QUESTION: You've repeatedly emphasized your pursuit of a diplomatic solution with Iran over its nuclear program, although you've always had the caveat that you don't rule out any options. The only danger, it would seem, from an extended diplomatic process is that throughout the time the Iranians can continue enriching uranium, refine their sort of mastery of nuclear technology. Do you think it's possible to pursue a diplomatic strategy for the rest of the Administration?

SECRETARY RICE: Well, obviously, the problem with an extended process is exactly the one that you've noted, that they continue to practice. After all, enriching and reprocessing is actually an engineering issue. It's not really a scientific issue. The scientific breakthrough is already there. So it's practicing.

I do think that there are some questions about how rapidly they are improving their capability. It seems to me that there have been what appear to be some exaggerated claims (inaudible) by Ahmadi-Nejad about how well they're doing in enriching and reprocessing.

So we have whatever time we have, and I have spent most of my effort trying to impress upon people that there is urgency but that there is also a path that, if we pursue it urgently and persistently, can lead to a change in Iranian behavior. I don't think that we have fully exhausted the range of means that we can use to isolate Iran and to press for a different course from the Iranians, and only now are you beginning to get the Europeans, for instance, talking about European Union sanctions that would be tougher than the ones that we've been able to get in the Security Council. You're seeing an accelerating number of financial institutions, companies that won't deal with Iran, not because of anything that we've done but because the reputational and investment risk of dealing with a country that's in a Chapter 7 circumstance is gaining steam. So I think there's still time to (inaudible) but there is some urgency.

QUESTION: What else are you thinking? What are things you haven't fully exhausted yet? What else besides --

SECRETARY RICE: Well, I think we can designate many more entities. We can make it hard for Iran to use the international financial system for bad purposes. And everybody will remember what happened with the North Korean situation; even after we were prepared to return the money to North Korea, it was very hard to do because people were concerned about being afoul of American sanctions.

And we can do a lot more in the Security Council and we can do a lot more outside the Security Council. I think we just have to get about the business of doing it.

QUESTION: When you talk about designating more entities, are you talking about the Quds Force?

SECRETARY RICE: It's certainly something that we're considering and I remember that the problem with the Quds Force is that it has a network of activities in support of terrorism, but it also, we believe, has a network of activities in support of proliferation. And there have been some Quds Force individuals and entities already designated, and we'll look at the prospect of doing it the organization as a whole.

QUESTION: And at what point does the diplomatic door close and the military one opens? Do you have (inaudible) how many centrifuges need to be (inaudible) and so forth? Is there a sort of a tipping point that you are looking at?

SECRETARY RICE: I don't think we - I don't think about it in those terms, Sue. We know that the longer this goes on, the better they're able to perfect the technology. So I don't know that there's a tripping point.

But again, I would just note that there is - there's urgency to doing it and there's urgency to moving the diplomatic track forward. But they also are experiencing some - there's a sense that their isolation is growing, and I think you're seeing concerns among some of the leadership about that. And we just have to continue to pursue that path.

QUESTION: Well, was Kouchner right to suggest that the world should prepare for the possibility of war if diplomacy doesn't actually succeed?

SECRETARY RICE: Well, I think our version of that would be that you never take any option off the table. But I think what - let me not comment on what Bernard said or didn't say. That's not fair to him. But what is very clear is that France is determined to reinvigorate the diplomatic track.

One of the things that I will say to my colleagues when I meet them in a couple of days is that we can't afford to let the international community and the world lose faith in the diplomatic track. And I do think that we are experiencing some loss of faith and even credibility in the diplomatic track if it starts to grind to a halt. And that's why we have to keep moving on the UN Security Council track. It's why it's a good thing that the Iranians signed an agreement with the IAEA to try to deal with past measures, although we think it's a relatively weak agreement. But even if it deals with past measures, we have to deal with the current problem and the future prospects.

And so I will say to my colleagues that if the diplomatic track cannot demonstrate vitality, then I think people are going to start to make other choices. And you have heard the French when Bernard Kouchner was with me say that, you know, the Europeans are looking at what they can do for European sanctions.

QUESTION: By people, do you mean the Israelis are going to start making other choices?

SECRETARY RICE: No, I said - no, I said the Europeans are looking at what can be done. One has to worry about the potential proliferation aspects and that people start to think that Iran is going to succeed, that people start making their own choices about how they defend themselves. And so it's extremely important that the diplomatic track shows some life.

QUESTION: Speaking of which, do you feel like you're any closer since the P-5+1 meeting on Friday to getting agreement on elements of a resolution, a third sanctions resolution?

SECRETARY RICE: I understand from Nick Burns that they had a good meeting, but I don't expect that - this meeting that we're going to have is not to finalize a text or decide on a text or anything of that sort. It's more in the way of plotting the strategy of the way forward so that we can tell the world that the dual-track strategy is alive and well and being pursued. But I don't expect to sit with my colleagues and look at text and try to agree on a text. I think that's going to take somewhat longer. As we're taking - as we take more steps, more interests get involved and it just takes longer.

QUESTION: Secretary Rice, does the talk of war help or hurt your diplomatic efforts? I mean, it's out there. It's chatter. How do you feel about it?

SECRETARY RICE: Well, I think that it's not really the - I wouldn't characterize it as a talk of war. I think I would characterize it as people speculating on what would happen if the diplomatic track doesn't succeed. And I don't think that speculating on it really is helpful. Everybody knows that we aren't taking any options off the table, and I think that's enough said, frankly.

QUESTION: On that, the talks between Ambassador Crocker and his Iranian counterpart haven't really (inaudible) yet at all, from what I've heard anyway. Do you see any point in continuing with these talks?

SECRETARY RICE: Well, it's very interesting that my counterpart in the Iraq meeting made a point of saying that they are open to continuing them if the Iraqis want to continue. I think we take the view that we're obviously interested in what the Iraqis think about this, but we also need to have a sense that this is going to lead someplace.

There's some benefit, I think particularly since the Iraqis are a part of these meetings, to a trilateral format. But since they haven't gone very far thus far, since we really haven't seen a diminution in Iranian activity of the kind that we're concerned about, I think we have to be careful not just to get into talks for the sake of talks.

QUESTION: So are you saying here that you don't think it's worthwhile to continue --

SECRETARY RICE: Well, I'm saying I think we leave that channel open. But I don't see that we're going to pursue it imminently.

. . .

QUESTION: ... Is there not a sense now that, you know, the Germans are tempted to shrink from some of the difficult responsibilities on issues such as troop deployment in Afghanistan, sanctions on Iran, taking responsibility in Kosovo?

SECRETARY RICE: On Iran, we've had good - continuing good cooperation with Germany and there frankly hasn't been - I know there have been some contacts and there's always going to - at lower levels at least, in the newspapers, the Germans said this, the Germans said that. But you know, in the final analysis, when I'm with Frank-Walter Steinmeier or Nick is with his new counterparts, the Germans are right there for the two-track strategy that we developed two years ago in London. So I have no complaints about German policies on Iran.

. . .

And the debates in the Bundestag and the German mindset about this shouldn't be surprising to anyone. I think we should be really very supportive of what Germany is doing. Of course, we worry about caveats when we talk about those things, but you know, this is a country that's come a long way in terms of its willingness to undertake external responsibilities after many, many years of essentially being a continental static force. So you know, it's not a bad story; it's a good story. And just because there are challenges and it isn't always as rapid as we might hope, we shouldn't denigrate what the Germans achieved. I think it's pretty remarkable.

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