• This is a partial transcript from "Your World with Neil Cavuto," August 19, 2005, that was edited for clarity.

    TERRY KEENAN, GUEST HOST: Three missiles were fired on Friday from the port city of Aqaba (search), two were fired towards U.S. Navy ships. And a Jordanian soldier was killed. The third missile landed near an airport in Eliat, Israel. And moments ago, I spoke with former Israeli Prime Minister Benjamin Netanyahu (search) who says he sees more rocket attacks coming.

    (BEGIN VIDEOTAPE)

    BENJAMIN NETAHYAHU, FORMER ISRAELI PRIME MINISTER: I think there's no question that the Al Qaeda (search) and the Islamic terrorist groups are trying to get a foothold in the heart of the Middle East. My concern is that the withdrawal from Gaza (search) will give them a terror-free zone — or rather a free terror zone. They'll be able to get in and out of Gaza without any hindrance. They'll have their own port there, and unfortunately, this withdrawal did not take place as part of a deal with the Palestinians, it was simply a unilateral uprooting of Israelis who were there, and the security envelope that had been controlled by Israel is going to be removed.

    So I have no doubt that Al Qaeda will try to move into Gaza. They have already announced that they will, and they have a lot of friends there. Hamas, Islamic Jihad and others. So this will be a base that will be used to attack not only Israel but Jordan, Egypt, which has already been the target of Islamic terrorists, and, of course, American targets. And you have got that as a precursor today.

    KEENAN: So you are saying that today's attacks were in fact directly linked to the Gaza pullout this week?

    NETANYAHU: No, I cannot say that, but I'm saying that the Islamic terrorists, they don't need any particular reason to attack, but they can get wind in their sails, and they can certainly get a bigger base to operate from. They're getting both, I'm afraid, from the Gaza withdrawal. Hamas, Hezbollah, Al Qaeda openly say that this is a great victory for terror. They do not interpret it the way we do or some of us do, in terms of an internal Israeli matter or a redrawing of the lines. They say, as the head of Hamas has said, this is a great victory for terror, or for the armed struggle, as they call it, that will reverberate, he said, as far as Afghanistan and Iraq.

    So, first of all, they see Israel retreating under terror fire. They think that this is a reward for terrorism, and they're emboldened. Secondly, they're getting a base. This is very important. There is no real Palestinian Authority. They don't lift a finger against terrorism. They don't disarm the terrorist gangs. So Gaza will be fortified as terrorists stream into it with their weapons. And that terror will eventually directed not only against Israel, which is bad enough, but also against American targets, against Jordanian targets, America's allies and America itself.

    KEENAN: If your scenario does come to pass, how long do you think it's going to take for them to establish a beachhead there?

    NETANYAHU: Well, you know, when I said as much in the Oslo Accords when there was a great euphoria, that this was a great peace, Nobel Peace Prizes were awarded to Arafat, people said that this is the end of 100 years of terror, in fact we got terror that we hadn't seen in 100 years. Hundreds and hundreds of suicide bomber attacks. That took about two years. So, I think this will take between one and two years.

    Our security experts, our intelligence chief, said in the parliamentary foreign affairs and defense committee the other day that they will give us a reprieve until the end of the January elections. Hamas will wait, but after that, they intend to continue probably first from the West Bank and then from Gaza later on.

    I don't know if it will take a year or two years. I know one thing, when they think that they have been rewarded for terror, they'll do more terror. A victory for terror in anywhere — anywhere in the world — is a victory for terror everywhere. And a defeat for terror anywhere in the world is a defeat for it everywhere. They think they have a big victory with a Gaza pullout.

    KEENAN: Yet, all in all, Israel and the Israeli stock market in fact has weathered this pullout very well. What's your outlook for that side, putting on your hat as former finance minister?

    NETANYAHU: Well, the Israeli stock market is responding also to news that the second quarter of 2005, we had 5.6 percent growth. That was directly related to the rapid and massive liberalization we did in the Israeli economy. That is breaking up monopolies, opening up the ports to competition, opening the banks to competition, moving people from welfare to work and above all, drastically reducing taxes.

    So the markets are responding to that, and I'm quite sanguine about the Israeli economy. The other factor that affects the economy is security, to the extent we maintain security, so far we have, it's going to be all right. But if this results in a decrease in security, that will affect somewhat our prospects. But I think we'll have to take the measures to restore security.

    In any case the pullout, I think, we have discussed it, I discussed it with the central bank director of Israel. We decided to treat it as a neutral in our forecast. It could be bad, it could be good, but we're not looking at it in those terms.

    KEENAN: Finally returning to today's missile attacks, who do you think was behind them, an Al Qaeda group has taken responsibility, but some people say there aren't the earmarks of Al Qaeda behind these missile strikes. What do you think?

    NETANYAHU: I don't know if it's Al Qaeda but I think it's unquestionably one of the prevalent terrorist groups. There are plenty of them. And look, they struck at Jordan and American targets, and at Israel, the Israeli port of Eliat, the seaport of Eliat was struck, the Jordanian port of Aqaba was struck. And they aimed at an American ship. And that's a almost classic triangulation. You hit America, you hit America's allies, first and foremost, Israel, but also Jordan.

    So the problem we have in fighting terrorism is that in order to defeat it, you have to fight it. And that is the doctrine that President Bush has valiantly put forward in the world and I support it.

    (END VIDEOTAPE)

    KEENAN: And that was former Israeli Finance Minister Benjamin Netanyahu.

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