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Transcript: Secretary of State Rice on 'FNS'

The following is a partial transcript of the Aug. 5, 2007, edition of "FOX News Sunday With Chris Wallace":

"FOX NEWS SUNDAY" HOST CHRIS WALLACE: Well, joining us now from the presidential retreat at Camp David is Secretary of State Condoleezza Rice.

And, Secretary Rice, welcome back to "FOX News Sunday."

SECRETARY OF STATE CONDOLEEZZA RICE: Good morning. Good to be with you.

WALLACE: All of Washington is waiting for the progress report that comes in mid-September from General Petraeus and Ambassador Crocker.

From what you've seen so far, how is the surge going and does it justify keeping more troops in Iraq into 2008?

RICE: Well, the president will get this report and then we will be able to chart a coherent way forward, but I think that there are many very good elements here.

Clearly, the security situation with American forces working closely with Iraqi forces has improved some.

Clearly, the situation in Anbar, which just a little while ago was considered the epicenter of Al Qaeda's activities, has really turned, and there we're working with locals.

Clearly, too, we have a lot of work to do on the political side. But, Chris, I would not underestimate the importance of the continuing work of the leaders of these very powerful parties in Iraq working through the presidency council, with the prime minister, to try to forge a compromise on some of these very essential elements.

So I think there are some very good elements. There are clearly some — there's a lot more work to do, but we will see what General Petraeus and Ambassador Crocker report.

But obviously, the president is looking to chart a way that is coherent, a way that stabilizes Iraq, and a way that exercises our obligations to the region to leave the region more stable with a stable Iraq at its center.

WALLACE: Secretary Rice, you talk about the good elements. Let's look at some hard figures. Here they are. The number of U.S. military deaths in July was 77. That's the lowest monthly total this year.

On the other hand, the number of Iraqi civilian deaths was 1,652. That's up by a third from last month.

Given that, can you say that sectarian violence is declining?

RICE: Well, you are having — there are two kinds of violence to talk about here.

One is the kind of sectarian violence we were seeing after the bombing of the Golden Mosque in February of '06, and that was large- scale sectarian death squads going into communities and lining up the men and shooting them, sending the women into exile, the bodies showing up in Baghdad every morning.

I think that that has diminished both by the actions of the Iraqis and by the fact that we've gotten really good work between Iraq and the United States to deal with some of these death squads and their networks.

On the other hand, there's no doubt that Al Qaida-inspired and other insurgents can get off the big suicide car bomb that unfortunately results in large-scale civilian casualties. That may continue.

But I think some of the underlying sectarian elements of the violence they're beginning to get a handle on, although there's obviously a lot more work to do.

WALLACE: Secretary Rice, let's turn to the political side of this where you indicated there hasn't been as much progress.

When President Bush announced the troop surge in January, he said he wanted to give the Iraqi politicians some breathing space to pass laws of national reconciliation.

You said much the same thing about Prime Minister Maliki right here six months before that. Let's take a look.

(BEGIN VIDEO CLIP)

RICE: I think we need to give him a little breathing space and a little chance here, and I think you're going to see very good things from this government. When they get it right, and they will get it right, everybody will forget how long it took them.

(END VIDEO CLIP)

WALLACE: Madam Secretary, it's now been 15 months since Maliki took over. It's been 7 months since the surge began.

I know, as you just mentioned, there has been some progress in the provinces where some of the Sunni sheiks have turned against Al Qaeda.

But I want to ask you specifically about Baghdad. How do you explain the total failure over 15 months of the central government — the failure to pass any of these key laws of national reconciliation?

RICE: Well, Chris, these key laws go right to the heart of what kind of Iraq it's going to be, and it's hard. They could have passed these laws by majority votes.

There's no doubt that they have enough votes in coalition to pass a national oil law, that they could pass de-Baathification laws. They could do that.

But they're trying to do this by consensus. They're trying to do it in a way that brings all Iraqis together regardless of what sectarian or what confessional group they come from. And that's very, very hard.

But it's not inconsequential that these very powerful party leaders are represented in this presidency council, that they're using the structure of the presidency council plus the prime minister to try and forge a compromise on some of these issues.

It's not inconsequential that money is really now starting to flow from the center into the provinces which will help the reconciliation that is happening from the localities upward and from the national government downward. They do need to make more progress.

WALLACE: May I interrupt, Madam Secretary?

RICE: Well, let me just say, Chris, they need to make more progress, but we shouldn't forget that they are, in fact, taking on some of these very, very difficult challenges at the leadership level.

WALLACE: So I want to make sure I'm — because I've not heard this before. You're saying that the Iraqi parliament could pass the de-Baathification law, the oil revenue law, and they've chosen not to do that because they want to get more of a consensus?

RICE: No, Chris, I said that I think that if they just took a majority vote, they could probably get through a national oil reconciliation law, but it would not have the support of all of the groups that are trying to do this.

And so they're trying to do a national oil reconciliation law that really brings all of the parties together. They don't want a 51- 49 on constitutional reform.

They want to try and bring this about in a way that brings all of the important groups together, and I think that that makes a lot of sense.

WALLACE: If they're so busy in trying to build a consensus, how do you defend the fact that the Iraqi parliament is taking the month of August off because it's too hot, while at the same time U.S. soldiers in full battle gear continue to patrol the streets of Baghdad?

RICE: Well, the leadership is not on recess. And the presidency council and the prime minister are still working.

This is a parliamentary system, Chris. And underneath the council of representatives, there are important party interests that are working to try to forge consensus so that when it goes to the council of representatives it has an opportunity to pass.

It's difficult work. It's difficult work to define how you're going to divide the resources of the country, the national oil resources of the country. It's difficult work to decide how you're going to deal with the past of the Baath party. It's difficult work to decide how you're going to reform the constitution.

We've been very clear that we don't think that they have achieved enough and that they need to work harder. We've been very clear that there is urgency to this. And the president, when he speaks to these leaders, when I speak to them, when all of us speak to them, we tell them that.

But we shouldn't simply dismiss the efforts that they're making to try to bring about a national consensus on these very important issues, and we shouldn't dismiss the work that they're doing to bring budget resources to the localities so that when Iraq emerges, it emerges as a place that has the support of all of its people.

And again, Chris, on what is happening in Anbar, we're not just talking about a few local sheiks coming over to the side of the coalition. We're talking about what used to be called the Sunni Triangle, this place in which Al Qaeda was strongest.

We're talking about these people deciding that they're going to take back their streets from Al Qaida, they're going to take back their streets from terrorism, and they're going to do it in cooperation with the United States.

That is a major development, not a minor one.

WALLACE: I want to move on to another subject. Senator Barack Obama has been highly critical of your and the president's foreign policy recently. Let's take a look.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, D-ILL.: If we have actionable intelligence about high-value terrorist targets and President Musharraf will not act, we will.

(END VIDEO CLIP)

WALLACE: Secretary Rice, the Pakistani foreign ministry says that President Bush called President Musharraf this week to try to distance himself from what he called unsavory comments made in the spirit of electioneering. Have the comments of Senator Obama been unhelpful in terms of our relationship with Pakistan?

RICE: The United States and the president are very committed to working with the Pakistanis on these difficult terrorism issues.

Now, let's remember that this government, Pakistan in 2001, was hardly a government that fought terrorism. In fact, it had very close relations with the Taliban. There are indications that there were — also, there was a sort of blind eye to Al Qaeda.

Now this is a government that's on the right side in the War on Terror.

WALLACE: So what's the problem with what Senator Obama said?

RICE: Well, Chris, the idea — first of all, what Senator Obama said, Senator Obama said. What the president said to President Musharraf is that we have to work harder, obviously, to deal with these Al Qaeda terrorists, some of whom, yes, are active in the northwest frontier areas of Pakistan.

But let's be very clear. If anyone thinks that the Pakistani government, which is under constant threat from Al Qaeda — Musharraf himself, who has been targeted for assassination by Al Qaeda — would not want to do everything possible to get high-value targets, I think you have to think again.

This is a government that has an enormous amount at stake. It is a focus of and a target of extremism.

If you look at what happened in the Red Mosque, if you look now at the very more active posture of the Pakistani military in these frontier regions — frontier regions, by the way, that have not been governed at all by the central government for many, many decades — I think you see a government of Musharraf that knows the threat of terrorism to them.

WALLACE: But I guess the question I'm asking you, Secretary Rice, is why did the president feel it necessary — you say Senator Obama said what Senator Obama said.

Why would it sufficiently rise to the level where President Bush would feel he had to call President Musharraf to clear this up?

RICE: The president talks with President Musharraf fairly frequently. And I can tell you that the president isn't going to go around disavowing comments that are made during an election campaign. It's not the president's responsibility to do that.

What the president is going to do with President Musharraf is to continue to affirm our partnership. He's going to continue to affirm our support for active Pakistani activities in this region.

And he's going to continue to press the importance of going after these terrorists, because American security is at stake, Pakistani security is at stake, and when he has these conversations, he finds in President Musharraf a man who knows firsthand the dangers of Al Qaeda to himself personally and to Pakistan as a whole. And so we have a very good partner there.

And I just want to repeat, if there are high-value targets, the United States and Pakistan both are going to have a very strong interest in doing whatever it takes to make sure that those high-value targets are captured or killed.

WALLACE: The president has just announced a $20 billion arms sale of sophisticated weapons to Saudi Arabia and other Gulf states, but according to the New York Times, U.S. officials feel the Saudis have worked against the Iraqi government, are currently funding Sunni insurgent groups, and that the majority of suicide bombers in Iraq are actually Saudi.

Secretary Rice, given what our own U.N. Ambassador calls the destabilizing policies on the part of Saudi Arabia, why would we be selling them more sophisticated weapons?

RICE: Well, let's remember that the United States has had interest and security cooperation in this region for decades. There's nothing new in this. And certainly, we want our allies and strategic partners in the region to be well defended.

It would make no sense to leave Saudi Arabia or the other Gulf states undefended, incapable of defending themselves, or turning to others who might be less reliable in providing for their defense at a time when the security challenges in that region are increasing.

Now, as to political cooperation with Saudi Arabia, we have — I've just been in Saudi Arabia talking with the Saudis and with the Gulf states, Egypt and Jordan, about all of our obligations to an Iraq that is unified.

I think these are states that understand that an Iraq that is unified is in their interest. Indeed, it's in their vital interest.

And I also would note that the Saudi government announced that it's going to put an embassy in Baghdad, something that we have hoped they would do for quite some time.

They're working to forgive the debt of Iraq, and they're working with these local tribes, some of whom have relatives across the Saudi border, to try and reinforce the need for Sunnis to be fully integrated in and fully active in the policies of Iraq.

And so I simply think that we have good cooperation. We want all of the states, all of the neighbors, to do more. But it makes no sense to leave our longtime strategic allies undefended in a region in which Iranian and other challenges are growing.

WALLACE: Secretary Rice, we have about a minute left — actually, less. I want to talk to you finally about Congress, which late last night passed a temporary fix of the Foreign Intelligence Surveillance Act.

How important is that, the fix that they passed, for our national security? And how do you respond to civil libertarians who say what this fix is actually going to do is make it easier for the government to spy on Americans?

RICE: Well, first of all, I think that the Congress did a very good thing, and we appreciate the cooperation of the Congress in doing this.

We're going to be safer because it is important that the United States use all legal means to know what the terrorists are doing and what they're planning.

The long pole in the tent against terrorism is not to let something happen and then prosecute it. It's to have good intelligence about what is about to happen and prevent it, because if you don't prevent it, thousands of innocent people die.

This will allow the program to do what we need to do. We need to know what is going on between people who are talking to terrorists who may be located in the United States and terrorists who are located outside the United States.

You don't want an artificial barrier between the territory of the United States and the territory outside of the United States. And most importantly, you want to be able to protect civil liberties, and this will protect civil liberties of Americans, but it will also make certain that we can surveil, can monitor, and can act on activities that may be plotting against the United States.

So technologically, these days, to have an artificial separation, given the way that telecommunications space is really a unified space across the world, would make no sense, so this is a very good step forward. It will make us safer.

And we very much are pleased that the Congress and the executive branch have been able to come together around this.

WALLACE: Secretary Rice, we're going to have to leave it there. We want to thank you so much for sharing part of your Sunday with us.

RICE: Thank you. Good to be with you, Chris.