In a wide-ranging interview with genial moderator Walter Isaacson, Richard Haass displayed an impressive mastery of U.S. foreign policy challenges around the world. Full video of this compelling discussion is available here, but here are the highlights in a nutshell:

China: China's leadership has "quite an inbox" at the moment, said Haass, citing the transition of power, the Bo Xilai scandal and now the controversy surrounding Chen Guangcheng, the blind dissident whose case has become a cause celebre on the eve of a crucial visit by Hillary Clinton and Tim Geithner.

In responding to this latest controversy, the U.S. has to balance its principles with a sense of realism. China not only holds much of our sovereign debt, but also is a necessary partner in dealing with other international conflicts that have humanitarian dimensions, including Syria and North Korea. These kinds of tradeoffs require a delicate balance, said Haass, predicting that a compromise that both sides can live with will be worked out behind closed doors; high-minded public pronouncements may not be helpful. The tension between principle and realism is always at work in the art of diplomacy.

The last three decades will not necessarily serve as a useful road map to the next three decades of U.S.-China relations, said Haass. Nothing is pre-ordained about the U.S.-Chinese relationship, and tensions between a dominant power and a rising power are the stuff of which history is made.

The Middle East: History will be quite harsh on the U.S. decision to go to war in Iraq and on the way it was executed, said Haass. One of the unintended consequences was to consolidate Iran as the dominant power in the region. He predicts that the specter of a nuclear Iran will be a problem that dogs us for years to come. The current combination of diplomatic talks and sanctions ("the honey-and-vinegar approach") may or may not work, and a preventive military strike is a thinkable - if terribly costly - option.

Haass dislikes the term "Arab Spring," since it implies hopefulness, and we don't yet know what will take root in the Middle Eastern nations swept by revolution. In Egypt, for example, he asked "Is it a push toward democracy, or is democracy just a mechanism to push for a more Islamist state?" He suggests watching the country's constitutional debate unfold to see how the new Egypt will treat the press, opposition parties, minorities and women.

Given the upheavals that have swept the region, the Palestinian issue is not top of mind for the rest of the Arab world at the moment. But Haass cautioned that it is still festering and will flare up again.

Europe: "Crisis was baked into the cake of contemporary Europe," said Haass. A currency union without a fiscal union was an accident waiting to happen. He sees a future of almost open-ended austerity for Europe, and notes that we are beginning to see popular pushback. The central problem, he believes, is that Europe doesn't have a growth strategy. The conversation needs to shift to issues like innovation and labor market reform.

Especially in the age of digital democratization, America's role in the world is shifting. Domestic failures like the Hurricane Katrina response and the financial crisis can deal blows to our international standing. In hard economic times, Haass says, foreign policy becomes secondary in the national consciousness - and open hostility to the outside world can take root. "Amercans don't appreciate how much the world looks to us," he said. Our moral authority rests not on military might, but on the example we set.