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TONY SNOW: Welcome back, friends. Joined now on the phone by Secretary of State Colin Powell who's been on a busy and wide-ranging diplomatic trip. He's just returned to Washington. Secretary Powell, welcome.

SECRETARY POWELL: Thank you, Tony. How are you?

SNOW: I'm doing fine. I want to get your reaction to a quote yesterday in a speech that Senator Edward Kennedy gave at the Brookings Institution, talking about America's approach to the war on terror and how he says it's alienated the allies. Let me play the clip:

[Begin audio clip] "By going to war in Iraq, we have strained our ties with longstanding allies around the world, allies whose help we clearly and urgently need on intelligence, on law enforcement and militarily. We have made America more hated in the world and made the war on terrorism harder to win." [End audio clip]

Secretary Powell, is it true that we are not having intelligence cooperation with our old allies?

POWELL: Not at all. Intelligence cooperation is good and getting better. I mean if you could see, Tony, the way we are cooperating with the Spaniards now on running down all of the individuals who were involved in the Madrid bombing last month, you'd be impressed.

And when Senator Kennedy says we don't have any allies and friends, 18 of the 26 nations of NATO are in Iraq with us. We have NATO taking over responsibilities in Afghanistan. We have our European friends putting in more what are called provincial reconstruction teams in Afghanistan.

We all realize that terrorism is a problem for every civilized nation, and with each passing day, intelligence cooperation and law enforcement cooperation are improving because nobody is immune to this, nobody can stand back from it.

SNOW: So Senator Kennedy, when he talks about intelligence, law enforcement and military cooperation, wrong on all counts?

POWELL: Yes. I think I can point out — and I'm sure my colleagues in the law enforcement and intelligence business can point out there is enormous cooperation between all of us. Everybody knows that terrorists try to cross borders; they try to send money across borders; they try to avoid intelligence detection; they try to avoid us and they are going to run into a net that's getting tighter and tighter and they're being rolled up. I mean, we are working with the Spaniards; we're working with the French; we're working with the Italians. Nobody is immune. Therefore, all of us have to work together and we are.

SNOW: Mr. Secretary, what is your reaction to a speech of the sort that Senator Kennedy gave yesterday?

POWELL: I was in Haiti and didn't see the whole speech, but I must say that Senator Kennedy, I think, should be a little more restrained and careful in his comments because we are at war, and debate is appropriate, and that's the beauty of our open, democratic system.

But I think this is also the time that we rally the nation behind the challenge that we face in Iraq and Afghanistan and other places in the world. We're going to make Afghanistan a democracy and a place that we're going to be proud of having gone into and gotten rid of the Taliban and severely damaged al-Qaida. But we've got to keep going after Al Qaeda.

Iraq is also a difficult challenge for us. The Iraqi people really want a better life, and we're going to do everything we can to get that better life for them, as the President has said repeatedly.

SNOW: Mr. Secretary, when a leading politician gives a speech like this, does that make your job tougher?

POWELL: It is a democratic system. Politicians give speeches, and political figures. He's not just a politician. Senators, and members of the House and other individuals speak out. And my job is to explain our policies to the American people as well as to our friends around the world.

SNOW: You were the Chief of Staff — the Chief of Staff during Operation Desert Storm. And you had a pretty graphic description of how you dealt with an enemy. It had to deal with crushing the snake.

We now have an insurrection in Iraq and we have — at least pockets of insurrection. Militarily, is it important, not merely from a strategic standpoint, but also to translate to everybody or transmit to everybody, the sense of America's seriousness, to have an overwhelming and unmistakable response, not only to what happened in Fallujah, but what's happening now with the followers of Moqtada Al Sadr?

POWELL: Of course we have to deal with the situation in Fallujah and what's happening in the south. And I know that our military commanders are working on plans to do so. And I will leave it in their good hands to analyze the situation they're facing and to use the forces available to them to deal, both with the situation in Fallujah, as well as what's happening down south.

SNOW: It seems increasingly apparent that the Iranians are responsible for a lot of this mischief, underwriting not only Moqtada Al Sadr, but also the Dawa Party. Within Iraq, what can we do, what do we need to do to get Iran to butt out?

POWELL: Iran knows that we believe that they would be better served by having a stable situation in Iraq, and it is not in their interest to have this kind of instability in the southern part of Iraq, just across from Iran. So we are telling them to avoid this kind of activity, which could be destabilizing.

But I think the major problem we're having in the South right now is from Sadr — he and his followers and the members of the Mahdi army. I don't think they reflect the views of all of the Shias in the South. Other clerics in the South have not come out in support of what Sadr is doing. Sadr is an immediate problem that has to be dealt with, and his army, the Mahdi, has to be dealt with.

SNOW: Condoleezza Rice is going to be testifying, as you know, before the 9/11 panel. But there is some question about who was more serious about terror, and so on. You had a conversation with former President Bill Clinton the day before President Bush took office.

Did President Clinton in that conversation mention Al Qaeda?

POWELL: No, it was a conversation about the Middle East.

As you recall, the peace process he was working on had just fallen apart within a day or so of us coming into office, and he was calling to offer me congratulations on my new position, but also to give me his assessment of the peace process.

It wasn't a comprehensive discussion on every possible issue that I might be facing. It really was focused on the Middle East peace process.

SNOW: Let's fast forward. Your testimony on February 5th of last year before the United Nations, talking about weapons of mass destruction, you have said in recent days that some of the intelligence may have been flawed there.

Are you prepared to say that there were no weapons of mass destruction, or do you think there's still a possibility that they existed and they can be found?

POWELL: The possibility exists, but let's be precise about what I was talking about the other day. It was a specific question dealing with the mobile biological labs that we believed were there and we had solid sourcing to tell us that they were there. And then we actually found something that looked like what our sources had described to us.

The intelligence agency was very comfortable about that, but in recent months, as they have gone back to the sourcing, some questions have been raised. And as Director Tenet said at his — in his Georgetown speech a few weeks ago — the community is not now sure what those trailers are, but they are looking into it.

SNOW: Mr. Secretary, is there a possibility that weapons of mass destruction were either hidden or taken out of Iraq, and given to terrorist organizations or states that would support them?

POWELL: You can't eliminate every possibility. I have no evidence to suggest that these weapons made it into the hands of terrorists. There are suggestions that some of these weapons may still be hidden or may have been sent to neighboring countries, but these are really just more suggestions than hard intelligence.

SNOW: When you have American politicians using the absence of weapons of mass destruction as their key brief against the war in Iraq, what do you tell them?

POWELL: What I say to them is that we went in with the best intelligence information that was available to us, available to the United Nations over a period of years, and available to most foreign intelligence services. We believed those weapons were there. We haven't found the stockpiles, but let there be no doubt that Saddam Hussein had the intention of having such weapons; he had kept intact the infrastructure to develop such weapons. And you've heard Mr. Duelfer in his briefings last week to the Congress reflect this fact.

And there should be no doubt in anyone's mind that if we had not dealt with the problem then, and if Saddam Hussein had escaped the sanctions regime and had been able to get rid of international scrutiny, he would be right back in the business of using that infrastructure, following his intent, and developing weapons and the means to deliver them.

Mr. Duelfer was particularly forthcoming last week with respect to describing the programs to deliver such weapons.

SNOW: Secretary — I'm speaking with Secretary of State Colin Powell on the Tony Snow show. A Congressional committee is going to start looking into the Oil-for-Food Program. Do you think the United Nations has a scandal on its hands?

POWELL: Well, I think there are serious questions that have been raised about the Oil-for-Food Program. There's no doubt that some diversion took place. And I cannot tell you who might have been responsible, and I think the investigation should get to the bottom of it to see whether there were faults on the part of the UN or others who were involved in the program.

I've spoken to Secretary General Kofi Annan about it a few times, and I know that he is very anxious to get to the bottom of it. And so we have encouraged the Iraqi Governing Council, and Ambassador Bremer has told them to make available to the UN and anybody who is investigating this, all of the information they have with respect to the Oil-for-Food Program.

You've got records in Baghdad. You've got records in New York. It's a very complex problem, and it will take a great deal of examination to find out the extent of the problem and the truth to the allegations.

SNOW: Mr. Secretary, very quickly, NATO forces — could they take over in Iraq?

POWELL: There are — 18 of 26 nations of NATO are there now. Taking over suggests that somehow there is enough remaining military capability, with the addition of the other eight nations — and we're unlikely to get those other eight nations, all of those other eight nations. For example, France and Germany, I think, are unlikely to make significant military contributions of a combat nature even with new UN resolutions and even if you could get NATO to play a larger role than it's playing now.

So we shouldn't deceive ourselves into thinking there's a magic solution or a magic bullet that goes by the name of "NATO" that will relieve us of political or military responsibility.

SNOW: Okay. Thank you, Secretary Powell.

POWELL: Thank you, Tony, bye.