This is a partial transcript from the April 14, 2005 edition of "Hannity & Colmes," that has been edited for clarity.

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SEAN HANNITY, CO-HOST: Madam Secretary, good to see you again.

CONDOLEEZZA RICE, SECRETARY OF STATE: Pleasure to be with you, Sean.

HANNITY: Now, are you as big a baseball fan — are you going to be a Nationals fan like you are in...

RICE: Well, I'm going to be a Nationals fan. I'm not as big a baseball fan as I am a football fan, but there's a new team in Washington and I am going to be right there for them.

HANNITY: Today is the day, so you're not going to be a baseball commissioner. We're still focused on...

RICE: Still focused on...

HANNITY: ... the NFL.

RICE: ... the NFL, that's right.

HANNITY: What can you tell us about this American contractor that is being held hostage? He had a gun to his head. Americans have been watching.

RICE: Well, we're obviously following it very closely. We're doing everything that we can to try and deal with this in a way that it's safe for him. It's a very difficult situation, but we have very good cooperation on the ground with the Iraqi officials and with others. We're working very hard on this.

HANNITY: In principle, you can never negotiate with hostage takers. Why?

RICE: Well, it's U.S. policy that we cannot, because it only encourages terrorists to do this again.

HANNITY: Let's talk about, you know, earlier this week there has been so much good news coming out of Iraq. The insurgency, especially after the election, has almost dropped off the map. There was talk earlier this week also of the possibility our troops can come home much earlier. It's been a tough 24 hours. Where do you see Iraq now in terms of the timetable and where we're going?

RICE: Well, again, we have been very careful not to set timetables, but to talk about a success strategy in Iraq, not an exit strategy. And nothing has changed in that regard, except that I think we're beginning to see now elements that show that the policies are working. The Iraqis are taking more responsibility for their own security, and that's going to increase as those forces become better trained. Clearly, the Iraqis made a huge step forward with the January 30th elections. I have said that the Iraqi people faced terrorism and faced it down, because they said, we are not going to be held fearful. And as a matter of fact, the fact that they voted in large numbers is terrific. And they now have a political process under way. You defeat an insurgency politically, and they now have a political process where people's interests can be accommodated. We're still going to have bad days, like the last 24 hours, because the terrorists and the insurgents are still going to try to derail the process. But every day that Iraq is making progress on its political process is a bad day for terrorism.

HANNITY: We see a lot of movement in the region. When you look at the events that have been unfolding in Syria, democratization, to some extent, in Egypt, changes, a shift even in Saudi Arabia, a movement in the Palestinian-Israeli conflict. When you look at all of these things, do you believe this is a direct result of the United States' actions, specifically with its allies in Iraq?

RICE: Well, clearly something has changed. And when the United States and its allies were able to first liberate Afghanistan and then liberate the people of Iraq, it fell then to the people of the region to take advantage of the opening that was created by that. And they're taking advantage of that opening. And Sean, what the American president can do is to change the sense of what's possible in the world. It's not that the United States can make decisions for the people who are fighting for their freedom. It's not that the United States can bring freedom to a people. They have to do that themselves. But the American president can change the sense of what is possible. And clearly, what seemed impossible a few months ago now seems almost inevitable for this region. And so, that's really what I think the policies have done.

HANNITY: Let me ask you this, in the short time now that you have been secretary of state, you traveled extensively. You have met with many of the world's leaders. You have had an opportunity to speak with them. There was so much antipathy, animosity, even hostility towards the United States over the issue with Iraq...

RICE: Yes.

HANNITY: ... and very specifically with our European partners and allies. Do you see that that animosity still exists?Is there a warming of relations? I saw a picture of you with Jacques Chirac. How are things in that regard? There's still difficult days ahead?

RICE: Well, of course, we will have our disagreements, even with our best friends. But what we have done is to reunite the democratic nations, the great alliance that brought down communism, around a sense of common values against. There are always going to be disagreements about policy. But we somehow seem to forget that we all have an obligation, as countries that are lucky enough, as peoples that are lucky enough to be on the right side of freedom's divide, to work hard on behalf of those who were on the wrong side of freedom's divide. And the transatlantic alliance in particular has now, I think, seen the ability, the importance of trying to see the spread of freedom and democracy into places where it has never been. And that has served to unite us again.

HANNITY: Yesterday, the administration questioned Israel in particular, their urgent warning on the advancement of Iran's nuclear weapon program, saying that it was unlikely — the administration, the State Department now saying it's unlikely that Iran will have the bomb in five years. It's also reported that the prime minister of Israel told Vice President Cheney that the program was at the point of no return. There seems to be a disparity.

RICE: Well, we had good discussions with the Israelis, and I just want to note, we have continuing discussions with the Israelis about a number of security issues, including concerns about the Iranian program. What happened is that we all agreed that this is a program that needs to be dealt with. I think it's not wise to talk about precisely when we think the Iranians will have this or that, what lines they have crossed, because frankly, a lot of this is not clear. But what we can do is to say that it is a problem that needs to be dealt with. And I noticed that in Prime Minister Sharon's remarks in an interview, he said that what they really are looking for is an international effort to make sure that the Iranians do not develop a nuclear weapon. And that's what we are trying to do in supporting the EU-3 diplomacy. I would note that the Russians, who just a few years ago didn't seem as concerned about the Iranian program, now even in the civilian nuclear reactor that they are going to build for the Iranians, have tried to build in safeguards by taking back fuel, not allowing the Iranians to enrich and reprocess. This is really about, will Iran have the technological capability to build a nuclear weapon through enrichment and reprocessing? Because that's the only — making certain that they do not is the only way that you can be sure that the Iranians will not build a nuclear weapon.

HANNITY: You once said, though, it was fairly recently, that we must not underreact. The State Department yesterday was saying, there is no reason for Iran to be enriching uranium, and that it should be suspended in terms of a practice. We go back and look at after the first Gulf War, I think the administration and other countries were fairly surprised at just how advanced Saddam Hussein's programs were.

RICE: Yes. Yes.

HANNITY: Can we be underestimating perhaps where Iran is at this particular time, and that would be a very grave threat, obviously, to world security?

RICE: Yes. Well, because you can never know, you are always better to try and resolve the problem as quickly as you can. Now, we have every reason to believe that the Iranians are in suspension right now. That appears to be the case. Iran is a somewhat more transparent society than Iraq, although I don't want to overstate that element. But what we're trying to do with the Europeans, with the Russians and with others, is to convince the Iranians that it is in their interest, sooner rather than later, to demonstrate that they're prepared to live up to their international obligations not to seek a nuclear weapon under cover of civilian nuclear power development. The diplomacy, we believe, has a good chance to work. But of course, we reserve the ability to go to the Security Council if it doesn't.

HANNITY: Prime Minister Sharon said, and he was very specific because he was asked about this, that Israel was not planning an attack on Iran. Now we go back to 1981, when Israel attacked their nuclear reactor, there was worldwide condemnation.The United States condemned that action. I think in retrospect we can all probably agree, or maybe I should ask you, in retrospect, was that the right move in 1981, even though the United States at the time condemned the action of Israel?

RICE: Well, I think that it's hard to go back and judge but obviously Saddam Hussein's regime was seeking nuclear weapons and something needed to be done about that. We have learned a lot of lessons since then, we've learned not to let these programs not get out of control. I was asked yesterday about the North Korea program. Well, the North Korea program has been developing since probably the 1960's. And the international community did not get itself organized in time to prevent the North Koreans from being very far ahead. With the Iranians, we have to learn that lesson. And there has to be a strong, united international front that says to the Iranians you cannot seek a nuclear weapon and be a member of the international community.

HANNITY: If we were to find out, because Prime Minister Sharon said — he used the words he thinks it's to the point of no return. If we were to find out — and there's been a lot of hostility on the Iranian side, at least publicly the posture is that they're not — the not in the desirous mode to negotiate at any particular point. Would we have to recognize that Israel may have to consider the possibility, once again, of striking, considering what a chilling scenario it would be to have a country like Iran with a nuclear weapon?

RICE: Well, I don't think we need to speculate about this. I think what we need to do is to pay attention to what we're doing now. And we had good discussions with the Israelis about this. The Iranians must not be allowed to get the technological capability to build a nuclear weapon. Everybody understands the destabilizing effect that an Iranian nuclear weapon would have on what is already a very troubled region.

And I believe we have got a good chance to do this diplomatically. We do have the security counsel as a next means if we need to do that. But the Iranians are going to have to be convinced that they face a choice between convincing the world that they're not going to go for a nuclear weapon, and isolation. And those are the choices.

HANNITY: Europe' solution, Britain's solution, Germany's solution is to offer economic incentives.

It seems like we went down that road before with Kim Jung-il and North Korea, it didn't work typically well there. Would that be a mistake?

RICE: Well, one of the problems with the 1994 agreement with North Korea is that North Korea was already very developed on the nuclear side. And it was a freeze of North Korean programs where the benefits were up front and the North Korean actions were later. We have a much better situation with North Korea now, where we are — even know the North Koreans have continued to develop apparently their capability, continued to try to remind the world of that, they're now in is a six-party framework in which they have to face not only the United States but also the Russians, the Japanese, the Chinese, the South Koreans.

I noted, Sean, that when the president of South Korean president was in Germany, he made clear that full scale economic relations with North Korea really couldn't proceed until there was a cessation and dismantling of the nuclear programs in North Korea. So we have to, in these difficult situations, mobilize international opinion and international efforts to keep these states from developing nuclear weapons.

HANNITY: Let's talk about John Bolton for a minute. He came under a lot of fire for suggesting if you lost 10 stories of the U.N. it wouldn't make a bit of a difference. He said the U.S. should be the one permanent member. There was a lot of talk and discussion yesterday about his temperament, especially dealing with fellow employees.

What are your thoughts on him?

RICE: Well, we all use colorful language from time to time.

HANNITY: I've been guilty of that.

RICE: But John is going to be a terrific ambassador to the United Nations. He is — he cares. He is committed. He is a great diplomat.

You know, I have watched John get in place the proliferation security initiative, negotiate the Moscow Treaty that cut American and Russian nuclear arsenals, I have watched him develop the global partnership that has us now able to leverage a lot of help to deal with dismantling the old Soviet nuclear arsenal. This is a very good diplomat. And he has a lot of people who have worked for him who are loyal to him. He is a good manager. He is going to be very, very good of this.

And, you know, we're very respectful of the fact that the Senate has its own deliberative process. But this is a time we need a permanent representative at the United Nations, because there's a lot going on there.

HANNITY: Let's look at U.N. as a body for just a second here. The U.N. puts countries like Syria, Iran, Libya, on their Human Rights Commission. I don't think they were particularly effective in Rwanda or the Sudan, I mean, 12 years, 17 resolutions, totally ineffective, somewhat impotent as it relates to Iraq Oil-for-Food. There's been corruption with many of the officials there. A lot of criticism is warranted. There are even a lot of Americans that would hope that, maybe we don't need to be as closely associated to that body as we presently are. Aren't these legitimate criticisms? Doesn't that next ambassador need to seek out serious reform?

RICE: Absolutely. There are legitimate criticisms and, in fact, some of them being made by the U.N. itself at this point, after this high-level panel. There's no doubt that this is an organization that needs updating and reforming in order to be effective. And, we're a founding member of the United Nations. We shouldn't abandon it. We should make it a stronger instrument.

But that's going to require some tough choices. It's going to require management reforms in the secretariat and in some of the U.N. agencies. It's going to require that the member states are much more vigilant than they were during the Oil-for-Food episode, which really was a terrible scandal. It's a terrible thing that was done to the Iraqi people, really. It needs reform on many, many fronts, and someone like John Bolton, who has spent a lot of time thinking about this, who was an assistant secretary for an international organization in the administration, needs to go there and help lead those reforms.

HANNITY: Let me ask you, you recently met with Mexican President Vicente Fox, and, you know, the Mexican government put out this travel guide, offering tips to people, how to break American laws, not respect the sovereignty of the United States of America. I interviewed Vicente Fox, once, a couple years ago, and he wouldn't admit that there was even an illegal immigrant problem in the United States. And I understand the desire of people who want jobs and so on. The estimates by our own border patrol are, they catch 1.1 million people entering the country illegally a year. They think they get one person for every four or five that attempts to cross. That means a lot of people are making it across.

How did your discussions go with him, and how firm should we be, considering national security issues, if somebody can get over because they want a job, similarly can't somebody get over that, perhaps, doesn't have the best intentions of the American people at hand? Shouldn't we demand that Mexico really step up on that issue?

RICE: Well, we certainly have the right to tell Mexico that they need to respect America's laws, and that these are borders that — about which we have laws and we expect them to be respected. We have actually had good cooperation with the Mexicans, better with the Fox government than at any other time. But there's a lot more work to be done.

The president has said — and as a former governor of Texas, this is an issue he knows very well — that we do need to reform our immigration laws so that we have policies that are sustainable, that match willing workers with willing employers, so that you're not facing the situation of the confusion of people who are trying to find work, work that very often Americans will not do, with people who are trying to come in and hurt us. We have done a lot of work on smart borders technology, to let the free flow of legal people and goods go through, while perhaps doing a better job on keeping people who would hurt us from coming forward.

But this is a very big and difficult issue. But that Mexico should be respectful of our laws, absolutely.

HANNITY: All right, last question. I'm not going to ask you the running for office question.

RICE: Thank you.

HANNITY: And I'm probably the only person because I think I know the answer here. First of all, I noticed as soon as you became secretary of state that there were a lot of comments on your fashion.

RICE: I know.

HANNITY: Did you ever think you would become a fashion trend-setter? And what are the differences between you and, say, Secretary Powell?

RICE: No, I didn't think about becoming a fashion trend-setter. I loved to shop since I was a little girl, and truth be known, that's been a passion of mine right alongside football for a long time. But...

HANNITY: Good combination.

RICE: Yes. No, Secretary Powell did a terrific job in this job. He's a good friend. You know, we've talked frequently since I took this job. I had dinner with Colin and Alma Powell, who've been long-time friends. He did a terrific job here. The times were different, you know, we were in a time in which we had to make a lot of really tough decisions, where we had to fight wars to liberate 50 million people, where were those were not always popular decisions, and where he did a really fine job of representing American interests during what was a really hard time. We're seeing now the benefits of the hard work that that team did, and now trying to build on that work to live — to leave a sustainable, peaceful environment. We now are more like in a period after the — after World War II, '47, '48, where we're institutionalizing now a lot of those changes, and harvesting some of the good decisions that were made during that time.

So, the times are different, but I have enormous respect for what Colin Powell achieved when he was here.

HANNITY: Madame Secretary, we always appreciate you being with us. Thank you very much.

RICE: Thank you. Great to be with you.

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