'FOX NEWS SUNDAY' HOST CHRIS WALLACE: In Iraq (search) two American soldiers were killed in a roadside bombing. In a separate incident, a suicide bomber exploded an empty fuel tanker near a police station, killing two more people.

Well, it's crunch time in Iraq. Leaders there have just eight days to finish writing a new constitution, and U.S. and Iraqi forces face an evermore deadly enemy.

To discuss the situation, we turn to two key senators: Richard Lugar (search), chairman of the Foreign Relations Committee, who joins us from Phoenix, and the top Democrat, Joe Biden (search), who's in Wilmington.

Senators, welcome back to "FOX News Sunday."

SEN. JOSEPH BIDEN, D-DEL: Good to be back.

SEN. RICHARD LUGAR, R-IND: Thank you, Chris.

WALLACE: Let's start with the big picture. Where are we in Iraq now?

Senator Lugar, how is the president's policy doing to build a stable Iraq both politically and militarily?

LUGAR: Well, the United States has agreed with the Iraqi government that we're going to see a constitution August the 15th, a referendum about two months following that, and elections in the country that will establish a government.

And clearly in that period of time, the intensity of training for the Iraqi security forces will be increased and hopefully successful.

Now, having said that, we're on track, at least I believe, in our own diplomacy with the Shiites (search) over women's rights. Our ambassador weighed in this week.

Clearly the Sunnis (search) and the Kurds (search) are having some trouble over the federalism principle, as well as allocation of resources. And those issues might not be decided by August 15th. They may be put over to the parliament to come.

But in any event, there is a predictable schedule, and it seems to me that things are on track.

WALLACE: Let me ask you, Senator Biden, for a brief overview. Are things on track in Iraq?

BIDEN: Well, it's too hard to tell right now, Chris. It depends what that constitution says.

Wouldn't it be the ultimate irony if written into that constitution women had fewer rights than they had under Saddam? Wouldn't it be an irony if in fact it becomes that -- the Sharia becomes "the" as opposed to "a" source of law.

So it's too early to tell. I'm still mildly hopeful.

The administration's made some changes. We have a first-rate ambassador there now who understands the need to do smallbore projects to change the circumstances of people on the ground.

But I think it's too early to tell.

WALLACE: Senator Biden, before we get more into the political situation, let's take a look at the military situation. This has been one of the deadliest weeks of the war for U.S. soldiers; 32 have been killed since Monday, most of them in attacks in western Iraq near the town of Haditha.

Now, we went into that area three months ago and cleared out all the insurgents at the loss of three Marines. Then we had to come back and have taken heavy losses again.

Question: Do we have enough U.S. troops in Iraq to take territory and then to hold onto it?

BIDEN: Absolutely not. We haven't had it from two years ago, a year ago, six months ago.

I came back from Iraq after my fifth trip on Memorial Day. I met with every major general that was there. They all said they didn't have enough forces to mount a counterinsurgency, which means that you have to seal that border; when you take territory, you have to occupy it.

These brave Marines go out in Anbar province, which is along the Syrian border out there. They clear out territory. They have to leave; it fills up again.

We don't have enough troops.

WALLACE: Senator Lugar, let me ask you about another angle of that.

The Washington Times, which has certainly supported this administration's policy in Iraq, quoted top military commanders this week as saying that there is not a single Iraqi unit that can conduct combat operations in the part of Iraq that Senator Biden was talking about, Anbar province, without the support of U.S. troops.

And there was another report this week that the defense ministry over there in Baghdad is a mess, that it can't pay, it can't feed, it can't equip its military units.

Why is it taking so long to get the Iraqis to bear more of the burden?

LUGAR: Well, a great number of reasons. But the reports you suggested today are important as a very candid reflection. And that kind of benchmark reporting is going to be required.

Clearly, the kind of forces the Iraqis are presenting that are confounding us, that are causing deaths of Americans, are tactics that we are not really prepared for.

And I would just simply say it's not simply Iraqis that are having problems. We are having problems with roadside bombs, with remote-controlled explosions.

Having said that, the fact is that we are proceeding with the reconstruction of the country, with the building of a constitution. And the time that we are devoting to that also is time for training with a lot of adjustments made on the basis of our experience.

WALLACE: Senator Biden, let me ask you something, because we've talked here about the fact that the Iraqis are slow in the training up, and we've also talked about the fact that there may not be enough U.S. troops there right now to meet the burden. But we're hearing from top U.S. officials talk about a possible draw-down next spring.

Do you think that's realistic? And is it being driven by the situation on the ground in Iraq? Or is it being driven by the political realities or political motivation, particularly the fact that there is a declining support here at home for the president's policy?

BIDEN: Well, I won't second-guess their motive -- the administration's motive.

But the fact of the matter is that I think instead of talking about drawing down and a timetable to do that, I think we should be making clear to the Iraqi people what our objectives are.

One is, we should state forthrightly, "We have no desire to have a permanent base there." Two, "We have no desire to deal with their oil."

We should be giving declarative statements to make clear to the Iraqis and broadcast it far and wide what our objective is, number one.

Number two, we waited much too long to begin to train the Iraqis.

You may remember, Chris, I've been on your show repeatedly saying that Rumsfeld was simply wrong saying there were 220,000 Iraqis trained, then 156,000 Iraqis trained. We've misled the American people. We have lost their confidence.

And now there's this race against time. Can we get a government up and running -- can they get a government up and running that has the capacity to maintain order before we lose the support of the American people?

And we are -- they're still not leveling with us.

WALLACE: When you say, "They're still not leveling with us," let me ask you a direct question, Senator Biden. How many Iraqi troops do you believe right now are adequately trained to take over from U.S. forces in all kinds of combat situations?

BIDEN: Fewer than 3,000.

WALLACE: Excuse me?

BIDEN: Fewer than 3,000 able to take over totally without U.S. support.

There are then another probably 25,000 to 30,000 that, with significant U.S. support, are able to do very useful things.

And then there's probably another 10,000 to 15,000 that are incapable of doing anything at this point.

WALLACE: Now, Senator Biden, I remember you said roughly that same number some months ago, during the confirmation hearings for Secretary Rice...

BIDEN: You're exactly right.

WALLACE: ... and Rumsfeld and some of the other people at the Pentagon said you're crazy.

BIDEN: They did say that. And I would just let history be the judge of who is correct.

WALLACE: Senator Lugar, let me ask you now -- let's switch, if we can, to the political situation.

Where are the Iraqis, at this point, in writing this constitution?

As we've talked about, there is a deadline -- eight days from today. But there still are big differences about, one, the question of the role of Islam in the formulation of that government and in the status of law, which could have considerable implications, for instance, for the rights of women; and also the question of federalism, how much power each ethnic and regional group will have.

How concerned are you about whether the center will hold in Iraq?

LUGAR: Well, the fact is that we have to have concern about whether Iraq remains a whole country.

I salute all those who are negotiating this constitution, because they're doing so with a history behind them that is not very promising for democracy. And yet they have succeeded, it seems to me, in getting a framework for a constitution that probably is going to work for Iraqis.

Specifically, they are down, I think, to the points of federalism, how do you allocate resources, especially oil; what are the prospects for the Sharia code and women, or opposed to that; and likewise, how do the Sunnis fit into this situation, right now, with just 17 people.

And I think those are the factors that are daunting, even to negotiators as skilled as these are.

But having said that, I would just comment that the United States, it seems to me, is playing a very constructive role with our ambassador.

Likewise, the discussion of our troop withdrawal, I believe, is calculated two ways, one of which is to assure us. Senator Biden has mentioned that the Iraqis know that we do not want a permanent presence there. But secondly, we're prepared to stay the course, to provide security for this fledgling government. And finally, to reassure the American people that we have a withdrawal strategy. Because there is desire to shore up our military and make certain we're capable of performing missions other places.

WALLACE: Senator Biden, your overview of where we stand in the writing of the constitution and whether the center is holding or whether the various factions are splintering?

BIDEN: Well, I think the center can hold. It's remarkable it's gotten this far.

But you mentioned before, Chris, that these three things that Dick just mentioned -- that is, federalism, allocation of resources -- that is, oil -- and the Sharia's role in the constitution -- we knew that, for the last two years, they would be the sticking points.

This is the really hard part right now. This is the most critical moment in modern Iraqi history, how those three get resolved. And that will determine whether or not there is a real shot of this country holding together, or we begin to see fissures that essentially result in Iraq turning into Lebanon.

I still am hopeful. I wish we had done what we did in Bosnia. I wish we had brought in the rest of the world that was prepared to be involved in the political process, like we did with the contact group in Bosnia, so that we weren't the one looking like we were pushing the constitution in a particular direction.

We have one of the most skilled ambassadors in my 32 years in the United States Senate in place now in Iraq. He's doing a brilliant job, long overdue, a brilliant job.

But I wish we were able to bring collective pressure, so that it wouldn't be us dictating -- appearing to be able to be used as dictating outcomes. That's my greatest concern.

WALLACE: Senator Biden, we're running out of time, and I want to ask you and Senator Lugar a couple of brief questions.

First of all, let's turn to Iran. There are reports just yesterday that, according to top U.S. intelligence, that some of the more powerful, more sophisticated bombs that are being used against us in Iraq apparently were being made and shipped in from Iran.

When you add this to Tehran's refusal to accept the European incentives to stop its uranium-enrichment program, what should we do about Iran?

BIDEN: Well, there's two things.

One, we have to, on the nuclear side, we have to stay in sync with the Europeans in the hope that if they do not respond, the Iranians, that we will collectively be able to respond with additional sanctions, because as the president says, we're sanctioned out.

On the latter part, it seems to be that we have to do something that's going to sound heretical here. What did we do in Bosnia, and what did we do in Afghanistan? We looked at a regional approach to both of those problems. In Bosnia, we got the Croats and the Serbs in to deal with the Dayton Accords (search). In Afghanistan, we actually brought in the Iranians as part of the solution there initially.

We need to be able to figure out how we make assurances and how we deal with the border states around Iran. There's no discussion, to the best of my knowledge, going on on any of those things. It seems to me that that's a mistake.

WALLACE: And finally, Senator Lugar, let me ask you about that new tape that came out this week from Al Qaeda's number-two, Ayman al-Zawahiri, in which he threatened both the U.S. and Britain with new attacks unless we pull out of the Middle East.

When you combine this with what's gone on in Britain over the last month, very briefly, where is the terrorist movement right now?

LUGAR: Well, I think those warnings will continue to come. Very clearly, Al Qaeda has not wanted us in Saudi Arabia for a long time, quite apart from Iraq or anywhere else. And therefore, they'll continue to issue those warnings.

The promising thing this week is that our diplomacy is now together with the Europeans, as Joe Biden has pointed out, in Iran, and likewise with the other five powers in North Korea.

In both cases, the negotiations have hit a stall because the two countries want to have the ability to have nuclear weapons. And they've got to decide whether they want to back off of this in return for a much broader policy on our part.

But I think those are encouraging developments. And I think that likewise, the fact that we're discussing the constitution and even a withdrawal plan in very encouraging in Iraq.

WALLACE: Senators Lugar and Biden, we want to thank you both, gentleman, for sharing your thoughts with us today. Please come back soon.

LUGAR: Thank you, Chris.

BIDEN: Thank you very much.