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QUESTION: What do we do about Iran? In many ways, I think most observers think that Iran was fighting this war by proxy. The Israelis found Iranian revolutionary guards fighting side-by-side with Hezbollah, they fund Hezbollah $100 million a year. The long-range rockets, they took credit for giving it to them. And we now discovered that there had been training of the people that kidnapped the Israeli soldiers from Iran. What do we do? And of course, Ahmadinejad says wipe Israel off the map and annihilate them. What do we do with the Iranian problem?

SECRETARY RICE: Well, I have said many times Iran is a very big strategic threat. And we have to deal with that strategic threat. For instance, I think it's extremely important that should Iran not respond to the Security Council resolution that was just passed on its nuclear program, that we go ahead with another resolution that begins to impose sanctions on Iran. I think it's important that we begin to use financial measures to make it difficult for Iran to engage in the kinds of support of weapons of mass destruction and proliferation that it engages in. And ultimately, the international community has to stand up to an Iran that is a state sponsor of terror, really the central banker of terror, terrorism, that is causing this destabilization in the international system.

QUESTION: If we assume that Ahmadinejad and his incendiary rhetoric continues, if his pursuit of nuclear weapons continues, must America and the world consider military force to stop him and stop Iran from becoming a nuclear power? I mean, assuming that somebody who says they want to wipe Israel off the map is not somebody you can negotiate with or that wants to go along with the world community, at some point a military option has got to be considered, no?

SECRETARY RICE: Well, obviously, the President isn't going to take the military option off the table. He doesn't take any of these options off the table. We still believe that a robust diplomatic response to Iran's intransigence on its nuclear weapons will work, on its nuclear program will work. Particularly if strong measures are taken that make it difficult for the Iranian regime to continue to argue that they are paying no price for their defiance of the international system.

I think, Sean, they were surprised that the resolution passed in the Security Council with the weight that it did, Russia voting for it, China voting for it. And so we will, if on August 31st there is not Iranian response, I think we'll move to another resolution.

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