Khatami, 62, served eight years as president before leaving office in 2005, and he remains close to Iran's powerful Supreme Leader, Ayatollah Khameini. Khatami, whose trip is designed to foster a "dialogue between civilizations," spoke to TIME for more than an hour this week in a heavily guarded Washington hotel suite. As the most prominent of his nation's reformers, he repeatedly distanced himself from many of the hardline views of Iran's current leadership, but strongly criticized the U.S. for what he suggested is "arrogance" in Iraq. He also cited human-rights violations at both Guantanamo and Abu Ghraib, and warned of the "costs" of a U.S. or Israeli military strike on his country. But he endorsed a "two-state solution" to achieve peace between Israel and the Palestinians, and called the Holocaust a "historical fact." Excerpts:
TIME: This is your first visit to Washington. What do you think of the country that has been called the Great Satan?
Khatami: I never say "Great Satan." But I get really upset when Iran is called part of the "Axis of Evil." Even [Ayatollah] Khomeini [who coined the phrase] was referring only to U.S. policies not to the American people or America itself, which is a great and big country.
TIME: Do you accept a two-state solution between Palestine and Israel? And does the government of Iran accept that?
Khatami: My opposition to Israel is moral. The peaceful solution to the problem of Palestine is to recognize Palestinian rights. This is the only way there could be sustained peace in the region.
TIME: And a Palestinian state to exist alongside Israel? Khatami: Yes.
TIME: Your successor [as president of Iran] has said that the Holocaust did not happen. How do you explain that?
Khatami: I personally believe that he really didn't deny the existence of Holocaust. I believe the Holocaust is the crime of Nazism. But it is possible that the Holocaust, which is an absolute fact, a historical fact, would be misused. The Holocaust should not be, in any way, an excuse for the suppression of Palestinian rights.
TIME: Bruce Laingen was the top American diplomat held hostage in Iran in 1979-80. And he has publicly raised a question in connection with your visit: What does the government of Iran owe the American hostages? And he's not talking about money. Morally?
Khatami: I regret the hostage crisis, hostage-taking. And I sympathize with the hostages and their families for their loss and their hurt. But this was [also] a revolutionary reaction to half a century of the U.S. taking Iran hostage. Maybe the other side [the U.S.] would be more indebted [to Iran].
TIME: Is there a civil war in Iraq?
Khatami: We are really concerned about this, but [there is no civil war], not yet.
TIME: Should Iraq be divided into Shi'ite, Sunni and Kurdish zones?
Khatami: Definitely a bad idea. Iraq should remain unified. The solution is a democratic state. Numerically, the country is majority Shi'ite, but the government is not yet sectarian. The president is a Kurd. The head of the government is a Shi'ite. The Sunnis have great, effective participation. So the breakup of Iraq is very dangerous. A democratic state can prevent from this from taking place.
TIME: President Bush's father did not occupy Iraq. What about the occupation of Iraq now?
Khatami: I don't know what President Bush, the father, would have done. But I know that eliminating Saddam [Hussein] has been to our benefit, to the benefit of Iran. I also predicted that getting into Iraq would be very easy [for America], but getting out of it would be extremely difficult. And today, Saddam is gone but Iraq has become the center stage of extremism and radicalism.
TIME: If you had any advice for the current President Bush, what would it be?
Khatami: The President should dispense peace and justice and reconciliation across the world. I believe that not only have U.S. policies not stopped terrorism, they have actually exacerbated and increased the problem.
Khatami: We could have resolved the Iraq issue without invasion and occupation without the cost in terms of human life, American lives, Iraqi lives and money. This could have been resolved. If the U.S. had not had such a sense of conceit and pride, or maybe even arrogance.
TIME: And the withdrawal of U.S. troops?
Khatami: The occupation should end as soon as possible [but] I believe we cannot just leave this newly born democratic government to the hands of terrorists, insurgents and people who are seeking violence. The best way is to strengthen and to support the government, its security services, its police forces, and the best way to do that is also to get help from neighboring countries. The U.S. should know that it could get the help of Arab and Islamic countries to secure its interests,rather than without them.
TIME: The U.S. has accused Iran of trying to build a nuclear weapon, and Iran has denied this. Is there a way out?
Khatami: Concern about proliferation is definitely justified. But in this region there are three states that possess nuclear weapons, with hundreds of warheads. The biggest [arsenal] is Israel. And then Pakistan and India. If there are serious concerns about nuclear weapons, we should start by eliminating those that already exist. And the U.S. does not display any sensitivity whatsoever to these issues, to these nuclear weapons. None of the three have signed the Nuclear Non-Proliferation Treaty, but Iran has. Iran has the right to have access to nuclear energy. And we are ready to give every guarantee that we would use this for peaceful purposes. Our leader has issued a decree prohibiting the production and the stockpiling of weapons of mass destruction.
TIME: Do you believe that a military attack on Iran, either by Israel or the U.S., is a possibility that Iran should take seriously and guard against?
Khatami: Any aggression against Iran would have costs, serious costs for the U.S., more than for Iran. Public opinion in the world, and a great majority of the American public, would not support a military engagement.
TIME: Anything else?
Khatami: In Iran, whenever the issue is Iran's territorial integrity, no political faction, no political group would have any doubt as to defending Iran's actions. This unity and national consensus would be really costly for the invader and aggressor.
TIME: President Bush has promised that the U.S. will try to impose sanctions on Iran through the Security Council in the near future, if this matter is not resolved. What would be the result?
Khatami: Experience has shown that threats, pressure and coercion has never created a solution, has never made sanctions effective. Sanctions, and even more than that, possible military action and the use of force, would create more crisis in Iran, for the region, and for the world.
TIME: Do you believe Hizballah won the war in Lebanon?
Khatami: I would say Israel lost the war. Israel has fought Arabs many times. It could even defeat, in six days, three or four Arab armies. But, you know, confronting Hizballah, it couldn't achieve any of those objectives. Unfortunately, U.S. rushed into defending Israel, wholeheartedly.
TIME: How do you explain charges from the U.S. and other critics that there were human rights violations, terrorism and a buildup of Iran's nuclear program when you were president?
Khatami: I don't claim that there have never been human rights violations in Iran, but I [also] believe human rights are being violated everywhere, with different names. I believe the violation of rights of prisoners in Guantanamo and Abu Ghraib is not compatible everybody should condemn the violation of human rights, everywhere. Double standards will not help.
TIME: When you were president of Iran, you used to complain, publicly, that you couldn't implement some of your reforms domestically and you couldn't take certain actions in foreign policy. Who stopped you? Was it hardliners who are now in control of Iran?
Khatami: I think democracy is a process. And this is especially [true] when there is external pressure, and dangers, the threat to the internal integrity of the nation. Definitely, there are people who have been theoretically against me, but when a major power explicitly says that it intends to overthrow a government...
TIME: Are you talking about the U.S.?
Khatami: Let me not [use] names. Those who officially put in their budgets money to overthrow the Iranian government it's natural that the constraints on freedom and openness will increase as a result of a security environment [like that].