Video & Transcript: Hillary Clinton to Council on Foreign Relations "American Leadership for Decades to Come"

Hillary Clinton's speech to the Council on Foreign Relations on Wednesday:



Although many in Washington and around the country are just coming off their summer vacations, events of the past few weeks have kept us busy.  We are working to support direct talks between the Israelis and Palestinians, and next week I will travel to Egypt and Jerusalem for the second round of negotiations.  In Iraq, where our combat mission has ended, we are transitioning to a civilian-led partnership.  We are stepping up international pressure on Iran to negotiate seriously on its nuclear program.  We are working with Pakistan as it recovers from devastating floods and combats violent extremism.  And of course the war in Afghanistan is always at the top of the agenda.

None of these challenges exist in isolation.  Consider the Middle East peace talks.  At one level, they are bilateral negotiations involving two peoples and a relatively small strip of land.  But step back and it becomes clear how important the regional dimensions of the peace process are, what a significant role institutions like the Quartet and the Arab League are playing, and how vital American participation really is.

Solving foreign policy problems today requires us to think regionally and globally, to see the intersections and connections linking nations and regions and interests, and to bring people together as only America can.

The world is counting on us.  When old adversaries need an honest broker or fundamental freedoms need a champion, people turn to us.  When the earth shakes or rivers overflow their banks, when pandemics rage or simmering tensions burst into violence, the world looks to us.   I see it on the faces of the people I meet as I travel... not just the young people who dream about America's promise of opportunity and equality, but also seasoned diplomats and political leaders.  They see the principled commitment and can-do spirit that comes with American engagement.  And they look to America not just to engage, but to lead.

Nothing makes me prouder than to represent this great nation in the far corners of the world.  I am the daughter of a man who grew up in the Depression and trained young sailors to fight in the Pacific.  I am the mother of a young woman who is part of a generation of Americans who are engaging the world in new and exciting ways.  I have seen the promise and progress of America with my own eyes, and today my faith in our people has never been stronger.

I know these are difficult days for many Americans, but difficulty and adversity have never defeated or deflated our country.  Throughout our history, Americans have always risen to the challenges we have faced.  That's who we are. It's what we do.

Now, after years of war and uncertainty, people are wondering what the future holds, at home and abroad.

So let me say it clearly: The United States can, must, and will lead in this new century.

Indeed, the complexities and connections of today's world have yielded a new American Moment.  A moment when our global leadership is essential, even if we must often lead in new ways.  A moment when those things that make us who we are as a nation - our openness and innovation, our determination, and devotion to core values - have never been needed more.

This is a moment that must be seized --- through hard work and bold decisions --- to lay the foundations for lasting American leadership for decades to come.

Now, this is no argument for America to go it alone.  Far from it.  The world looks to us because America has the reach and resolve to mobilize the shared effort needed to solve problems on a global scale - in defense of our own interests, but also as a force for progress.  In this we have no rival.

For the United States, global leadership is both a responsibility and an unparalleled opportunity.

A New Global Architecture

When I came to the Council on Foreign Relations a little over a year ago to discuss the Obama Administration's vision of American leadership in a changing world, I called for a new global architecture that could help nations come together as partners to solve shared problems.  Today I'd like to expand on this idea, but especially to explain how we are putting it into practice.

Architecture is the art and science of designing structures that serve our common purposes, built to last and withstand stress.  That's what we seek to build - a network of alliances and partnerships, regional organizations and global institutions, that is durable and dynamic enough to help us meet today's challenges and adapt to threats that we cannot even conceive of, just as our parents never dreamt of melting glaciers or dirty bombs.

We know this can be done, because President Obama's predecessors in the White House and mine in the State Department did it before.  After the Second World War, the nation that had built the transcontinental railroad, the assembly line and the skyscraper turned its attention to constructing the pillars of global cooperation.  The third World War that so many feared never came.  And many millions of people were lifted out of poverty and exercised their human rights for the first time.  Those were the benefits of a global architecture forged over many years by American leaders from both political parties.

But this architecture served a different time and a different world.  As President Obama has said, today it "is buckling under the weight of new threats".  The major powers are at peace, but new actors - good and bad -- are increasingly shaping international affairs.  The challenges we face are more complex than ever, and so are the responses needed to meet them.

That is why we are building a global architecture that reflects --- and harnesses --- the realities of the 21st century.

We know that alliances, partnerships and institutions cannot solve problems by themselves.  People and nations solve problems.  But an architecture can make it easier to act effectively by supporting the coalition-forging and compromise-building that is the daily fare of diplomacy.  It can make it easier to identify common interests and convert them to common action.  And it can help integrate emerging powers into an international community with clear obligations and expectations.

We have no illusions that our goals can be achieved overnight, or that countries will suddenly cease to have divergent interests.  We know that the test of our leadership is how we manage those differences - and how we galvanize nations and peoples around their commonalities even when they have diverse histories, unequal resources, and competing world-views.  And we know that our approach to solving problems must vary from issue to issue and partner to partner.  American leadership must be as dynamic as the challenges we face.

But there are two constants of our leadership, which lie at the heart of the President's National Security Strategy released in May, and run through everything we do:

First, national renewal aimed at strengthening the sources of American power, especially our economic might and moral authority.  This is about more than ensuring we have the resources we need to conduct foreign policy, although that is important.  When I was a young girl, I was stirred by President Eisenhower's assertion that education would help us win the Cold War.  That we needed to invest in our people and their talents.  He was right.  America's greatness has always flowed in large part from the dynamism of our economy and the creativity of our country.  Today, more than ever, our ability to exercise global leadership depends on building a strong foundation at home.  That's why rising debt and crumbling infrastructure pose very real long-term national security threats.  President Obama understands this --- you can see it in the new economic initiatives he announced this week and in his relentless focus on turning our economy around.

The second constant is international diplomacy aimed at rallying nations to solve common problems and achieve shared aspirations.  As Dean Acheson put it in 1951, "the ability to evoke support from others" is "quite as important as the capacity to compel".  To this end we have repaired old alliances and forged new partnerships.  We have strengthened institutions that provide incentives for cooperation, disincentives for sitting on the sidelines, and defenses against those who would undermine global progress.  And we have championed the values that are at the core of the American character.

Now there should be no mistake: this Administration is also committed to maintaining the greatest military in the history of the world and, if needed, to vigorously defending our friends and ourselves.

After more than a year and a half, we have begun to see the dividends of our strategy.  We are advancing America's interests and making progress on some of our most pressing challenges.  Today we can say with confidence that this model of American leadership works, and that it offers our best hope in a dangerous world.

I'd like to outline several steps we are taking to implement this strategy.

Our Closest Allies

First, we have turned to our closest allies, the nations that share our most fundamental values and interests --- and our commitment to solving common problems.  From Europe and North America to East Asia and the Pacific, we are renewing and deepening the alliances that are the cornerstone of global security and prosperity.

Let me say a few words about Europe in particular.  In November, I was privileged to help mark the 20th anniversary of the fall of the Berlin Wall, which closed the door on Europe's broken past. And this summer in Poland, we marked the 10th anniversary of the Community of Democracies, which looked ahead to a bright future.  At both events, I was reminded how far we have come together.  What strength we draw from the common wellspring of our values and aspirations.  The bonds between Europe and America were forged through war and watchful peace, but they are rooted in our shared commitment to freedom, democracy and human dignity.

Today we are working with our allies there on nearly every global challenge.  President Obama and I have reached out to strengthen both our bilateral and multilateral ties in Europe.

The post-Lisbon EU [European Union] is developing an expanded global role, and our relationship is growing and changing as a result.  There will be complications as we adjust to influential new players such as the EU Parliament, but these are debates among friends that will always be secondary to the fundamental interests and values we share.  And there is no doubt that a stronger EU is good for America and good for the world.

NATO remains the world's most successful alliance.  And together with our allies, including new NATO members in Central and Eastern Europe, we are crafting a new Strategic Concept that will help it meet not only traditional threats but also emerging challenges such as cyber security and nuclear proliferation.  Just yesterday, President Obama and I discussed these issues with NATO Secretary General Rasmussen.  After the United States was attacked on 9/11, our allies invoked Article V of the NATO charter for the first time.  They joined us in the fight against al Qaeda and the Taliban.  And after President Obama refocused the mission in Afghanistan, they contributed thousands of new troops and significant technical assistance.  We honor the sacrifices our allies continue to make, and recognize that we are always strongest when we work together.

A core principle of all our alliances is shared responsibility --- each nation stepping up to do its part.  American leadership does not mean we do everything ourselves.  We contribute our share, often the largest share, but we also have high expectations of the governments and peoples we work with.

Investing in Developing Partners

Helping other nations develop the capacity to solve their own problems --- and participate in solving shared problems - has long been a hallmark of American leadership.  Our contributions to the reconstruction of Europe, to the transformation of Japan and Germany from aggressors into allies, to the growth of South Korea into a vibrant democracy contributing to global progress, these are some of our proudest achievements.

In this interconnected age, America's security and prosperity depends more than ever on the ability of others around the world to take responsibility for defusing threats and meeting challenges within their own countries and regions.

That is why the second step in our strategy for global leadership is to help build the capacity of developing partners.  To help countries obtain the tools and support they need to solve their own problems and help solve our common problems.  To help people lift themselves, their families, and their societies out of poverty, away from extremism, and toward sustainable progress.  The Obama Administration views development as a strategic, economic, and moral imperative - as central to advancing American interests as diplomacy and defense.

Our approach is not development for development's sake; it is an integrated strategy for solving problems.  Look at the work to build institutions and spur economic development in the Palestinian territories.  The United States invests hundreds of millions of dollars to build Palestinian capacity because we know that progress on the ground will improve security, help lay the foundation for a future Palestinian state, and create more favorable conditions for negotiations.  Think about our efforts to empower women and girls around the world.  This is the right thing to do, of course, but it is also rooted in the understanding that when women are accorded rights and afforded opportunities, they drive social and economic progress that benefits us all.  Similarly, our investments in places such as Bangladesh and Ghana are bets on a future where more and more countries will be capable of contributing to solving problems in their regions and beyond.

Engaging Emerging Centers of Influence

We must also take into account those countries that are growing rapidly and already playing more influential roles in their regions and in global affairs, such as China and India, Turkey, Mexico and Brazil, Indonesia and South Africa, as well as Russia, as it redefines its own role in the world.

Our third major step has been to deepen engagement with these emerging centers of influence.  We and our allies --- indeed people everywhere --- have a stake in their playing constructive regional and global roles.  Being a 21st century power means accepting a share of the burden of solving common problems.  It also means abiding by a set of rules of the road, everything from intellectual property rights to fundamental freedoms.  So through expanded bilateral consultation and within the context of regional and global institutions, we look to these nations to assume greater responsibility.

The emerging powers represent a spectrum of interests and values.  India, for instance, is the world's largest democracy, a country with which the United States shares fundamental values and a broad range of national interests.  That convergence of values and interests has helped us to lay the foundation of an indispensable partnership.  President Obama will use his visit in November to take our relationship to the next level.

With Russia, we took office amid talk of cooling relations and a return to Cold War suspicion.  This invigorated spy novelists and arm chair strategists.  But anyone serious about solving global problems such as nuclear proliferation knew that without Russia and the United States working together, little would be achieved.  So we refocused the relationship on mutual respect, interest and responsibility.  The results speak for themselves: a historic new arms reduction treaty, which the Senate must pass this fall; cooperation along with China in the UN Security Council on tough new sanctions against Iran and North Korea; a transit agreement to support our effort in Afghanistan; a new Bilateral Presidential Commission and civil society exchange that are forging closer people-to-people ties.  And, as we were reminded this summer, the spy novelists still have plenty to write about.

Working with these emerging powers is not always smooth or easy.  Disagreements over policies and priorities are inevitable.  On certain issues, such as human rights with China or Russian occupation of Georgia, we simply do not see eye to eye --- and the United States will not hesitate to speak out and stand our ground.  When these nations do not accept the responsibility that accrues with their expanding influence, we will use all the tools at our disposal to encourage them to change course while we will press ahead with other partners.

But we know that it will be difficult, if not impossible, to solve many of the world's biggest problems without the cooperation of these nations.  So our goal is to establish long-lasting positive and productive relationships that can survive the times when we do not agree and enable us to continue working together on shared challenges.

A central element of our approach is to engage directly with the people of these nations --- and indeed with foreign publics around the world.  Technology and the spread of democracy have empowered people around the world to speak up and demand a say in their own future.  Public opinions and passions matter, even in authoritarian states.  So in nearly every country I visit, I don't just meet with government officials.  In Russia, I did an interview on one of the few independent radio stations.  In Saudi Arabia, I held a town hall at a women's college.  And in Pakistan, I answered questions from every journalist, student and business leader we could find.

Strengthening Regional Architecture

While we expand our relations with emerging centers of influence and developing nations, we are also working to engage them in effective regional frameworks and global institutions that encourage constructive contributions.

Few, if any, of today's challenges can be understood or solved without working through a regional context.  Think about the complex regional dynamics surrounding the fight against violent extremism in Afghanistan and Pakistan or the process of reintegrating Iraq into its neighborhood.

Nor can we expect regional dynamics to remain static.  Countries like China and Brazil have their own notions about what regional institutions should look like, and they are busy pursuing those ideas.  Our friends and allies depend on us to remain robustly engaged and to help chart the way forward.

So the fourth key step in our strategy has been to reinvigorate America's commitment to be an active transatlantic, Pacific and hemispheric leader.  In a series of speeches and through ongoing consultations and discussions with partners from Europe to the Americas to the Asia-Pacific, we have laid out core principles for regional cooperation and worked to strengthen institutions that can adapt to new circumstances.

Let's examine the Asia-Pacific region. When we took office, there was a perception --- fair or not --- that America was absent.  So the Obama Administration made it clear from the beginning that the United States was back.  We reaffirmed our bonds with close allies like South Korea, Japan and Australia.  We also deepened our regional engagement with China, and with India, which we see as a vital Asian democracy.

The Asia-Pacific has few robust institutions to foster effective cooperation, build trust, and reduce the friction of competition.  So with our partners, we began working to build a more coherent regional architecture that will strengthen both economic and political ties.

On the economic front, we have expanded our relationship with APEC, which includes four of America's top trading partners and receives 60 percent of our exports.  As President Obama has said, to realize the benefits from greater economic integration, we must implement policies that promote balanced and sustainable growth.  To this end, we are working to ratify a free trade agreement with South Korea and pursuing a regional agreement with the nations of the Trans-Pacific Partnership, efforts that will create new opportunities for American companies and support new jobs at home.

On the political front, we are engaging with the East Asia Summit, encouraging its development into a foundational security and political institution for the region, capable of resolving disputes and preventing them before they arise.  I will be representing the United States at this year's EAS in Hanoi, leading up to presidential participation in 2011.

In Southeast Asia, ASEAN is home to nearly 600 million people and more U.S. business investment than China.  We have bolstered our relationship by signing the Treaty of Amity and Cooperation, announcing our intention to open a mission and name an ambassador to ASEAN in Jakarta, and holding annual U.S.-ASEAN Summits.

As the Asia-Pacific region continues to grow in importance and influence, developing these regional institutions and establishing new habits of cooperation will be vital to stability and prosperity.

Global Institutions for the 21st Century

Effective institutions are just as crucial at a global level, where the challenges are even more complex and the partners even more diverse.

So our fifth step has been to reengage with global institutions and begin modernizing them to meet the evolving challenges of the 21st century.  We need institutions that are flexible, inclusive, and complementary, instead of competing with one another for jurisdiction.  Institutions that encourage nations to play productive roles, that marshal common efforts, and enforce the system of rights and responsibilities that binds us all.

The United Nations remains the single most important global institution and we are constantly reminded of its value: The Security Council enacting sanctions against Iran and North Korea.  Peacekeepers patrolling the streets of Monrovia and Port-au-Prince.  Aid workers assisting flood victims in Pakistan and displaced people in Darfur.  And, most recently, the UN General Assembly establishing a new entity --- UN Women --- which will promote gender equality, expand opportunity for women and girls, and tackle the violence and discrimination they face.

But we are also constantly reminded of its limitations.  It is difficult for the UN's 192 Member States, with their diverse perspectives and interests, to achieve consensus on institutional reform, especially reforming the Security Council itself.  The United States believes that the Council must be able to react to and reflect today's world.  We favor Security Council reform that enhances the UN's overall performance, effectiveness and efficiency to meet the challenges of the new century.  We equally and strongly support operational reforms that enable UN field missions to deploy more rapidly, with adequate numbers of well-equipped and well-trained troops and police they often lack, and with the quality of leadership and civilian expertise they require.  And we will continue to embrace and advocate management reforms that lead to efficiencies and savings and that prevent waste, fraud, and abuse.

The UN was never intended to tackle every challenge, nor should it.  So when appropriate, we are working with our partners to establish new venues and organizations to focus on specific problems.  To respond to the global financial crisis, we elevated the G-20.  We also convened the first-ever Nuclear Security Summit.  New or old, the effectiveness of institutions depends on the commitment of their members.  President Obama has reaffirmed our commitment and we have encouraged other nations to do the same.

Our efforts on climate change offer a good example of how we are working through multiple venues and mechanisms to advance our goals.  The United Nations Framework Convention on Climate Change process allows all of us - developed and developing, north and south, east and west - to work within a single venue to meet this shared challenge.  But we also launched the Major Economies Forum to focus on the biggest emitters.  And when negotiations in Copenhagen reached an impasse, President Obama led our team into a meeting of key leaders that included China, India, South Africa, and Brazil - working with them and our colleagues from Europe and elsewhere to fashion a deal that, while far from perfect, saved the summit from failure and represents progress we can build on in the future.  For the first time, all major economies made national commitments to curb carbon emissions and report with transparency on their mitigation efforts.

An Architecture of Values

As we strengthen and modernize regional and global institutions, the United States is also working to cement democracy, human rights, and the rule of law into their foundations.  To construct an architecture of values that spans the globe and includes every man, woman and child.  An architecture that can not only counter repression and resist pressure on human rights, but also extend those fundamental freedoms to places where they have been too long denied.

This is our sixth major step.  We are upholding and defending the universal values that are enshrined in the UN Charter and the Universal Declaration of Human Rights.

Today these principles are under threat.  In too many places, new democracies are struggling to grow strong roots.  Authoritarian regimes are cracking down on civil society and pluralism.  Some leaders see democracy as an inconvenience that gets in the way of the efficient exercise of national power.

This world-view must be confronted and challenged.  Democracy needs defending.  The struggle to make human rights a human reality needs champions.

This work starts at home, where we have rejected the false choice between our security and our ideals.  It continues around the world, where human rights are always on our diplomatic and development agendas, even with nations on whose cooperation we depend for a wide range of issues, such as Egypt, China and Russia.  We are also committed to defending these values on the digital frontiers of the 21st century.  And in Krakow this summer, I announced the creation of a new fund to support civil society and embattled NGOs around the world.  This will continue to be a focus of U.S. foreign policy going forward.

Iran Sanctions: Our Strategy in Action

Now, how do all of these steps --- deepening relations with allies and emerging powers, strengthening institutions and shared values --- how do they work together to advance our interests?  One need only look at our diplomatic effort to stop Iran's provocative nuclear activities and its serial non-compliance with all of its international obligations.  There is a still a lot of work to be done, but how we are approaching the Iranian challenge is an example of American leadership in action.

First, we began by making the United States a full partner and active participant in international diplomatic efforts regarding Iran.  Through our continued willingness to engage Iran directly, we have re-energized the conversation with our allies and are removing easy excuses for lack of progress.

Second, we have sought to frame this issue within the global non-proliferation regime in which the rules of the road are clearly defined for all parties.  To lead by example, we have renewed our own disarmament efforts.  Our deepened support for global institutions such as the IAEA [International Atomic Energy Agency] underscores the authority of the international system of rights and responsibilities.  Iran, on the other hand, continues to single itself out through its own actions.  Its intransigence represents a challenge to the rules to which all countries must adhere.

Third, we continue to strengthen relationships with those countries whose help we need if diplomacy is to be successful.  Through classic shoe-leather diplomacy, we have built a broad consensus that will welcome Iran back into the community of nations if it meets its obligations and likewise will hold Iran accountable to its obligations if it continues its defiance.

This spring, the UN Security Council passed the strongest and most comprehensive set of sanctions ever on Iran.  The European Union has followed up with robust implementation of that resolution.  Many other nations are implementing their own additional measures, including Australia, Canada, Norway and most recently Japan.  We believe Iran is only just beginning to feel the full impact of sanctions.  Beyond what governments are doing, the international financial and commercial sectors are also starting to recognize the risks of doing business with Iran.

Sanctions and pressure are not ends in themselves.  They are the building blocks of leverage for a negotiated solution, to which we and our partners remain committed.  The choice for Iran's leaders is clear, even if they attempt to obfuscate and avoid it: Meet the responsibilities incumbent upon all nations and enjoy the benefits of integration into the international community, or continue to flout your obligations and accept increasing isolation and costs.  Iran now must decide for itself.

Conclusion

Our task going forward is to take all that I have discussed today and make it lasting.

To help achieve this goal, America needs the tools and capacity to do the work I've described.  So we are strengthening every aspect of our civilian power.  Congress already has appropriated funds for more than 1,100 new Foreign and Civil service officers.  USAID has begun a series of reforms that will reestablish it as the world's premier development agency.  Across the board, we need to rethink, reform, and recalibrate.  And in a time of tight budgets, we must ensure our resources are spent wisely.  That is why I launched the first Quadrennial Diplomacy and Development Review, or QDDR, a wholesale review of State and USAID to recommend how we can better equip, fund, and organize ourselves to meet the world's challenges in the years ahead.  I will be talking much more about this in the coming weeks and months as this review is completed.

We recognize the scope of the efforts we have undertaken.  And looking at our agenda, reasonable observers may question how we can handle so many problems at once.  The first answer is that, as I've described today, we are not trying to do it alone.  One of the central purposes of the strategy we're pursuing is to build relationships and institutions that encourage others to step up.

But I would also ask: Which of our great challenges today can be placed on the back burner?  Are we going to tell our grandchildren that we failed to stop climate change because our plate was just too full?  Or nuclear proliferation?  That we gave up on democracy and human rights?  That is not what Americans do.

Now, all of this requires what we call strategic patience.  Long after our troops come home from Iraq and Afghanistan, our diplomatic and development assistance and support for the Afghan security forces will continue.  Ridding the world of nuclear dangers, turning back climate change, ending poverty, hunger and disease - this is the work not of a year, or a presidency, or even a lifetime.  This is the work of generations.

America is up to the job.  We will seize this new moment of opportunity - this new American Moment.  We are a nation that has always believed we have the power to shape our own destiny, to cut a new and better path.  This administration will do everything we can to exercise the best traditions of American leadership at home and abroad to build a more peaceful and prosperous future for our children and children everywhere.

Thank you.

(Applause.)

MR. HAASS: Well, thank you. And I will ask a slightly longer first question than I normally would while you fumble with that.

SECRETARY CLINTON: Thank you very much. (Laughter.) Very kind of you.

MR. HAASS: The old stall tactic, filibuster, and you may recall that from a previous life.

SECRETARY CLINTON: Yes, I do, but I never knew it would be so common. (Laughter.)

MR. HAASS: Yes, it’s – Council on Foreign Relations, we’re trying to keep up. We’re trying to keep up. Touché.

Let me start where – you okay?

SECRETARY CLINTON: Yeah.

MR. HAASS: Let me start where you began --- where you ended rather --- which was with all these things we want to do, and you called for strategic patience in Afghanistan and so forth. Yet the United States is soon approaching a point where the scale or size of our debt will exceed our GDP. It’s a question of when more than if. Where does national security contribute to the solution to running deficits of $1.5 trillion a year, or do we continue to carry out a foreign and defense policy as if we were not seriously resource constrained?

SECRETARY CLINTON: Well, Richard, first, as I said, I think that our rising debt levels poses a national security threat, and it poses a national security threat in two ways. It undermines our capacity to act in our own interests and it does constrain us where constraint may be undesirable. And it also sends a message of weakness internationally. I mean, it is very troubling to me that we are losing the ability not only to chart our own destiny, but to have the leverage that comes from this enormously effective economic engine that has powered American values and interests over so many years.

So I don’t think we have a choice. It’s a question of how we decide to deal with this debt and deficit. I mean, it is – we don’t need to go back and sort of re-litigate how we got to where we are. But it is fair to say that we fought two wars without paying for them and we had tax cuts that were not paid for either, and that has been a very deadly combination to fiscal sanity and responsibility.

So the challenge is how we get out of it by making the right decisions, not the wrong decisions. There’s a lot of wrong things we could do that would further undermine our strength. I mean, it is going to be very difficult for those decisions. And I know there’s an election going on and I know that I am, by law, out of politics, but I will say that this is not just a decision for the Congress; it’s a decision for the country. And it’s not a Republican or a Democratic decision. And there are a lot of people who know more about what needs to be done and who, frankly, have a responsible view, whose voices are not being heard right now, and I think that is a great disservice to our nation. Whether one is a Republican or a Democrat, a conservative, a progressive, whatever you call yourself, there is no free lunch and we cannot pretend that there is without doing grave harm to our country and our future generations.

So when you specifically say, well, what about diplomacy, development and defense, we will have to take our share of the burden of meeting the fiscal targets that can drag us out of this deep hole we’re in, but we’ve got to be smart about it. And I think from both my perspective and [Secretary of Defense] Bob Gates’s perspective, and we talked about this a lot, Bob has made some very important recommendations that are not politically popular, but which come with a very well thought out policy. And what I’ve tried to do is to say, “Look, we’re going to try to be smarter, more effective.” In our QDDR [Quadrennial Defense and Development Review], we’re recommending changes in personnel policies, in all kinds of approaches that will better utilize what we have. But we needed to get a little more robust in order to catch up to our responsibilities.

A quick final point on that. When our combat troops move out of Iraq, as they’ve been, that will save about $15 billion. That’s a net win for our Treasury, and it’s the policy that we have committed to along with the Iraqis. The Congress cuts my budget of the State Department and USAID for trying to pick up the pieces that we’re left with. We now have the responsibility for the police training mission, for opening up consulates that have to be secure. So even though our troops are coming down and we’re saving money, and what we’re asking for is considerably less than the $15 billion that we are saving by having the troops leave, the Congress cuts us.

And so we have to get a more sensible, comprehensive approach. And Bob and I have talked about trying to figure out how to present a national security budget. It’s a mistake to look at all of these items – foreign aid, diplomatic operations, defense – as stovepipes. Because what we know, especially from the threats that we have faced in Iraq and now in Afghanistan, is you have to be more integrated. So let’s start thinking from a budget perspective about how to be more integrated.

So there’s a lot that we can do on our side to help. But the bottom line is that the public and the Congress and the Administration have to make some very tough decisions, and I hope we make the right decisions.

MR. HAASS: Let me just follow up on that because you broached the political issue, and let me do it in the following way. I don’t have a crystal ball any better than anyone else’s, but let’s assume some of the pundits are essentially right and Republicans pick up quite a few seats in the House – whether they have control or not, who knows, they pick up a few seats in the Senate – so government is more divided come the new Congress when it takes office early next year. What does that mean for you? What are the opportunities? What are the problems in that for being Secretary of State?

SECRETARY CLINTON: Well, I won’t answer that as a political question because I don’t want to cross my line here. But I will say that I have found a lot of support for what we’re trying to do on both sides of the aisle in both houses, and I think we will continue to have that. And I’m hoping that we can maybe reestablish something of a détente when it comes to foreign policy that cuts across any partisan divide.

Like, take the START [Strategic Arms Reduction Treaty with Russia] treaty; we have unanimous support for that. Our two chief negotiators, Rose Gottemoeller, our Assistant Secretary, and Ellen Tauscher, our Under Secretary, are here and they did a terrific job. And we’ve had a very positive endorsement of it by former secretaries of State and Defense, of both parties, the Joint Chiefs have come out, everybody’s come out for it. And it’s a political issue. I wish it weren’t because most of these treaties pass 95 to nothing, 90 to 3. They have huge overwhelming majorities in the Senate.

But we know that we have political issues that we have to address, which we are, and talking to those who have some questions. But I hope at the end of the day, the Senate will say, “Something should just be beyond any kind of election or partisan calculation,” and that everybody will pull together and will get that START treaty done, which I know, from my own conversations with Eastern and Central Europeans and others, is seen as a really important symbol of our commitment to continue working with the Russians.

MR. HAASS: Let’s ask one last question, then I’ll open it up to our members. You’re about, as you said, to head back to the Middle East for the resumption of the Israeli-Palestinian talks. The op-ed pages have been filled. I would say a majority of the pieces have been quite pessimistic. Why are the pessimists wrong? (Laughter.)

SECRETARY CLINTON: Well, I think they’re wrong because I think that both sides and both leaders recognize that there may not ever be another chance. I think for most Israeli leaders that I have known and worked with and especially those coming from sort of the right of Israeli politics, which the prime minister does, it’s like Mario Cuomo’s famous line: “They campaign in poetry and they govern in prose.” And the prose is really challenging.

You look at where Israel is and the threats it faces demographically, technologically, ideologically, and the idea of striking a peace deal with a secular Palestinian Authority that is committed to its own people’s economic future makes a lot of sense if it can be worked out. From [Palestinian Authority leader Mahmoud] Abbas, he was probably the earliest and at times the only Palestinian leader who called for a two-state solution going back probably 20, 30 years, and for him, this is the culmination of a life’s commitment.

And I think that the Arab League Initiative, the peace initiative, put the Arab – most Arab and Muslim countries on record as saying that they could live with and welcome a two-state solution. Fifty-seven countries, including some we know didn’t mean it, but most have followed through in commitments to it, has changed the atmosphere. So I know how difficult it is, and I know the internal domestic political considerations that each leader has to contend with, but I think there is a certain momentum. We have some challenges in the early going that we have to get over, but I think that we have a real shot here.

MR. HAASS: So I’ll open it up and what I’ll ask is people to identify themselves, wait for a microphone, and please limit yourself to one question and be as short as you can. Sir, I don’t know your name, but just – pick up.

QUESTION: How are you, Secretary Clinton? My name is Travis Atkins. I’m an International Affairs Fellow with the Council on Foreign Relations focusing on Sudan this year. And my question is if – you mentioned Darfur once in your talk – if you could elaborate a little bit on our ramped up efforts in Sudan as we head towards the referendum there in January.

SECRETARY CLINTON: Well, thank you. Thanks for asking and thanks for your work on Sudan. We have a very difficult set of challenges in Sudan. Some of you in this audience, those of you who were in government before like John Negroponte and others, you know this firsthand – the situation in Darfur is dangerous, difficult, not stable.

But the situation North-South is a ticking time bomb of enormous consequence. So we are ramping up our efforts to bring the parties together, North and South, the African Union, others to focus on this referendum which has not been given the attention it needs, both because the South is not quite capable of summoning the resources to do it, and the North has been preoccupied and is not inclined to do it because it’s pretty clear what the outcome will be. The African Union committee under Thabo Mbeki has been working on it.

So we are upping our diplomatic and development efforts. We have increased our presence in Juba, we have sent a – we’ve opened a – kind of a consulate and sent a consul general there, we are – Princeton Lyman, whom some of you know, is – sort of signed on to help as well with Scott Gration and his team.

MR. HAASS: Until last week, a senior fellow here.

SECRETARY CLINTON: That’s right, and Assistant Secretary Johnnie Carson. It’s really all hands on deck, so that we’re trying to convince the North and South and all the other interested parties who care about the Comprehensive Peace Agreement to weighing in to getting this done. The timeframe is very short. Pulling together this referendum is going to be difficult. We’re going to need a lot of help from NGOs, the Carter Center, and others who are willing to help implement the referendum.

But the real problem is what happens when the inevitable happens and the referendum is passed and the South declares independence. So simultaneously, we’re trying to begin negotiations to work out some of those intractable problems. What happens to the oil revenues? And if you’re in the North and all of a sudden, you think a line’s going to be drawn and you’re going to lose 80 percent of the oil revenues, you’re not a very enthusiastic participant, what are the deals that can possibly be made that will limit the potential of violence? And even if we did everything perfectly and everyone else – the Norwegians, the Brits, everybody who is weighing in on this – did all that they could, the reality is that this is going to be a very hard decision for the North to accept.

And so we’ve got to figure out some ways to make it worth their while to peacefully accept an independent South and for the South to recognize that unless they want more years of warfare and no chance to build their own new state, they’ve got to make some accommodations with the North as well. So that’s what we’re looking for. If you have any ideas from your study, let us know. (Laughter.)

MR. HAASS: We’ll turn to Carla Hills.

QUESTION: Secretary Clinton, first of all, thank you for a really far-ranging, extraordinarily interesting talk. You mentioned strategies that are regional, and I’d like you to just say a word more about this hemisphere. You gave a wonderful speech at the border of Mexico where you asserted that we had responsibility for the drugs coming north and the guns going south. Talk a little bit about how we are implementing strategies to turn that around and also to gain friendships that would be helpful throughout Latin America.

SECRETARY CLINTON: Well, first, Carla, thank you for asking about this hemisphere, because it is very much on our minds and we face an increasing threat from a well-organized network drug trafficking threat that is, in some cases, morphing into or making common cause with what we would consider an insurgency in Mexico and in Central America.

And we are working very hard to assist the Mexicans in improving their law enforcement and their intelligence, their capacity to detain and prosecute those whom they arrest. I give President Calderon very high marks for his courage and his commitment. This is a really tough challenge. And these drug cartels are now showing more and more indices of insurgency; all of a sudden, car bombs show up which weren’t there before.

So it’s becoming – it’s looking more and more like Colombia looked 20 years ago, where the narco-traffickers control certain parts of the country, not significant parts. And Colombia – it got to the point where more than a third of the country, nearly 40 percent of the country at one time or another was controlled by the insurgents, by FARC. But it’s going to take a combination of improved institutional capacity and better law enforcement and, where appropriate, military support for that law enforcement married to political will to be able to prevent this from spreading and to try to beat it back.

Mexico has capacity and they’re using that capacity, and they’ve been very willing to take advice. They’re wanting to do as much of it on their own as possible, but we stand ready to help them. But the small countries in Central America do not have that capacity, and the newly inaugurated president of Costa Rica, President Chinchilla, said, “We need help and we need a much more vigorous U.S. presence.”

So we are working to try to enhance what we have in Central America. We hear the same thing from our Caribbean friends, so we have an initiative, the Caribbean Basin Security Initiative. And our relationship is not all about drugs and violence and crime, but unfortunately, that often gets the headlines. We are also working on more economic programs, we’re working on Millennium Challenge grants, we’re working on a lot of other ways of bolstering economies and governments to improve rule of law. But this is on the top of everyone’s minds when they come to speak with us.

And I know that Plan Colombia was controversial. I was just in Colombia and there were problems and there were mistakes, but it worked. And it was bipartisan, started in the Clinton Administration, continued in the Bush Administration, and I think President Santos will try to do everything he can to remedy the problems of the past while continuing to make progress against the insurgency. And we need to figure out what are the equivalents for Central America, Mexico, and the Caribbean.

And that’s not easy because these – you put your finger on it. Those drugs come up through Bolivia, Peru, Colombia, through Central America, Southern Mexico to the border, and we consume them. And those guns, legal and illegal, keep flooding along with all of the mayhem. It’s not only guns; it’s weapons, it’s arsenals of all kinds that come south. So I feel a real sense of responsibility to do everything we can, and again, we’re working hard to come up with approaches that will actually deliver.

MR. HAASS: Speaking of guns, I’m going to be shot if I don’t ask a question that comes from one of our national members, and thanks to the iPad I have on my lap, I can ask it. Several have written in about the impact of the mosque debate in New York, about the threat to burn Qu’rans. How do – what’s your view on all this from the Department of State? How does this complicate your life? (Laughter.)

SECRETARY CLINTON: Well, I mean, we’re a country of what, 310 million-plus right now and – I mean, it’s regrettable that a pastor in Gainesville, Florida with a church of no more than 50 people can make this outrageous and distressful, disgraceful plan and get the world’s attention, but that’s the world we live in right now. I mean, it doesn’t, in any way, represent America or Americans or American Government or American religious or political leadership. And we are, as you’ve seen in the last few days, speaking out. General Petraeus made the very powerful point that as seemingly small a group of people doing this, the fact is that it will have potentially great harm for our troops. So we are hoping that the pastor decides not to do this. We’re hoping against hope that if he does, it won’t be covered -- (laughter) --

MR. HAASS: Bonne chance.

SECRETARY CLINTON: -- as an act of patriotism. But I think that it’s unfortunate. I mean, it’s not who we are, and we just have to constantly be demonstrating by our words and actions. And as I remind my friends around the world, in the environment in which we all now operate, anybody with an iPhone, anybody with a blog, can put something out there which is outrageous. I mean, we went through the cartoon controversy. We went through the Facebook controversy in Pakistan. Judith McHale, who is our Under Secretary for Public Diplomacy, is on the front lines of pushing back on all of this all the time. And so we want to be judged by who we are as a nation, not by something that is so aberrational. And we’ll make that case as strongly as possible.

MR. HAASS: Time for one more?

SECRETARY CLINTON: Sure.

MR. HAASS: Okay, let me first of all apologize for the 283 of you whose questions will not – (laughter) – get answered. And let me also say that after the Secretary completes her next answer, if people would just remain seated while we get you out quickly and safely.

SECRETARY CLINTON: Safely? Do you think they’re going to storm the stage? (Laughter.)

MR. HAASS: This is the –

SECRETARY CLINTON: I don’t know. I’m looking at this audience. There’s a – (laughter) – a few people I think that might. (Laughter.)

QUESTION: Thanks, Richard. Barbara Slavin, an independent journalist. Madam Secretary, it’s a pleasure and I appreciate the responsibility on my shoulders. I have two very quick ones.

MR. HAASS: (Off mike.)

QUESTION: Very easy ones.

SECRETARY CLINTON: Go ahead.

QUESTION: Is it the role of the United States to support the Green Movement, the opposition in Iran? And if so, how should we be doing that?

And secondly, you’ve hardly mentioned North Korea. Is U.S. policy now just to let North Korea stew in its own juices until the next Kim takes over? Thank you.

SECRETARY CLINTON: Well, with respect to the first question, it is definitely our policy to support freedom and human rights inside Iran, and we have done so by speaking out. We have done so by trying to equip Iranians with the tools, particularly the technology tools that they need, to be able to communicate with each other to make their views known. We have strongly condemned the actions of the Iranian Government and continue to do so.

I don’t think there’s any doubt that Iran is morphing into a military dictatorship with a sort of religious, ideological veneer. It is becoming the province of the Iranian Revolutionary Guard and in concert with some of the clerical and political leadership. And I don’t think that’s what the Iranian Revolution for a Republic of Iran, an Islamic Republic of Iran was ever meant to become.

So I know there’s a great deal of ferment and activities inside Iran that we do try to support. At the same time, we don’t want to either endanger or undermine those very same people so that it becomes, once again, the U.S. doing something instead of the U.S. being supportive of what indigenous efforts are taking place.

We know that Iran is under tremendous pressure. Early returns from implementation of the sanctions are that they’re feeling the economic effects. We would hope that that would lead them to reconsider their positions, not only with respect to nuclear weapons, but, frankly, the export of terrorism. And it’s not only in the obvious places with Hezbollah and Hamas, but in trying to destabilize many countries in the region and beyond, where they have provided support and funding for terrorist activities as far away as Argentina.

So I think there is a very, very sad confluence of events occurring inside Iran that I think eventually – but I can’t put a time frame on it – the Iranian people themselves will respond to. And we want to be helpful, but we don’t want to get in the way of it. So that’s the balance that we try to strike.

Now, with respect to North Korea, we are continuing to send a very clear message to North Korea about what we expect and what the Six-Party process could offer if they are willing to return and discuss seriously denuclearization that is irreversible. We are in intense discussions about this with all the other Six-Party members and we’re watching the leadership process and don’t have any idea yet how it’s going to turn out. But the most important issue for us is trying to get our Six-Party friends, led by China, to work with us to try to convince whosever in leadership in North Korea that their future would be far better served by denuclearizing. And that remains our goal.

MR. HAASS: As always, thank you so much for coming here, first of all, but also giving such a thorough and complete and serious and comprehensive talk about American foreign policy. And I know I speak for everyone that we wish you Godspeed and more in your work next week and beyond. Thank you so much.

SECRETARY CLINTON: Thanks, Richard.

(Applause.)

Israel-Palestine: Israel's Security Summit, Abbas and Netanyahu Clash on Core Issues

Israel's Security Summit: On Monday, Israel's Prime Minister Benjamin Netanyahu met with members of the Israel Security Council led by Maj.-Gen. (ret.) Uzi Dayan. In the meeting, four strategic measures were discussed in detail: "Maintaining a solid Jewish majority in the State of Israel, preventing the creation of a hostile Palestinian entity that could threaten Israel from Judea and Samaria as is the case today in Gaza, the Iranian threat, and the de-legitimization assault against Israel."

The Israel Security Council also stated that there must be clear red lines during negotiations with Palestinians, especially in maintaining the Jordan Valley as Israel's eastern security border. The need to to strengthen Jewish-democratic identity in Israel and to prevent Iran from arming itself with nuclear weapons were also conveyed to PM Netanyahu.

Video and Transcript: Obama’s New Year Message to Israelis
Israel-Palestine Analysis: Can Ramallah’s “Security” Card Advance the Talks? (Yenidunya)

No Israeli Presence in the West Bank: Talking to al-Ayyam on Monday morning,  Palestine Authority leader Mahmoud Abbas said: “We clarified that [the Palestinian Authority] would not agree to continued Israeli presence, military or civil, within a future Palestinian state.”

Abbas-Netanyahu Challenge on Core Issues: According to Al Quds, Abbas has said that if he is pressured on key issues at the direct talks, such as borders and refugees, he "will take his bags and leave". Abbas stated that the issue of the pre-1967 borders are as important as Israel's emphasis on its security.

Abbas said late Monday that he has asked the U.S. "to intervene in the settlement issue", with the freeze ending in less than three weeks. It appears that Israeli "gestures" instead of an extension of the freeze did not work in Ramallah. Abbas does not see these gestures --- such as transferring an important piece of land from Israeli to Palestinian control, releasing hundreds of prisoners, and removing dozens of checkpoints --- as a substitute of a concession on settlements.

Chief Palestinian negotiator Saeb Erekat denied on Monday that there will be a meeting between President Mahmoud Abbas and Israeli Premier Benjamin Netanyahu in Jerusalem in mid-September. "What has been agreed upon is a meeting between President Abbas and Israeli Prime Minister Netanyahu in Sharm el-Sheikh on Sept. 14 only," Erekat told Xinhua.

On Tuesday, in a Rosh Hashanah greeting, Netanyahu told the nation that there was no guarantee that negotiations between Israel and the Palestinians would succeed, but he vowed to aim for a peace agreement by the end of the year. (Interpretation: Our red lines are crystal-clear, sothere can be no improvement if Palestinians do not come to terms.) He said:

We are trying in good faith, but not naivety, to reach a peace agreement. Any arrangement between us and the Palestinians will be based on two criteria: security and recognition of Israel as a Jewish state.

Security, because no peace will last without a strong anchor of actual security on the ground, not on paper and not as a hazy international commitment. The second thing is the recognition that Israel is the national state of the Jewish people.

If we are asked to recognize a Palestinian state, it is both natural and appropriate that the Palestinians recognize the state of the Israeli people as a Jewish state.

Israel-Palestine Analysis: Can Ramallah's "Security" Card Advance the Talks? (Yenidunya)

After the killing of four Israeli settlers and wounded of two others in the West Bank on 31 August, the Palestinian Authority arrested dozens of Hamas members. However, Hamas' war on the peace process has continued through an attempt to legitimise the targeting of the settlers.

On Friday, Hezbollah leader Hassan Nasrallah praised Hamas for the West Bank attacks and said, "This is the way to free Jerusalem and Palestine." Supported byIran's statements calling the participants of peace talks in Washington "traitors", Hamas sharpened its tone.

Israeli settlers in the West Bank are legitimate targets since they are an army in every sense of the word, senior Hamas official Ezzat al-Rashk said on Saturday:

They are now a real army in every sense of the word, with more than 500,000 automatic weapons at their disposal, on top of the basic protection by the [Israel Defense Forces].

Israel-Palestine Talks: So What is a Settlement? (Stone)
Israel-Palestine: An Interview with Hamas Leader Khaled Meshaal (Narwani)

In response, Ramallah arrested dozens of Hamas members and vowed to hit them with the iron fist.

Hamas' action, rather than undermining the talks, may have strengthened the Palestinian Authority's hand in the negotiations. Officials from Ramallah are sending message to Washington that extra pressure on the PA damage the chance for peace and security of the region.

On Sunday, the chief PA negotiator Saeb Eerekat said that if his organisation and Israel "sign[ed] an endgame agreement on all core issues, I believe we will bring Gaza back." Then Erekat added that he feared the "Palestinian Authority will dissolve if we fail to reach an endgame agreement".

Talking to Palestinian newspaper al-Ayyam on Monday morning, PA leader Mahmoud Abbas took the message further by linking it to a core demand: "We clarified that [the Palestinian Authority] would not agree to continued Israeli presence, military or civil, within a future Palestinian state." Message? want peace and security, it is that Palestinian state, existing peacefully alongside Israel, that should have a monopoly over the use of power in its terrority.

Ramallah had already warned that they would leave the negotiation table if the 10-month-freeze in the settlements did not continue. Its latest deployment of peace and security will be put to two Israeli groups: a relatively "practical" camp in giving concessions but conceding on security and a relatively "conservative" one that moving strategically to capitalise on the failure of the talks. The former one is the alliance of Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak alliance and the latter is the team of Foreign Minister Avigdor Lieberman and Shas leader Eli Yishai.

Lieberman has already said that the direct talks with the Palestinians would not bring a general peace agreement. He is backed by Yishai, who recently said that the Israeli forces lost against 2000 Hezbollah men "because Israel's people had distanced themselves from God". On the other side, Netanyahu says that creative thinking can remove obstacles on the way to Mideast peace and Ehud Barak fills in the details by saying that Israel will neither cancel the 10-month curb on settlement expansion nor extend it before getting a concession from the other side on borders.

Meanwhile, Israeli officials are playing another card on the negotiation table. Israel's ambassador to the US, Michael Oren, said on Friday that West Jerusalem is offering the Palestinians gestures, in place of extending the settlement moratorium, to keep them in peace negotiations. Indeed, the move seizes upon the PA's "security" theme, with the gestures including the removal of checkpoints and transfer of greater control of the West Bank to Ramallah.

Yet all of this may be overshadowed by the news from diplomatic circles who said on Sunday that Israel is considering calling off the meeting with the PA's negotiating team, scheduled to be held in Jericho on Monday, after news of the discussion was leaked to the press. [Editor's Note: The meeting has been cancelled.]

So, before the scheduled high-level meeting in Sharm-e-Sheikh on 14 September, the question is put forth: can the Palestinian Authority's own "security" card, ironically brought into play by its rival Hamas, offer a way forward in talks or will the sticking points over Israeli settlements --- the moratorium on West Bank expansion ends in less than three weeks --- ensure that there is no movement?

The Latest from Iran (5 September): Cracking Down after the Disappointment

1905 GMT: The Story to Watch on Monday. Another rift may be opening up between the President and Parliament....

Ahmadinejad's representatives, who have asked for the withdrawal of the 5th Budget Plan because they do not like the amendments of the Majlis, did not appear in the Coordination Commission on Saturday. MP Mohammad Hassan Abutorabi-Fard was sent to the President's office --- Ahmadinejad is on a tour of Tehran Province --- to convince it to change its line.

So far there has been no movement, and the Coordination Commission has stopped its work.

Peyke Iran notes that, six months after the start of the Iranian year, the 5th Plan has not been implemented.

1900 GMT: The Regime Line. The fervently pro-Government Raja News is repeating the claim of the Revolutionary Guard's Javan that 100 reformists met to plot against Mehdi Karroubi.

1845 GMT: Execution (Sakineh) Watch. Yesterday we reported the claim of Sajad Ghaderzadeh, the son of Sakineh Mohammadi Ashtiani, that his mother had been sentenced to 99 lashes because a photograph of a woman without headscarf --- mistakenly identified as Ashtiani --- appeared in The Times of London. The punishment is added to the death sentence that Ashtiani already faces for adultery.

An unusual development today, as Ashtiani's lawyer, Mohammad Mostafaei, is claiming that Ghaderzadeh was given false information. Mostafaei, who has fled Iran and is now in Norway, says that the story of 99 lashes is untrue.

Ghaderzadeh has appealed to Mostafaei not to make any more comments either on his mother's case or on his father's death.

NEW Iran Feature: An Open Letter to Detained Activist Shiva Nazar Ahari (Vahidmanesh)
NEW Iran Breaking: Uncertainty if Lawyer Nasrine Sotoudeh Arrested
Iran Special: How Do You Analyse a Non-Event? (Lucas)
Iran Overview: “A Small Rally to Make More Enemies” (Shahryar)
Iran Propaganda Special: The Green Sedition Festival
UPDATED Iran Video: The Claimed Attack on Karroubi’s House (2/3 September)
The Latest from Iran (4 September): A Qods Day Failure?

1630 GMT: Sanctions Watch. Bankers and businessmen report that most banks in the United Arab Emirates, a key trading partner and conduit for Iran, have stopped money transfers after the latest round of sanctions.

Dubai-based Iranian businessman Morteza Masoumzadeh, vice president of the Iranian Business Council, said that the latest sanctions have halved trade with Dubai, an important re-export centre for Iranian goods.

A banker with an Emirati bank said that transfers to Iran in dollars and euros are now forbidden, and have become "very difficult, if not impossible, in dirhams," the UAE's currency.

"Transactions by Iranian clients are closely monitored," the banker said, adding that certain activities by Iranian clients, such as transfers to Asia to purchase goods, are sometimes blocked.

"We used to deal with some banks in Tehran, but now it is almost impossible," the banker said.

The Iranian Foreign Ministry on Sunday responded to trouble on another front, as Japan announced it is suspending new oil and gas investments in Iran and freezing the assets of 88 organizations and 24 individuals. Spokesman Ramin Mehmanparast said any country that imposes sanctions on Iran will create problems for their companies, waste their national interests, and pass on business opportunities to their rivals.

Better news for Tehran came with the resumption of gas export to Turkey after 12 days of disruption because of an explosion, thought to be the work of the Kurdish separatist movement PKK, that damaged a major pipeline.

1523 GMT: Political Prisoner Watch. More sentences against youths: an appeals court in Mazandaran in northern Iran has confirmed the prison sentences and lashings for 10 university students.

1520 GMT: The Karroubi Siege (Wasn't Us Edition --- cont.). The head of the Basij militia, Mohammad Reza Naqdi, has blamed the US, Britain, and Zionists for the attack on Mehdi Karroubi's home.

1515 GMT: We have posted updates on the detention of defense attorney Nasrine Sotoudeh and on the regime efforts to blame "Western media" for the disappointment of the Qods Day rally.

1425 GMT: Political Prisoner Watch. Iran's Supreme Court has confirmed the death penalty for Kurdish activist Habibollah Golparipour.

1420 GMT: The Karroubi Siege (Wasn't Us Edition). The Islamic Revolution Guards Corps has issued a statement denying involvement in the attacks on Mehdi Karroubi's home, blaming "rogue elements" for the violence and intimidation.

1415 GMT: Political Prisoner Watch. A day marked by news of detentions and trials of student activists (see 0930 and 1105 GMT). It is reported that Sanandaj Azad University student Azad Kamangar was arrested by intelligence agents two days ago. His whereabouts are unknown.

Kamangar's uncle, Farzad Kamangar, was one of five Iranians executed on 9 May for alleged ties to the Kurdish separatist group PJAK.

1410 GMT: Execution (Sakineh) Watch Update. As the son of Sakineh Mohammadi Ashtiani asks Pope Benedict XVI (see 1220 GMT) to intervene on behalf of his mother, sentenced to death for adultery, the Vatican has issued a statement condemning stoning.

The Vatican's spokesman, the Reverend Federico Lombardi, said the Vatican had not received a formal appeal but was "following the case with attention and interest". He added, "When the Holy See is asked, in an appropriate way, to intervene in humanitarian issues with the authorities of other countries, as it has happened many times in the past, it does so not in a public way, but through its own diplomatic channels."

1220 GMT: Execution (Sakineh) Watch. Peyke Iran reports that Sajad Ghaderzadeh, the son of Sakineh Mohammadi Ashtiani, has appealed to Pope Benedict XVI and the Italian Government to seek clemency for his mother, who is sentenced to death for adultery.

Coincidentally, Keyhan newspaper --- which last week called French First Lady Carla Bruni a "prostitute" and said she should die after she joined the calls for leniency in Ashtiani's case --- has declared that Italian President Silvio Berlusconi, who publicly supported Ashtiani, is a "Mafia leader" and "a symbol of decadence, moral corruption, and sexual addiction".

1120 GMT: Academic Corner. Writing in Haaretz, Zvi Bar'el reports on tensions within Iran's universities. Included in the piece....

*An Iranian academic who writes Bar'el, "We will no longer be able to correspond using the previous e-mail address. I have begun work at Amirkabir University and I am afraid that the supervision of e-mails will be far more stringent," and notes difficulties with resources: "We try to glean whatever we can from the Internet, but the problem starts much earlier, with high-school students. They don't learn anything --- and I'm talking about top students who passed the exams with very high marks."

*The Supreme Leader's plan for the construction of another 1,000 mosques in schools at all levels and the addition of new religious subjects

*The difficulties for graduates in finding suitable employment, with some waiting more than three years to find suitable work.

1105 GMT: Political Prisoner Watch. Reformist politician Mohsen Safaei Farahani, who suffered a heart attack last week in Evin Prison, has been transferred to the Cardiac Clinic in Tehran.

The final court hearing has been held for two student activists, Bahareh Hedayat and Milad Asadi. We await word on further sentencing: in May, Hedayat received a 9 1/2-year prison term and Asadi was given six years.

1100 GMT: Stopping the Lawyers. As we await word on the fate of defense attorney Nasrine Sotoudeh, summoned to court yesterday, and note the general crackdown by the regime, we flash back to a November 2007 article in the Los Angeles Times, "In Iran, A Cadre of Lawyers Takes the Case of Justice".

0930 GMT: Political Prisoner Watch. Tehran’s court of appeals has confirmed the sentencing of Mohammadreza Rashad, a student activist at Azad University, to two years of suspended imprisonment. Rashad was arrested a few days after the demonstrations last December at his home and was held in detention for 3 months.

An appeals court has upheld the two-year sentence of Mohsen Abdi, a student activist at Hamadan’s Bou Ali Sina University. Abdi was also detained just after the Ashura demonstration.

0745 GMT: We have posted an open letter to journalist and activist Shiva Nazar Ahari, facing trial and a possible death penalty, from her colleague Parvaneh Vahidmanesh.

0715 GMT: Parliament and Government. Lost this week, amidst Qods Day and the Karroubi siege, is the news that 13 of 21 ministers in the Ahmadinejad Cabinet have been summoned to the Majlis. The ministers --- in science, education, social welfare, labour, foreign policy, oil, health care, interior, communications, industry, energy, and justice --- will be answering queries in several commissions. A list of 78 questions has already been posted.

0710 GMT: Film Corner. Director Jafar Panahi, detained for three months earlier this year and barred from leaving Iran, tells the US film newspaper Variety by phone, "I have learned something, and that is that I never lose hope. I hope that things will change even tomorrow, or in the next year so that I can start working again."

0645 GMT: Regrouping. A series of items on attempts by some conservatives and principlists to re-establish a common front....

Habibollah Asgarouladi used tough talk, denouncing those who "try to increase tensions everyday" and declaring that "system-breaking reformists have broken all bridges behind them" and "cannot return to the Revolution, Supreme Leader, and people". He added that some had tried to divide the clergy, but the clerics were too clever to accept this.

Asgarouladi capped out his move by saying that the "fitna" (sedition) movement was passing its last days, and the leaders were related to Al Qa'eda.

Other principlists are publicly discussing whether to make approaches to reformists or to focus on the reconstruction of their movement. Emad Afrough summarised that the solution to actual problems is that "the Revolution gets back in the hands of well-founded persons", declaring also that "there is unity in diversity".

0635 GMT: The Battle Within. Khabar Online reveals what occured during a meeting between the President and Mohsen Rezaei, Secretary of the Expediency Council and 2009 Presidential candidate, two months ago.

Khabar asserts that  Ahmadinejad was given nine points of advice. These included strengthening legal institutions, support for private sector, creating a uniform management structure and opposing sanctions, supporting the domestic economy, and supporting relations with neighbouring countries.

If the report is true, this meeting took place around the time that --- according to our sources --- Rezaei was meeting Speaker of Parliament Ali Larijani and key MP Ahmad Tavakoli to discuss the limiting of Ahmadinejad's authority and possibly his replacement.

Rumours of three other meetings with the President have been denied by the Rezaei camp.

0630 GMT: Speaking of Legitimacy. Prominent commentator Babak Dad has praised the letter of Fatemeh Karroubi, Mehdi Karroubi's wife, to the Supreme Leader during the siege of the Karroubi home. He notes that the mere fact that a woman would dare to write to Khamenei is an insult to the regime.

In the letter, Fatemeh Karroubi challenged the Supreme Leader by asking if he condoned the "unethical acts" of the pro-regime crowd around the Karroubi residence.

0625 GMT: The Regime Line. Javan, the newspaper linked to the Revolutionary Guard, has tried another line of attack, claiming that a group of about 100 members of the reformist Islamic Iran Participation Front members staged a rally against Mehdi Karroubi.

0620 GMT: Speaking of Legitimacy. The Palestinian Authority has struck back at Mahmoud Ahmadinejad's denunciation, in his Qods Day address on Friday, of the Israel-Palestinian direct talks.

It did so by going to the heart of Ahmadinejad's claim of authority. A spokesman said, "He who does not represent the Iranian people, who forged elections and who suppresses the Iranian people and stole the authority, is not entitled to talk about Palestine, or the President of Palestine."

0615 GMT: The Karroubi Siege and the Supreme Leader. This extract from an interview of Mehdi Karroubi's son Hossein, conducted by the International Campaign for Human Rights in Iran, is striking: “My father believes the attackers were organized by the security forces and government. There is no point in filing a lawsuit against these actions, as we know it’s not going to go anywhere. The attackers have complete impunity.”

0610 GMT: Political Prisoner Watch. An Iranian activist, drawing from RAHANA, has updated the list of known political prisoners, posting 591 names.

0600 GMT: A busier than expected Saturday, with lots of follow-up on the apparent disappointment for the regime of its Qods Day show and some signs of quiet satisfaction amongst the opposition. One activist asserted, "The regime was heavily duped by the Greens.They "jaa khaali daadand" (sidestepped) and left Ahmadinejad alone with his misery."

The twist on Saturday, however, is that the Government was not ready to be left alone with misery. Instead, the evidence was of a follow-up --- as has happened on other occasions --- of intimidation. While more information came in of last week's attacks on Mehdi Karroubi's home and the Qoba Mosque in Shiraz, there was more propaganda against "enemies" and detentions.

Perhaps the most significant development was the widening of the campaign against defence lawyers with the summoning of Nasrine Sotoudeh to court. She was held overnight, and we'll be looking today to see if she has been arrested.

We're also keeping an eye out for the outcome of the trial of prominent journalist and activist Shiva Nazar Ahari, which was supposed to take place yesterday.

One correction: last night we reported a demonstration of several hundred people in Sari in Mazandaran province in northern Iran was over discrimination in university admissions. It was actually over discrimination in alllocation of jobs.

Israel-Palestine: An Interview with Hamas Leader Khaled Meshaal (Narwani)

On the eve of this week's direct talks between the Israeli Government and the Palestinian Authority, Sharmine Narwani spoke with Hamas political director Khaled Meshaal in Damascus:

SN: The peace process has been going on for 19 years -- what in your view has been the major reason for its failure thus far?

KM: Three reasons. First of all, Israel does not want peace. They talk about peace but they are not ready to pay the price of peace. The second reason is that the Palestinian negotiator does not have strong cards in his hand to push the peace process forward. The third reason is that the international community does not have the capability or the desire to push Israel towards peace.

Israel-Palestine Analysis: The Lopsided Table at the Direct Talks (Agha/Malley)

SN: On Thursday, direct talks begin again between the Palestinian Authority (PA) and Israel -- the US has worked hard to bring this about. What are your thoughts on this round, the US role, and prospects for a breakthrough?

KM: These negotiations are taking place for American and Israeli considerations, calculations and interests only. There are no interests at all for us as Palestinians or Arabs. That's why the negotiations can only be conducted under American orders, threats, and pressure exerted on the PA and some Arab countries.

The negotiations are neither supported nationally nor are they perceived as legitimate by the authoritative Palestinian institutions. They are rejected by most of the Palestinian factions, powers, personalities, elites, and regular people -- that is why these "peace talks" are destined for failure.

This represents a perfect example of how the US administration deals with the Arab-Israeli conflict --- how American policy appears to be based on temporary troubleshooting instead of working toward finding a real and lasting solution.

Consecutive US administrations have adopted this same policy of "managing conflict" instead of "resolving conflict". This can be useful for American tactical and short-term purposes, but it is very dangerous on the long-term and the strategic levels. This approach will ultimately prove catastrophic for the region.

SN: There is debate about whether Hamas accepts the premise of a two-state solution -- your language seems often vague and heavily nuanced. I want to ask if you could clarify, but I am also curious as to whether it is even worth accepting a two-state solution today when there has been so much land confiscation and settlement activity by Israel in the West Bank and East Jerusalem?

KM: Hamas does accept a Palestinian state on the lines of 1967 --- and does not accept the two-state solution.

SN: What is the difference between the two?

KM: There is big difference between these two. I am a Palestinian. I am a Palestinian leader. I am concerned with accomplishing what the Palestinian people are looking for --- which is to get rid of the occupation, attain liberation and freedom, and establish the Palestinian state on the lines of 1967. Talking about Israel is not relevant to me --- I am not concerned about it. It is an occupying state, and I am the victim. I am the victim of the occupation; I am not concerned with giving legitimacy to this occupying country. The international community can deal with this (Israeli) state; I am concerned with the Palestinian people. I am as a Palestinian concerned with establishing the Palestinian state only.

SN: Can you clarify further? As a Palestinian leader of the Resistance you have to give people an idea of what you aspire to -- and how you expect to attain it?

KM: For us, the 20 years of experience with these peace negotiations --- and the failure of it --- very much convinces us today that the legitimate rights of Palestinians will be only be gained by snatching them, not by being gifted with them at the negotiating table. Neither Netanyahu nor any other Israeli leader will ever simply gift us a Palestinian state. The Palestinian Authority has watered down all its demands and is merely asking for a frame of reference to the 1967 borders in negotiations, but Netanyahu has repeatedly refused to accept even this most basic premise for peace. Nor will America or the international community gift us with a state --- we have to depend on ourselves and help ourselves.

As a Palestinian leader, I tell my people that the Palestinian state and Palestinian rights will not be accomplished through this peace process --- but it will be accomplished by force, and it will be accomplished by resistance. I tell them that through this bitter experience of long negotiations with the Israelis, we got nothing -- we could not even get the 1967 solution. I tell them the only option in front of us today is to take this by force and by resistance. And the Palestinian people today realize this -- yes, it has a steep price, but there is no other option for the Palestinian people. The Palestinian people tried the peace process option but the result was nothing.

SN: While Hamas has not been a participant in the peace process, many of the Arab nations have pushed for these very negotiations. So then why have they persisted with these talks if most of them think the process is futile?

KM: This bloc (of Arab nations) which has pursued the peace process strategy with Israel is ready to continue with habitual and continuous negotiations without even a single outcome. They will continue with this peace process with Israel because they are not ready to turn to the other option.

SN: And the other option is?

KM: The confrontation of Israel. The other option is resistance --- which will gain the strong cards to pressurize Israel. In short, a weak party (this Arab bloc) will adopt a course of action though he knows that he will see no positive outcome, as he does not have his own strength and has no strong cards. At the same time there is also a great pressure on The Resistance from America and Israel in order to prevent our success. If the peace process is blocked without hope, there is no option for the Palestinian people -- for the people of the region -- but the option of continuing with resistance, even though they realize the pressure that will come, and even though they realize there is a conspiracy against The Resistance.

SN: Well one of these Arab nations that keeps pushing for the peace process is Egypt. Egypt is also a party to the siege of Gaza. And yet Hamas accepts the decision of the Arab League to choose Egypt to mediate reconciliation between Fatah and Hamas. Why did Hamas accept Egypt as a mediator?

KM: There is no doubt we have differences with Egypt regarding many of its political positions and decisions. But the reasons for Egypt's mediation of reconciliation talks are different. The first is that Egypt is a major country in the region --- it is not easy for other nations to just bypass them on any issue. The second reason goes back to geopolitics and the history between Palestine and Egypt, which make Egypt more vested in the Palestinian issue than virtually any other country.

The third reason is that the reconciliation itself consists of two parties --- Hamas and Fatah. No mediator in this reconciliation effort will succeed unless both groups agree to their participation. Fatah simply refuses the intervention of any other Arab country as this will anger Egypt. We in Hamas do not refuse Egypt as the caretaker for the mediation -- what is important for us is not whether we have X or Y as the mediator, what is important to us is that reconciliation itself has to be advanced in a correct way. And it was evident in the last round that the main impediment to this reconciliation is American interference.

SN: But then does reconciliation become impossible if Egyptians always cave to US pressure?

KM: Yes, there is an American pressure where Egypt is concerned. Mahmoud Abbas is also acquiescing to that same pressure and this undoubtedly makes the reconciliation more difficult.

SN: Why, in your view, does the West not engage directly with Hamas and make you a partner to the solution? Surely the only path to a comprehensive peace is a solution agreed upon by all major parties to a conflict?

KM: The West is trying --- either because it lacks the capability or desire --- to get somewhere in the region through pressuring the Palestinian side, and not pressuring the Israeli side. The Americans are still convinced today that if they continue pressuring the Palestinian and Arab negotiators --- and not get Israel angry --- they can reach some breakthrough through this process. The time is coming when they will reach a dead-end because the Palestinian people will simply not agree to any solution which will not provide for all their legitimate rights.

SN: Well some Palestinians would. It appears that the Palestinian Authority is prepared to strike a deal that does not address the Palestinian refugees' right of return. But could that be a real solution?

KM: I am talking about a majority of Palestinians --- not the few. The Palestinian Authority cannot reach a solution with the Israelis without the approval of the majority. Any rightful representatives of the people will advocate for, and not disregard, the Palestinian people's ambitions and legitimate rights. In short, the West will discover sooner or later that any solution that will not fulfill the rights of the Palestinian people will not be successful and will not be implemented. In that very particular instance, when they finally decide to respect the desires and ambitions of the Palestinian people, they will decide to engage with the Hamas movement.

To clarify... Though we are open to them, the key for the success of any solution is not through the West or the Americans --- we believe that the key to success will come through pursuing our national rights. The change will be made from within the region --- whether America is satisfied or not --- because anyone who is awaiting change from the West today will not get any change.

SN: There are rumors that Hamas has been secretly talking to US officials for about two years --- is there any truth to this?

KM: We don't have any interest in concealing official meetings if they take place. Essentially speaking, there are no official or direct talks with the US administration, except for some meetings that happened at the side of some conference in Doha with low-profile individuals, and we do not consider these direct or official talks with the administration.

But we do consider some of these meetings as indirect talks --- we know very well that some non-US officials we meet with report to the administration. And yes, we have met some former Democrat and Republican officials, and we know that they too report to the administration. We are interested in meeting with the Americans and the West, but we do not beg for these meetings and we are not in a hurry.