SHIMON PERES, FORMER ISRAELI PRIME MINISTER: Thank you.

GEORGE NEGUS: Should we presume that the future of the Middle East is going to happen without Ariel Sharon? Which I suppose is a way of asking, is he finished, politically, and what is his state of health?

SHIMON PERES: It's a medical problem and I'm not a professional to answer it, but it doesn't look like that he'll have it transferred on to active life.

GEORGE NEGUS: But does that mean that the situation that's occurred since he decided to form Kadima and you joined him - is that in jeopardy as well?

SHIMON PERES: I don't think so. What happened is, the death of the right wing in the Israeli politics. By him leaving the Likud he killed the Likud ideologically, in a clinical manner.

GEORGE NEGUS: Many people were surprised that you, a man who has been called "a dove for all seasons", joined forces with a man who a lot of people regard as a superhawk. A lot of people regard as a war criminal, even.

SHIMON PERES: Well, who has changed? Many people ask me, why did you go with Sharon? I say, why did Sharon go with me? Because while we made the same Government, but ideological, clearly, Sharon moved flanks from his previous position.

GEORGE NEGUS: Did you see it, or do you see it - the whole idea of what Sharon had and Kadima and now that you're part of that - as the last, best, even desperate hope for peace?

SHIMON PERES: The last - never, but the best hope, yes.

GEORGE NEGUS: Were you surprised that he has shifted so much in the last year or so, politically? This man who is regarded by so many people as anything but a man of peace. A man who has been accused of murdering women and children. A man who has been seen as the butcher of Sabwa and Shatilla. What was his motivation for suddenly feeling, at this point in his life, that maybe he was an instrument of peace, not war?

SHIMON PERES: He's not a fool, and even a hawk has two eyes, can watch a situation, and I think Ariel can count out that we don't have a demographic future as things stand.

GEORGE NEGUS: That you will be outnumbered by Palestinians?

SHIMON PERES: Outnumbered by the Palestinians. The war will go on.

GEORGE NEGUS: So let's get real - is that the way to approach?

SHIMON PERES: Yes, and I think there are winds of change. I think he reached the right conclusion. I think he's a very wise man and I wasn't totally surprised that he could have changed the direction. It took him time. We were together in the same Government. I could have watched it. We had a lot of discussions and he used to tell me all the time, "Look," he says, "finally I am with your ideas but you must be more patient, you're too impatient. You think it can be done in a few years and I think it will take a longer period of time."

GEORGE NEGUS: Have you seen Middle Eastern politics or Israeli and occupied territories politics more precarious, more unpredictable, more chaotic? We don't know about Sharon's future. We don't know how Kadima is going to go in the election and, more importantly, the Palestinian elections are also extremely different from what they've been with the entrance of Hamas into the equation.

SHIMON PERES: Well, everybody departed from his past positions, that's clear. On the Palestinian side, the fact that they're having for the second time, free elections is a novelty. It's not bad news.

GEORGE NEGUS: But a free election that now includes Hamas, who have been committed to the destruction of the state of Israel.

SHIMON PERES: Yes, suppose Hamas will win the elections, what are they going to do with their victory?

GEORGE NEGUS: What do you think they would do?

SHIMON PERES: I think they'll have a dilemma, because if it remains a terrorist organisation they will not be able to govern. If they want to govern they cannot be a terrorist organisation. None of us will go to negotiate if they come to the negotiations with bombs and pistols. It's nonsense.

GEORGE NEGUS: Do you believe that they can change their spots though? Do you think that a terrorist organisation, which is what you've always seen them as, who are committed, by their own charter, to never recognising the state of Israel, and fighting it by violent means. Do you think they can change their old habits, their old ways?

SHIMON PERES: That all belongs to the past, they can never create the future, because it's a protest. They don't have a message.

GEORGE NEGUS: So if they are part - if they don't get power - if they are just part of a new Palestinian Parliament and Government, will you deal with them?

SHIMON PERES: Part with arms or without arms?

GEORGE NEGUS: Arms negotiations are off?

SHIMON PERES: Yes. Would you go to have a rendezvous with a lady terrorist that carries a pistol under her dress? You wouldn't.

GEORGE NEGUS: But I guess they would argue, what does Israel have to offer in return? Will they stop their actions against Palestinian people?

SHIMON PERES: The fact is we left Gaza. We told them we would leave Gaza 10 or 15 years ago. They prevented us from doing it, and now they're almost forcing us to go back to Gaza. Those idiots.

GEORGE NEGUS: Is that how you see them, as idiots?

SHIMON PERES: Pardon?

GEORGE NEGUS: As idiots?

SHIMON PERES: Hamas, yes. Idiots in political terms. I'm not referring to - it's not a personal insult. If Hamas will change their minds - we are not fighting names, we are fighting situations and positions, so if they will change, it's OK.

GEORGE NEGUS: But you say you're not fighting names and there's nothing in a name, but there are a lot of Israeli people who believe that so many Israelis have died because of the terrorist actions of Hamas, they could never forgive and forget and deal with them.

SHIMON PERES: It was about the Fatah is the same. Look, we went to war with Egypt, many people lost their lives with Egypt. You have to make peace, not only with your enemies, but with your enemies that killed your children and your boys.

GEORGE NEGUS: So what will this mean? If Sharon's dream, the one that you've always had, the dream you've always had, comes to pass? What will it mean? Will that wall, that's received so much vociferous criticism all over the world, will that be the border between two states, and where does that leave Jerusalem?

SHIMON PERES: Well, I wouldn't answer this question before the elections but I think we shall abandon most of the West Bank and give it back to the Palestinians, but for the necessary security arrangements, I'm sure it will find a solution for Jerusalem that will keep the city united.
But in the meantime we can create the infrastructure for a new economy. We have to be politically separated states and economically coordinated, if not united.

GEORGE NEGUS: On the way here I had a taxi driver from Ben Gurion Airport to Jerusalem. He was a young man who said to me he wanted peace because he didn't want his children, two boys, to grow up in the same country he grew up in. What do you say to him? What chance have his children got of growing up in a completely different Israel and occupied territories?

SHIMON PERES: Not bad at all. Look, since Oslo, 10 years past - it's a long period of time in private life - historically, not such a big deal - but the fact is that in spite of all the pessimistic views, the Palestinians are going to ballots and having an election, and there is no single man who dictates their future or their destiny. So I mean, I'm not hysteric about it. I think life is wiser than the leaders. They will have to find a compromise, what are they going to do? Who will pay for their mistakes?

GEORGE NEGUS: You've made some very strong statements recently about Iran. Why do you think it is the greatest danger of our time and is it likely that Israel will take its own unilateral military action?

SHIMON PERES: It's the greatest danger because it is a combination of a very extreme group of religious fanatics that think that they have the permission of law to kill other people. And then they have - not only they're trying to build a nuclear bomb but also long-range missiles. It's a world responsibility. They're a danger to the world. I don't suggest that Israel will monopolise this danger. The picture is not as simple as it looks because Iran is an extremely weak country. They are a broken nation, they are a poor economy, the stock exchange, just a few weeks ago, fell down 30%, inflation is close to 20%, unemployment is close to 20%.

GEORGE NEGUS: It doesn't sound like a nation that could build a nuclear weapon.

SHIMON PERES: They are building with the helps of others and they've building with the poverty of their own people. Their own people are becoming poorer and poorer.

GEORGE NEGUS: Can I finish on this note? You're 82 - I hate to bring up age but you're 82. You've fought this battle for peace most of your life. Does it bother that, when people talk about Shimon Peres they talk about a man who's an elder statesman, a veteran of this long battle, this long fight for peace, but when it comes to being prime minister, a loser. When people use that word 'loser' to describe you does it bother you? It must.

SHIMON PERES: No. Maybe I'm a bad campaigner but also maybe that I was occasionally a little bit ahead of time. I don't have to be a prime minister, I have to - if I can be a maker of peace it's more important.

GEORGE NEGUS: Nice to talk to you, it always is, and I'm sure that you're going to be playing a role for some time yet.

A philosophical and perennially optimistic Shimon Peres there on the mixed legacy of Ariel Sharon and the emergence of Hamas, the militant Palestinians, as a real force in the Middle East conflict. But you'd have to say that, right now, both camps are in a strange state of suspended political animation. Stay tuned for the fireworks with the Palestinian elections going on and the Israeli elections at the end of March.