This is a partial transcript from "The Journal Editorial Report," February 18, 2006, that was edited for clarity.

PAUL GIGOT, HOST: The militant Islamist group, Hamas, takes control of the Palestinian Authority this weekend, as Parliament convenes for the first time since last month's elections. It remains unclear, however, if the new government will heed calls to renounce violence and recognize Israel.

Dennis Ross is the former U.S. envoy to the Middle East. He's now counselor at the Washington Institute for Near East Policy and a FOX News foreign affairs analyst. He joins me from Washington.

Mr. Ambassador, let's consider the big picture, first. We've had the election of Hamas in Palestine. We've got the elections postponed in Egypt.

What does this tell you about the viability of the president's democracy agenda for the Middle East? Is it in trouble?

DENNIS ROSS, FOX NEWS FOREIGN AFFAIRS ANALYST: Well, I think the agenda, as it's been defined at this point, obviously isn't doing real well. But, I think, we have to put it in some perspective.

Number one, democracy as an agenda item needs to be there. As an objective, it needs to be there. But we need to look at it with some perspective.

Democracy is a process. It's not an event. If we focus only on elections, then we're going to find we have a problem in the Middle East. And the reason for that is the structure of the realities in the Middle East.

We have regimes that, for the most part, are corrupt and despised. And the only place there's been an area where you could be free to organize was in the mosque. So the radical Islamists have been the ones who have seized the availability of mosques to recruit, to organize, to develop a program.

They deliver services. They're not corrupt. They seem to embody social justice. If you have an election and the only two choices are corrupt regimes that are despised versus those who embody social justice, those who embody social justice win every time.

And the problem is they're not democratic forces. They're using democratic forms to pursue an anti-democratic agenda.

GIGOT: But do you think that groups like Hamas or, say, like the Muslim Brotherhood are, over the long term, compatible with democracy? Or is the risk that this is going to be one man, one vote, one time? Can a group like Hamas, for example, moderate in power, knowing what you know about that group?

ROSS: I have very low expectations that they will moderate in power. It's not an impossibility. There certainly are elements within Hamas that are pragmatic, not moderate, but pragmatic, at least in terms of understanding they have to try to be responsive to the daily needs of Palestinians.

But the only way there's any chance of transformation of these groups is if they understand that they have to face up to hard choices, and they cannot be relieved of those choices.

Hamas has an agenda. It has a strategy. It wants to Islamize Palestinian society. If we let them off the hook so they don't have to adjust to the world, as opposed to the world adjusting to them, we're going to find that over time they used democratic forms to ensure there is no democracy.

GIGOT: Now, the president says we're going to make them face up to those difficult decisions. And one way we're going to try to make them do that is cut off U.S. aid unless they do change their positions. Do you agree with that policy?

ROSS: Yes, I do. I think it's essential that they not be allowed to avoid making a choice.

They're going to face dilemmas right now. They've made all sorts of promises to Palestinians about what they're going to deliver. They're going to produce an end to chaos. They're going to produce law and order. They're going to produce a new economic policy, a new industrial policy, a new health policy.

All of this is going to be very hard for them to do unless, "A," they deal with the Israelis. And "B," they are, in fact, able to have access to assistance from the outside.

If they don't do either of those, they're not going to deliver. So I think the one thing we have to focus on is making sure they have to give up a program where they reject Israel, where they reject peace, where they promote violence.

If that's their agenda, then they have to pay for it.

GIGOT: But there's a problem, is there not, in the fact that, whatever the U.S. decides not to provide for the Palestinians, could be made up by other countries, particularly the Saudi's or the Iranians. And how does the United States stop that money from flowing in and propping Hamas up?

ROSS: Well, the Iranians will be hard-pressed to stop. On the other hand, there is a reality that Iran isn't in a position where, by itself, it can make up for what everybody else is doing.

Secondly, with the Saudi's, this is a big issue. We have, since at least May 2003, had a pretty good handle on all financial transactions, including from Islamic charities, ensuring that those financial transactions have stopped when it goes to providing moneys to al Qaeda.

Now, there is no reason in the world that we shouldn't be just as vigilant with the Saudi's on ensuring that Islamic charities cannot be providing monies to Hamas.

That means the U.S. has to work very hard with the Saudi's. It means we use the same mechanisms of control. It means that you stay with them on a daily basis.

And I would say that means having regular teams of American officials dealing with Saudi's, and others in the Gulf, to ensure that they don't allow non-governmental organizations or Islamic charities to fund Hamas and allow them to make up for the assistance they might otherwise lose.

GIGOT: Ambassador, very quickly, do you think that President Putin of Russia has been helpful in inviting Hamas to Moscow? Or do you think he's sending them a message that, maybe, the West is going to fold on this one, and they won't have to make a tough choice?

ROSS: I think it's a disaster that he's done this. What he's done is send a message that whatever we're saying, the world will, in fact, adjust to Hamas and not the other way around.

The message is in the meeting itself. I think it should be clear to the Russians that, if they persist with this, they will no longer be a member of the quartet.

GIGOT: OK. Ambassador Dennis Ross, author of "The Missing Peace." Thank you.

ROSS: You're welcome.

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