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QUESTION: Welcome back to Late Edition. I'm Wolf Blitzer in Washington. We return now to my interview with the Secretary of State Condoleezza Rice.

The Democratic presidential nominee in 2004, John Kerry, who is going to be on this program later, he made a very, very stark statement yesterday. Listen to what he said: "Be forewarned, don't be surprised if they hype the Iranian nuclear crisis come October if all other appeals to fear are failing as the midterm election approaches."

SECRETARY RICE: Well, I'm not going to try to speak to the politics, but I think it's really quite remarkable when you have a statement like that when you've had the International Atomic Energy Agency Board of Governors register severe concerns about the Iranian nuclear activities, when you've had the UN Security Council vote just a little over a month and a half ago that Iran must mandatorily suspend its enrichment activities, when you have the IAEA Director General Mohamed ElBaradei saying he's not getting full cooperation from Iran. This isn't the United States hyping a threat. This is the United States trying to build a coalition of states, all of whom know that Iranian nuclear activities are unexplained and troubling.

QUESTION: Do you have the support from Russia and China and even France for tough sanctions against Iran right now?

SECRETARY RICE: I think you will see that the world knows that Iran has not lived up to the promise, the promising opportunity that was given to it when the six powers got together to put forward a package of incentives and said clearly to Iran it was possible for Iran to have civil nuclear power and civil nuclear cooperation. Iran has not taken that opportunity. And I'm quite certain, having not taken that opportunity, that the world will respond as the Security Council resolution demands.

QUESTION: With tough sanctions?

SECRETARY RICE: There will be, I am quite, quite certain, sanctions that demonstrate to Iran that it can't continue on this course. Now, Wolf, it is true that people want to leave open the path of negotiation, that talks are continuing. But Iran also needs to understand and I think will understand that the world is prepared to act on the resolution that it passed just six weeks ago.

QUESTION: Most of Iran's revenue comes from the export of oil. It's a major oil exporting country. Should the United States propose sanctions on Iraqi oil exports?

SECRETARY RICE: Well, on Iranian exports.

QUESTION: Excuse me, on Iranian oil exports.

SECRETARY RICE: The issue here is not Iranian oil exports.

QUESTION: Why not get them where it would be most painful?

SECRETARY RICE: Because we believe that the key here is perhaps on the financial side. There are things that you can do to cut off financing to Iran's programs, to make clear to Iran that it will not be able to take advantage of the international financial system in the way that it needs to to be able to use those proceeds from oil.

Everybody jumps to the notion that oil and gas sanctions are the next best thing. We have developed with our partners a list of potential sanctions. I think we will want to match those to Iranian activities and to Iranian behavior at any point in time. But that there will be an international community, an international coalition that will make it clear to Iran that it can't continue on the course that it's on, I'm quite certain of that.

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