This is a rush transcript from "On the Record ," January 16, 2008. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, HOST: Our interview with President Bush, not in Washington, not even in the United States, but 7,000 miles away in Abu Dhabi in the United Arab Emirates.

The president was in Abu Dhabi as part of his historic eight-day trip to the Middle East. He went to Israel, Egypt, Kuwait, Saudi Arabia, the West Bank and Bahrain.

The president is hoping to kick start the Arab-Israeli peace process and improve diplomatic relations, especially as he perceives the threat of Iran growing. Now, we took the 15-hour flight so we could ask him some questions you want asked and so that you could hear the answers directly from him.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Mr. President, nice to see you, sir.

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: Thank you, Greta.

VAN SUSTEREN: This is a historic journey, at least for you as president to go to Israel, your first trip to Israel as president.

BUSH: True. Timing was right for me to go, and I went for a couple of reasons. I went to make sure the Israelis understand that America knows that their security concerns are paramount. And secondly, I went to advance the peace process with the Palestinians. And I think I made some pretty good progress.

VAN SUSTEREN: Well, yesterday in your speech here in — it was interesting how you talked about Iran. It almost seems like everything sort of leads back to Iran. The problems in Israel lead back to Iran. Is — do you think that?

BUSH: Well, I really talked about the advance of democracy and how it's opposed by extremist forces like al Qaeda, on the one hand, or states that sponsor terror, like Iran, on the other. And when I was talking about Iran and state-sponsored terror, of course, I was referring to Hezbollah or Hamas, which is — you know, it's just — their actions in Gaza really talk — really do define what I'm talking about extremists stopping the hopes of many.

So, yes, I believe Iran's a bad influence, and so do a lot of other people here in the region. And we're just going to have to deal with it in a way that ends up achieving certain objectives.

The primary objective is to prevent them from having the know-how on how to make a nuclear weapon.

VAN SUSTEREN: But when you talk about Iran and the peace process — and I also want to talk about the nuclear weapon issue — if they are funding Hamas, and if Hamas is a giant problem in trying to get the Palestinian state and Israelis to work together, it seems that this is quite a challenge.

BUSH: It is. The question is, is Hamas a giant problem? I happen to believe the definition of a state around which reasonable Palestinians can rally will make Hamas less of a problem. In other words, they will become marginalized.

Their vision is one that basically is — it does not have a hopeful future for the Palestinians. And a definition of a Palestinian state agreed to by the Israelis and the Palestinians will provide a hopeful future.

This is part of the ideological struggle that I described in my speech. And that struggles between forces of moderation and rationality versus forces of extremism. And the danger about the Iranians is that they used their oil wealth to fund forces of extremism.

That's not to say we won't prevail. I believe we will, we being people who just want to live in peace.

VAN SUSTEREN: In order to understand this conflict, it is complicated.

BUSH: It sure is.

VAN SUSTEREN: And it has been a daunting task for many presidents.

If you're sitting back home, and this is such an important issue, and you just haven't followed this—but sitting back home in the United States, how do you tell the American people that this is so important and why it is that we try again to get these two sides to talk?

BUSH: What is important is the advancements of democracy and freedom in the face of an ideological threat where the enemy, like Al Qaeda, uses murder to achieve its objectives.

The civilized world has seen these kinds of threats in the past. People have a vision that is dark and dim, but they murder to achieve it.

That is what we are dealing with in the 21st century, so that anytime you can advance democracy and liberty as the basis of society, you are achieving yet another blow to those who espouse chaos and violence.

And in the Palestinian state it is particularly important, since many other nations here in the region view this as the core issue for peace.

Nations like the UAE, for example, which is an unbelievably modern nation, by the way, and a great place to be—they are concerned that until this issue was resolved there will still be agitation in their societies and that people will view the Palestinian issues around which to rally and the violent people around which to rally.

And so it is an important part of the democracy agenda. It also happens to be an important part of bringing more stability to the Middle East.

VAN SUSTEREN: What struck me though yesterday from listening to your speech is that it seems like with Iran out there poisoning the peace process in the Gaza Strip and with the Palestinians and Israelis with funding, that we really have to pay more attention. I am not saying that you're not paying attention, but that Iran really is a giant issue for the world.

BUSH: It's a real problem for a couple of reasons. One, if Iran were to develop the know-how to make a nuclear weapon and then follow through, you can imagine what it would do to the nation's out here. People would be nervous, people would be defensive, people would feel like they might have to develop their own nuclear weapon. In other words, it would be very dangerous. And most of the civilized world understands that.

And, secondly, obviously, we have got to be very careful about Iran because, one, they are sending sophisticated IEDs into Iraq, or they're helping destabilize Lebanon, or, as you mentioned, Hamas is in the Palestinian territories.

I happen to believe that most people understand the Iranian threat, and if we can just keep working together, we can eventually deal with it.

But there is no question it is a great challenge. This world would be better off if the Iranians weren't intent upon destabilizing the Middle East and other parts of the world.

VAN SUSTEREN: Do you believe — in December there was an intelligence report that Iran had stopped its nuclear weapons program as of 2003. Do you believe that?

BUSH: I believe that the intelligence professionals are very sincere in their analysis. That should not say to people that Iran is not a threat. In other words —

VAN SUSTEREN: You believe that —

BUSH: I believe they want a weapon, and I believe that they're trying to gain the know-how as to how to make a weapon under the guise of a civilian nuclear program.

Basically, what they're saying, we just want to learn to enrich in order to have civilian nuclear power. The problem is knowledge can be transferred from a civilian program to a military program.

What I have told people out here is that if you had a military program once, you can easily start it up again. A lot of people heard that NIE out here and said that George Bush and the Americans don't take the Iranian threat seriously. And one of my missions out here is to make it clear to them I do take it seriously, and so should they.

VAN SUSTEREN: But, as a practical matter, you will no longer be the president in January, 2009 —

BUSH: That is a practical matter.

VAN SUSTEREN: So, you can take it seriously, but if it is larger world problem, are other countries getting on board and having the same thought? Are you talking to them about this, if you believe that it is —

BUSH: I think that is a great question, and the answer is "absolutely." One of the things, if this issue has not been solved, and I hope it has been, but if it hasn't been, we will leave behind a structure for the next president in which to work.

In other words, the president will have a couple of U.N. Security Council resolutions. We are working on another one. The last two, by the way, had the support of the Chinese, the Russians, as well as, obviously the rest of the U.N. Security Council.

And so there is a framework, an international framework in place to help keep pressure on the Iranians. And the whole objective of the pressure is to say to people inside the Iranian government "There is a better way forward. You can either continue to be isolated and face economic deprivation, or you can make a rational decision and suspend your program, and there is a better avenue for you."

And if you listen to my comment, I am always talking to the Iranian people. And my comments are America respect you. We respect your history and tradition. The problem is it's your government that's isolating you. And you can do a lot better. You can have a much better economy and a much better acceptance in the international community.

(END VIDEOTAPE)

VAN SUSTEREN: Iran said it wants Israel destroyed. Many fear Iran wants a nuclear weapon. We asked the president more about Iran. Listen to what he says, then you tell us. Go to gretawire.com. What should we do about Iran, if anything?

(COMMERCIAL BREAK)

(NEWSBREAK)

VAN SUSTEREN: The president spoke about Iran and the threat of their nuclear program.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: We have not had diplomatic relations with Iran since 1979, since the incident at the American embassy there. Is there any vision of speaking to them? We speak to them indirectly through the Swiss, I guess, and through our allies here, but is diplomacy a possibility?

BUSH: What I have just described is diplomacy.

VAN SUSTEREN: But not directly with them, with the Iranians.

BUSH: We have said if you want to have discussions with the United States and other nations that are now in the process of isolating you, verifiably suspend your program.

The reason why it is important to seek a verifiable suspension is, one, the key ingredient for them is order to have a nuclear weapons program is to learn to enrich. And, therefore, getting them to not enrich would, basically, disable their nuclear weapons program. And we want it verifiable because in the past they have not been fully transparent.

For example, our NIE said they had a program. They suspended their program, but they have yet to admit they've had a program.

The object, frankly, should not be for me to have to defend our NIE, it ought to be for them to tell the world the nature of their program, to be fully transparent, like they're so supposed to be under the NAEA and the NPT — these are all initials for agreement that they signed onto to protect the world from proliferation.

And so the trip has been successful from this perspective of saying we take this threat seriously and we will keep the pressure on.

VAN SUSTEREN: Do you think the January 6 incident in the Straits of Hormuz, was that sort of a gesture toward you, do you think, by the Iranian speedboats coming on our Navy?

BUSH: I do not know what their intention might have been, but it was provocative, and it was dangerous. And they should not do that.

VAN SUSTEREN: Mr. President, it is gorgeous out here in front of the Persian Gulf. In addition to your speech here in the Middle East about democracy, you visited many religious places in Israel.

BUSH: Well, they were moving experiences for me. I am a Christian, a practicing Christian. And to walk the steps of our savior is profound. It was profound for our whole delegation.

It was just a reminder about how complicated the Middle East can be, because we think that the Israeli-Palestinian conflict, yet the Middle East is also the birthplace of our Christian religion. I really had a good experience in Israel.

VAN SUSTEREN: You have high hopes and high expectations that we can do something in the next 12 months.

BUSH: Absolutely.

VAN SUSTEREN: You are optimistic.

BUSH: I'm not only optimistic, I am realistic, because I know the players, I know the leaders, I know their attitudes. I know the sense of urgency they feel.

And I am not saying it is easy, but I am saying it can be done. And they believe that, too, that is the most important thing. And I feel good about it, I really do.

VAN SUSTEREN: You met with a bunch of sailors and soldiers?

BUSH: I did. Anytime I have a chance I like to thank our military for their service. I am always inspired when I am with members of the U.S. military. These are selfless folks who are courageous and skilled. I met with some in Kuwait and I met with some in Bahrain.

VAN SUSTEREN: I really thought it was interesting, that encounter with the Iranian speed boats, that they held their fire(ph), especially in light of the USS Cole.

BUSH: I talked to the admiral in charge of the fifth fleet, and he described the procedures in place and the professionalism of his captains. But he also said these leaders had to make some split decisions. And that is why I called the Iranian speedboat incident a provocation.

And they had better be very careful, because our boats will defend themselves.

VAN SUSTEREN: Do you get called when this happens, right as it happens? When do you hear about it?

BUSH: No. I would get called if they were firing.

But, listen, these are professionals. Our Navy is very well-trained, very well-schooled. They're very thoughtful people.

And there are instances all around the world with our military. And our commanders can handle it. Obviously, if the Iranians had made a decision other than to pull back and attack our ships, I would know about it. And we would have done something about it.

VAN SUSTEREN: You said that you speak, you also speak to the Iranian people when you're here. Do you have a message for the Iranian people if they are watching?

BUSH: I do, and that is the president of the United States respects you. More importantly, the American people respect you. We respect your heritage, respect your history, and we want to have better relations.

But it is your government that is preventing the Iranian people, you, from having as positive and economic environment that you could conceivably have and better relations with the best of the world. It is not just the United States from which Iran is isolated, it is the world, with the notable exception of a few countries.

VAN SUSTEREN: Mr. President, thank you, sir. Thank you very much, it is always nice to see you, sir. Thank you.

BUSH: Thank you, Greta.

(END VIDEOTAPE)

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