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QUESTION: Madame Secretary, it's been about a year now since the U.S. and Europe made Iran that P-5+1 offer, and they haven't accepted and we have this IAEA report last week now showing that they're getting ever closer to the magic 3,000 centrifuge mark. My question is: Do you have a red line and are you worried at all about whether or not the diplomatic strategy is going to be effective before you reach that red line?

SECRETARY RICE: Well, you should know, and perhaps you do know, that Javier Solana is going to meet again with Larijani at the end of the month, and he will restate again the interest of the six in another course for Iran, a course that turns away from confrontation, contingent on Iran meeting the now multiple demands or multiple times that this demand for suspension has been made by the international community. And I think that's another opportunity for Iran to be compliant.

But the fact is that we still think the diplomatic course if the international community holds strong and within the Security Council, should Iran not choose the course that will be offered to them, that that is a course that will ultimately have an effect on Iran's ability to carry out any number of activities that Iran wants to carry out in international politics and will increase its isolation.

Now, as I've said several times, we're not dependent just on the Security Council track. The financial measures that are being taken against Iran, in part because some countries have decided to enhance the Security Council measures, in part because private concerns are reacting to both the reputational and investment risk that is associated with Iran under Chapter 7, it's having an effect on the Iranian economy -- that and the mismanagement of the Iranian President of that economy.

And I am not one who agrees that somehow because the Iranians are continuing to make progress or are purported to continue to make progress on certain kinds of technologies, that it's time to abandon the requirement that they suspend. I think that would be a very big mistake. You have to remember that we're talking about an engineering problem when you talk about enrichment and reprocessing, and it's something you need to practice. And so doing it once or even doing it a couple of times doesn't mean that you're capable of doing it in an extended period of time to do the sorts of things that you need to actually be able to enrich material.

So we are firm about the need to suspend. We are firm about the need to continue to increase the pressure. And we're firm that should Iran make a different choice, we're prepared to go that way as well. And as to red lines, you know I don't speak in those terms.

QUESTION: Madame Secretary, if you are firm about the measures you are ready to take, what kind of other sanctions do you envision? Would it be some economic sanctions or would be -- would it be really serious economic sanctions?

SECRETARY RICE: Sylvie, one of the things we'll do, and I think we will want to hear from Javier Solana after his meetings, is to assess where we think we are in terms of Iran's response to the May 31 meeting. We can then assess whether to simply continue and move up, tighten the sanctions that are already there or whether there are new categories that need to be considered. But again, I would remind everyone that there is the fact of the Security Council resolution, that's one; but the other is that there are things that can be done outside of the Security Council if we choose to do it.

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QUESTION: Madame Secretary, two questions. You made a reference to Mohamed ElBaradei's comments that Iran -- just because they're making progress on enrichment doesn't mean they should abandon suspension, it seems. Does this mean you are dissatisfied with the clarification the U.S. sought from them? And since you're going to be in Vienna, why not stop in and chat with them to clear this up?

And I'm also, second, just curious whether -- when you're meeting with G-8 foreign ministers if you're going to explain President Bush's -- what he outlined as a new approach in Iraq for the U.S. military, are you going to talk to them about that?

SECRETARY RICE: Well, on Iraq, I think the thing to remember is that we're in the phase right now of completing the deployment of the forces for the surge, pushing forward on the reconciliation and on economic reconstruction. Obviously, there will come a time when the surge has been completed and when its benefits have been seen that, you know, you need to think about what comes next. But that's a future issue.

Right now, everybody is very focused on making this work, and that's what I'll say. And I think the Europeans want to see it work so I don't -- and I -- Iraq -- I really intend to talk more in the context of what we achieved at Sharm el-Sheikh, what could be done to support the Iraqi Government, perhaps to read out a little bit our views of the contact that Ryan had with his Iranian counterparts. That sort of thing.

As to the ElBaradei comments, look, I -- the key here is that the IAEA is not an agency that is negotiating with the Iranians. That's being done under Security Council resolutions by six states and I just think it's appropriate for those six states to determine what the diplomatic course ought to be.

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QUESTION: I have two sanctions questions. Number one, on Iran, do you think it's time to start looking at the oil and gas sector and whether you should target those? And secondly, the President, in his speech or in his announcement today on Sudan and new sanctions, said that you were going to be approaching the United Kingdom for a new resolution. And you mentioned this in your G-8 comments. What are you going to be speaking to the G-8 about when it comes to Darfur and putting more pressure on the Sudanese Government?

SECRETARY RICE: Well, on the first point, I think we just need to look, as I said, at -- so the question is, do we stay within the context and tighten the sanctions in the areas that we are currently operating in or do we start to look outside of that.

I just might note that you don't have to have sanctions through the UN Security Council to have an effect on the oil and gas industry if investment is in -- is impacted, if the ability to do certain kinds of transactions in the international financial system is impacted. Those are impacts in their own right, but we'll examine the full range and see what we think is appropriate. I've always thought that the financial measures are actually more -- the collateral effects here are probably more important than almost anything else and so we'll see how some of those are affecting the industry.

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