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MR. SESNO: Joining us now live from Jerusalem, Israeli Prime Minister Benjamin Netanyahu. Prime Minister, thanks very much for coming and spending a few minutes with us.

PRIME MINISTER NETANYAHU: Thank you.

MR. SESNO: Let me ask you, then, if I may, today another soldier, Israeli soldier, was killed in southern Lebanon; this past week, another deadly suicide bombing, with more recriminations from Israel and the Palestinians. What's left of the peace process at this stage as Madeleine Albright prepares to visit Israel and the region?

PRIME MINISTER NETANYAHU: Well, I think the first thing that has to be there is a desire, a fervent desire for peace. And that's something certainly the people of Israel have and I have. I think that when we agreed to undertake the Oslo process signed by the government before us, we said we're doing so with the understanding that the Palestinian Authority keep its commitments as well.

And the central commitment that was given to my predecessor, the late Yitzhak Rabin, by Yasser Arafat was we give them territory; they give us a pledge to fight terrorism from within that territory. And that hasn't happened. The Hamas terrorists organized these suicide attacks from Palestinian-controlled areas.

So I would say the first thing we have to do to keep peace alive is to have a decision to want peace on the Palestinian side and a decision to work for peace by dismantling the infrastructure of these terrorist organizations.

MR. SESNO: All right, Prime Minister, just a few hours ago the chief Palestinian representative to the United States, Hasan Abdel Rahman, said on television here that the Palestinian Authority has cracked down on terrorism. I'd like you and our viewers to see some of what he had to say. Here it is.

HASAN ABDEL RAHMAN (CHIEF PALESTINIAN REPRESENTATIVE): (From videotape.) Hamas is a movement of people. You cannot arrest every single man who is a member or sympathizer of Hamas. In the same way, we cannot ask the Israelis to put in prison all those who oppose the peace process. As far as the infrastructure is concerned, we have done that in the past. We have destroyed the caches. We have destroyed their factories. We have arrested -- we have many members of Hamas who are in prison now.

MR. SESNO: Prime Minister Netanyahu, your response to that?

PRIME MINISTER NETANYAHU: Well, I wish that were true. In fact, the leaders of the Hamas movement, the military leaders, those who are actually carrying out these destructive raids or preparing them and launching the suicide bombers, they're all walking free. And their names are known. We've submitted them again and again to the Palestinian Authority. They haven't done anything with them.

They're walking around totally free, making demonstrations, declaring that they'll destroy the state of Israel, and being applauded by the security chiefs of the Palestinian Authority. Indeed, Yasser Arafat himself has embraced, kissed one of these Hamas leaders. And he has named a square in honor of the arch-killer, Yichi Ayash (ph), who killed 60 or 70 Israelis, calling him a martyr and a saint. You cannot educate people to fight terrorism if you embrace terrorism.

.MR. SESNO: As far as --

PRIME MINISTER NETANYAHU: And indeed, the difference between us, since there was a parallel done to us, here's what we did. We have those who tend towards extremism; for example, the Kah (ph) movement, we simply outlawed them. We put them outside the realm of law and we don't allow them to operate in this way. That's what we expect from the Palestinian Authority, to round up these terrorists, to interrogate them, to stop the incitement, to stop embracing them, to put these organizations outside the realm of law. If the PA did this, believe me, we'd be the first one to applaud.

MR. SESNO: According to a report this week in Jane's Foreign Report, the two suicide bombers who staged the July 30th market square bombing, they were recruited by Iran from Lebanon, came into Israel through Turkey. Now, Jane's also reports that the failed bombing attempt where the individual was blown up in his hotel -- you recall that as well -- involved a Lebanese man with a forged British passport who came to Israel from Zurich. Is that true? Does it indicate that the support, the control, comes from outside of Arafat's territory and domain?

PRIME MINISTER NETANYAHU: Well, it's certainly true that Iran, and not only Iran, is encouraging Hamas terrorism. But it is not true that this terrorism is possible without the very powerful support of the Hamas infrastructure within Palestinian-controlled areas. Let me give you an example --

MR. SESNO: But isn't it true that those individuals came to Israel from outside of the region, through Zurich, through Turkey?

PRIME MINISTER NETANYAHU: No, we have no information -- we have no confirmation of that at all. We did have, over two years ago, close to two years ago, one such attempt that failed of a person who came from the outside, was greeted by people on the inside. But since then we cannot confirm any external importation of actual terrorist perpetrators.

MR. SESNO: Palestinian officials --

PRIME MINISTER NETANYAHU: The important thing to understand is -- sorry?

MR. SESNO: I'm sorry. I was just going to say, Palestinian officials would say to you that the questions raised by these sorts of reports and some intelligence, conclusive or otherwise, suggests that it is unfair to hold Arafat fully accountable for all of these incidents.

PRIME MINISTER NETANYAHU: Well, first of all, let me tell you what -- I don't hold them directly accountable. I hold them indirectly accountable, because the organizations that prepare,

organize and launch these terrorist attacks are based in his territories. Of that we have no doubt.

Understand that for something like this to happen, it's not only the two or three suicides, the people who commit the suicides that are necessary. You have to have people who prepare the explosives, deliver the explosives, prepare vehicles, take care of the suicides' families, organize the whole access from the line of preparation, the place of preparation, to these various sites. In other words, dozens of people are involved, and they reside in the Palestinian-controlled territories. That is under Yasser Arafat.

I'm not saying that Arafat tells them, "Go ahead and strike." I am saying that, number one, he facilitates their operation within his territories. He's effectively turned the Palestinian-controlled areas into safe havens and bases of terrorist organizations minutes away from our major cities. And if that continues, and if indeed he talks about embracing them and kisses their leaders, what other message is conveyed to the terrorist organizations than that they should attack Israelis with impunity? That is what has to change.

MR. SESNO: Prime Minister, let's turn to southern Lebanon for just a moment -- another Israeli casualty, fatality, today; more violence there. Ariel Sharon and others now suggesting it's time for Israel to consider a unilateral withdrawal; get out. One hundred and one -- if my numbers are correct, 101 Israeli troops have died in southern Lebanon so far this year. Is the time to get out now?

PRIME MINISTER NETANYAHU: Well, the numbers are wrong, but any fatality that we have there is very painful. And we had a very tragic loss of our finest soldiers a few days ago, as you know. I would be the first to leave Lebanon. In fact, I suggested soon after coming into office that I'm prepared to leave right away and that all we want is some safeguard, some arrangements to prevent Hezbollah from attacking us. That has been resisted by the government of Lebanon, probably because Syria has not looked kindly towards this.

MR. SESNO: So what would it take for you to --

PRIME MINISTER NETANYAHU: So we would like to have an arrangement --

MR. SESNO: What would it take for you to leave Lebanon?

PRIME MINISTER NETANYAHU: The arrangements that would prevent Hezbollah from coming right up to the border fence and attacking our women and children beyond that fence. Right now we have a small buffer zone inside south Lebanon that prevents that direct physical access, direct ground penetration of the terrorists, into our cities and our towns in the north of Israel. If we could have the government of Lebanon deploy its troops, possibly with international support, to the border, thus preventing Hezbollah from coming in, that would satisfy our needs.

MR. SESNO: And you would leave. Finally, and one last --

PRIME MINISTER NETANYAHU: Then we would leave.

MR. SESNO: One last 30-second question and response here, because we're nearly out of time; I apologize for that. Secretary of State Albright comes to the region; some high hopes, some suggesting low expectations. What can she realistically accomplish?

PRIME MINISTER NETANYAHU: First of all, she's a welcome visitor here. And we hope that she can work with us to revitalize this process. I think she had it right. The first thing is the primacy of security. Yasser Arafat must be made to live up to his promise to fight the terrorists, to stop coddling them. If he does that, I think it'll be a major move forward and we can move on towards achieving a final settlement between Israelis and Palestinians to achieve the peace we all need, and certainly we want.

MR. SESNO: Prime Minister Benjamin Netanyahu, thank you very much for your time today. We do appreciate it.

PRIME MINISTER NETANYAHU: Thank you very much.


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