This is a rush transcript from "On the Record," June 9, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Is South Carolina about to pull an Arizona? We took a road trip to Capitol Hill in South Carolina, and Senator Lindsay Graham went "On the Record" about illegal immigration and so much more.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: A big topic that the country is talking about and your state of South Carolina is talking about it as well is illegal immigration. And there's even discussion in your state government to pass a similar law to Arizona. What do you think about it?

SEN. LINDSEY GRAHAM, R-S.C.: I think the best way to solve immigration is for the federal government to secure our borders and have national immigration policy. I understand the people of Arizona are being overrun. They are right on the boarder and this is spreading to places like South Carolina.

There is legislation in the state house, and my hope is to sit down with some Democrats and Republicans, and if not this year, next year come up with a comprehensive immigration plan that would make people feel like they are secure and immigration is no longer broken.

VAN SUSTEREN: What is wrong with now? I understand you have tried before. Since the mid 1980s we've heard about securing the border, and it is not believable from a voter standpoint. It is just not happening.

GRAHAM: Here's the problem. I tried in 2006, 2007, we failed. The key to border immigration reform is confidence. Why would you give these 12 million a second chance if we are going to have 20 million more in the future?

People ask me all the time if we give them a second chance which I'm not opposed to in principle, convince me we won't have 20 million more. And that is the key. We have to secure our border better than better doing now. And 40 percent here never legally came across the border and their stay is illegal.

If we can show people to border security as if we are at war, a commitment to policing our visa program, then we move on to the other parts, temporary worker program, employee verification, and dealing humanely with the 12 million.

VAN SUSTEREN: I got that. But here's the problem, it's that border security thing that's just not happening. You come into JFK and go through long lines to get through immigration and customs. But we had these unsecure -- you can walk across the border of Arizona.

So why isn't -- why aren't our politicians securing the border but just telling us, yes. that's a good idea?

GRAHAM: Two years ago they required fencing to be done throughout the border. The Obama administration has cut a number of border patrol agents. They are not building the fence like Congress directed. And there are 300 million (ph) people who cross the U.S.-Mexican border illegally.

VAN SUSTEREN: Why aren't they doing that? The Obama administration is saying we are the most secure, we have all these resources. And I don't know who to believe. All I know is that the border is not secure.

GRAHAM: Believe what they are doing and ask yourself if it is enough. Is 1,200 National Guard troops enough? Do you need 6,000? The answer is yes.

The virtual fence is not working. He should show an urgency to fix that fence. If he would show as much urgency now about securing the border it would help me and other people be able to work with him to solve the other parts of the problem.

But this lackadaisical attitude about border security makes it impossible to do a comprehensive bill. The president should go to the border like he's going down to Louisiana, spend a night in Arizona or Texas, understand why people feel so frustrated, take a tour of the southern border and come back to Congress with an agenda to fix it and get 80, 90 votes for strong border security in 2010. In 2011 we'll deal with the other parts of the problem.

VAN SUSTEREN: You are going to have a new governor, maybe even a woman, we don't know yet. And even Senator DeMint your colleague has some intrigue. His Democratic opponent has a few problems.

GRAHAM: We are in an interesting place, and sometimes bizarre politics. The Democratic nominee for Senate last night is a young man who has never run for office, unemployed, who didn't spend one penny and got 59 percent of the vote, and he's facing felony charges. That is an uphill climb.

VAN SUSTEREN: For him, not for Senator DeMint, I take it.

GRAHAM: Senator Jim DeMint is going to win no matter who they put up.

But in a way this is not good for democracy. Democracy depends on competition, honest competition based on ideas. And it is not good for my state or any other state to have such a lackadaisical attitude about the United States Senate.

So the person that he beat was a former judge, was a state house member, retired member of the National Guard. But the guy that won didn't spend one penny, has never campaigned at all, and he won going away.

And that is not good for democracy. Senator DeMint is going to win reelection.

VAN SUSTEREN: Who is going to be the Republican nominee for governor? Do you think the opponent to your frontrunner should withdraw or should they duke it out on the 22nd?

GRAHAM: There are two weeks, and Gresham Barrett feels like he has a message to deliver, go ahead and deliver it. Nikki Haley has run an incredible campaign. She is articulate. She has a vision for the state. She has caught on fire.

The good news is, two weeks from yesterday, last Tuesday, we're going to have a Republican nominee, and I think a good shot to elect a Republican governor.

But I would say this to the Republicans in South Carolina -- you just can't win by showing up. Democrats won the Senate seat in North Carolina. They had a runoff in the Senate seat in Georgia in the last election cycle. So we can't just expect to put an "R" by our name and win.

So when the primary is over hope everybody will come together and we'll work hard because the public is going to make us earn any job in South Carolina.

VAN SUSTEREN: Iran -- the president today announced the U.N. Security Council had gone to our fourth level of sanctions against Iran. Your good friend Senator John McCain is most unimpressed with what the Obama administration has secured in the Security Council. Your position?

GRAHAM: My position is sanctions should be tried in a way to change the behavior. The sanctions that are on the table now are not going to be behavior-altering, they are not tough enough.

VAN SUSTEREN: Are they effective at all?

GRAHAM: They could be. Iran depends on importing their gasoline. If you wanted to hit the regime and hit it hard you would cut off all petroleum supplies until they abandoned their nuclear program.

The people would suffer but they would be the biggest winners overall. The people in Iran are a good ally for us. The regime in Iran is a nightmare for our nation and the world at large. This regime could come down if economic sanctions were placed that cut off their economy and their ability to grow.

They need refined petroleum. They have a lot of oil but can't make their own gasoline. If Russia and China married up with the United States and the European nations throughout United Nations and imposed petroleum sanctions on Iran they would change their behavior in a heartbeat.

VAN SUSTEREN: One to 10, how do you rate the sanctions in terms of its effectiveness in achieving what we want from Iran?

GRAHAM: The ones being proposed -- two or three. You asked what keeps you up at night. We talk about immigration, $13 trillion national debt, a health care bill overreaching, a lot of domestic problems.

But the one thing that keeps me up at night more than all the others is how the world would look if this regime in Iran had a nuclear weapon. Would they give a terrorist organization? Would they attack Israel? No one knows.

It changes the world as we know it. It puts it in the state of chaos and flux. Every country may feel like they need a nuclear weapon. So the Obama administration has one last chance through sanctions to change the behavior of the Iranian regime. If that doesn't work we need to look at military option as the last option but a viable shun.

If this regime develops a nuclear weapon you will never contain them.

VAN SUSTEREN: Senator, thank you, sir.

GRAHAM: Thank you.

(END VIDEOTAPE)

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