SECRETARY RICE: Well, I think there would be a very big difference to -- for them working towards nuclear proficiency while the international system thought we had serious negotiations going on and therefore was putting no pressure on them, and having them "work towards nuclear proficiency" while the international system is mobilized against them and might still have an opportunity to persuade them differently.

So one is that they get to continue their work under cover of negotiations in a sense making everyone relax and say, well, perhaps this will work so we won't be as vigilant and we won't press forward on the resolutions and press forward on the financial measures. I think that's an untenable place for the international system to be. That's why suspension for suspension makes sense. If they are -- even if they're continuing to work, and I think there is a question of how much proficiency they've actually gained because this is an engineering problem and you have to keep practicing it, you have to learn to do it over a longer and longer cascades for longer periods of time, introduce more and more nuclear material, and this is a complex process.

But let's say that they're continuing to work toward proficiency. I would rather be in a position in which the international community know that they're doing that in contradiction to the wishes of the international system, that in fact the potential for escalating Security Council resolutions is there, and the collateral effects of Chapter 7 where Iran is clearly not in cooperation and people are making their investment and reputational risks knowing full well that Iran is not in cooperation rather than under the smokescreen of negotiations. So that's the difference.

QUESTION: The Israeli Ambassador said the other day that he thought the worst case scenario would be two years until Iran gets the bomb.

SECRETARY RICE: I spend most of my time sensing that we need to do this as urgently as possible rather than trying to come to a firm conclusion on when they're going to succeed in this complex process. We know that they are continuing to work at it, which means to me that the international community needs to step up its efforts to convince Iran that they're on a bad course. But I can't comment on how long it might take.

QUESTION: But given the scenario that you outlined of continuing to work, what is your best case? I mean, what would you hope to see will happen over the next year while the Bush Administration is still in office?

SECRETARY RICE: Well, I think the first thing that they should do, they should suspend, and then I think there are plenty of possible ways to get to a civil nuclear program that makes sense for Iran, that would come with a lot of other benefits of trade and political relations. And so that would be the best outcome because -- you asked what would be the best outcome. That would be the best outcome.

QUESTION: How realistic that is --

SECRETARY RICE: Well, alternatively, I'd like to see the international system, the international community, get more -- get tougher about the kinds of pressures that it puts on Iran and to confront Iran with a clear choice between continuing down this road and the kind of isolation that the international community can actually bring to bear. And I think it's a combination of what you do in the UN and choices that people make.

QUESTION: Can you pursue both courses at once? I mean, we are going to hammer you if you don't and the land of milk and honey is open to you if you do?

SECRETARY RICE: Yeah. And I think that's really what we're doing because Javier Solana just met with him. He's going to meet with him again. There is a package out there that is a very forward leaning and quite attractive package of measures that the six would be prepared to engage Iran in if they're prepared to come to an agreement that makes sense for them and for the international community.

And everyone says, you know, well, why won't the United States talk to Iran. Well, I've been saying, you know, why won't they talk to us. Because in fact, if what they want, which we sometimes hear, is to begin a path toward a different kind of relationship with the United States and therefore the international community as a whole, there's a path to do that and it's a very clear path.

QUESTION: Why shouldn't people, when they look at your insistence on missile defense and naming specifically Iran in there as one of the main reasons for it, why shouldn't people assume that you've just resigned yourself to the fact that the Iranians are going to get -- are going to do this and they are going to have long-range missiles too?

SECRETARY RICE: Well, because, first of all, nobody is resigned to them doing anything and nobody is pursuing a policy of -- that is based on resignation to them doing anything. But in terms of their long-range missile threat, they have also been improving their missile capability and given that these deployments of missile defense would take some time, you have to plan against their potential missile capabilities. And you know you want to both plan for the outcome in which perhaps -- and this is not just a nuclear issue, this is a ballistic missile issue -- in which they have a relationship with the international community in which you can begin to deal with that threat, but you also have to plan for the situation in which they have a relationship with the international community which you don't, and you do have to plan for that.

QUESTION: I'm sure people want to talk about missile defense more, but can I just go back on Iran? You have a situation where four Iranian Americans that we know of are in custody and one's been missing for a long time. The President himself made a statement about this a couple weeks ago. Sean yesterday or the day before made another statement about it. Have we reached the point now where you think this is a new crisis, that Iran is holding these people and wants something specific in (inaudible)?

SECRETARY RICE: No, I -- these -- the Iranians are holding people and trying people who have done nothing except try and make Iran a more open and better place, in some cases just went to visit their families. And so we are calling upon them to release these people. They should be released. But the Iranians should recognize that it just shows again what kind of regime this is.

QUESTION: But doesn't it sort of evoke that time, though, when you hear Americans are being held in Iran?

SECRETARY RICE: No, let's not try to go back to a historical analogy that I think is a very different set of circumstances. We take seriously the holding of any American anywhere in the world where they're being wrongly held and where they're being accused of things that clearly are untrue. The Embassy situation I think everybody recognizes had a special character and it is at the root of why it is very difficult to see the path to normal relations with Iran. This was a pretty unprecedented in kind of diplomatic history.

QUESTION: Will -- sorry.

SECRETARY RICE: Modern diplomatic history.

QUESTION: Will Ambassador Crocker or some other high-ranking U.S. officials have direct talks again with Iran before these people are released?

SECRETARY RICE: These people are not linked up with what we're doing in other fora. The nuclear issue is being handled by a coalition of six and we're going to keep that as an issue for the coalition of six. Ryan's conversations, if they happen again, and Iraqis would like it to happen again -- we haven't determined when and if it makes sense. But Ryan is there to send a strong message to the Iranians about Iraq and to talk to the Iranians about the degree to which they seem to be undermining their own policy. They say they want a stable, secure Iraq. They say they are supportive of the Shia-led government there. They say they want normal relations with Iraq where they're engaged in reconstruction.

And then they arm militants, send in technologies that are killing coalition forces even though everybody understands, including the Iraqis, that the coalition needs to be there until the Iraqis can defend themselves, and engaging in practices, frankly, that threaten to draw in other Iraqi neighbors in unhealthy -- unhelpful ways.

And so you say to the Iranians: How does this accord with what you say are your policies? And so you look for whether there are areas in which we might as Iraq's neighbors, and in our case kind of a neighbor through circumstance, where we might find some common ground to give the Iraqi Government the kind of support that it needs.

But I think the last thing you want to do is to conflate these issues, including the issue that we are dealing with through several different channels, including friendly governments, on behalf of the people who are being held in --

QUESTION: What issues are being weighed now about whether to continue these discussions with Iran?

SECRETARY RICE: Well, you'd like to have some sense of where this is going. It would obviously be very useful if the Iranians -- if Iranians showed on the ground that they were prepared to be more cooperative -- or let me put it this way, less uncooperative, less destructive.

But I will tell you, I think a lot of this will depend on how the Iraqis assess how they would like to see this move forward. Just like the neighbors conference, this is more than anything about rules of the road and ground rules for how Iraq's neighbors are going to relate to the Iraqi Government. And the reason we've been really prepared to go down this road with Ryan and his counterpart is that the Iraqis believe that this is useful from the point of view of beginning to engage all of the interested parties, their neighbors, in a dialogue about how to support them. And so I suspect we'll also -- as a part of the assessment, we'll lean pretty heavily on how the Iraqis think about it.

QUESTION: I'd like to come back to the question of missile defense, particularly President Putin's proposal involving Azerbaijan. And I'd like to know how you see Azerbaijan, what kind of role Azerbaijan could play in this kind of arrangement, apart from the details of what tactical equipment might be in Azerbaijan or not. This is a country that has its own complicated relationship with Iran and the State Department's own Human Rights Report isn't laudatory. Do you think Azerbaijan has a role in this?

SECRETARY RICE: I think we have to take a look. You know, it was a bit of a surprise, to be frank, and one doesn't choose sites for missile defense just out of the blue. I mean, you have to have a sense of what the missile defense system is trying to do and where the optimum places to place interceptors, place radars. You know, it's geometry and geography on how you intercept a missile, not a political decision, "Well, we'd rather have it there because of this or that relationship with this or that government."

And so I think the President said, "You know, we'll have to assess it. We'll take a look." But they also agreed that they could intensify the dialogue probably through the ministries of defense and foreign affairs and Bob Gates and myself on taking a look at the threat environment. The Russians have made the argument that they don't understand how this missile defense responds to the threat environment as we have described it. They may even have some differences on what the threat environment is. I think you probably heard -- you maybe heard Sergey Lavrov say when I was with him, "Well, we're dealing with the North Korean threat through the six-party talks and the Iranian threat."

I think it is a conversation that we can have, but that's why it is not a bad thing to go back and say, "All right, well, let's see if we have a common understanding of the threat." But what the threat isn't is Russian -- the Russian nuclear deterrent, because there isn't -- no way that this system, really, or even a system that will evolve out of it is going to deal with the thousands of warheads that the Russians can put on to missile defense to defeat it. And they themselves have said that. So we probably need to continue to talk about it. There's also -- this isn't going to be deployed for some time. We've got work to do with the Poles and the Czechs. We've got work to do in NATO. And so it makes some sense to step back and have these discussions.

QUESTION: Is it --

SECRETARY RICE: But as to Azerbaijan, I think we have to see whether Azerbaijan makes any sense in the context of missile defense.

QUESTION: But is there anything political about Azerbaijan that would exclude it?

SECRETARY RICE: Well, you know, we'd have to take a look at what our relationship is with Azerbaijan in terms of the stationing of essentially military equipment there. I think this is an idea that has not yet been vetted, let me put it that way.

QUESTION: Is it correct that really, you had no inkling that this was coming down? Nothing was said in Moscow or in Europe or in even -- obviously, not Oslo, but there was no hint?

SECRETARY RICE: I was not aware, I will -- I'm not with the party, so I won't speak for the party. I was not aware that the Russians were going to propose a concrete -- or have a concrete proposal for cooperation. I did say to them at NATO, "If you've got ideas, you should put them out there," so --

QUESTION: Well, then --

SECRETARY RICE: -- they are.

QUESTION: Given that, do you see this as -- this is -- do you see it as a good sign, that this is the opening -- the Russians' opening stance of the negotiation, whereas before, they have previously said no negotiations --

SECRETARY RICE: Well, first of all, it's not -- let's be clear, it's not a negotiation, all right, because this is about American defense and the defense of the United States and the defense of NATO. But yeah, I see it as a good sign that they're putting ideas out there and that they want to talk about things and they think that the concept of missile defense is worth discussing. Sure, I see that as positive.

QUESTION: And do you think that that will carry -- could carry over to other areas, perhaps? I mean, does this -- you know, we had the situation in Moscow where both you and Lavrov had said, "Okay, we're going to tone the rhetoric down."

SECRETARY RICE: Right, right.

QUESTION: And then -- you know, what, three days later or whenever it was, a week later, Putin comes out with this -- you know, "We're going to target Europe."

SECRETARY RICE: Yeah.

QUESTION: So is this suggestion, his idea -- do you think that that could pave the way for renewed, better cooperation in other areas, not just missile defense? Is this really kind the Russian -- the next Russian bear climbing down (inaudible).

SECRETARY RICE: I think we have a lot of areas of cooperation already and this is an example, I think, of what you do. You see that there's an area of conflict and you come to some agreement about how you might try to pursue that area, try to pursue common solutions to that area of conflict. But I wouldn't read too much into it wider, because I think we're going to always have these areas of conflict and areas of cooperation. And the more that you can put on the cooperation side rather than the conflict side, the better.

QUESTION: It isn't just Putin throwing out a red herring saying something that he knows you'll never go for?

SECRETARY RICE: I'm not -- you know, what are the motives here? I do think that there was an effort to -- perhaps the rhetoric was not helping anybody, including the Russian cause in Europe. And this is probably a better way to go about it and so I'm going to take it on face value. It's responsive to our offer to have cooperation, to have discussions that go back to trying to assess the threat, and to looking for some common ground and I'll take it on face value.

QUESTION: This is also a good way not to get disinvited to Maine. (Laughter.)

SECRETARY RICE: (Inaudible).

QUESTION: Is the U.S. also being essentially polite in even considering this? Because, I mean, you could dismiss out of hand. It seems to have come out of nowhere and doesn't quite make sense.

SECRETARY RICE: Well, I don't know if it makes sense. I have to -- I was trying to see about the geography of Azerbaijan myself and I don't -- you know this is something I think missile defense experts will have to look at when you have to look at the political issues and so forth. But look, it's worth -- if it is a way to begin more serious discussions about what we believe is a common threat, which is the threat of the Irans or the North Koreas of the world watching missiles. I think that's a very -- that's a positive development.

But we are continuing our discussions with the Czech Republic and Poland and we're going to do that. We are continuing our discussions in NATO and we're going to do that. And you know I think we will do what is best from the point of view of actually dealing with a problem, which is a real security problem. This isn't a sort of false security problem, it's a real security problem.

QUESTION: You talked a little bit about the Baghdad channel with Iran. Is there anything new on U.S. outreach with Syria? Do you have any new meetings --

SECRETARY RICE: No.

QUESTION: -- or any further discussion?

SECRETARY RICE: No, we haven't, but we will -- you know, we're assessing how to move that forward as well. I think all of this -- you just remember that we're all -- this is all in the context of the neighbors meeting that took place. These various tracks will develop and I think we'll look at what's possible. But there's nothing yet on that.

QUESTION: Can I ask about another neighbor of Iraq?

SECRETARY RICE: Yes.

QUESTION: Turkey today said they'll do what it takes to root out PKK bases in northern Iraq. What sort of dialogue is going on now with Turkey, and, I guess, to what end to keep them from possibly bringing some destabilizing factor to the north of the country?

SECRETARY RICE: Well, let me make a point first that that border has been a problem for a long time, not just since Iraq was liberated.

QUESTION: Right.

SECRETARY RICE: And there have also been activities on that border back and forth for a long time, and so I think it's important to put it in that context. And it does from time to time become more acute and it's in a somewhat acute phase over the last several months because the PKK has been making some attacks across the border. But we have a mechanism, which is a trilateral mechanism with the Iraqis. And we have General Ralston working with a counterpart because we want to deal with the terrorist threat there, too. We understand that we have an obligation to the Turks that Iraq's territory not be used for terrorist activity; that they have to have some assurance that that situation is going to be addressed and addressed seriously.

And I think we're making some progress. I believe the Turks are sending a signal that they expect the problem to be dealt with; that they expect progress. But I think they know and they understand the downsides of engaging in a more robust cross border activity. And those consequences would be, I think, not very good for Iraq and not very good for Turkey. And so we're prepared to work with Turkey, but it's not going to help anybody to have a unilateral move across that border in a robust fashion.

QUESTION: Would you support any new peace discussions between Israel and Syria at this point?

SECRETARY RICE: I've said all along if Israel believes that there is a track to pursue peace with Syria then that's fine. Now my understanding is that the behavior of the Syrian Government has suggested to people that that option or that opening isn't there at this point in time. What is very important is that everybody recognize that it wouldn't be a substitute for an Israeli-Palestinian track because the situation in the Palestinian territories makes even more urgent the development of a normal political framework in Palestinian life and movement toward a two-state solution so that moderate forces have a chance and moderate forces have a context in which they can address the Palestinian people with a future that looks better than the future that the extremists can offer them.

QUESTION: Are you disappointed that the meeting that was supposed to be yesterday didn't come off?

SECRETARY RICE: I understand the reasons that it didn't and it's postponed. I hope that it will take place relatively soon. But they needed to do some more work to assure its success, and I think it's better to do that work than to have the meeting and have frustrations at the meeting, so --

QUESTION: Are you encouraging Israel to release the tax money?

SECRETARY RICE: We are encouraging the Israelis and the Palestinians to work together on this issue. I understand the Israelis' concerns about what might happen to tax revenue, but we think that there are mechanisms that they could use in the ways that they have in the recent past to support important activities in -- among the Palestinians. But I think it's a broader issue than that. It's really an issue of how the Israelis and the Palestinians would use these bilateral talks to move forward, obviously, on some of the day-to-day things, but more importantly how they will use them to begin to develop a context in which they understand the possibilities of a Palestinian state that's really going to be good for both sides. And if it takes a little more time to do that work at the staff level, then I think that's fine.

QUESTION: Thank you. If I could get back to Iraq for second --

SECRETARY RICE: Yes.

QUESTION: The President's new war adviser told the Senate yesterday that he had serious concerns about the Government of Iraq's ability to really take control of their country, no matter what pressure the U.S. puts on it. If he -- if that dire scenario turns out to be right, where does that leave the U.S. policy going forward?

SECRETARY RICE: Well, I think he said he has concerns. I think we all have concerns because we've not seen the kind of performance on the reconciliation agenda that we think is necessary. But we are all working towards that end. And I wouldn't make an assessment now of whether or not this government is going to be able to move those things forward. I know that, you know, they continue to work on constitutional reform, they continue to work on provincial elections, they continue to work on the oil law. Be that the case, it is particularly difficult because it really does go at nerves of -- old nerves at people who lost family members to the Baath Party or to the hierarchy of the Baath Party, and you're asking for reconciliation on some issues where there's a lot of rawness still.

But I think that they still will -- and must, because they have pressures not just from the United States from pressures from their own people -- to make enough progress on what I call the de jure reconciliation package so that the Iraqis can begin to see an Iraq in which all Iraqis have a place.

And I want to draw a distinction here. You know, there's -- when I say de jure, I really mean pass the laws, get the reforms done. The kind of normative reconciliation that one hopes to see in the society will take place over a much longer period of time. But our responsibility is to help them get the de jure pieces in place so that people are responding to laws and a political and legal framework that tells them here are the ground rules for how you're going to behave toward one another, here are the ground rules for how the country's resources are going to be divided, here are the ground rules for what the bases of political power-sharing is going to -- are going to be.

And I've used the example, and there's always a bit of danger with historical analogies. But you know I was a kid in Birmingham, Alabama when the Civil Rights Act passed, the Public Accommodations Act. And so the day after that passed, my family and I went into a restaurant for the first time. Maybe -- I think in retrospect maybe two days. I can no longer remember if it's one or two. But we went into a restaurant. And now, two days before that act passed, we couldn't have. Two days after that act passed, we could. But does that mean that everybody in that restaurant was thrilled to see us there? No. In fact, was the notion of mixing of the races, as it was called in Birmingham, immediately a good thing from the point of view of most people? No. But did they know they had to live with it? Yes. And over time, did it become normal? Yes. And is it the case that if you go into a restaurant in Birmingham now, nobody thinks about it? Yes.

So I would draw a distinction between getting the laws and the political institutions in place so that people have a chance to start getting accustomed to what the ground rules are, and over time they'll come to accept it and deal with it. But right now, that framework isn't in place. And I think sometimes when people talk -- when we say giving space for reconciliation, people think we mean we have to be there to give space for the normative piece of this. I think what we have to do is to be there to give space to moderates to create the framework.

QUESTION: Well, what happens if they can't even get the de jure framework in place?

SECRETARY RICE: Well, I am not at the point yet where I think we have to consider that. We may have to. But we've got to put all of our efforts right now in helping them to get to that de jure framework. And there are other things going on in the society. For instance -- I mean, the politics. For instance, Prime Minister Maliki has been much more active with the Presidency Council than he had in the past. Now, why is that important? The government and Prime Minister Maliki really can only make this work if the kind of, if you will, power brokers of the various groups are supported. And frankly, the Presidency Council represents in ways the government does not the powerful Kurdish interests, the powerful Shia interests and the powerful Sunni interests. And so working with those leaders as well -- Talabani, Hashemi and Abd al-Mahdi, et cetera -- I think may give more impetus to these political efforts than the government trying to do it even just through the structures of the government and the parliament. And so I think they've begun to mobilize a little bit better all the potential elements to get this work done.

QUESTION: There's been quite a bit of talk lately from Admiral (inaudible) and others about -- they called it a Korea type scenario for Iraq, which I won't have to explain to you, of course.

SECRETARY RICE: Yes.

QUESTION: But does -- from a political and diplomatic point of view, does this seem to make any sense?

SECRETARY RICE: Well, I think that the -- I think of it maybe as a metaphor rather than as an analogy, and there are a couple of things that are important about it. The first is that it was a very violent beginning for what became in the long run a rather more stable situation, and it became more stable both through the commitment of the United States to stability so that parties could begin to plan for their future against a promise of - a kind of external promise of stability, if you will.

And secondly, it didn't begin as a strong and stable democracy in South Korea. As a matter of fact, I think you can say that took quite a long time, well into the '80s really. But within that context of external stability or externally provided stability, that evolution took place.

Now, how you provide that external stability I think is another issue, and I don't think under the circumstances, given that you also had a hostile power on the other side, that people ought to assume that this is a kind of 50-year proposition. That's why I say don't take the analogy necessarily literally.

But will there be some need to train and equip and help to provide territorial integrity for Iraq for some time beyond this immediate security problem? Yes, probably. How will it be provided? That's got to be worked out with the Iraqis themselves. What will be the role of neighbors in doing this? It will be a lot easier to do if the neighborhood is not hostile to the Iraqi Government, which is why working some of the issues that you've individually been bringing up -- Iran, the Sunni neighbors, Turkey -- if it's an environment in which those neighbors realize and believe that their security is better ensured by a stable and democratic Iraq and a "strong" Iraq, and strong in quotation marks, rather than a weak Iraq in which they each play out their politics internally in Iraq through surrogates in some fashion, then it's going to be a lot easier to provide that stability. And so there are a lot of pieces.

What you're really seeing then is a discussion of what is going to be the broader context in which Iraq, once it gets its sort of internal politics in a more -- a less acute position, what's going to be the context in terms of neighbors, in terms of security presence, to allow that kind of normative reconciliation and all those things to take place over a period of time. That's really the discussion that's going on.

So when people draw on the Korea analogy, I think that's really what they're talking about.

QUESTION: You talked about giving space and time for reconciliation. There's a lot of discussion in Washington and in Baghdad about the difference in the Baghdad clock and the Washington clock. What should the Washington clock be? How much time should we tell people they have to give Iraq to make it work?

SECRETARY RICE: I don't think we can go at it that way. I think we have to ask what is it we have to be able to do for what period of time. And we clearly right now have to be able -- we're in a phase right now where we are trying to help the Iraqis redress the -- address the circumstances that emerged really principally -- not solely, but principally -- out of the February '06 Samarra bombing when the sectarian violence peaked, or spiked. And that means getting them to the place that their security forces are not viewed as so sectarian that people won't trust them. That means that the security forces have to do things like equally take on Shia and Sunni bad guys.

I think that's this phase that we're in right now where a few months ago death squads were going into a neighborhood, lining up the men and shooting them, sending the women into exile, and the Iraqi citizen had no reason to believe that their government could or would protect them from this kind of sectarian onslaught. That's the first thing that we've got to help them do. And I think in that regard, kind of clearing these neighborhoods of these bad forces that were terrorizing the population and stoking sectarianism is order number one.

And on that, I think some progress is being made. It's one reason we see, even though it's ticked up a little bit, lots fewer sectarian murders than you saw, you know, several months ago and where I do think our commanders would say that the military forces, the security forces, Iraqi security forces, are acting in a more evenhanded fashion.

Secondly, you've got to see whether or not you can provide some assistance on what al-Qaida has stepped up, which is these really rather spectacular bombing attacks. And that means going after these networks that are building suicide bombs and getting tips from the population of somebody who might be preparing to do that and hardening markets and all of that kind of thing.

Now, that's a very different proposition that we're engaged in now, and as I think, you know, General Petraeus has said, it's a more dangerous proposition for American forces. Then what you would hope to be doing at some point is that you are prepared to assess that the surge has achieved that element of security. And then I think you really are more in to making sure that Iraqi forces are really trained and that you're embedded with them to the degree that you need to be so that they are taking over the holding of a lot of these areas and reconstruction is following in, that you really are sending powerful signals to the neighbors -- and I mean all the neighbors -- that external security is not going to be provided by playing surrogate politics inside of Iraq, but rather that the United States is prepared to be a force there to show that that's where the external security is coming from.

But that's a different phase and that's a kind of post-surge phase. Interestingly, I think that is -- when people look at some of the things that have been suggested by -- I don't mean people who say we just have to get out of Iraq immediately, tomorrow, no questions asked. That's a phase that people seem to understand that American forces may need to do for some time to come. And so that's obviously where we're trying to go, but you don't want to get ahead of yourself and start trying to plan for that phase before you've succeeded in the first. But I don't think we're seeing --

QUESTION: (Inaudible) unrealistic or (inaudible) --

SECRETARY RICE: No. But, Anne, that's what I'm saying. I wouldn't say Congress because I think that there are a lot of people who may be skeptical about what we're doing in this phase who understand the need for that next phase of training, embedding, territorial integrity, making sure that you support allies like in Anbar who are fighting al-Qaida.

QUESTION: But they want to get there and they want to get there quickly.

SECRETARY RICE: They want to get there and they want to get there quickly. We want to get there quickly, too. But we want to get there having provided the space for the Iraqis to reestablish that there is going to be an Iraq for all Iraqis, which is why the reconciliation that we were talking about is important. But I really think it's important not to conflate or confuse those two. The possibility of what we may need to do for the Iraqis once this phase is completed -- I think there may be more understanding of that and more support.

QUESTION: Well, how do you get there? Because Baghdad is not Birmingham. And you know, if you put the law down and someone goes to a caf� the next day, they get blown up. They get killed.

SECRETARY RICE: But --

QUESTION: And the next day another person doesn't go to that caf�.

SECRETARY RICE: No, but maybe, maybe not. Because right now, nobody has the broad population, but most importantly the (inaudible) population, doesn't know what the rules of the game are going to be on something like sharing the oil resources. Nobody knows what the rules are going to be on whether or not you can continue to teach if you were a member of the Baath Party for reasons that were totally instrumental. Nobody knows whether or not there are going to be provincial elections that are going to change the character of some of these governments in the provinces where Sunnis didn't vote. The psychology of this is extremely important because right now the uncertainties about where you will stand in Iraq, particularly if you are Sunni, but obviously you can't know where you're going to stand even if you're Shia at this particular point in time. So that's why we've got to get the reconciliation -- de jure reconciliation -- done.

QUESTION: Do you think it's -- do you take it as a bad sign that they still haven't been able to get the oil law done?

SECRETARY RICE: I take it as a sign of how essential the issues are, how elemental the issues are. What you're really doing is you're asking people -- or telling people -- that the economic resources of this country, the considerable economic resources of this country, are not going to be held by the people who are actually sitting on them. That's actually a pretty hard message. And I think in any other circumstance, and I don't mean to suggest that I don't know that they are in the circumstance they're in, but in any other circumstance one wouldn't expect a little over a year after coming into power a government to have resolved something as fundamental as how oil resources are going to be divided up.

Just look at the number of fundamental things that we can't resolve in our mature democracy. And they're doing it with relative -- with very young, quite weak political institutions that have barely come into being, and you're saying, all right, the Kurds have to give up on all those resources, the Shia have to give up on all those resources in the South and you have to pool them in the center, and then we'll re-divide them based on a calculation of population and need. Just kind of imagine trying to do that deal in almost any country in the world, and imagine trying to do it with people --

QUESTION: (Inaudible). (Laughter.)

SECRETARY RICE: No, actually, I think it's -- you know, it would be the most forward leaning free enterprise system in the Middle East because it also has provisions for foreign investment in the oil sector, which doesn't exist anyplace else in the region. So I just think you -- I think you have to recognize how complicated the issues are that they're going through, and they're doing it in a very immature and weak political system in which there's a fair amount of distrust. That said, that is where they are and they're going to have to do it no matter how hard it is.

QUESTION: Speaking of administrations, for the Bush Administration during these years, things have gone from when -- and you've been President Bush's political advisor since he was the candidate Bush. You've got a Middle East that's -- no peace still as -- you know, you've got the "axis of evil" countries. Iraq is pretty nasty right now. Iran and North Korea are still problems. Even Pakistan is getting a little bit dicey these days.

So the question is -- I mean, it seems from polls that Americans believe that today's world for Americans is more dangerous, it's scary, and it's a lot worse off in many ways than six years ago or seven years ago.

SECRETARY RICE: Now, six years ago, al-Qaida was planning to attack the Twin Towers. It wasn't a very nice world. And I think that if you think about six years ago, al-Qaida was preparing to attack the Twin Towers, Pakistan was allied with the Taliban, Afghanistan was the base from which al-Qaida was going to operate; the Israelis and the Palestinians had given up on a chance for -- or let me put it, the Palestinians had walked away from a chance for a Palestinian state, launched the second intifada, elected Ariel Sharon who basically said there would never be a Palestinian state and there will be a greater Israel; the North Korean were cheating on a deal that they had just signed; China and others were indifferent to that because it was a U.S.-North Korea bilateral deal; Iran was cheating on the IAEA out of sight. I could go on and on and on. That was the world in 2000 and 2001.

And there is no doubt that by confronting -- oh, by the way, and Saddam Hussein was shooting at our pilots regularly in the no-fly zone and making a mockery of the Oil-for-Peace -- Oil-for-Food program and corruption was running rampant in that program.

So, a worse world? I think so. And I think that what this President has done is in some ways comparable to beginning to set up the long struggle that we are going to have to resolve particularly the problem of the growth of extremism in the Middle East, which was clearly there underneath the surface and exploded on September 11th so that we finally knew what the real problem was. The real problem wasn't just that there were extremists. It's that they were pretty widespread, they were very well networked, they were operating in lots of countries including our own. We couldn't even figure out that they were talking to one another from San Diego to someplace in the Middle East about Afghanistan. I don't think we were in better shape.

And so by confronting this problem, they now have come to the surface to fight. And whether it is in the war on terror and now a much more extensive -- a pretty -- a very extensive, in fact, network of intelligence and information-sharing and law enforcement capability worldwide that can pass information as rapidly as we did to break up these various plots; to a coalition now of states that have twice voted for Chapter 7 resolutions against Iran, whose activities were to date hidden; to a coalition of states that reacted to the North Korean nuclear test in a way that actually now produced an agreement on getting the North Korean nuclear program first stopped and then, it is my hope, beginning to reverse it; to a Middle East in which Likud, the party of Ariel Sharon, split to produce a party that now accepts a two-state solution and accepts that there will be no greater Israel. You know, I think there's a lot of progress.

Now, will we see the end of all of this? Maybe not. But when you're confronted with a fundamentally changed strategic set of circumstances, you can try to put band-aids on it or you can say we're going to have to deal with the root problems here and it may take a long time and it may take successive administrations to succeed. But we know what we have to put in place so that successive administrations can succeed, and you don't get there by covering the problems or trying to find a temporary solution to them that isn't worth the paper that it's written on.

You know, you've all heard me say that I was lucky enough to be here the last time for the end of a big historic transformation. But that was an historic transformation that was begun by people like Marshall and Vandenberg and Acheson, when things looked pretty awful. You know, when the question wasn't: Is there going to be a communist Eastern Europe? It was was there going to be a communist Western Europe in 1946 and 1947, the kind of origin of the Marshall Plan and the Truman Doctrine. And when the question was would there be an Israeli state and when the question -- a Jewish state, and when the question was, okay, so you had to permanently divide Germany, could you make one part of Germany more successful than the other. And when the Soviet Union was, you know, exploding a nuclear weapon five years ahead of schedule and the Chinese communists won their revolution and the Korean War broke out -- speaking of the Korean analogy.

And over an extended period of time, you can go back and look at any one of those issues that in those days must have looked insoluble and that we were on the wrong side, every single one of them has worked out to our advantage. And I think that you will see that we've now -- we're here at the beginning of a big historic transformation, and some of them may still work out on our watch and some of them may not. But now if you -- if you -- with all due respect, if you try to judge what you should do by today's headlines, you miss the fact that history's judgment is rarely the same as today's headlines.

QUESTION: Are you confident that the world will view Iraq in that same way?

SECRETARY RICE: Well, I am. I am.

QUESTION: Something that seems improbable that --

SECRETARY RICE: I am. Because I think the Iraqis will work their way through their problems. I think these political institutions will come into being. I think it'll be tough and messy and unfortunately violent. The only way that I think it doesn't come out that way is if we don't provide that external mechanism of security so that either Iraqis don't make the right choices or their neighbors decide to make choices for them. And that's why I think our presence is so important.

QUESTION: The world should get tougher on Iran. Should that include economic sanctions?

SECRETARY RICE: What I said is that I think the time is coming. We'll see what Javier says. We're going to start to talk about what the next round of UN activity ought to look like and you'll see. But I think whatever we're doing in the UN is having a very important collateral effect and we need to look at those -- strengthening those collateral effects as well.

QUESTION: Thank you so much.

SECRETARY RICE: All right. Thank you.

2007/T11-2