Wallace gets quite a reaction from Putin by asking him about a recent change the Russian leader made.  Says Wallace, "There was a time when the regional governors were elected, correct? And all of the sudden, Putin says, 'No, no, no. I shall appoint the governors.' That's democracy? That's not democracy the way I understand it," says Wallace.  "The principle of appointing regional leaders is not a sign of a lack of democracy," Putin retorts. "You're absolutely wrong.  For instance, India is called the largest world democracy. But their governors have always been appointed by the central government and nobody disputes that India is not a democracy," says Putin.

The Russian leader then points to what he believes are drawbacks to America's own brand of democracy, including the Electoral College system.  "In the United States, you first elect the electors and then they vote for the presidential candidates. In Russia, the president is elected through the direct vote of the whole population. That might be even more democratic," Putin says.  "And you have other problems in your elections," he tells Wallace.  "Four years ago your presidential election was decided by the court. The judicial system was brought into it. But we're not going to poke our noses into your democratic system because that's up to the American people."

Putin also believes the U.S. democratic system does not travel well and that is precisely why he was against the war in Iraq from the beginning.  "Democracy cannot be exported to some other place. [Democracy] must be a product of internal domestic development in a society," says the Russian president.

But pulling out of Iraq is not an option, says Putin.  "But if the U.S. were to leave and abandon Iraq without establishing the grounds for a united and sovereign country, that would definitely be a second mistake," he tells Wallace.