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Lou Dobbs Tonight

IAEA Says Iran Has Refused to Stop Nuclear Activities; Major Newscasts Accused of Being Blatantly Sympathetic to Illegal Aliens; Middle Class Americans Fearing For Future; General Motors Voting Itself Off "Survivor"; John Bolton Interview; Charles Grassley Interview

Aired August 31, 2006 - 18:00   ET

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

KITTY PILGRIM, CNN ANCHOR: Tonight, the International Atomic Energy Agency says Iran has refused to stop its nuclear activities. President Bush says there must be consequences.
And Americans say they are worse off than a generation ago. We'll have a special report on the war on the middle class.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Thursday, August 31st.

Sitting in for Lou Dobbs, who's on vacation, Kitty Pilgrim.

PILGRIM: Good evening, everybody.

Iran tonight is on a collision course with the rest of the world. The International Atomic Energy Agency says Iran has failed to meet a U.N. deadline to stop enriching uranium.

President Bush said the world faces a grave threat from Iran. The president said Iran must not be allowed to have nuclear weapons.

Suzanne Malveaux reports from the White House on the president's warning.

Aneesh Raman reports from Tehran on Iran's nuclear defiance.

And Richard Roth reports from the United Nations on the U.N.'s response to this crisis.

We turn first to Suzanne Malveaux -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: There certainly are some White House officials, U.S. officials who say this is a deadline that has come and gone, and there's a certain sense of "I told you so" attitude here, some who did not even believe that negotiating or talking with Iran through the permanent five members of the U.N. Security Council was going to work. But at least they have Iran on the record.

There are some, however, who are being a little bit more cautious in their approach here. They are essentially trying to buy time here to get those permanent members of the U.N. Security Council together in a unified response, a unified voice. What the Bush administration is pushing now is for the toughest sanctions possible against the regime, trying to make the case that this is in fact a dangerous regime that is worthy of having those kinds of economic and other sanctions that would change its behavior.

President Bush from earlier today.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is time for Iran to make a choice. We have made our choice. We will continue to work closely with our allies to find a diplomatic solution, but there must be consequences for Iran's defiance and we must not allow Iran to develop a nuclear weapon.

(END VIDEO CLIP)

MALVEAUX: But, Kitty, it really is far from certain whether or not they're going to have that kind of unity that they need to push for sanctions that have some real teeth. Of course, Russia and China have expressed reservations before in doing that. So what you'll see over the next couple of weeks is a lot of behind the scenes and maybe a little bit in front of the camera, but mostly behind-the-scenes diplomacy here, trying to push forward in those sanctions to the U.N. Security Council.

Of course on another front, President Bush today launching this new public relations effort, a strategy to try to convince Americans to get on board with the war on terror. This comes at a time when there's a lot of criticism. Democrats, even some Republicans saying the U.S. should get out as quickly as possible.

It comes, of course, as the anniversary of September 11th is right around the corner. And many nervous Republicans thinking that they're going to pay for the discontent, Americans' discontent when it comes to the war on terror.

So President Bush today trying to up the stakes of this war on terror by making the case that it is a global fight.

(BEGIN VIDEO CLIP)

BUSH: The security of the civilized world depends on victory in the war on terror, and that depends on victory in Iraq. So the United States of America will not leave until victory is achieved.

(END VIDEO CLIP)

MALVEAUX: Now, Kitty, of course we have heard that message from the president before, but again upping the stakes today. The president saying this is a global war that he compared to previous world wars when it came to fighting communism and fascism. There are some historians who believe that that is an exaggeration -- Kitty.

PILGRIM: Thanks, Suzanne.

Suzanne Malveaux at the White House.

Well, the Iranian president, Mahmoud Ahmadinejad, today said Iran will never give up its country's peaceful nuclear technology, as he called it. The Iranian Foreign Ministry says Iran is not afraid of any international sanctions.

Aneesh Raman reports from Tehran.

(BEGIN VIDEOTAPE)

ANEESH RAMAN, CNN CORRESPONDENT (voice-over): Defiant to the end, Iran's president, speaking this morning to huge crowds in northwest Iran, left no doubt his country will not suspend its nuclear program.

"This nation," he said, "will not tolerate tyranny and will not give in to a cruel pressure and violation of its rights, even a bit."

People in this agriculture region are some of Ahmadinejad's strongest supporters, cheering every phrase. Here, for some, he is a hero. And they reveled in their president's continued challenge to debate U.S. President Bush.

"They say they want the public to know all of the news and facts," he says, "and decide for themselves. But when we offered to debate the world's problems and corruption and let the world judge for themselves, they rejected."

But it is Iran's rejection of the U.N. deadline to stop its nuclear program that matters today. And in Tehran, as shops open for business despite fears of businesses go down of sanctions, here as well there was defiance.

"We have undergone sanctions for 27 years," says Hussein. "We are not afraid of sanctions. Iranians can live off of bite of bread and live in cramped dwellings."

There are many here who do fear sanctions outright. And while today's deadline was big news in Iran, Iranians have known this day was coming, have known they can do little to affect their government's choices. They can only now hope against the worst.

"If a military invasion against Iran is a possibility," says Barham (ph), "it's to the Iranians' benefit to resolve the problem peacefully."

A military invasion is not seen as something that will come any time soon. But Iran's government has made it clear through war games that have been ongoing for weeks now that it will defend against any attack.

(END VIDEOTAPE)

RAMAN: Kitty, late tonight Iranian officials dismissed the IAEA report as baseless, as illegal. And they do not think sanctions are inevitable. Iranian officials are heading to Europe next week to try and jump-start new talks. So, in Iran tonight, they do not think that time has run out -- Kitty.

PILGRIM: Aneesh, the United States already has had sanctions on Iran for decades. So how far are the Iranians willing to go here, do you think?

RAMAN: Well, there seems no deal that can be made to get Iran to suspend its nuclear program. When I ask officials and people about sanctions, they simply shrug it off. They say, "We have endured them before, we are enduring them now. We endured an eight-year battle with Iraq. Sanctions mean very little here."

But if the sanctions are tough economic sanctions, if they cut key commodities like gas, if the prices go up, unemployment rises further, inflation as well, that is when domestic support for this program might start to wane -- Kitty.

PILGRIM: Thanks very much.

Aneesh Raman in Tehran.

Thanks, Aneesh.

Well, the United Nations Security Council could meet as early as next week to discuss Iran's nuclear defiance, but communist China and Russia are reluctant to support strong sanctions against Iran. And Europe plans more talks with Iran.

Richard Roth reports from the United Nations.

(BEGIN VIDEOTAPE)

RICHARD ROTH, CNN SR. U.N. CORRESPONDENT (voice-over): Iran's president, who wants to debate the U.S. president, has insisted the country was enriching uranium for civilian energy use. But the U.N.'s report says it continues to be unable to verify Iran's intentions were strictly peaceful.

Key red flags for the inspectors, new traces of highly enriched uranium found on waste storage containers and equipment linked to a military facility. No explanation given by Iran. No documentation either provided for operation of P2, centrifuges which can more quickly enrich uranium for energy or weapons-making. And no answers provided by Iran for the casting of Uranium metal, designs that can only be for the core of nuclear bombs.

The report said Iran was enriching some uranium just one week ago, but there had not been a jump in the quality or quantity of the processing.

DAVID ALBRIGHT, INST. FOR SCIENCE & INTERNATIONAL SECURITY: Iran isn't enriching much. It's holding back for whatever reason. It seems like it's a perfect time to try to find a way to negotiate a solution where both sides are able to declare victory.

ROTH: But the U.S. is already drumming up options to punish Iran with economic sanctions, everything from travel bans on Iranian officials to financial asset freezes.

JOHN BOLTON, U.S. AMBASSADOR TO U.N.: I think there's a substantial history that sanctions can have a dramatic effect on national policy, and that would be our hope here as well.

ROTH: But Russia and China, despite agreeing last month to consider next steps if Iran failed to comply, are hesitant to push for sanctions immediately.

And there will be more talking -- the European Union, with Iran's nuclear negotiator, and also the Security Council permanent members huddling on strategy.

U.N. Secretary-General Kofi Annan will visit Iran this week. The U.S. says he should tell the Iranians unambiguously to accept the Security Council resolution.

(END VIDEOTAPE)

ROTH: The Security Council gave Iran a 30-day deadline, suspend or else. But it appears it will be at least 30 days before there's any vote on sanctions here against Iran -- Kitty.

PILGRIM: Thanks very much.

Richard Roth.

Well, later in the broadcast the U.S. ambassador to the United Nations, John Bolton, will join me.

And turning now to Iraq, insurgents have killed four more of our troops. Two soldiers were killed in a roadside bomb attack and a soldier and a Marine were killed in Al Anbar province.

Sixty-three of our troops have been killed in Iraq this month. That's one of the highest monthly totals this year. 2,640 of our troops have been killed since the war began.

Nearly 50 Iraqis were killed in a bomb and mortar attack in Baghdad today, and most of them were killed in rocket attacks in Shiite neighborhoods. More than 250 Iraqis were wounded.

The number of American troops in Iraq has risen to 140,000. That's the highest level this year. Now, the Pentagon says the number has risen because troops rotating into Iraq are overlapping with troops leaving. It says the only additional troops in Iraq are soldiers from the Stryker Brigade who recently deployed to Baghdad.

Still to come, are the broadcast networks promoting illegal immigration in their newscasts?

We'll have a special report.

Plus, the Bush administration and corporate America appear totally indifferent to the troubles of middle class Americans.

And Iran defies the world. The U.S. ambassador to the United Nations, John Bolton, will join me.

(COMMERCIAL BREAK)

PILGRIM: Tonight, this nation's major newscasts are being accused of being blatantly sympathetic to illegal aliens. This broadcast has continually made the distinct between legal and illegal immigration in this country. And a group that regularly criticize network news coverage says networks refuse to make that distinction.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): When the House of Representatives passed the Sensenbrenner border security bill in December, the three broadcast television networks did not report the development during their evening newscasts. But months later, when illegal alien advocacy groups organized street protests against the bill, the networks gave those demonstrations glowing coverage.

That's just one of the charges in a study released this week by the conservative Media Research Center. It claims ABC, CBS, and NBC News have been promoting illegal immigration.

TIM GRAHAM, MEDIA RESEARCH CENTER: You have these aliens marching down the streets en masse in white shirts waving American flags, and it really was a long organized political commercial instead of being a real story about the immigration debate.

WIAN: The study examined network news coverage of the issue from March 24th through May 31st. Among the findings, illegal alien amnesty advocates appeared in about twice as many sound bites as supporters of border security. Not surprisingly, President Bush appeared on both sides.

Networks routinely ignored polls showing the vast majority of Americans favor stronger border security. And the study concluded, "The networks seemed to offer honorary citizenship to anyone crossing the border."

The broadcast networks did not respond to requests for comment on the study, but one media watchdog says it overstates their perceived support of illegal immigration.

MARGARET ENGEL, NEWSEUM: When you really significant numbers of people in the streets protesting something, you can't avoid it simply because the Gallup polls show the numbers are 81 percent in a different direction.

WIAN: The study also examined language used in coverage of illegal immigration. It found the label "conservative" used 89 times, but "liberal" was used just three times. One surprise, network reporters and anchors used the word "illegal" more than five times as often as the politically correct term, "undocumented."

(END VIDEOTAPE) WIAN: However, the word "alien," as in "illegal alien," was only used seven times in more than 300 reports. One network reporter even referred to protests in support of those who critics call illegal -- Kitty.

PILGRIM: Thanks very much.

Casey Wian.

Well, tonight, Americans are also not being told about the real truth about this nation's economy. Government officials and big business interests tout the strength of the economy, but middle class Americans are falling further behind and fearing for the future.

Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): There's the view from the top and what American workers are actually feeling.

A Labor Department release today trumpets, "The American economy is strong and growing."

The Chamber of Commerce...

MARTIN REGALIA, U.S. CHAMBER OF COMMERCE: The economy is still producing jobs. It's still creating net new jobs. It's still moving forward.

ROMANS: But Pew Research Center found workers feel otherwise.

PAUL TAYLOR, PEW RESEARCH CENTER: Most people think that work life in this country has gotten a lot worse over the last generation or so across virtually all dimensions of work, whether you're talking about wages, benefits, stress, security, et cetera.

ROMANS: Workers keenly aware of stagnant real wages, rising gasoline and housing costs, and there's a sense that companies and the wealthy are the true beneficiaries of economic growth.

The Chamber of Commerce acknowledges the skills needed in this economy are changing.

REGALIA: The people that are skilled and possess those skills and education seem to be faring much better than the people at the other end of the income spectrum, where their skill levels are very low.

ROMANS: A view critics say is out of touch.

JARED BERNSTEIN, ECONOMIC POLICY INST.: I hear folks saying, "Hey, what are you talking about? Why don't you get it? This economy's doing great." And these are the folks who are looking at the top line statistics and ignoring the paycheck statistics. And then I also hear folks who acknowledge that the growth isn't reaching enough people and they say, essentially, "It's your fault you're not educated enough," that you need to get more schooling.

ROMANS: Amounting, he says, to blaming the victim.

(END VIDEOTAPE)

ROMANS: Pew Research Center says the American worker is taking in stride this perceived fraying of the safety net, remaining relatively confident in their own job, even, Kitty, as they worry about the future.

PILGRIM: Thanks very much.

Christine Romans.

Well, still ahead, the producers of "Survivor" receive a reality check. Now, their big idea to separate contestants by race is backfiring.

We'll have a special report.

Plus, Tropical Storm Ernesto is close to hurricane strength and on target to hit the Carolinas. We'll have the very latest on that.

And U.S. Ambassador John Bolton says Iran should face sanctions after defying the United Nations. Ambassador Bolton will be my guest.

(COMMERCIAL BREAK)

PILGRIM: Tonight, a main sponsor of the hit reality TV show "Survivor" is pulling its support from the program. General Motors is voting itself off "Survivor" as producers proceed with their idea to team up the contestants on the show by race.

Louise Schiavone reports.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): General Motors is shoving off after a six-year association with the CBS reality series "Survivor." Reports of GM's marketing decision coincide with "Survivor's" plans to launch the fall season with four racially divided tribes, or teams, a format that has enraged minorities.

JOHN C. LIU, NEW YORK CITY COUNCIL: Major corporations that are mainstays of America realize that they are sponsoring a show that -- that puts a battle of the races together. Those advertisers and companies will not want to support this kind of show either.

SCHIAVONE: Nonetheless, "Survivor" is one of TV's top-rated shows and one of the best places to be seen. Marketing insiders are surprised.

JACK IRVING, ADVERTISING & MARKETING ANALYST: It's critically important to be in these shows. I mean, you look at "American Idol," you look at "Survivor," shows of that type reach a very, very desirable target audience. It's basically young adults, 18 to 34, with a high disposable income. If you have the ability to advertise your product on a show like this, I would characterize it as being somewhat unusual to pull out.

SCHIAVONE: General Motors insists it did not withdraw from the attractive advertising perch in reaction to the controversial new "Survivor" format that pits team of whites, Asians, Hispanics and blacks against each other.

Said GM's Ryndee Carney, "The truth is we made a decision prior to having any knowledge of the new 'Survivor' format."

In a statement, CBS Entertainment concurred: "GM notified us of their decision several months ago before they had any knowledge of the show's ethnic format."

Still, GM's decision emerged about the same time the networks previewed their fall shows for advertisers. Industry insiders at TNS Media Intelligence in New York report General Motors has been one of "Survivor's" strongest advertisers, spending close to $15 million on "Survivor" in the first half of this year.

(END VIDEOTAPE)

SCHIAVONE: Kitty, interesting social experiment, outrageous, or just plain cheesy? Viewers will be the judge of that. Analysts say the controversy will be a shot in the arm to the show as the season opens, but whether "Survivor" can itself survive the storm remains to be seen -- Kitty.

PILGRIM: Thanks very much.

Louise Schiavone.

Well, time now for some of your thoughts.

Betty in Kentucky writes, "When churches start protecting lawbreakers they should lose their tax exemptions and sign up as a political party."

And don in Ohio writes, "If it's OK to offer safe haven to fugitive illegal immigrants, perhaps churches should invest in take-a- number boxes. They're going to need them. And heavy knows we have plenty of American fugitive lawbreakers already in our own community that may also prefer going to church rather than going to jail."

Carol Lynn in New York writes, "Any church that harbors any illegal alien should lose their nonprofit status immediately! Hmm, wonder how long it would take for the church to take another point of view."

And Annette in New Jersey writes, "As a taxpaying American and a senior citizen, I have decided to go to Mexico to become a citizen, then to cross the border and come back to the United States, where I will then be able to get all my health care for free as an illegal alien."

Do e-mail us at LouDobbs.com. And we'll have a little bit more of your thoughts later in the broadcast.

Coming up, Ernesto's second U.S. landfall. It's only hours away in the Carolinas. We'll have a live update on that.

Plus, Iran's nuclear showdown with the rest of the world is intensifying. The U.S. ambassador to the U.N., John Bolton, and three of this nation's most distinguished experts on Iran will be here.

And the secret's out. The uproar continues. How Washington's secret senator controversy threatens your right to know. The chairman of the Senate Finance Committee, Senator Chuck Grassley, will join me.

(COMMERCIAL BREAK)

PILGRIM: Still ahead, U.S. Ambassador John Bolton will be my guest as Iran defies a key nuclear deadline.

But first, Tropical Storm Ernesto will make landfall in the Carolinas later tonight. Ernesto is already dumping heavy rains on the South Carolina coast. Winds have intensified to 70 miles an hour, very close to Category 1 hurricane status.

In southern Mexico tonight, 15,000 people are being ordered to evacuate as Hurricane John approaches. Now, John has been downgraded to a Category 2 storm. It is expected to hit Mexico's Baja peninsula tomorrow.

Reynolds Wolf is following these storms for us at the CNN weather center -- Reynolds.

REYNOLDS WOLF, CNN METEOROLOGIST: Hi, Kitty.

(WEATHER REPORT)

PILGRIM: Thanks very much Reynolds Wolf. Well, turning to the nuclear confrontation with Iran, the International Atomic Energy Agency today said Iran has failed to meet a U.N. deadline to stop enriching uranium. I spoke with U.S. ambassador to the United Nations, John Bolton, earlier. I began by asking him whether the IAEA report will convince the world that it's time to take action on Iran.

(BEGIN VIDEOTAPE)

JOHN BOLTON, U.S. AMBASSADOR TO U.N.: I think this report really is very compelling evidence of Iran's continuing defiance. Not only does it make clear that Iran has disregarded the Security Council resolution that required them to suspend their uranium enrichment activity, but it also documents the continuing obstructionism and lack of cooperation that Iran has demonstrated for years now with respect to the International Atomic Energy Agency.

And when you put all that together, there isn't any other logical explanation, but that Iran is seeking to acquire nuclear weapons, which is why we've gone down the road we've followed.

PILGRIM: President Ahmadinejad, even today, holding a rally, defying the United Nations. Is the next step the Security Council?

BOLTON: Well, there's no doubt that the foreign ministers of the five permanent members plus Germany agreed about two months ago that they would try one more time to give their very generous offer to Iran to see if Iran wanted to give up the pursuit of nuclear weapons and they agreed that a fundamental precondition to talking about that offer was that Iran suspend its uranium enrichment activities so that they wouldn't be getting closer to a nuclear weapons capability while the discussions were going on.

Iran has obviously refused to do that. The IAEA report documents that and the foreign ministers agreed that if we came to the point we're now at on August 31st, the next step would be to seek sanctions in the Security Council.

PILGRIM: The Chinese ambassador seems to indicate that there is still time for dialogue with Iran. Russia has very lucrative deals with the civilian nuclear project at Bouchair (ph), will you get China and Russia, in your estimation, to sign on to any sanctions or do you think that that is the obstacle in the Security Council.

They, after all, have veto power.

BOLTON: The foreign ministers of Russia and China agreed that we would seek sanctions. It's true we have to talk about exactly what kinds of sanctions but the statement that they made with the other foreign ministers two months ago is unambiguous on that point.

But it will be a test. We'll find out in the next several weeks whether we're able to proceed to sanctions. There's now doubt that the commercial contacts that Russia and China have in Iran are very valuable to them. But that's the whole point. To prove to Iran that, as the president said, if they continue to pursue nuclear weapons, they are going to face adverse consequences.

PILGRIM: What are the range of sanctions that are available and how strong might they be initially?

BOLTON: We're still consulting with the European countries as to exactly what we might do but in general terms, what we're going to aim at is the leadership of Iran. And the programs involving their nuclear and ballistic missile capabilities.

We're going to try and avoid sanctions that impinge on the average Iranian citizen. We don't have a quarrel with Iranian people. We have a quarrel with the government and their pursuit of nuclear weapons and that's what we're going to try and target.

PILGRIM: Could sanctions be applied outside the Security Council venue?

BOLTON: There is no doubt that there is a wide range of sanctions we could seek to impose on Iran that do not require Security Council authorization. I think the utility of the Security Council acting under Chapter 7 is to make the sanctions mandatory for UN members but if for whatever reason we don't achieve the level of sanctions we want, and even if we do, there are other things we're going to pursue that countries like the European Union, Japan and others can impose by their own national decisions.

PILGRIM: Doesn't the United States need the support of Europe and potentially Japan to impose significant sanctions on Iran because the United States already has sanctions on Iran?

BOLTON: We've imposed just about all the sanctions we can with a couple of small exceptions. Small in the big picture. But - for instance, in the area of financial transactions, investment transactions and large flows of capital, there are a number of things that governments could do already under existing authorities concerning antiterrorism legislation and Iran is the central banker of terrorism, as Secretary Rice likes to say.

So there are a lot of steps that countries could take and I think major financial institutions, major businesses, ought to think long and hard about doing business with a country like Iran.

PILGRIM: The American public is following this closely and with the war in Iraq there is concern that Iran may become a military conflict. Military sanctions, anything like that being discussed at this time?

BOLTON: President Bush has made clear we are trying to resolve this diplomatically. But we're not the ones that are breaking our obligations under the Nuclear Nonproliferation Treaty. We're not the country that is financing and providing weapons to Hezbollah and Hamas.

So the consequences of an Iran with nuclear weapons are not only the capability they're seeking to deliver them through ballistic missiles, but also the possibility they could transfer a nuclear weapon to a terrorist group.

This is a real threat, as the president has said, so we're exercising a lot of diplomatic activity here to try and resolve this peacefully. That's our objective but no president charged with defending the American people takes the military option off the table.

PILGRIM: Iran has shown military belligerence in recent weeks, testing some missiles out in the desert. This is a show of force or certainly just a statement to the world? How do you assess this and when Iran starts military testing, it does raise concern, doesn't it?

BOLTON: I think that the pattern Iran has displayed over the past couple years is a lot of bluff and bluster, a lot of effort at intimidation, a lot of throwing sand in the eyes of the international community, the IAEA, I think this is all part of the show and tell.

The real question is whether they will come to their senses and recognize that what puts them at risk is precisely their pursuit of nuclear weapons and that if they took the same decision that Libya took and gave up the pursuit of nuclear weapons, they'd find they were actually much safer.

PILGRIM: One could only hope for that and thank you very much for joining us this evening, Ambassador John Bolton.

BOLTON: Glad to be here.

(END VIDEOTAPE)

PILGRIM: Ambassador Bolton speaking to me a few moments ago.

Now, as we reported, President Bush today said there must be consequences for Iran's defiance. And in our poll tonight what do you believe those consequences should be, more negotiations, economic sanctions, or military action? Cast your vote at LouDobbs.com and we'll bring you the results later in the broadcast.

Up next, General David Grange joins me next to discuss whether or not the consequences against Iran are likely to include military action. And we'll speak to three of the world's leading authorities on Iran.

And your right to know the secret action in the Senate that's meant to keep the public in the dark, Senator Chuck Grassley is trying to do something about it and he'll join us.

(COMMERCIAL BREAK)

PILGRIM: Well, joining me now, three of the world's leading authorities on Iran. Evand Abrahamian has written numerous books on Iran, including "Inventing the Axis of Evil," and also a forthcoming book, "The CIA Coup in Iran." Hooshang Amirahmadi is the director of Rutgers University Center for Middle Eastern Studies, and also the founder of the American Iranian Council. And from Washington, Ilan Berman is the author of "Tehran Rising," and vice president of the American Foreign Policy Council.

Better expertise we could not find. And thank you all for being here. First of all, your reaction to the IAEA report today which seems quite an indictment on Iran and their pursuit of what appears to be a nuclear weapons program. What's your assessment of the situation?

HOOSHANG AMIRAHMADI, PROF., RUTGERS UNIVERSITY: Well, the report is mixed. Basically, it says the progress is very slow. So there's enrichment activities going but to everybody's surprise, the Iranian case is obviously not one of escalating the tension, but going with enrichment of a slow pace. But it has also ...

PILGRIM: But this slow pace is illegal, is it not?

AMIRAHMADI: It is. Now, that's a different issue. When Iran was asked by the Security Council to stop enriching uranium altogether by today, they have defied it. So there are two points, two sides of this story: the defying side and the fact that the progress in the Iranian side has been slow, slower than had been expected. PILGRIM: Mr. Abrahamian, some find very little comfort in the fact that the progress has been slow, given that it's been going on for years.

EVAND ABRAHAMIAN, AUTHOR, "INVENTING THE AXIS OF EVIL": Well, I think the Iranians too have a response to that. Everything they have done is actually legal under the treaty. The reason they had to do it basically secretly, because the arm of the United States reaches very far. Every time they made a deal on the open market to buy certain things, the U.S. could step in and sabotage it.

So, because of that, over the years, they have done everything that they are allowed to do, but they have had to do it secretly. Now the question, then, becomes, why would were they doing secretly? The answer is if they were allowed to do it openly, they there wouldn't have been any suspicion about it.

PILGRIM: They've also refused to come up with information with the United Nations which is not the United States, the P2 centrifuges.

ABRAHAMIAN: Well, they have a good reason for that.

PILGRIM: They won't confirm or deny. Mr. Ahmadinejad has said that they are received stuff from A.Q. Khan in Pakistan. They will not confirm a lot of information that the United Nations is demanding.

ABRAHAMIAN: Again, they have an answer which is as long as the U.S. is talking about airstrikes and Israel is talking about airstrikes, obviously, they don't want to tell the United Nations exactly where things are, how deeply they're buried because they know that information will get back to Israel and United States. So they do have security reasons of their own.

PILGRIM: You know, one of the things that has been done recently -- and I'll call on Mr. Berman for his thoughts on this -- is that the United States and other partners have put forward a very, very nice offer for Iran to try negotiate the way out.

This offer was put in place two months ago, but there have been other offers for years for Iran to comply with the international standards and to be more forthcoming about their so-called civilian nuclear weapons -- nuclear program. They have not accepted any of these offers. How do you assess that, Mr. Berman?

ILAN BERMAN, AUTHOR, "TEHRAN RISING": Well, I think -- look, I think the Iranian strategy has been very clear for the last three years. They're drawing out the negotiating process, they're trying to buy time to build a nuclear weapon. And I say this very clearly: a nuclear weapon.

And the reason I say this is because the offer in late May that the secretary of state, Condoleezza Rice, put forward as well as the offer that the EU3 put forward a year before that in February of 2005, actually included the offer of light water proliferation-resistant reactors to Iran, essentially things that would be good to generate nuclear energy but would not be usable in a weapons context, and the Iranian regime rejected that. So it clearly tells you that what they're after is not simply civilian nuclear energy.

PILGRIM: Let's go back to the venue of the United Nations. We have Russia and China sort of quibbling about sanctions now, even though they committed a little bit earlier to tough results, if Iran defied the deadline. How do you assess a position of China and Russia? And do you believe that they're helping the situation?

AMIRAHMADI: No, they're not helping, and they're being opportunistic. If I was Russia and China, I would not isolate the United States of America in this particular time, in this particular case. It would be more dangerous for the world community, for Iran, for the region to get the United States isolated as a superpower.

It will happen -- what will happen after that will be what happened in the Iraqi case. Russia, and China, and the others did the same to the United States, but they were not able to stop it. So I think my advice to Russians and Chinese would be don't do what you do in the Iraqi case. Stay with the U.S. Get the Iranian side to come clean, build confidence and make sure the world community understands clearly that your case is a peaceful case.

PILGRIM: Mr. Abrahamian?

ABRAHAMIAN: Yes, I think actually that too much attention is paid to Russia and China. I think the real issue is how to deal with Iran directly with the United States. And I think the real -- I think the trump card Iran has is not so much its relations with those two countries. Its trump card is the influence it has in Iraq.

So the problems the United States is really bogged down in Iraq is very much tied on how it deals with Iran. And if we go -- if U.S. is going down the hard road and thinking about a tough policy, U.S. has to realize down the road U.S. is going to be faced with a Shiite revolt in Iraq. And I'm not sure if the U.S. military wants to deal with a Shiite revolt on top of a Sunni revolt. And Iran does have those capabilities of really causing major problems in Iraq.

PILGRIM: And let's let Mr. Berman have the last word on this. Next week potentially in the Security Council -- quickly, how do you see it shaping up?

BERMAN: Well, I think the real moment of truth here is fast approaching because Russia and China are two of Iran's major strategic partners but they also hold veto power at the Security Council. So, it's going to be a real struggle to get through any sort of sanctions that are less than palatable to Moscow and Beijing.

And if the sanctions that come out of the Security Council are watered down and they're watered down to appease the Russians and Chinese, it's very likely that Tehran is not going to be losing very much sleep over them either.

PILGRIM: All right, thank you very much, gentlemen, Evand Abrahamian, Hooshang Amirahmadi, and Ilan Berman thank you very much for being here.

AMIRAHMADI: And thank you for having us.

BERMAN: Thank you.

PILGRIM: Up next, General David Grange weighs in with his thoughts on the military option against Iran.

And Senator Chuck Grassley is outraged over a secret maneuver that preserves the secrecy of the Senate. He says the public's right to know is being violated, and he will be my guest. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight, your right to know about how Congress really spends your money is at risk. Senator Ted Stevens of Alaska has admitted to placing a secret hold on legislation that would bring transparency to the secret federal spending process.

Now, Senator Chuck Grassley, the chairman of the Senate Finance Committee, calls these secret holds shameful, and he joins me tonight from Cedar Falls, Iowa. Thanks for being with us, sir.

SEN. CHARLES GRASSLEY (R), IOWA: Glad to be with you.

PILGRIM: Well, first of all, Senator Stevens says it wasn't secret. How do you react to that?

GRASSLEY: Well, most holds are secret. When I put a hold on a bill, I always put a statement in the public record, the Congressional Record, of why I'm doing it and what bill it is.

There's nothing wrong with a hold, per se. But remember, what American government is all about is transparency. People ought to know what's going on. So a hold is secret if the senator doesn't say that it's -- who is putting it on.

And I have a bill that passed the Senate 84-13 that would end holds, that's in conference with the House, because my feeling is, the public's business ought to be public. And there's nothing wrong with a hold. If you think a bill ought to be held up, you know, hold it up. But tell the public why you're doing it.

Another reason is, if a senator has a bill up and somebody puts a hold on it, how do you negotiate with that person to find out what their objection is if you don't know?

PILGRIM: You know, this is a pretty tough test case for you, and it rankled a lot of people, because the bill that he held up is in response to public concerns about the deficit and also pork barrel spending. This is not where you should pick your battle on this, and yet he did. What do you think will happen now? Do you think that your legislation will get some momentum because of the outcry over this?

GRASSLEY: Well, it ought to. But you know, this is inside-the- Beltway stuff. Most of the public doesn't look at what goes on in the Senate in the process. The legislation is a very good piece of legislation. Whether it's Senator Stevens or anybody else, a hold is legitimate, but you ought to be willing to say who it is and stand up and defend your position.

PILGRIM: We certainly can agree with you, sir. Senator Grassley, thanks for being with us this evening.

And still ahead -- the results of tonight's poll on Iran's nuclear program and more of your thoughts on the war in Iraq and the Bush administration. Also, General David Grange joins us to discuss the likelihood of military action against Iran. We'll be right back.

(COMMERCIAL BREAK)

PILGRIM: President Bush today declared that Iran must face consequences if Tehran does not stop enriching uranium. The president did not say what those consequences might be, but some analysts believe the United States may eventually have to take military action against Iran.

Well, joining me now is General David Grange. And General Grange, how -- I mean, how -- is our military prepared for something like that?

BRIG. GEN. DAVID GRANGE (RET), CNN MILITARY ANALYST: Well, the military is prepared, and you can be assured that many plans are on the shelf to pick up and execute if the need be.

It will be a last resort. There is, from your previous segment, it is an issue about what would happen in Iraq with Shia. And that's something that's going to eventually have to be taken on, because that's going to happen anyway. And I think that it's time to disrupt that Iran meddling in Iraq sooner than later, because it can only get worse.

So I don't think we should wring our hands about that if we have to do military action in Iran. And there is a series of things to be done, from the obvious of bombing, use of special operation forces, or probably maybe more effective is the use of information warfare to discredit the leadership and the motives of Iran earlier in this campaign of concern than later.

PILGRIM: You know, the American public's looking at Iran, Iraq, Afghanistan, and the situations in all of those. We have a comment from General George Casey, who is the commander of the multinational force in Iraq. Let's listen to that and then discuss it.

(BEGIN VIDEO CLIP)

GEN. GEORGE CASEY, COMMANDER, MULTINATIONAL FORCE IN IRAQ: I can see over the next 12 to 18 months, I can see the Iraqi security forces progressing to a point where they can take on the security responsibilities for the country with very little coalition support.

(END VIDEO CLIP)

PILGRIM: That sounds like a very positive assessment. And yet we see widespread violence in Baghdad these days. What is your assessment of General Casey's comments?

GRANGE: Well, first of all, it's good to hear a positive statement in a situation that at least to us, through reporting, looks very bad. And it is a tough situation. But he's on the ground, he assesses what's going on, and he probably has a handle on it.

You know, it's a very tall order to start a military, an army, from scratch, create that in the middle of a conflict, and then produce a force that is loyal to their people, not themselves, to maintain rule of law in an environment like this. And I think it's very possible, but what you're going to see is a continuous support from the United States of logistics, medical, intelligence, communications and air, as well as a backdrop of American forces, maybe removed from the cities, but out in the -- into the frontier, but ready to respond if the Iraqi military gets in trouble.

And last point on this, I think that if things go really bad, probably the only enduring institution that Iraq will have left is the army.

PILGRIM: Thanks very much, General David Grange. Thank you.

Now, the results of tonight's poll. Let's do this: 32 percent of you believe that consequences for Iran's defiance should be more negotiation; 49 percent said economic sanctions; 19 percent of you did say military action.

It's time now for more of your thoughts. And Joe in New York writes -- "I finally figured out why we have so many problems with the occupation of Iraq. First was terrorists, then dead-enders, and then numerous other groups in between, and now it's Islamic fascists. How can we win if the goons in Washington can't decide who they're fighting?"

And Louis in South Dakota writes -- "If this administration spent as much time doing their job and truly protecting America as they do in public relations to make themselves look good, then the war in Iraq might be going better and America would be truly safer."

Sent us your thoughts at LouDobbs.com. And each of you whose email is read here will receive a copy of the financial report of the United States, with the foreword by Congressman Jim Cooper of Tennessee. Also, a copy of Senator Byron Dorgan's important book, "Take This Job and Ship It."

Well, thanks for being with us tonight. Good night from New York. "THE SITUATION ROOM" starts right now with John King -- John.

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