ELISE LABOTT, CNN GLOBAL AFFAIRS CORRESPONDENT: Secretary Tillerson thanks so much for joining us, and Happy New Year.
SECRETARY REX TILLERSON: Happy New Year to you and to all the Americans out there as well. It's a pleasure.
LABOTT: Let's start with North Korea. There was big news last night about the North and South arranging talks for next week. North Korea now, coming to the table. Is that an opening, maybe for talks with the US, or nuclear talks?
TILLERSON: Well, I think it's too early to tell. We need to wait and see what the outcome of their talks are. The President had a -- President Trump had a good call with President Moon yesterday morning, which I participated in. And their intent is to talk about the Olympics. Obviously a very important upcoming event for South Korea and the potential participation of North Korea in those Olympics, so our understanding is that's the content of the meetings. So, I think it's a little early to draw any conclusions at this point.
LABOTT: But it could be a positive sign, maybe, that North Korea wants to engage a little bit?
TILLERSON: Well, we'll see. We'll see. Perhaps. I know some are speculating that this may be their first effort to open a channel, but as you know we've had channels open to North Korea for some time, and so they do know how to reach us if and when they're ready to engage with us as well.
LABOTT: Well maybe you'll be next.
TILLERSON: We'll see.
LABOTT: If you can explain a little bit about what the US policy is on North Korea, because I think Americas are a little bit confused. Do the North Koreans have to give up their nuclear program before committing to talks?
TILLERSON: Our policy is the complete, verifiable, irreversible, denuclearization...
TILLERSON: ...of the Korean peninsula. That is a policy that is commonly held by everyone in the region as well.
TILLERSON: The Chinese have that as a stated policy. Russia has it as a stated policy. So, regionally, all of the countries in the neighboring area, as well as the international community, are well aligned on the policy. How we achieve the ultimate endpoint -- the final fully -- full denuclearization, the verification of that, and the irreversibility of it, clearly that's going to take some time.
So how we begin the talks is yet to be determined, but we clearly need a signal from North Korea that they understand these talks must lead to that conclusion. The pathway of how you get there, that is the nature of a negotiation. There'll be some give and take to achieve those objectives. So that objective has never changed.
LABOTT: Because you said, it's unrealistic for them to kind of sit down and say, we're ready to do it. But it sounds like, you know, they have to show some willingness, but then the mechanics of that are able to be worked out.
TILLERSON: We have to have a shared view that that is the reason we're talking. That's the purpose of these talks, and it is through those talks that North Korea actually can chart the way for themselves of a more secured future, a more prosperous future for their people as well. So there are very positive outcomes to these talks from North Korea as there will be positive outcomes for the security of the entire region. That is the nature of the negotiations.
LABOTT: Do you think -- a lot's been made about the President's tweet on the nuclear button, but now North Korea's talking with South Korea. Do you think that tough rhetoric has worked here?
TILLERSON: I think the rhetoric that North Korea understands is while it is our objective, and the President's been very clear, to achieve a denuclearization through diplomatic efforts, those diplomatic efforts are backed by a strong military option if necessary. That is not the first choice, and the President's been clear that's not his first choice. But, it is important that North Koreans as well as other regional players understand how high the stakes are in an effort to ensure our diplomatic efforts are fully supported, and I think to date, the diplomatic efforts have been supported very well in the international community.
If you look at the three U.N. Security Council resolutions on sanctions, the participation in those sanctions and a number of countries going well beyond the Security Council resolutions and imposing unilateral actions on their own, both economic as well as diplomatic. I think it is a recognition that the President has demonstrated to the world how high the stakes are. That's why we must achieve a diplomatic outcome, but the North Koreans have to understand that, and they have to understand that the penalties to them will continue and will only grow more severe in terms of sanctions actions and other actions until they do get on a pathway to achieve that objective that the entire world hopes to achieve.
LABOTT: So it sounds like this kind of good cop, bad cop if you will. Hold out the prospect of talk, but if talks don't work, military action. That might be the formula that you and the President will continue.
TILLERSON: I'm going to let you characterize that way. I'm not going to necessarily show all of our cards.
LABOTT: Let's go to Iran. You've said that you want to support "elements in the country that will lead to a peaceful transition of government." That sounds like regime change.
TILLERSON: Well, I think the Iranian have suffered under this regime, the regime that is -- it is a revolutionary government. They've described themselves as a revolutionary government, and the Iranian people have suffered under this regime. Very little good has happened for the Iranian people. Ever since this regime has taken power, they have suffered under economic sanctions because of this regime's destabilizing activities in the region.
At some point, people will decide this is not how they want to live any longer, but we always support a peaceful transition of power. We do not support violent transitions of power, but we do support peaceful transitions of power, and we've seen those expressions in years past with the large demonstrations at the elections in 2009, the demonstrations that we see in the streets today.
We are supportive of the Iranian people achieving their aspirations for a better quality of life, for greater freedom. We believe they deserve that, but it will be up to the Iranian people to manage that peaceful transition. We support that.
LABOTT: How do you help them facilitate that?
TILLERSON: I think by amplifying their voices. When they go to the street, we listen to why they are there, what are their concerns. And where there are legitimate concerns, and we agree that their concerns are legitimate, we should support the expression of those. And that's what the President has done, the White House, the Vice President, myself here at the State Department, through statements we've made is to give their voice amplification. We know the regime listens to the world, and that's why we've been working diligently with others in the world, including our European partners, to also amplify these voices within the country to say to the regime "you must address these concerns of these people, and you should address it by beginning a process of reform.
LABOTT: How does that factor into your decision on sanctions? Do you support waiving sanctions at this next certification?
TILLERSON: Well, we've been very clear on our policy in Iran. The prior administration focused all of the Iranian policy around the nuclear deal, the JCPOA. Our policy is much broader.
TILLERSON: We look at the totality of Iran's actions and behaviors. So the decisions around waiving sanctions relative to the nuclear agreement and decisions to take in terms of imposing additional sanctions on Iran that are unrelated to the nuclear agreement are -- there's a broad array when you talk about sanctions, and I think --
LABOTT: So non-nuclear sanctions, you're talking about?
TILLERSON: Well, I think some people get confused sometimes and it's understandable. But Iran's support for the Houthis in Yemen, their support for destabilization efforts in Syria, the funding of militias, the sending of foreign fighters, arming terrorist organizations in the region, Lebanese, Hezbollah, that has to be dealt with. And our sanctions are targeted at Iran's destabilizing activities within the region, while still maintaining all our efforts to ensure Iran never acquires nuclear weapons. So there are sanctions regimes built around both of those efforts, and what the President has done with his policies, is he's now looked at Iran in its totality and said Iran has to be held to account in both of these areas.
LABOTT: So it sounds like maybe, even if you certify on the nuclear assure, more sanctions -- more non-nuclear sanctions could be coming.
TILLERSON: They will be coming, there were non-nuclear sanctions announced yesterday by the Treasury Department in response to Iran's missile -- ballistic missile development programs, which are in violation of earlier agreements.
LABOTT: And more to come?
TILLERSON: In all likelihood, unless Iran alters its behavior. And again, this is the objective of the sanctions is to -- is to put enough pressure on these governments that they decide the price -- the cost of what they're doing is too high.
LABOTT: Well, and also, the revolutionary guard's grip on the economy, right? That's really what you're trying to...
TILLERSON: That's a lot of what the demonstrations in the streets were about, is young people and others saying, you know, there's too much of our economy and the wealth of our country going to support these destabilizing activities of the IRGC, as well as the IRGC's involvement in our economy. We're not seeing enough of the benefit, the elites are seeing the benefit.
LABOTT: Let's talk about Russia. You came in, the President wanted a better relationship. It's been a tough year. What do you see as the flashpoints next year?
TILLERSON: Well, it has been a difficult year with Russia. We clearly -- and I've said clearly, the President stated clearly -- our two nations should have a more productive relationship. Today it's very strained for all reasons that I think the American people well understand. Having said that, we have maintained a constant engagement with Russia, very active engagement. The President has had two face to face meetings with President Putin and he's had phone calls with him as well. I have a very active line of communication as does DOD with Russian counterparts.
LABOTT: But I hear when you're with Foreign Minister Lavrov, you're -- you're pretty tough.
TILLERSON: Well, we're -- he's pretty tough and I'm pretty tough, but I think this is -- it's important if we're going to deal with these tough issues. We have to be very open and candid and frank with one another about what both of us -- and I think Foreign Minister Lavrov is as committed to trying to improve this relationship as I am, these are difficult issues and we have made it clear that the keystone is really Ukraine.
TILLERSON: We have to make progress in Ukraine. Having said that, we have found areas of cooperation in Syria that have led to the near defeat of ISIS in Syria. The US has, along with the Iraqi forces, has completely defeated ISIS in Iraq, and now it's how do we stabilize and chart the path forward for a stable Syria -- so that it does not present opportunities for ISIS to reemerge or other terrorist organizations.
LABOTT: President Trump said that this whole Russia investigation has been kind of a drag on your foreign policy. That it hurt you with allies, that there's a lot of confusion. Has -- how has that impacted your dealing with world leaders in term of this cloud, if you will?
TILLERSON: It has had no impact.
TILLERSON: It's had none. It never comes up in our conversations, or in my bilats, or my dialogues with world leaders elsewhere. The domestic issues around the Russia involvement in our elections are not part of our dialogue elsewhere. I think the rest of the world recognizes it is a domestic issue, it's an important one. The Russians and we talk about it and we have said to them, "look, it's a problem."
LABOTT: You think there going to try to meddle in 2018?
TILLERSON: I don't know. I hope they don't.
LABOTT: Do you have evidence that they are?
TILLERSON: We have none yet. But we do know that Russia has involved themselves in other elections --
TILLERSON: -- in Europe and elsewhere. So it's -- it is a message that we convey to the Russian. The way I convey it is, "I don't understand why you do this. I don't understand what you think you're getting for this because it's not evident to me as to how's this benefiting you" --
LABOTT: Chaos in the United States benefits them right?
TILLERSON: How's it damaging -- but it damages Russia because we're not making progress --
TILLERSON: -- and they're not making progress with others. So we try to stay focused on the really big issues between us which is Syria and the situation there, situation in Ukraine, and Eastern Europe, and creating stability in Eastern Europe, and recognizing what Russia's concerns are. And we have very important talks coming up on the START treaty and the INF treaty as well.
LABOTT: You've said your redesign project is going to be the most important thing that you do here in terms of your legacy. More important than ending the conflicts in Syria or peace in North Korea. You're a year in now, you still feel that way?
TILLERSON: I think that was taken a bit out of context.
LABOTT: You do?
TILLERSON: My redesign for the State Department I think is the most important thing I can do for the State Department.
LABOTT: For over the long term you mean?
TILLERSON: And I think it will have a very long-lasting impact on the effectiveness of the State Department for decades to come. The specific challenges of the day are clearly our highest priority.
TILLERSON: Achieving and denuclearizing North Korea, defeating terrorism and ISIS around the world, improving the Russian relationship, improving the relationship with China and charting the way forward. Those are all high priority -- but what will have a lasting effect, because there will be other challenges that confront The State Department --
TILLERSON: -- in the future. How do we become more effective, more capable, more nimble, to use the intellectual capacity of the people in this department? What we really want to unleash -- that's what we produce here is ideas, we produce plans, we produce policies and then we implement them. How do we unleash that human talent? And today that human talent carries a lot of bags and weight around with it that gets in their way of being effective. That will have a very long lasting effect here.
LABOTT: Look there's a lot of unease in this building, you've seen it and you've seen the op-eds. Ryan Crocker for instance, star diplomat, him and Nick Burns, who've served in both administrations, you know, saying that some of the budget cuts, some of the leadership that you've put in the department is going to hamper diplomacy for years to come. How do you turn that around -- perception around?
TILLERSON: Well first I don't agree with their assessment. We'll see where our budgets ultimately end up but in my engagements with OMB as well as my engagements with authorizers on the Hill, I've made the point that the State Department's budget when we came to the State Department in February, we had a $55 billion budget, all time high. It was up from what traditionally, if you look back eight to ten years ago, we operated at around $37, $38, $39 billion. It is very hard to execute a $55 billion budget and execute it well. And so --
LABOTT: Let me just stop you --
TILLERSON: And so part of this is what are our policy objectives, what does the Congress want us to achieve, and then what are the resources that are necessary to achieve that, both in terms of dollars, but also in human capability? And that's what I've focused on is how do we achieve the objectives that the President wants to achieve? And then we understand we have an equal branch of government in the Congress. They have objectives they want to achieve. How do we accommodate all that, and then how do we resource it? That's what's important for me to focus on.
LABOTT: If -- we're surprised that we're having this conversation because if you read the papers, you should be gone by now. What is with these rumors about you leaving? How long are you planning to stay, or are you planning to stick around for awhile?
TILLERSON: I had a -- we had a very productive 2017 in the 11 months I was here. It was an extraordinarily challenging period because when the President came into office, we had so many policies that the President ran on in his campaign and made clear to the American people he intends to pivot those policies in a different direction. It takes a lot of effort to do that in that first year so that your partners, your allies, and your adversaries understand you've moved. We had a very successful, in my view, year of 2017, pivoting our policies and helping our partners understand those polities. We're now into the implementation and execution against those policies. I think we're going to have a very productive 2018. Again, the State Department gets stronger everyday understanding what we're trying to do, and I look forward to having a very, very successful 2018.
LABOTT: For the whole year?
TILLERSON: I intend to be here for the whole year.
LABOTT: I mean, look. The President said these rumors are fake news. Why are these -- these rumors are persisting. Is it a Washington thing?
TILLERSON: You tell me.
LABOTT: I don't know.
TILLERSON: You tell me.
LABOTT: Has the President given you any indication that you won't be around for awhile?
LABOTT: None whatsoever?
TILLERSON: None whatsoever.
LABOTT: Look, I'm sure you've heard about this new book out there about the White House. It's the talk of the town. It describes a President who's Foreign Policy is uniformed, that he's not engaged, that he's not interested, that he gets up and leaves meetings with world leaders because he's bored. You're at the White House several times a week. Is that your experience?
TILLERSON: I think among all the cabinet secretaries, I probably have spent more time with --
LABOTT: That's right.
TILLERSON: -- the President than perhaps Secretary (of) Defense Mattis, who spends a lot of time with him as well. I have never seen the President leave a meeting with a foreign leader. He is very engaged in these meetings, and in our policy deliberations and the meetings of the National Security Council with him to, as I've said, a big challenge was pivoting policies in a different direction than they were placed when the President took office. From North Korea, to the Afghanistan -- South Asia policy in Pakistan, to the Defeat ISIS Campaign, the President prioritized the threats early on, and that's the sequence in which we have addressed those, and in all those diliberations -- and these have been -- not been easy diliberations. These are not easy decision for a President to make. He has been very deliberative, he has listened to the arguments, he argues back as he should --
LABOTT: Because all of these --
TILLERSON: -- he pushes back, and in the end he makes a decision which we then implement. I would tell you on all of the major policy areas, the President has made the right decision on every one of those. How we got there involves a lot of debate, and it should involve a lot of debate. It's a very healthy exchange with the President and one which I think is important that we continue to have.
LABOTT: Look, everybody in this book questions his mental fitness. Have you ever questioned his mental fitness? And describe your relationship with him because some people would think it's, through his tweets and stuff, it's not a very good relationship.
TILLERSON: I've never questioned his mental fitness. I have no reason to question his mental fitness. My relationship with him -- and it is a developing one and I remind people and I think it's well known that he and I did not know one another before he asked me to serve as Secretary of State. So, we don't have a lot of history and past, so part of this is us knowing -- coming to learn and understand one another.
LABOTT: You're also two different kinds of people.
TILLERSON: Well, and we have different management styles. How I make decisions, how I process information. I have to learn how he takes information in, and process it and makes decisions, and that's my responsibility. I'm here to serve his presidency, so I've had to spend a lot of time understanding how to best communicate with him so I can serve his needs with information.
I do think one of my roles is to always give him all sides of the issues even when I know it's not the side that he really wants to consider. I think it's part of making good decisions is that I know he at least has had visibility to all aspects of the decision he's about to make, and that's my role as Secretary of State, is to provide him that full 360 visibility of what these decisions mean for our foreign affairs with allies, with partners, and with adversaries. And I think what comes out sometimes, what people see then, they think that is conflict when it's not. It's a normal process of having the President look at all sides and then saying, "I don't like that." And that's healthy. That's good. I mean, people should feel good about the way decisions are made because it's not just one giving in to what you think the President wants, rather helping him see the full array of all the options and what the implications of those are, and then he decides. He's the Commander in Chief, he's the President, he decides, and then we'll implement against his decisions.
LABOTT: You're a year into this job. What have you learned about yourself? Came in as a CEO, no government experience, working in an unorthodox administration. Reflecting back, what have you learned about yourself, and what might you do differently next year?
TILLERSON: You know, you learn things about yourself all the time. I was learning things about myself the last year I was Chairman and CEO at ExxonMobil. You never stop growing as an individual. So in terms of what I would do different, I'm going to build on my ability to communicate with the President better, my ability to communicate with others better. As I said, something I had to learn is what is effective with this president. He is not typical of presidents of the past. I think that's well recognized. That's also the why the American people chose him. They were tired of what was being done in the past. They wanted something to change.
So, I've learned over the past year better how to deal with the President, to serve what he -- I think he needs to know so he can make good decisions, and I've learned about the interagency process which was new to me, and that'll get better all the time as well, but that is our role here at the State Department. We want to take the foreign policy back to the State Department. It's created here, it's developed here, then we take it into the interagency process where it gets a thorough vetting --
LABOTT: It doesn't seem like it's been that this year though.
TILLERSON: No, that is exactly how the policies have been developed. Every single one of those policies were germinated here at the State Department and then taken into the interagency process.
LABOTT: Mr. Secretary, thank you very much for joining us, and good luck in the next year.
TILLERSON: Thank you. I look forward to it.