This is a partial transcript of "Special Report With Brit Hume," Nov. 26, 2004, that has been edited for clarity.

Watch "Special Report With Brit Hume" weeknights at 6 p.m. ET

BRIAN WILSON, HOST: Prominent Palestinian, Marwan Barghouti (search), convicted of murder, imprisoned by the Israelis bowed to pressure from his Fatah faction today, dropping plans to run for Palestinian president.

Well, here to talk about all of this and more is Ambassador Dennis Ross, former Mid East envoy and author of the book "The Missing Peace;" also a Fox News Channel foreign affairs analyst.

Thank you for joining us, Dennis. Good to see you.

DENNIS ROSS, FMR. MIDDLE EAST ENVOY: Good to be with you.

WILSON: Well, I mean this Barghouti thing — let’s talk about the significance of this because it didn’t get lot of play. But it is very important because it does tend to suggest that Mahmoud Abbas is the man who has the juice.

ROSS: Yes, I think there are two points to bear in mind here. Mamoud Abbas (search), also known as Abu Mazen is part of the old guard of Fatah. But he’s very well respected by the rest of the world, number 1. Number 2: he’s been very critical of what they call the militarization of the Intifada. Meaning the turn to violence, that it’s a big mistake from the standpoint of the Palestinians. Number 3: Marwan Barghouti is much more popular than he is on the street. But as you said, he did submit, I think, to the pressure from his own I would say constituency within Fatah (search).

Fatah was the organization that Arafat controlled, set up over the years. It’s the most important of all the Palestinian organizations. The younger guard, in fact, would not normally be supporting Mahmoud Abbas, Abu Mazen. But they also see him as a transitional figure. And they understand that to go with him right now is the responsible thing to do. Had they gone with right now, I think, Barghouti’s instinct to run for elections, what they would have been doing is perpetuating what I call the symbolism Arafat.

Arafat believed in making statements, not in changing policy. He believed in symbolism over substance. And in effect, what Arafat believed in was being defiant for the sake of being defiant.

Now, what you see with the under guard going along with Abbas is that look, we need to change our approach. We need to deal with reality. And we need to change reality. If we focus only on making statements, only on being defiant, we’re going get nowhere. We’ll perpetuate what has been going on. Had Marwan, in fact run, it would have done two things. First, it would have split Fatah, which is the key organization. And then it opens the way for other organizations, like Hamas. And it will make a statement that it’s more important to be focusing on symbols than it is to change realities to be ground.

WILSON: Dennis, what you’re saying seems to be very encouraging.

ROSS: I think it is. I think this was a very important step. One thing that’s interesting is that normally Barghouti has not been allowed to see other members of the Fatah younger guard. And yet, the Israelis permitted that to happen, which tells you that they also understood that they, too, have an interest right now in letting the Palestinians sort things out among themselves. But also, those who are prepared to be responsible on the Palestinian side, they need to give them enough space to be able to act in a way to give them breathing space so they can begin to have some effect.

WILSON: How effective could Barghouti have been if he’d been elected and he’s still in prison in Israel?

ROSS: Well, that’s the point.

WILSON: It would have been a symbol, symbolic.

ROSS: Right. It would have been a statement again. Here we’re more interested in making statements than we are in terms of moving to a new day, changing the reality for Palestinians. This was, I think, was a very encouraging thing to see, precisely because it was his constituency, his colleagues, the Fatah younger guard that went to him and prevailed upon him not to run.

Now, to be fair to him, it’s also possible that he did this as a way of improving their leverage in negotiations with Mamoud Abbas. The younger guard in Fatah is completely focused on building institutions on the one hand, and making sure that the next generation, as it were, that their generation begins to have much more effect than the old guard. The old guard primarily came from outside the territories; the younger guard comes prior merely inside the territories.

WILSON: We just saw this fascinating piece from Jennifer Griffin, our crack reporter over there in Jerusalem. It points out the Palestinians are still very actively involved in using media incitement to keep their side roiled up. And we heard the guy that’s in charge of Palestinian TV saying I’ve gotten no orders to pull back. Are you surprised by that?

ROSS: Not really. Because I think right now what you have got on the Palestinian side is entirely an internal focus. Look what they just did today. It was only in the last few of days that they nominated Mahmoud Abbas. Today they were dealing with the fact that Marwan Barghouti was thinking about that he was going to run, which would have split Fatah. So in a sense I think they’re completely consumed right now with what it takes to get from the period after Arafat, to the establishment of a new leadership.

This is a transition period right now. This is a caretaker government right now. After you have an election on January 9, assuming Mahmoud Abbas is elected. And I think the decision by Barghouti today makes that much more likely than would have been the case. Then I would expect to see more change; again, not as a favor to us and not as a favor to the Israelis. But largely as a function for Palestinians having a need to change things for themselves.

We’re in a period right now that is extremely important. I hope to see us more actively involved precisely because the elections create a basis on which to establish direct talks between Israelis and Palestinians. We shouldn’t be in the business of seeking assurances from Israelis. We want Israelis and Palestinians to reach mutual understandings, so they can create an environment on the ground where the Israelis can pull back, because they know the Israelis won’t be attacked if they do.

WILSON: Dennis, you have contacts all over that region. What is the talk on the Arab street right now? Are they excited? Are they looking at finally a real possibility of change?

ROSS: You know, it’s a very interesting question, because I expected the emotionalism over Arafat to last a little while longer than it did. In a sense, it played out in one day. And since that time the focus is really on the sense that there is a possibility. And you see it not only among Palestinians. You also hear it from others in the area who realize that as long as Arafat was there, nothing was going to change. Now with Arafat not being there, there’s a potential for change.

But we shouldn’t have any illusions that it will be overly rapid. Don’t expect the new Palestinian chairman, or president of the Palestinian Authority (search) to suddenly be able to concede on Jerusalem or on refugees. First, they’re going have to build the authority. Building their authority means tackling corruption. That’s what all Palestinians support. If they focus on corruption and say stop the violence, if they can show they can deliver, if suddenly life gets better. If we generate a lot of investment from the outside, and they can see this way works, not the other way. Then it will be possible to get back to peacemaking.

But I think there’s a lot of — I think there’s a lot of optimism at least beginning to emerge on the Arab side.

WILSON: In the 30 seconds sorry we have left. The United States and Israel are going have to walk pretty gingerly in the meantime?

ROSS: It’s critical that we not look like we’re intervening in their elections. But it’s also critical for us to do all we can. As I said, to make sure the environment for the elections is set up. It’s not enough to have the Israelis pull back and then have a terror act where we go back in. We have to have a cease-fire under by both sides the same way.

WILSON: Dennis Ross, it’s great to have you here. Thanks a lot.

ROSS: A pleasure.

Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.