♪ announcer: from our studios in new york city, this is "charlie rose." ian: good evening. i am ian bremmer president of the eurasia group, filling in who is on assignment. john kerry remains for talks with iran, and in their 15th day, it is the longest trip abroad of any secretary of state since george schultz in 1983. a third deadline has come and gone, with talks now extended until monday. both signs claim -- sides claim

slow, hard progress it meantime, opposition is real in the middle east and here in congress. will we achieve a deal, and what are the implications of success or failure? joining me now from washington is suzanne maloney with the brookings institution, and from cambridge massachusetts, gary samore the executive director for research at belfer center at the school. i am pleased to have them both on this program. welcome. let me start with the question of the latest pickup -- pickup -- hickup, in one issue that has become very prominent is the question of the removal of this u.n. arms in bargo -- embargo. suzanne, why has that got in all

of the attention over the past couple of days, it is this an issue that can scuttle the deal? suzanne maloney: i think you are right that this is the most interesting item. there have been any number of issues that have been seen as obstacles, which both sides have focused on in their public statements. first, the technical issues surrounding their hip abilities, and more recently about the timing and the scope of sanctions relief, but this week almost out of nowhere, the iranians began talking about their insistence that the arms embargo part and parcel, but most particularly the embargo included in a resolution in 2010, they want that to go. this is something that the administration has been consistent in -- with its interlocutors in suggesting that it will remain in place irrespective of negotiations and so to see this arise at this

late date i think suggests that either there have been some very large issues that the two sides really have not had the time and opportunity to focus on, or from a more conciliatory point of view that the iranians are looking for an issue to either delay or tank the negotiating process in a way that will squarely divide the international coalition, the p5 plus one, that has been negotiating with them, and particularly a line china and russia more directly with iran would either the failure or the delay with that process. ian: i saw a statement that foreign minister lavrov actually said that the u.n. arms embargo has to go. it has to be one of the first things to go. that is a pretty significant gap implication between the united

states and the europeans. iranian negotiators also saying that the russians and chinese have a different perspective and that there are very different moves from the different countries with the p5 plus one, and that is confusing all of this, so, gary, what is your view on all of this? do you think the russians are basically taking a flyer here? are they moving away? are they looking to stick it to the americans at the last moment? are the iranians getting cold feet, or is this just one or two statements that really do not matter? gary samore: i think it matters a great deal, and i can understand for matters of substance why they would like the arms embargo to be lifted the russians because they want to sell weapons to iran, and the iranians because they need modern military hardware, and they are going to have extra money because of this nuclear deal in order to purchase

additional weapons. on the other hand for the u.s. and for the western powers, i think it is impossible to imagine we could accept a lifting of the arms embargo. i think that would not be politically sustainable, so from iran's standpoint, this was a good issue to it -- to pick, to wait until the end game, when most of the other issues have been resolved as far as i can tell, and we just do not know if the iranians will use this as a bargaining chip, and they will concede to keep the arms embargo in place for the time being in exchange for getting concessions on other issues relating to inspection or research and development limits on their enrichment program or whether they are serious about taking a stab at trying to get the arms embargo lifted, if not right away, then over a relatively brief. keeper of time, and knowing that they have the russians and chinese backing that, which

could very easily, it seems to me, it could very easily lead to a delay in the deal coming together, but i don't think it will result in a breakdown of the process, and i think ultimately, the negotiators will probably figure out a compromise so that a deal comes together. i just don't know if it will happen over this weekend. ian: that is fair enough. so if there is no deal by monday do we have another extension, and we continue with all of the sites in place, occasionally moving back and forth to their capitals, or are we going to take a break and not really come back for a while? gary samore: well it is very hard to make a call if you're not in the room. obviously, john kerry will have to decide whether or not he thinks an additional amount of time will produce a compromise on the remaining issues, or particularly the arms embargo, or whether he thinks they have reached the end in this round of negotiations, and there is no

room for further progress, in which case i think both sides would be willing to end to this round, to extend the interim agreement, because neither side once the process to collapse and make plans for having another round of discussions sometime over the summer. ian: so you really do not see -- when we see the russians and the chinese breaking, and the russians doing so quite publicly, and we k theee -- and we see kerry coming out and saying, we are not going to have endless negotiations, and the patience is wearing thin, you do not think the process is going to be derailed at this point? you think it is a continuation of gary samore: interim agreements, or we get a deal? -- continuation of interim agreements, or we get a deal? gary samore: neither side wants it to break down. they have not been able to

advance their program significantly since the interim agreement went into force in january 2014. rum iran's standpoint, a breakdown in the talks means a resumption of -- from iran's standpoint, a breakdown in talks means a resumption. the status quo of the interim agreement being in place, and we will try to avoid a breakdown especially a messy breakdown, where fingers are being pointed as to exactly who is at fault, and certainly the country that is seen as triggering the breakdown is going to be more vulnerable to diplomatic pressure, and neither side wants to be blamed for causing the process to collapse. ian: if we lose on monday suzanne, we don't get to a deal, who is more likely to be blamed for that at this point in the court of international public opinion? do you have a view? suzanne maloney: i think it is hard to say.

the iranians have done a good job of avoiding the blame for the delays in the process up till this point, and it really has been washington that has invested the most to try to bridge gaps where they have appeared. i think a real danger in not getting a deal over the course of the next 48 to 72 hours is what we saw after the last round, the sides came together in late march, negotiated round-the-clock for some days, and actually came to this legal framework in switzerland that was hailed as a big step forward, and then went away, and by the time they came back to the negotiating table, there was a lot of work to be done in terms of solidifying the positions they both achieved in that critical framework, so they effectively had to renegotiate some of what they had already agreed upon, and i think one of the dangers, and one of the incentives keeping everyone at the table right now is that we are this close. we know it will take work to get back to this point if we all

disappear for a week or two or three. we have got to try to get it across the finish line, that at the same time, there is a danger in that that compromises will be made in a way that will be unsustainable to either side once they go back to political capitals and have to debate to this. ian: is there a danger that the sanctions themselves start to road especially if americans are blamed as for why we have not gotten to a deal? again, i am thinking about the fact that their p5 plus one do not seem to be quietly as aligned as they have been. suzanne? suzanne maloney: i think they have been durable, and they demonstrate the ability of the u.s. financial system to sort of persuade the rest of the world that there is a choice to be made about doing business with iran and doing business with the united states, and that is not really a question for anyone in the world other than maybe uluru's, and i think this will

remain quite strong in almost scenario. -- other than belarus, and i think this will remain quite strong in almost every scenario. in the meantime, the chinese are maintaining a relationship with washington than they are in the potential upside for business with iran. they have already had a lot of opportunities that they have slow rolled in order to assure that they are diplomatically aligned with washington, so i think in the short term, we do not have a lot of fears of engines, erosion, or collapse. if the process were really to break down and we were going to see some sort of and to negotiations, then i think all measures are off. ian: gary, what about if we do not get a deal on monday? gary samore: i agree with suzanne, that the iranian's walk back on agreements. it is possible they could open

issues that have been resolved during this latest very intense round. there is a little bit of protection against that only in the sense that, as i understand it the documents are virtually completed, so there may be a few brackets you were there, but in the hundred or so pages of documents that have been agreed upon, it gives you a little bit more confidence that you can take a break and not reopen texts. it is not absolute proof, but at least it gives you some protection, whereas in april in lusan there was very little agreed text, or there were a lot of brackets in the text. in terms of backtracking, some external event could take place, which could jeopardize the negotiations. the middle east, as we all know is in the middle of an incredibly turbulent and unstable and conflictual phase with wars going on with iraq and syria and yemen and civil conflict in libya and many other

places, so with that kind of boiling stew, there is always a possibility that something could happen that would complicate the politics of reaching an agreement for either tehran or washington or both. ian: it has been a lot of talk this week that one of the reasons why this last deadline was important is because congress only had 30 days as opposed to 60 to look at and then approve the deal. it needs two thirds of the vote, so you just cannot have the republicans scuttling it, but do you think that in terms of it is dragging on and there is a longer period now, how much danger do we have that you get to yes, and congress gets to know? suzanne? suzanne maloney: it is still a minority danger. i think the administration has done a good job of effectively co-opting congress. they want to be out in public with their views on this but in the end, i think it will be very

difficult for republicans and other opponents of the deal to pull together a coalition of 66 or 67 senators who are prepared to override a presidential veto, a vote of disapproval, of any kind of agreement with iran. there is a danger that the 60-day period provides for more public antics on the part of congress, as well as some sense of dissatisfaction on the irradiance side that the agreement they may have committed to one of take that much longer to see a fresh phase of implementation. ian: do you accept that, gary? that is interesting. a majority of americans say they want to deal with this point. gary samore: i think the outcome of the congressional review has to deal with the substance. if it includes strong provisions for monitoring, strong limits verifiable limits on iran's ability to produce fissile

material and graduated sanctions relief in response to steps that i ran has taken, then i think the administration is in a good position to sustain the agreement, and whether it is 30 days or 60 days, it does not matter. if the administration makes additional significant concessions and has loopholes on issues that have not really been resolved yet, then i think it becomes more difficult, and it is conceivable they would lose enough support that they would not be able to sustain the agreement even in terms of sustaining a presidential veto so i think it is premature at this point to predict what the congressional review will look like. in general, i agree with suzanne that the most likely outcome will be that there will be strong congressional opposition maybe even majority support for a resolution of disapproval, but unlikely that congress would at the end of the day be able to muster enough votes to override a presidential veto, but i do

nothing think you can really make that judgment until you see the actual details of the agreement. ian: how do you respond to those who say irrespective of whether or not we have a deal that this is a regime that is going to get a lot more powerful and a lot wealthier, and they are going to use that wealth in ways that clearly is antithetical to american interests in the region and beyond question mark how do you respond to that, suzanne? suzanne maloney: i think iran's bad behavior has never been a function of its resources. the islamic republic. some of the worst occurred during the 1980's, at a time of tremendous resource constraint with iraq and other issues, so i am not particularly concerned that the influx of resources as a result of sanctions relief is going to alter what we know is a very problematic foreign policy. we have to confront it. we have to deal with that foreign policy irrespective of sanctions or resources

available. i do think that, you know, there is an argument to be made that iran will have other interests as a result of re-engagement with the world, that there will be some constraint on its willingness to go rogue and to cause trouble, particularly in the gulf, because of its investment in ensuring that it sustains its economy, but fundamentally, this is a country with which he had deep and i think long-standing divisions. those will not be resolved by a nuclear deal, and we are going to have to ensure that we have a policy that is well devised for confronting it. ian: and in addition to that, of course, we see a lot of folks, and in the region, netanyahu the saudi leadership very strongly opposed to a deal do you think that is an accurate read by them of their national interests, that they should oppose a deal from their

perspective or is that mostly posturing to get the americans to do more for them? suzanne maloney: i think whenever we are talking about allies, their fundamental concern is not the nuclear issue, even though that is part of the threat and part of the underlying worry about what iran is up to. fundamentally what they are concerned about is support to terrorists, to subversive groups, fraud, and its role in destabilizing some of its neighbors, but at the same time, we have to recognize that some of our own allies, particularly the saudi's and others in the gulf have either been asleep at the wheel or engaged in a way that has not been productive in terms of addressing some of the long-standing issues, so i think we have to be careful to avoid accepting the narrative of the gulf states, in particular, about how to handle iran. i think the administration has been right to try to craft a diplomatic resolution to the

nuclear crisis and right to try to address the issues of the islamic state, in the labonte -- levant corresponding to what the iranians are doing on the ground. ian: gary, we are focusing relentlessly on the technical side of the nuclear deal. we are not focusing on these other issues that many in the gulf states, the israelis think are more important. we are not focusing on cyber. we are not focusing on ballistic missiles. we are not focusing on hezbollah or proxy fights with our people in the region. is that a use of american sources? gary samore: i think it is. i think if iran were to get nuclear weapons, it would pose such a threat to the national security interests of our allies and partners in the region that

it is right to try to address that issue as a separate isolated matter, but we should also recognize that this is a transactional agreements that is being negotiated. we are getting restraints on iran's nuclear program in exchange for sanctions relief. it does not fundamentally change the nature of the iranian regime nor the various areas of conflict between the u.s. and iran, as well as u.s. allies in the region and iran, so to be sustainable any nuclear agreement has to be part of a broader regional context. that will try to take advantage of the time we buy under the nuclear agreement, in order to encourage critical change in iran, and to contain a rant influence -- to contain iran's influence. my guess is after a nuclear deal, you will see the administration be much more active in terms of trying to craft policies on iraq and syria and so forth that will both be

an effort to assure our allies who are very nervous about this agreement, as well as an effort to try to contain iranian influence. whether that will be successful or not in the short time remaining for the obama administration, i think this is going to be an exercise that is going to continue well into the next administration, because there does not appear to be any near-term and to the various civil wars and conflicts that are taking place in the region. ian: so with syrian policy very much in disarray, and with the obama administration or any of the republicans running for president, if we have an iran deal, do you see the united states working more closely with the armenians to try to bring about resolution or at least improvement and those two areas and how do you think that would be articulated, suzanne? suzanne maloney: i do not think we will see some sort of quick

condominium between the two countries. as gary said, this is very much a transactional deal. for the iranians, they want to get out from under the sanctions. but their interests in iraq and syria and elsewhere in the region remain very much as they have seen them. their perception of those interest has not changed and probably will not change, so i do not expect to see any sort of cooperation in the short term. also, there are any number of logistical issues, including that the key aspects of the iranian fighting force in iraq are under u.s. sanctions, so there really is no opportunity for direct coordination. ian: and yet on many items, the u.s. and iran are on the same side on some issues. do you think there will be more high-level strategic coordination, military discussions? if everyone is trying to defeat

isis, and that is a top priority, are you going to see the americans and the iranians seeing themselves as more cooperative strategically in an area that is clearly a great national security concern to the americans and also to the saudi's, the things going in a direction geopolitically that is not in their favor? gary samore: that the u.s. and iran can cooperate openly against the islamic state in the case of iraq -- i mean obviously, there is some tacit cooperation going on. we are training the sunni tribal fighters to do the house to house fighting in ramadi. the shia militia have been dispatched to the outskirts of town, but to a sense that we're trying to call together a sunni arab coalition to defeat isis, that would be severely undercut if we were to be operating overtly with the iranians in a way that would cement iranian influence in iraq, so i think

the limits on our ability to cooperate with the iranians in the battle against i.s. is going to continue, even after a nuclear deal. ian: it has been a long long --slog, but if we come out of monday with a deal, what does this mean for the region, and what does this mean for the obama administration, more broadly? gary samore: again, it really depends on the details of the agreement. if the detail is sound, and, in particular, has strong provisions for verification and monitoring, then it occurred iran's ability to produce nuclear weapons for some period of time, 15 years, maybe more, and the question is, having neutralized that issue whether we can take advantage of the hiatus in order to deal with more structural, underlying problems in the region and it is going to take a long time. i mean, the middle east is

fundamentally broken in the wake of the arab spring, and the u.s. appetite for deploying major military assets and ground forces to deal with that instability is very limited. that is going to continue for the next president, and i think we're going to have our hands full, trying to deal with structural things in the region. ian: gary, i have a sense that in the 11th hour, you think we are going to cave, and you have said this a couple of times, if it does not look great. if the deal is lousy, how will it be loudly, in your view? gary samore: well i think there were a couple of issues that were not fully resolved in april, if you look at the lusan parameters, and the most important has to do with the verification and enforcement mechanism. we, i think, have a very robust proposal that the p5 plus one have agreed to, the iranians

naturally are contesting that. a are trying to weaken the challenge inspection mechanism in particular. they may have agreed to the overall structure, but there are a lot of details in terms of time light and decision process and so forth, and my impression is that some of those issues have not been addressed yet, and i hope the administration feels comfortable keeping the process in place, not making further concessions, agreeing to continue the negotiations, because i do think that at the end of the day, the iranians want this agreement. i think they needed for sanctions relief, and the administration, i think, would be wise not to feel under any particular pressure to get a deal in the next 48 hours. ian: how confident are either of you that this country, that this regime can stay together, and if it doesn't, are we looking necessarily at a very messy

transition? suzanne, do you want to get a shot at this one? suzanne maloney: never predict change in iran. if you think about it, this is a regime that has survived everything short of the play civil insurrection at home, earthquakes, drought, just about everything else, so i think that in fact, it is a fairly stable regime at this point, despite the upheaval that we saw only back in 2009. we have seen a real reconsolidation since the election of president rouhani and i think that they are well prepared to handle the influx of capital, of contact with the wider world. in effect, in part because their population is already exposed to so much of this as a result of connections through the internet and other ways. that is not to say that iran will never change grid that is not to say that the islamic republic is going to be around forever, but i think that, in

effect, we can expect that we're going to be dealing with some iteration of the current leadership for some time to come, and we should make our plans around that. i ran can grow a great deal. it has got -- it is an incredibly wealthy country with an educated population and a really diverse resources base so i think we're going to see are a lot of opportunity. but at the same time, i read have the same ability to impact the international marketplace, and it will not draw the same kind of demand, irrespective of the political risk climate there, so it is going to be an interesting time but i think one that is relatively stable. ian: a lot of governments in the middle east would have thought they were relatively stable and found out they were less so in the recent years. i guess that is the western. gary, do you want to answer that? gary samore: i agree with suzanne. i think it is likely we will -- unlikely we will see a change. the islamic group seems to

pretty well entrenched. they survived a pretty serious, spontaneous, internal threats in the green revolution in 2009. in the longer-term term, i think it is very hard to predict. if someone dies, it is unclear who his successor would be. there is a very large group of younger people that have suspect loyalties to the theocratic state, and how that develops in the creature i think it's just very hard to say. ian: gary samore suzanne maloney thank you for joining me today. gary samore: thank you, ian. ♪

♪ ian: we now turn to china. a massive correction wiped out more than $3 trillion in wealth. beijing is working to turn it around, but with government intervention that many argue was a large step backward in the government plans for reform. the recent drama in the u.s.-china relationship, the u.s. office of personnel management revealed details of one of the worst hacking scandals in u.s. history, with beijing allegedly stealing information on 25 million people. the opm director katherine archuleta resigned today over the breach.

joining me is kevin rudd, president of the asia policy institute and former prime minister of australia. welcome, kevin. kevin rudd: good to be on the program. ian: xi jinping is doing his best and propping up the markets. we have got 30% down and the last couple of days have been almost as dramatic going back up, but intervention, and how does that look for a government that is trying to actually open up the financial sector? kevin rudd: i think it is important to that back from it a little bit and put it in a little context. 30% down from june, if you bought these stocks last june you'd probably be about 85% up, so let's understand that this is a significant correction in the market. you have got chinese assets which have been overpriced even against a basic analysis with

the standard price-to-earnings ratios, but to drive too much of an implication from this in terms of, number one, the overall performance of the market in recent times and two, what it means for the economy in general, and three, the direction of reform, i think we need to take a calm her -- c almer perspective, and let's face it, the chinese government is not the first to intervene in markets. the united states did, and i think the japanese did so in the early 1990's, and the hong kong government did so in the late 1990's. by larger orders of magnitude than this. this is a significant intervention by the chinese government, but it is not unprecedented. ian: but as you say, the chinese market was essentially in bubble territory, and yet the statements made by the chinese

leadership, by the state media, the interventions made certainly seemed both significant, a little bit alarmist domestically . are they just acting too conservatively? is the issue not that investors are taking a hit but rather they are being protected from markets actually becoming markets? kevin rudd: well, again if we step back from it at all, china is in transition. the economy is in transition. years or so ago, this was a socialist economy, where there was no market. 30 years later, it is a mixed economy. and then a central organizing principle for economic behavior, so this is the transition period, and i think what you see in as far as these actions by the chinese government on the stock market is a government which is learning the difficulties of handling a market in very turbulent circumstances.

i think this institution, the shanghai exchange ain't as old as the new york stock exchange and if you look at the new york stock range over a longer period of time we will find that interesting gyrations, as well. my real point is that this is a market in transition. it will take time. this has been a significant intervention and, yes, they have acted to seek to protect individual investors. ian: xi jinping has been lauded around the world were such strong leadership. is this the biggest knock on him as president that we have seen, or would you point to something else? kevin rudd: there is a great danger as we look at china that we are captured by the instantaneous rather than looking at where the country and the economy is going in the longer term. i am much less concerned, to be lunch, about what is happening

in china with the stock market than im about how sustainable the chinese growth rate is over time. that i think is a much more legitimate basis for link the public policy debate around the world that the stock market. -- for link the -- lenghtthy public-policy debate around the world than the stock market. rightly, i feel the real challenge they face, and if i were xi jinping, the thing i would be most engaged on would be the sustainability of the growth rate at 7%. i think they can keep it north of 6% over time. it is going to it harder. europe is bumping along the bottom, europe a bit -- america a bit better, and then chinese consumers are not consuming as much as the chinese government would want.

they are still saving like a frenzy. these are the big questions on the mind of the chinese policymakers, the transition and the growth model. the stock market, frankie, is a smaller concern. ian: wynette let the markets slip farther? again, a small piece of the economy 90 million investors, short-term, and people would have taken massive gains in the run-up. they had been told to do that. in other words, is the danger here not that they have left it alone and that this is not a problem but intervening too much? this requires opening the economy. does that mean that you do not want to see these kinds of interventions? kevin rudd: you do not want to see government interventions in this order of magnitude, but

again, the chinese actions are not unprecedented. it has been done elsewhere. a decade or so ago, it was done in hong kong, not far from beijing, but the overall point is this that this is a government dealing with a regulation of financial instruments and financial markets which historically they have not had to do, because they had a central plant economy, and secondly, sure, they are can learn about the impact on individual investors, and while they are not voters in the chinese system, they are concerned about public support for the government. they are not unique in that sense, so i think this is, frankly a stock market which is not mature. it is a stock market which only barely has 20 20 five years of history, and as a consequence it is a talk at length on the way through. american investors and investors in my country, australia, they

have seen ups and downs and ups and downs over decades, and you are accustomed to swings and roundabouts it comes to the stock exchange. chinese investors do not have that experience. so they have acted to stabilize the market. remember this. this is a one-party state. it is a country which says we are not about to become a liberal democracy. we are an authoritarian state. in my judgment, what can be best described as a state capitalist model, so it is always going to be different than what we anticipate in our own country. ian: so we should not worry about it in the short term pre-this will be gone in a week. but increasingly not democratic but nonetheless increasingly caught up with the demand of chinese constituents a component here, a component there, that is going to make them take their eye off the ball for these long-term structural

changes which are so hard to implement. kevin rudd: remember, our chinese friends are dealing with something in history. they are seeking to execute market reforms in the economy, which, as you know, has the ability of disseminating information right across society, as well while maintaining a fabric of a one-party state, and we looking across the collective west would say that is not actually sustainable long-term. xi jinping's determination out of the communist party is that he can ride against what we described as the inevitable forces of history, so they have embarked on what i consider a unique experience. we're going to have this consistent, difficult interrelationship between a state apparatus, which wishes to maintain political control, and on the other hand realizing that the optimal use of the resources of the chinese economy lie in letting the market rip so that is the dilemma. it is large.

how it is going to turn out in the next decade, difficult to tell, but i do know what xi jinping's idea is, and that is that he thinks he can reconcile these forces. ian: as a consequence of where the chinese and the americans are, challenges also in the bilateral relationship. let me shift you. 21.5 million americans with their records taken. a belief or an allegation from circles, including the u.s. government, that this originally emanated from china. not a great deal of response from the chinese government on this front. what does the u.s. china relationship look like to you, and how much of a problem is this? kevin rudd: well, ciber is a real problem not just in the u.s.-china relationship but in the u.s.-russia relationship, as well. it does point to an absolute need for what is called in the business now as rules of the

road, but in terms of state to state cyber activity, and also state and corporation cyber activity. at present, it is a bit like the wild wild west out there without a sheriff. that is what cyber land looks like right now in terms of protocols for how actors should behave, so in the overall spectrum of the u.s.-china relationship, this is one of about three or four big ones at the moment, but it would be wrong to conclude that this is the only one. and putting it all together, i think the recent develop its in the south china sea have been obviously watched acutely by the united states, not just the country and the region. the photographs posted by i think it was cnn, coming off the back of aerial surveillance by the united states of the china land reclamation activities in the south china sea i think cap

taken the debate about china here in the u.s. and america's relationship with china out of the think tanks and much more to the main street, as people see things which they believe and are concluding will impact the overall direction of the relationship. my argument is you need a framework for this relationship which can manage these sorts of very large differences and incrementally resolve them over time and at the same time place primary emphasis, primary emphasis on what you can do together in the world, and let me tell you, there is a lot of those, starting with the korean peninsula. ian: i will start with that, but before we get to korea, with the united date, if he is to me that you can look at a lot of what the chinese are doing, whether it is ciber, the south china sea, anti-monopoly issues and frame it as things the chinese are doing to americans we don't like.

is that an appropriate way to think about the challenges in the u.s.-china relationship, or should we be a little bit more balanced? kevin rudd: well, as a former prime minister of australia, i never come to another country and say this is what you should be doing. i cannot think that is polite or helpful, and how america constructs is responses for the people's republic as a matter for the u.s. party politics, but it is the beginning of wisdom to understand how the other person thinks. the american view of the chinese behavior in the south china sea is clear. if we are sitting in a tv studio in beijing with a similar question, it would be wise if the united states fly spy planes up and down every day and every day of the year and sometimes day in and day out, collecting data on us? why is it that the united states through its conflict have a life is in the west pacific? why are they seeking to contain

china's freedom from policy movement and freedom of policy action? surely, this is all part from the united states perspective of keeping china contained within its boundaries and, in fact hopefully at the end of the day seeing the chinese communist party ball and having just spent 12 days in china myself, frankly that is pretty much the internal narrative in so many parts of the chinese think tanks about what motivates u.s. policy. it is negative about what the u.s. is doing, as i fear the reaction to china is in this country, so if those two realities exist, the real challenge for the future is is it a good thing that this relationship just continues to deteriorate in the future and live, or should we begin constructing a different way in which such radically different countries with different political system can construct some common ground for the

future, and i have always been in the latter camp. ian: you just mentioned one of the areas for common ground is in korea. do you want to give us a sense of that? kevin rudd: yes. here in the united states, we are focusing on the nuclear negotiations, but let me tell you, if a are resolved and resolved successfully, i believe the lens will increasingly go to what is happening with the north korean nuclear program. this is a state which already has significant nuclear materials to manufacture up to five or 10 bombs. secondly, it has quite vividly advanced rocketry, and thirdly, it is in the business of trying to move it to rise weapons to put them on the ends of rockets, and if you were sitting in south korea, japan, or in a larger radius of the united states, if they manage to perfect icbm technologies, then friendly that lives as a much more acute and strategic threat for the

wider region that perhaps even those of iran, so as this unfolds over time, i believe there's going to be an increase in cooperation between united states and china on how you achieve the denuclearization of north korea. 10 years ago, very little common ground. now, i think xi jinping will see the north korean program as derailing so much of what he is trying to achieve for his country. ian: and now, a willingness, do you believe, on the part of china to talk about the peninsula if that was on the table? kevin rudd: i believe so, and very much so, and the sense of dialogue is very important. bear in mind, if you are looking at the world through the lens of beijing, you're trying to develop your economy, managing the market transition with all of the funds and twist in the

road, like the stock market, which goes out of control for a few weeks, and with the object of raising living standards elsewhere in china, where you still have hundreds of millions of people still in poverty, and the main game is to complete the development of your economy, and over here, you have got this lock in pyongyang, who have not exhibited the most stable of statecraft, and the attitude towards nuclear nonproliferation through his consistent underground testing program. from xi jinping's point of view, this is bad. therefore, the commonality of interest i think is becoming sharper. having the chinese and the u.s. engaged in this kind of dialogue is, i know come in both countries interest, and then large constituents think the same, so when i point to the future, yes, we can talk about the marketplace reform and the economy and its implications for

chinese growth into the future and its impact on the global economy. that is important. ciber critically important. but when i look at the north korean nuclear weapons program this is an area where the two countries, u.s. and china, have so much in common. ian: thank you. kevin rudd: thank you for having me on the program, ian. ♪

mom has always been one of those people who needs to keep busy. if she's not working in her garden, she's probably on one of her

long walks with bailey. she was recently diagnosed with a heart condition. i know she's okay, but it concerned me she's alone so often. so i encouraged her to get a medical alert button. philips lifeline offers the best options to keep her doing the things she loves in the home she loves. if she ever falls, or needs help, i know we can get to her quickly and with her condition that can be critical. and even though she doesn't typically go far from home, the button always goes with her. these days, she's still as busy as ever. just the way she likes it. innovation and you. philips lifeline. lifeline is america's #1 medical alert service. visit philipslifeline.com/caregiver today or call this number for your free brochure and ask about free activation.

charlie: democracy arriving in saudi arabia. prince saud al-faisal: even with the forces in iraq, presumably for democracy, that saudi arabia would be democratize before iraq. charlie: do you still believe it is true? saudi arabia will democratize before iraq? prince saud al-faisal: i believe saudi arabia is undergoing a reform that is not only serious ly pursued but adamantly pursued despite the opposition inside saudi arabia against modernism and in spite of efforts from the outside to influence it. charlie: how will it manifest

itself? what will it look like? prince saud al-faisal: the institutions will be our institutions. charlie: what will they look like? prince saud al-faisal: they will look like what comes from this date. charlie: your grandfather bought it together. prince saud al-faisal: not just the grandfather but the great great grandfather. this is a family that has come back again three times after saudi arabia was established. charlie: i think you know i have read it. prince saud al-faisal: that means that there is a connection between the people of the country and this family. if the family did not serve a purpose for the saudi's, they would be like any other family.

they would disappear from the scene but we are serving the people of saudi arabia, and that is why and the service we are going to do now is the service of bringing modernization to saudi arabia. charlie: the reforms coming from the crown prince. prince saud al-faisal: yes, he has started the reform by establishing the basic law with the rights of the citizens and responsibilities of government and establishing the council said his reforms started the ball rolling in saudi arabia, and the crown prince is pursuing it with vigor. charlie: it is said that saudi arabia is regardless of how

fast or the reality of a move to democracy it is a society that is in change having to do with some of the things you're talking about. prince saud al-faisal: this is absolutely right. this is a society in change but we have two aces in the deck that will work for us, and i hate to use a gambler's simile in this. it is a family that has its ears to the ground, that works for the interests of the people, that has the judgment to know if a bad decision is made to go back and correct it, to move with the people, for the people and not in spite of the people and the other aspect of that is the fate of the saudi citizens

in the region, which will be the binding force that allows this great transformation to happen in the country and keep the social cohesion of the country together and the unity of the country together. ♪ . .

♪ angie: ready for a hard sell. suppressed -- tsipras prepares to lay out his deal for grreece. hardliners say they cannot and will not support it. on the edge. iran nuclear talks pass another deadline. reports say an agreement could come at any time. and on a roll. chinese markets look for further gains as more suspended companies return to trade. welcome to "first up."