This is a rush transcript from "On the Record," May 20, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Ambassador John Bolton is here to go "On the Record," and there is very distressing news tonight about Iran. Iran has test fired a missile capable of hitting Israel and our U.S. air bases in the Middle East. John Bolton, former U.S. ambassador to the United Nations, joins us live.

Testing that missile today, just another routine test, you know, or is this a sign?

JOHN BOLTON, FORMER U.S. AMBASSADOR TO THE UNITED NATIONS: No, this is another test forward, clearly. It's a few weeks before the Iranian election, always good politics for any politician to do it. It's demonstrating the continuing growth of their ballistic missile capability. And I think putting in range American forces and Israel is about as clear a sign as you can make.

VAN SUSTEREN: You know what I think is particularly disheartening about this is that the director of the CIA, Leon Panetta, went to Israel on a secret trip recently and to tell them basically not to freelance, telling Israel not to strike Iran. And he came back. And then now that Iran has done this -- and there's an article on the front page of The Jerusalem Post that the people in Israel are going to wake up to tomorrow where the headline, "Has Obama Given Up on Halting Iran," basically sending a message to people in Israel to adopt this, is that don't depend on the United States. We have to go alone, which can escalate things.

BOLTON: Yes. I think Israel is going to do what it thinks is in its national interests. In 2007, they came to the Bush administration and said, You know, the North Koreans are building a nuclear reactor in Syria, and we're going to take it out. And the Bush administration -- Well, we don't think you ought to do that, and besides, prove that it's really a reactor, which they Israelis did. And they bombed it in September of '07, right at the end of the summer, when they predicted.

So I don't think the Israelis particularly are going to pay much attention to Mr. Panetta. I think they are concerned about what the Obama administration's policy is.

VAN SUSTEREN: Well, if they think that -- if they think that Iran is getting this nuclear capability and their -- you know, their technology, as well, is in terms of a delivery system of it, at what point do you expect that they would strike? I mean, it almost seems predictable they're not going to sit there.

BOLTON: Yes. I think by the end of this year is the outermost limit. Look, if you think that Iran really wants nuclear weapons, why waste any time? Why guess wrong on when they're actually going to have the capability? Because if you guess wrong and they've already got it and you attack, the Iranian retaliation would be nuclear.

VAN SUSTEREN: Well, I guess that you might through the presidential election to see if Ahmadinejad, for some -- I mean, if he were not reelected, because Ahmadinejad has made it quite plain he wants to destroy Israel. So if he were somehow out of the picture, that might make it a little bit better. But if he's still in the picture and they've got this technology, that certainly does make a different picture.

BOLTON: Yes. I don't think, actually, the election will make any difference. The argument between Ahmadinejad and the "moderates," the great white whale of Western European and American liberal effort on Iran, is that Ahmadinejad wants to talk about destroying Israel and get a nuclear he capability, whereas the moderates want to get the nuclear capability and not talk about it. That's the only real difference.

VAN SUSTEREN: All right, if Israel does strike and go after Iran's nuclear capabilities, where does that -- what happens -- what happens next?

BOLTON: Well, look, this is a very unhappy decision to have to make. Nobody should really be enthusiastic about an Israeli military attack. But I do think many of the reactions or projections about what Iran might do have been overblown. I think the most likely Iranian reaction would be to unleash Hezbollah or Hamas to attack Israel with rockets. I think it's very unlikely Iran would try and close the Straits of Hormuz. I don't think they could do it, in any event. I think it would invite direct American involvement, and they don't want that.

VAN SUSTEREN: So the deterrence to Israel is -- I mean, they're going to stop listening to us. They're going to -- as you say, they're going to consider their national interest. The deterrence to them is Hezbollah coming after them from the other side of the country.

BOLTON: Well, I think that you have to look at what the real choice is here. The choice is not between the status quo as it exists now compared to the consequences of an Israeli attack. The choice is the consequences of an Israeli attack compared to Iran with nuclear weapons. That's the judgment the Israelis are going to make. And as unattractive as a military attack would be, they have to look at how unattractive it would be to see themselves threatened continuously by a nuclear Iran.

VAN SUSTEREN: Well, one of the things I read in The Jerusalem Post tonight is that -- that many -- some Israelis (INAUDIBLE) -- I don't know how many people -- are disheartened with the Obama administration, saying that they are -- they're focusing on the creation of a two-state, the Palestinian conflict, and that the Israelis are more worried about being taken out by Iran, you know, that we can't sort of get on the same -- the same parallel track just in terms of -- and what's the -- what we should handle, in what order.

BOLTON: Well, I think Netanyahu and Obama are looking at this through two separate ends of the telescope. The Obama focus -- and he said this publicly at the news conference with Netanyahu on Monday -- is if you could make progress with the Palestinians, you could mitigate the problem of Iran.

I think that's otherworldly, is the only way to describe it. I think Netanyahu focuses on not only the problem of the Iranian nuclear program but Iran's financial and military support for Hamas and Hezbollah. So he says, If we could deal with Iran, you might actually stabilize the region to the point where you could deal with the Palestinians.

VAN SUSTEREN: It seems so unlikely to me, though, that Iran is -- even if the Palestinian issue were resolved, that Iran is going to (INAUDIBLE) Oh, that's great. Well, I'm glad to see that's been resolved. Now we're going to go away, and we think you should exist.

BOLTON: Of course not. That's why the Obama policy is based on a fundamental fallacy and can't come to a happy result.

VAN SUSTEREN: Ambassador, thank you, sir.

BOLTON: Thank you.

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