This is a partial transcript of "Special Report with Brit Hume", June 28, 2004 that has been edited for clarity.

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PRESIDENT BUSH: Iraqi officials informed us that they are ready to assume power. And Prime Minister Allawi believes that making this transition now is best for his country.


BRIT HUME, HOST: Obviously a big day for Iraq and a big day for the Bush administration.

For analysis of today's handover of sovereignty, I'm joined by a man who served both the past two presidents as a special adviser and envoy on the Middle East. Fox News contributor Dennis Ross.

Dennis, welcome.

DENNIS ROSS, FMR. U.S. ENVOY: Nice to be here.

HUME: So the last several times that we've discussed this issue, you raised some questions and some tests. One was would leaders emerge in Iraq to make the process go forward? Have they?

ROSS: I think we're now seeing people who have assumed a leadership role, been willing to do it, been willing to stand up, and been willing to talk in ways that were different than we saw a few months ago. A few months ago, one of the things that worried me more than anything else was that we had nobody in Iraq who would stand up and say the U.S. is doing the right thing. That was a pretty bad indication of where we stood.

Now today, we do have leaders who are prepared to assert an Iraqi role, to make it clear they're going to pursue Iraqi interests. And now the measure is going to be can they; will they be seen as authentic by their own people?

HUME: Now wouldn't you also agree that perhaps Ayatollah Sistani -- al Sistani stepped up even before this group of leaders assuming power today?

ROSS: He did, but he also did it in a way that also shows that there is a lot maneuvering that will still go on. Sistani didn't exactly come down like a ton of bricks on Sadr. In fact, he seems to have supported an approach that would...

HUME: Sadr being, of course, the renegade cleric who caused all the trouble around Najaf back in April, about the same time we were having all that trouble in Fallujah (search).

ROSS: Exactly. I mean a very junior cleric, one who couldn't compare to him in terms of learning, knowledge, standing. And yet, notwithstanding that, they seemed to want him to be incorporated into a political process. So what that suggests is they have a view that respects his ability to command a following. And we have to keep that in perspective as well.

HUME: All right. Now, one other thing you were worried about was you were concerned that we could be facing the kind of violence that would upset the apple cart. At the time, of course, when we were talking about this, Fallujah was in full cry, as a point of rebellion. So was the Sadr uprising, such as it was down in Najaf.

Those things, for whatever reason, have subsided and we've seen further violence. Has the further violence in, your judgment, been on as threatening as scale or less so?

ROSS: Certainly less threatening than April, because April was basically a two-front war. We went to take on Fallujah. It became very costly. And it was clear the Governing Council said you're going to make things much worse if you go in. It wasn't easy to make the decision not to go in.

And Fallujah is likely still to be a problem for us. Same time, you had Sadr triggering what was in fact a confrontation throughout the south, an area we had considered to be stable. So we certainly haven't had violence on that scale...

HUME: Does it appear to you it's likely to recur on that scale?

ROSS: I'm afraid that it may.

HUME: Same places?

ROSS: Not necessarily the same places. My fear is that at least in the Sunni areas, maybe not the Shiia areas; I'm more confident about the Shiia areas, but I'm worried about the Sunni areas. My fear is that the insurgents are much better organized than we have fully anticipated.

HUME: Well, in fact though, in the past week, we've had one day with an exceptional amount of violence in the past week. There's some disagreement about whether or it was coordinated or not. But the effect of it was 100 people died in one day. That was ugly.

ROSS: That's right.

HUME: My own thought was we were going to see more of that the next day and the day after that. That didn't happen. Does that tell us anything?

ROSS: I'm not sure. Because in fact, one of the reasons we may have moved up the handover was because the fear was June 30 would have looked precisely like that day. They may have been gearing themselves for that day, with the idea of saying look, we're here, we'll overwhelm this government, they're not calling the shots, the U.S. is still going to call the shots.

We took away a symbol for them. Now, they still have that government. They're going to try to discredit that government. How it responds is going to be the measure of how it builds its own credibility.

HUME: There was a poll taken, they won't tell us who the pollster was. We have reason to believe it was a scientific poll that the Coalition Provisional Authority had taken it. And the results came out last week. Let's take a look at a couple of findings for your reaction to them.

One of them, confidence in the new leader: 68 percent. Another of the findings, their were a number of them, but all along these lines. Support for Prime Minister Allawi: 73 percent.

Now, at the time that Allawi and his team were emerging, it did appear that they had much more widespread political support across Iraq than any of the original Governing Council members had enjoyed, while they were part of that group. What does that tell us, anything?

ROSS: It tells me that we actually do have the emergence of an Iraqi leader that has a following now. One of the big criticisms of the Governing Council, even though Allawi was on the Governing Council, is that nobody had any real standing. They were viewed as basically being our puppets.

Now the fact that you have polls that suggest 68 to 73 percent supportive of this, confidence in him, maybe it won't be sustained, but it's a very good starting point.

I mean we are now, I think, in a position where there it is an unmistakable opportunity. I just came back from the Middle East. One of the things I was struck by is everybody I talked to, looked at June 30, which is now today, as an opportunity.

Now, I'm talking only about those I spoke to in the Arab world. They had all sorts of skepticism about will we really not be the ones calling the shots? Will we really see an authentic Iraqi leadership? There is an opportunity here.

It is critical for the new Iraqi government to demonstrate it's calling the shots, to demonstrate its independence; to demonstrate what it is doing is for the well being of Iraq. I have had one idea, which I've been pushing for sometime. Which I think can add to their credibility and authority. I want them to call for earlier elections. I want them to say...

HUME: You mean for some regional elections to occur?

ROSS: Yes.

HUME: Where they can?

ROSS: Where the can. Wherever the situation is secure enough to do it. Say we're going to hold elections. First of all, that will demonstrate that they're committed to having the Iraqi people express their will. And where they can't do it because of security, they'll be able to say we're in favor of the Iraqi people expressing their will.

The insurgents clearly fear that and want to block it. So who is the authentic Iraqi? You don't win insurgencies...

HUME: Of course, the killing now is mostly of Iraqis. Isn't it?

ROSS: It is. But you don't win; you don't defeat insurgencies unless the population is with you. And this gives us a chance to have the Iraqis thinking they are now fighting for an Iraqi government, not defending an American presence.

HUME: Dennis Ross, it's always good to have you, thank you.

ROSS: It's a pleasure.

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