This is a rush transcript from "The Journal Editorial Report," February 24, 2007.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," another U.N. deadline comes and goes as Iran continues to defy the international community. But as the U.S. ratchets up the financial pressure, are cracks emerging in the regime?

Plus, what role is Tehran playing in the chaos in Iraq? We'll examine that evidence.

A Hollywood heavyweight throws the democratic presidential nomination into turmoil with some choice comments about the Clintons.

Those topics, plus our weekly "Hits and Misses," but first, these headlines.

(NEWSBREAK)

GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

In a finding that clears the way for harsher sanctions against Tehran, the IAEA said late this week that Iran has expanded its uranium enrichment program instead of complying with the U.N. Security Council ultimatum to freeze it.

But as the international community contemplates its next step the U.S. is ratcheting up the financial pressure, hoping to expose some cracks in the Iranian regime.

Iranian author and journalist Amir Taheri joins me now from London.

Amir Taheri, thanks so much for joining us.

AMIR TAHERI, JOUNALIST AND IRANIAN AUTHOR: Pleasure.

GIGOT: Mahmoud Ahmadinejad dismissed the U.N. deadline this week as meaningless. Do you think the Tehran government is feeling any pressure at all from U.N. sanctions?

TAHERI: Yes, they are, in a number of ways. First, economically. Businesses have stopped doing deeds in Tehran. Money is leaving the country. The value of the Iranian currency is plummeting. And, of course there is a mood of uncertainty which is bad for business.

GIGOT: Well then, why is the Iranian regime continuing to defy the international community and not coming to the table to try to remove the sanctions.

TAHERI: Because they think that saving face is more important for them. This is a regime that has lost its legitimacy, it's revolutionary legitimacy, and wants to regain a new legitimacy as a regime that has stood up to great powers and won.

GIGOT: The nuclear weapon that it is trying to gain is one way of achieving that kind of renewed legitimacy? Is that why you think they are pursuing the program?

TAHERI: Yes, if they can defeat the United States, if they can defy the international community and force the Americans to leave the Middle East, of course, they will gain a new legitimacy not only inside Iran, but throughout the Middle East because they think they have an alternative to the American model of globalized system that we have now. They think their model is much better and they are the only power capable of standing up to the United States today.

GIGOT: What do you the government strategy is in dealing with the U.N. and United States? Do you think it is a divide and conquer strategy where they are trying to pit the Europeans and the Russians and the Chinese on one side, who take a more dovish approach against the U.S.?

TAHERI: Yes, because the collation is the Europeans and the Chinese and the Russians will not do anything really to hurt the Islam regime on the assumption that, if the Islamist regime becomes really dangerous and nasty, the Americans will deal with it anyway. So why should the Europeans, the Chinese and Russians do something now?

So everybody is waiting for the 11th hour. The Iranian leadership thinks that, if we are going to back down, why should we back down now? It is eighth our or ninth hour. It will wait until the eve of the last moment, when we see we are really in danger. Then we can always back down.

GIGOT: I want to ask you about a point you've been making in the past in some articles that the nature of this regime in Tehran is revolutionary. That's your word. What do you mean by that? And what are the implications of that?

TAHERI: Well, it has happened often in history that a nation becomes afflicted by a kind of schizophrenia. Iran is two Irans now. One Iran has a revolution. And one Iran has a nation state. And the interests of the two do not coincide.

The outside world has problems with Iran as a revolution because this Iran as a revolution wants to change the world. It wants to impose its own version of Islam, first, on the Middle East and then on the entire world.

But Iran as a nation doesn't have that ambition. So as long as these duality controls, it is impossible to make any settlement with Iran.

The revolutionary Iran must be absorbed by Iran as a nation state so that it becomes normal.

For example, we had a problem with the Soviet Union. But not with Russia. We had problem with France under Napoleon, but not with France as such. We had problems with China during Mao's heyday, but not China as an ordinary member of the international community. So...

GIGOT: But that meanings you can't — is the implication of that that you can't treat — or this Iranian government as a status-quo power, that you can't sit down with it at the negotiating table, the bargaining table, like you can, say, with modern China in Beijing?

TAHERI: You can't. Because the history of the past 28 years shows that you cannot negotiate with Iran as a revolution. People think that the U.S. hasn't talked to the Iranians. This is untrue. The U.S. has been talking to the Iranians before Khomeini came to power.

President Carter was negotiating with him. Afterwards, he was negotiated with them, President Reagan was, President Bush senior, all of the American presidents have done.

But you know, this revolution regime cannot achieve a compromise because it wants everything. You know? It is not in a mood of give and take like all other revolutions.

GIGOT: And so the implications of that for U.S. policy have to be regime change. Is that your argument?

TAHERI: Yes, it has to be a policy aimed at helping Iran to really become an ordinary nation state and to stop the revolution. This doesn't mean, of course, invading Iran. Because as soon as you say that you can't talk to these Iran, people think that I am preaching an invasion and full- scale war. No.

This is — the important thing is to realize that you cannot make a deal with this regime because, even if its leaders wanted to make a deal, they can't. They are — their DNA would not allow it. They are programmed not to make a compromise.

Therefore, the long-term or mid-term policy should be regime change. And this could be achieved by supporting the Iranian opposition inside the country, by trying to reduce the price of oil, by helping the new emerging regional alliance against Khomeini's regime. There are a lot of things one could do.

And this is a very weak regime fundamentally. It has lost its revolutionary legitimacy inside Iran. It is trying to gain a new legitimacy and it is really in a vulnerable position.

GIGOT: All right, Amir Taheri. Thanks so much for that point of view. We appreciate it.

TAHERI: Thank you.

GIGOT: Much more on the showdown with Iran when we come back. What role is that rogue regime playing in the continuing violence in Iraq? We'll examine that evidence.

And the Clinton-Obama drama, an uncivil war erupted between the two democratic frontrunners this week. What does it say about Hillary's chances of clinching the nomination? Our panel weighs in when the "Journal Editorial Repot" continues.

(COMMERCIAL BREAK)

GIGOT: Its nuclear program is not in the Bush administration's only beef with the Iranian regime, as more questions emerge about Tehran's role in the continuing violence in Iraq.

Joining the panel this week, "Wall Street Journal" Columnist and Deputy Editor Dan Henninger, Columnist Bret Stephens and opinionjournal.com Editor James Taranto.

Bret, the IAEA report came out this weak. What's the big news in it?

BRET STEPHENS, WSJ COLUMNIST: Well, the biggest news is that the Iranians continue to flout now their third deadline to suspend the enrichment of uranium. And not only are they flouting the deadline, they are ramping up their industrial capability.

The director general of the IAEA on Monday told a newspaper that Iran is about between 6 months and a year from having industrial-level enrichment capabilities, which is to say that they would, at that point, be within a year of producing enough fissile material for a nuclear bomb. And we already know they have advanced designs to actually turn that fissile material into a weapon.

GIGOT: Where does that leave the international community, the vaunted international community, Dan? Is the U.N. going to act on this?

DAN HENNINGER, WSJ COLUMNIST AND DEPUTY EDITOR: Well, the U.N. already acted on it. They told them not to continue enriching uranium, to stop building their heavy water reactor and to cooperate with the IAEA.

They didn't do all three. Okay? But in this business, three strikes and you are never out.

Amir Taheri put forward the idea that we cannot negotiate with a regime of this nature. You have to negotiate with a rational partner. And the Europeans and United Nations seems to think they are negotiating with a rational, normal partner. They are not.

GIGOT: So you have to keep on the economic pressure. You have to ratchet up the financial sanctions, as the U.S. intends to do outside the U.N. construct because they are running into opposition from the Chinese and Russians and even some other Europeans on this.

HENNINGER: I think the operative word is force. Whether it is military force or economic force, you have to force them to stand down.

STEPHENS: I think one of the things that we often say about North Korea is that the nuclear card is the only card that Kim Jung Il has to play. And I think what we are seeing now, especially in terms of what Ahmadinejad has said about the importance of a nuclear weapon, is that, that too, is the only card that regime has to play.

Now, that tells you two things. Number one, they are not going to give up their drive for the nuclear weapon. But on the other hand, it tells you that the regime is fairly brittle and is susceptible to various kinds of pressure, non-military pressure included.

GIGOT: Let's deal, James, with this debate last week over whether or not Iran is helping kill Americans in Iraq. We had U.S. intelligence sources give background briefings, showing weapons that they said were actually killing Americans. These so-called roadside IEDs.

How credible is that evidence?

JAMES TARANTO, WSJ OPINIONJOURNAL.COM EDITOR: I think it is pretty credible. We've got a whole report here on the Quds Force, the elite unit of the Iranian Revolutionary Guards and the support they have been given to various troublemakers this Iraq.

And of course, one thing we should note, Cud's actually means Jerusalem. This is the Jerusalem force. Saddam Hussein also had a Jerusalem Brigade. So just as an aside, let's point out, Israel never had a Baghdad brigade or Tehran force. So that tells you something about who is stirring up trouble in that region.

GIGOT: Well, why was official Washington so skeptical that this was actually true, that it might be killing Americans?

TARANTO: Partly because domestic politics have gotten so twisted in this country that there are people whose reaction, when the Bush administration says anything, is to say, well, Bush says it has to be false.

We had an editorial in the "New York Times" not long ago called "Bullying Iran," as if Iran is the victim here.

GIGOT: Bret, so Iran may be getting a free pass as on its nuclear program because official Washington decides we want to re-fight the Iraq intelligence war?

TARANTO: Exactly.

STEPHENS: But I think...

GIGOT: Sorry, Bret, I've got to go.

STEPHENS: All right.

GIGOT: Still ahead, Hollywood heavyweight David Geffen throws his support behind Barack Obama, and not without some choice comments about the Clintons. Is Hillary headed for trouble with the Democratic left?

Our panel debates when the "Journal Editorial Report" continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON, D-N.Y.: I sure don't want Democrats or the supporters of Democrats to be engaging in the politics of personal destruction. I think we should say focus on what we're going to do for America. And, you know, I believe Bill Clinton was a good president. And I am very proud of the record of his presidency.

(END VIDEO CLIP)

GIGOT: That was Senator Hillary Clinton responding to comments made earlier this week by Hollywood mogul David Geffen in Maureen Dowd's column in the New York Times.

Speaking of the Clintons, Geffen said, among other things, "Everyone in politics lies, but they do it with such ease, it is troubling."

Once a high dollar donor to the Clintons, he has thrown his support behind Barack Obama's bid in 2008.

James, what is behind this Hollywood revolt against the Clintons?

TARANTO: Well, I think it is partly personal and partly business. Geffen, according to Dowd, is still mad at Bill Clinton for refusing to pardon Leonard Pelletier, who is a so-called activist who murdered two FBI agents. And I'd like to know what Obama thinks of that. Would he pardon Leonard Pelletier?

GIGTO: He was convicted of that?

TARANTO: Yes, exactly. But also, I think they have their doubts as to whether Ms. Clinton can win. She never had a tough race for any office. Even her husband hasn't really had one in about 15 years. And I think they are skeptical and perhaps, with some reason, as to whether she is the Democrat's best hope.

GIGOT: That's the big underlying issue here, isn't it? There are millions of Democrats out there who really are wondering. They see this juggernaut, the Hillary juggernaut, with all of these forces and all of this money and all of this support, and they said, boy, are we going to nominate somebody who one might lose?

HENNINGER: Yes. I take Geffen's outbreak more seriously than most people. David Geffen is a ruthless Hollywood handicapper. He wants to win.

And I think what he's recognized is there is certain amount of politician fatigue out in the country. The Clintons have been around for a long time.

And the media, which exposes them, is a two-edge sword. Yes, it elevates you. It makes you a household name. But people get tired of these things.

And, you know, this is the same problem John McCain may run into, that the electorate has been around them too long. I think Geffen is saying Obama is just the fresh facial.

STEPHENS: But I think this whole debate, in a sense, underscores or highlights the dysfunction of the Democratic Party. Because look at really who are the players involved in this fight.

You have, on the one hand, Hillary Clinton being accused — or the Clintons being accused credibly of problems with the truth. And on the other hand, the accuser is a Hollywood — far-left wing Hollywood mogul. That, in a sense, kind of describes the range of this party.

In the Republican Party, Hollywood big shots don't call the shots in Washington the way they do with the Democrats.

GIGOT: I think, Bret, this is the party that is likely to win the next presidency. I mean...

STEPHENS: Well, that's your prediction, not mine.

GIGOT: That's not a prediction. It is a possibility. In fact, after two terms of Bushes, the polls show that the country is looking for a change.

STEPHENS: I think the Democrats are far more weak than most people tend to realize.

President Bush is weak right now. He is weak on account of Iraq. But is not at all clear to me that the country is willing to go for a party that wants out of Iraq the way the Democrats do, and that has the kind of cultural issues that the Democrats have.

GIGOT: Let me read something about the Obama campaign, James, and throw it to you.

"We aren't going to get in the middle of a disagreement between the Clintons and someone who was once one of their biggest supporters. It is ironic that the Clintons' had no problem with David Geffen when he was raising them $18 million and sleeping at the invitation in the Lincoln bedroom."

Should Obama — he is supposed to be above it all — should he have taken the bait and said this?

TARANTO: Well, why not. What I love is Howard Wilson. Hillary's man came out and said Obama needs to renounce David Geffen's comments. Because, you know, they are trying to set up this idea that it is just beyond the pale, unacceptable to criticize Hillary Clinton on the ground of character.

And Hillary has gone a long way playing the victim. What she is most famous for is a very public marital humiliation, which she turned around and made herself and her husband out to be the victim of the vast right- wing conspiracy.

GIGOT: All right, James, last word.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Winners and losers, picks and pans, "Hits and Misses," it's our way of calling attention to the best and the worst of the week.

Item one, a hit for unsung heroes on the drama on Mt. Hood — Dan?

HENNINGER: Yes, the Mt. Hood story focused, as always, on the victims up on top of the mountain and the dog that saved them and the exercises they did.

I just once would like to see one of these stories focus on the bravery of the rescuers, who themselves go up into these impossible conditions to try to bring these people down.

There is a related point here. The people, who got caught up there, had an electronic locator. And now there is a move afoot to require all climbers to have them.

The most experienced climbers say, don't do it because it marginal climbers will take greater risks on the belief that the rescuers will just come right to the electronic locator, and put them at risk. I agree with that.

GIGOT: All right, Dan, thanks.

Next, on the heels of the British government announcing it will withdraw some troops from Iraq, comes news of a notable deployment — Bret?

STEPHENS: Yes, well, once upon a time, there was an English prince, who went by the nickname Harry. Most of us know him better as Henry V, who had what you might call a misspent youth and then found his place in history on the battlefield called Agincourt.

Well, today, there's another English prince, also called Harry, also with something of what you might call a misspent youth, who is now, by his own choice, going to be deploying to Iraq to lead a squad of soldiers in southern Iraq.

And I think a lot of people wonder what the purpose of an aristocracy is, especially when most European aristocrats spend their time disgracing themselves on the pages of "Hello."

I think young Harry is showing what that purpose is. It is to set an example. And I think he's made the British very proud.

GIGOT: All right, Bret, thanks.

Finally, New York's senior Senator gets nostalgic for days of Vietnam — James?

TARNATO: Yes, Chuck Schumer described the democratic congressional strategy for Iraq this way, quote, "There will be resolution after resolution, amendment after amendment, just like in the days of Vietnam."

He wants another Vietnam? Vietnam was a humiliating defeat for the United States. It was a humanitarian disaster for the people of South Vietnam and Cambodia. And it as a political disaster for the Democrats, who won one state in 1972, and probably would have lost in the '74 and '76, if not for Watergate. And they've never won another presidential election until the Cold War was over. This is crazy.

GIGOT: Are the voters really going to hold Democrats responsible if Iraq goes badly, James?

TARANTO: It depends on how actively they are trying to bring that about.

GIGOT: All right, thank you.

That's it for this week's edition of the "Journal Editorial Report." Send your e-mails to jer@foxnews.com and visit us on the web at www.foxnews.com/journal.

Thanks to Dan Henninger, Bret Stephens and James Taranto.

I'm Paul Gigot. Thanks to all of you for watching. And we hope to see you all right here next week.

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