This is a partial transcript of "Special Report with Brit Hume," July 7, 2004 that has been edited for clarity.

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BRIT HUME, HOST: It took just over a week from the turnover of sovereignty to that new Iraqi government, for that government to announce emergency powers to crack down on the continuing terrorist violence. So does that mean things are worse there than we thought or better?

For answers, we turn to Dan Senor who, until last week, was a senior adviser and spokesman for the Coalition Provisional Authority.

Welcome, Dan. I guess the Coalition Provisional Authority have gone the way of the great hawk. It no longer exists, right?

DAN SENOR, FMR. COALITION SPOKESMAN: That's right, the Iraqi government is in charge.

HUME: So the Iraqi government is in charge and these new powers, I guess have not been invoked, but have been announced.

SENOR: Right.

HUME: What does that say to us?

SENOR: Well, it tells us what we saw mid June when Prime Minister Allawi (search) was urging us for more and more authority. The Thursday before we handed over sovereignty, there were 11 ministries still under the control of the coalition. Sixteen were already in the control of the Iraqis. He said turn them over. So in practical terms, for the second half of June, the Iraqis, Prime Minister Allawi was in total operation of the government. He said now give us early handover of sovereignty. So from a ceremonial and symbolic standpoint, it will strengthen my hand in dealing with the insurgency and dealing with the terrorist threat. That's what he told us.

Well, we did. He hit the ground running. He said he was ready to lead early. Every day matters. And what he's done is gotten to work on a number of security measures, one that he's talking about now. It means that he's got a strategy for dealing with the security situation. From our standpoint, it's a good thing. If the Iraqi want to take the lead in countering the terror threat and shutting down the insurgency, this is positive.

HUME: Now, when something like this happens, like you had a running battle in the streets of Baghdad today, it appeared from the report we had that the U.S. forces arrived on the scene well after it had been going on a while. Are we likely to see more of that kind of thing?

SENOR: It will be interesting to see how it plays out. I think it's too early to tell. But what Prime Minister Allawi has made clear is it's in everyone's interests, if the Iraqis, whenever they have an opportunity to do so, should play a front line role. Sort of play the enforcement role and then have the Americans do the backup.

HUME: But there are nowhere really near enough forces to do that everywhere, the Iraqi forces.

SENOR: Right. And they're not ready yet. I mean the Prime Minister Allawi has made clear the Iraqis have to defeat the insurgency; the Iraqis have to counter the terror threat. But the security forces are not in a position right now to handle either of those on their own.

So they need help, not only financing and equipment, but they also need the support of our troops. He's asked for the support of the multinational forces. But he says it's central to the Iraqi security strategy for Iraqis to be on the front lines whenever they can be.

HUME: To what do you attribute the fact that the wave of violence that was expected at or around the time of the handover did not happen? Was it because you did it early or because it was never going to happen?

SENOR: I think it's too early at this point to speculate. And I don't want to prejudge.

HUME: Something could happen yet.

SENOR: Exactly. Exactly.

HUME: I understand.

SENOR: But Prime Minister Allawi's view and comments he had -- conversations he had with us before we departed, he believed that this early departure would wrong-foot the terrorists. He was pretty certain of that.

I also think what you're seeing now is Iraqis playing an increasing role in the gathering of intelligence, which is critical. I mean we can do our best to gather intelligence. But Iraqis have a better sense for the local culture, the local rhythm of life, the local language, regional accent, when foreign fighters come into the country. Iraqis are in a better position to play that role and they have been and that's been making an important contribution.

HUME: What's the proportion, to the extent you know, of foreign versus local terrorists?

SENOR: Well, the insurgency, in terms of numbers, is much larger than the number of foreign fighters there in the country. But in terms of the greatest number of casualties caused, those are caused by foreign fighters, Zarqawi types, elements from the al Qaeda affiliates and their terror networks. In fact, most Iraqis.

HUME: Because they're simply more deadly, more ruthless, more violent?

SENOR: They engage in suicide bombings, IEDs, VIEDs that kill 20, 30, 200 people at given time. The Iraqis will tell you, after every one of these explosions, they say Iraqis don't do suicide bombing. It's not indigenous to Iraqis. These are all foreign fighters. They are trained professional terrorists coming into the country to do it. And they're responsible when you have the situations where tens or hundreds of Iraqis are killed in one day. That tends to be the foreign fighters and the international terrorists.

HUME: To what extent are we now at liberty, after the turnover, to work on border security and to go after the foreign terrorists more than we were, if at all?

SENOR: We still are playing a significant role in that regard. But doing it in consultation with the Iraqis. And in fact, if you look at the recent hit on the Zarqawi safe house earlier this week, Prime Minister Allawi has indicated that that was based on intelligence provided by the Iraqis that helped with that target. So I think on the borders and inside the country, we still play a significant role. But we're doing it as a partnership with the Iraqis.

HUME: So you've been out of there a week now. You obviously had some idea what to expect. How is it going, in your judgment? And I don't expect you to say it's going badly, obviously. But what's going well? What's not going so well?

SENOR: Before we left, as I said earlier, we were struck by the extent to which Prime Minister Allawi was, to quote him, "I'm ready to lead. I'm ready to take the initiative. I'm ready to get going. Every day matters." And I was curious, in the days immediately thereafter, how much he would sort of jump into things, and he has. It's been very impressive. He has a real agenda. He's engaging in developing that agenda. Every day he's implementing things. This is one of the first major laws that he's announced.

So I, you know, fingers crossed, I think things are going well. I think that Prime Minister Allawi is really seizing the moment. And he's zeroed in on the issue that Iraqis care most about. They care most about security. And this is a guy with tremendous security credentials. And he's really sort of embracing the moment.

HUME: So just very briefly, the inconveniences this may cause will not damage his popularity?

SENOR: I don't think so. The things you're talking about are checkpoints, curfews, regulations on public movements. If it can prevent suicide attacks, Iraqis will be for it.

HUME: Dan Senor, great to have you again. Thank you.

SENOR: Good to be with you.

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