.. .

QUESTION: One of the other recommendations of the Baker-Hamilton report was the idea that the United States should talk to Syria and Iran. Now, you've dealt with this -- I've heard your language on this before, but I -- part of the argument is that during the worse period of the Cold War, the United States talked at very high levels with the Soviet Union, even when the Soviet Union was engaged in all sorts of proxy wars against the United States throughout the world. . .

. . .

SECRETARY RICE: . . . On the Iranians, well, we would have ended 27 years of policy. I think I put it very, very -- I thought in fairly colorful language. I'd meet my counterpart any place, any time. All they have to do is suspend their enrichment -- which has been, by the way, a demand of the international system going back a couple of years - that's so that the talks don't become a cover for continued enrichment activity that just practices how to resolve the engineering difficulties that would then allow you to go industrial-scale production. So the offer is there. And by the way, we didn't say you could talk only about the nuclear issue; we said we could talk about anything. But they couldn't take up that offer.

Now in the current context, I think the problem is that you have to ask if Iran and Syria are, in fact, have decided that it's in their interest to have an Iraq that is more stable than the one now, even if it's not full stable -- more stable than the one now, I assume they'll act. I assume they'll do it. And that we aren't the ones who have to tell them to do it.

The other explanation is they're looking for compensation to do that and that's a problem. Because when you go to the table, particularly in the circumstances now where you're going and saying, please, help us with the stability of Iraq, the potential that what they're really looking for is compensation. And then you have to ask -- it's very high -- and they you have to say, what is that compensation? Well, on the Syrian side, I suspect that the highest priorities are being played out in the streets of Lebanon including about the tribunal, including about Syrian power in Lebanon. And on the Iranian side, the Iranians have been pretty upfront about it. They're not going to talk about Iraq over here and their nuclear program over there. And so do you really want get yourself into a situation in which you're talking about allowing the Iranians to continue to acquire the nuclear technology that will allow them to build a nuclear weapon to try and achieve or try to get their support in Iraq where, if they have an interest in a stable Iraq, they'll do it anyway. So I just -- I think we have to come down from the level of talk to them and ask what's really going on here.

. . .

QUESTION: Can I just go back to what Fred asked. That as you see the situation in Iraq deteriorating -- if one wants to use the word (inaudible). You said that one of the reasons for not talking to Iran is that it would give them coverage to continue their nuclear program. I'm not sure I understand.

SECRETARY RICE: No, I said I think -- I didn't say -- look, the cover I think would come from just continuous talks which is why we had insisted on suspension for the nuclear talks.

QUESTION: Right. But the fact is they are continuing with their nuclear plans.

SECRETARY RICE: Yes. What I don't want --

QUESTION: What do we get out of it and why -- in keeping our goal, our goal of getting them to suspend their nuclear plan and, secondarily, to do something in Iran -- in Iraq, why can we not change our tactics because the tactics that we're using now don't appear to be working? They're continuing to interfere in Iraq and they're continuing with their nuclear program.

SECRETARY RICE: Well, first of all I don't want to link what we do on the nuclear program to what they do in Iraq; that's the real point here. Because we are on a track on the nuclear program -- you're right, they haven't suspended yet but we have international agreement that they have to suspend and go back to negotiate. Now, the day that the United States suddenly, because we want to make a deal about something, says, oh, by the way, we don't really have to -- you don't really have to suspend and the nuclear issues becomes a part of talks that I am quite certain will not be kept separate -- Iraq over here and nuclear over here. We've also blown up the international consensus that if we have a chance to have diplomacy work on the nuclear program is our only chance to make that diplomacy work.

We do have -- I think we will get a resolution in the Security Council that is a Chapter 7 resolution on Iran. A Chapter 7 resolution has its own collateral effects on a state. They'll be in a pretty specialized category along with North Korea as states that are under Chapter 7 resolutions. And so we have to continue -- we're engaged in increasingly tough financial measures against the Iranians. We have to continue that course because an Iranian nuclear weapon really, really will destabilize the Middle East in major ways. And I don't think we can afford any confusion about what we are prepared to do on the nuclear side in order to gain somehow support for something that they should do.

QUESTION: I'm sorry, I won't belabor it, but you said we don't want to allow them to lead the issues. But it seems to me that we are the ones that will bring the issue. The President got up the other day and said -- when he was asked about the recommendation in the report to talk to them, he said, we will only talk to them about -- if they get rid of their nuclear program. So we're the ones that are linking it. We're saying unless that happens nothing else is happening.

SECRETARY RICE: The President was saying that we've offered the opportunity to talk because of the nuclear program. But I'm speaking to this hypothetical set of discussions with the Iranians that somehow not -- doesn't come from their accepting our offer to talk after suspension. This is a hypothetical set of talks and I think that that hypothetical set of talks goes in a very bad direction, which is that the Iranians come to the table, if they're prepared to talk about Iraq in any way, certainly wanting to link that to their nuclear program, they've been clear about it. Actually they've been saying, well, you know, we would have to talk about the nuclear program. And I don't think they mean they just want to talk about the nuclear program; they want a deal on the nuclear program and that's very dangerous.

. . .

QUESTION: You mentioned the new UN resolution about Iran. From the outside, it looks like you could have gotten that resolution three months ago and much stronger if it had not been for the need to negotiate with the Russians about it. And I think it raises the QUESTION: Are the Russians crippling the international effort to place real pressure against Iran and would it be better to try either without them or at least to speak more openly about the obstructionism you're encountering.

SECRETARY RICE: Well yes, if we had written the resolution ourselves we could have -- it would have been a stronger resolution. There's no doubt about it. But there -- it's a reason it's called a P-5 and you need the agreement of the five.

Now, I think that the resolution that is now proposed to be passed is a very good resolution. The piece that I've been most concerned about, frankly, is that it be under Chapter 7 because I do think that Chapter 7, as I said, puts Iran into a category that states shouldn't generally like to be in and it begins to govern or it begins to affect how all kinds of institutions, investors, states think about the shadow of the future with Iran because the possibility that there are more sanctions coming and ever tougher sanctions coming is always there. We already know that several banks have decided that they don't want to deal with the Iranians because they worry about assets that may in fact be tied up in either terrorism or the WMD. So I think it will have an effect.

Now, it's very important that we recognize that there are several tracks though. The UN track is one and it's an important track, but the United States has just sanctioned -- designated Bank Saderat, an Iranian bank. I think that will have effects on what the financial system is prepared to do with certain Iranian banks. And so we will keep up our own financial measures and encourage others to join us to deal with those issues.

We also, of course, are keeping the door open for negotiation should the Iranians ever decide that that's in their interest. But I don't want anyone to think that the UN track is the only track. It's a critical track. It's very important. It's very good that the P-5 have been able to stay together because that too sends a signal to the Iranians. But some of what happens down the road is going to depend on Iranian behavior. If they keep crowing about 54,000 centrifuges, I rather think it's going to get more people's attention and probably tougher sanctions.

QUESTION: Do you have anything to say about the Russians?

SECRETARY RICE: Oh, the Russians, they've had a different view about how to deal with this specific phase. But the Russians have also come a very, very long way in their attitudes about the Iranians from a year or so ago when it was a difficult conversation to even get them to abstain on a resolution in the IAEA that called for suspension, to now when they are going to back sanctions under Chapter 7. So I think the Russians have come a long way, but I hope they'll come further.

. . .