This is a partial transcript of "Special Report with Brit Hume", May 25, 2004 that has been edited for clarity.

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(BEGIN VIDEO CLIP)

PRESIDENT BUSH: We're making security a shared responsibility in Fallujah. Coalition commanders have worked with local leaders to create an all-Iraqi security force, which is now patrolling the city. Our soldiers and Marines will continue to disrupt enemy attacks on our supply routes, conduct joint patrols with Iraqis to destroy bomb factories and safe houses, and kill or capture any enemy. We want Iraqi forces to gain experience and confidence in dealing with their country's enemies.

(END VIDEO CLIP)

BRIT HUME, HOST: Question. Is the approach being used by the U.S. military in Fallujah simply the best it could manage in a bad situation? Or is this an ingenious and effective way to deal with Iraq security problems that can be applied elsewhere in that country?

For answers we turn to retired Army General Robert Scales, who has written extensively on both Gulf Wars and is also a Fox News contributor. Welcome to you, sir.

ROBERT SCALES, FOX NEWS MILITARY ANALYST: Hi, Brit.

HUME: What do you think of this -- this Fallujah, turning it over to local forces who have not always been friendly to our cause, and were friendly in Saddam's cause...

SCALES: Right.

HUME: ... and letting them run the place. And can that -- is that a good idea, A. And B, can it be applied elsewhere? And is it a good idea elsewhere?

SCALES: It might very well be a template or model for what is about to happen. Look, we're five weeks away from turning over authority. Security is the biggest problem in that country. And I think the American command is finally realized that they have to balance this quest for national unit with the understanding of the tribal affinities -- the tribal nature of Iraqi societies.

So if you could build the military organizations that possess a little both, a sense of obligation and patriotism for the country, and at the same time, an understanding and realize that the Iraqi society consists of many different ethnic entities and tribes, and build on that. Then perhaps you could achieve security without having the country fracture apart into civil war.

HUME: Now the question though, of course, is whether in Fallujah the way we did it allowed some of the worst of the bad guys, perhaps from places outside the country, to get away. And left the city in the hands of people who will not crush what remaining resistance was there because that would be Iraqi on Iraqi. So Fallujah remains, therefore, a trouble spot waiting there to erupt again.

SCALES: They very well will be not only a model, but just -- it may be a bell weather of what's about to happen. Look, a lot of bad guys got out of Fallujah three weeks ago. No one knows where they went. The nightmare scenario is they went back into al Sadr City and back into the capital to regroup and wait for the June 30 takeover. That would not be a good thing.

I happen to believe that it's better to have Iraqis patrolling the streets of Iraqi cities than Americans. And ultimately the president said this last night -- ultimately Iraqification is the American exit strategy. And the sooner we get to Iraqification, the sooner the drawdown of American forces can begins.

HUME: The question arises, of course, is whether Iraqification of the military means the training, retraining of Iraqi forces, who would then wear the uniform of a new army of Iraq, and be under a centralized command.

Or whether you'll end up with pockets of the country doing what we did in Fallujah that are effectively under the control of local militia, perhaps tribal militias, as you suggest, who are not responsive to the nation's overall military.

SCALES: Brit, it's a balance. We have to do both. You have to have a national army. But remember, we've only got eight battalions of Iraqis so far trained in the national army. We may go to what? Fifteen or 16 by the end of June; that's less than 20,000 soldiers to defend an entire country that's -- that's in the midst of an irregular war; can't do that.

This is manpower-intensive business, and you have got to have boots on the ground, Iraqi boots on the ground, when the transition to Iraqi authority occurs. And the only way to do that in the short-term is to empower the militias to take up part of the burden.

HUME: Now, we read now that this happening elsewhere in Iraq. That the local militias that we hoped to disband, or had planned to disband were now trying to co-opt. Or perhaps are they co-opting us?

SCALES: Well remember, in the north, the Peshmerga, the 60,000-man militia that the Kurds have put together, literally is running that part of the country. In the south you've got the Badr Corp and the Dawa army, those are sort of...

HUME: What are the Badr Corp and the Dawa army?

SCALES: Well, they're -- again, they're tribal oriented militia organizations that are loyal to various tribes in both Baghdad and in the south.

HUME: And to religious leaders as well?

SCALES: And to religious leaders. And they've really gone to ground right now. They walk around the streets with Kalashnikovs on their shoulders and they say they're not a militia army, but clearly they are. And they are waiting to see which way the security situation turns around 30 June.

HUME: Do we have reason to believe that these -- that they're would be loyal to Iran in any way, or that they will be associated with terrorists?

SCALES: I don't think they're associated with terrorists because they're mostly Shiites. But I do believe they're taking a wait and see attitude. I mean if the country is quiescent, if the central authority is -- has the respectability -- has the respect of the Iraqi people, that's really what's going to turn it.

It goes like this, Brett. You know, what we want is we want to create situation, where an Iraqi soldier respects the Iraqi leadership and government enough to die for it. If you reach that level of allegiance and effectiveness in the Iraqi system after 30 June, then you're going to have a situation where both the central army and these tribal militias will be able to work together. If not, we face fracturing and civil war.

HUME: It certainly appears now that in the situation around Karbala and Najaf, and all that, that that -- they did that the old-fashioned way. That seems to have worked.

SCALES: Boy, that worked well! Didn't it? And what the First Armored Division did was basically disassembled the modern brigade by chipping away at al Sadr's authority very carefully, very surgically, very patiently over time and basically cause that brigade to collapse. And that's another model where you say the enemy down patiently. You do use overwhelming force, but you apply it very selectively and very discreetly over time. And it worked.

HUME: Bob Scales, always good to have you. Thanks for coming.

SCALES: Thanks.

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