This is a partial transcript from "The O'Reilly Factor," July 1, 2004 that has been edited for clarity.

Watch The O'Reilly Factor weeknights at 8 p.m. and 11 p.m. ET and listen to the Radio Factor!

BILL O'REILLY HOST:  In "Impact Segment" tonight, The Factor is on record as believing Saddam Hussein was linked up with Al Qaeda through a man named Abu Musab al-Zarqawi.  As you may know, U.S. authorities will pay $25 million if you can bring that guy to justice.  He's believed to be behind much of the terror in Iraq, including the beheadings of civilians.

Joining us now from Washington is Jonathan Schanzer, a fellow at The Washington Institute for Near East Policy (search).  Mr. Schanzer is working on a book about Al Qaeda (search).

All right, last Saturday in "The New York Times" -- which doesn't want, by the way, any link between Al Qaeda and Saddam to be established at all -- and the paper doesn't want it.  And they're going to do everything they can to discredit any link.  A man named Peter Bergen wrote an op-ed that you read and I read, basically saying, al-Zarqawi, really not much to do with Al Qaeda.  Is that true?

JONATHAN SCHANZER, WASH. INST. FOR NEAR EAST POLICY:  It's not true.  I mean, I think if you're trying to ask whether Abu Musab al-Zarqawi is bin Laden's right-hand man, well, that may be true.  If you want to look at his links to Al Qaeda over the years, there have been many.

To begin with, when he was a young man of perhaps 18 to 22, he was in Afghanistan fighting along the Mujahedin, which of course was where bin Laden founded his Al Qaeda movement.  This is where he established a number of his Al Qaeda contacts.

Going back to Jordan, where he was subsequently arrested, he was working with a cleric who had links to Al Qaeda.  After that, he was released in 1999.  He went back to Afghanistan.  Actually, went to an Al Qaeda associate and tried to ask for money, was training in one of their camps.  And then after that, he seemed to have broken off and created his own group.  But this group certainly, I think, works in line with the Al Qaeda ideology.  So, I don't really see that much of a difference between what Al Qaeda does and what al-Tawhid does...

O'REILLY:  All right, let's get specific about it.  Now, this guy was wounded on the battlefield fighting for the Taliban against the USA and the northern coalition in Afghanistan.  He went to Iran and then to Iraq, where he was treated in a hospital in Baghdad run by Uday Hussein.  Is that all correct?

SCHANZER:  That's correct.

O'REILLY:  All right.

SCHANZER:  It was a military hospital.  That's what we know.

O'REILLY:  All right, so we know that this al-Zarqawi was, you know, in the terrorist club, the same club that Usama bin Laden belongs to.  Now, whether they are pals or whether they're acquaintances, it doesn't really matter.  It's the same club that's bent upon killing Americans, correct?

SCHANZER:  Absolutely correct.  These are adherents to what we would call a radical-Islam, people that want to upset the current order of things, defeat America, have radical-Islam reign supreme in the Middle East and beyond.

O'REILLY:  All right, so these are the terrorists that are coming after us and our families.

Now, Zarqawi winds up in Baghdad.  And then, he convalesces and he's back on his feet.  And he starts to cause trouble using Iraq as a base.  And this is when Saddam was in charge, correct?

SCHANZER:  Correct.

O'REILLY:  He's already killed Foley, the U.S. representative in Jordan.  He goes up to Ansar al-Islam in the northern part of Iraq.  They hatch the ricin plot that Britain stopped, thank God.  But all of this Saddam Hussein knows about.

SCHANZER:  Absolutely correct.

O'REILLY:  Had to.

SCHANZER:  Well, I mean, here's the catch.  I mean, there's two sides to this story.  Number one, you know, Ansar al-Islam was operating in the Kurdish enclave.  So, in other words, Saddam, this was in the no-fly zone.  Saddam did not have direct control over this group.

However, Saddam, it has been reported, did have shipments of weapons going up to this group.  He was supporting this group and certainly did nothing to stop it while it was in existence.

O'REILLY:  Right.

SCHANZER:  Beyond that, I had a chance to interview some Ansar al-Islam prisoners and even a member of Saddam's Mahabharat.  This was in January when I visited Iraq.  And those people spoke very openly about Saddam Hussein's ties to Ansar al-Islam, which was the group that Abu Musab al-Zarqawi was aiding and helping to develop chemical or possibly biological weapons.

O'REILLY:  And I understand in your research, and tell me if this is true or not, you actually talked to an Iraqi who linked Saddam directly with this terrorist, al Musab.

SCHANZER:  That's exactly right.  That's exactly right.  What he essentially said was that Zarqawi -- you know, of course, this is one person telling us.  This is an Iraqi who was in jail.  He could have just been trying to tell me what I wanted to hear.  But what he told me was is that this man was essentially the ambassador for Al Qaeda to Saddam's regime.

O'REILLY:  Yes.  I mean, that's going to be in your book, correct?


O'REILLY:  All right.  So, look, you know, I think we've established beyond a reasonable doubt that Saddam and Al Qaeda had links.  We don't know how they came back fully, but keep your research, Mr. Schanzer.  When your book comes out, you're welcome back on The Factor.  And we appreciate you taking time.

SCHANZER:  Thank you.

Copy: Content and Programming Copyright 2004 Fox News Network, L.L.C. ALL RIGHTS RESERVED. Transcription Copyright 2004 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, L.L.C.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.