Interview With Neil Cavuto of Fox Business Network

SECRETARY RICE: Well, here let me just quote Secretary Paulson, who of course as Treasury Secretary is working very hard to remind people that we have a diversified economy, a strong economy that continues to grow. And the President is pursuing policies that will help that. For instance, in the area of trade, we believe that open and free trade is going to continue to give us an opportunity to grow, and it's why we're working so hard on issues like the Doha round. So this is being looked at very closely and Secretary Paulson has signaled that very strong confidence in our economy.

QUESTION: All right. You're referring to Treasury Secretary Henry Paulson. You know the President today, Secretary, had also said oil, when it went over $90 a barrel, was unacceptable, he'd like to see it lower. He must have gotten his way because oil did drip down lower after that, but it's still very, very high. And I'm just wondering how this is complicating issues for you. Is it?

SECRETARY RICE: Well, we're obviously, from the point of view of oil, in a very tight supply-and-demand situation. And the President through his energy policies has been very clear that we'd like to see additional sources of oil and gas. But really, the long term here, and here I think we can help on the international side, will be to develop alternative sources for the fueling of our economies, sources that will appeal to the developing -- large developing countries, the emerging economies like China and India.

Because ultimately, Neil, unless we can find alternatives to carbon-based fuel sources, we're neither going to be able to have the kind of supply that we need for economies like China and India that are booming, nor are we going to have the kind of environmental stewardship. And that's why the President has been working on these major economies -- this major economies conference that we recently had here that looks at ways to diversify our energy supply in the future.

QUESTION: Well, those are good long-term goals, Secretary. The concern seems to be what help we could get from some of our Middle Eastern friends, notably Saudi Arabia. Do you think that country is doing all it can to help us on this front and could it, in fact, be pumping more oil to ease this energy concern?

SECRETARY RICE: Well, the President has always said that we should hope for and encourage additional supply in both oil and gas. But we are looking very carefully at this situation. The Secretary of Treasury follows it. The Secretary of Energy follows it. Obviously, the oil suppliers are very concerned about the international economy and they'll take -- I hope they'll take policies that will continue to allow the international economy to grow.

QUESTION: And they're concerned as well about Turkey amassing troops along the Iraq border. That seemed to ease a little bit today, but can you update where that stands?

SECRETARY RICE: We've been encouraging Turkey -- I had conversations just a few days ago with the President of Turkey, with the Prime Minister of Turkey. The President has spoken with them. Turkey needs to exercise restraint. We understand the problem of the PKK. It's a terrorist organization. We've branded it as a terrorist organization. We want to work with the Iraqis, with the Turks, to make certain that there are not attacks from Iraqi soil onto Turkish soil. We all share the same goal here. But military action of the kind that is sometimes talked about would have no effect except to destabilize an already tentative stability in the north of Iraq. And so we are in very close contact with the Turks about this and it's our hope that they'll continue to exercise restraint.

QUESTION: All right. And if they do not?

SECRETARY RICE: Well, I'm not going to speculate here. Turkey has an interest in a stable Iraq as well. It's, after all, their northern neighbor. I'm going to attend a meeting just in a couple of weeks here for the neighbors of Iraq in the second neighbors conference that's going to be held in Istanbul. I think that that shows that Turkey knows that its future is also going to be very much better if there's a stable Iraq. So we're counting on the Turks to take good decisions.

QUESTION: Let me get your sense of Vladimir Putin as well as, you know, he met this week with Mahmud Ahmadi-Nejad in Iran and had said that the country, Iran, has the right to peaceful nuclear energy and would do what he can to support that. He has also said that the United States should set a timetable to get out of Iraq.

Increasingly, his comments, while not necessarily bellicose, have not been friendly. Is it fair to say, Secretary, that President Putin and President Bush do not enjoy the same close relationship they enjoyed a few years ago?

SECRETARY RICE: Our relationship with Russia is not an adversarial relationship. Yes, we have some differences on policies. I would note cite, by the way, Iran as an area in which we have wide differences. We have some tactical differences with the Russians about when we ought to have another Security Council resolution, sometimes about how strong those resolutions should be. But I would just in Moscow and the Russians remain with us on a course that is really a two-track course. On the one hand, we're encouraging negotiations. There will be talks between Larijani and Solana next week. We hope that those talks show that Iran might be ready and willing to accede to international demands. But if not --

QUESTION: Yeah, but we don't know -- what about this special proposal, Secretary, that Mr. Putin referred to? What was that?

SECRETARY RICE: I have every reason to believe that what the Russians said to the Iranians is very much in line with what the P-5+1, meaning the EU-3 countries -- Germany, France, Britain -- and China, the United States and Russia have been saying to the Iranians all along, which is that they need to abandon their efforts to get technologies that could lead to a nuclear weapon, except a civil nuclear program that would not have proliferation risk, come to negotiations in order to do it. And they need to live up to what is -- what their obligations would be under these Security Council resolutions. And nothing that I have seen suggests that the Russians did anything that would be counter to that line.

QUESTION: So even when they say that there is sort of a right for Iran to have peaceful use of nuclear energy, that doesn't jive with anything I've heard either you or the President ever say.

SECRETARY RICE: Well, actually, Neil, we don't object to the Iranians having civil nuclear issue -- nuclear energy. We don't object to it at all. In fact, we've supported the Russian concept of having maybe even a joint venture with the Iranians to allow them to have civil nuclear energy. The issue is not to allow the Iranians on their territory to enrich and reprocess, which is a technology that can be used to enrich nuclear materials to a level that can be used in weapons. So --

QUESTION: But once you're on the civil nuclear path, right, it's really not a big leap to go further, right?

SECRETARY RICE: Well, if you have the potential, the ability to enrich and reprocess on your territory, then yes there is a danger, a real risk of the ability to make a nuclear weapon.

QUESTION: I see.

SECRETARY RICE: But if the enrichment and reprocessing is done someplace else and the fuel is supplied to a civil nuclear reactor, then that fuel is taken back, that significantly decreases the risk of proliferation. And we have supported that kind of civil nuclear program for Iran.

QUESTION: Secretary, have you had a chance today, or even like yesterday, to speak to former Pakistan Prime Minister Benazir Bhutto after what was clearly an assassination attempt, and a bloody one at that?

SECRETARY RICE: I have not had a chance to speak with Mrs. Bhutto or with the Pakistani President either about the terrible events that happened there. We did issue a very strong statement condemning this terrorist attack. I think it shows that there are people who are trying to attack moderate leaders, people who are trying to bring Pakistan to the center, people who recognize that extremism and modernism cannot exist side by side in Pakistan. I may well speak with these leaders, but of course I was traveling and unable to do so.

QUESTION: So you don't see this as lessening the likelihood that Mrs. Bhutto and President Musharraf can work together, as is the plan?

SECRETARY RICE: I believe that it makes even more necessary and indeed more urgent the cooperation among moderate forces in Pakistan. Because clearly, there are people in Pakistan who are given over to extremism. There are people in Pakistan who want to make the future of Pakistan one in which extremism triumphs, and people who have rather a view that Pakistan ought to be a force for moderation, and I think that would be true of both Mrs. Bhutto and President Musharraf, ought to work together. And so if anything, this makes it more necessary that they work together.

QUESTION: I know you've been traveling, ma'am, so maybe this is not fair, but some of the investigations since the assassination attempt have revealed that there had to have almost inevitably been some way for either Taliban or al-Qaida elements to have penetrated the government, or certainly the security forces, to have access to the motorcade at the point that they did. Do you suspect that that could be the case that there are al-Qaida elements working even within the government now?

SECRETARY RICE: First of all, I'm not going to speculate about investigations that are going on. I do believe that the Pakistani Government wants a full and complete investigation of this situation because this government has nothing to gain by the kind of thing that happened yesterday. But I'm not going to speculate about who might have been responsible. I just want to note that, of course, extremists have tried these efforts in Pakistan. They've tried to assassinate President Musharraf a couple of times. And so these extremists want to go after moderate forces wherever they find them.

QUESTION: All right. Now, I know you're still trying to work very closely with the Palestinians and Israelis on a deal. We're told, ma'am, that President Mahmoud Abbas left the initial session with you angry. I don't know if that's true. Was he angry?

SECRETARY RICE: Certainly, no. We had a very nice lunch. We have a wonderful relationship. That's nonsense. Absolute nonsense.

QUESTION: All right. So there was no frustration or resentment? I think he felt that it was too slanted toward Israel and that he wasn't getting his say. There was none of that?

SECRETARY RICE: No, no. You know, I -- there were two people and a translator in that meeting, and I think we're the people who know how that meeting went. It was very friendly. We have a really wonderful relationship. And if anybody is telling you anything else, it's just nonsense.

QUESTION: All right. So where did that come from, the anger thing?

SECRETARY RICE: I don't know. As I said, it's nonsense.

QUESTION: Okay. It's the media, the media. Let me finally get your sense of how close a potential agreement might be. I know you hate and never do put timelines on things, but you know, there's about, what, 14, 15 months left of this Administration. Any guess?

SECRETARY RICE: Well, I can't guess. I can tell you that the most encouraging thing for me on this recent trip is that these parties are very serious about trying to make progress toward ending their conflict. There's a sense in which people realize that this has gone on an awfully long time and that the extremists have a lot to gain by the continued perpetuation of this conflict. Now, there are a lot of problems to solve. There are security issues, real security issues for both Israelis and for Palestinians. There are real issues to overcome of historical differences and historical grievances. Those will have to be overcome.

But you have a sense that these people are having the most serious discussions that they've had in almost a decade now about how to end their conflict. And they've put serious people in charge of the negotiations, senior people in charge of them. The international community and especially the Arab states also have now an overriding interest in seeing this conflict resolved. I can't tell you how long it will take, but I will tell you that I found a spirit of seriousness and dedication to trying to get it done.

QUESTION: Secretary Rice, thank you very much for joining us.

SECRETARY RICE: Thank you. It's good to be with you.

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