This is a partial transcript of "Special Report with Brit Hume", April 15, 2004 that has been edited for clarity.

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BRIT HUME, HOST: Years of Palestinian terrorism and Israeli counter attack, with occasional interludes of negotiation, have been the pattern in the Middle East for decades. But Ariel Sharon seems bent on breaking that pattern by, as the Israelis sometimes like to say, changing the facts. And now he has President Bush on his side.

For more on what that means, I'm joined by a man who tried through two presidencies to find a peaceful solution in the Middle East. Ambassador Dennis Ross, now among other things, a Fox News analyst.

Dennis, welcome.

DENNIS ROSS, FMR. U.S. ENVOY: Thank you.

HUME: So what are we to make of this change by President Bush? It's historic. It's a first. It's -- it's a big deal, or is it?

ROSS: Well, I think it's significant, but I wouldn't overstate it. I think there's a tendency to somehow say here is a total transformation of the American approach, and it prejudges outcome. But in truth, it doesn't.

The fact of the matter is, in the year 2000, we put ideas on the table as part of a negotiated outcome that would have provided for settlement blocks for Israelis in the West Bank. So it's not as if this is unheard of.

HUME: Let me see if I understand correctly. We can see some of the pictures in that -- in that piece we just saw from Jennifer Griffin. There are housing developments that dot parts of the West Bank, including even high-rise buildings. Am I correct about that?

ROSS: That's correct.

HUME: And nobody in their right mind thinks that Israel is going to give those parts of the West Bank up. So that's part of what's in play here.

ROSS: That's right. That's right.

HUME: And Gaza, meanwhile, though, which has Israeli settlements, is being abandoned and those settlements dismantled.

ROSS: That's right. Or evacuated.

HUME: And that is a unilateral concession by the Israelis?

ROSS: That's correct.

HUME: In the meantime, of course, this wall is being built.

ROSS: Yes, let's put it all in perspective. No. 1, we've had a situation for the last three years that is characterized by war. There's been not been a peace process. There's no dialogue between the two, except the dialogue of violence. The situation has been completely frozen.

Now, Ariel Sharon has made a decision to try to unfreeze it by taking a step, and the step he is taking is unprecedented from Israeli standpoint. Prime Minister Rabin didn't do this, Paris didn't do this, Barak didn't do it. None of them were prepared to leave settlements, evacuate settlements without getting anything from the Palestinians in return. And that's what he is doing.

Now, in return for that, he sought certain assurances from the United States, and he got them. Truth be told, they're substantially less than what he was seeking. He wanted an explicit recognition of Israeli settlement blocks in the West Bank. He did not get that. What he got was an acknowledgment from the president that when it comes to the end of the day, the final borders will have to take account of the realities on the ground where there are large Israeli population centers.

Most of the Israeli settlers, who live in the West Bank, live close to what's known as the Green Line. When we were trying to negotiate an outcome in the year 2000, 5 percent of the territory would have been annexed to Israel. There might have been a territory swap.

HUME: Annexed to Israel?

ROSS: Yes. So that these settlement blocks would have been part of Israel.

HUME: Now, what about the wall? Is the wall going to be so configured that it will encompass and keep on the Israeli side of it these areas of the West Bank that are now in question, that we're talking about?

ROSS: Where it's being built -- and the terminology is everything here. The Israelis call it a "security fence." Palestinians call it a "wall." I call it a "security barrier." And the reality here is that it is being built along 12 percent of the West Bank.

Three quarters of the Israeli settlers live to the west of that. One quarter will live to the east of it. And that has an implication about what happens to those who live to the east of it.

HUME: But the 3/4 will be inside the wall and protected by it, correct?

ROSS: That's correct.

HUME: So the affect of this is to create a kind of temporary settlement between the parties, in the sense that the wall will take care to the extent it can of the security piece of a settlement. And the remove -- the withdrawal from Gaza will compensate the Palestinians, though not in a way they would necessarily want. And in the meantime, the -- Israeli will hold on to, by virtue of the wall, a protected part of what the Palestinians has claimed is their own.

ROSS: Absolutely. Think about it this way. In Gaza, the Palestinians for the first time will be able to govern themselves, and there will be no excuse. They can't say, well, we can't do this because the Israelis stop us because the Israelis will not be there. So this is a...

HUME: It's going to be out of all of the rest of the West Bank. The Israelis will be gone.

ROSS: Out of Gaza. They'll be out of Gaza and that will give the Palestinians...

HUME: Now what about the parts of the West Bank that...

ROSS: In the West Bank the Israelis will still be there. The logic of building a security barrier is that, in fact, Israelis can lift the siege that currently exists. They have 160 checkpoints throughout the West Bank.

HUME: Those will be gone mostly?

ROSS: Mostly those will be gone, because once they build the barrier, they don't need to have the checkpoints. The checkpoints prevent the Palestinians from moving. It prevents normal life as well.

HUME: So -- and that's a situation then that becomes the basis for any future negotiation?

ROSS: Absolutely. And what it can do...

HUME: Quickly.

ROSS: ... if it works the right way, you create two freedoms: freedom for the Israelis from insecurity because of terror, but also you begin to create freedom for the Palestinians from Israeli control.

HUME: Within their own territory.

ROSS: That's right.

HUME: All right. Dennis, great. Thank you very much.

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