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QUESTION: I'll try to be an average Israeli trying to ask you a question about the situation in Israel.

SECRETARY RICE: Yes.

QUESTION: You still speak about the majority of the Israelis that are for the peace process, for a two-state solution. At the same time, they are being pounded by rockets on a daily basis. So as an Israeli, do you have any suggestion for me, what should I do? And if in few weeks I’ll go for a big military attack in the Gaza Strip is it going to help the spirit of Annapolis?

SECRETARY RICE: Well, I'm not going to speculate on what Israel might do. We believe very strongly that Israel should not, of course, be subjected to rocket attacks out of the Gaza. And the problem is that the Gaza right now is under the control of Hamas, which is not supportive of the peace process. It says to me that there's ever more reason to be supportive of those Palestinians who do not believe in terror and violence as a way to get to a two-state solution. Because the best armor that they have against Hamas, the best that they can give to the Palestinian people is to give them a vision of a peaceful relationship with Israel.

So while I think that the rockets in Gaza have to be dealt with and Palestinians should be doing everything that they can to stop it, I also believe that it is not an argument for avoiding the peace process. In fact, I think you could say that it's an argument for intensifying the peace process.

QUESTION: With what's happening in Gaza, Israel has, you know, been saying that basically, if Abbas so much as flirts with Hamas that's really it for any sort of two-state peace process possibility. And I'm wondering if the United States shares that position.

SECRETARY RICE: Well, I would just quote what President Abbas himself has said, which is that the -- he believes in Palestinian unity. We all believe in Palestinian unity. But Hamas has rejected the agreements that the Palestinians have made with Israel. They continue to hold to violence as an option. The -- Hamas had an unauthorized coup d’état against legitimate Palestinian institutions in Gaza. And he's been very clear that unless Hamas plans to have a different program the possibilities of reconciliation are not there and so I think that's a position that we find totally defensible.

QUESTION: But if they talk now, if there are conversations between Abbas and Hamas now, is that problematic for --

SECRETARY RICE: Well, I think there's -- the issue is that the kind of efforts to bring Hamas and Fatah back together in some sort of unity government, I think, is what people are focused on. And I just don't see any evidence that that is the intention of Mahmoud Abbas.

QUESTION: Is it --

SECRETARY RICE: Or I should say it's not the intention of Hamas because I think Abbas would be open to Palestinian unity on terms that he has out laid -- that he's laid out.

QUESTION: Can you see any evidence of change underway, I mean, in Gaza Strip because of the difficulties of the population? Can you see anything coming?

SECRETARY RICE: Well, first, let me first say that I do think we have to continually be concerned about innocent people in Gaza and the humanitarian circumstances there, because it should not be because you have the bad fortune to be trapped in Gaza with Hamas in charge that you can't get food or medicines or whatever. And so we've been working very closely with the UN and working with Israel to say that that really must not be the case.

On the other hand, the -- Hamas, which has taken responsibility for Gaza by having taken all of the authority, can't deliver and why can they not deliver? Because they're isolated from the international community, they're outside the Arab consensus. I was just asked by an Arab TV station: well, do you think it's right that the world tries to isolate Hamas? Well, Hamas has isolated itself. When you say, if you're Hamas, that you're not prepared to renounce violence, when you say that you're not prepared to live up to the agreements that Palestinian leaders have signed, what is there left to do except to isolate Hamas?

QUESTION: I'm not going to ask you about the performance of the Egyptians unless you volunteer talking about it.

SECRETARY RICE: Well, we think that Egypt has to do more. Those tunnels need to be dealt with and the -- we have had a team of army corps of engineers out in Egypt and the Egyptians have said that they want some, perhaps, technical help. We're prepared, obviously, to give that, but it's also -- you know, the will to do it is very important here.

QUESTION: So there is no will?

SECRETARY RICE: No, I said the will -- I do think -- look, the Egyptians don't have any national interest in having Hamas strengthened next to them. Let's be very clear on where I think Egyptian interests are.

QUESTION: But they prefer the idea to be in Gaza Strip rather than in Sinai?

SECRETARY RICE: No, but I don't think that there's any argument that suggests that Egypt has a national interest in a strengthened Hamas in the Gaza. I just don't see it. But it requires dealing with what has been a very tough problem, which is the tunnels; they are there when there are embargos. People smuggle. It gets harder. And the Egyptians need to deal with it. We're going to try to help them deal with it.

QUESTION: What kind of assistance?

SECRETARY RICE: I'm sorry?

QUESTION: What kind of assistance?

SECRETARY RICE: Well, they talk about perhaps even some technical capabilities to deal with it.

QUESTION: To find tunnels, kind of --

SECRETARY RICE: Yeah, it's -- the army corps of engineers -- I have not seen myself the report that they've made, but they've been talking to Egyptian security personnel about it.

QUESTION: I'm not the first one to ask you the question, but I'll ask you anyway.

SECRETARY RICE: Yes.

QUESTION: You are talking about two people that are willing to go -- you know, to step further forward, but at the same time, you see that Olmert coalition is very weak, it can't deliver even the first phase of the roadmap, not to mention Abbas, he can't deliver anything. So how come that you're going to restart -- you know, speak about core issues when --

SECRETARY RICE: You know, it's really interesting because this time last year, they weren't going to talk about anything. They weren't even going to talk about core issues. This time last year, nobody dreamed they'd actually both commit to final status negotiations to try to complete them in 2008. And so when people say: well, what makes you believe that they can move forward? I've already seen these two leaders move forward despite all of the difficulties. Now the truth of the matter is when there were "strong leaders," they haven't been able to get this done.

QUESTION: They didn’t want to.

SECRETARY RICE: So I -- and I don't see either Prime Minister Olmert or Abbas as weak. I see them as having certain assets and having certain challenges in their political lives.

QUESTION: We know about the challenges. Well, what are the assets?

SECRETARY RICE: Well, the assets are, first of all, commitment. That's an important asset. Secondly, I know what polls are saying, but I think Israelis and Palestinians don't want to live in this condition of perpetual conflict any longer. I think that Palestinians and Israelis both understand that there is a window that is closing because extremists, now with more international flavor thanks to the Iranians, are penetrating into the Palestinian-Israeli conflict in ways that they have not. We didn't talk, even several years ago, about Iranian-backed Hamas. Yes, the Iranians backed some fringe elements (inaudible) and so forth, but Hamas? And so I think they have a strategic argument that was not there before, which they can both mobilize.

I also believe they've got a strong relationship, both of them, with the United States of America and with an American President who has a track record of having been the first President to call for a Palestinian state, but also being a President, who has been unequivocally, undeniably committed to the defense of Israel.

QUESTION: So when you speak about the President, I was wondering what you see as the practical implications of the letter that he wrote in 2004. Do you agree with the Israeli position that it was an acknowledgment that Israel would have sovereignty over certain settlement blocs? And in terms of the settlements and the roadmaps calling for a freeze in settlements, do you see Jerusalem settlements -- East Jerusalem as being part of the call to be frozen or are they -- is Israel allowed to be building in them because there has been a consensus?

SECRETARY RICE: The United States doesn't make a distinction. The roadmap obligations are on settlement activity generally. Now --

QUESTION: To understand, so you're saying that East Jerusalem settlements also need to be halted?

SECRETARY RICE: Well, for instance, Har Homa is a settlement that the United States has opposed from the very beginning.

QUESTION: And Gilo and Ramot, these are also settlements?

SECRETARY RICE: The important point here, and I'll get to the Sharon letter, but the important point here is that one reason that we need to have an agreement is that we can stop having this discussion about what belongs in Israel and what doesn't. It's very clear, and that's what the letter spoke to, that there have been important changes since the '49 armistice and since the events of '67.

And those are going to have to be accommodated in an agreement, but there needs to be an agreement, because the President's acknowledgement that these changes have taken place and need to be accommodated is the President's acknowledgement of that, the President's willingness to say that, which, by the way, an American President had not been willing to say before, but an American President -- this President also said it needs to be mutually agreed so the negotiation, the agreement itself will finally resolve these issues and we can stop having the discussion about what's a settlement and what isn't.

QUESTION: Iran?

SECRETARY RICE: Yes, Iran, yes.

QUESTION: First of all, the main purpose of the visit in the Middle East is Iran?

SECRETARY RICE: Well, the main purpose of the visit in the Middle East is the President -- we have a large agenda in the Middle East: Middle East peace, Gulf security, our relations with our allies, the importance of the democracy agenda in the Middle East. There are a lot of elements to the --

QUESTION: In this regard, how do you perceive the incidents?

SECRETARY RICE: Yes, well, let me just say that Iran should not engage in such provocations and that's what it was and it needs to stop. And the United States is going to defend its interests, it's going to defend the interests of its allies, and the President's made that very clear.

Now as to Iran as a subject, yes, there will be discussions of Iran. There will be discussions of Iran in Israel, in the Gulf, all around because Iran is the single most important, greatest threat to the kind of Middle East that we all want to see. It's a supporter of terrorism in Iraq, in Lebanon, in the Palestinian territories. It has nuclear ambitions.

And let me just say one thing about the NIE. There is nothing in the NIE that suggests Iran is not dangerous. The NIE talks about a -- one of the three elements of a nuclear program, which is weaponization. Enrichment and reprocessing, which can lead to fissile materials, continues. The desire to get ever longer -- the effort to get ever longer ranges of ballistic missiles continues. And what even the halt to weaponization says to me is that this is a state that after denying for years that it had a covert military program -- in fact, our intelligence says had a covert military program. Now, did they halt it? Perhaps; if they halted it, they did it apparently because of international pressure, which says to me you want to keep up international pressure. And it also says that Iran has a lot of answers to give to the world about what the state of that program was when they supposedly halted it. So this -- the NIE should not be understood to say that Iran is not a danger.

QUESTION: But there is the perception about the NIE that called it -- that now, you have to go to the Gulf countries, states in order to reassure them.

SECRETARY RICE: Well, we have been reassuring our allies for quite some time now by increasing our -- their defense capability, by increasing American presence in the Gulf, by taking on the Iranians when we find them in Iraq and by making it difficult for them to move financially by sanctioning their banks. I mean, we've been going at this for some time. That's the reassurance that we would give and the President doesn't take his options off the table. No American President will.

QUESTION: Nobody's talking anymore about the UN Security Council resolution.

SECRETARY RICE: No --

QUESTION: Everybody's in New Hampshire now and Des Monies and the forgot a little bit about nuclear --

SECRETARY RICE: Well, we haven't forgotten. We haven't forgotten and in fact, I expect to talk soon to my foreign minister colleagues about moving forward on the next Security Council resolution.

QUESTION: Any timetable?

SECRETARY RICE: No, but I would hope not terribly long. Look, the -- it's no secret that we and the Russians and, to a certain extent, the Chinese have slightly different views of -- tactically of the timing of a resolution and of the nature of a resolution. But we don't have a difference on the fact that the UN Security Council track needs to keep moving if, in fact, the Iranians refuse to suspend their enrichment and reprocessing.

QUESTION: I think the effect of the NIE, at least in Israel, is a feeling that Israel is now on its own and that the military option is off the table. I think it's also something that the Gulf states feel as well. Do you understand that feeling that Israel feels alone? Do you think it's appropriate?

SECRETARY RICE: Well, I don't think it's appropriate. I can certainly understand that the NIE, if it is not either read in its entirety or not thought of in its entirety or if there's just the headline about having stopped weaponization and you don't, perhaps, follow these things very closely or people don't follow them very closely, they say, well, does United States now consider Iran less of a threat?

And what I would underscore is the United States considers Iran a threat, the single greatest threat in the region, a state that is supporting terrorists, a state that is continuing to try and destabilize fragile young democracies, a state that does have nuclear ambitions and a state that was only, in terms of the weaponization, prevailed upon to suspend or to halt that weaponization because there's been intense pressure from the international community. And that says to the United States that intense pressure has got to continue and the world will make a very big mistake if it thinks that Iran is not a danger.

QUESTION: So what's the message to Israel if they're now preparing to go it alone?

SECRETARY RICE: That's precisely -- well, Israel is an American ally. The President's made clear that we have a stake in Israel's security and in the defense of Israel. This is similar for our Gulf allies with whom we've had security relations for decades. The United States takes those obligations and responsibilities very, very seriously and I think we're going to have a good strategic discussion when we're in Israel.

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