This is a rush transcript of "Special Report With Bret Baier" from June 12, 2009. This copy may not be in its final form and may be updated.
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BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES OF AMERICA: Whoever ends up winning the election in Iran, the fact that there's been a robust debate hopefully will help advance our ability to engage them in new ways.
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CHRIS WALLACE, FOX HOST: The president today careful not to take sides in the Iranian election, but I think it would be safe to assume he would welcome a more moderate Iranian leader.
Time to bring in our panel, Steve Hayes of "The Weekly Standard," A.B. Stoddard from "The Hill Newspaper," and syndicated columnist Charles Krauthammer.
Well, Charles, no official results, but a fierce campaign and a huge turnout today. Without knowing who won, what does all that tell you about the state of Iran these days?
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: But we have heard that the interior ministry has said that the incumbent has gotten about 70 percent of the vote with half of it counted.
WALLACE: I think now it is down to 60 percent, but anyway.
KRAUTHAMMER: But that is still a landslide. It is like Lyndon Johnson without a free election.
Look, these were sham elections from the beginning. In a real democracy, you can have a change of power as a result. That was not going to happen in Iran. The mullahs are in charge. Khamenei, the supreme leader, remains in charge. Nuclear and foreign policy will remain exactly as is.
But that doesn't mean an election like this is irrelevant or meaningless. It does reflect sentiment in the country.
We have long known how unpopular the Mullahs are, especially among the young, and we have watched in this election a lot of fervor for opposition candidates.
If the Mullahs decide to re-anoint the incumbent with a number of 60 or 70 percent that that is obviously fraudulent, this presents an opening. You could get unrest.
Historically in dictatorships, for example, in the Philippines under Marcos, an obviously fraudulent election can stir unrest in the streets.
And I think that that's the real opening here. If there is unrest — our only hope of changing the nuclear issue with Iran is not in the negotiations. It would be in the change of regime.
We have long known of the popularity of the mullahs, and, ultimately, a revolution is inevitable. But it looks as if it's far away. It could be a little closer if the mullahs are so afraid that they are going to fraudulently anoint a winner, somebody who the people have a sense has actually lost.
So there could be instability, and that would be something we ought to encourage, and not accept the results on face value.
WALLACE: Of course, A.B., it is conceivable that you could have had this fierce election, you could have had these big rallies for Mousavi, the moderate challenger, the former prime minister, and there could still be a majority and a sizable majority that backs Ahmadinejad.
A.B. STODDARD, "The Hill": Absolutely. But I think with the unprecedented turnout and all the excitement, the way that Mousavi sort of galvanized his supporters in the last couple weeks, there will be a belief among many of his supporters that it was rigged, and I think there will be unrest.
Ahmadinejad's reelection presents, obviously, some serious challenges to Barack Obama, who has promised direct negotiations without preconditions. He has been reserving his details on his Iran policy for this election. We don't know if we will have a runoff a week from now.
But I do think change has come to Iran in some form. I think it will be — if Ahmadinejad is reelected, it won't be easy for our dealings with them. But it might, as Charles points out, indicate that change will come years down the road.
WALLACE: But Steve, I have been in Tehran, and I understand, I think people are surprised at the fervor of this election. If Ahmadinejad wins, how do the opponents, how do the people that don't like him and don't like the mullahs, make their feelings known on a continuing basis in Tehran?
It is a very dangerous place to take to the streets when they don't want you there.
STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": It is, although, we have seen over the course of the last several years, you know, sort of spurts of this. You had some labor uprisings in the past in rural areas. You have also had student uprisings from time to time.
So I think we have seen that there is a potential for that. And I agree with Charles maybe that the fact that this was sort of an energetic election, that you had these candidates and these debates. I mean, the debates were remarkable. You had these candidates actually really going after one another and making serious and sustained charges.
That said, I think it doesn't matter that much who wins in terms of, you know, how it's going to affect U.S. foreign policy in the near term.
I mean, the mullahs are in charge. The mullahs are going to be in charge a year from now and probably five years from now, sadly, even with all this unrest.
So I think the prospects of even a Mousavi victory turning into some great new engagement and a new era of American diplomacy with Iran, I think , are just highly unlikely. And people who are suggesting that, I think, aren't helping in the event of a Mousavi victory.
WALLACE: You know, it was interesting, Charles, in his remarks today, which were very careful, but the president talked about there is a desire for change in Iran, and tied it to the speech that he made in Cairo.
What are the challenges here for the president if Ahmadinejad wins, which you seem to have already anointed him, not waiting for the Iranian — no, I understand, but we need Michael Barone here to tell us what precincts they're coming in from.
But assuming Ahmadinejad wins, does that mean that the president's efforts to reach out to Iran are ended?
KRAUTHAMMER: I have looked at early returns in Isfahan, especially in the suburbs, and they're amazing.
Look, obviously we're going only on what we are hearing. But what you do when you hold an election, even a sham election, because it wouldn't have mattered who won, the policy that is relevant to the United States would have remained the same. But once...
WALLACE: You don't think it would have make any difference is Mousavi won or Ahmadinejad?
KRAUTHAMMER: The nuclear issue would have gone unmolested and unchanged. And that's the one that we care about. It's not going to change.
However, when you hold an election, as Chile has discovered and Argentina and the Philippines and other places, you can unleash a popular force that you would not have expected.
Obama assumes the legitimacy and the permanency of the current regime. He shouldn't, because, ultimately, our only hope in dealing with Iran is a change of regime.
And if this election and the stealing of it, if that's what's actually happening, if that occurs and it stirs unrest, we ought to be open to at least hands off and not supporting the dictatorship against whatever popular regime emerges as a result.
HAYES: I think everything turns on whether this is, in fact, a sham election or not, and there wasn't much in the way of international observers to tell us that.
The risk, I think, is that if Ahmadinejad wins, his rhetoric was hot towards the United States. I mean, this took place in these debates. He was telling people that what had happened was his hard-line policies had won out.
Years ago, he was part of the axis of evil. Now America is coming hat in hand, asking for favors and seeking to negotiate. He is claiming that as a victory.
The question is, if it is a more legitimate election than Charles might suggest it might be, does that further embolden him? And in that case, I think that's really dangerous.
WALLACE: All right, we have to take a break her, but when we come back, Sarah Palin defends herself after late night comedian David Letterman cracks questionable jokes about the governor and her daughter. The Friday lightning round is next.
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PALIN: I would like to see him apologize to young women across the country for contributing to that, kind of that thread that is throughout our culture that makes it sound like it's OK to talk about young girls in that way, where it's kind of OK, accepted, and funny to talk about statutory rape.
It's not cool. It's not funny.
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WALLACE: That's Sarah Palin continuing her feud with late night comic David letterman, just one of the topics on our Friday lightning round.
So we're at the end of week one of the Palin-Letterman feud, Steve. How much genuine outrage here, and how much does the publicity actually benefit both of them?
HAYES: Well, I think the publicity benefits Sarah Palin. I think she is genuinely outraged. I don't think the publicity benefits David Letterman. How could the publicity in this case benefit him?
WALLACE: Because he has Conan O'Brien on the air, and people talking about him.
HAYES: If you say any publicity is good publicity, then I guess he wins that way. But I think he just looks like a jerk. I mean, what he said was inappropriate, it was tasteless. And I think virtually everyone agrees that that was the case.
STODDARD: I think his jokes were over the top and she was right to ask him to apologize to women and girls instead of to herself.
I don't think that Letterman is going to lose any viewers. Those Letterman viewers are not going to feel sorry for Sarah Palin and they are going to stick by David letterman.
I think the problem for Sarah Palin is she needs to grow her support. The base listens to Sarah Palin, but if she wants to be a serious candidate in the future, she is going to have to attract people in the middle who now tune her out, don't hear her engaging on serious policy questions, but hear her fighting about her family quite frequently, starting with the father of her grandchild.
KRAUTHAMMER: On this issue, Palin is right, but she is losing. You don't get into a fight with a comedian, a clown, and a jester. It doesn't look good if you are a person who aspires to high office.
Letterman is the winner here. Everybody is talking about him exactly in the week or two in which he is getting a rival on NBC. All publicity is good for him, and he is loving this stuff.
I think she ought to cease and desist. It is going to keep hurting her.
WALLACE: Let's go to issue two. The U.N. Security Council today finally weighed in on North Korea and all of its provocative actions, imposed some new sanctions. Steve, is this going to change the behavior in Pyongyang?
HAYES: No. If it weren't so serious, it would be funny. I mean, we have seen them lie. We have seen them violate U.N. resolutions serially in the past, we have seen them test a crude nuke in October of 2006, and we have seen them proliferate nuclear weapons technology to a state sponsor of terror.
And now the U.N. Security Council is going to get tough? I mean, that's just silly.
STODDARD: I agree. Their reaction to sanctions, traditionally, has been to double down, more provocation, furthering weapons sales and nuclear tests.
Yes, China weighed in with Russia to support this, but China still gets to have normal trade, which is burgeoning right now at a great rate with North Korea.
If we see ships being interjected and searched, we could actually have some enforcement here. But unless we do, then it stays the same.
WALLACE: I am going to, because this is the lightening round, I'm going to switch subjects on you, Charles. Let's talk about Guantanamo. We have just gotten news the Department of Justice says now that three Saudis have been transferred from Guantanamo to the Kingdom of Saudi Arabia. So we are peddling these guys out.
On the other hand, the story today that the White House has given up on the idea of actually ever releasing any of these detainees to the streets of the United States, not saying that they wouldn't put them in prisons, but they wouldn't release them to the streets.
Where does this all stand?
KRAUTHAMMER: Three guys in Saudi Arabia, Uighurs in paradise, and the American Congress demanding that no one end up in the United States, as a result which Europe will not accept them.
The odds of anybody ending up anywhere other than staying in Guantanamo are decreasing every hour. I don't see how Obama escapes a humiliating retreat on this issue.
HAYES: The collapse begins. I mean, we have seen this policy in sort of a slow motion disintegration over the past several weeks, and this is doing it.
You are seeing the government of Bermuda, as Catherine Herridge was reporting earlier, throwing fits, I mean, the opposition in the country throwing fits, the tourism industry worried about whether people will actually want to come to Bermuda anymore because they have the Uighurs there.
WALLACE: Ten seconds, A.B.
STODDARD: This is a staggering concession. He has conceded significant bargaining power. He might have thrown a few Uighurs there, a few Yemenis to Saudi Arabia. But he is going to — having to taking 240 of them and send them overseas when we won't take any is very hard.
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