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QUESTION: On the other channel, you're going to see both the Russians and the Chinese here. Still a Russian holdup? I mean, how -- what are you going to do about it?

SECRETARY RICE: Well, you know, the problem isn't the unwillingness to have a Security Council resolution. There is willingness to have a Security Council resolution. So on the strategy there is agreement. The question is what is that resolution going to say and how broad is it going to be, and I think we just have to keep working through it. But I think we will get a resolution and we've just got to come to some conclusion about how broad it's going to be.

QUESTION: Are you going to get a resolution that the Iranians are going to take seriously though?

SECRETARY RICE: I think they have to take any Chapter 7 resolution seriously. You know, Chapter 7 resolutions -- it's a small club. It now includes North Korea, it includes for not much longer Iraq. It's a really small club. And to be in that club has all kinds of collateral effects that I think the Iranians will not be able to ignore. They already have banks leaving Iran and refusing to deal with their accounts. I think that you will see that investment decisions about Iran are affected by the fact that they're under a Chapter 7 resolution with the potential for further sanctions. Whatever this initial list looks like, there's always the potential for future sanctions.

So you know, I know that the Iranians have a tendency to say, oh, well, they really don't care if they're under Security Council sanctions. Well, most people try to avoid Security Council sanctions for a reason, and the Iranians have done everything that they can to avoid Security Council sanctions. It shouldn't surprise anybody that every time we get close to a Security Council resolution, every Iranian diplomat in the world is on a plane somewhere to argue against Security Council resolutions. So I guess they do care what happens.

QUESTION: It's still going to get read though as sort of like the incredible shrinking sanctions. I mean, every time you get close to this, the menu gets smaller, the --

SECRETARY RICE: I just think it's the wrong way to look at it. The fact of the matter is, first of all, sanctions are there to try to convince people to negotiate. They're not there just for the purpose of having sanctions. But if they won't negotiate, then they will live under the specter of a Chapter 7, which is really, you know, opprobrium from the international community that you've done something bad enough to be under Chapter 7 is pretty bad. And then people start making decisions based on your status in the international system, and that's not something that the United States will have to make a very big deal of. People can read the tea leaves. People can understand that if this continues and the Iranians continue to move down a nuclear road that it's entirely possible that there are further sanctions. And they start to make decisions accordingly. So to my mind, the important breakthrough was 1696 when it became clear that the Security Council, in particular the P-5, would come back under Article 41 of Chapter 7.

QUESTION: There was a line in your intervention this morning that interested me and it was the one where you talked about the importance of other members of APEC preventing their financial systems from being exploited by proliferators, weapons proliferators which you didn't name but obviously the most conspicuous one is North Korea. Was that directly aimed at -- primarily aimed at North Korea and did you get much of a sense from the other members that they're interested in doing that, in trying to shut down their banking systems to dealings with North Korea?

SECRETARY RICE: Well, it wasn't aimed at North Korea. It was aimed at any proliferator. And we know that we have a proliferation problem with North Korea. We also have a proliferation problem with Iran.

QUESTION: And was there much -- did people respond to it?

SECRETARY RICE: I delivered the line and I left pretty soon after that. (Laughter.) It's not as if people had much chance to respond. Look, Secretary Paulson has -- and Stuart Levey, the Under Secretary, have made presentations to people and the point is only the following. The international financial system has to have integrity to it, and that means that it cannot be used and should not be used for states that are engaged in illicit activities, most especially states that are engaged in activities regarding terrorism or proliferation. And both a formal and informal set of arrangements are emerging to deal with the ability of states to use the legitimate international financial institutions to do illegitimate business.

It's been -- it's far more advanced on the terrorist financing side than it is thus far on the proliferation side, but when you talk about the building of cooperative institutions you don't have to talk about the building of yet another organization. Cooperative institutions also include having rules and understandings about keeping track and monitoring and being vigilant about your own financial institutions and systems so that those systems are not used and those institutions are not used for illicit purposes.

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