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Exclusive: CIA Director John Brennan provides insight into agency overhaul to face modern threats

Editor's note: This transcript has been corrected to indicate that during the final panel segment of the show, Liz Cheney said the following, not Judy Woodruff:

CHENEY: I think it clearly -- sorry, Bob, but I think it clearly does change the overall relationship. You know, I was in Israel last year and they are stunned. They cannot comprehend why the president of the United States is obviously doing more to align American policy with Iran than with Israel. And you've got a situation now where it's not just the Israelis that are just completely baffled. It's the Gulf Arabs. You know, in the Brennan interview, he said oh, the Gulf Arabs know that we will be there to defend them. They don't believe that anymore and the Israelis don't believe it anymore.

This is a rush transcript from "Fox News Sunday," March 22, 2015. This copy may not be in its final form and may be updated.

CHRIS WALLACE, FOX NEWS ANCHOR: I'm Chris Wallace, at the headquarters of the Central Intelligence Agency. Today, an exclusive interview with CIA director, John Brennan.

(BEGIN VIDEOTAPE)

WALLACE: Fact is, they fooled us, repeatedly, the Iranians.

In a wide-ranging interview, we discuss Iran's nuclear program, the growing threat from ISIS and Russian President Putin's global ambitions.

As director of the CIA, do you see any indications that Vladimir Putin wants out of Ukraine?

Spy master John Brennan from the CIA, only on 'Fox News Sunday.'

Then, new tensions between the White House and Israel. After Prime Minister Netanyahu is re-elected.

Will the Obama administration let the U.N. recognize a Palestinian state?

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: The commitment to that two-state solution has been in a lot of ways sort of a guiding principle. It's pretty clear that Israel is no longer committed to that outcome.

WALLACE: Our Sunday group discusses that and our interview with John Brennan.

And our power player of the week, Mitt Romney's former campaign manager now leaving the oppo research effort against Democrats.

UNIDENTIFIED MALE: All these people here are focused on Secretary Clinton. And so, they are tasked day in and day out.

WALLACE: All, right now, on FOX NEWS SUNDAY.

(END VIDEOTAPE)

WALLACE: And hello again from FOX News. Today, at CIA headquarters in Langley, Virginia, this is the agency's iconic entrance here with the CIA seal.

In this complex, thousands of officers work around the clock collecting intelligence and directing covert operations to protect the U.S. from foreign threats. But while the CIA is the stuff of spy movies and Tom Clancy novels, in real life, the agency has a unique insight into what's happening in hot spots around the world.

Today, we take you inside for a rare and exclusive interview with the man who heads the spy agency, Director John Brennan.

(BEGIN VIDEOTAPE)

WALLACE: Director, we're here in the CIA's private museum. Tell us about this model next to us.

JOHN BRENNAN, CIA DIRECTOR: Well, first of all, welcome, Chris, to our museum that we're quite proud of. This is the model of the compound in Abbottabad that Osama bin Laden was hiding for years in a number of years. And that was the site of the takedown of bin Laden.

But despite the detail that you see in the outside, there's still a lot we didn't know at the time as far as the inside of the building and what bin Laden and his cohorts might have planned in terms of blowing up the building and confronting any type of force that would come in.

WALLACE: Let's talk about a current threat, Iran. What if the talks fall apart and there is no deal? What's your best intelligence? Will Iran race to develop a nuclear weapon? Or are they more likely to go back to where we were before the talks, just a couple of months short of breakout?

BRENNAN: The nuclear program is one issue that we're hoping to be able to halt, but also we see that Iran is still a state-sponsored terrorism. So what we have to do -- whether there's a deal or not -- is to continue to keep pressure on Iran and to make sure that it is not able to continue to destabilize a number of countries in the region.

WALLACE: I want to get into that in a moment. On the deal, what's your guess what happens if there is no deal? Do they breakout or do they stay just short of that?

BRENNAN: I think they realize there will be tremendous costs and consequences and implications if they were to decide to go for a breakout. There are a number of things that the United States has available to it to prevent Iran from getting a bomb. President Obama has made it very clear that we are going to prevent Iran from having that type of nuclear weapon that they may were going on the track to obtain.

So, if they decide to go down that route, they know that they will do so at their peril.

WALLACE: On the other hand, if there is a deal, the big question is, can we verify that Iran is living up to that deal?

Here is what Israeli Prime Minister Netanyahu told Congress.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: Iran not only defies inspectors, it also plays a pretty good game of hide and cheats with them.

(END VIDEO CLIP)

WALLACE: Question, how confident are you that between the new inspections regime under the agreement and your intelligence in the area that you would be able to ensure that Iran was not secretly building a nuclear weapon?

BRENNAN: It's not a question of trusting the Iranians on this. I know that Secretary Kerry and President Obama are comfortable with what it is that we are insisting on as far as a verification regime.

WALLACE: But, frankly, our track record when it comes to Iran and its nuclear program is not good. Iranian opposition groups in 2002 were the ones that revealed that the regime had secret facilities at Natanz in Iraq. One of your predecessors, Michael Hayden, says that they had done a lot of work at Fordo before we knew about it.

Fact is, they fooled us, repeatedly, the Iranians.

BRENNAN: And I think we've gone to school on some of those developments over the last decade or so, so that we can now have a better plan and opportunity to verify some of the things that they are saying they are going to do and not do.

WALLACE: Are you aware of an underground site near Tehran called Lavizan-3?

BRENNAN: I know that there are a lot of reports. I'm not going to get into what it is we know about the Iran nuclear program. But I am confident that our intelligence capabilities are sufficiently robust that we have a good understanding of what the Iranian nuclear program entails.

WALLACE: Well, the reason I ask is Iranian opposition groups say that there is a secret nuclear facility there that we haven't known about.

BRENNAN: I think we have confidence that we're aware of the facilities that Iran has right now, and there's going to be a lot of speculation and rumors about other facilities. But, again, I'm confident that right now, we have a good appreciation of what the Iranian nuclear program consists of.

WALLACE: What is the danger of nuclear arms race across the Middle East? Top Saudi officials, including former intel chief, Prince Turki al Faisal, say if there's a deal, that the Sunni nations are going to match whatever it is we allow the Iranians to do. Doesn't that just lead to an arms race?

BRENNAN: We talked to the Gulf partners. We're trying to stay close in touch with them. I believe that they do have confidence that the United States is going to be sort of the security guarantor in that region to prevent this type of escalation that's going to include nuclear weapons.

WALLACE: But when you have top Saudi officials say they're going to top what we have Iran have, doesn't that create an arms race?

BRENNAN: We continue to have this close dialogue with them, about what it is that we are insisting upon, from the Iranians and the verification system there. So, I'm confident that the Saudis will be a responsible partner and player in the region.

WALLACE: Which is a greater threat to the U.S., Iran or ISIS?

BRENNAN: I think they're both threats.

WALLACE: The reason I ask is Iran's reach -- I don't have to tell you -- is spreading into Iraq, into Syria, into Lebanon, now into Yemen. General Qassam Suleimani, the head of the Quds force, from Iran, is leading the offensive in Tikrit.

Here is what you said recently.

(BEGIN VIDEO CLIP)

BRENNAN: There's an alignment of some interest between ourselves and Iran, clearly in terms of what ISIL has done there.

(END VIDEO CLIP)

WALLACE: Do you really think that the U.S. and Iran share interests?

BRENNAN: I think what's Daesh, ISIL has been doing in the region is something that is counter to U.S. interests as well as counter to Iranian interests. And the Iranians are now engaged with their Iraqi partners to try to push back these forces of terrorism inside of Iraq.

So, Iran does have an interest in preventing further Daesh, ISIL terrorist attacks. At the same time, I think they need to be responsible as far as what they're doing inside Iraq and not further inflaming that situation.

WALLACE: But your immediate predecessor in this job, General David Petraeus, said this week Iran is not an ally. It's part of the problem, not part of the solution. And Benjamin Netanyahu, when he spoke to Congress, said the enemy of your enemy is not your friend, he is your enemy.

BRENNAN: Well, I wouldn't say that Iran is an ally right now. All I'm saying is that the Iranians are pursuing their interests inside of Iraq, some of which include efforts against Daesh and preventing that phenomenon from growing.

WALLACE: But the concern is that we're somehow letting Iran back into Iraq and other areas and I understand that we don't have a veto power, but, you know, the concern is that we are letting them play a bigger role --

BRENNAN: We're not letting them play that role. I think they're working with the Iraqis to play that role. We're working with the Iraqis as well. And the Iranians are involved as a neighboring state. They clearly have interests there. They're pursuing them.

Qassem Suleimani, head of the Quds Force, is somebody who has been very aggressive, very active. There are many things that Qassem Suleimani is further that future destabilizing the situation there. So, I wouldn't concern Iran an ally inside of Iraq right now.

What I'm saying is that the forces that Daesh has brought to bare in Iraq generated an Iranian reaction, that they need to make sure they're not pursuing a very parochial and separate agenda from what the Iraqi nation and people need.

WALLACE: General Lloyd Austin, the head of the U.S. Central Command, told Congress recently that ISIS is losing. But ISIS is still dug into Iraq and Syria. They now have affiliates across North Africa. They were possibly responsible for these terrible attacks this week in Tunisia and Yemen.

Director, can we really say ISIS is losing?

BRENNAN: Clearly, ISIS momentum inside of Iraq and Syria has been blunted and it has been stopped. So, they are not on the march as they were several months ago. And so, our working with the Iraqis and the Iraqis now trying to push back against it, it is having some great, I think, progress.

At the same time, this phenomenon of Daesh throughout the entire region is something that we need to work with our partners. We see what's happening in other countries, in these franchises that are blowing up in Libya and other areas. They -- they've claimed responsibility for attacks in Tunisia and Yemen.

This is something that clearly is not just restricted to Iraq and Syria. So, we cannot relent. We have to continue working with our partners in the region.

WALLACE: Here is what you said in 2012.

(BEGIN VIDEO CLIP)

BRENNAN: If the decade before 9/11 was the time of al Qaeda's rise and the decade after 9/11 was the time of its decline, then I believe this decade will be the one that sees its demise.

(END VIDEO CLIP)

WALLACE: Director Brennan, weren't you just flat wrong about that?

BRENNAN: No. And when we look at al Qaeda and we look at what has happened to al Qaeda and particularly the core of al Qaeda that was in the area of Afghanistan and Pakistan, they have taken some really big hits.

WALLACE: But -- but, respectfully, sir, when you were saying this is the decade of al Qaeda's demise, I don't think most people thought you meant, well, yes, but there will be an offshoot called ISIS which spreads across the Middle East.

BRENNAN: This phenomenon that Daesh represents right now is a new one. It is one that has grown up in the past two years.

WALLACE: But it's an offshoot of al Qaeda.

BRENNAN: We've done a lot against al Qaeda. We've been able to push them back. We've been able to prevent their attacks.

But there are these offshoots, as you say. This is a phenomenon that we're going to have to deal with. And I do think over the next decade, this is going to be a long, hard fight.

WALLACE: I guess what I'm asking is didn't you give the American people -- and the president give the American people a false sense of confidence back in 2012 about our fight against Islamic terrorists at a time, perhaps not so coincidentally, when the president was running for reelection?

BRENNAN: What we said was al Qaeda was on the run. We said that al Qaeda was really bloodied and it was not the same organization that it was in 9/11, as well as in the years after that.

There was no sense that I think either I or the president or others gave to the American people that terrorism was going away. But we've made great progress against a lot of these groups that had plans in place to carry out attacks.

WALLACE: You talked recently of the ideology -- your word -- that fuels ISIS.

What is that ideology?

BRENNAN: It is a very twisted, perverted interpretation of a religion that they purport to represent, but in no way do they represent. It's an ideology of violence. That's what it is. It is not a religious ideology.

WALLACE: Well, Islam is certainly a part of it, isn't it?

BRENNAN: They purport to be Muslims. But as I said, the overwhelming majority of Muslims throughout the world roundly denounce and condemn what they're doing. And that's why we should not give them any type of religious legitimacy.

WALLACE: This gets to your refusal and the president's refusal to talk about Islamic extremism.

Lieutenant General Michael Flynn, former head of The Defense Intelligence Agency, says you can't defeat an enemy unless you define it.

And Egyptian President el-Sisi called for a religious revolution recently.

(BEGIN VIDEO CLIP)

ABDEL FATTAH EL-SISI, EGYPTIAN PRESIDENT: The Muslims have to stand up correct, this misinterpretation and deformed picture of what Islam is.

(END VIDEO CLIP)

WALLACE: If ISIS is selling its ideology, its brand -- twisted brand of Islam to followers and pulling in recruits, don't you have to confront that?

BRENNAN: And we are confronting it.

WALLACE: So why not say this is a perverted form of Islam and here's what we're doing to stop it, and this is why they're wrong about Islam, instead of ignoring that?

BRENNAN: No, I think that's exactly what we have said. It is a corruption of the Islamic faith. It is a distortion of it. It does not represent the Muslim community or Islam.

WALLACE: Are you prepared to say they're Islamic extremists?

BRENNAN: I'm prepared to say that they are extremists. They're violent terrorists who misrepresent what the Islamic religion is about -- yes, absolutely.

WALLACE: What is your read on Russian President Putin? What are his strategic ambitions?

BRENNAN: I think President Putin has a view of what sort of Russian nationalism is, that, unfortunately, I think he has put some of the personal interests of himself and some of the senior members of the Russian government ahead of the best interests of the Russian people.

And what he needs to understand is that if Russia is going to play the appropriate place in the world, it needs to respect the territorial integrity, as well as the sovereignty and the independence of the countries that are in the region of Russia.

WALLACE: Haven't we misread Putin throughout the Ukraine crisis?

President Obama kept talking about giving Putin off ramps. But in a -- a movie on the first anniversary of the invasion, Putin said that he always saw Crimea as part of Russia and that he was even willing to put nuclear forces on alert.

He never had any intention of backing down.

BRENNAN: I think Mr. Putin has demonstrated that he's going to continue to push as far as what his objectives are inside of Ukraine. And I think it is --

WALLACE: So, wasn't it naive to even talk about off ramps?

BRENNAN: No. I think what Mr. Putin himself needs to do is to understand how he can extract himself from this situation, because it is coming at the cost of the Russian economy and the Russian people being hurt.

WALLACE: But he's happy with this situation.

BRENNAN: I don't believe he's happy with the situation.

WALLACE: As director of the CIA, do you see any indications that Vladimir Putin wants out of Ukraine?

BRENNAN: I see that what we need to do is to continue to put pressure on Mr. Putin so that the Ukrainian people and the Ukrainian government can have a future that is going to be peaceful and safe and secure.

WALLACE: But you see any sign he's looking for an off ramp?

BRENNAN: I think that there are signs that discomfort that is associated with this is becoming more uncomfortable.

(END VIDEOTAPE)

WALLACE: When we come back, more of our exclusive interview with CIA director, John Brennan. Why was his agency surprised by the spread of ISIS and Putin's move on Ukraine? And did the enhanced interrogation of terror suspects after 9/11 produce key information or not?

(BEGIN VIDEO CLIP)

BRENNAN: I cannot determine cause and effect that it was only for the use of those EITs that those individuals provided information.

(END VIDEO CLIP)

WALLACE: More of our conversation as FOX NEWS SUNDAY continues from inside the CIA.

(COMMERCIAL BREAK)

WALLACE: And we're back inside CIA headquarters, just across the river from Washington, with more of our exclusive interview with Director John Brennan.

The spy agency has gotten a lot of things right over its 68-year history, most notably tracking down Osama bin Laden. In recent years, critics say they've been surprised repeatedly by global events.

And that's where we picked up our conversation with Director Brennan.

(BEGIN VIDEOTAPE)

WALLACE: Director Brennan, President Obama says the intelligence community underestimated ISIS' spread during the early part of 2014. Other officials say that you made the same mistake when it came to the spread of the Iranian-backed rebels in Yemen and the general belief was before he invaded that Putin wasn't going to go into Ukraine.

Why did -- do those misjudgments happen?

BRENNAN: Our ability to evaluate some of things is limited if we don't have the presence, if we don't have the insights and capabilities.

But I think we've done a very good job over the course of time, identifying some of these new waves that have come through. But intelligence is not a perfect science. It is one that is based on the intelligence information we get, the insights, the assessments.

And what we try to do is to give policymakers a sense of these developments as they unfold.

WALLACE: But critics would say are we getting enough? Are we getting our money's worth for the billions we spend on intelligence? Aren't those serious mistakes?

BRENNAN: No, the world is a complicated place. There are a number of developments that are going on right now in countries that unfold with, I think, great speed as well as a result of some of the actions that individual leaders take. And unfortunately, the challenges that government faced in a number of these countries are significant.

WALLACE: Speaking of misjudgments, a special national intelligence estimate concluded that the pullout by President Obama of all of our troops from Iraq in December of 2011 helped set the stage for the spread of ISIS.

Wasn't the pullout a mistake?

BRENNAN: I think the fault really lies with a number of the Iraqis who wasted and squandered the opportunity they had after the government was reconstituted, not to put at rest some of these sectarian tensions and not to be more inclusive as far as bringing the Sunni community in.

WALLACE: But what about the special national intelligence estimate that the pullout of U.S. troops contributed?

BRENNAN: Clearly, U.S. military forces provide a tremendous capability to our partners, whether it be in Iraq or other countries.

But it really is up to these countries' military security and intelligence forces to step up.

WALLACE: Last year, U.S. drone attacks killed at least 138 Al Qaeda operatives.

Isn't part of the problem that we now have a policy where we basically kill these terrorists instead of capturing them and so we lose the intelligence that they could provide?

BRENNAN: I think we have said over and over that if we have the opportunity to capture terrorists, simply working with a lot of our partners overseas, we will do that.

And there have been countless terrorists who have been captured, who have been arrested and detained, who have been debriefed and are providing intelligence and insights into those terrorist organizations.

WALLACE: Experts tell me that -- that when opposite -- when other countries catch these guys, they slit their throats. We don't get any intelligence.

BRENNAN: Well, I think those experts are wrong, because we are working with our partners and we're making sure that they do not do things like that and if we find that there are indications that they're doing this, we take action against them.

WALLACE: You were one of the key players in the take-down of Osama bin Laden. And from this compound here, Navy SEALS were able to recover one and a half -- an estimated one and a half million documents.

Why have only 25 been released to the public?

BRENNAN: There is a process underway for the release of those documents. There's also been quite --

WALLACE: It's been almost three years.

BRENNAN: Yes. And there's also quite a bit of exploitation of information that was obtained in that raid that has assisted greatly our efforts against the terrorists that are out there.

We'll continue to do that and exploit that.

WALLACE: But I guess the question is, if you have scrubbed them so thoroughly and if it's -- it's now four years later, can't more than 25 be released to the American people?

BRENNAN: Sometimes these things take time, and we need to make sure that the resources are dedicated to that effort as well as dedicated to keeping the American people safe.

WALLACE: There are reports that one of the reasons these documents aren't being released is because a number of them show that al Qaeda was not in decline, was on the on the run, as it was being portrayed in 2012 -- but, in fact, was a very active operation.

BRENNAN: That's hogwash. If anybody believes that we're withholding documents because we believe that would be embarrassing, that is just absolutely wrong.

WALLACE: You recently created a new division here in the CIA, the directorate of digital innovation.

Has cyber become the new frontline in the contest between nations and terrorist groups?

BRENNAN: The CIA has an obligation to make sure we're able to work in all the various domains, the physical domain, maritime, aviation. But the digital domain has continued to grow and evolve. That digital domain is going to be used by terrorist groups and others, proliferators, to be able to communicate, to be able to incite, encourage, use propaganda and communicate.

And so, CIA, as well as our other intelligence agencies, really need to master that domain as a way to protect the American people.

WALLACE: Speaking of mastering that domain, was the U.S. behind the massive Internet outage in North Korea last December after the hacking of Sony?

BRENNAN: The North Korean system is fraught with a number of sort of challenges, because it is a country that, unfortunately, has put its pursuit of military capabilities in front of what the best interests are of the people.

And so, there is an infrastructure there that is rickety, there are challenges that they face on a technical front. So there are a lot of reasons why the North Korean people and the Internet system out there has problems.

WALLACE: Did the U.S. give a little shake to the rickety North Korean system?

BRENNAN: I'm not going to address anything that we may have done in that instance, and I'm not acknowledging anything at all here. What I'm saying is --

WALLACE: But you're not denying it either?

BRENNAN: You can raise any question about what might happen worldwide, or I'm not either going to confirm nor deny it.

WALLACE: We began, you and I, talking about this interview last summer, at a time when the Senate intelligence agency was investigating the enhanced interrogations that were carried out after 9/11.

And one of the key issues was whether or not the agency exaggerated the effectiveness of the EITs.

Did enhanced interrogation play a role in our being able to track down Osama bin Laden?

BRENNAN: I cannot determine cause and effect, that it was only for the use of those EITs that those individuals provided information. But the take-down of bin Laden at that compound was the result of tedious work that was done by counterterrorism experts that were able to tap into the information that was provided by individuals who were in detention and that the CIA debriefed.

WALLACE: How badly did the criticism coming 12 years after 9/11 of what this agency did, a very different time, a very different place -- how badly did that damage the morale of this agency?

BRENNAN: It was demoralizing to a number of people, particularly those who were involved in the program, who really felt as though there was an effort on the part of some individuals involved in that investigation, that report, that were intentionally trying to just emphasize and over-emphasize the mistakes that were made and did not put it into a broader context.

Yes, mistakes were made. But the overwhelming activities that were a part of that program, the ones that I think the American people would feel proud that the agency was able to fulfill its responsibilities.

WALLACE: Finally, from your 27 years at this agency, the last two as director of the CIA, what do you think the public needs to know about the Central Intelligence Agency?

BRENNAN: The successes and accomplishments that we have, the overwhelming majority of them will not ever find expression in newspaper and media. They do it silently. They do it not for accolades or parades. They do it because they are true American patriots.

So, the American people should feel good about what CIA is doing. And, yes, we've made mistakes. And sometimes, they're the ones that get the spotlight and the headlines. But they are a very, very small portion of what this agency does. And I couldn't be prouder to be here.

WALLACE: Director Brennan, first of all, thank you for inviting us here to headquarters.

Thank you for talking with us. And thank you for your years of service to the country, sir.

BRENNAN: Thank you, Chris.

(END VIDEOTAPE)

WALLACE: To see more of our interview with Director Brennan, go to our Web site FOXNewsSunday.com.

And that's it from CIA headquarters here in Langley, Virginia.

When we return, we'll be back in our Washington studio to get our Sunday group's reaction to the interview.

Plus, what would you like to ask the panel about chances for a nuclear deal with Iran? Just go to Facebook or Twitter @FoxNewsSunday, and we may use your question on the air.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JOHN BRENNAN: President Obama has made it very clear that we are going to prevent Iran from having that type of nuclear weapon that they maybe were going on the track to obtain. So if they decide to go down that route, they know that they will do so at their peril.

(END VIDEO CLIP)

WALLACE: CIA Director John Brennan warning what will happen if there's no deal and Iran pursues a nuclear weapon. And it's time now for our Sunday group. Radio talk show host, Laura Ingraham. Judy Woodruff, co-anchor of the PBS NewsHour. Fox News contributor, Liz Cheney and Bob Woodward from ‘The Washington Post.’

Well, Laura, Director Brennan seemed confident that if there is a deal that we'll be able to verify it and if there isn't that we'll be able to stop it? Do you share his confidence?

LAURA INGRAHAM, FOX NEWS CONTRIBUTOR: I'm skeptical. And the interview was fascinating, because you got into not only this issue, but then you went back and we examined why we missed ISIS, what was going to happen with ISIS, how lethal ISIS would become. So the trust, I think, is based on recent experience, how credible are their reassurances that if they go off the tracks we'll be able to stop it. We weren't able to see what was about to happen in the Middle East with the rise of ISIS.

WALLACE: We also missed a lot of what Iran has done over the last decade and now that Brennan wasn't on the watch then, but ...

INGRAHAM: Well, and the - and all of the nuclear sites that you also alluded to. So, there's a track record of spotty results, I think, for American intelligence. I am glad you got to the point about moral at the CIA, which I think took a huge hit. He acknowledged that. So, while I understand that the administration is trying to reassure all these skeptics in Congress, on Capitol Hill, that they are worried about, I think even recent history, that is a difficult sell to make and especially now with this conflicting deal with Iran fighting ISIS, but Petraeus says Iran is a bit - his predecessor is saying that's the big threat here. I think it's difficult for this administration to make this case at this point with this recent history.

WALLACE: We asked you for questions for the panel and we got this on Facebook from Annette Demoss. She writes, what has changed in our government where we are now considering allowing Iran even limited nuclear development?

Judy, how do you answer Annette because from what we understand and obviously we only know the reports, Iran under this deal would be able to have 6,000 centrifuges. They would be able to continue to enrich uranium, although at lower levels. Whatever happened, I guess, and that is asking to the old policy of no nuclear program period.

JUDY WOODRUFF, CO-ANCHOR, PBS NEWSHOUR: Well, I thought - I also thought the interview was fascinating. And I was struck when he said, you were asking him about how do we know? Some of these very questions you're asking us. How do we know what Iran is up to? And he said we went to school in effect on the mistakes that were made. So they are saying that they know more about what Iran is up to than we know, than they can talk about. So, one has to assume that that's the reason that they are prepared to say Iran can do more. But I just want to say what we know about the negotiations, Chris, at this point is that serious issues or yes, the centrifuges, the quality of the uranium and so forth, but the sanctions are - I'm told by people watching this closely, what is really holding this up at this point. The U.S. wants them phased out. The Iranians are saying, no, we want them gone immediately.

The Iranians have come a little bit in the direction of what the U.S. wants. They talked about something called snap back where-in, if there's any material breach of an agreement, the sanctions would come back in full force, but it is still believed by the people watching these negotiations very closely that that's not enough that the Iranians still need to do more to move forward.

WALLACE: Interestingly enough, and supposedly, according to reports, the French are taking a harder line than the U.S. is in terms of holding Iran's feet to the fire. Director Brennan and I also discussed at some length the question of the claims by the administration during the re-election that al Qaeda was on the run. Here is a look at that exchange.

(BEGIN VIDEO CLIP)

WALLACE: Didn't you give the American people and the president give the American people a false sense of confidence back in 2012 about our fight against Islamic terrorists at a time perhaps not so coincidentally when the president was running for re-election?

BRENNAN: There was no sense that I think either I or the president or others gave to the American people that terrorism was going away.

(END VIDEO CLIP)

WALLACE: Liz, Brennan said that, in fact, core al Qaeda in Pakistan has been decimated, his argument is ISIS is a completely different proposition.

LIZ CHENEY, FOX NEWS CONTRIBUTOR: Well, decimated only if you think decimated means rapidly spreading throughout the region. I mean, you have a situation where obviously during the election the president's position was I'm keeping America safe. I've gotten bin Laden, therefore the problem is over. He said it repeatedly. And what we know now from the bin Laden documents, for example, that have come out through some court cases, although they need to release more, is that that absolutely wasn't the case. You've got Iran (ph) study that talks about 50 percent increase in al Qaeda affiliate groups since 2009. The president knew it wasn't the case and he said it anyway for political purposes.

WALLACE: But Brennan seems to draw this line between al Qaeda and groups like ISIS and Boko Haram and other groups. Do you think that's a fair distinction?

CHENEY: No. I think that clearly, what we've seen is that, you know, ISIS is an offshoot of al Qaeda in Iraq. And al Qaeda affiliated organizations themselves are rapidly spreading. And bin laden who I think even Director Brennan would say was at the center of core al Qaeda. We know that the documents that they released from the Abbottabad raid are the documents that show he was sort of this lion in winter, but that is not what the rest of the documents apparently say. The rest of the documents demonstrate that he has been - was very clearly directing al Qaeda throughout his time even when he was in hiding.

WALLACE: Bob, when I talked with the intelligence community this week, particularly about this question of misjudgments, they used a phrase I hadn't heard before, they said political successes and intelligence failures. And what they were saying was, look, some of those times when the administration throws us under the bus and says, well, they didn't - and particularly they mentioned this about ISIS, and they underestimated the spread of ISIS, they say we were telling the political leaders in 2014 a lot of this stuff, they didn't react to it and now they blame it on us.

BOB WOODWARD, THE WASHINGTON POST: Well, I think if you looked at the overall in the interview, there's lot of from Director Brennan, no wrong hogwash. And you look at this and is he giving an accurate fundamentally accurate picture of the world? I think it's kind of whitewashed. And there's a lot of happy talk here. And ...

WALLACE: Such as?

WOODWARD: Well, such as this idea that they have blunted and stopped ISIS in Syria and Iraq. I mean, there's some pluses. You get into the details here. There are indeed some negatives. And I take a step back, where you really have to here. The world is a much more dangerous place than he is outlining here. That the ingredients of instability in Syria and Iraq, in the whole region of the Middle East, in Pakistan, North Korea, you know, this is a time of deep anxiety and the real question is this of an intelligence picture. He is presenting to the president or is he being more realistic when they talk.

WALLACE: Judy?

WOODRUFF: I was just going to say, and I'm listening to Bob, but I also looked at, as I'm sure you did, he gave a speech to the Council on Foreign Relations at the end of last week, and he talked about this being the most unstable period since the breakup of the Soviet Union. I mean he didn't, in at least what I was hearing, he didn't understate I think the threats out there. So ...

WOODWARD: You know, but he didn't say this in that interview. And he kept saying - when you posed some skepticism, he would say, oh, no, that's not true or that's wrong or hogwash on these documents.

INGRAHAM: I want to get this sense at some point that there is some post hawk attempt to justify the Noble Peace Prize here, right? That even the French are saying, the French ambassador of the United States says, this is a bad tactic to say we really must have a deal, at least the beginnings of a deal by March 31ST? Why. We want a deal that's good for America, that's good for this country and obviously regional security, global security, but this has to be good for the United States.

And I think, Bob, I think you hit on it. The sense that the world is more chaotic, you bet it is. We're not better off than we were in 2009 when it comes to security in the world under Obama's leadership. Our influence is on decline. And the world is more dangerous.

WALLACE: Iran was continuing its nuclear program, too. And I know your dad, it was one of the things he was most upset about, was that they didn't intervene in Iran.

CHENEY: Well, I think, you know, one of the other points here that it's important to raise in the Brennan interview is the verification point. Judy touched on this. But the IAEA last month said the Iranians are not currently living up to their obligations. So, for director Brennan to say, and I noted twice, he said we have a good understanding. He didn't say complete understanding. But I think frankly it is false to give the American people the idea that we know what is going on inside Iran or that we will be able to verify after this agreement. The French, I believe, sadly I never thought this sentence would come out of my mouth, but the French actually have a much more realistic and harder line approach to this.

WALLACE: All right. We have to take a break here.

When we come back, the rift between President Obama and Benjamin Netanyahu only grows after the prime minister is re-elected. What do growing tensions between the U.S. and Israel mean for security in the region?

And what do you think about the testy relationship? Let me know on Facebook or Twitter @foxnewsSunday and use the #fns.

(COMMERCIAL BREAK)

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(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I didn't retract any of the things that I said in my speech six years ago calling for a solution in which a demilitarized Palestinian state recognizes a Jewish state. I said that the conditions for that today are not achievable.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: I indicated to him back given his statements prior to the election, it is going to be hard to find a path where people are seriously believing that negotiations are possible.

(END VIDEO CLIP)

WALLACE: Israeli Prime Minister Netanyahu denying he ruled out creation of a Palestinian state the day before elections and President Obama refusing to let him off the hook. And we're back now with the panel. Bob, it seems to me the most interesting development this week was not Netanyahu's on again, off again, on again relationship for support for a two-state solution. It was President Obama's decision, clear decision to ratchet up the tension between his administration and Netanyahu. How do you explain that?

WOODWARD: Yeah. Well, I mean that's a move, but I suspect if we had a transcript of the Obama/Netanyahu phone call a couple of days ago, it would contain the elements they say. But they need each other. And Obama remembers, a politician, and he realized Netanyahu did some things to stay in office. And I think ...

WALLACE: But wait a minute. I mean you had that, but then the day after and even after he seemed to walk things back on Thursday, you had the State Department, you had the White House spokesman, now you have President Obama all in effect saying, no. You know, he said and Obama said I take him at his word, he doesn't support a Palestinian --

WOODWARD: Yes, but his word is he is riding both horses, as we know is documented. And I don't think this is the really central thing going on if I may disagree with you.

WALLACE: It's a lie ....

WOODWARD: I thought the most important thing going on is the Iran negotiation. And very interestingly, just yesterday, I guess, it was "The Huffington Post" put out an interview with Obama. And he said, yeah, we expect maybe we'll get a deal in weeks, and then he said two things. He said, we need Iran to make more concessions. Have you ever been involved in a negotiation? In a negotiation you don't go public and say, oh, yeah, we want concessions from the other side. As we know, there is politics in Iran. And in Iran, there are hard liners and soft liners.

WALLACE: Forgive me.

WOODWARD: Yeah.

WALLACE: But I want to talk about Israel. And I think you're glossing over what I think is a fairly remarkable statement. You even had the administration, Liz, talking about the possibility of abandoning Israel at the U.N. and letting a resolution pass that would recognize a Palestine state?

CHENEY: Look, the administration has now I would say since 2009 been looking for any excuse possible to distance the United States from Israel. You now have this unbelievable situation where we are aligning ourselves more with the Iranians than with the Israelis in the Middle East. And I just noticed something else in that interview that you showed, which is stunning to me that demonstrates this total lack of familiarity on the part of the president of what's happening around the world. He said we have got to evaluate what other options are available in terms of a two-state solution. To make sure we don't see a chaotic situation in the region. What in the world does he think is going on in the region? And from the Israeli perspective, I think you've got to say it makes complete sense that they at this point would not trust their security to an American president who doesn't have their interests in mind, who has done everything he can to distance himself from them and seems to be totally unaware at best of the complete and total mess his policies have created in their neighborhood. It's really breathtaking.

WALLACE: You know, Judy, White House chief of staff Denis McDonough is going to speak to J Street tomorrow. This is a pro-Israeli, but liberal democratic group that has been very critical of Netanyahu and it just seems to be one more indication, you know, we don't know what McDonough is going to say, but the fact that he would talk to this group would seem to indicate they're going to continue to ratchet this up.

WOODRUFF: Well, it looks that way. But I think, you know, I think as Bob said and I think as Liz is suggesting, there's so much at stake in the relationship between the United States and Israel. It's hard to believe that people like Denis McDonough and people who were making decisions in this administration aren't taking the long view.

Yes, there clearly is a short-term peak over what happened. And I think people are looking both at the politics of it because it's clear -- I mean, it's clear to me that Republicans are going to do better with the Jewish vote in the future, given what's happened in the last few weeks with Netanyahu. You know, one can assume there are going to be more votes, more money from Jewish voters who maybe thought they would never be voting Republican are seriously considering doing that now.

At the same time, I think what Netanyahu has helped to do is to create questions about this historic bipartisan support for Israel in the United States. And I think the younger generation of Jewish voters from talking to people who know the American Jewish community well, younger Jewish voters, Jewish voters who just are not comfortable with Netanyahu's, some of his domestic positions are questioning whether they're going to continue to support Israel like they have.

WALLACE: I have got to say, I'm a little bit stunned here. Because it seems to me there's been a fairly dramatic development here. Am I crazy?

INGRAHAM: No, you're absolutely right. This is what Obama treats Netanyahu similarly the way he treats the Tea Party. But in this case, it's dangerous, it's irresponsible, and it's incredibly immature. His petulance after Netanyahu clearly steps back a little bit from his statements about the Palestinian, you know, the two-state solution, unclenching his fist and reaching out back to the United States. Now, the president made that big speech early on in this administration to the Muslim world, if you unclench your fist I'll take your hand. Here it is a slap across the face to a man who won a solid victory in a democratic election in the Middle East.

WALLACE: But wait, wait, wait.  Now, you're going, to me you're going a little bit too far the other way. Don't you think Netanyahu bears some responsibility for going to Congress and speaking there? I mean it isn't as if he's been the innocent victim in this ratcheting up of relations.

INGRAHAM: The president brought David Cameron here to the United States to do phone a friend in Congress to try to move congressional opinion.

WALLACE: That's a little different than ...

INGRAHAM: Well, we're bringing outside people into the United States a lot, the Congress, OK. Have a disagreement with him about that. That's fine. You know what would have been the mature thing for him to have done? He said, you know something, you're in town to give this speech, I'm not thrilled by it. Let's come - let's talk. I want you to come over to the White House and let's talk. That would have been a mature thing. That would have been good for America. It's supposed to be what's good for our security and regional security. This approach has been counter-productive.

WOODWARD: The dynamics at all. I mean serious disagreement, but as everyone has said, including President Obama, in the phone conversation with Netanyahu, they agreed that the military intelligence and diplomatic alignment remains. That's what's important. This is not going to change the overall.

CHENEY: I think it clearly -- sorry, Bob, but I think it clearly does change the overall relationship. You know, I was in Israel last year and they are stunned. They cannot comprehend why the president of the United States is obviously doing more to align American policy with Iran than with Israel. And you've got a situation now where it's not just the Israelis that are just completely baffled, it's the Gulf Arabs. You know, in the Brennan interview, he said oh, the Gulf Arabs know that we will be there to defend them. They don't believe that anymore and the Israelis don't believe it anymore.

WOODWARD: It just is not true that the president has aligned himself with the Iranians on this. Come on, he said, look, we're going to have intrusive inspections, is that alignment?

(LAUGHTER)

WALLACE: It's the Middle East, we're never going to agree. But thank you for disagreeing so agreeably. Thank you, panel. See you next Sunday.

Up next, our Power Player of the Week, a look inside an oppo research factory.

(COMMERCIAL BREAK)

WALLACE: Every election there's a game changer, whether it's an issue or the candidate's own words. Now one campaign veteran is taking lessons he learned the hard way to change the game in 2016. Here is our Power Player of the Week.

(BEGIN VIDEO CLIP)

MATT RHOADES, CHAIRMAN, AMERICA RISING: It's not dumpster diving. It's very issue-focused. Especially in the era of social media, Twitter, Tumbler, there's just a constant appetite now for content.

WALLACE: Matt Rhoades is the head of "America Rising" what's been called an opposition research factory that goes after Democratic candidates. Last election day, they had 73 full-time staffers in more than two dozen states putting out damaging information in Senate, House and state races.

UNIDENTIFIED FEMALE: So, yes, I did miss that one.

WALLACE (on camera): How do you feel when you're a researcher, your tracker comes to you and says, look at this, boss.

RHOADES: It's a rush, no doubt about it, Chris.

WALLACE (voice over): Such as when they got a hold of this clip of Iowa Democrat Bruce Braley taking a shot at Republican Senator Chuck Grassley.

(BEGIN VIDEO CLIP)

BRUCE BRALEY: You might have a farmer from Iowa, who never went to law school, never practiced law, serving as the next chair of the Senate Judiciary Committee.

(END VIDEO CLIP)

RHOADES: He bagged on Iowa farmers, he bagged on Senator Chuck Grassley. We released it to the Iowa media and it just transformed the race.

WALLACE: While at headquarters, staffers search a candidate's record and old clips. "America Rising" also has trackers in the field recording everything that Democrat says and sometimes trying to create an issue.

UNIDENTIFIED MALE: Miss Nunn, did you vote for President Obama in 2008 and 2012?

WALLACE: Which brings us to 2016.

RHOADES: So, this is the presidential research team. All of these people here are focused on Secretary Clinton and so their task day in and day out --

UNIDENTIFIED FEMALE: Look for any Hillary videos you can find.

WALLACE: The team has been going through Clinton's record for almost two years now. And you never know when it's going to pay off.

RHOADES: This is our war room, Chris.

WALLACE (on camera): When Hillary Clinton holds her news conference, so that's on all four TVs there. Does this place shut down or do they speed up?

RHOADES: That's go time for this crew.

HILLARY CLINTON: I thought it would be easier to carry just one device for my work and for my personal e-mails instead of two.

WALLACE (voice over): Clinton was still talking when the war room pumped out this clip from a few weeks earlier.

HILLARY CLINTON: iPhone.

(CHEERS)

HILLARY CLINTON: OK. In full disclosure, Blackberry. And a Blackberry.

RHOADES: Basically blowing a whole in her convenience argument about why wanting to - one e-mail and one device.

WALLACE: Rhoades felt the sting of oppo research as Mitt Romney's campaign manager in 2012. He says a Democratic group "American Bridge" was better than anything the GOP had then.

RHOADES: Our Democrat opponents in the Republican primary were the first ones that asked Mitt to release his tax returns.

MITT ROMNEY: There are 47 percent of the people who will vote for this president no matter what.

WALLACE (on camera): Is there some connection between the fact that you're doing this and that Romney was kind of sunk by a video about the 47 percent?

RHOADES: Is there some poetic justice in the Bruce Braley clip? I hope. We can't change what happened, but we certainly can balance the playing field.

(END VIDEOTAPE)

WALLACE: Matt Rhoades says he's still getting over the Romney loss in 2012, but he says he's determined not to go out on the losing end. And that's it for today. Have a great week and we'll see you next "Fox News Sunday."

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