutal, Madame Secretary, editorial op-ed piece today by Maureen Dowd of The New York Times saying that you and President Bush have spent more time exercising than you have trying to seek peace in the Middle East.

SECRETARY RICE: Yeah. Well, I think that's laughable. You know, yeah, I exercise, I certainly do. And I exercise because, like I hope most Americans would, I recognize that good health, both mentally and physically is important to clear thinking. But this President and I think I, as the Secretary of State, have spent an extraordinary amount of time trying to do three things in the Middle East -- trying first of all, to hold the standard, bear the standard for a more democratic Middle East that will not produce the resentments and the grievances that led to the kind of radicalization and extremism that we have seen. Secondly, trying to help the people of the Middle East build a more prosperous future through trade agreements and efforts to help build those economies. And third, what you saw in Annapolis yesterday, trying to help the Palestinians and the Israelis end their age-old conflict.

Now, we -- people have said to me, well, are you looking for a legacy? I can tell you, there are a lot easier ways to get a legacy than to try to end a conflict that is now 60 years old, that people have tried to end repeatedly over time and have never been able to do it. But we're doing it because we think it's the right thing to do. We're doing it because we think it's the right thing to do for Palestinians and Israelis for the region and frankly for American security as well.

And when I sat there yesterday and I looked around and I saw the Palestinians now really anxious to try to build their state and I saw the Israelis wanting the Palestinians to have their state, I thought, what a difference from 2001 when the President first talked about a Palestinian state and made it a matter of American policy; when it seemed really remote with bombs going off in Israeli neighborhoods and the Passover massacre and all of the horrible things that happened; when it seemed really remote that the father of the settlement movement was going to be talking about sharing the land; and when it seemed really remote that you were going to have a democratically elected Palestinian President who wanted to sit down and make peace with the Israelis, I thought, we've worked at this the right way and now we've got a chance, so let's try to make it happen.

QUESTION: Final question. When you go outside these buildings, outside this city, maybe in places in this city, you say peace in the Middle East and lots of people roll their eyes --

SECRETARY RICE: Yeah.

QUESTION: Right.

SECRETARY RICE: Right.

QUESTION: Part of the reason seems to me to be not only that there's -- that there has been failure or a history of failure, but also that deep down it's not just about borders, it's not just about policies, it's about feelings and passions.

SECRETARY RICE: Yeah. That’s right.

QUESTION: And it seems to me that the Israelis wanted acknowledgement that they have a right to have a Jewish state and it seems to me the Palestinians want an acknowledgement that they lost something, that they've given up something in order for that state to exist. And then we start the cycle again. Do you think that the parties are at the emotional state necessary to really make peace?

SECRETARY RICE: You know, it's a really excellent point because somebody said to me once, you know, it's just a border dispute, you can settle it like you settle any border dispute. But if there's one thing that you really know and learn about international politics is it's rarely just a border dispute. That border dispute is masking long-held grievances and long-held passions and long-held aspirations that probably aren't going to be met. And what Palestinians and Israelis are now going to have to do is that they're going to have to realize that there are historical aspirations, emotional aspirations that are not going to be fully met. No one is going to get a maximalist position here.

QUESTION: Everyone's going to have to give up something.

SECRETARY RICE: Everybody's going to have to compromise. And when I hear Palestinians and Israelis through Mahmoud Abbas and Ehud Olmert talking about painful compromises, I think that's what they mean. When I hear them saying that they know that they're going to have to overcome years and years of grievance, I think that's what they mean. And I said to a group of religious leaders the last time I was in Jerusalem and I said, you know, all of us have our grievances. If you go back in history, we all have our grievances. I related that certainly my ancestors had their grievances. And as their descendants, perhaps we could have hung on to those grievances. But ultimately, you have to put historical grievances behind you. Ultimately, you have to put unrealistic aspirations behind you that you will get it all. And then you can get an agreement. And what I have felt from these Palestinians and these Israelis is that they understand that, and that they're now going to go to the table to try to determine the contours of, the composition of a Palestinian state so that they can finally live side by side in peace and security.

QUESTION: Well, Madame Secretary, thank you very much for talking to us. I know you've been to the region eight times in the last year. Too bad they don't have frequent flier miles, because I have a feeling you're going back a lot more in the coming year.

SECRETARY RICE: I think you're right about that.

QUESTION: Thank you so much.

SECRETARY RICE: Thank you.

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