This is a rush transcript from "The O'Reilly Factor," September 12, 2008. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: In the "Unresolved Problem" segment tonight: Barack Obama believes he can rally Europe to fight Islamic terrorism and may even turn the Muslim world against the killers. Thursday on the anniversary of 9/11, we saw no public display of sympathy for the 9/11 victims in the Muslim world. Nothing. So the senator might have a tough road on this one.

Now, earlier this week I spoke with ABC News correspondent Jim Sciutto, the author of the brand-new book, "Against Us," about this situation.

(BEGIN VIDEOTAPE)

O'REILLY: Barack Obama says he's going to make the USA's image in the world better and in the Middle East, as well. I say that's almost impossible for any politician to do because of Israel. As long as the United States supports Israel, the Muslim world is going to hate us. Am I wrong?

JIM SCIUTTO, AUTHOR, "AGAINST US": I wouldn't say it's impossible. It's certainly more difficult than it was seven years ago. That's my experience. Because you hear this thinking, not just from the people you would expect to hear it from, this sense of Islam under assault by the U.S., the jihadis, but you hear it from average people on the street, and you hear it from people who you would think would be our allies: democracy activists in Egypt and in Iran who normally ā€” Israel, for instance, is not as much of a hot-button issue. It's spread that wide. So it's a deep hole to dig out of.

O'REILLY: OK. It is a deep hole, but I remember my first trip to a Muslim country was Morocco. It was 30 years ago. And when I got to Morocco, what I heard was, "We hate the Jews. The Jews are bad."

This has been going on for thousands of years, and as long as the USA is the main benefactor of Israel, you know, could have Moses parting the Red Sea there, there's going to be that attachment to hating the USA because of Israel. It's undeniable.

SCIUTTO: It's a major factor. It's undeniable. And invariably people in that part of the world see Israel as a tool of America. That's the face of America in that region. For instance, I covered the Israeli-Lebanon war in 2006. That was an Israeli- Lebanon war. In the views of the Lebanese, that was a U.S.-Lebanon war.

O'REILLY: Right, and it's always the U.S.'s fault. Now the other thing that I don't know if we could ever bridge the gap with the Muslim world is that after 9/11 the Muslim world didn't rise up and condemn those attacks, generally speaking. There were some leaders that did, but the images that we focused on in America were dancing in the streets. We have a right to be suspicious of the Muslim world. We have a right to demand that they take action against Al Qaeda and these people, and they don't. So yes, they've got a beef with us. We've got a beef with them.

SCIUTTO: Well, listen, there's certainly a denial of responsibility. I remember covering an earthquake in Iran in 2005, and the conspiracy theory there was that this was a CIA super-bomb. We get blamed for everything as well.

O'REILLY: Right.

SCIUTTO: But there is a logic from their point of view. What I tried to do with this book is hold a mirror up to the place, and this is the thinking, that they view Islam as being under assault from the West. The most poignant examples, Iraq and Afghanistan, those invasions, they look at the U.Sā€¦

O'REILLY: That's insane. Let me stop you here. That's insane, that we're not going to invade Afghanistan when Al Qaeda harbors there? And they resent that? That's too bad.

SCIUTTO: It is interesting that you will see Muslims in that part of the world make a distinction. They'll often say, "Listen, I can at least understand why you would go to Afghanistan, but you didn't have the justification to go into Iraq." They will make that distinction.

O'REILLY: All right. So Saddam Hussein is a great guy. He killed 500,000 Muslims because he didn't like what their politics were.

Look, what I'm trying to get across to you in reading your book, because you've been there a lot more than I have, but I've been there, I don't know if we're ever going to solve this problem in our lifetime. And I just don't know what the United States can do that it isn't doing ā€” and I'm going to ask you this as my final question for you ā€” to try to make the Muslim world understand our point of view; we're not their enemies.

SCIUTTO: From their perspective they look at us as cutting corners on principle. And I think that in these last seven years, you can say that we underestimated the price of cutting corners on principles: Guantanamo, Abu Ghraib, that sort of thing.

I think one reason for hope is that the basis at the root of this anger is an inherent contradiction, because they have great admiration, not just for the American lifestyle but also for the American system. Polling consistently shows they rate very high, above Islam, a system of government that they find accountable. They want that sort of system. And these are educated or uneducated Muslims in that part of the world. The trouble is that today they see America as standing in the way of that progress, as opposed to promoting that progress.

O'REILLY: Very good book, Jim. Thanks for coming in. We appreciate it.

SCIUTTO: Thank you.

(END VIDEOTAPE)

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