This is a rush transcript from "America's Election HQ," May 20, 2008. This copy may not be in its final form and may be updated.

MEGYN KELLY, CO-HOST: Presidential candidate, Barack Obama on "America's Election Headquarters" for the very first time — speaking out on everything from Senator Kennedy's cancer diagnosis to why Obama wants to sit down with Iran. And, is he about to declare victory in his quest to become the Democratic nominee?

The Illinois senator just 17 delegates away from locking up the majority of pledged delegates in this race, expected to accomplish that goal tonight. I asked him about that, but first, we talked about John McCain, who lambasted Obama today over Cuba, saying Obama's willingness to deal with Raul Castro would send the worst possible message.

Video: Watch Megyn's interview

(BEGIN VIDEO CLIP)

KELLY: Senator John McCain came out swinging against you today on the issue of negotiating with our enemies without preconditions. Today, the subject was Raul Castro of Cuba. Yesterday, it was Ahmadinejad of Iran. GOP voters and others also agree with McCain saying — this is bowing down to terrorists, to dictators in some instances. What's your response to those who believe that?

SEN. BARACK OBAMA, D-ILL., PRESIDENTIAL CANDIDATE: You know, I think the people just have to look at our history. Ronald Reagan met with Gorbachev; Kennedy met with Khrushchev; and, Nixon met with Mao — and these were folks who have done horrendous damage not only to their own countries but to other countries. But what we understood was tough, strong, direct diplomacy is the hallmark of a leader in the world, and that's the kind of leadership that we need right now.

Keep in mind, I have never said that I would somehow have meetings with these folks right away, that there wouldn't be any preparation for them. What I've said is that the failed approach that we've had over the last eight years with George Bush not initiating any contacts with these countries has led to them becoming stronger, and Iran is the perfect example.

Iran is stronger now than when George Bush took office. And the fact that we have not talked to them means that they have been developing nuclear weapons, funding Hamas, funding Hezbollah. We have had no impact whatsoever as we pursue our policies.

And if you keep on doing the same thing over and over again, and it doesn't work, then at some point, you should start thinking about something new.

KELLY: Senator, do you assume too much about men like Ahmadinejad, in other words, that you could reason with someone as irrational as he is?

OBAMA: First of all, he is not the most powerful leader in Iran. So, he might not be the person that we would need to meet with. But more importantly, the reason that you have discussions and diplomacy is not because you assume reason or good motives on the other side. That would be naive.

What you assume is that if you are very clear about the need to stand out on nuclear weapons, that you are very clear about the need to stop funding Hezbollah and Hamas, and to stop threatening Israel. And you have engaged in those direct talks and you are listening about what their interests are — number one, we get a better sense of what their true interests are, and number two, you have sent a message to the world that we are not the impediment of making progress, that they're the ones who are holding up progress, which allows us then to strengthen our alliances, to impose the kinds of tough sanctions that may be necessary to change their behavior.

Right now, what we are doing is playing into their hands. It makes us look like we are the ones unwilling to reason and unwilling to talk, and that's what we've been doing for the last eight years with respect to Iran.

When it comes to Cuba, what I've said is we should loosen up remittances and a travel ban for Cuban-Americans to visit their families as a gesture of good faith, but the bottom line is, our goal should be Cuban liberty, the same goal that I think Democrats and Republicans have. The difference is, John McCain said the same thing eight years ago, that we should look at over time normalizing relations. He is the one who's flip- flopped, partly because, he is pursuing the presidency.

KELLY: But what about the argument that John McCain and others raised, that is sitting down with people like Ahmadinejad, offers them a certain sort of cachet that they then have with their supporters and with the world in meeting with the U.S. president?

OBAMA: Listen. You know, the truth is, we don't have to worry about losing a propaganda war to dictators. We're the most powerful nation on earth, and if we are clear about what we stand for, what we advocate for, then we should not be afraid of being willing to have tough, strong direct talks with other countries.

My goal as president would be to keep the American people safe. If I can change Iran's behavior, if I can potentially change Cuba's behavior so that the Cuban people have more liberty, that's something that we should explore.

The fact is that what we are pursuing now, and what John McCain intends to pursue over the next four, five years, if he were president, has failed, and one of the things that we have to ask John McCain or anybody else who wants to pursue these policies is: what do you think will be different when John McCain is president? Is Iran suddenly going to change its behavior because John McCain is there if he's pursuing the exact same policies that George Bush has been pursuing? And if nothing is going to be different, then we are on the path to Iran developing a nuclear weapon. That is unacceptable.

We're on the path where Hamas continues to control Gaza, and Hezbollah continues to stir up trouble in Lebanon and threaten Israel.

Those are the best options. And so, what we should be looking at is real results instead of just keeping on doing the same thing over and over again.

KELLY: senator tonight is a big night for you and your campaign. We've got the Kentucky and the Oregon primaries. And you are expected tonight to get to the point where you have won a majority of all available pledged delegates. We're told you won't declare victory, but you are going to celebrate that moment in Iowa.

Some Clinton supporters have suggested, you know, you're sort of pushing the knife in here, you're rubbing it in by going to Iowa for tonight. How do you respond to that?

OBAMA: You know, I think that we've been very restrained in this whole process. You know, we are going to reach a milestone today, hopefully, that is very important. It means that we've gotten the most delegates that are assigned by voters in primaries and caucuses. And that's important.

We haven't declared victory. We've got three more contests after tonight, and we still are going to have to get more superdelegates in order for us to actually secure the nomination. But, you know, what I've said consistently during the past week as we've been campaigning is that Senator Clinton has run a terrific campaign.

We are looking forward to these last three contests, and hopefully at that point, we'll be able to pivot and start focusing on uniting the party and whoever the Democratic nominee is, start focusing on winning the general election.

KELLY: And before I let you go, senator, I have to ask you about the sad news that came out today, involving your friend and colleague and supporter, Senator Ted Kennedy, diagnosed with a malignant brain tumor. Your reaction to the news.

OBAMA: Well, it's heartbreaking. You know, Ted Kennedy is, obviously, a giant in the Senate. He has served longer than almost any other person ever to have served in the Senate. He's done more good on issues like voting rights, on helping the poor, raising the minimum wage. He's just been an extraordinary senator, but he's also been an extraordinary friend to me, but also to all my other colleagues in the Senate. You know, despite real differences, you hear a lot of Republicans say what a great guy Ted Kennedy is.

So, he has been a fighter all his life. I know that he is going to fight this real hard. Our job is to support him and his family during this difficult hour, and our thoughts and our prayers are with him.

KELLY: Indeed. When you get news like this, there are no parties. We're all Americans. Senator Barack Obama, thanks so much for being here. We'll be watching tonight.

(END VIDEO CLIP)

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