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Does Iran make the U.S. look impotent?

"Hardball" guest host Norah O'Donnell talks to Amabssador John Bolton about the United State's relationship with Iran.

On Friday's "Hardball," guest host Norah O'Donnell talked to John Bolton, the U.S. amassador to the United Nations, about the United State's relationship with Iran.  You can find the transcript below.

NORAH O'DONNELL, GUEST HOST, "HARDBALL":  Iran is refusing to comply with the deadline to halt its nuclear program.  Iran says it won't be bullied, but can it be stopped?  John Bolton is the U.S. ambassador to the United Nations.  Welcome, Ambassador.

JOHN BOLTON, U.S. AMBASSADOR TO THE UNITED NATIONS:  Glad to be here.

O'DONNELL:  Iran is once again refusing to comply with this deadline.  Do you have any confidence that the U.N. Security Council would agree to sanctions?

BOLTON:  I don't think we know at this point.  I think this is going to be a major test of the Security Council, to see whether it's capable of dealing with the serious proliferation threat that Iran poses.

Now, the foreign ministers who are the five permanent members of the council, plus Germany, have agreed that if we came to the point that we've reached, that they would seek sanctions in the Security Council.  So we're certainly prepared to do that when we get the instruction to proceed up here. Whether the council will actually produce a resolution with sanctions remains to be seen.

O'DONNELL:  Well, your good friend, Russia's foreign minister, Mr. Lavrov, said today that he thinks sanctions are a dead end.  So, clearly, the Russians have signaled they're not willing to agree to any sanctions.

BOLTON:  That, of course, would be a contradiction to what he signaled in June, when he signed on with Secretary Rice and the other foreign ministers to do just that if Iran declined to suspend its uranium enrichment activity.

I have a feeling that when we get down to cases and actually put a resolution on the table, we'll find out more specifically.

But as I said at the beginning, this really is a test for the Security Council.  If we can't deal in the council with a proliferation threat like Iran, then I think that tells us a lot about the utility of the council and the global struggle against proliferation of weapons of mass destruction.

O'DONNELL:  But as you know, Russia and China have economic interests and other reasons why they don't want sanctions on Iran.

If the U.N. Security Council does not agree to sanctions, what good options do you have left?

BOLTON:  The possibility of sanctions in the council has always only been one part of the effort that we're prepared to undertake against Iran.  There are a number of other steps we could take.

Most significantly, lots of countries can impose sanctions on Iran without action by the Security Council, the European Union, Japan, others.  Just as the United States has unilaterally imposed almost total economic sanctions in terms of bilateral transactions, other countries could do the same thing.

But I want to come back to the council for a second.  It's not at all clear that Russia or China would actually veto a resolution in the Security Council.  They may not support it, but if they acquiesce in it by abstaining, that still leaves open the possibility that the council could act.

O'DONNELL:  Ambassador, I must ask you, because since 2002, we have called Iran part of the axis of evil.  The president, Ahmadinejad, seems emboldened.  He says, "I'm not going to be bullied."

The U.S. keeps talking about consequences and, yet, there have not been consequences.  And the Iranians, many experts say, keep calling our bluff.  Does the U.S. look impotent?

BOLTON:  Well, one of the things that we've been trying to do really for about over three years now, since Secretary Powell agreed to the initiative that British then foreign secretary Jack Straw undertook to try and find a negotiated solution to the problem posed by Iran's effort to acquire nuclear weapons.

So the course of this diplomacy, which Secretary Rice continued and, indeed, expanded, has been to work with the three European countries that have been engaged in the negotiations with Iran.

O'DONNELL:  But, Ambassador, you have repeatedly tried the diplomatic route.  You have tried it in the U.N. Security Council.  You have issued warnings.  The IAEA is on your side.  They just put out a U.N. report that said that they had found bomb grade uranium.

I mean, there are more and more dire warnings and increased rhetoric from Iran.  And, yet, again, answer that question about consequences to Iran.  We see the president there feels emboldened by this.

What consequences does he face?

BOLTON:  Right.  I was answering it when you interrupted me.  But the discussion we've been having with the three European countries, the United Kingdom, Germany and France, have allowed them to take the lead in trying to find a peaceful and diplomatic solution by offering Iran a very, very generous package that if Iran would give up its pursuit of nuclear weapons, they could have a different relationship with us and with western Europe.

Now, they have not done that and we are at the point where the five foreign ministers agreed, bringing in Russia and China, significantly, that we would go back to the Security Council and seek the consequences that President Bush spoke of earlier this week.

So I think in that sense, we really are, at the moment, that we've predicted for some time that if Iran did not comply with our demand that they give up the search for nuclear weapons.

O'DONNELL:  As you know, David Ignatius from "The Washington Post" is in Iran.  He has a piece in today's "Washington Post" today.  And he reports that, in fact, Iranians feel more emboldened by the dire situation in Iraq.

Do you acknowledge that the war in Iraq has made diplomacy with Iran more difficult?

BOLTON:  Well, I haven't seen that piece, so I don't really know what the thrust of the argument is.

But I think the question of dealing with Iran's nuclear program is really substantially different than the situation we faced in Iraq.  And I don't think that the security situation inside Iraq really affects our diplomacy vis-à-vis Iran.

I think...

O'DONNELL:  But you do acknowledge that Iran, to some degree, recognizes what's going on in its neighborhood and feels emboldened by the situation in Iraq and some say emboldened certainly by the situation in Lebanon.

BOLTON:  I think what Iran is doing is causing a major part of the problem both in Iran and in Lebanon and in the occupied territories by its support for Hezbollah and Hamas.

I think that the rhetoric that President Ahmadinejad loves to use all contributes to the compelling need to prevent Iran from obtaining nuclear weapons, because with that kind of regime --

O'DONNELL:  So let me --

BOLTON:  -- having nuclear weapons would be a very difficult threat in the region and worldwide.

O'DONNELL:  There have been dire warnings from this administration that Iran of course is seeking to acquire and build nuclear weapons.  How would sanctions stop that effort?

BOLTON:  Sanctions, as I said earlier, are only a part of the effort.  I think there are, in addition, steps that we have taken, will continue to take through the Proliferation Security Initiative, which is intended to onterdict international trafficking in weapons and materials of mass destruction.  We're also now going after the financing aspect of weapons of mass destruction proliferation and going after the financial contacts that Iran has with the outside world.  All of which can have a dramatic impact on the country.

What we're seeking to do is find ways to prevent Iran from getting a completely indigenous nuclear capability.

O'DONNELL:  As you know, Kofi Annan is in the region.  He is planning to meet with the Iranians tomorrow.  Do you have any confidence that Kofi Annan will be tough enough with the Iranians tomorrow?  What do you want him to say?

BOLTON:  I think what he should say is, Read Security Council Resolution 1696 again:  it made it clear that you are required to suspend your uranium enrichment activity and that if you don't, the Security Council will proceed to sanctions.

I don't think he's there to negotiate, but I think it certainly would be useful if he conveyed again the message that the Seucrity Council sent in that resolution.

O'DONNELL:  All right, we'll be back with Ambassador John Bolton.

And, coming up, on Wednesday on MSNBC, Decision 2006: Battleground America.  All day we're gearing up for the big midterm elections.  NBC's Tim Russert kicks off our coverage at 9:00 a.m. and NBC's Brian Williams, David Gregory, Campbell Brown, Lester Holt, Chris Matthews, Joe Scarborough and Tucker Carlson will all bring you the biggest races and the hotest political stories this fall.  It's all part of this huge day, Wednesday, only on MSNBC.

O'DONNELL:  What is the worst case scenario if Iran is able to continue its uranium enrichment?

BOLTON:  The worst case would be they would perfect the uranium enrichment technique.  They would then move to industrial scope of production to enrich uranium to weapons grade, concentrations of the U-235 isotope, and then begin producing nuclear weapons.

What we'd like to see is a reversal of that strategic decision by Iran, much the same way Libya came to the conclusion they were actually safer not pursuing nuclear weapons than doing so.

O'DONNELL:  And why do you think Iran feels emboldened to continue to defy the United States and the international community?

BOLTON:  Well, I certainly can't read the minds of the people in control in Iran and I think that's one reason why we feel we need to take the step of going to sanctions and increased international isolation, since, to date, the diplomatic efforts have not succeeded in convincing them to change that strategic decision.

O'DONNELL:  But you must have some kind of inkling or thought about why they feel so emboldened to continue to defy the United States.

BOLTON:  Well, they've been pursuing nuclear weapons, by our lights, for close to 20 years.  So I don't think that reflects in any change in what they've been doing.

They're just getting much closer to it now than they have been in those past years.  This is a longstanding policy they're pursuing.

O'DONNELL:  Again, referring to David Ignatius of "The Washington Post," he reports today that Ahmadinejad's defiant rhetoric, in that that there's a widely shared conviction in the Middle East that Iran is a rising power in the Middle East, while the United States is in decline and now is the moment for Iran to emerge as a regional superpower.

Is that one of our concerns?

BOLTON:  I don't think that that analysis is necessarily accurate.  The support that Iran has been providing to Hezbollah in the range of a $100 million a year, the support it's provided to Hamas, the support it's provided to other terrorist groups has also been part of a longstanding policy.

So I don't know that this reflects an overall change in Iran's behavior, but a continuation of policies they've been pursuing for some time, policies which are very dangerous in the region and globally, no doubt about it.

O'DONNELL:  We talked about the worst case scenario with Iran and, clearly, they want to become a regional superpower.  Does the U.S. have any good military options?

BOLTON:  Well, I think that the discussing what the options are is obviously not something that would be terribly productive.  I think any president charged with responsibility for protecting the American people is not going to take the military option off the table when you confront a threat as grave as an Iran, armed with nuclear weapons.

O'DONNELL:  So you're saying, when the president, just like he did the other day before the Amercian Legion, warns of consequences for Iran, you're saying he's not referring to military consequences.

BOLTON:  He's made it plain for some time that our prefered way of dealing with this problem is through peaceful and diplomatic means, and that's what we've been doing for the past several years.

O'DONNELL:  But you've found those means thus far unsuccessful.  Is it now time to turn to another means of dealing with Iran?

BOLTON:  Yes; as I said before, now that the Iranians have made it clear they have no intention of suspending their uranium enrichment activity, I think moving for sanctions in the Security Council, considering other economic steps, ramping up the Proliferation Security Initiative, are all things we should and will be doing.

O'DONNELL:  And quickly, since the UN General Assembly meets at the end of September, do you hope to have those sanctions by then?

BOLTON:  I never make predictions about the timing of action in the Security Council, but once we're given the instruction to proceed here in New York, we'll go as fast as we can.

O'DONNELL:  And finally, I must just ask you, the Iranian president, Ahmadinejad, has challenged President Bush to a debate.  I don't imagine that's something you're considering, is it?

BOLTON:  That's another one of his silly ideas, and I wouldn't waste any time on it.

O'DONNELL:  Understood.  Thank you, Ambassador John Bolton -- thank you very much for your time.  We greatly appreciate it.

BOLTON:  Happy to do it.