QUESTION: Secretary, thanks so much for the interview. I wonder if we could begin just asking what do you make of the people who say that in your second term you really made a valiant effort to rebuild the international ties which frayed in the first?

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SECRETARY RICE: The one area in which I really did, with the President's very strong support, take a conscious decision to change course was on Iran, where I went to Europe in February of 2005. And it was my first trip as Secretary, and I was stunned at the degree to which there was a split with our allies, our closest allies. And I expected - I remember it was an interview - a press conference with Jack Straw, and I thought all the questions would be about Iraq, and 75 percent of them were about Iran. And we'd somehow gotten ourselves into a situation where we were the problem and Europe felt that it needed to mediate between the United States and Iran. Well, this is no place to be, and so we designed a strategy which culminated in the May 2006 decision and we made some tentative first steps to support the negotiations and decided to join the negotiations, creating then the P-5+1 as Russia and China also came on board. So that was a conscious decision to change course because I felt we were in the wrong place with our best allies.

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QUESTION: Looking forward, Secretary, when you talk about things like Iran, is it right that there seem to be very strong elements of continuity with the Obama approach? You sent Bill Burns. He talks about a carrot and a stick. And just in the principles that he's set out so far, even as President-elect, what measure of continuity do you see?

SECRETARY RICE: Well, I'm certain - and I don't want to speak for the new administration - they will do things in their own way. But I think that we've left in place some diplomatic structures that are ways of managing, and I think ultimately resolving, these really difficult issues, whether it's the P-5+1 on Iran, where we still as a group have an offer on the table, where I signed the letter, where Bill Burns received the answer. And I - when I talk to our allies, they believe that that is the structure in which this is ultimately going to be resolved.

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QUESTION: Is there any sign (inaudible) on Iran that it's working? People talk an awful lot about the process, and yet Iran continues enriching and is getting close to nuclear capacity.

SECRETARY RICE: I think that that's a fair argument on Iran. You know, on North Korea, I think in real outcomes. I think on Iran we've managed to levy great costs to Iran for what they're doing. They're very isolated. They can't use the international financial system because of sanctions and our national sanctions and increasingly European sanctions and Australian and Japanese and so forth. Investment credits have dried up. All of the major Western companies, Western oil companies are out. Total was the last one to go.

And so we are imposing costs. I suspect those costs will be amplified by the lower price of oil. And then we'll see whether the ferment that you're hearing inside of Iran, which does question whether Iran's president is on the right course with the international community, begins to produce a change in behavior. I think it probably will. There's also an election coming up in Iran.

QUESTION: Will it in time, given how close they've come?

SECRETARY RICE: That's the question. And that's why it's important to, if anything, tighten even further the constraints on Iran so that it has to make those choices sooner.
But the President has remained and continues to believe to this day that this is something that has to be and can be solved by diplomacy. It's not that it takes options off the table. Nobody wants the American President to do that. But this is a situation where you're just going to have to keep pressing the diplomacy and make it work.

And by the way, there are other elements to this. Iran's allies lost in the south of Iraq, in Basra. The Iraqi security forces - the people they defeated were Iran's allies, those special groups that Iran had trained. Iran did everything that it could to stop the SOFA with the United States, and they couldn't do it. Iraq is emerging again as an independent Arab state that is a bulwark against Iranian influence into the region. The United States has strengthened its security cooperation with all of the Gulf and Israel, and we have strengthened our own security posture in the region.

So from a sort of geostrategic point of view, I think the Iranian position is not very strong. They keep an option on their tentacles, like Hezbollah and Gaza-based Hamas, and they are a dangerous power and they can cause a lot of trouble. But the - I think we've succeeded, and I think in large part because we've done it with friends. We haven't done it unilaterally. We've succeeded in large part in making life very difficult for the Iranians. When that will have an effect on their decisions about enrichment and reprocessing, I can't tell you.

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