The following is a rush transcript of the June 28, 2009, edition of "FOX News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

BRET BAIER, GUEST HOST: Five years ago today, the U.S. transferred sovereignty to Iraq. And a few days from now, U.S. troops will withdraw from all major cities in Iraq. Here to talk about these milestones is the commanding officer in charge, General Ray Odierno. He comes to us live from Baghdad.

General, welcome to "FOX News Sunday."

GEN. RAY ODIERNO: Thank you, Bret.

BAIER: General, will you make the deadline of June 30th to pull U.S. troops out of major cities inside Iraq?

ODIERNO: Well, Bret, in fact, we've already met the deadline. We have already moved out of the cities. We've been slowly doing it over the last eight months. And the final units have moved out of the cities over the last several weeks.

BAIER: So there are more than 130,000 U.S. troops still on the ground in Iraq. And in recent days there has been a serious uptick in violence, at least 200 people killed in recent days in these spectacular attacks.

What is happening with this recent uptick in violence, in your opinion?

ODIERNO: Well, again, I would say that overall stability in Iraq remains good. What we've had is we've had some extremist elements trying to bring attention to themselves as well as divert attention from the progress being made in Iraq, and so we've seen a couple high- profile attacks aimed at the — aimed at innocent civilians.

I think what this has done, frankly, is brought the ire of Iraqi citizens against these groups and I think it will harden them in supporting them. And frankly, I believe it will make it much more difficult for them to continue to operate inside of Iraq over the long term.

BAIER: General, in April you said that this deadline might have to shift based on what you were seeing on the ground. What changed for you to be able to get to this point?

ODIERNO: Yeah. Well, Bret, in May we had the lowest level of incidents we've ever had on record in Iraq. In the — in the first three weeks of June, we did as well.

You've seen a slight uptick this past week with these high- profile attacks, but again, I would say these are just extremist elements that are attempting to bring attention to themselves, and I think this is the right time for us to turn responsibility over to the Iraqis.

BAIER: Understanding that this is part of the agreement that the U.S. signed with Iraq, are the Iraqis ready? How confident are you that they can handle the task of providing security to these cities?

ODIERNO: Yeah, I'm fairly confident, Bret. Obviously, we've been working in close partnership with them for a very long time. We've seen constant improvement in Iraqi security forces over the last two years.

We've also seen improvement in local governance, in provincial governance. We've seen some improvement in the federal government.

We've also seen the resilience of the citizens and the fact that they want the Iraqi security forces to take over security. And I think all of these factors, combined with the continued improvement in overall stability and security, makes this the right time for us to turn this over to the Iraqi security forces.

BAIER: General, Iraqi prime minister Nouri al-Maliki calls this a great victory for the Iraqis. He describes it as a repulsion of the foreign occupiers and he compares it to the rebellion against British troops in 1920.

Now, understanding he's playing to an Iraqi audience here ahead of an election in January, the U.S. has spent hundreds of billions of dollars in Iraq. We've lost more than 4,300 men and women there. Do you find this terminology acceptable?

ODIERNO: Bret, frankly, that's not exactly how I read it. I believe this is a celebration, and what we've seen the last few days is they're talking about this as a celebration of Iraqi being able to — Iraqis and Iraqi security forces being able to take over responsibility inside of their cities.

And they're seeing it as a progression in their capacities, and I think that's the important point. And we've seen that emphasized more and more over the last several days by all Iraqi leaders, both in the local press and in the international press.

And I think that's the appropriate tone, and I believe — I agree with that, and I think it is time for them...

BAIER: Yeah, he...

ODIERNO: ... to take responsibility inside of the cities.

BAIER: He doesn't talk publicly about the American role of providing security. What does he say privately to you?

ODIERNO: Well, we — we've had a partnership. We've built a hard partnership here over the last 2.5 and three years, through the surge, through the dark days here in Iraq, when attacks were 10 times what they are today, when there were a significant amount of more civilian casualties. We worked very hard together to gain this improvement. There's been sacrifices by Iraqi security forces. There's been sacrifices by the coalition forces. They recognize this. We are continuing this partnership.

But it's time for this partnership to have an Iraqi lead. It's time for this partnership to have the Iraqis out front. And it's time for us to support that.

BAIER: The rules of this agreement — do they bar U.S. troops from using armored vehicles inside cities during the day? There was a report to that effect. And is this possibly more dangerous for U.S. troops in this different scenario, being outside the cities?

ODIERNO: Yeah. First, there's nothing in the security agreement that bars us from using any type of vehicles. All our units have several sets of vehicles. They have tanks, Bradleys, Humvees, MRAPs. The commanders get to decide which vehicles they use based on the situation that they're in, and that will not change after the security agreement.

I believe that with the coordination we've set in place, with the trainers, advisers and coordinating elements we have established at each level of command — I believe we'll be able to maintain the necessary oversight and situational awareness to protect our soldiers, sailors, airmen and Marines as we continue operations.

BAIER: General, what's the reaction inside Iraq to the situation on the ground in Iran, its neighbor?

ODIERNO: Well, I think it's been some — they're just watching. I don't think there's been any overreaction. What I do believe, though, is it gives them more confidence in their government, in the fact that they just went through legitimate and credible elections to elect their provincial leaders, and the fact that they're going to go through credible and legitimate elections here for their national leaders in January, and that they will oversee those elections and they will have U.N. and international observers that will validate those elections.

And I think that will also encourage them to continue to move towards democracy.

BAIER: Just a couple quick questions. Are there fears as the U.S. draws down that Iran will somehow fill the vacuum in Iraq?

ODIERNO: I'm sure that some people have those fears. My assessment here is that Iraqis want to control their own destiny. They don't want anybody else filling that gap. So when we leave, they will — we will leave and they will have the capability to do that.

They will not allow anyone else to come in here and try to fill the gap instead. They believe they are nationalists. They want to control their own destiny. They understand and want to have full sovereignty over their own country.

BAIER: Lastly, General, what's your biggest concern going forward? What makes you stay up at night?

ODIERNO: Well, I mean, it has to do with the potential political drivers of instability that remain. We still have much work to do in terms of Arab-Kurd relations.

We still have reconciliation to go through. We've made some good steps towards reconciliation, but they have to continue to address the area of reconciliation in Iraq. So I think it's these political issues that will be the most important as we move towards the national elections.

And I think these could cause some instability, and that's what I worry about. What I hope is these will be solved through politics and diplomatic measures and not through violence.

BAIER: General Odierno, thanks for taking the time with us this morning. Thank you for your service and good luck.

ODIERNO: Thank you very much, Bret. It's a — it's a pleasure to be with you this morning.

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