This is a partial transcript of "The Big Story With John Gibson," July 19, 2006, that has been edited for clarity.

JOHN GIBSON, HOST: Before Al Qaeda hit us on 9/11, Hezbollah was the terror group responsible for more terror-related American deaths than any other group in the world.

But that is only part of the reason the U.S. government has kept a close eye on Hezbollah for the last two decades. Sometimes we even put spies into Lebanon to watch Hezbollah, Syria and others. We are watching them right under their own noses. My next guest was one of those spies.

Joining us now is former CIA agent Bob Baer, author of "Blow the House Down."

So Bob, Israel wants to crush Hezbollah in southern Lebanon. Is that possible, probable or unlikely?

BOB BAER, FORMER CIA AGENT: It's unlikely. As you said, they have put 18 years into trying to defeat Hezbollah and ultimately failed. And one of the reasons they haven't put ground forces in, a lot of ground forces, is because these ambushes are set up all over the south.

I was there earlier this year and Hezbollah made no bones about it. They have got that whole country blocked with military units, which the Israelis do not really want to engage.

GIBSON: Bob, how strong is Hezbollah?

BAER: John, I got to tell you, I have a lot of respect for this group. It killed two of my bosses, it blew up the Marines, it blew up two of our embassies and I could go on and on and on. These guys are the major leagues when it comes to terrorism.

GIBSON: What does that mean, Bob?

BAER: That means they could hit us almost anywhere in the world. I don't know about the United States, but there was some suspicion they had groups in North Carolina, Detroit. They claim they can take down commercial airliners. They can hit all over Europe and South America, Africa and Asia.

GIBSON: Were they picking a fight with Israel here or did they miscalculate?

BAER: I can only guess. I think what they wanted to do was open a front against Israel. And there are a lot of reasons for that. They are backed by Iran.

And John, I've got to say, I'm not advocating war with Iran. I don't want to get put in that category, but Iran had to have been part of this attack last Wednesday because Hezbollah depends on ammunition and money from Iran. And they wouldn't have gone ahead with this attack on an Israeli patrol without Iran's approval.

So what I think what they want to do is draw the Israelis in to a land war in Lebanon again. And the Iranians say, look, our conflict is with Israel. Don't pay any attention to Iraq. And they want to unify Islam essentially.

GIBSON: Unify Islam under what, an Islamist theology?

BAER: Yes, the president of Iran and the spiritual leader of Iran, Khamenei, are both believers and they both believe firmly in the destruction of Israel and they would like to open this front up. Again, they would like to open up several fronts in the Gulf, Lebanon, in Iraq eventually.

GIBSON: The Israelis, apparently — the latest word from Jennifer Griffin is the Israeli generals think they need about two weeks to bring Hezbollah down where they could live with them across the border. That is pretty much taking it apart. And basically they are doing it with airstrikes and planes on patrol looking for targets of opportunity. Is that going to be effective for the Israelis?

BAER: No. It will not be effective. And the Israelis, in all fairness, would like to hit military targets.

But the problem is that Israel cannot find them. They don't have military camps. Hezbollah is hidden among the civilian population, like traditional guerilla groups. They are working out of caves and they don't know what targets to hit. And this is why they are hitting roads, infrastructure, power plants, is the only thing they can hit right now. They don't know how to stop the shelling. If they did they would have stopped it on day one.

GIBSON: Is this why there seems to be a lot of civilian deaths, because Hezbollah is mixed in with the Lebanese population? In fact, I think the Lebanese ambassador to the U.N. told me last night they are Lebanese and they are essentially in anybody's apartment building or on anybody's block.

BAER: You know, you go to Hezbollah offices in the southern suburbs and the first thing you notice is you are walking up some stairs and there are families living in their military committee headquarters, in the political headquarters. All these apartments are all bunched together. They are living in small villages in southern Lebanon.

They don't wear uniforms. It's impossible to distinguish them. Remember, they have had 20 years experience fighting against Israel and they are putting that into play.

GIBSON: But if that's the case, when we hear these stories about civilian deaths, are they really civilian deaths or are they Hezbollah?

BAER: You cannot avoid going to war in Lebanon without civilian deaths. You just cannot avoid it. Yes, there are civilians being killed.

Israel — let's look at this realistically — has no choice. They could sit back and they could say, all right, keep attacking us or they can try to hit these people.

I think we are in a dangerous situation now because there's a lot of popular support in Lebanon for Hezbollah among the Shia, among the Syrians and a lot of Arabs. So this could spin out of more control than it already has.

GIBSON: Well, tell me what happens. What is that dangerous situation? What is spinning out of control more than it already has?

BAER: Well, if I'm sitting in Tel Aviv and one of these new missiles hits Tel Aviv, kills 20 people, you can say, all right, what target do we have now? And the target would be not an obvious one, but would be Damascus. Let's hit Damascus.

So this would take this war to another country and we would have this arc of chaos going from Iraq, Syria, to Lebanon, and that's what worries me the most.

GIBSON: If Damascus were hit, would Damascus react militarily or would Damascus say, oops, we've pushed the situation too far and back off?

BAER: Syria has a very weak army. We could, for instance, be in Damascus in a week. Our troops in Iraq, you could cut right through the Syrian army. There's not much of an army. It's demoralized. So could the Israelis.

But that still wouldn't solve their problems with Hezbollah. All Hezbollah would say is, look, we told you they are after us. Syria has only limited influence over Hezbollah. Right now they are letting weapons in. You could probably close down these routes inside Syria, but the attacks would continue. They would eventually peter out when the arms — but again, you are opening a chaotic situation in that region.

GIBSON: Bob, you were a spy in Lebanon for the CIA. Do the Americans now and do the Israelis have spies, like you were, on the ground there telling them what's really going on?

BAER: No. The problem is that Hezbollah has an incredible counterintelligence capability. If the Israelis could, they would assassinate the head of Hezbollah, Hassan Nasrallah, and the military commanders.

They can't find him because they don't have spies. They are not on the telephone. And it's this kind of intelligence problems the Israelis are facing. And they obviously don't know where the rockets are because they would just take them out if they did.

GIBSON: So if you were still operating there they would have found you?

BAER: Oh, absolutely. I wouldn't dare go into Beirut today as an American and try to operate against Hezbollah because they have got so much popular support. You would be turned in and kidnapped or killed.

GIBSON: Bob Baer, former CIA agent, author of the great new novel, "Blow the House Down." Bob, thanks very much for your expertise.

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