• With: Israeli Prime Minister Benjamin Netanyahu

    This is a rush transcript from "On the Record," September 23, 2011. This copy may not be in its final form and may be updated.

    GRETA VAN SUSTEREN, FOX NEWS HOST: It doesn't get any more important than this. Even a remote chance of peace for Israel seems to be slipping away. That's after Palestinian Authority President Mahmoud Abbas petitioned the U.N. for statehood for his people.

    And 60 minutes later, Israeli Prime Minister Benjamin Netanyahu blasted the U.N. as the "theater of the absurd." The Palestinians' official bid for statehood comes in defiance of both Israel and the United States.

    Now, we spoke with Prime Minister Netanyahu right after his speech at the U.N.


    VAN SUSTEREN: Mr. Prime Minister, nice to see you, sir.

    BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: Well, good to be here. Thank you, Greta.

    VAN SUSTEREN: And welcome to the United States. I know you spent a lot of time here in the United States growing up, but it's nice to see you back, sir.

    NETANYAHU: Thank you.

    VAN SUSTEREN: Today you called the U.N. General Assembly -- you used the term "theater of the absurd." You came out pretty hard hitting on the General Assembly. Why?

    NETANYAHU: Well, because, you know, it can decide these odd things. It can pretty decide the earth is flat. It can decide that the Western Wall, which is Judaism's most holiest site, is occupied Palestinian territory.

    It singles out Israel every year for attack. You know, 21 out of 27 resolutions adopted by the U.N. on human rights are directed against Israel, the Middle East's only true democracy. All the other countries there -- and you can imagine some of them -- nothing! They don't mention anything.

    So you know, it's an upside-down place. I mean, I've been used to it. But in a place like that, the only thing you can do is just tell the truth, which is what I tried to do.

    VAN SUSTEREN: I'm sort of curious whether there's some sort of temptation not to even comment. I mean, if the -- Israel is portrayed by many in there as the villain...


    VAN SUSTEREN: ... and you referred to it as the "theater of the absurd." And we all sort of watched -- we watched President Abbas speak, then we watched you speak. And it's -- it is a theater and with -- with undetermined consequences.

    NETANYAHU: Yes, but you know, it's a strange place, the U.N., because they make, you know, Saddam's Iraq responsible for disarmament, and you know, Qaddafi's Syria chair the Human -- Qaddafi's Libya chair the U.N. Human rights Commission. And now you have Lebanon, which is effectively controlled by Hezbollah, a terrorist organization, preside over the Security Council, which is responsible for global security.

    You know, that's very odd. And one of the victims of this absurdity, of this travesty, is Israel, that gets hammered day in, day out, as some -- as a country opposed to peace, as a country -- as an aggressive country, when it's a tiny country, the one and only Jewish state of the Jewish people that is fighting for its life against terrorists supported by Iran, and is accused of -- when it's tying to defend itself, as any democracy would.

    So you know, I think the only defense against lies is to tell the truth, even in an unpopular forum, and that's what I thought the responsibility of an Israeli prime minister is. And I'm the prime minister, I went there and told it like it is.

    VAN SUSTEREN: I was reminded and I'd forgotten -- of course, I've been to Israel -- but about how tiny Israel is, when you compared it to Manhattan, talked about flying -- you could fly across Israel in what, three minutes, then cross the United States, six hours. It really is...

    NETANYAHU: A big difference.

    VAN SUSTEREN: ... a big difference. And it really puts the sort of issue of security up front and center for people who are listening.

    NETANYAHU: It's a tiny country that is faced with enemies and challenges to its security like no other. I mean, we've had in this tiny country -- it's a little bigger than Rhode Island. We've had 12,000 rockets lobbed at our cities in recent years. Can you imagine Rhode Island sustaining 12,000 rockets and missiles on Providence and on the towns next to it? I mean, it's unbelievable!

    And so Israel has to defend itself. And part of peace must be proper security safeguards where Israel can defend itself by itself in order to also defend the peace. I think these are the things that we need to negotiate with the Palestinians. So far, they refuse to negotiate, basically relying on the received wisdom in certain international quarters that, well, they don't have to negotiate because Israel will always be blamed as not wanting peace.

    We want peace. We're prepared to have peace with the Palestinian state. The Palestinians want, basically, a Palestinian state without peace. And so I think fair-minded people should tell them, Sit down and negotiate. Work out these issues of security and the recognition of Israel as the Jewish state. Negotiate peace. That's the only way that we can have it. You can't resolve it by U.N. declarations. That's not going to do it.

    VAN SUSTEREN: Did you watch President Abbas's speech or listen to it in another room?

    NETANYAHU: I read it. I was busy writing my own speech at the time, so...

    VAN SUSTEREN: You were still writing yours?

    NETANYAHU: I write my speeches right up to the podium, more or less. And I change them on the podium. I sort of look at -- I actually look at the audience, and if I see them dozing off, I say, Well, I better say something to wake them up.

    VAN SUSTEREN: So what did you think of President Abbas's words?

    NETANYAHU: I thought that -- I was disappointed because I'd hoped that he would -- you know, aside from I think not telling it like it is, because he said -- he said -- in fact, he said something very telling. He said -- the other day, he said that Israel has been occupying Palestine for 63 years.

    Wait a minute. If they're talking about the West Bank, that's -- that goes back only to 1967. Sixty-three years goes back to the founding of Israel. Is what President Abbas telling us that Tel Aviv is occupied Palestinian territory, that Haifa is occupied Palestinian territory? In other words, that all of Israel is basically a land that has to be freed in quotes, Israel shouldn't exist in any boundary?

    I think there's something telling there because that really gets to the core of the conflict. It's the persistent refusal of the Palestinians to accept a Jewish state in any border. That's the core of the conflict. And I hope -- you know, I hope they muster the courage, President Abbas and his colleagues, to tell the Palestinian people that that kind of thinking has to be discarded. They have to recognize a Jewish state. And they have to sit down and negotiate with us a workable peace, a defensible peace.

    VAN SUSTEREN: Was that a slip, or do you think that's sort of the Hamas thinking? I mean, Hamas don't recognize the right of Israel to exist. Is that -- was that sort of a slip and he made a mistake speaking, or do you think underlying all this is that he doesn't think that Israel has a right to exist?

    NETANYAHU: I think you should be interviewing him and asking him that question because I think they walk around this issue all the time. They never just come out and say it. You know, it was very hard for me as a Likud leader to speak to my own people and my own constituents. And I said, Look, as difficult as it is, as deeply attached as I am to every inch of the land of Israel, our historic homeland in Judea and Samaria, we'll have to make some compromises here. And it's going to be very painful, but I'm prepared to do it.

    I'm willing to set up a Palestinian state that lives in peace with Israel, providing we have proper security. But I'm not prepared to have another Iran there -- in other words, to establish another Gaza there, where they'll fire rockets at our territory and not make peace with us.

    What I hear the Palestinians so far saying is, We want a state not to end the conflict, we want a state to continue the conflict. And that's wrong. So I think part of it is telling Abbas or letting Abbas tell his people, It's got to be over. You know, we're going to get a state and we're not going to try to go for Tel Aviv or the other parts of Israel. We're going to live at peace. Israel is here to stay. That's why he should recognize the Jewish state. That's so simple.

    But again, I don't place preconditions on beginning negotiations. I would start them right away, right now.

    VAN SUSTEREN: Well, you offered that to him. But you know, listening to your speech (INAUDIBLE) you talk about being a theater and then looking at sort of the reaction, I saw that, you know, of course the Palestinians were cheering on their president. The Israelis are cheering on their prime minister. And it seems like, you know, if we're all sort of creating this theater, we can't really get you guys to sort of sit down and work things out because now your base has dug its heels in to...