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CNN LATE EDITION WITH WOLF BLITZER

Special Edition: The Best of 2006

Aired December 24, 2006 - 11:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, HOST: It's 11:00 a.m. in Washington, 8:00 a.m. in Los Angeles, 4:00 p.m. in London, and 7:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for this special "Late Edition" -- the best of 2006.
We'll get to our interviews with the year's top newsmakers, beginning with President Bush, in just a few minutes.

But first, let's get a quick check of what's in the news right now.

(NEWSBREAK)

BLITZER: Iraq endured a year of rising sectarian violence and brutal insurgent activity. Many are now calling it a full-scale civil war. With both politicians and the American public growing tired and increasingly angry, President Bush says there's still time to find what he calls a new way forward. We expect him to reveal a new plan early in the new year.

This year, I spoke with the president in September, and he told me history will look back favorably on the war.

(BEGIN VIDEOTAPE)

BLITZER: Let's move on and talk a little bit about Iraq...

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Sure.

BLITZER: ... because this is a huge, huge issue, as you know, for the American public. A lot of concern that perhaps they are on the verge of a civil war, if not already a civil war.

BUSH: Yes.

BLITZER: I'll read to you what Kofi Annan said on Monday. He said, "If current patterns of alienation and violence persist much further, there is a grave danger the Iraqi state will break down, possibly in the midst of a full-scale civil war."

Is this what the American people bought into?

BUSH: You know, it's interesting you quoted Kofi. I'd rather quote the people on the ground who are very close to the situation, who live it day by day, our ambassador, or General Casey. I ask this question all the time, "Tell me what it's like there." And this notion that we are in civil war is just not true, according to them. These are people that live the issue.

BLITZER: We see these horrible...

BUSH: Of course you do.

BLITZER: ... bodies showing up, torture, mutilation.

BUSH: Yes.

BLITZER: The Shia and the Sunni, the Iranians apparently having a negative role. Of course, Al Qaeda in Iraq still operating.

BUSH: Yes, you see it on TV. And that's the -- that's the power of an enemy that is willing to kill innocent people. But there is also an unbelievable will and resiliency by the Iraqi people.

Twelve million people voted last December. Admittedly, it seems like a decade ago. I like to tell people when the final history is written on Iraq, it will look like just a comma, because there is -- my point is, there is a strong will for democracy.

These people want a unity government. The unity government is functioning.

I'm impressed by President Maliki. I've talked to him. I've seen the decision-making process that he's put in place. The Iraqi army is still recruiting and training.

BLITZER: But you weren't upset when he went to Tehran and gave a big hug and a kiss to Ahmadinejad.

BUSH: Excuse me for a minute. I was on a brilliant point, as you know. The Iraqi government and the Iraqi military is committed to keeping this country together. And so, therefore, I reject the notion that this country's in civil war based upon experts, not based upon people who are speculating.

I fully recognize it's still dangerous and there's more work to do. The enemy has got the capacity to get on your TV screens by killing innocent people, and that should speak volumes to the American people about the nature of these people we face.

BLITZER: The visit -- the visit from Nouri al-Maliki to Iran ...

BUSH: To Iran.

BLITZER: ... that was -- that was a picture that -- a lot of Americans saw that picture, big hug, big kiss, and they said, hey, what's going on here?

BUSH: But wait a minute. What's going on here is you've got the president of a sovereign nation going to a neighbor, making it clear to the neighbor to stop meddling with their new democracy, that he would expect there to be support of this new government and not undermining the new government. This is a man who is dedicated and committed to a unity government. He has taken great risks to advance the cause of peace and unity is his country, and so...

BLITZER: So the bottom line, you have confidence in him? Because a lot of other people are beginning to lose confidence.

BUSH: Yes. No, I have -- I don't only have confidence in him, but General Casey and, again, our ambassador. That's how I learn it.

I can't learn it -- I frankly can't learn it from your newscasts. What I've got to learn it from is people who are there on the ground.

And so I ask them all the time, "How are things going? Give me the decision-making process of Prime Minister Maliki. Is he growing in the job?"

The guy's been there for about 100 days, and I am impressed by his -- his strength of character.

BLITZER: I woke up in New York like you did this morning. I read...

BUSH: And what are you reading there?

BLITZER: ... the "New York Times," there's a paragraph in there -- I'll read it to you -- about your dad's former secretary of state, James Baker.

"In his 1995 memoir, Mr. Baker said he opposed ousting Saddam Hussein in the Persian Gulf War in 1991 because he feared that such action might lead to an Iraqi civil war, to criticism from many of our allies, and to an eventual loss of American support for an occupation."

BUSH: Yes. Yes. He -- he was writing before September the 11th, 2001, and the world changed that day, Wolf.

BLITZER: But Iraq had nothing to do with 9/11.

BUSH: Excuse me for a minute, please.

The world changed that day because we had to deal with threats. No question Saddam Hussein did not order the attacks.

On the other hand, Saddam Hussein was viewed as a threat by the Congress, by the United Nations, and by the United States administration. And so James Baker was writing before the world changed.

And we took out Saddam Hussein because he was viewed as a threat. He was a state sponsor of terror. He had used weapons of mass destruction. He had invaded his neighbors.

The decision was the right decision. And now the question is, will this country and our coalition partners have the will to support this new government, a democracy in the heart of the Middle East?

BLITZER: You know, you were thinking of dealing with Saddam Hussein long before 9/11.

BUSH: Well, I wasn't in office long before 9/11.

BLITZER: No, let me remind you...

BUSH: Wait a minute. I wasn't in office that much longer.

BLITZER: I'm going to remind you of an interview you and I did...

BUSH: It was 9/11/2001 and I swore in in January of 2001.

BLITZER: But when you were a candidate for president -- you were still the governor of Texas -- you and I sat down in Iowa...

BUSH: Right.

BLITZER: ... just before the Iowa caucus, and we had this exchange.

Listen.

(BEGIN VIDEO CLIP)

BUSH: We shouldn't be sending mixed signals. And if any time I found that the Iraqis were developing weapons of mass destruction, they wouldn't exist anymore.

BLITZER: Who wouldn't exist anymore? The weapons wouldn't exist...

BUSH: The weapons of mass destruction, yes. And I'm not going to -- they just need to hear that from a potential president. If we catch them in violation of the agreement, if we in any way, shape or form find out that they're developing weapons of mass destruction, that there will be action taken. And they can just guess what that action might be.

(END VIDEO CLIP)

BLITZER: The point though being that -- at least to my mind -- the weapons of mass destruction issue, in your mind, even as a candidate running for president, was a trigger potentially that could lead to war.

BUSH: Well, of course Saddam -- I viewed Saddam Hussein for what he was, a threat. He was declared a state sponsor of terror, Wolf, by previous administrations.

BLITZER: But there are other countries that have been declared state sponsors of terror, like North Korea, like Syria, Cuba. You don't go to war against them. BUSH: Well, North Korea hadn't invaded its neighbors. North Korea, you know, hadn't made declarations of intent. North Korea is relatively isolated compared to Iraq.

Every threat must be taken seriously and every threat must be dealt with in different fashion. I strongly stand by my decision to remove Saddam Hussein.

BLITZER: And you don't look back with any regrets?

BUSH: I regret when people lose lives. But -- you know, and presidents don't get to do do-overs. But I believe that the decision was the right decision. And now we've got to help this young democracy survive.

And what's interesting is extremists and radicals aim to destroy young democracies, whether it be Hezbollah, or whether it be al Qaeda, who you mentioned, in Iraq. And that's the real challenge of this -- of this century. It's a challenge between moderation and reform versus extremism and radicalism. Those extremists and radicals are willing to use terror and murder as a weapon to achieve their objectives.

(END VIDEOTAPE)

BLITZER: President Bush includes the Iranian president, Mahmoud Ahmadinejad, on that list of extremists. Here is what Mr. Bush had to say about that.

(BEGIN VIDEOTAPE)

BLITZER: You're here in New York. The president of Iran is here in New York. You have a chance -- I don't know if you still have a chance, but you had a chance to meet with him. Given the stakes involved -- a nuclear confrontation -- what do you have to lose by sitting down with Mahmoud Ahmadinejad?

BUSH: Our position is very clear to the Iranians that if they want to sit down with American officials that they first must verifiably suspend their enrichment program. They know our position, the world knows our position, and I clarified it at the United Nations over the past couple of days.

BLITZER: But if it would help -- if it would help to sit down, talk to them and try to convince them. You know, there have been other moments when great leaders have made that major decision, have a breakthrough -- Nixon going to China, Sadat going to Jerusalem. What would be wrong to just sit down with them and tell them, you know what, here are the options before you?

BUSH: Yes, well, he knows the options before him. I've made that very clear. Secondly, Wolf, in order for there to be effective diplomacy, you can't keep changing your word. At an important moment in these negotiations with the EU3 and Iran, we made it clear we would come to the table, but we would come to the table only if they verifiably suspended their enrichment program. And the reason that's important, that they verifiably suspend, is because we don't want them to have the technologies necessary to be able to build a nuclear weapon. A nuclear weapon in the hands of Iran in the middle of the Middle East would be a very destabilizing and troubling occurrence.

BLITZER: India and Pakistan already have a nuclear weapon. Israel has a nuclear weapon. Why would it be so bad if this Iranian regime had a nuclear weapon?

BUSH: This Iranian regime is -- promotes militias like Hezbollah to create instability. This Iranian regime has made it abundantly clear that they would like to destroy Israel, who is our ally.

BLITZER: Do you think they would drop a bomb or launch a missile on Israel?

BUSH: Wolf, my judgment is you've got to take everybody's word seriously in this world. Again, you can't just hope for the best. You've got to assume that the leader, when he says that he would like to destroy Israel, means what he says. If you take -- if you say, well, gosh, maybe he doesn't mean it, and you turn out to be wrong, you have not done your duty as a world leader.

BLITZER: So you take him seriously at that?

BUSH: Absolutely I take him seriously, just like I take al Qaeda seriously when they say they're going to attack us again, just like I take these extremists seriously when they say they're trying to disrupt democracies.

BLITZER: George Voinovich, the Republican senator from Ohio, has compared him to Hitler.

BUSH: Yes, you know, I mean, people have got strong opinions about him, and I can understand why. He's a -- look, Olmert -- Prime Minister Olmert of Israel reaches out to President Abbas of the Palestinian territory to try to help establish a democracy, and there's an unprovoked attack by Hezbollah on Israel.

Hezbollah's funded and armed by Iran. Iran wants to stop the advance of democracy and peace, and I can understand why people have strong opinions about the Iranian regime. Our goal is to have a diplomatic solution, starting with convincing the Iranians that they either face isolation and possible sanctions if they don't give up their weapons programs.

BLITZER: The foreign minister of Israel told me the other day that they believe -- the Israelis -- there's only a few months left, a few months of a window before they get to a point where there's literally a point of no return and they've learned how to enrich uranium and effectively could go forward and build a bomb. How much time does the world have to resolve this?

BUSH: First, if I were the Israeli foreign minister, I'd be deeply concerned about somebody in my neighborhood whose stated objective was the destruction of my country, and the desire of that country to end up with the capacity to do so. And so I can understand her concerns. I'm not going to discuss with you our intelligence on the subject, but time is of the essence.

BLITZER: Is it a few months though?

BUSH: Well, time is of the essence, and that's why here at the United Nations I spoke with our allies. Condi Rice met last night with foreign ministers of the EU3 and Russia, and I think China was there as well, urging them to follow through on the resolution we got passed at the United Nations Security Council.

I'm concerned that Iran is trying to stall, and to try to buy time, and therefore it seems like a smart policy is to push this issue along as hard as we can and we are..

BLITZER: Because a lot of experts say short of regime change in Iran, or military action, there's no way this leader in Tehran is going to give up that nuclear ambition.

BUSH: We'll find out. The country can face isolation. They could face, you know, sanctions, or they can choose a better course. The choice is the Iranian leader's choice. I spoke yesterday at the U.N. and I spoke directly to the Iranian people.

It's important for the Iranian people to know this, that we respect their heritage, we respect their history, we respect their tradition. We believe this can be a great nation if the government, you know, relies upon the talents of its people and encourages and nurtures those talents.

BLITZER: Is there anything you heard from him in his address last night or your analysts that was encouraging?

BUSH: Not really.

(END VIDEOTAPE)

BLITZER: At year's end, perhaps a slight shift in Iran. So- called moderate conservatives, angry with President Ahmadinejad's hard-line policies, swept local elections.

Just ahead, much more of this year's best moments on "Late Edition." Democrats were increasingly critical of President Bush's Iraq policies, calling for U.S. troops to come home. We'll hear from the party's top leaders.

Also, my no-holds-barred conversation with Lynne Cheney, the wife of the vice president. You won't want to miss our war of words.

Plus, actor and activist George Clooney uses his star power to bring attention to the tragedy in Sudan.

And for our North American viewers, John Roberts has a special year-end program: "The Year at War," that's coming at 1:00 p.m. Eastern, right after "Late Edition." We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to a special year-end "Late Edition."

Throughout 2006, foreign policy -- specifically Iraq -- was a political battleground. At the forefront, the question of U.S. troops. Some 3,000 servicemen and women have been killed, and more than 22,000 wounded since the war started more than three and a half years ago. Are more troops needed to get the job done now? Or is it time for them to simply go home? Former Democratic presidential candidate Senator John Kerry and Democratic National Committee Chairman Howard Dean were two of the top Democrats to weigh in on that.

(BEGIN VIDEOTAPE)

SEN. JOHN KERRY (D), MASSACHUSETTS: In the larger context of our foreign policy and interests in the region, the fact is that they have made a mess of the policy in Iraq.

They didn't do the planning. They didn't put in enough troops. They didn't keep the Army intact. They didn't keep a civil structure. Every mistake possible has been made. And there's been no accountability for it.

Now, I believe that Iraq is one of the great foreign policy disasters of all of American foreign policy history. They have over- extended our country. They have lost us allies.

They've taken their eye off of Osama bin Laden. They've reduced our ability to forge a legitimate coalition and other efforts to chase terrorists. They have hurt the United States's moral authority in the world, with Abu Ghraib, with Guantanamo.

I mean, this is an enormous catastrophe for American legitimate interests in foreign policy.

And the fact is that what Senator Rockefeller is saying is that, when you measure that against the boxed-in, completely held down Saddam Hussein, you've got to ask a question.

Now, look, I don't think it's worthwhile going backwards, Wolf. I think what we have to do is say, what do we do now?

How do we get our troops out of there?

How do we protect American interests?

BLITZER: Now, let me press on this point, is Iraq already in a civil war?

KERRY: Yes.

BLITZER: Because I interviewed the prime minister, two weeks ago exactly today, Nouri al-Maliki, and he said this. Listen to what he told me. I'll read it to you.

"We're not in a civil war. In Iraq we'll never be in a civil war... the violence is in decrease and our security ability is increasing, and I want to assure he who loves Iraq, that is will never be in a civil war."

Is he wrong?

KERRY: By most standards by which experts look at what is a civil war, the answer is yes, he is wrong.

In most civil wars in history, the average number of people killed is around 18,000. And it is violence, internally, of one group against another for one reason or another.

All those reasons are there and all that violence is there. And more deaths are there. The fact is there is a low-grade civil war going on.

Has it broken out into a full-scale, entire country engulfed?

No, it hasn't. And it is possible that it won't.

BLITZER: Are you supporting a flat timetable for U.S. troop withdrawal?

KERRY: I support it, Wolf, because I believe it is the way to pressure the Iraqis to understand the needs to coming together to assume responsibility for themselves. And every time the president says we're there for as long as it takes or the next president is going to make the decision about this, what he's doing is saying to the Iraqis who are jockeying for position and power that they have an endless amount of time within which to do that. The United States is going to be there and be their crutch.

HOWARD DEAN, DNC CHAIRMAN: I think the American people have been lied to by this group just one too many times. Here's the president's and the Republicans' record on defense. The president came in and identified three countries as a problem. Iraq, Iran and Korea.

Six years later, we're in the middle of a civil war in Iraq we can't get out of. We're in the middle of a testing program by North Korea for nuclear weapons. Not one additional nuclear weapon was added when Bill Clinton was president. But now George Bush comes along, and they're testing nuclear weapons, and Iran is about to get nuclear weapons. Osama bin Laden, who is responsible for the murder of 3,000 Americans, is at large.

I would argue that the Democrats are likely to be much stronger own defense than Republicans. I think they're weak on defense. They talk tough to scare the American people at election time, and in the meantime they don't do anything.

Look at the U.N. resolution. Big thing I saw on all the talk shows this morning, Josh Bolten, oh what a great U.N. resolution. The Chinese have already, before the ink is dry, said they're not going to search any North Korean trucks going into North Korea.

This a toothless administration. They have not defended the United States of America, and we need a tough and smart defense policy, not just talk tough at election time.

BLITZER: John Bolton, the U.S. ambassador to the U.N., not Josh Bolten. Josh Bolten...

DEAN: Oh, pardon me.

BLITZER: ... is the White House chief of staff. They are not related...

DEAN: That's true.

BLITZER: ... although their last name is the same. I want you, though, to hear what the president said this week about the Democrats also harping on this issue of national security.

(BEGIN VIDEO CLIP)

BUSH: There's a difference of opinion in Washington, if you listen closely to some of the leaders of the Democrat Party, it sounds like, it sounds like they think the best way to protect the American people is wait until we're attacked again. That's not the way it's going to be under my administration.

(END VIDEO CLIP)

BLITZER: Is that the strategy of the Democratic Party, wait to be attacked...

DEAN: Of course not. Of course not.

BLITZER: ... and then simply respond?

DEAN: That's George Bush having been basically incompetent in managing the budget, incompetent in managing natural disasters, incompetent in -- his party being incompetent in managing attacks on children -- or seductions of children in the Congress. And now incompetent in defending America.

They talk big at election time. They don't deliver. What we want is the policy of Harry Truman, Franklin Roosevelt and Jack Kennedy: Be tough on defense, but be smart. Be able to tell the difference. And listen to -- between a situation where we can win and a situation we shouldn't get involved in, such as a civil war in Iraq.

Listen to our military, which nobody in the administration did other than Colin Powell, who was fired for his trouble. We can do better than this, and we will do better than what's been going on in the last six years, both in defending America, in having a real economy where 80 percent of the Americans benefit, not get hurt. And in responding to natural disasters the way Bill Clinton and James Lee Witt would have, had they been in power when Hurricane Katrina hit.

(END VIDEOTAPE)

BLITZER: As it turned out, the 2006 election turned largely on the question of Iraq, and Democrats swept to power in both the House and the Senate. Shortly after the election, I spoke to Representative Nancy Pelosi, who will become the speaker of the House in January, about her working relationship with the White House.

(BEGIN VIDEOTAPE)

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: I think, in the interest of our national security and protecting the American people and bringing stability to the region and to honoring our commitment to our troops, we need a different approach.

And extending the hand of partnership to the president, not partisanship but partnership, to say, let's work together to come to some common ground where we can solve the problem in Iraq.

BLITZER: Can you work with this president?

Because he was asked, at the news conference earlier today, about some things you've said of him. Our Suzanne Malveaux asked a very pointed question of the president, quoting some of the remarks, "a liar," "misleading the country."

PELOSI: I never called the president a liar. I never called him that.

BLITZER: But you have a problem working with this president. Is all that in the past now?

Are you ready to start afresh in working as the incoming speaker?

PELOSI: Absolutely. You know, the campaign is over. Democrats are ready to lead, prepared to govern, and absolutely willing to work in a bipartisan way, in partnership, not partisanship, with the Republicans in the Congress and with the president of the United States.

BLITZER: The vice president said, the other day "... the president has made clear what his objective is. It's victory in Iraq and full speed ahead on that basis, and that's exactly what we're going to do."

Do you consider that statement -- that was pre-election -- still operable?

PELOSI: I would say to the vice president that it's a little too late for full speed ahead. We've been in Iraq 3 1/2 years, longer than the U.S. was in Europe during World War II. So "full speed ahead" -- I don't think so.

Right now, again, we need a new direction that brings stability to the region and makes the American people safer.

BLITZER: The power that you will have as the majority is subpoena power, when you conduct your investigations, your oversight.

You said on "Meet the Press," back on May 7, "Well, we will have subpoena power. Investigation does not equate to impeachment. Investigation is the requirement of Congress. It's about checks and balances."

Tell us how you plan on pursuing -- using this subpoena power.

PELOSI: Well, first of all, others have said to us, do the Democrats want to get even now that we're in the majority?

We're not about wanting to get even. What we want to do is to help the American people get ahead, not to get even with the Republicans.

And so as we go forward with our hearing process, which is the normal checks and balance responsibility of Congress, it will be to what is in furtherance of passing legislation that makes the policy better, that improves the lives of the American people. In order to make important decisions, you have to base them on facts. That's the only way your judgment...

BLITZER: So you'll use that subpoena power as appropriate.

PELOSI: Well, it's not a question -- well, subpoena power is a last resort. We would hope that there would be cooperation from the executive branch in terms of investigating the prewar intelligence. I don't know what those -- those decisions will be made by our caucus with the wisdom of the committees of jurisdiction. They may or may not be a priority.

We're a brand new caucus. We have many new excellent members coming in, and we will establish our priorities together.

(END VIDEOTAPE)

BLITZER: Nancy Pelosi, who will become the first woman speaker of the House of Representatives.

There's much more ahead on our special "Late Edition." I'll take you into the war zone as Hezbollah's deadly Katyusha rockets reigned down on Israel.

How close is Iran to a nuclear bomb? The view from Israel's prime minister.

But up next, a quick check on what's in the news right now. This is a special "Late Edition:" The best of 2006.

(COMMERCIAL BREAK)

BLITZER: Welcome back to our special "Late Edition." I'm Wolf Blitzer in Washington.

The summer of 2006 saw a bitter war between Hezbollah in Lebanon and Israel. It was spared by Hezbollah's cross-border kidnapping of two Israeli soldiers. As Israel tried to root out Hezbollah, southern Lebanon was caught in the crossfire. A lot of it was destroyed. More than a million Lebanese left at least temporarily homeless.

Israel says Hezbollah used innocent civilians as cover to launch rockets, and that 157 Israelis were killed in the fighting.

A U.N.-brokered cease-fire finally stopped the violence. I reported on the war from Jerusalem, and had some exclusive access to the Israeli military and the challenges it faced.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Take a close look at this extraordinary video provided to CNN by the Israeli navy. A seemingly innocent jet- skier races toward Israeli shores, ignoring repeated orders to stop. As a result, he's shot and killed. A senior Israeli navy officer says the jet-ski was loaded with explosives.

And check out this video. An Israeli naval vessel intercepts this small boat with two men on board. The same Israeli navy officer says, they are suicide bombers. The Israeli sailors survive, but are seriously injured.

Finally, take a look at this deflated raft the Israeli navy comes upon. Israeli sailors open machine gun fire to make sure there's nothing hidden inside. But, under fire, it explodes.

Here's how it looked from a second Israeli camera on shore.

The senior Israeli navy officer tells CNN there have been 80 maritime terror plots that Israel has detected over the years. Most have been foiled.

Still, Israel has established an elaborate network of early- warning devices to monitor threats from the sea, including the nightmare of a cargo ship loaded with explosives.

And there's now heightened fear involving the Katyusha rockets that Hezbollah has been firing into northern Israel.

RON BEN-YISHAI, ISRAELI DEFENSE ANALYST: The very same rockets that hit, say, Nahariya these days can be launched from the sea as easy, and even easier, than they are launched from -- from the ground. They have a prolonged-range Katyusha rockets, range of about 30 kilometers, that can be launched from very deep in the sea, way beyond the Israeli territorial water.

BLITZER (on camera): We're here in Ashdod, Israel's major port along the Mediterranean. You can see the facilities right behind me -- waiting off the coast here, right off the beach, a few ships. They're waiting to bring some cargo into Ashdod -- Ashdod, all of a sudden, becoming even more important now that Haifa, the big port up in the north, has been effectively shut down because of the rockets coming in from Lebanon, from Hezbollah.

If you go down a little bit further, down this beach is Ashkelon, another big Israeli town. That town, earlier today, saw two Israeli kids who were injured as a result of Palestinian Qassam rockets landing in Ashkelon, landing in a park.

Right down the road, only a few miles down from where I -- I am right now, is Gaza.

(voice-over): The bottom line for Israel, the threats come in all sizes and from all directions.

(END VIDEOTAPE)

BLITZER: We were also able to get an entirely different perspective as we took to the skies over Israel.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): We fly north at a relatively low level along Israel's Mediterranean coast line, toward Haifa and beyond.

The further north we go, the less traffic we see along the coastal highway, and that's for good reason, since Hezbollah rockets have rained down over northern Israel by the hundreds for more than two weeks. Many Israeli citizens living in those areas have relocated for their own safety.

Haifa, a city of some 300,000 under normal circumstances, is drained. We fly over warehouses, factories, and garages, including one struck by a rocket the other day, killing eight people working inside.

The huge port area, usually full of cargo ships from around the world, is largely empty. So are the beautiful Mediterranean beaches nearby.

UNIDENTIFIED MALE: The beach is empty. No traffic. Very low traffic in the streets. No people out. The city has no life. This is the third largest city in Israel.

On the right is the beach of Nahariya. It is empty. This city makes a living from tourism. There's nothing there now. A ghost town.

BLITZER: We can easily see Lebanon, though we don't fly there. We stay completely on the Israeli side.

As destructive as this side of the border is, I know it's a lot more destructive on the other, the result of heavy Israeli shelling and air strikes. General Nehushatan knows that as well.

GEN. IDO NEHUSHATAN, ISRAELI AIR FORCE: This is our challenge. How to give these people security. How can we restore life here? Here and on the other side.

(END VIDEOTAPE)

BLITZER: Israelis are also worried about another nearby neighbor. How close is Iran to a nuclear weapon? Israel's Prime Minister Ehud Olmert on the danger to the region.

And as the Taliban return to Afghanistan, we ask the Afghan and Pakistani presidents why they weren't stopped. All coming up on a special "Late Edition," the best of 2006.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Throughout 2006, the possibility of Iran's acquiring nuclear weapons was a major international concern. The Iranian president, Mahmoud Ahmadinejad, repeatedly defied international inspectors.

I asked Israel's prime minister, Ehud Olmert, about his country's options.

(COMMERCIAL BREAK)

EHUD OLMERT, ISRAELI PRIME MINISTER: The issue of Iran is a very serious one. And the question is not when, technically, they will be in possession of nuclear bomb. The question is when will they cross the technological line that will allow them at any given time, within six or eight months, to have nuclear bomb?

And this technological threshold is nearer than we anticipated before. This is because they are already engaged very seriously in enrichment. So in other words, we are close enough to the possible possession of a nuclear weapon by the most extreme fundamentalist government, which talks openly and publicly about the wiping out of the state of Israel. That's where we are.

BLITZER: Well, what does that mean in terms of the time line? Do you believe it's months away, years away from crossing that technological threshold, as you say?

OLMERT: The technological threshold is very close. It can be measured by months rather than years.

BLITZER: So what does that mean from Israel's perspective? A lot of us remember the Israeli action in 1981 against the Iraqi nuclear reactor, the facility at Osirak. You remember that Israeli strike. Is Israel planning a preemptive strike against Iran's nuclear facilities?

OLMERT: At that time, Wolf, you'll remember that most of the international community, including your country, were entirely unaware of the danger of Iraq and of the possible nuclear weapons possessed by Iraq. And therefore, at that time, when we sensed that the international community is not aware, we were left with no other option but to attack Iraq ourselves.

Now there is an entirely different situation. America and Europe are leading this international effort. It is now on the agenda of the United Nations Security Council, and many countries are involved in trying to stop this, and I hope that they will succeed.

We will certainly try to convince other countries how urgent it is and why it is so important that, at this time before they cross the technological threshold, that the measures will be taken to stop them.

But thank God now it's widely recognized by the international community, and therefore, Israel doesn't have to act on its own.

BLITZER: Do you really believe that the president of Iran would stop its nuclear enrichment program under these political pressures from the U.S., the U.N., the Europeans?

OLMERT: I prefer to take the necessary measures to stop it, rather than to find out later that my indifference was so dangerous.

You know, Wolf, in modern times, we have to remember what happened when the world did not listen to dictators threatening other nations of annihilation. We had one experience in history of the Jewish people that we definitely don't want to be repeated.

And when I hear a president of a nation openly and officially declaring on every possible network in the world that he intends to wipe out another nation, my nation, and at the same time, he's working so hard to possess nuclear weapons, I have all the legitimacy to be concerned and to motivate other nations to take the necessary measures to stop him.

(END VIDEOTAPE)

BLITZER: And this year, President Ahmadinejad also repeatedly denounced Israel's right to exist, and even had a conference in Tehran for deniers of the Holocaust.

In just a moment, a story that caused a huge uproar this past year, the deal for Dubai Ports World to manage U.S. ports. My visit there, and an exclusive interview with the chairman of the company. That's coming up.

Plus, a special conversation with the man in the hot seat in Iraq, the prime minister, Nouri al-Maliki.

For much more of our special "Late Edition," stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Until February of this year, many Americans had probably never heard of Dubai, one of the seven Arab emirates on the Persian Gulf that make up the UAE, the United Arab Emirates. But Dubai was thrust into the spotlight when one of its major companies, Dubai Ports World, bought the operation that manages six ports in the United States. I spoke to the company's CEO, Mohammed Sharaf, and he stressed his company's worldwide reputation for safety and security.

(BEGIN VIDEOTAPE)

MOHAMMED SHARAF, CEO, DUBAI PORTS WORLD: We have customers whose vessels call at our terminals, which cost hundreds of millions. Not only the vessel, the goods on them cost hundreds of millions of dollars. If they don't have any confidence in our operation, they would not bring their ship to our terminals.

Each ship has up to 9,000, 10,000 containers on that. Can you imagine, each container costs -- the value of each container is around $100,000. What's the value of the total ship? Would they bring their ship to our terminals if they don't feel secured or safe?

(END VIDEOTAPE)

BLITZER: During my three-day behind-the-scenes visit, I also had a chance to inspect the port operations from a tug boat ride in the harbor, and it was very clear that the port operator -- in this case, DP World -- can have a significant impact on security, for good or for ill.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Could you please proceed to tanker boat number seven, please?

(END VIDEO CLIP)

BLITZER: Up in the port control tower, I saw DP World employees who have advance knowledge of ship itineraries, controlling which ships go to which berths, determining how fast ships are loaded and unloaded, and directing giant cranes.

One of DP World's biggest customers is the United States Navy. It makes over 500 port visits a year to Dubai. I spoke with the Navy Captain Thomas Goodwin.

(BEGIN VIDEO CLIP)

BLITZER: It's quite a little operation you've got over here. How secure do you feel as we get a sense of the U.S. Navy presence that occasionally comes in here?

CAPT. THOMAS GOODWIN, U.S. NAVY: Well, Wolf, as you know, security is kind of -- and the feeling of safety is kind of a relative thing. If you look around here, pretty populated with U.S. Navy ships, military sea lift command ships. I feel very safe here. I know the crews and the people who are stationed down here in the UAE feel very safe here as well.

BLITZER: Now, who provides the services when a U.S. Navy vessel comes in here? Dubai Ports World, I take, helps you guys, or is the port operator.

GOODWIN: In fact, it is. United Arab Emirates, it's Dubai Ports World. They own their territory. This is their home territory. We work hand in glove with Dubai Ports World for services and to provide fuel, logistics, and everything that a warship or another logistics ship would need here, absolutely.

BLITZER: And how do they do? What is the receptivity? What kind of grade would you give them when you come here to Dubai?

GOODWIN: If I put them on a grading scale, like you're back in college or something, I would have to give them at least an A plus.

(END VIDEO CLIP)

BLITZER: Despite that, the deal did eventually fell through, and Dubai Ports World agreed to sell off U.S. operations.

There is much more ahead on our special "Late Edition." A tough conversation with one very tough woman, Lynne Cheney, the wife of the vice president. She took CNN to task during our interview.

Secretary of State Condoleezza Rice defends the decision to invade Iraq and take down Saddam Hussein. Does she, though, have any regrets?

And I'll ask the actor George Clooney why he went to war-torn Sudan.

This is a special "Late Edition," the best of 2006.

(COMMERCIAL BREAK)

BLITZER: This is a special "Late Edition," the best of 2006.

(NEWSBREAK)

BLITZER: Welcome back to our special "Late Edition," our best interviews with the top newsmakers of 2006.

We'll get to my conversation with Secretary of State Condoleezza Rice in just a moment. First, though, let's get a quick check of what's in the news right now.

(NEWSBREAK)

BLITZER: In 2006, it became increasingly clear the Iraqi insurgency was more than just a small group of dead-enders as the former Defense Secretary Donald Rumsfeld used to call them. Many think the rise in sectarian violence now qualifies as a full-scale civil war. The Pentagon estimates there are almost 1,000 attacks a week, and that sectarian militias in Iraq have replaced al Qaeda as the most dangerous element in the country.

President Bush is working on a new strategy with his top advisers, and we expect to hear it in a speech early in the new year.

This year, on the fifth anniversary of the al Qaeda attacks on the United States, I sat down with Secretary of State Condoleezza Rice. I asked her why it was necessary to remove Saddam Hussein.

(BEGIN VIDEOTAPE)

CONDOLEEZZA RICE, SECRETARY OF STATE: The fact is that Iraq was a state sponsor of terror.

And what the president is talking about and what we've all been concerned about -- were all concerned about -- was this nexus between one of the most dangerous figures in the Middle East, Saddam Hussein, who had taken that region to war twice in a very short period of time, causing more than a million lives in the Iran-Iraq war and putting 300,000 of his own people in mass graves.

That link, his love of weapons of mass destruction, someone who had actually used them against his own people -- the link between Saddam Hussein, a dangerous figure, terrorists who he clearly harbored like Abu Nidal and his animosity for the United States, and his ability to build weapons of mass destruction -- in a post-September 11th world, letting that nexus remain in the middle of the world's most volatile region was not in the U.S. interest. And the world is better off without him.

BLITZER: There are several other countries on the State Department list of state sponsors of terror, including Syria and Cuba and Iran, North Korea. And the United States has not gone to war to depose their leaders.

RICE: Well, but Saddam Hussein was special in this case. This is somebody against whom we went to war in 1991.

BLITZER: But wasn't he contained -- with hindsight...

RICE: No, I simply don't buy that argument.

BLITZER: ... contained in that box?

RICE: No, absolutely not. This is somebody who was, with high prices of oil -- by the way, not as high as they are now -- was continuing to build his arsenal, somebody against whom the sanctions regime had clearly broken down -- you can't read the reports of the oil-for-food scandal and think that the oil-for-food sanctions were somehow constraining Saddam Hussein -- somebody who continued to shoot at our pilots as they tried to fly no-fly zones to keep him from attacking his own people or attacking his neighbors, someone who was paying money to suicide bombers to launch attacks on Israel.

BLITZER: So let me interrupt...

RICE: This was a dangerous man, and it was time to get rid of him.

BLITZER: So looking back, with hindsight, obviously -- all of us are smarter with hindsight -- no weapons of mass destruction, absolutely no connection to the 9/11 plot from Saddam Hussein -- is that right?

RICE: Well, it depends on how you think about 9/11. I think we've all said Saddam Hussein, as far as we know, had no knowledge of, no role in the 9/11 plot itself.

But if you think that 9/11 was just about Al Qaida and the hijackers, then there's no connection to Iraq.

But if you believe, as the president does and as I believe, that the problem is this ideology of hatred that has taken root, extremist ideology that has taken root in the Middle East, and that you have to go to the source and do something about the politics of that region, it is unimaginable that you could do something about the Middle East with Saddam Hussein sitting in the center of it, threatening his neighbors, threatening our allies, tying down American forces in Saudi Arabia.

We are in much better shape to build a different kind of Middle East with Saddam Hussein gone.

BLITZER: So you have no regrets about going to war against Saddam Hussein?

RICE: Oh, no, absolutely not. I think it is one of the most important historical decisions that an American president has taken in decades. And it is the right decision. Because when there are threats like that in a volatile region, you should take care of them and give yourself a chance for a better future.

BLITZER: This same Senate Intelligence Committee report says that the intelligence that you were getting -- your administration, the U.S. government -- from Ahmed Chalabi, one of the Iraqi exile leaders and his Iraqi National Congress, much of that was fabricated and phony.

RICE: Well, the same...

BLITZER: Involving the weapons of mass destruction.

RICE: Look, Wolf, the same intelligence reports that it seems to have had -- whatever fabricated evidence there was seems to have had relatively little effect on the Central Intelligence documents the president was relying on -- the National Intelligence Estimate, the work that he got from the director of Central Intelligence.

Let's remember -- and people have short memories -- there were very tough sanctions on Saddam Hussein. Why?

Because the entire world worried about his weapons of mass destruction, because he continued to lie to weapons inspectors, because he created conditions in which they had to leave in 1998.

President Clinton ordered, in 1998, strikes against Iraq, because of these...

BLITZER: But we now know -- and correct me if I'm wrong -- that he was telling the truth when he said he didn't have weapons of mass destruction.

RICE: But what we do know, also, from other reports is that he was retaining certain kinds of capabilities, that he never lost his intention to build these weapons of mass destruction. And I think this will unfold over time.

But when you ask, given what we knew at the time, was it right to take him down? Absolutely.

(END VIDEOTAPE)

BLITZER: Saddam Hussein has stood trial in Iraq for numerous war crimes and has now been sentenced to death by hanging.

There's much more ahead on our special "Late Edition." When will Iraqi troops be able to stand up so U.S. troops could stand down? A surprising answer from Iraq's prime minister, Nouri al-Maliki.

Then, where is the world's most wanted man, Osama bin Laden? The presidents of Afghanistan and Pakistan sharply disagree.

Also, the vice president's wife, Lynne Cheney, comes out swinging against Bush administration critics.

And for our North American viewers, at 1:00 p.m. Eastern, a special "Year at War." John Roberts takes a comprehensive look at events in Iraq and around the world.

Stay with CNN. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Where is Osama bin Laden? Not much progress in answering that question in 2006. But with the resurgence of the Taliban in Afghanistan and the violence escalating, the world's focus may soon turn back on the elusive al Qaeda leader. Many intelligence experts suspect bin Laden and others fled to the so-called lawless areas along the Afghan-Pakistan border.

It was clear, however, during my conversations this past year with the presidents of both of those countries, Pervez Musharraf and Hamid Karzai, that cooperating to capture the fugitives was not necessarily going well.

(BEGIN VIDEOTAPE)

BLITZER: Are you any closer to having a better sense where these Al Qaida leaders are hiding out?

PRES. PERVEZ MUSHARRAF, PAKISTAN: Frankly, I wouldn't be able to say whether we are closer or farther. We don't know where they are.

We are launching our operations on all al Qaeda positions that we come to know, Al Qaeda or Taliban. And in the process, if we can get them, we'll get them.

But we don't exactly know where they are. I presume they're somewhere in the border area, on the Pakistan side or Afghan side. So I wouldn't be able to comment whether we've got any closer to them.

BLITZER: There was this story in the Associated Press the other day. Let me read a headline from it. "President Hamid Karzai of Afghanistan has handed intelligence to Pakistan that indicates Mullah Mohammed Omar, the supreme leader of the Taliban regime ousted by U.S.-led forces and key associates, are hiding in Pakistan. Afghanistan also provided information about the locations of alleged terrorist training camps along the border and in Pakistani cities.

Is that correct? Is that accurate?

MUSHARRAF: That is -- they have given us a list, and I am really surprised and shocked why they have disclosed this to the media.

They have given a list. Now that they have done that, let me answer very frankly. We've already gone through it, this list. Two- thirds of it is months old, and it is outdated, and there is nothing. What there, the telephone numbers that they are talking of, two-thirds of them are dead numbers, and even the CIA knows about it because we are sharing all this information with them.

The location that they are talking of Mullah Omar is nonsense. There's nobody there. We've gone there exactly and seen that there are families living there and there's no sign of Mullah Omar. This also seems to be very, very old information.

And lastly, let me say, why were they waiting for a presidential visit to hand me over this list? What was stopping them from giving this list or sharing these numbers immediately on occurrence? Is that the way intelligence functions?

I am totally disappointed with their intelligence, and I feel there is a very, very deliberate attempt to malign Pakistan by some agents, and President Karzai is totally oblivious of what is happening in his own country.

BLITZER: There was a serious rift between you and the president of Pakistan in March. On March 6th, President Musharraf, you will remember, was on "Late Edition," this program, and he said this about you. Listen to what he said.

(BEGIN VIDEO CLIP)

MUSHARRAF: I am totally disappointed with their intelligence. And I feel there is a very, very deliberate attempt to malign Pakistan by some agents. And President Karzai is totally oblivious of what is happening in his own country.

So therefore, I would say he should pull up his intelligence; he should pull up his Ministry of Defense; he should coordinate with our intelligence.

(END VIDEO CLIP)

BLITZER: I know you've met with President Musharraf since then. Have you patched up your relationship? Because it was very tense only a few months back.

PRES. HAMID KARZAI, AFGHANISTAN: I don't think we ever had a problem of tension between us. We have had issues of concern to both countries to discuss. I consider him a brother of mine and a neighbor of ours. I just met with him when we were in Shanghai.

We seek, in Afghanistan, cooperation from our brothers in Pakistan in fighting terrorism. And I have conveyed this many times to my brother, President Musharraf. He understands. We have discussed it with him.

We only need to coordinate it better and more effectively for the good of all of us. There is no tension and there will not be tension between us. There are issues that we have to get resolved.

BLITZER: What is the most important issue that separates your government from the government of President Musharraf?

KARZAI: Everything is going on well between Afghanistan and Pakistan. At the time of the Taliban, Pakistan's exports to Afghanistan were $25 million, only, a year, annually.

Today, as you and I are speaking, Pakistan's exports to Afghanistan stand at $1.3 billion annually. It is because Afghanistan is prospering. It is because Afghanistan has, now, money to spend. It is because the international community, led by the United States, is helping Afghanistan with billions of dollars in reconstruction and institution-building in Afghanistan.

So what is happening in Afghanistan today is good for Pakistan, good for Pakistan's security, good for Pakistan's economy.

What we are seeking from Pakistan, from our brother, President Musharraf, is that we should recognize this reality and work together to remove a threat to mankind, to all of us, to his people, to his children, and to Afghan children, and to the children in the rest of the world; that is to go and fight terrorism more effectively and sincerely.

BLITZER: The New York Times on June 11th reported this. Let me read it to you, Mr. President. "For several years, the Taliban could only field a few hundred men in scattered groups in mountainous areas. Now, the Taliban claims to have 12,000 fighters. Even though several hundred insurgents may have been killed in fighting this year, the Taliban are recruiting ever greater numbers of local people."

Is the Taliban making a comeback, and does it represent a threat to your government in Kabul?

KARZAI: It does not. I would like to repeat myself, that the problem of Taliban as a movement that can cause danger to the Afghan government, that can cause danger to the coalition's effort for the long-term stability of Afghanistan does not exist.

They exist in the form of attacking schools, attacking children, killing innocent people, killing clergy, harassing road workers, engineers. They are no match for our power. They are no match for our fighting ability.

What we are seeking is a solution that would not take military -- that would not take use of a lot of firepower. We are trying to do this by negotiations with our brothers in Pakistan. We are trying to convince our brothers that you cannot be peaceful with a good future, prospering, if we continue instability in Afghanistan through the use of terrorism, through burning schools, through causing harm to innocent civilians. There is no way, Mr. Blitzer, that the Taliban can come back and take power in Afghanistan. The Afghan people will never, ever allow that.

(END VIDEOTAPE)

BLITZER: From one battle front to another. There's much more ahead on our special "Late Edition." The top U.S. military commander in Iraq tries to define the enemy. Who's the biggest threat to U.S. troops? My interview with General George Casey.

And later, my conversation with movie star George Clooney about a very important cause. We'll be back in a moment with more of our special "Late Edition," the best of 2006.

(COMMERCIAL BREAK)

BLITZER: Welcome back to our special, year-end "Late Edition," the best of 2006. I'm Wolf Blitzer in Washington.

As well as being the wife of the vice president, Lynne Cheney is an accomplished author with a sharp political mind. With the war on terror and Iraq looming large in the headlines, she vigorously defended the Bush administration's policies and challenged CNN over our coverage.

(BEGIN VIDEOTAPE)

BLITZER: I want to pick your brain a little bit on news that's happening right now, including your husband, the vice president.

He was interviewed earlier this week out in North Dakota and he had this exchange with a radio talk show host.

Listen to this.

(BEGIN AUDIO CLIP)

UNIDENTIFIED MALE: Would you agree a dunk in water is a no- brainer if we can save lives?

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Well, it's a no-brainer for me, but I -- for a while there I was criticized as being the vice president for torture. We don't torture. That's not what we're involved in.

(END VIDEO CLIP)

BLITZER: It made it sound -- and there's been interpretation to this effect, that he was, in effect, confirming that the United States used this water boarding, this technique that has been rejected by the international community that simulates a prisoner being drowned, if you will; that he was, in effect, supposedly confirming that the U.S. has been using it.

LYNNE CHENEY, DICK CHENEY'S WIFE: Wolf, that is a mighty house you're building on top of that mole hill there, or a mighty mountain. This is a complete distortion. He didn't say anything of the kind.

BLITZER: Because of the dunking, using the water and the dunking?

L. CHENEY: I understand your point. It's kind of the point of a lot of people right now, to try to distort the administration's position. And if you really want to talk about that, I watched the program on CNN last night which I thought -- it's your 2006 voter program -- which I thought was a terrible distortion of both the president and the vice president's position on many issues.

It seemed almost straight out of Democratic talking points, using phrases like domestic surveillance. When it is not domestic surveillance that anyone has talked about or ever done. It's surveillance of terrorists. It's people who have al Qaeda connections calling into the United States. So I think we're in a season of distortion. And this is just one more.

BLITZER: But there have been some cases where innocent people have been picked up, interrogated, held for long periods of time, then simply said, never mind, they're let go.

L. CHENEY: Well, are you sure these people are innocent?

BLITZER: They are walking around free right now and nobody's arrested them.

L. CHENEY: You made a point last night of a man who had a bookstore in London where radical Islamists gathered. Who was in Afghanistan when the Taliban were there. Who went to Pakistan. You know, I think that you might be a little careful before you declare this as a person with clean hands.

BLITZER: You're referring to the CNN "Broken Government" special. This was the one that John King reported on last night.

L. CHENEY: I certainly am. Well, right there, Wolf, "Broken Government." Now what kind of stance is that? Here we are. We are a country where we have been mightily challenged over the past six years. We've been through 9/11, we've been through Katrina. The president and the vice president inherited the recession. We're in a country where the economy's healthy, that's not broken.

This government has acted very well. We have tax cuts that are responsible for our healthy economy. We're a country that was attacked five years ago. We haven't been attacked since. What this government has done is effective, that's not broken government. So, you know, I shouldn't let media bias surprise me, but I worked at CNN once. I watched your program last night ...

BLITZER: You worked as co-host of "Crossfire."

L. CHENEY: ... and I was troubled.

BLITZER: All right. Well, that was probably the purpose, to get people to think. To get people to discuss these issues. Because ... L. CHENEY: Well, all right. Wolf, I'm here to talk about my book. But if you want to talk about distortion ...

BLITZER: We'll talk about your book.

L. CHENEY: Right, but what is CNN doing? Running terrorist tape of terrorists shooting Americans. I mean, I thought Duncan Hunter asked you a very good question and you didn't answer it. Do you want us to win?

BLITZER: The answer of course is we want the United States to win. We are Americans. There's no doubt about that. Do you think we want terrorists to win?

L. CHENEY: Then why are you running terrorist propaganda?

BLITZER: With all due respect, this is not terrorist propaganda.

L. CHENEY: Oh, Wolf.

BLITZER: This is reporting the news. Which is what we do. We're not partisan.

L. CHENEY: Where did you get the film?

BLITZER: We got the film -- look, this is an issue that has been widely discussed. This is an issue that we reported on extensively. We make no apologies for showing that. That was a very carefully considered decision why we did that. And I think, I think that if you're ...

L. CHENEY: Well, I think it's shocking.

BLITZER: If you are a serious journalist, you want to report the news. Sometimes the news is good, sometimes the news isn't so good.

L. CHENEY: But Wolf, there's a difference between news and terrorist propaganda. Why do you give the terrorists a forum?

BLITZER: And if you put it in context, if you put it in context, that's what news is. We said it was propaganda. We didn't distort where we got it. We didn't distort anything about it. We gave it the context.

(END VIDEOTAPE)

BLITZER: There's much more ahead on this special "Late Edition." And to find out the real situation on the ground in Iraq, I went to the men in charge. My conversations with Iraqi Prime Minister Nouri al-Maliki and a top U.S. military commander in Iraq, General George Casey.

And actor and activist George Clooney on whether U.S. troops should stop the genocide in Darfur. But up next, a quick check of what's in the news right now. This is our special "Late Edition," the best of 2006. (COMMERCIAL BREAK)

BLITZER: Welcome back to our special "Late Edition." I'm Wolf Blitzer in Washington.

In a surprise move in November the day after the Republican defeat in the midterm elections, the Defense Secretary Donald Rumsfeld resigned. His replacement, the former CIA Director Robert Gates. He is promising to make Iraq his top priority, and says that failure there would be a calamity.

Back in March, I spoke about the situation on the ground with the commander of the multinational forces in Iraq, U.S. Army General George Casey. And a few months later, I asked the Iraqi Prime Minister Nouri al-Maliki whether the insurgency was becoming an all- out civil war.

(BEGIN VIDEOTAPE)

BLITZER: Let's talk a little bit about the insurgency. Based on all the intelligence you have, how many insurgents are there?

GEN. GEORGE CASEY, U.S. ARMY: Well, Wolf, that's a tough one. You know that.

The -- it is very, very difficult to estimate insurgents' numbers. We've been -- we've been through this. There's several different methodologies.

But broadly, I think it's interesting. Even by our most pessimistic estimates, we think the insurgency is less than one -- one/tenth of one percent of the population of Iraq. So 99.9 percent of the Iraqis want something better and want to move forward.

BLITZER: So are you talking 10,000, 20,000? How many people, approximately, would you describe as this core of the violence that we see unfold on our T.V. screens on a nearly daily basis?

CASEY: It's -- again, Wolf, it's very, very difficult to put a number on. It ebbs and flows.

There are -- the core, as you call it, that actually goes out and conducts the operation. There's a -- there's some number of supporters that support those folks that aren't actually parts of the insurgency. And there's really no good way to give you a finite number that I could be confident in.

BLITZER: Can you give me a percentage? How many are Iraqis, and how many are what they call foreign fighters?

CASEY: The -- the numbers -- we believe that the numbers of foreign fighters are a relatively small percentage of the overall insurgency.

BLITZER: What about the equipment and the money that they're getting? Where do they get that from? CASEY: It varies. The -- as I said, while the foreign fighters are a relatively small percentage, they are -- they do have a great impact on it because of the financial resources that they bring to the insurgency and the experience.

As you know, I think, that Iraq is awash with ammunition. And there's ammunition buried all around the country. And we continually go out and try to pick that -- you know, pick that up. They hide it -- they hide it all over the place here in weapons caches that they can go and visit and continue to reuse. It will be awhile before they run out of ammunition.

The equipment, the military equipment is also here. A lot of what was in the former army is -- has gone over to the insurgents. So they don't really want for that.

And -- but the interesting thing is, there's not a huge effort, external effort, that is supporting this insurgency. You don't have truckloads of weapons and ammunition being smuggled across the borders at night. You do have some level of support coming, but it's certainly -- this is -- insurgency is primarily resourced internally.

BLITZER: What about Iran? Is Iran helping the insurgents? Are they providing equipment, money, troops, whatever, to try to keep this insurgency going?

CASEY: We have very good information that improvised explosive device technology is coming from the country of Iran into Iraq, destined for Shia insurgent extremist groups.

I do not have intelligence that will allow me to say that someone within the Iranian government is specifically doing that or supporting that operation.

I suspect that's the case, but I cannot document it.

BLITZER: Is it better or worse, for Iraq, for a prolonged U.S. military stay? In other words, does the presence of American forces help your government or hurt your government with the Iraqi people?

NOURI AL-MALIKI, IRAQI PRIME MINISTER (THROUGH TRANSLATOR): No, it helps. But as I said to you, that we are, the level of strength that we could -- that if the multinational forces want to lessen its presence, it could do that because we could cooperate with the rest of the operation and have stability and security to protect the democratic process.

BLITZER: So you think you, maybe, need the bulk of these troops for another year, a half a year, two years?

Can you give us a little guideline of how much longer you think it's necessary to have this foreign presence in Iraq?

MALIKI (THROUGH TRANSLATOR): In reality, there was an agreement between us and with the leadership of the multinational forces. The agreement was about a certain period and certain time. We agreed to work and to decrease the time so we could evaluate our troops so we could be able to control the situation and so it would enable the multinational forces to leave.

BLITZER: In short, Mr. Prime Minister, you don't want to give a timeline, is that right?

MALIKI (THROUGH TRANSLATOR): In truth, as I said to you, I don't want to commit with a certain time or a certain period. But I want to have my best efforts to decrease this time. It could be a year or less, or a few months.

This has to do with our success of the political process in Iraq and to have the security agencies to protect this process.

BLITZER: There is an assessment that many analysts have pointed to in recent weeks, suggesting the situation in Iraq is getting worse -- the sectarian violence -- and is approaching a civil war, if there hasn't been a civil war yet.

Do you see a civil war emerging in Iraq?

MALIKI (THROUGH TRANSLATOR): No. The violence is not increasing. But no, we're not in a civil war. In Iraq, we'll never be in civil war.

What you see is an atmosphere of reconciliation and the leadership of the tribes, of the parties -- the political parties. And all their efforts are coming up to end these activities and the violence.

The violence is in decrease. And our security ability is increasing. And I want to assure he who loves Iraq that Iraq will never be in a civil war.

BLITZER: I interviewed, a couple weeks ago, the United States ambassador in Baghdad, Zalmay Khalilzad. And he told me that Iran, your neighbor, is playing a very negative role in encouraging the violence inside Iraq.

I'll read to you what he said: Quote, "Iran is playing a role in the sectarian violence that is taking place here. It is providing arms, training and money and other support to groups involved in sectarian violence, including militias that have death squads associated with them."

Do you agree with Ambassador Khalilzad that Iran is undermining the entire security situation in Iraq?

MALIKI (THROUGH TRANSLATOR): There are talks, but the policy we follow in the new government, that we will do our efforts, that we'll commit the neighbors not to intervene in Iraqi affairs. And we had talks with this regard. And we have reached many results, but not final, in which that it will impose a respect or not to interfere in Iraqi internal affairs.

There are attempts in the region to fix the cards in the country. But the policy by our government, it will not allow any neighbors in the region to interfere in Iraqi affairs. And he who cooperates and receive aid from these countries will be subject to the law and anti- terrorism laws.

BLITZER: Is Iran, your neighbor, providing money and arms to death squads inside Iraq, specifically Shiite death squads?

MALIKI (THROUGH TRANSLATOR): Some reports are saying this. And we are investigating. And to confirm the credibility of these information, some of these reports say, but we have communication and exchange with the Iranians to know the truth and to have the efforts and to prevent this interference and the people who come into Iraq to prevent these attempts.

BLITZER: What is the relationship between Iran and the radical Shiite cleric Muqtada al Sadr, whom many U.S. officials see as a terrorist leader inside Iraq?

MALIKI (THROUGH TRANSLATOR): I don't know the nature of this relation. But you can ask him about the nature of this relation, whether this relation is with Iran.

BLITZER: What do you consider Muqtada al Sadr to be? Because as you know, earlier, U.S. military personnel have said he has tried to kill American troops, that he has blood on his hands, yet he remains a free man inside Iraq today.

MALIKI (THROUGH TRANSLATOR): Truly, I feel with this issue with the regard -- as per the legal situation, with the political process, and he has said many things and this group will be committed with the political process and against violence.

But the problem, that I want to move toward find solutions, that we want everybody to participate in the political process.

As I said, it's commitment. And this commitment means committed to the constitution and law and not to violate the security situation.

There's a development in the situation. And I hope that the Iraqis will be positive about this and to work with the new government.

BLITZER: So Muqtada al Sadr, from your perspective, is a legitimate political figure inside Iraq?

MALIKI (THROUGH TRANSLATOR): As far as are committed with the security and not to violate the law, yes, it will be. But any violation of law and security, it will remove him from this description.

(END VIDEOTAPE)

BLITZER: And as the violence grew worse in Iraq, the prime minister held a reconciliation conference with all groups in Baghdad. Unclear if anything emerged positively from that. Up next, what should the world do about the tragedy in Darfur? Actor George Clooney is raising the alarm. This special "Late Edition," the best of 2006, will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Academy Award-winning actor George Clooney is using his star power to bring attention to the genocide in the Darfur region in Sudan. More than 200,000 people have been killed, and about 2.5 million people have been displaced in three years of fighting in Darfur between African rebels and the government troops allied with the Arab militia known as the Janjaweed.

In April, Clooney, joined by Harvard's Samantha Power and others, went to Africa to see for themselves what was going on. I spoke to him shortly after he returned.

(BEGIN VIDEOTAPE)

GEORGE CLOONEY, ACTOR/ACTIVIST: We are a country that is always slow to act. We always have been, on almost everything, but especially on situations like this. Rwanda is a perfect example. The Balkans are a good example. But we -- once we get our mind to it, we do it pretty well. We have failed, you know -- it's political savvy to say hey, we're all doing a little bit of something and it's good that we're moving in the right direction. We're not doing enough.

BLITZER: What do you want President Bush to do?

CLOONEY: Well, there's -- there's -- immediately we want to try and get security. That's the first thing, security for...

BLITZER: Send in U.S. troops?

CLOONEY: No...

BLITZER: Do you want to send in the Marines?

CLOONEY: No.

BLITZER: What do you want to see happen, military -- militarily get involved?

CLOONEY: I think -- I think through NATO, if we can get a bridging force through NATO while we put together something in the U.N. I think that's our best bet. I don't think that that -- I don't think anyone wants that to be or thinks that's going to be American troops. It means that we who -- America, who usually is very good at coordinating these things, can be the leader in coordinating these things.

BLITZER: You and the president and the Bush administration are pretty much on the same page?

CLOONEY: I think so. I think that -- and I think that most of the world, especially most of the country, is on the same page, if they are reading the book. And unfortunately that book isn't getting read very often right now or loud enough. And so my job is to try and bring attention to that.

BLITZER: When it comes to Iraq, you and the president are not on the same page?

CLOONEY: No. But that's not what we're here to discuss.

BLITZER: Well, you...

CLOONEY: You know, I mean I agree. But, you know, I also would suggest that Senator Brownback and Senator Obama, who are the two leading the way in the Senate, don't agree on very many things either. But they certainly agree on this.

And I think that there's -- there's no two sides to this issue, Wolf. I mean, there really are no two sides to it. There is simply one side. There's no two sides to the idea of rape.

BLITZER: How do you explain -- how do you explain that 60 years after the Holocaust, after Rwanda and Burundi and what happened in the Balkans, that this kind of thing can go on in this day and age?

CLOONEY: Because we've -- and it happens a lot with us. We've spent a lot of our political capital in other places, and probably Iraq would be one of them. We certainly have not the greatest relationship with the U.N. So there's a lot of other elements that are playing.

China has not been very forthcoming with sanctions against -- against the Sudanese government and they're getting a free reign because they're getting oil by themselves without competing with America right now.

It's a tough, tough situation to solve. But if we get -- if we're able to just protect some of these people and then start a diplomatic -- start some diplomatic measures, we have a chance.

(END VIDEOTAPE)

BLITZER: And George Clooney just returned from a separate visit to Egypt and China, trying to convince those countries to use their influence to stop the fighting.

Up next, extraordinary Dubai, a visit to the city of gold on the Persian Gulf. "Late Edition," the best of 2006, will be right back.

(COMMERCIAL BREAK)

BLITZER: Earlier in the year, I traveled to the United Arab Emirate of Dubai. The controversial Dubai Ports World deal was causing a huge stir here in the United States. And I had exclusive interviews with top port officials and government leaders.

But I also had a chance to see some of the extraordinary sights and hear the extraordinary sounds of Dubai. Here's a look and a listen.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): This is the Burj Al Arab Hotel in Dubai, arguably one of the man-made wonders of the world. It's the world's tallest hotel, complete with a helipad near the top. It's also one of the world's most expensive. Luc Delafosse, originally from Paris, is the hotel's general manager and gave us a tour.

LUC DELAFOSSE, HOTEL GENERAL MANAGER: This is quite something unique in the world today and it represents Dubai. We have a magnificent view anywhere and the building itself soars at 321 meters. So you are in suite 2008, that is actually one of our panoramic suites, and the particularity of this suite category is this fantastic window, where you can actually really see Dubai at your feet.

And also, we have a particularity as well at the Burj Al Arab is the very amazing service we give in our suites to all our guests. We have a team of 150 butlers working on a 24-hour basis. So it's our ground floor, where you have a bar area, you have a lounge area. We call it actually the majlis here, for example, in this region. You have a dining room, you have two bedrooms. You have a bedroom on the ground floor and you also have the master bedroom on the mezzanine level on the upper floor.

BLITZER (on camera): This suite is per night, how much?

DELAFOSSE: I would say in terms of dollars, you know, it will be something like around $4,000 or $5,000 a night. We have a magnificent spa located on the 18th floor, an amazing place. Our actually, commitment, or mission, is to be clearly the world's most luxurious hotel.

BLITZER (voice-over): Not far from the hotel is this mall. What's extraordinary is what's inside, it's called Ski Dubai.

(on camera): It's hard to believe that we're right in the middle of the desert. Yes, we're in the desert, even though it's cold in here, you can say my breath, it's very cold, it's below zero. But these people are skiing, they are going on chair lifts. We're in the middle of Dubai and yes, there's a ski lift and there are ski slopes indoors.

It's the most bizarre scene, people from all over the world snowboarding and skiing downhill and indoors. The snow is manmade, as is the below-freezing temperature. But everything else is very real, check it out.

(END VIDEOTAPE)

BLITZER: Dubai, what a place. And that's your "Late Edition" for this Sunday, December 24th. Please be sure to join us every Sunday 11:00 a.m. Eastern for the last word in Sunday talk.

We're also in "THE SITUATION ROOM" Monday through Friday, 4:00 to 6:00 p.m. Eastern, and then for another hour at 7:00 p.m. Eastern. Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. To all of our viewers, please have a merry Christmas and a happy New Year. And for our North American viewers, a very special "This Year at War" just ahead.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com

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