This is a partial transcript from "Your World with Neil Cavuto," October 14, 2004, that was edited for clarity.

NEIL CAVUTO, HOST: Secretary, it’s always good to have you. Thank you very much for joining us here at FOX.

COLIN POWELL, SECRETARY OF STATE: Thank you very much, Neil. Good to be with you.

CAVUTO: We are dealing with record high oil prices (search) again today and some have expressed surprise at that given the fact that we were told when we went into Iraq and freed up the oil from Iraq that oil prices would come down. They’re decidedly higher. What is the deal?

POWELL: Well, I wouldn’t attribute it solely to Iraq. There are so many other factors that go into the price of oil. Worldwide demand, increasing demand coming from China (search), which has become a so much more industrialized nation and is putting great demand on the system.

Refining problems, lack of conservation in a number of countries, and I might add, in the United State we could do more with respect to reducing the demand for oil. So there has been an increase in demand worldwide, especially in some of the developing world, China comes to mind. And there are refinery capacity limitations.

And also there is a limitation in how quickly the oil producing countries can bring more oil on line. Certainly interruptions in Iraq play a role in this. But I would think that’s a minor part of the problem.

CAVUTO: I know you’re not an oil-watcher, sir, so forgive my question in this regard. But I will pass along something an oil-watcher had passed along to me, that he believes there is a $10 premium in the price of oil because of concern about Iraq. Do you buy that?

POWELL: Well, I don’t know. I’ve learned over the years in a variety of jobs not to try to make judgments about what causes oil prices to go up and down and how speculators view the oil market. So there is one thing I don’t do is handicap the premium associated with oil and any uncertainty that is built into pricing.

And I had better stay out of that. Secretary Abraham gets nervous when I start talking about oil prices.

CAVUTO: All right. That’s a good thing, too, because I was going to ask you about Alan Greenspan and interest rates. So I’ll move on.

(LAUGHTER)

CAVUTO: You know, Mr. Secretary, the German defense minister, Peter Struck (search), scored some news when he talked with The Financial Times the other day and said that Germany could send some troops to Iraq. It was quickly repudiated by Gerhard Schroeder, the chancellor. I know you made a call to your counterpart in Germany. What is the real story there?

POWELL: Well, when I read the piece in the Financial Times, I looked at the headline and that grabbed my attention. But then when I saw what the minister actually said, he began his statement by saying, we are not sending any troops to Iraq. And then he went on to speculate about something that might possibly happen in the future. And that’s what grabbed the headline.

So by then Chancellor Schroeder had already put out a statement. And I decided just to make sure I understand this, I called my colleague, Foreign Minister Joschka Fischer, and he reaffirmed that there was absolutely no change in the position of the German government. Nor was Minister Struck trying to indicate any such change.

CAVUTO: Still, it left open the possibility that they would be open to, if this were to come to pass, a President Kerry holding an Iraq summit that would involve nations like Germany and their openness to send troops perhaps under him when they didn’t have it under President Bush. What do you know of that? 

POWELL: I did not hear Chancellor Schroeder or Foreign Minister Fischer leave that open. I think you’re, once again, referring to Minister Struck’s comment when he expressed in an international conference, which is an idea that has been around for over a year. And even we have been considering it an international conference at some point.

It was a French-Russian idea and it has some merit. But we believe it is more important to have a regional conference of the type we’re having next months where all of Iraq’s neighbors come together to talk about the need for stability in that part of the world, the need for them help Iraq achieve that stability. And we will have members of the G-8 attending that regional conference. And some other nations and organizations may also be represented.  Not a full scale, worldwide international, but certainly an important international conference to help the Iraqi government through this time of challenge.

CAVUTO: I know you don’t like to comment necessarily, Mr. Secretary, on things political, but Senator Kerry has said again in his debate with the president last night this issue of the war being the wrong war at the wrong time. What signal do you think that is sending the Iraqis?

POWELL: I think the Iraqis know that we are in a political season.  But what the Iraqis also see, 140,000 American troops are there working alongside them. And that $18 billion is being spent for reconstruction in Iraq. And part of that money is being used to build up their security forces to take responsibility for the security of the Iraqi people and get it out of the hands of the coalition forces. Something we support.

My deputy, Deputy Secretary of State Richard Armitage going to Tokyo over the past couple of days, being in Tokyo the past couple of days, to pull all of the nations of the world together to rationalize the additional funding that is coming from the international community, the $13 billion of additional funding on top of our $18 billion to help the Iraqi people.

The Iraqi people are free. So they don’t think it was wrong time.  They know that they are better off without Saddam Hussein. And what we are going to do is keep our eye on the ball. And that is to make sure the Iraqi people get this insurgency under control and that we have elections in January of 2005.

And hopefully there will be elections of the kind that we saw in Afghanistan this past weekend where also people were telling us, it isn’t going to work, you’ve gotten yourself into a mess. Well, I was sure happy to see on Sunday that tens upon tens of thousands of Afghans came to the polling places to make their wishes known and to put in place a government that is of their choice. We want to see that same thing happen in Iraq. And it can happen as long as we stay the course.

CAVUTO: Senator Kerry seems to be saying, sir, that foreigners would be more amenable to dealing with him than with President Bush and that there is more of an openness to really re-open a dialogue with a different administration. What do you make of that?

POWELL: I spend an enormous of time with foreign friends. I attend conferences on a regular basis. I’m on the phone constantly with all the foreign ministers of these nations. And they are doing everything they can to help us.

Take Germany, for example. Germany says they are not going to be able to send any troops. We understand that. We would be surprised if they said anything else. But they are training Iraqis outside of Iraq, helping them to train police forces, providing equipment and support that will help the Iraqi people.

So many ways in which nations can help. And I don’t want to get into the political debate, as you noted, and Senator Kerry can make these statements and I’m not sure that he can really back them up or that suddenly support that is not there now will magically appear with a change in the presidency.

CAVUTO: Donald Rumsfeld has indicated, Mr. Secretary, that maybe after the Iraq elections we can start scaling back our troop commitment, I guess we’re at about 135,000 soldiers now. How realistic is that, what kind of numbers have you thought about?

POWELL: I think it is all a function of what’s going on in the country with respect to the insurgency. The important thing is to get this insurgency under control by the use of our troops, but more importantly, to build up the Iraqi troops: the police forces, the military units, the national guard, the border patrol, and let them take on the larger burden.

And if we can get through this insurgency, high intensity period from now to the election. Get a free election of the kind we saw in Afghanistan, then certainly we can take a look at what our troop needs are at that point.

I don’t think Don was suggesting that the numbers have to go down or up. He’s hoping, as we all are, that they will be able to go down. But I know Don feels as strongly as I do and the president does that we would put the troop force in there that is needed to get the job done. And hopefully as the Iraqi forces build up, fewer of our troops will be needed, especially in the post-election period.

That’s our hope. But what we will really do beyond that hope is to put on the ground whatever our commanders say they need to do the job.  

CAVUTO: Still, they insist -- that is, the Democratic ticket and many others as you know, sir, that we are spread too thin, that we’ve essentially got a back door draft right now. Do you agree with that and if you do, would be willing, and has it serious been considered, that we revisit it?

POWELL: Nobody is revisiting the draft. Nobody is thinking about revisiting the draft anywhere in the administration. We have a great volunteer force. It is being stretched. It’s doing many things. But I’m so pleased that Americans are still signing up to serve in that force and re-enlistments are high.

Re-enlistments are high because these young men and women realize that they’re doing important work, serving the cause of freedom around the world for people who want to be free.

CAVUTO: Do you think we’ll ever find weapons of mass destruction?

POWELL: I have no reason to believe any longer after the reports we’ve seen, and most recently the Duelfer Report, that there are any stockpiles…

CAVUTO: But where does that…

(CROSSTALK)

POWELL: It’s not a matter of where did they go? We thought there were stockpiles. All the intelligence that came to us, the intelligence I used from the CIA and the rest of the intelligence community when I made my presentation last February, led us all to the conclusion that there is not only an intention on of the part of Saddam Hussein to do this, and Duelfer has pointed that out, and not only did he have the capability to do it, Duelfer has pointed that out, and not did he have a history of doing it, but he actually had stockpiles.

We knew that, and that’s what we presented to the world, the basis with which we went to the world and to the United Nations. Those stockpiles have not been found which suggests that maybe we were wrong, the intelligence community was wrong and there were no stockpiles. They had been destroyed earlier, or maybe they hid them somewhere. But if they are, I can’t figure our where they are. 

CAVUTO: From knowing what you know now…

(CROSSTALK)

CAVUTO: From knowing what you do now then, sir, would you have advocated going into Iraq as we did?

POWELL: I can’t answer that because it’s not what I know now, it’s what I knew then, what I knew then. And what I believed then based on all the intelligence that came to me, intelligence came to the president, the intelligence that was coming from other nations, the United Kingdom and elsewhere, the same intelligence that went to the Congress and all the senators in the Congress, and the same intelligence that President Clinton used to undertake military action in 1998.

The president made the right decision. And I wish I could, but I can’t go back and tell you what factors would have influenced any recommendation I would have made to the president at that time or what the president would have decided.

He decided it on the basis of the information we had. And in the aftermath of the conflict, knowing what we know now about Saddam Hussein and all of his efforts, knowing even more than we knew then, with respect to the mass graves which we see being opened now, yesterday. You saw pictures, Neil, of children, pregnant women, murdered, put in mass graves.

I have been to the place in northern Iraq, Halabja, where in one morning Saddam Hussein gassed 5,000 people, killed 5,000 people, not on a battlefield, but in a village. Knowing what we know about that regime, knowing what we see still with respect to his intentions, his capabilities, his strong desire to get rid of those U.N. sanctions, that’s why he was hiding -- he was playing a game with the international community to get rid of the U.N. sanctions.

The only part that we did not get right, and the intelligence is doing all sorts of analyses to find out how they got it wrong, was he did not have sitting, standing stockpiles of the kind that we thought were there.

CAVUTO: Having said all of that, sir, and since I know you regularly read the "Financial Times," as you said at the outset there, Brent Scowcroft, the former national security adviser under the president’s father’s administration, has said that this administration, the unilateralist stance is contributed, he says, to the decline of the trans-Atlantic relationship, that we’ve isolated ourselves. Do you think that there’s a bit of truth to that?

POWELL: I hear this frequently and I have the greatest respect for Brent Scowcroft. But we had worked with our European friends to expand the NATO alliance to twenty-six. We worked with our European friends and they have expanded the European Union to twenty-five.

I was one of the signatories on the Adriatic Charter a year or so ago to help Croatia, Albania and Macedonia get ready for their entry into the E.U. and into NATO as part of the expansion of the trans-Atlantic union.

I have a steady stream of visitors from the trans-Atlantic world coming to see me to talk about what we can do together. Don Rumsfeld is in Romania these past couple of days working with NATO on getting NATO to help with the training of Iraqi military forces. Talking to NATO about how NATO can take over, perhaps, next year the mission in Afghanistan.

This isn’t an administration that is not working with partners. We’re spending a lot of time with our partners… 

CAVUTO: Then why is the perception that it’s not, Mr. Secretary, why do you see polls like in countries like France, 80 percent of the people prefer Senator Kerry to the president, in Germany a like number, even in Italy, close to 60 percent? Why do these numbers still…

POWELL: Because there is still a hangover from Iraq. We had a major dispute with some of our traditional allies over Iraq last year. We had a major dispute with the French and the Germans and one of our new partners, the Russians. They were opposed to it. Their publics were opposed to it.

But we also have strong relations with powerful friends in Europe: Italy, Spain, the United Kingdom, all of the Central and Eastern European nations that have been once oppressed, each and every one of them knew the importance of standing alongside of us as we brought freedom to another nation. They stood with us.

But it was not a popular action on our part throughout European .

CAVUTO: Yes. But I believe Mr. Scowcroft’s problem was that he felt this administration was sort of joined at the hip with Ariel Sharon. He said that it appeared to him that Ariel Sharon has the president wrapped his little finger.

POWELL: It was this president that got Ariel Sharon to join with then- Prime Minister Abu Mazen at Aqba last year, standing together to say that we are committed to the road map, we are committed to the creation of a Palestinian state. And whatever reluctance Mr. Sharon had, he was there. And ever since he has reaffirmed his commitment, notwithstanding statements by others.

And we have worked with Mr. Sharon so that his disengagement plan of pulling out of all the settlements in Gaza will be joined to the elimination of four settlements as a start in the West Bank as part of the road map. And all final status issues will be decided between the Palestinians and the Israelis.

So the road map is alive and well and the president is working with both parties. But it has been very, very difficult. Mr. Sharon has a responsibility to defend the people of Israel. And we need reformed leadership in the Palestinian community. Chairman Arafat has not been a successful leader. However much he is regarded by his people, he disappointed the previous administration, President Clinton’s administration.

And I spent a great deal of time trying to get traction with the Palestinian Authority. And what we need is a Palestinian prime minister who is empowered, empowered to make the necessary tough political choices and tough security choices in order to give us a responsible Palestinian government that we can work with and expect him to meet their obligations.

And at the same time we can press Israel more on meeting their obligations: the elimination of outposts, the ending of settlement activity.  All of that is part of the president’s agenda, leaving final status issues for the two parties to negotiate. And the president’s overall goal is the creation of a Palestinian state that will live side by side in peace with the state of Israel.

CAVUTO: All right. Finally sir, you’ve been very patient, but the last question concerns poll numbers. I’ll read them, from leaders across the globe. And you might be surprised to know you have the highest approval ratings of any leader or close to world leader on Earth. In fact, in this country, you are the most respected public figure just judging by polls. Do you ever look at that, Mr. Secretary, and say, President Powell sounds good?

POWELL: No.

CAVUTO: At all?

POWELL: No. I made my decision in 1995. I considered how I should spend the next days of my life after leaving the military and spending a little time in the private sector. And I’ve decided that I could devote my time to working with young people as I did for a number of years. And when President Bush gave me this opportunity to serve the nation, I served it again as secretary of state.

But I know who I am, I know what I can do and what I’m good at and what I don’t think I’d be so good at. And elective politics was not the right thing for me to do.

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