On This Week with Christiane Amanpour, an interview with Secretary of State Hillary Clinton. First of all, this is public diplomacy. Obviously, Clinton is only telling the truth as it suits the long-term Mideast strategy. For example, Prime Minister Benjamin Netanyahu has ignored the settlement moratorium for which she's praising him -- but hey, that's what diplomacy is: Resisting the urge to slap someone in the face and yell, "Liar!"

CHRISTIANE AMANPOUR: Madam Secretary, thank you for joining us.

HILLARY CLINTON: It's a pleasure. Thank you for being here in Jerusalem.

CHRISTIANE AMANPOUR: How are the talks going? Are you down beyond the sort of photo-op stage. Are you into core issues?

HILLARY CLINTON: We really are, Christiane. And I have to say, it's been impressive to see the two leaders engage so seriously so early on what are the core issues. But these talks are already into very sensitive and important areas.

CHRISTIANE AMANPOUR: President Obama has said that given the talks going in a constructive way, Israel should continue the moratorium on settlements. Do you believe that that will happen?

HILLARY CLINTON: Well, that certainly is our hope. Now we've also said that we'll support an agreement that is reached between the parties. It took a lot of political capital for Prime Minister Netanyahu to achieve this moratorium. It had never been done before. And I, rightly I think, gave him credit for it about a year ago here in Jerusalem. At the same time, it's been in effect for the time that it was set for and the talks are just starting. So we are working hard to make sure there remains a conducive atmosphere to constructive thought.

CHRISTIANE AMANPOUR: Is there any flexibility you can see, any creative diplomacy that anybody's talked about, to get through this hurdle?

HILLARY CLINTON: They need to keep talking. And each party-- both Israelis and Palestinians need to figure out a way to make that happen.

And I think this President has said, "We are committed. We will stay with you. We will do everything we can to facilitate that." At the end of the day this has to be an agreement between Israelis and Palestinians.

CHRISTIANE AMANPOUR: Who do you think is making the biggest psychological leap, the biggest leap of heart?

HILLARY CLINTON: I think both are. You know, Israel today is under tremendous security pressure and they can look over the horizon and see even more when you've got a country like Iran standing by saying, "We want to wipe you from the face of the Earth and annihilate you." I mean that does concentrate your mind.

And on the Palestinian side, "We've been down this road-- you know, we're-- we're trying to build our own institutions of a new state. You know, can we really afford to not do it?"

HILLARY CLINTON: We don't want either party to leave these negotiations or to do anything that causes the other to leave the negotiations.

CHRISTIANE AMANPOUR: Are you urging President Abbas to stay?

HILLARY CLINTON: We are having very-- you know, very clear conversations with each. And I will certainly-- urge him to continue in the negotiations just as I've urged-- Prime Minister Netanyahu. And as President Obama has said, to continue the moratorium.

CHRISTIANE AMANPOUR: Do you believe you've convinced some of the skeptics, for instance the Foreign Minister Avigdor Lieberman, who you also spoke with. Have you convinced him that this two state solution, this protest, is the right one?

HILLARY CLINTON: I don't claim to convince someone whose views are are very different from that position. I think that he and many Israelis are quite skeptical, just as many Palestinians are quite skeptical. But I asked them, "What's the alternative? I mean what is the alternative?"

CHRISTIANE AMANPOUR: Can we move on to Iran? Can I first ask you, what is your reaction to the release of Sarah Shourd?

HILLARY CLINTON: Great relief. I-- I was so-- so pleased that this young woman was able to come home. I want-- the other two young Americans-- Josh and Shane, to come home as well. But as a mother, I've met with their mothers and I just can't even imagine how painful the experience that they themselves have had inside prison, but then of course the pain that their families feel. So thankfully she'll-- she'll be given a chance to be reunited now.

CHRISTIANE AMANPOUR: Will there be any further talks at any time soon on the nuclear issue? Is there any date, any agreement from the Iranians to meet in a P5 Plus One?

HILLARY CLINTON: Well, we thought that they were open to that. And we certainly had-- indicated our readiness to meet. Now at the United Nations next week I will be meeting with my counterpart for the P5 Plus One to discuss where matters stand, but as we're speaking right now I know of no meeting that the Iranians have agreed to attend. CHRISTIANE AMANPOUR: On the one hand you say that you're grateful that Iran released Sarah Shourd as a humanitarian gesture. You need to do diplomacy through the P5 Plus One on the nuclear issue. On the other hand, in your speech and in your comments at the Council on Foreign Relations, you said that it's a country morphing into a military dictatorship. Explain that?

HILLARY CLINTON: Well, Christiane, I'm concerned about what I see going on. And I am of course grateful and appreciative that Sarah was released and want to see not only her two compatriots but other Americans who are held without cause released as well. And we are concerned about the nuclear program.