The following is an excerpt from FOX News Sunday, Jan. 4, 2004.

CHRIS WALLACE, HOST, FOX NEWS SUNDAY: Late this week, Iran turned down a U.S. offer to send a high-level humanitarian delegation to the site of last month's deadly earthquake in the ancient city of Bam.

Despite the rejection, the Bush administration, which had been calling Iran part of the axis of evil, is now clearly trying to reach out to the regime there. Is there a bridge to build between Washington and Tehran?

For answers, we turn to Reza Pahlavi, son of the late shah of Iran, who's been working for years to promote democracy and a constitutional monarchy for his homeland.

And, Mr. Pahlavi, welcome. Good to have you with us this morning.

REZA PAHLAVI, SON OF THE SHAH OF IRAN: Thank you, Chris. Good to be here.

WALLACE: What do you think of the Bush administration's overture to Iran to send this delegation, including Senator Elizabeth Dole and a member of his own family?

PAHLAVI: Sure, Chris, first and foremost, let me join in offering my thanks on behalf of my compatriots and myself to the entire world and particularly Americans who have shown so much compassion toward my compatriots in view of this earthquake. This is deeply appreciated.

Look, it's very simple. As long as such overtures is consistent with the distinction that is made between the people of Iran on the one hand and the clerical regime, I believe the right impression will be left with the Iranian people. I've always been a supporter of honest and transparent dialogue.

The distinction here is that if any kind of approach is meant in a way to seem to appease the current regime, as opposed to critically engage the Iranian people in support for their freedoms, then it will set the wrong impression, as far as my compatriots are concerned.

WALLACE: Well, that raises, obviously, a delicate question. If you were to send a delegation over -- and this is not just a humanitarian delegation if it has Elizabeth Dole, although she used to be head of the Red Cross, and a member of the family. One assumes that they would meet with Iranian officials. So is that being sent to the Iranian people? Or does that, in some sense, as I know you worry, does that in some sense prop up the ruling regime?

PAHLAVI: Well, again, it depends on what has been asked and what has been said. As Iranians, we have been waiting for many years to see the international community, and particularly foreign governments, to take notice of the fact, based on the regime's track record and domestic behavior and the way it's been suppressing the Iranian people ever since its inception, we are demanding some specific reactions by the regime consistent with what we all hope will be a reversal of what we see.

The freedom of political prisoners, we would like to see a reversal on the ban on the media, we would like to see the freedom of political parties to be able to organize and assemble. And, ultimately, what is our ultimate wish is to be able to conduct a free and fair, all-inclusive referendum in Iran, so that the people of Iran can democratically decide for themselves what they want.

Now, any position from the outside world engaging in dialogue with the current regime ought to expect some specific milestone being reached by the regime that has so far been completely oblivious to such domestic as well as international demands.

WALLACE: But just the fact of sending this kind of a delegation, then, you would have no problem with that, especially if it was clear what the U.S. position was?

PAHLAVI: Of course. Listen, I always believe that engagement and dialogue is much better than containment and isolation. First of all, isolation helps such regimes survive much longer. We saw that in the case of other totalitarian regimes. It is only when they're exposed to democratic societies and the democratic world where they begin to crumble from within. That has been historically the case. It will not be an exception in the case of the current regime.

What's important for the people of Iran, however, is after so many years of suffering, so many years of being denied an opportunity, they would love to see the international community, for a change, shift their focus on them rather than trying to cut a deal with the current regime or appease such a regime for purposes of, you know, diplomatic overtures.

If there is today such an earthquake diplomacy, let me put it this way, it ought to be focusing again in engaging the Iranian people, and that will certainly create much more goodwill, as opposed to Iranians seeing that once again governments may be falling into the trappings that the regime has always tried to set them up.

WALLACE: All right. Here was the response Friday from Iran state radio. Here's what they said: "The Americans, by publicizing their aid to Iran, have ineptly tried to implement their duplicitous policy of creating a rift between the Iranian nation and government."

Why do you think the leadership of Iran, the ruling clerics, turned down the U.S. offer?

PAHLAVI: I think it's beyond that. This simply shows how much some elements within the regime are in denial of the reality that they have long lost their legitimacy with the Iranian people.

This rift has been created a long time ago by the regime's own doing. It has nothing to do with the U.S. government, or any other foreign government, for that matter.

The fact, however, is that the current U.S. administration, for one thing, has made the recognition between the difference that exists between the Iranian people and the regime. And that happened shortly after September 11th, when President Bush, in his State of the Union address, made that clear distinction, which was warmly received in Iran as, finally somebody is making the difference between us and the regime.

WALLACE: Well, let me ask you about that, because there were reports this weekend that, in the Iranian parliament, the reform movement, some people wanted to reconsider accepting this delegation. Do you think there's a possibility that there might be a change, and the delegation might be accepted?

PAHLAVI: Look, the more we go in time, as a result of both domestic as well as international pressure, this regime has nowhere else to go but retreat. They know that. It's just a matter of time.

However, how it's been played by them is one thing. How the world should look at it, and how we as Iranians should take advantage of the situation, is another.

The regime will try to gain some pretense to legitimacy by, for instance, claiming that people are participating in their elections or claiming that we have been engaging in dialogue with foreign government, therefore telling the people, you know, we are here to stay. That kind of stuff.

It's important not to fall into those trapping. This is why it's so critical at this juncture that any government engaging with the Iranian government, whether it's the U.S. government or any other government, recognize that from the point of view of the Iranian people, how they treat the regime, what they say to its leadership and how they present themselves to the people in Iran at large, is going to be the difference between a feeling of attention, as opposed to dealing over the head and appeasement towards the regime.

WALLACE: All right. Let's deal with some facts now, not some diplomacy. You are in contact with many people in Iran. Do you believe that there are senior members of Al Qaeda, either in custody or at large?

PAHLAVI: I think there has been tremendous amount of evidence gathered over the years that points to the direction that Al Qaeda members have been operating and active on Iranian soil, either been trained there or been financed by them or at least assisted directly or indirectly. It's been long established.

It doesn't stop at that, unfortunately. Al Qaeda has become a big issue since September 11th. The problem has been that the clerical regime, for years now, has been supporting terrorist networks both inside and outside the country. And it has been the case in the Middle East and all the way of the four corners of the world...

WALLACE: Do you believe that -- we hear reports that Osama bin Laden himself might be in Iran.

PAHLAVI: That I don't know for a fact. I've heard some rumors about it. I cannot tell you right now that I have a yes-or-no answer to that question. There are speculations.

But whether Osama bin Laden is in Iran or not is not the question. The question is the nature of the regime at the end. This regime has created an environment of instability. It has survived on the basis of promoting and fomenting radicalism and extremism and violence all these years for the sole purpose of its own survival.

And what it has cost our nation and our immediate area and the rest of the world is today something that we all see.

WALLACE: And very briefly, if I might, sir, how close do you believe Iran is to getting a nuclear bomb?

PAHLAVI: I think that there is a lot of prediction that points to the direction that Iran is not too far from it, in terms of the level of approaching it.

And again, since you raised the subject, let me be very clear on one point. It's not the technology that is the problem. It's the hand on the trigger. It's the terrorist nature of this regime that is alarming the world today.

Clearly, a democratic Iran is going to resolve not only the problem of concern we have today with WMDs, but also every other issue remaining to regional stability and, of course, stability that we are all hoping for. And this is what we are all striving for in Iran today.

WALLACE: Mr. Pahlavi, thank you. Thank you so much for joining us.

PAHLAVI: Thank you, Chris.

WALLACE: Appreciate it.

PAHLAVI: Thank you very much.