KATIE COURIC: General Powell, Secretary Powell, first question: How has September 11th changed this country in your view?

U.S. SECRETARY OF STATE COLIN POWELL: It changed us in some ways for the better. It showed us once again what we're made of. It gave us a real test of our character, of our courage, of our determination. We passed that test. We will forever mourn those who were lost, and there was a loss of innocence that day when we realized that terrorism was not something that just happened far away in the Middle East; it happened right in our own country. And so that was a terrible tragedy, but out of that tragedy we became a stronger nation and we showed what we were made of -- a spine of steel, a heart as big as the whole outdoors. And I think we've demonstrated to the people of the world that this is a challenge that must be met by the entire civilized world.

In some ways, I think we're a better and stronger nation as a result of what happened on September 11th of last year.

COURIC: Where were you when you first heard about what had happened on September 11th?

POWELL: I was in Lima, Peru, having breakfast at the President of Peru, President Toledo, and there was a round table, there were about eight of us there, talking about economic issues -- textile quotas, of all things. And then suddenly a note was handed to me saying that something had happened in New York City, some planes had crashed into the World Trade Center. And as soon as it was clear it was plural, not one plane, I knew something was wrong, but I wasn't quite sure.

And then a few moments later, more information came in, and it was obvious a terror -- it was obviously a terrorist attack. So we concluded the breakfast. I was supposed to attend a full day's meeting with the Organization of American States, but I told my staff, "Get the plane ready. We got to get home." Because clearly this was -- this was catastrophe and I had to get back to the United States.

COURIC: You flew home.

POWELL: I -- it took an hour, and in that hour, I went to the OAS meeting, the Organization of American States, and all of our friends in the hemisphere joined in a spontaneous act of solidarity: We're with you, America, in this crisis.

And then we passed a resolution -- that was the purpose of our meeting -- committing ourselves to democracy in this hemisphere. And after that very emotional meeting with the OAS, I got on my plane and flew seven hours back to Washington, anxious to get back, with only one or two opportunities to speak to my staff here during that seven-hour flight because of the communications problems. It was one of the longest -- longest days of my life.

COURIC: And your thoughts on that day when you got home?

POWELL: How many people had lost their lives. By then I had known -- I knew about the Pentagon as well and the plane in Pennsylvania, and what was this going to require of us? Would we find out who did it? Would we bring them to justice? And what was my job going to be? What was I going to be charged with doing?

But I knew the answer to that question, to try to bring the international community together in this to make sure that we got all our friends allied in this response. And that's what we succeeded in doing very effectively.

COURIC: The United States has been less successful in terms of finding out who did this and bringing that individual to justice, though, has it not?

POWELL: We found out the organization very quickly -- Al-Qaida. Al-Qaida is not just one person. It's a lot of people around the world, perhaps in dozens of countries. And we're going to get them all. We're going to root the whole thing out. The individual who heads Al-Qaida, Osama bin Laden, we don't know whether he's dead or he's alive. We can't bring him to justice yet, or perhaps justice has already been meted out to him.

But we're continuing to look, and he will -- he will never rest if he's alive because we will be in pursuit of him.

COURIC: More on terrorism in a moment, Mr. Secretary, but first let me ask you about Iraq. Iraq is Topic A right now throughout the country. Can you tell the American people why the Bush administration feels a military attack against Iraq may be warranted or justified?

POWELL: President Bush is considering all of the options that are available to him -- political, diplomatic, and military. And the reason he's considering these options with respect to Iraq is that Iraq has violated its obligations to the international community, to the United Nations. It entered into resolutions at the end of the Gulf War that said they would not have weapons of mass destruction -- no chemicals, no nuclear, no biological. And we had inspectors in there for years rooting up all of this material that they had been salting away and all of the programs they had. And then the inspectors were thrown out in 1998. So they have not complied with the UN, and they are developing dangerous weapons that threaten their neighbors and threaten the civilized world --

COURIC: How do you know that?

POWELL: -- the United States -- oh, it's -- we have the intelligence that'll prove it. And if they don't have it, why don't they let the inspectors in? It is not for us to prove they have it. It is for them to prove they don't have it.

COURIC: If Saddam Hussein does let UN inspectors back in his country unconditionally, as the UN has requested, should that be the next step?

POWELL: President Bush has called for those inspectors to go back in. It would be the simplest thing in the world for Saddam Hussein to merely pick up a phone and tell Secretary General Kofi Annan, "As I said, I don't have these kinds of weapons and devices and materials, so send your inspectors in, look all they want, and you will not discover anything." It would be the simplest thing in the world. That's what President Bush and all of the members of the international community have called for.

COURIC: But do you trust Saddam Hussein to be open and honest about these inspections?

POWELL: No. That's why we're saying if the inspections get started again, they have to be on our terms, the terms of Dr. Hans Blix who heads the inspection team, and he knows what he's going to be looking for, and he has to be given unfettered access.

COURIC: Mr. Secretary, if it comes ultimately to military action, can the United States handle this? The Mideast is in such disarray, as you well know. Can the U.S. launch a military attack and still try to forge peace in the Middle East? And --

POWELL: We have --

COURIC: -- how much can the region handle?

POWELL: We have to try to forge peace in the Middle East. There is no alternative to this. And I can assure you that if the President decides upon a military option, we have the capacity to execute it, and I'm sure we will do it well.

COURIC: Do you support that, a military action against Iraq? Or do --

POWELL: The President --

COURIC: -- you feel uncomfortable with that notion?

POWELL: It's the recommendation that we will all make to the President in due course. We're studying all the options available to him, and we have not provided a recommendation to the President yet.

COURIC: Other than UN weapons inspectors in the country, what other diplomatic solutions can you envision?

POWELL: Diplomatic solutions could involve first Saddam Hussein doing what he was supposed to do as called for by the UN resolutions, and then we would see where we are at that point. We still believe that a regime change would be a better outcome. We believe that he is suppressing his own people. We believe that he is a threat to the region. And we believe that the people of Iraq and the people of the region will be better off if Saddam Hussein was not the leader in Baghdad.

COURIC: There are many who say that this is unfinished business from the Gulf War. You were Chairman of the Joint Chiefs of Staff then. Is this cleaning up what wasn't accomplished and should have been accomplished 11 years ago?

POWELL: What was accomplished in the Gulf War was exactly what the international community, the United Nation and the American President, President George Herbert Walker Bush, set out to accomplish, and that was to eject the Iraqi army from Kuwait. There was never any plan to go to Baghdad or to remove the regime. There was no authority from the UN to do that nor from the American Congress. The decision not to do that was not made at the end of the war. It was made before the war. The war was fought for the purpose of kicking the Iraqi army out of Kuwait, and that mission was accomplished, and when it was accomplished we stopped. It wasn't unfinished business.

Now, we had hoped that Saddam Hussein would not continue in power, but he did. And we are faced with that problem. We have worked hard to contain him. We have worked hard to keep the sanctions in place and make the sanctions smarter. But he is still there, and we believe he is a danger to the region. He's certainly a danger to his own people.

COURIC: Mr. Secretary, you are well aware from your Gulf War experience the importance of enlisting a cohesive international coalition. President -- King Abdullah of Jordan has expressed serious reservations about a military action against Iraq. He says most moderate Arab nations agree with that assessment. Even Tony Blair seems somewhat skittish about the prospect. Does --

POWELL: We --

COURIC: -- that give you pause?

POWELL: We're in constant communication with our friends and allies, and when the President has made a decision different or a new decision, a different decision than he has already made or we change our policy and decide to move in a new direction, we'll consult with our friends and allies at that time. As all our friends and allies have said in response to the questions that constantly are posed to them, they have not been asked by the United States to join into a military coalition --

COURIC: But they don't seem too --

POWELL: -- [inaudible] at this point.

COURIC: -- too excited about the notion.

POWELL: Well, you -- I've answered the question, Ms. Couric.

COURIC: Okay, Mr. Secretary. Let me move on.

Your overriding military philosophy is to go in with overwhelming force --

POWELL: I've never said that.

COURIC: -- and get out --

POWELL: You used "decisive force."

COURIC: Decisive force, okay.

POWELL: A difference.

COURIC: Okay. I think it's safe to characterize your military philosophy as going in with decisive force and then having a clear exit strategy. Is that fair?

POWELL: I've never used the term "exit strategy."

COURIC: Well, what -- okay. Then you characterize your military philosophy.

POWELL: When I used to be a military adviser, which I am not now, I used to believe that you ought to have a clear political objective, and then if you understood that in the accomplishment of that clear political objective you needed to use military force as well as the other elements of national power, then you should use military force in a decisive way and have some understanding of how the conflict would end and what you would do at that point.

COURIC: There are some observers who feel given the internal situation in Iraq -- warring ethnic groups and the implementation possibly of a nascent democratic regime -- that that will require the presence of U.S. troops for 10, 20, 30, 40 years to ensure it sticks, if you will.

Is the United States ready to make that kind of commitment?

POWELL: We have made no recommendation to the President with respect to a military operation, and there are lots of people who write lots of articles and who presume to have knowledge of what thinking is inside the administration but who do not have knowledge of what thinking is inside the administration.

COURIC: But do you see the situation requiring a continued U.S. presence --

POWELL: We --

COURIC: -- knowing what you know?

POWELL: You're asking me to discuss a hypothetical military operation that has not been recommended to the President nor decided by the President.

COURIC: Let me ask you about September 11th. Do you believe the Iraqis were involved somehow in the events of September 11th?

POWELL: I have no information that would give us conclusive evidence of such involvement. We're looking at Al-Qaida, and we're looking at Osama bin Laden and the relationship they have with the Taliban.

COURIC: What about this supposed meeting between Iraqi intelligence officials and Mohamed Atta in Prague in the months preceding September 11th? The White House has now asserted they believe that did, in fact, happen. What is your thinking on that?

POWELL: Which White House are you talking about? I'm sorry, who --

COURIC: White House officials have basically --

POWELL: What White House officials?

COURIC: -- asserted --

POWELL: I'm not sure -- I'm not sure what you're referring to.

COURIC: Well --

POWELL: There are different points of view with respect to -- with respect to whether or not that meeting happened.

COURIC: What is your point of view?

POWELL: I have no idea. I think that's something you should put to the intelligence community because they are the ones who have studied this. I think it is a controversial issue. Some people believe that it did happen and it has some relationship to subsequent events, and other people are less sure that it did happen.

COURIC: Let me ask you, Mr. Secretary, about Saudi Arabia. That country continues to fund, quote-unquote, Islamic charities that are really financing reportedly Islamic terrorist movements. Saudi clerics continue to routinely preach about a holy way against the United States on state-run television. The Saudis have refused to allow U.S. investigators to interview families of the September 11th hijackers.

What's going on here with Saudi Arabia? Why, in your view -- or are they being duplicitous? And why is the United States tolerating it?

POWELL: We're working very closely with the Saudis. They are friends of the United States. They have been very responsive to our requests, and they're working in a very cooperative way. And --

COURIC: With all due respect, this does not sound very friendly.

POWELL: That is your bill of indictment. My response is that the Saudis have been very cooperative with us. They're good friends. They've been friends for many years. And all the requests that we have put to them, they have been responsive to.

Where there are differences of opinion or where we think we need to work out a problem with it -- with them, we work out that problem with them.

COURIC: Do you feel they are no longer funding terrorist organizations through Islamic charities?

POWELL: They are giving money to charities, no doubt, and they have made it clear that they are giving money to people they feel are in need who might be the dependents of people who are involved in suicide bombings. We have discussed that with them, but I am not going to characterize how they are giving their moneys to one organization or another.

COURIC: Are you making any headway, though, with the Saudis in terms of trying to get them to be more careful about funding --

POWELL: Yes, we are --

COURIC: -- certain organizations?

POWELL: We are in -- we are in direct conversation, and I speak to the Saudis on a regular basis with respect to their actions. And they're good allies, they're good friends, and we ought to respect that friendship and not go out of our way to find ways to -- to criticize the Saudis. Should we -- should we criticize them when it's appropriate? Yes. But we should not seek opportunities to criticize them just for the sake of criticizing good friends of ours who have been supportive of our efforts and have been helping us in this campaign against terrorism and are hosts to our military forces in the region and with whom we've had a strong relationship for many decades.

COURIC: Do you, Mr. -- do you believe, Mr. Secretary, that Al-Qaida is more dangerous today than it was one year ago?

POWELL: No.

COURIC: Why?

POWELL: Because we've destroyed their base in Afghanistan, because the Taliban regime which was supporting them is no longer there, and the Pakistani support of the Taliban regime, of course, is also gone. And we've got them on the run. They have been picked up in various places around the world -- in Singapore. We are doing more with respect to law enforcement, intelligence collection, intelligence sharing with our friends and allies. And I think that we have got them on the run.

Are they still dangerous? Yes. Are they still in many places around the world? Yes. Are we going to continue to pursue them? Yes. Are we going to get them? Yes.

COURIC: What about sleeper cells here in the United States? Do you believe that they exist?

POWELL: I have no way of knowing that. I think one has to assume that there may be other individuals from Al-Qaida like those who perpetrated the 9/11 crimes who might still be in the United States. But I -- I can't -- if I knew where they were, if I knew where they're sleeping, I'd be out helping chase them down, not just speculating about it.

COURIC: What do you think the most important lesson we can learn from September 11th?

POWELL: That the world is still a dangerous place. Even though the Cold War is over, there are people who will attack us, if given the chance. There are people who don't understand the democratic system that we believe in, and that we have to be on guard, and we are on guard. Creation of the Homeland Security Department shows that, the manner in which we have responded to this challenge with the creation of an international coalition aligned against terrorism. We're responding to the challenge.

But, clearly, we were given a new challenge that we were not quite expecting at the beginning of the 21st century, and it's a challenge we will certainly meet.

COURIC: Is it sad but true that terrorism will never be completely obliterated?

POWELL: There will always be someone who is willing to take an innocent life for a flawed purpose or objective. But what we can do is everything in our power to make sure that those people do not succeed. Terrorism has been around I guess since the beginning of humankind, and so it may continue in the future. Our responsibility is to guard against it as best we can by protecting our borders, by protecting our population, by working with our friends and neighbors, but also by making sure we remain an open society. We don't want to shut foreigners out from America. We want to show them what America's all about. We want to show them our value system. We want them to come to our schools. We want to come -- have them come and visit our tourist attractions and go back with a better image of America so they could say to people who might be radicalized or might be inclined toward terrorism, "No, I've been there, and this is a country that treasures its people. This is a country that treasures its diversity. This is a country that is showing what democracy is all about and how the free enterprise system can work. And this is a country we ought to look at with respect and a country that is not trying to impose anything on us, that's trying to work with us, that's trying to help us."

COURIC: And that we may want to use as a role model?

POWELL: An example to the world. I don't like "role model." That suggests you have to look like us. But I think an example to the world of what you can do when you take people from every imaginable part of the world, every culture, every country, every religion, every race, bring them together, give them all a sense of hope, put them in an environment of democracy and the free enterprise system, and let them be -- look what can be accomplished. Take a look at an -- that example and see how it can be applied to your country. And even in this time of terror and trouble, more and more countries are looking at that example and coming to the conclusion that democracy, the free enterprise system, and respecting the individual rights of men and women, that's the way to go.

COURIC: Can I ask you one more intelligence question? It seems everyone conceded in the days, Mr. Secretary, following September 11th that U.S. intelligence was lacking, especially the human element, actually people on the ground with an ability to infiltrate and monitor terrorist organizations. Do you see improvement in that regard during the past year?

POWELL: There has -- there's always -- there has been improvement, and we're always improving our intelligence and law enforcement capability. But to say we failed because we weren't able to get inside of this terrorist organization I think is not -- is not the right characterization. Our intelligence people did a -- did a heck of a job last year. We knew something was going on. We had warnings in the course of the summer. We tried to chase those warnings, and we tried to track it down. We weren't successful.

But I wouldn't say that it was because our intelligence system failed. There are people out there who were determined to make sure we didn't know what was going on. They hid it very well. And hopefully we are better able, now that we see how they did it, we're better able to discover patterns and find other means of breaking into these networks so that it won't happen again.

But we have perhaps the best intelligence system in the world, and we're always trying to improve it.

COURIC: You say "hopefully." Do you feel confident that that's the case?

POWELL: How -- how can anybody feel absolutely confident? One doesn't know what the future holds, and one doesn't know who's really out there trying to do us -- do us harm. And so what we have to do is keep trying and trying and trying and improving, and hope that we're going to be successful.

COURIC: Thank you, Secretary Powell.