MR. RUSSERT: And with us is the Secretary of State Colin Powell. Mr. Secretary, welcome back.

SECRETARY POWELL: Thank you, Tim. Good morning.

MR. RUSSERT: Let me start with Saudi Arabia. Al-Qaida website has posted this picture. They say it is Paul Johnson. And there is his business card. Mr. Johnson's son has confirmed that his dad has been kidnapped in Saudi Arabia. The other night, Kenneth Scroggs, was killed. The British have authorized their staff to leave. Your Department, the State Department, has suggested that Americans not travel to Saudi Arabia. Is the Saudi Kingdom unraveling?

SECRETARY POWELL: It's not unraveling, but it's certainly a dangerous situation right now. Terrorists are going after the Saudi leadership. They're trying to make the country unstable. And I know that the Saudis are treating it with utmost seriousness and they're counterattacking. They've done some rolling up of these terrorist organizations. But, clearly, this is a dangerous time for Saudi Arabia and we are working with them. We're cooperating with them in every way that we can to defeat these terrorists.

MR. RUSSERT: If they can affect the world's oil market by driving American workers out of Saudi Arabia, what will that do to our economy?

SECRETARY POWELL: Well, it would not be a good thing for them to be able to do this. And that's why we have to do everything we can to help the Saudis keep that from happening. We have to put back a sense of security in the society so that people will not leave. We don't like the situation we are in right now in Saudi Arabia. And I know that the Saudis see this in the same serious manner that we do, and they're going to go after these terrorists, but it's a tough situation.

MR. RUSSERT: Now that Mr. Johnson has confirmed his dad was kidnapped, can you confirm it?

SECRETARY POWELL: For Privacy Act reasons, I cannot yet confirm it, but I accept what I see on television.

MR. RUSSERT: Let me turn to the situation in Iraq and discussions the President and you have had with leaders of European nations. This is how Charles Kupchan, who works for the Council on Foreign Relations, put it the other day:

"No WMD, no link to al-Qaida, no progress on the Israeli-Palestinian peace process, the region has been essentially stirred up, not tamed, and al-Qaida recruitment has picked up. So Europeans generally feel that their assessment of the war going into the conflict was accurate."

SECRETARY POWELL: Well, there is also no Saddam Hussein. There is no dictatorial regime. There is a new Iraqi Interim Government that is about to take over. There is a new UN resolution that was approved unanimously that approves the way going forward.

And so, while we do have challenges ahead, and the principal challenge is one of security -- stopping these attacks, stopping this insurgency in Iraq -- and once we can get that security situation under control, the combination of our troops, coalition troops and Iraqi forces being built up, then you will see reconstruction take off. You will see a better life for the Iraqi people being created. You will see elections. You will see a new constitution, and you will see something far better than a regime that is no longer there.

MR. RUSSERT: But the second ranking Iraqi official was killed yesterday. The insurgency seems to be picking off the Iraqi leadership.

SECRETARY POWELL: They are going after these courageous leaders who have stepped forward, but that's not something to give them credit for. They're murderers and they are trying to murder people who are trying to serve the Iraqi people, and they cannot be allowed to succeed.

What kind of world would we have, what kind of region would we have, if these kinds of terrorists were allowed to proceed or allowed to succeed and we gave up and said we are not going to do anything about it?

We are going to do something about it. We're going to continue to keep our troops there, coalition troops there, do everything we can to build up Iraqi forces. We're going to support the new Iraqi government that is rapidly taking over. Fifteen ministries have already been transferred to full Iraqi control. And the President, that you will be interviewing later, as well as the Prime Minister, will be taking office with their leadership at the end of the month and we will support them. They must be given everything they need to prevail over these former regime elements and terrorists.

MR. RUSSERT: Must the Iraqis not take control of their own destiny? Must they be willing to kill fellow Iraqis, if need be, to put down the insurgency?

SECRETARY POWELL: Yes. And I think they understand that perfectly. They know that they are being challenged. They don't want to go back to the past. We don't want to go back to the past, and we are not going to go back to the past. And that's why we're so pleased that the United Nations Security Council spoke clearly about this with a 15-zero resolution.

Even those nations that did not think it was wise for us to go into Iraq last year -- France and Germany, I will mention -- have now come together on this resolution, recognizing that the international community must not fail. We must not allow terrorists to prevail. Whatever the disagreements were over the past year, they have to be behind us, and we have to come together now to defeat this insurgency and to move forward.

Now, the G-8 meeting, clearly, also reinforced this point. I'm sure that the NATO Summit, later this month, will also do likewise. We're not expecting major additional contributions of troops from our NATO Allies beyond the 16 nations that are already involved. But there may be other things that NATO can do, with respect to police training, with respect to headquarters involvement, and we'll be pursuing this with our NATO colleagues.

MR. RUSSERT: There was an article in the Financial Times the other day which suggested that failure, in fact, may be an option. And let me show it to you.

"Simon Serfaty, an analyst at the Center for Strategic International Studies, was recently commissioned by someone on the Administration -- he did not say who -- to write a paper on the effect of failure in Iraq on Europe and transatlantic relations. He defines failure as an abrupt withdrawal of most U.S. troops while Iraq dissolves into internecine strife."

SECRETARY POWELL: Well, that is not an option for us. The President's made it clear that we're going to stay and help this new sovereign government. The international community, with its unanimous vote in the Security Council, has said the same thing. It is not an option to, essentially, walk away from this problem and allow these terrorists to prevail or these former regime elements to take the Iraqi people back into the past.

MR. RUSSERT: The cost of the war, this was on the Associated Press wire the other day:

"Cheap Gas From the War? Only for Iraqis, Not Americans."

"While Americans are shelling out record prices for fuel, Iraqis pay only about 5 cents a gallon for gasoline -- a benefit of hundreds of millions of dollar subsidies bankrolled by American taxpayers…A three-month supply costs American taxpayers more than $500 million, not including the cost of military escorts to fend off attacks by Iraqi insurgents."

SECRETARY POWELL: This is the nature of the economy that we inherited from this regime. A regime that was bankrupting itself, by providing these kinds of subsidies for gas, for food, and for other necessities, which they controlled. It was a way in which they control the population.

As the new government takes over, and as the economy settles down and becomes more market-based, you will start to see all of these prices start to go up to market level conditions, and certainly not at the current subsidized level. Even the electricity was free. And we have to change all of that, as we bring this country along and bring it into the 21st century and into an integrated economic world.

MR. RUSSERT: But psychologically, the American people see their gasoline over two dollars a gallon, and they see the Iraqis paying a nickel and they say, what is this about?

SECRETARY POWELL: Well, what it's about is a broken system that we are trying to fix.

MR. RUSSERT: I saw this article in the New York Times. I'm going to ask you about it because of your involvement as a heroic military man and as Secretary of State. This is specialist Danielle Green. And here is her picture. She lost her left hand in the war. She was known as "D Smooth," when she played basketball for Notre Dame. And she said this: "They just don't want us there. I personally don't think we should have gone into Iraq, not the way things have turned out. A lot more people are going to get hurt, and for what?"

SECRETARY POWELL: Well, I'm terribly sorry that she lost her hand. We regret all losses of that kind, loss of life, the injuries that our young men and women have suffered, and those of the coalition forces, and those of the Iraqi people as well. But I hope she will see in time that her sacrifice was worth it. That we are going to leave in place a nation that is better than the nation that we found when we went in. With a people that believe in the rule of law, that have defeated this insurgency, that are having democratic elections and that will be a model for the rest of the region. And I don't think that's out of our reach.

These are difficult times. The security situation is difficult. But if we were to defeat this insurgency, say, tomorrow, if we could -- we can't -- it will take us a while. Once this insurgency is put down, brought under control, then I think you're going to see rapid reconstruction, you're going to see a rapid movement to a constitution and to elections, and it is completely within our reach to put in place the kind of system that we think the Iraqi people deserve.

And guess what? The new Iraqi leadership wants that kind of system for its people. You will be speaking to the president of the Interim Government a little bit later on, and you will see that they are committed to democracy, the rule of law -- a Shia majority, clearly, but protecting the rights of the Sunnis and the Kurds and the other minorities within the country, something we all can be proud of. And it takes the sacrifice of wonderful young men and women often to achieve this kind of freedom, this kind of liberty.

MR. RUSSERT: We turn over the keys, if you will, on June 30th, just two weeks from now. But the American people should not think that this is the end of the violence. It could potentially still be a long, hot, bloody summer.

SECRETARY POWELL: Yes, it could be, and it's long and hot and bloody right now. We see that these people don't want a better life for the Iraqi people, and we're going to have to stay the course and show the kind of determination, patience, that we have shown in previous conflicts.

MR. RUSSERT: As you try to oversee our foreign policy, the President oversee the war in Iraq, this is the Gallup poll about U.S. attitudes on war. Whether the war was just: World War II, overwhelmingly, 90 percent to seven percent; Iraq 49 to 49. How much does that affect your ability to conduct policy?

SECRETARY POWELL: It makes it more difficult, because we have to explain to the American people, explain to the world, why it was a just war and what it's all about and what we're trying to accomplish. And when you have difficult situations, as we're having now, with officials being assassinated and bombs going off, people see this on television, and they begin to question. And we have to keep reinforcing to the American people and to the rest of the world why this was, one, a just war. Why it makes sense for us to stay the course. And keep reminding people that a very tyrannical, terrible regime that filled mass graves, that did terrible things to its own people, and that was a destabilizing influence in the region, is gone.

And let's not forget that. They are gone. This insurgency has to be defeated. And when it's defeated, then you will see that the process of democratization, constitution writing, elections and reconstruction will move rapidly. And we are going to be there to help the Iraqi people.

MR. RUSSERT: Some observers, Mr. Secretary, will say: "the primary rationale for the war, weapons of mass destruction, have not been found. We are supposed to be greeted as liberators, which is not the case. That a lot more than just 130,000 troops are truly necessary. That General Shinseki, the Army Chief of Staff, who said we needed hundreds of thousands was probably more correct." Why shouldn't people say that this war has been mismanaged from the very beginning?

SECRETARY POWELL: Well, it's succeeded in its principal objective of eliminating this regime. And the intention and capability that this regime had to have weapons of mass destruction, even though we haven't found actual stockpiles, we now don't have to worry about that intention or capability any more. It's gone.

And, clearly, the insurgency has caused us more of a problem than we had anticipated in the beginning. We did come as liberators, but the Iraqi people want us to remain. You don't see any polls saying, "get out right away." They want us to leave in due course, but right now this new government is asking us to stay in order to help secure the country.

And let's not use the actions of just the insurgents as the reaction of the entire population. What the entire population wants, they want jobs, they want electricity, they want revenue coming in from their oil and they want us, ultimately, to leave. They want their own forces to provide for their security. And we are working toward those goals: building up the Iraqi forces to provide their own security in due course, bringing our force levels down till we can go home, and getting to the elections at the end of the year, a new government and then a constitution next year.

MR. RUSSERT: Let me turn to Afghanistan because it's not been on the radar of the American people very much. There was a sense after September 11th that we went into Afghanistan, toppled the Taliban, and now things are all just fine, which is far from the case, as you well know.

This is the General Accounting Office, the investigative arm of the Congress, who put this out:

"Conditions in Afghanistan such as the deteriorating security situation, the relative weakness of the central government, and the increase in opium production, complicate the longer term reconstruction process and threaten its ultimate success."

SECRETARY POWELL: There is much work to be done in Afghanistan, but a lot of work has been accomplished and we shouldn't sell it short. President Karzai, who you will have on your show in a few moments, has done a tremendous job. He is a visionary leader. And when you think of where we were right after the defeat of the Taliban, when there wasn't a single phone working, there is now a government that is functioning.

It is slowly, but surely, extending its reach out and beyond the capital. It is being challenged still by Taliban remnants and some al-Qaida presence, and they also will have to be defeated. We're going to stick with the Afghan Government, as they go about doing this. But they are now scheduled for free elections in September and those elections are on track. And I think slowly, but surely, we are going to be successful in Afghanistan. We are successful --

MR. RUSSERT: There are reports that --

SECRETARY POWELL: We are successful now.

MR. RUSSERT: There are reports that elections may be postponed again.

SECRETARY POWELL: Well, I've heard those reports, and we'll just have to wait and see. But, right now, in my conversations with President Karzai, he is still committed to having the elections in September.

MR. RUSSERT: How concerned are you about the dramatic increase in opium or heroine production?

SECRETARY POWELL: It is a major problem. And we are working with our European friends, especially the British, who have the lead on the opium reduction programs in Afghanistan. President Karzai fully understands that this shadow economy cannot be allowed to continue to exist. But it is a difficult problem to get on top of, as we have discovered, with drug production in other parts of the world.

MR. RUSSERT: Let me turn to this report on global terrorism. Your credibility being called into question. This is your Deputy Secretary of State Richard Armitage in April:

(Previously recorded videotape was played.)

DEPUTY SECRETARY ARMITAGE: Indeed, you will find in these pages, clear evidence that we are prevailing in the fight.

MR. RUSSERT: In the fight on terrorism. And the report says this:

"There were 190 acts of international terrorism in 2003, a slight decrease from the 198 attacks that occurred in 2002, a drop off of 45 percent from the level in 2001 of 346 attacks. The figure in 2003 represents the lowest annual total of international terrorist attacks since 1969."

And then two professors from Princeton, they took a look at this -- and from Stanford -- and they concluded this:

"Yet, a careful review of the report and underlying data supports the opposite conclusion: The number of significant terrorist acts increased from 124 in 2001 to 169 in 2003 -- 36 percent -- even using the State Department's official standards…The only verifiable information in the annual report indicates that the number of terrorist events has risen each year since 2001, and in 2003 reached its highest level in more than 20 years."

Henry Waxman, the democratic Congressman from California, said that you are manipulating data for political purposes.

SECRETARY POWELL: Well, we're not. The data that is in our report is incorrect. If you read the narrative of the report, it makes it clear that the war on terror is a difficult one, and that we're pursuing it with all of the means at our disposal.

But something happened in the data collection and we're getting to the bottom of it. Teams have been working for the last several days and all weekend long, and I'll be having a meeting in the Department tomorrow with CIA, other contributing agencies, the Terrorist Threat Integration Center, and my own staff, to find out how these numbers got into the report.

Some cutoff dates were shifted from the way it was done in the past. There is nothing political about it. It was a data collection and reporting error and we'll get to the bottom of it. We'll issue a corrected report. And I've talked to Congressman Waxman.

MR. RUSSERT: Was it CIA data?

SECRETARY POWELL: It's a combination of data that flows in. And some of it is CIA. The Terrorist Threat Integration Center compiles data and provides it to us. But when you look at it in hindsight now, and you look at the analysis given to me by Congressman Waxman and these two Congressmen, all sorts of alarm bells should have gone off. And all sorts of, as I say to my staff, circuit breakers should have dropped when we saw this data. And they didn't.

But I don't think there was anything political or policy-driven about it. It was just data that was incorrect, or it wasn't properly measured, compared to the way it was measured in previous years. And so, what we have to do is normalize the data this past year, 2003, in the same way that we normalize data in previous years. And we will be putting out that correct information, as fast as we can.

MR. RUSSERT: But it is embarrassing.

SECRETARY POWELL: Very embarrassing. I am not a happy camper over this. We were wrong.

MR. RUSSERT: You know, you take this report on terrorism, and the last time you were here, about a month ago, Mr. Secretary, I asked about your presentation to the United Nations, and this is what you said.

(Previously recorded videotape was played.)

SECRETARY POWELL: "But it turned out that the sourcing was inaccurate and wrong, and, in some cases, deliberately misleading, and for that I am disappointed and I regret it."

MR. RUSSERT: Inaccurate, wrong, deliberately misleading on WMD and then this report on terrorism. Why shouldn't the American people lose all confidence in the information their government is giving them from the CIA about weapons of mass destruction, about terrorism, and who knows what else?

SECRETARY POWELL: The term, "misleading," in the context of the earlier interview, was that the sources were misleading. Not that the agency was misleading, the sources were misleading.

With respect to this report, if you read the report, you will see that it, in narrative form, gives a solid picture of the challenge we are facing with terrorism. It doesn't downplay terrorism in the slightest. But, unfortunately, the data that is within the report, the actual numbers of incidents, is off. It's wrong. And I am regretful that this has happened, that we're going to get it fixed. We're going to get it corrected. And that's the best I can do.

MR. RUSSERT: But the information given to you to go before the United Nations, also inaccurate and wrong. What's wrong? What's going on?

SECRETARY POWELL: Well, we've got to get to the bottom of that, Tim. And with respect to this terror report, we're going to get to the bottom of it tomorrow.

MR. RUSSERT: Are you pleased that Director of CIA George Tenet resigned?

SECRETARY POWELL: George is a good friend of mine, and it was a personal decision of his. I regret that I am not going to be able to work with him. He's a dedicated individual. He's had many successes during his years as director of the CIA, and there have been some areas where I know that he would rather have seen things turn out differently. But he has served this nation very, very well with great distinction and honor.

MR. RUSSERT: When you look at the CIA information on weapons of mass destruction. Former President Clinton said Saddam had weapons of mass destruction, as well as current President Bush. The UN inspectors, the Russian, French and German intelligence agencies said he had weapons of mass destruction. What happened? How could there have been such a colossal intelligence failure?

SECRETARY POWELL: Well, maybe because what we were all looking at was a body of evidence that gave you every reason to believe that he did have weapons of mass destruction. He had the intention. He used them. He stiffed the UN for 12 years. He had the infrastructure. He had the capability. The only thing we haven't been able to find are actual, current stockpiles of such weapons. Everything else was there.

Everything else was there with respect to capability and intention. And any reasonable person looking at this regime, looking at the threat inherent in that intention and capability would have come to the conclusion, based on unanswered questions -- remember, the basis for the stockpiles were unanswered questions about what he had in the past and what happened to it, and some inferential evidence we had with respect to bunkers and other information we had, that gave any reasonable person basis to believe that there were stockpiles, in addition to capability and intention.

We haven't found those stockpiles. But there is not doubt in my mind that he never lost the intention or the capability, and if he had ever been freed from international inspection, of the pressure of the international community and just left alone, and we hadn't acted, you would see Saddam Hussein still there still, now developing stockpiles with the freedom to do so because he is not under pressure.

MR. RUSSERT: Before you go, Mr. Secretary, the last time you were on, one month ago, I received thousands of letters and telegrams about this scene, let's just watch it for a second.

SECRETARY POWELL: Tim, don't swing the camera away from me again.

(Laughter.)

(Previously recorded videotape was played.)

MR. RUSSERT: "Finally, Mr. Secretary, in February of 2003, you placed your enormous

(volume turned down)"

MR. RUSSERT: Mr. Secretary, you answered the question, and because of that, we are internally grateful. We'd like to present you the First Annual Colin Powell Palm Tree Award for answering questions under adverse circumstances. (Laughter). You'll forever be in the annals of "Meet the Press." We thank you again for joining us today.

SECRETARY POWELL: Well, Tim, thank you very much. I honor this. A very dedicated staffer of mine knew that I had two other interviews to do and she was trying to serve me, but did not know you were still asking a question. And I'm glad we got the question in. And I accept this in the spirit in which it is offering.

MR. RUSSERT: And thank you for your answer, as always.