Senator Barack Obama appeared this morning via satellite on Morning Joe to discuss his foreign policy proposal. Transcript follows…

JOE SCARBOROUGH, MSNBC ANCHOR: You know, guys, America has gotten its foreign policy wrong with Iran since 1953. There’s a great book called “All the Shah’s Men” that just shows all the mistakes that we’ve made over the past 40, 50 years.

Well, the New York Times today talks about a dramatic new break with our foreign policy. Barack Obama has proposed it. No major presidential candidate has ever proposed anything like that.

And he’s with us right now.

Senator, thank you so much for being here.

SEN. BARACK OBAMA, D-ILL.: Great to talk to you, Joe.

SCARBOROUGH: Hey, Senator, this is a dramatic break from, I guess, 28 years of foreign policy toward Iran, since 1979. Why do you decide to step forward with this proposal now?

OBAMA: Well, it’s consistent with what I’ve been saying in the past, Joe, which is that Iran has been in all sorts of ways an irresponsible actor. They have been funding terrorist groups like Hezbollah and Hamas. They are trying to develop nuclear weapons, and if they did, that would trigger an arms race in the Middle East. They are helping militias inside Iraq that threaten our troops.

So there are a whole set of reasons why they are a big problem for us.

But what is also true, as you pointed out in the open, is that we have not dealt with them very effectively. We have consistently threatened them. We undermined their democracy in the past. There are those memories of our intervention that continue to cloud the relationship.

And what we need to do is to send a clear signal to them, we don’t accept their behavior, but there’s the possibility of us setting our relationship on a more sensible footing.

And that’s going to involve maintaining the sticks that we have, and maintaining military options. But also carrots, and sending a clear signal to them that they could potentially rejoin the community of nations in a more effective way, both for their economy and for their people. And we haven’t had those kinds of direct diplomatic talks in a very long time.

SCARBOROUGH: You know, Senator, this is a dramatic shift not only from the Bush administration policy, but also from Hillary Clinton’s position. She signed on to a resolution that a lot of people said could have been written by neocons.

Do you think her approach toward Iran is a dangerous approach for America to take moving forward?

OBAMA: Well, I think there is a very real difference between myself and Senator Clinton on this issue. She signed on to an amendment that suggested that how we structure our forces in Iraq should in part be to avoid any increased influence by Iran in Iraq. Now, that is an entirely new rationale for our operations there.

Ironically, the precise thing that has strengthened Iran has been this invasion of Iraq. And they have vastly expanded their influence in the Middle East. They’re the big strategic winners of our invasion of Iraq.

So what we need to do is to create a situation where they’ve got a series of different incentives. They have incentives to behave in a responsible way, and if they do, there are concrete rewards that would be helpful to them.

And we — part of that is us saying we are willing to talk to them directly. There are reports that over the last several years after their help with us, when it came to Afghanistan, that they were willing to talk without preconditions and George Bush and Dick Cheney rejected though overtures.

I think that we have to explore them to see if we can resolve some of these conflicts without engaging in yet another front of military action.

MIKA BRZEZINSKI, MSNBC ANCHOR: Well, certainly I think this will reignite the debate over whether or not, and how we deal with Iran.

Senator, it’s Mika Brzezinski here. Thanks very much for being on the show.

And given the multiple Brzezinskis working with you on foreign policy, I won’t ask you about Iran.

I’ll just maybe commend you for your dancing. Great dancing on “Ellen.”

OBAMA: Thank you.

BRZEZINSKI: That was something else.

OBAMA: Not bad, right?

(LAUGHTER)

BRZEZINSKI: Hey, you know what?

OBAMA: I can — I can bust a move. No doubt about it.

BRZEZINSKI: You can bust a move. And I actually was very impressed.

SCARBOROUGH: We both decided we’d much rather see you dance than Rudy Giuliani.

BRZEZINSKI: Yes. We took a poll, and you won.

(LAUGHTER)

Speaking of polls…

OBAMA: Thank you.

BRZEZINSKI: … Senator, there was a lot of build-up to the debate, a lot of noise — people asking, “Is he going after Hillary Clinton? Is he going to, you know, perhaps get nasty toward Hillary and talk about the Clinton legacy or the implications of a Clinton presidency?”

We didn’t see that during the debate. And I’m just wondering, given some of the poll reactions that we saw after the debate, do you think the media is looking for something different in Barack Obama than perhaps what the voters want, specifically voters in Iowa?

OBAMA: There’s no doubt about it.

Look, I don’t do nasty. If that’s what folks are looking for, they’re going to have to go someplace else.

But what we know is that after the debate, to the extent that there were focus groups there, I was declared the clear winner.

I think there’s a way for us to engage in a serious policy debate and point out serious differences while still being civil.

And part of what I’m trying to do in the campaign is what I want to do as president, which is be in a position where I can bring people together to actually get stuff done.

And it is working very well in those places where I have a more unfiltered access to the voters, like Iowa.

And, you know, one of things I’m hoping is that at some point the national press and pundits start looking at what’s happening on the ground where we know that we’re going to have a contest in just about 60 days.

BRZEZINSKI: It will be fun to watch.

SCARBOROUGH: All right, Senator Barack Obama, thanks for stopping by, talking about this dramatic, this historical proposal with Iran. We greatly appreciate it.

BRZEZINSKI: Thank you, sir.

OBAMA: Thank you, guys. Appreciate it.