In an exclusive interview with The Wall Street Journal, Mr. Peres said Israel's survival as a Jewish state depended on its ability to conclude a two-state peace deal with the Palestinians. Below is an edited transcript.

The Wall Street Journal: Where should we begin?

Shimon Peres: I think there is a misconception about the whole story of peace both here and abroad. Israel wants peace, not because we want to make a gesture toward the Arabs -- By the way, it's nice to make a gesture. I have nothing against it -- and not because there is American pressure. Israel needs peace for her own sake. The choice is clear. Either live in one state with two nations or to have a two state solution. In other words, either live one on the side of the other or one inside the other. And living inside the other is impossible for them and it's impossible for us because of history, because of religion, because of poverty, because of a lack of resources. Every need, every want, every issue would be translated into national terms.

The man who saw it first clearly was David Ben Gurion. He did something that no other Israeli leader would have done. He accepted the 1947 map of the United Nations which gave Israel a tiny little piece of land, more borders than land. He was urged because he saw the survivors of the Holocaust found all the doors were closed and he said we have to have a port in the world. It happened that the Arabs rejected it and declared a war. The minute they declared a war, we didn't have any more a map. We had a front. Then he made a second decision which was also far-reaching and courageous: to build a state without borders. In the declaration of independence of Israel and in the constitution of Israel there are no references to borders. Build and we shall see. In my long talks with the Palestinians I tell them do likewise instead of arguing all the time about borders which are very hard to reach an agreement. You have your own territory. Build build. And only now, [Palestinian Authority Prime Minister Salam] Fayyad, late in the day is taking the philosophy of Ben Gurion.
Because talk talk is not good enough. You have to talk talk and build build too.

Most people forget. I used to think the best solution was what they used to call the Jordanian solution, for the Jordanians to preside over the Palestinians. We reached the London Agreement between me and King Hussein. I saw that once the London agreement was torpedoed we needed another partner in order to have a two-state solution. The other partner that was left was the Palestinians and among the Palestinians we have had to make a choice, either to take the extreme Palestinians like Jihad and Hamas and these sort of people or to take the more political Palestinians, which included [the late Palestinian Authority President Yasser] Arafat as well because Arafat changed his mind. To have one state with two babies in the Middle East is impossible. We must be realistic and honest to understand that what we need is not a victory, but what we need is a conversion. We need to convert a hostile neighbor into a friendly neighbor.

WSJ: You mentioned the misconception about Israel's attitude toward peace. Why does this misperception exist? Why do some people have the impression that Israel doesn't want peace?

Mr. Peres: Because people don't live on history books. They live on newspapers and television so they don't remember. People forget that in 62 years Israel has had to go through seven wars and two intifadas.
I am not surprised that so many Israelis lost their trust when they're being attacked time after time, time after time. And people also forgot that it wasn't Israel who went and occupied territories. Israel was attacked. We were outgunned, outmanned. Even Gaza. It's a puzzle why there are misconceptions from it. We left Gaza completely. We forced the settlers out. Mobilized thousands of policemen and paid 2.5 billion dollars in compensation. Why did we do it? We weren't under pressure from either the U.S. nor the Arabs. We wanted to give them a piece of land. Now many in Israel said what do you want? We left Gaza in their hands, why did they fire at us?

Before us, six hundred innocent people were killed in Kosovo. Did anybody ask for an investigation. There were events in Chechnya, in Afghanistan, in Iraq. Did anybody ask for an investigation. Why Israel? We weren't first on line. We gave back the land. And there is just one reason and that's the source of our complaint. There is a built-in anti-Israel majority in the United Nations. We don't stand a chance.

Now we are having an internal debate between which way to go. The rightists wing of Israel, they started wanting the two banks of the Jordan then they went to their own bank of the Jordan, finally today they are for having two states. So on principle we have reached an agreement. When it comes to negotiations it's a different story. The problem is first of all with your own people, they say why do you give away so much. They say why do you trust them? They shoot at you, they kill you. These are questions that even innocent people are asking innocently. And you have to answer in a very sophisticated manner.
It's news versus thoughts. News is quick and clear. Thoughts are sophisticated and complicated.

WSJ: You said Israel doesn't need a victory, but rather it needs to convert a hostile neighbor into a friendly neighbor. Do you believe that has happened? Do you believe there is a partner for peace now on the other side? And do you believe that the Israelis are ready to try peace again?

Mr. Peres: Nobody is born as a partner. Everybody is born as an individual. The question is not are they a partner. The question is can we create partnership and the answer is yes. The best example I can think of is Europe. Europe saw 1,000 years of hatred and killing.
For 1,000 years they weren't able to be partners and then in 3 years they became partners.

WSJ: When you look at this current government do you think it has contributed to the perception that Israel doesn't want peace? Do you think it has mishandled the peace process and the relationship with the Americans?

Mr. Peres: I'm sure that wasn't their intention. I think basically they would like to have peace. I don't believe there was any Israeli who would like to have a crisis with the United States government.
America is our best friend and has been for many years. Not only politically and not only financially, but also emotionally. The fact that 67% of American public opinion supports us is meaningful. Not just the administration, not just the parties. So who would give that up. Also when you analyze the American position it's not far away from our own. We are for a two-state solution. The United States is for a two-state solution. We are against terror. The U.S. is against error.
We are against seeing Iran leading toward a nuclear terroristic tendency. So is America. Basically we are not divided at all. But the world is changing in many ways for America and for us.

One of the problems of our time is it's very difficult for a leader to make an impression on his people. The best way for a leader to make an impression on his people is to demonstrate to his people that their country under his leadership is greater than it is really great. It's not a fight for ideology. It's a fight for ambition. Even [Iranian President Mahmoud] Ahmedinejad. What does he want? To be great. He is against the United States; he will conquer the Middle East. He will be great. And [Turkish Prime Minister Recep] Erdogan, in his own way, he thinks he can conquer the Middle East by smiles. Okay. Fine. So wherever you look… I don't want to name names because I don't want to insult anybody… but the idea of grandeur has become the appetite of everybody. The United States fortunately is great without declaring it. I spoke once with Russian leaders and I told them, don't compete with America. You are making a mistake. They said why? I said, look, American is blessed, by nature, by composition, by … first of all the land is the best proportion on earth in terms of the size of the land to the size of the people. There are people who are overloaded and there are countries that are empty. America has the right land for the right number of people. Russia has 11.5 percent of the surface of the world but only 140 million people. Eastern Russia is the size of India. They have only 6 million Russians. Second, they have the right proportion between natural resources and [human capital]. They don't live like us just off their intelligence. Neither do they live only off oil. They have built the country in a balanced way. Third point, America is located in a very wise place. An ocean on one side, an ocean on the other, Canadians to the north, Latin Americans in the south. America can wake up in the morning, look at all four corners of her world and she doesn't have to be nervous. When Russia wakes up, she sees China, India, Japan, Germany, the Balkans… it's not so simple.

There are two things this government did which I supported. One was to introduce a so-called economic peace, namely to be able to develop the West Bank in plain terms. That's a novelty. And it has a double meaning. One, the Palestinians can begin building a state. It's one thing to build a state in theory and another to actually build a state, planting a tree, building a home, or building a high-tech industry. And the results are good. Still we have problems with terrorists but by and large it's a major change. And it's also a signal to Gaza you could have the same thing. But if you don't want peace, you want to terrorize, it has a cost.

The second thing [Israeli Prime Minister Benjamin] Netanyahu, by agreeing to a two-state solution, brought an end to the debate in Israel at least on a theoretical level. Now comes the problem of security in the West Bank. I think we have to start with security for the simple reason because the nature of security today is different than what it used to be 62 years ago. Security today has two major problems, terror and missiles. It's less a confrontation among the troops; it's more a confrontation among brains. If you ask me where we have the best success concerning terror, I will answer immediately Jordan. This is the most complicated border because you know it goes like a snake, the length of the border is very windy. It's the longest border in a way. We have a common danger. It's the same with the Palestinians too. The three of us have the same danger. Hamas, supported by Iran, linked to Hezbollah. And secondly we don't need Jordanian troops in Israel and there are no Israeli troops in Jordan.
We simply coordinate how to prevent a danger from becoming an immediate and real danger.

When it comes to missiles, there is not yet an answer. I'm saying this because this defines also how to make the border and what is a success. Because the people on the spot know how to prevent terror better than foreign troops. You can put in Norwegian peacekeepers. But they wouldn't know the difference between Hamas and Fatah. They wouldn't know anything about the families, the connections, the tribes. It's only the people on the spot. Now we are trying this with the Palestinians and it works. There was one city already handed over to the Palestinians, Jenin. If they will do that elsewhere we shall continue to do it.

WSJ: Have you conveyed a message of displeasure or concern about Netanyahu's handling of the peace process and the relationship with the Americans?

Mr. Peres: Look, the best thing I can say is that what happened between Israel and America, it wasn't necessary for anyone. It happens sometimes that there are uninvited appearances. I am not sure they were planned or contemplated, but let's let bygones be bygones.
President Obama is the president of the United States, I don't think there is any responsible person in the world that can imagine a world without the Americans. There is no responsible man who shouldn't be interested in the success of the American president. I have had several meetings with Obama and I was profoundly impressed by one thing, that his commitment to the security of Israel is constant, immovable and expressed in deeds. I wouldn't belittle that.

WSJ: Do you believe the relationship with Washington is on the right course now and that people have appreciated mistakes were made and corrected them or are you still concerned?

Mr. Peres: I am concerned. Because of the shortage of time. They say four months. That's 120 days. You take out the weekends. And take out the flights. It's a really short time. Also, I know there are things that are not under our control. Basically, having been myself prime minister, I know it's an illusion to think that prime ministers are controlling realities. They are being controlled by realities. Many of them are forced to do things because of unexpected developments. I don't think they are irresponsible. Most of the prime ministers I know in Israel, in Europe and elsewhere, have had to do things that they didn't like. And we are living in a world which is changing all the time, the structure, the strategies, the priorities.

WSJ: Can Netanyahu, will Netanyahu, make the concessions necessary to make peace?

Mr. Peres: I am trying to give you an honest answer. Let me say it a conditional way. Netanyahu has a dream and a nightmare. His dream I believe is peace like all of us. His nightmare is Iran. Were we to get rid of the nightmare, I would think that the dynamics of peace would become more evident. And by the way, the problem of Iran is not an Israeli monopoly. It doesn't belong to us alone. It's a world problem.
And we see the contradictions between the need to have a coalition and the cost of having a coalition. Napoleon said I prefer to fight against a coalition than with a coalition. This is true in politics as well.

WSJ: Are you saying that this government won't make peace until the Iran problem is dealt with?

Mr. Peres: It's not as mechanical as that. I think the two things will be developed in a parallel manner, the peace process and the way how to contain or prevent the Iranians from having a nuclear bomb. There is no simple link, you can't synchronize a day or the process. It's impossible. There are so many forces involved and only a few of them are under control of the leaders.

And one thing that can make hope stronger, is that the differences between Israel and the Palestinians are not as big as they used to be.
Even the economic peace, people didn't take it seriously, but it has an impact. Israelis lost faith in Palestinian behavior and Palestinians lost faith in the process of peace. Somehow the Palestinians got the perception that peace is a summit meeting, a photo opportunity, you shake hands and nothing is happening. It doesn't bear fruit. What is happening in the West Bank? For the first time they are seeing the trees and the fruits of the trees. For the first time. It may not be great trees and the yield may not be tremendously great, but for the first time you can see that a nucleus can grow a tree and a tree can bring fruits.

And on Iran, I think that the greatest mistake was to ignore the moral confrontation, about the nature of the Iranian government. It should be a shame for any country to have [Iranian President Mahmoud] Ahmadinejad as the guest of honor. He doesn't deserve it. He's threatening to destroy another land. Among the members of his cabinet he has a minister that Argentina says is a war criminal. We forgot all this. I read that President Obama is a great admirer of Reinhold Niebuhr. I am a lucky man and I was able to listen to lectures of Reinhold Niebuhr. He was lecturing at the New School for Social research in New York. The lectures were about the basis of Judaism and Christianity. He gave the six most brilliant lectures I ever heard in my life about Judaism. Just brilliant. And he started by saying that the greatest problem of the entire life is moral corruption. In my eyes, the Iranian government, not the Iranian people, are today the expression of moral corruption. I wouldn't give up the fight. In my judgement, for the young generation, for all of us, to take the moral aspect is even more important than taking the economic one. He kills people. He hangs people in the streets. He kills people because they are homosexuals. He shoots at demonstrators He smuggles money. He supports all terror. He's the center of terror. For heaven's sake, take this campaign. Don't let it aside. If there is no moral divide we shall not win the war, or the campaign I'd rather say. So I would do that and economic sanctions and also an envelope against the missiles of the Iranians and not let them build a bomb.

WSJ: What's your opinion of the course America, the international community and Israel is taking to stop Iran's nuclear program?

Mr. Peres: I would like to see the declared policies of President Obama implemented. That is my first priority. But I would act with a moral compass. Look at what's happening. America is fighting for liberty and being accused of repression. Now to say that Iran is the fighter of liberty, what an absurd idea. Nehru once said something
nice: he said what is the difference between the Soviet Union and the United States of America? He said, in Russia, the situation is terrible like hell but the communists claim they know the way to paradise, while in America maybe they have a paradise, but nobody knows how to explain it.

WSJ: Would you support, do you believe that a nuclear-armed Iran warrants Israeli military action?

Mr. Peres: I won't speak about that. I don't think we have to include it, I don't think we have to exclude it.

WSJ: The interdisciplinary center recently called together Israel's top thinkers on Iran for a war game the premise of which was the day after Iran gets a nuclear weapon. Has Israel already begun to operate on the assumption that Iran will get a nuclear weapon?

Mr. Peres: I think it's good they discuss everything. But there are two problems in Iran, not just what will happen after the bomb but what will happen after the ayatollahs. Who says the ayatollahs will remain forever. And what will happen first? Maybe the prevention of the bomb, and maybe the toppling of the ayatollahs. Because bombs don't fire themselves. When the world goes into deeper analysis of the Iranian issue, maybe the solution would be about the nature of the holders of the bombs, rather than the bombs.

WSJ: Can a nuclear Iran be deterred, is this something that Israel can live with?

Mr. Peres: I suggest we let the world leaders handle it and Israel will be a disciplined participant. But nobody doubts where we stand.
But we don't have to picture ourselves greater than we are.

WSJ: Elvis Costello just cancelled his visit here. What's your explanation for this growing campaign to isolate, and delegitimize and boycott Israel?

Mr. Peres: I have talked to many of these people who criticize Israel…

WSJ: Did you speak with Elvis Costello?

Mr. Peres: No, but I spoke with the people who criticize Israel who say aren't you concerned about the attempt to delegitimize Israel. I said I am concerned but more about you than about us. Because when you delegitimize us, who are you legitimating? Who? Hamas? Ships are going to Hamas, because Hamas doesn't want peace? Because Hamas wants terror? What are you doing? All the dark forces of the world, that's the alternative to Israel. Can you stop terror without using military arms? Please tell us. Don't keep a secret. You didn't go through seven wars in 60 years. We did. Many of the people who criticized us when they were in crisis they asked for American soldiers. Let me remind you that Israel was wise enough never to ask American mothers to send their boys to fight instead of us. My god, we have it enough and we gave back enough. We gave back for peace for everything. So I am asking what is their legitimacy. What are you for? I want to understand. You think the system in Iran is better than the system in Israel? You think Hamas is better than Fattah? What are you doing? Do you have a way to stop terror? Please tell us, we will gladly do it.

WSJ: What do you think of Mr. Fayyad's role in this, his campaign to boycott the settlements, etc?

Mr. Peres: I think it's a mistake what he is doing. But since I appreciate very much his building, you see, apparently he wants to balance the building by taking some anti-Israel measures to win support. I think it's a mistake. I think if you want peace go the whole way for peace. But all these empty gestures of boycott they create bad blood, which again holds back the support for peace. What do you need it for? You think this will change our view? On the contrary. I think it's a mistake.

They don't have to support the settlements. They have to support peace because Israel has shown we can be flexible about settlements too like in Gaza. And even now Israel says we should leave a great part of the West Bank. And by the way, whether you like it or not settlements are employing 30,000 to 40,000 Palestinians. They are harming themselves.
It's not effective economically, but it is revolting politically.
Don't do it.

Look at what they did in South Africa. You need a sort of forgiveness on both sides, not to raise anger, but to raise forgiveness. Israel didn't suffer from economic boycott. Israel doesn't make its living off the land in the West Bank, we make the living off of science and intelligence. I myself founded an organization, the Peres Center for Peace, that all its purpose was to help Palestinians. Why did we do it? Because we think peace needs a climate. So don't scream through a loudspeaker about the negatives. Particularly when we're negotiating.
I would understand if there were no negotiations. But If you negotiate, you must understand, when you negotiate with another party, don't raise the anger, don't raise the suspicion, it's of no value but a negative one.

I appreciate what Fayyad is doing in the West Bank, and I want to help as much as I can. I appreciate Abu Mazen [Palestinian leader Mahmoud Abbas] too and Abu Ala [former Palestinian Prime Minister Ahmed Qurei]. I meet them, I speak with them. When I say they make a mistake I don't say they are the mistake. They are the partners that occasionally make a mistake.

By the way, the Lord that gave wisdom to all of us permitted us to make a few mistakes as well and we use, all of us, this privilege from time to time.