This is a partial transcript from "On the Record," February 2, 2005, that has been edited for clarity.

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CONDOLEEZZA RICE, SECRETARY OF STATE: We've got a lot of challenges ahead of us. This is a really remarkable time in our country's history. The president has set forth a really bold agenda for American foreign policy, and the State Department has got to be in the lead in this period in which diplomacy will be so important to solidifying the gains of the last few years and to pressing forward an agenda for a freer and more prosperous world.

I can't think of a better call than to say that America will stand for freedom and for liberty, that America will stand with those who want their aspirations met for liberty and freedom.


FOX News CountryWatch: Iran

GRETA VAN SUSTEREN, HOST: The Bush administration is pushing for a peaceful solution to the Iranian nuclear threat (search), but refuses to rule out military force as an option. Will diplomacy be enough?

Joining us in Washington is former — not former, current Senator Joe Lieberman — I'm proud to say, headquartered in Connecticut — announced that it's going to stop doing business in Iran. Get a few more big companies to do that, and Iranians are going to get the message.

They don't want to be exiled from the international economic community. But they can't be part of it unless they play by the rules of the civilized world. And that means stopping being still the No. 1 supporter of terrorism and stopping their nuclear weapons program.

VAN SUSTEREN: So how do we do that?

LIEBERMAN: Well, I think we're into a kind of Mutt and Jeff, as the cops call it, routine, where the Europeans are sort of going at it more diplomatically and we're standing back with a club, saying is you don't cooperate, watch out.

VAN SUSTEREN: So when does that clock run out, though? I mean, because you know, while we have talks, and talks are important...


VAN SUSTEREN: Negotiation, diplomacy is far better than war. But it's also a good time for people to get up and start running with programs while we're talking.

LIEBERMAN: No, I agree. And we don't know enough to say when you come to that point where you've got to make a tougher decision.

But the Iranians ought to be under real pressure. I want to come back to what I said before. We'd feel uneasy if Iran was developing a nuclear weapons program and it was a democracy. But we'd feel a lot better if it was a democracy and the people were running it, rather than this group of fanatical mullahs who constantly say the worst things about America. And as I said again, one of the largest state sponsors of terrorism in the world.

So this is going to be the next big test. The elections in Iraq tell us we've begun to turn that around. If Iraq becomes a self-governing country, connecting to the modern world economy, that will send a real message. And maybe we can begin to move that over to Iran.

VAN SUSTEREN: All right. Current Senator Lieberman, thank you very much.


VAN SUSTEREN: I appreciate you joining us.

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