This is a rush transcript from "On the Record," September 30, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: The time for debate is running out. President Obama must make a decision about Afghanistan -- more troops or pull out, or even something in between.

Earlier Senator Evan Bayh went "On the Record."


VAN SUSTEREN: The news today is that Senator McCain wants general McChrystal to come back here and speak to the United States Senate. Do you agree with Senator McCain?

SEN. EVAN BAYH, D - IND.: I think we should hear from General McChrystal, sure, whether it is in person or through video conferencing or through writing. I think we need to have the benefit of his views.

VAN SUSTEREN: Why haven't you heard from him since he's been in the stuff post?

BAYH: Many members have been over and visited with him directly, so it is not as if his voice hasn't been heard. And, as you heard, his report that has been waiting to be delivered to the president sort of leaked out and has been widely disseminated.

So his voice is going to be prominent in the decision about what to do going forward in Afghanistan.

VAN SUSTEREN: Many people are somewhat surprised with the revelation that General McChrystal, I think you spoke to him today or might have when they had this big meeting, but that up until this last week and General McChrystal and President Obama have only spoken once since he was put in that top post. Why?

BAYH: I think we run the risk of having form over substance here, Greta. What is important is that the general's views and opinions are factored into the decision that the president makes.

But there are a variety of ways he can have those. Directly they have spoken once. He is going to get the written report submitted by the general. She is going to have the views of General Petraeus, the Joint Chiefs of Staff. A lot of people are going to weigh in on this. Secretary Gates, of course, is a very experienced individual.

So his voice is going to be heard, and I would not obsess too much on whether they talked one time, two times, three times. He is going to be important.

VAN SUSTEREN: What is your though on strategy? Should we send 40,000 more or some number less than 40,000, or should we pull out?

BAYH: That's a very difficult question. If we believe there is a chance that the central government there could be strengthened sufficiently with more troops, more police, more intelligent services, then I think it's worth making the investment, because that would be the best chance of protecting us from further attacks from Afghanistan.

If, on the other hand, you think Karzai is just corrupt, the government is weak, and they do not have a very long history in that country of strong central governments, they are too divided on ethnic and religious lines, further sacrifices in pursuit of that would be in vain, then I pick you take a different strategy of pursuing a sort of lighter touch, more drone attacks, frankly bribing some of the Taliban as the British did for many years to cooperate and not participate with the radicals. You can pursue that kind of strategy if you believe that they are just not capable of having a strong central government.

This is the debate we need to have. Frankly, I right now lean more toward the first camp, making the additional investment, giving the optimal case every chance so that we don't see a repetition of Al Qaeda attacks emanating from there.

But you can make a case based on history that perhaps that is just not doable. This is a discussion we need to have been finally resolved.

VAN SUSTEREN: Iran is a very troubling part of the world for us. You are now pursuing a way to get the president more authority to provide more sanctions, is that correct?

BAYH: Yes. The only thing the Iranians respect is strength. They are contemptuous of weakness. They have at least for the next year or so a real weakness that we can exploit if we are strong and move quickly, and that is their dependency on imports of refined petroleum products.

It is very ironic. They are sitting on top of a lot of oil, but they don't have enough refining capacity. So they actually had to import gasoline, about a third of what they need. And so this would potentially be a body blow to their economy at a time when it's already weak and their finances as a nation.

We should exploit this to our advantage and really ratchet up the cost of them continuing to pursue a nuclear weapons program.

VAN SUSTEREN: I guess it depends on two things. Number one is whether or not, even if we did impose those sanctions on them, but 20 or 30 percent domestic consumption of petroleum products, is whether anyone end runs us and provides that deficits. If we cut it off, that is the first thing.

The second thing is if we do impose those sanctions, whether the Iranian people think it is us who has created this hardship or their own government.

BAYH: Two excellent questions.

With regard to first, as your question implies, the history of enforcement of sanctions is certainly not very good. But this time we seem to have some of our western allies on board, and many of the imports come from western oriented companies.

The key here is China. They have now stepped up and are beginning to supply the gas went because they covet Iranian oil. So we basically need to say to the Chinese, look, if you want to be a responsible player on the world scene you can facilitate destabilizing things like the nuclear program in Iran. It is more important than long term oil supplies.

VAN SUSTEREN: Let me ask you though, but, at the same time, yes, that would be great if we say that to China, but we are so beholden to China on our debt or be in any position to act big and tough and say China, you have to do this, and, by the way, can you pick up our debt this month?

BAYH: Greta, you and I are singing out of the same hymnal. Our financial weakness, our dependency on borrowing money from abroad undermines our national security and reduces our leverage in trying to get the Chinese and others from whom we borrow the money to do what we think is not only in our interest but the global security, the globe's national security -- the globe's interest. So it's a problem.

With regard to the sanctions, we need to try oil, but is not the only thing we need to try. Reinsurance is important for the shipments that go when there. If the companies that ship the products can't get insurance for the ships that's a real problem for them.

Cutting off their ability to do business in other countries, that's a real problem for them.

Petroleum and all these other things we need to pursue and concert -- to get to your very good question, will be around and people blame us? There might be some of that, but it is not legitimate or fair because we have been very clear, Greta, and said, look, this is not necessary. If you'll just give up your nuclear weapons program, we will provide for you a civilian, peaceful nuclear power program. We will give you the fissile material, we will help you construct the plant.

But the government won't go for that.


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