Iran is undertaking a massive effort to expand its influence in southern Iraq. At the same time, that influence decreases the more the political process in Iraq progresses.

Americans have eliminated Iran's worst enemies, the Taliban in Afghanistan and Saddam [Hussein]. I occasionally threatened my Iranian counterpart in Kabul that one day I would send him a big bill for what we did. But, seriously, Iran is pursuing a dual strategy in Iraq. On the one hand, the Iranians, after decades of hostility, are now interested in good relations. On the other hand, they want to keep the country weak and dominate the region.

The Sunnis continue to see themselves, possibly for nostalgic reasons, as the most influential group and want a stronger central government - quite unlike minorities in other countries. The circumstances here are far more complex than many people in Washington imagine.

We're dealing with such enormous problems today that we have no other choice but to work together. If Iraq fails, if a religious civil war breaks out and the neighboring states are drawn into this conflict, if the Kurds declare independence and al-Qaida takes over an entire province - that's when the consequences will be dramatic.

The U.S. and Iraq will work together next year to shift Iraqi resources from unproductive subsidies to productive uses that enable Iraqis to earn livelihoods.

Today we're seeing fundamental conflicts within political Islam, with the fundamentalists on the one side and the moderates on the other. Who gains the upper hand means a great deal to the world.

Nation building is our central task, both in Afghanistan and in Iraq. And states, nations can't just be built with military power. Despite all difficulties, it's very inspiring to see how the Kurds, the Arab Sunnis and the Shiites are coming together here, how they're jointly defining the basis on which their state is to be built, the political course this state will pursue and who is to receive which cabinet positions.