WOLF BLITZER, CNN ANCHOR: A big day today, the President of the United States hosting a summit with the Israeli and Palestinian leaders right here in New York. Let’s get right to the Israeli prime minister, Benjamin Netanyahu. He’s joining us.

The Russian president, Dmitry Medvedev, told our Fareed Zakaria the other day that he had an assurance from the Israeli president, Shimon Peres, that Israel has no intention of attacking Iran. Is that true?

NETANYAHU: Well, I’m not going to deal with hypotheticals. I think the important thing is to recognize that Iran’s ambitions to acquire or develop nuclear weapons is a threat, not only to Israel, but to the entire world. Remember, this is the country that sponsored terrorism worldwide. And imagine what would happen if these terrorists had a patron that that gave them a nuclear umbrella, or, worse, actually gave them the nuclear weapon.

I think that these are catastrophic consequences. And it’s the interests of the entire international community to make sure this doesn’t happen.

BLITZER: So, are you willing to repeat what you have been quoted in the Israeli press as saying, that „all options” for Israel are on the table right now?

NETANYAHU: I’m willing to say what President Obama has said, namely, that all options are on the table is a position we support.

BLITZER: Have you been concerned at all about the Obama administration’s diplomatic initiative in trying to reach out to Iran to see if that will secure some results?

NETANYAHU: I have spoken to President Obama several times about this. And he assured me that the goal of all his activities, diplomatic and otherwise, is to ensure that Iran does not develop nuclear weapons. And I think the goal is what counts. And, increasingly, I think people understand in Washington and certainly  in Washington and elsewhere, in the major capitals, that the problem of Iran’s acquiring nuclear weapons threatens everyone. It threatens world peace in a way that very few events could possibly threaten it.

I’m hopeful and I would like to believe that the international community understands that Iran has to be pressed strongly. There are ways of pressing this regime right now, because it’s weak. It’s weaker than people think. It doesn’t enjoy the support of its own people.

BLITZER: How much time is there, Mr. Prime Minister?

NETANYAHU: Whatever time is there, Wolf, it’s getting shorter, because Iran is moving ahead.

But this is a regime that is susceptible to pressure. It’s been exposed for what it is. It tyrannizes its own people. The Iranian people detest this regime, as has been plainly evident in the recent election fraud. But, equally, I think that Iran is susceptible because its economy is susceptible. And the time for pressure is now, with or without talks.

BLITZER: Would you act unilaterally, without U.S. support?

NETANYAHU: Well, there you go again asking a hypothetical question. I would like to believe that the United States and the major powers of the world understand that this threat, that this danger threatens them as well. And you know what? From everything that I have seen and heard, speaking to President Obama, speaking to President Sarkozy this afternoon as well, speaking to many of the major leaders of the world, I stand by that assessment.

Iran is certainly a grave threat to Israel, but it’s a grave threat to international peace. It’s a grave threat to America and to everyone else.

BLITZER: I want to read to you some comments that the former national security adviser to then President Jimmy Carter, Zbigniew Brzezinski, wrote the other day.

He said this. He said: „We,” referring to the United States, „are not exactly impotent little babies. They have to fly over our airspace in Iraq. Are we just going to sit there and watch? If they fly over, you go up and confront them,” Brzezinski writes. „They have the choice of turning back or not.”

That’s a pretty strong statement. What does it say about the current state of U.S.-Israeli relations when a former national security adviser writes something like that?

NETANYAHU: See, now you’re asking me to comment on a hypothetical on a hypothetical. I’m not going to do that. But I will tell you that the state of the U.S.-Israeli relations is very good, indeed. I was very pleased with the meeting hosted by President Obama today. For months, I have been calling for such a meeting, to put aside all these preconditions, and get on with the business of talking about peace.

It’s very hard to make peace unless you talk about it, although we have been improving conditions on the West Bank, and life is getting a lot better there. But we can do a lot more if we talk to each other.

So, on Iran, I have given you my answer. But, on peace, I think the possibilities are there. Let’s just get on with it. Let’s move. And I think that a good and firm U.S.-Israel relationship is the pivot of that peace and the pivot of security in the Middle East.

BLITZER: I want to get on and talk a little bit about the peace process. But just give me an answer, if you can, to a sensitive question that a lot of people are asking, especially friends of Israel here in the United States. Who is a better friend of Israel, the former President George W. Bush, who had a very close relationship with you, or the current president, Barack Obama?

NETANYAHU: Let me tell you something about President Obama, because I think this should be fully appreciated. He stood before the entire Muslim world. I don’t know if a billion people heard him, but hundreds of millions of people in Muslim countries heard him. And he said: The bond between America and Israel is unshakeable. We are absolutely committed to Israel’s security. I think that was a very important statement. And I think every president of the United States has had his contribution to Israeli- American relations and to the friendship between our countries. It is a very strong friendship, indeed. And I appreciated the president’s comments in Cairo. And I appreciated his comments today, too.

BLITZER: I hear you saying you trust this president.

NETANYAHU: I think that President Obama’s commitment to Israel has been expressed very loud, very clearly by him. And I think this reflects the underlying friendship between our two countries. It’s very strong.

You know, I walk on the streets of well, New York, yes, but also the Midwest and every part of the United States. I have been in every part of it. I will tell you, it’s heartwarming, because I see this tremendous, tremendous effusion of friendship towards Israel as a sister democracy, yes, often embattled by these dark forces of terrorism that embattle all of us.

And I think Israel has a terrific friend in America and the American people. And I want the American people to know that they have a terrific friend in Israel. In the Middle East, you don’t have that many friends, but we’re definitely right at the top of the list.

BLITZER: In the first eight months of his administration, he’s repeatedly appealed to you to freeze all settlement activity, and you have declined that request. Did anything change today?

NETANYAHU: I think what is important is that we’re moving on to talk peace. And I hope to make peace.

Any time we have encountered an Arab leader who wanted to make peace, we made peace. Anwar Sadat came. Menachem Begin of the Likud made peace. The late King Hussein came. Yitzhak Rabin of Labor made peace. I’m telling you that, if Mr. Abbas, the leader of the Palestinian Authority, genuinely steps forward and says, we recognize the State of Israel, we’re willing to make peace with the Jewish state, just that, the Jewish state, and it will be a peace of the recognition and security, then my government will make peace. I’m no exception, because the people of Israel want peace. And I think people understand that now.

As to the question of settlements, I think that raising this condition, something that hasn’t happened in 15 years of Israeli- Palestinian dialogue – nobody put this precondition – this is just costing us a great deal of time.

The issue of settlements has to be discussed at the end or in the context within these negotiations, not before. It has to be resolved. And we’re prepared to look into this issue, as into other issues. But we have to talk in order to talk about it. That’s obvious. And yet we haven’t. For six months, we have been waiting to talk about talks. I say let’s put that aside. Let’s just get on with it and start the peace process again.

BLITZER: We’re hearing from U.S. officials and Palestinian officials that the president gave them, the Palestinians, a commitment that, once the negotiations resume, they would resume where they left off, including such sensitive issues as the future of Jerusalem, allowing Jerusalem – at least part of it – to be under Palestinian control. Is that even available to you? Is that even open to you, that Jerusalem could be a subject for these negotiations?

NETANYAHU: Well, you asked me two questions in that question.

The first is, will the talks continue where they left off? Well, there were no agreements. I mean, the previous government spoke for three years, but came to no agreements. And we were elected with a clear mandate to provide peace and security. And, of course, we will do that.

We will take into account the 15 years of Israeli-Palestinian negotiations, but we will be committed to the mandate that we received. And that mandate seeks to arrive at a better future for all of us. That is a future of peace for our children and for future generations of Israelis and Palestinians, and, for that matter, any Arab party in the Middle East. We’re prepared to begin negotiations immediately or go anywhere.

BLITZER: Are you ready to talk about Jerusalem?

NETANYAHU: We have certain views about Jerusalem. I think the fact that it’s been united under Israeli sovereignty has ensured that, for the last four decades, all major faiths, Christianity, Islam, and Judaism, all monotheistic faiths, have enjoyed the great freedom of worship and access to their religious sites, something that hasn’t happened before since the rise of the three monotheistic religions.

It’s only under Israeli sovereignty that this city has been open to all religions. Jerusalem for us is our eternal capital. We don’t want to redivide it and see a Berlin Wall in the center of it. So, obviously, that’s our position.

The Palestinians will raise their point of view. And that’s clear. But we will talk about these things, but my position is well-known.

BLITZER: You know this United Nations commission, which just came back with a scathing report suggesting that Israel, your military, committed war crimes or something close to that, crimes against humanity, perhaps, even, during the fighting in Gaza. And I know you strongly disagree, but I want you to react to that United Nations report.

NETANYAHU: Now you’re being a diplomat. I strongly disagree? I think this is preposterous. It’s absurd. Israel was rocketed, pummeled for eight years by thousands of rockets that came from Gaza. We vacated all of Gaza, hoping that this thing would stop, and they fired not one rocket, but thousands of rockets, after we left Gaza.

So, what’s a country to do? I mean, what would you do if thousands of rockets fell on – Where are you talking from, Wolf, Washington, right? – Washington, D.C., or any part of the United States? You know what the United States would do.

BLITZER: The argument, though, Mr. Prime Minister, in this U.N. report is that you overreacted, and, in the process, you killed a lot of civilians.

NETANYAHU: We overreacted, did we? Well, let me tell you, after a million or so of our people were under rocket fire, progressively larger and larger circles of rockets falling on our cities, we did what every reasonable country would do. We tried to get at the rocketeers, those terrorists firing those missiles and rockets who placed themselves, embedded themselves in homes and schools and mosques, and you name it.

And we tried to target these people. We even sent them SMS text messages, telling the Palestinian civilians, please get out of harm’s way, cellular phones, you name it. So, we did everything possible to minimize the loss of innocent civilian lives.

And yet the Hamas actually was committing a double war crime, firing on civilians while hiding behind civilians. That’s a double war crime. They’re the ones who sort of get a free bill out of this biased U.N. report, and Israel, that is defending itself, is accused.

BLITZER: All right.

NETANYAHU: So, the terrorists are exonerated. The victims are accused. That’s an upside-down world. And I think this does grievous harm to the battle against terrorism, because the terrorists are basically being told, you get a free ride. All you have to do is fire at a democracy from built-up areas, from residential quarters, and you will get a clean bill of health. And I think it does a great disservice to peace, too, because we’re asked to take risks for peace. The international community says, if you take risks for peace, we will support your right of self- defense. And yet we did just that. We vacated Gaza in the hopes that this would advance peace. And when we’re rocketed with thousands of rockets and missiles from the places we vacated, people say Israel is the war criminal.

BLITZER: All right.

NETANYAHU: Come on. I mean, this is absurd.

BLITZER: If there is a trial at the International Court and the accusation is that Israel committed war crimes, or crimes against humanity in Gaza, will you cooperate with that?

NETANYAHU: Well, the question is, will any serious country cooperate with it?

I took note of the fact that the leading democracies that were in this U.N. commission, they opposed this. They were against this mandate, because it looked like a kangaroo court in the first place, where Israel was basically hanged, drawn, and quartered morally and given an unfair trial to boot right at the start of these proceedings.

I think this is wrong. But understand this. It’s not only we who will be damaged. It’s you, too. I mean, American pilots, NATO pilots, let alone Russia and other countries that are fighting terrorists, are going to be put on the dock, too, because it’s said that you cannot fight terrorists.

It means that all the terrorists have to do is put themselves in a residential quarter, and they receive immunity. And that’s not something that any country fighting terrorism can accept. And I don’t think you can accept it either.

BLITZER: Mr. Prime Minister, there was an op-ed article written in „The New York Times” back in July by an Israeli journalist named Aluf Benn, who writes for the „Haaretz” newspaper. And, among other things, he said that President Obama is ignoring Israel, has not visited Israel, even though he’s been to several Arab countries, and he’s not reaching out to the Israeli people, the way he’s reaching out to the Arab and Muslim world. He hasn’t given any interviews, as far as I know, to the Israeli press, for example, or Israeli television. Do you agree with that assessment?

NETANYAHU: I think that people should not rush to judgment. I think that these are two new administrations, my own new government and the new government in Washington. We have found a way to communicate. I think we have resolved a lot of the issues between us. We can have differences. That happens among the best of friends. It even happens in our own families.

But I think there’s a growing closeness that I have found. What people don’t know – and I’m not referring to the public diplomacy – but I want to tell you something about private diplomacy. There’s virtually not a day that goes by that the Obama administration and my own government don’t communicate on a very senior level on very important matters in a very confidential and respectful way.

And I say that advisedly. I’m choosing my words carefully. There’s barely a day that goes by without that happening. So, that should give you some indication of the growing, of the closeness of that relationship. And it’s getting better, for sure. There’s no question about it.

BLITZER: Because there was a very explosive charge in that same article on the op-ed page of „The New York Times.” And I will read it to you, because I want to give you a chance to respond. It caused a huge commotion. This is what Aluf Benn wrote in „The New York Times.”

„In Mr. Netanyahu’s narrative, the president has fallen under the influence of top aides, in this case, Rahm Emanuel, the White House chief of staff, and David Axelrod, the White House adviser, whom the prime minister has called – quote – ‘self-hating Jews.'” Is that true?

NETANYAHU: No. No, it’s not. I never called them any such thing. And I don’t think that. I have known Rahm Emanuel for some time. I just met David Axelrod today, in fact. And I think they’re American patriots. They think of what is important for the United States. And they certainly bear no enmity to Israel. They probably want the best for Israel, too. So, I think that this is – and we can have, as we say, occasional differences of opinion. But I never called them those things, and I don’t think that, and I’m sorry that anyone has given credence to this kind of nonsense.

BLITZER: Did you reach out to Rahm Emanuel and David Axelrod and reassure them that that that was a lie?

NETANYAHU: Well, we immediately denied it. And, yes, we did reach out to them, of course.

BLITZER: Did you personally call them?

NETANYAHU: I didn’t personally call them, but I had my aides communicate this to the White House as quickly as we could.

BLITZER: All right, let’s move ahead and take and look and see where the situation goes from here. You have now met with the Palestinian president, Mahmoud Abbas. Are there going to be more direct meetings with you and the Palestinian leader without the United States in the room?

NETANYAHU: I hope so. And I think we should.

I said to Mr. Abbas today, listen, we’re old hands. We have had many meetings in the past when I was prime minister during my first tenure, and I met him. And I respect him. And I think there is a lot we can do together.

Look, you know, we have lifted all these roadblocks in the West Bank, checkpoints. I’ve opened the Allenby Bridge on the Jordan River to allow the inflow of goods into the West Bank. So life is getting better. The IMF is talking about a seven percent growth rate in the West Bank.

And guess what, Wolf? I think we can top that. This is what we’re doing. I mean we’re easing those restrictions and opening up passage, even though there’s a certain security risk involved, because I think that prosperity is good for peace. I don’t think it’s a substitute for a political peace, but I think it really enables it because young Palestinians see there is a future there. I mean, they have jobs. There are investments. There are buildings sprouting out in Palestinian cities like Ramallah and Jenin and not missiles, as in Gaza, but, you know, high rises, apartment blocks, office buildings.

This is what I’d like to see. I’d like to see this dynamic of peace, prosperity and security. And if we meet, then we could get a lot more of this going and that’s good for us. It’s good for the Palestinians. It’s good for peace.

BLITZER: Mr. Prime Minister, a year from now, will there be an agreement, a peace treaty, if you will, between the Israelis and the Palestinians?

NETANYAHU: Well, I I don’t want to set a timetable on it or a stopwatch, but the sooner we get going, the sooner we’ll get an agreement. If there is a willingness on the part of the Palestinians to remove the main obstacle to peace. And the main obstacle to peace is the persistent refusal to recognize Israel as the Jewish state – the nation state of the Jewish people.

There are non-Jews living there and they have equal rights. The Arab citizens of Israel vote in the Knesset. They’re represented in every form of life and have political rights – equal political rights. But Israel is the state, the nation state of the Jewish people. And I think if we’re asked to recognize the Palestinian state as the nation state of the Palestinian people, then the least we expect from the Palestinians is to come right out and say yes, you know, it’s over. Yes, we accept the State of Israel.

BLITZER: But if the Palestinians do that, Mr. Prime Minister, are you ready to bite the bullet and make the tough concessions that have to be made? And everybody seems to know what the final agreement is going to look like. Are you ready to make those territorial concessions and go back, sort of, close to the ’67 line?

NETANYAHU: Well, I think we need to make sure that Israel can defend itself and defend the peace. Because even if the Palestinian leaders make that simple statement that they so far haven’t made, that they recognize the Jewish state – and I think that’s imperative for peace – it may take a long time for this to be internalized by the Palestinian people that have been subjected repeatedly to very harmful propaganda against Israel.

So we have to make sure that we can defend ourselves, that we don’t have these Palestinian territories become the sites for the launching of thousands of missiles and rockets, which is exactly what happened to us from the other areas we vacated.

We need a demilitarized Palestinian state that recognizes the Jewish state. That’s the winning formula for peace.

Now, look, any time Israel was faced with an Arab leader that genuinely wanted peace, whether Anwar Sadat or the late King Hussein, Israel made peace. And if President Abbas takes this forceful step, deciding that he wants to be a Sadat and not an Arafat, then he will find in me a partner for peace. And believe me, the Israeli people are yearning, praying, hoping that we have such a Palestinian partner on the other side.

BLITZER: Prime Minister Netanyahu, thanks very much for joining us.