Russia's attack on Ukraine is a 'game changer for Europe,' CFR fellow says

Council on Foreign Relations Senior Fellow Charles Kupchan discusses Russia's ruble crashing, sanctions on Russia by the U.S. and its Western allies, and the outlook for the Russia-Ukraine war.

Video Transcript

- But first, the very latest on the conflict between Russia and Ukraine. Talks between a Russian and Ukrainian delegation underway along Ukraine's border with Belarus in the first direct talks since the fighting began. Meanwhile, here in New York City, the UN General Assembly is meeting in a rare special session to discuss the latest Russian actions against Ukraine.

The US is now stepping up its sanctions this morning, imposing a ban on any transaction with Russia's central bank, a historic move that essentially freezes all of its assets in the US, and all of this coming as we continue to see these crippling sanctions take fold. Over the weekend, we saw the US and Western allies move to cut some Russian banks out of the financial messaging system known as SWIFT, the US also imposing direct sanctions on President Vladimir Putin, Foreign Minister Sergei Lavrov, and its national security team.

And over in Europe, the EU has now moved to block more than half of Russia's central banks for reserves. It's also moved to impose a blanket ban on all Russian planes. That means Russian aircraft can no longer take off, land, or fly over the EU. The impact of these sanctions, we've already said, taking shape here with the Moscow Exchange closed for the day, the Russian ruble crashing, falling to its record level against the dollar. That prompted the Russian central bank to more than double its key interest rate from 9.5% to 20%.

And we've seen those images of Russians rushing to withdraw money from their banks on concerns that some of these banks could start limiting cash withdrawals, all of this, of course, happening alongside the fights in the field here, Russian forces continuing to press into the capital of Kiev and the second largest city of Kharkiv.

We should mention the humanitarian toll continuing to take shape here. The UN reports more than 400 civilians have now been killed in Ukraine so far, while 500,000 Ukrainians, half a million, have fled the country. There's a lot to get into this morning.

I want to just bring in our first guest for the hour. We've got Charles Kupchan, Council on Foreign Relations Senior Fellow. And Charles, we spoke to you a few weeks ago in the anticipation of the fight escalating and the way we have seen play out over the last several days. We're now starting to see these sanctions really start to cripple the Russian economy. What are your thoughts?

CHARLES KUPCHAN: Well, the Russian advance has not gone as smoothly as the Russians had hoped. The Ukrainian military is putting up a fierce fight. Sadly, I don't think that the Ukrainians will be able to block the Russians. We've seen armored columns now coming in to the country. So my guess is that we will see Kharkiv, Kiev, and perhaps other cities fall in the coming days.

Putin knew that he was going to get hit hard with sanctions. These are very significant sanctions, going after Putin and his foreign Minister Lavrov, taking some banks off Swift, freezing the assets of the central bank. I don't think it's going to get Putin to back down, in part because he knew this was coming, in part because he's got links to China that can help him whether the sanctions.

But yeah, we are now in a full blown crisis, as you put it, 20% interest rates in Russia. But I think we're going to have to wait and see where this military conflict goes. Putin does not seem to me to be the kind of person who is ready to say uncle. This is hurting my economy. Let's make a deal.

- Charles, to that point, the hope is that these sanctions, as crippling as they are to the Russian economy, will essentially move to destabilize the economy and force President Putin's hand. The fear on the other side is, of course, this could escalate the tactics on the Russian side. We've already gotten reports this morning about civilian neighborhoods getting attacked in Kharkiv. How concerned are you that this could really escalate on the military front?

CHARLES KUPCHAN: Well, I think the biggest impact on the sanctions front is not putting pressure on Putin and making him back down. In my mind, the bigger concern for Putin is, how does this play domestically? And there's no question that many Russians are skeptical of what he's done. You've seen protest in the street. Russians know that their troops are killing their Ukrainian brethren.

So I think the issue here is, will over time, we begin to see the beginning of the end of the Putin regime? But on the ground in Kiev I don't think we're going to see much pullback. I think Putin wants to topple the regime. He wants to take control of at least Eastern Ukraine, perhaps more than that, all the way over to the west of the country, to the Polish border.

That having been said, I think the chances of escalation are relatively low. The big concern in my mind is that weapons that the US and its allies are now trying to get to the Ukrainians are coming through Poland, Romania, other countries that border Ukraine. Is it possible that the Russians would take a strike, an air strike, artillery against these incoming weapons? That could lead to a wider war because it would constitute an attack on NATO.

- And I know, Charles, you served as Special Assistant to the President for European Affairs, we should say, under President Obama. So you're quite familiar with the Security Alliance. It feels like there is a fundamental rethink that's happening over in Europe. On the defenses that now need to be put in place, we saw Germany now raise its budget beyond that 2% of GDP. For defenses specifically, how do you see those pieces moving in the days ahead?

CHARLES KUPCHAN: Well I think the strongest suit of the United States is not the sanctions. It's not more troops on the Eastern flank of NATO. It's solidarity. And so far, we have seen the US and its allies, not just in Europe, but around the world, standing shoulder to shoulder, confronting Putin with a United front. And that speaks volumes.

It says to me that Putin probably miscalculated here, and he has taken a bite that, in the longer run, may well not pay off for him. Yes, you're right to say that this is a game changer for Europe. To have Germany talk about increasing defense spending by $100 billion, going above 2% of GDP, nobody ever thought that would happen. They were around 1.4% of GDP and dragging their feet.

Germans are confronting the prospect that they now live in a dangerous world, where traditional geopolitics rules. That's going to mean more defense spending, a political consensus behind putting more troops on the ground, putting more air assets on NATO's Eastern flank. I think what we're looking at here is Cold War 2.0 and the remilitarization of the border between NATO and Russia.

- And Charles, finally, with President Putin and Russia really quartered on multiple fronts with these economic sanctions in place, there's a question of who Russia can now turn to. I mean, we've seen China at least publicly a little hesitant to just throw their weight fully behind Russia. But to what extent can China step in, at least on the financial front, to support Russia? To what extent do you think China is willing to take on that role?

CHARLES KUPCHAN: I think one of the reasons that Putin moved when he did was support from China. That emboldens him. It gives him not just political cover, but economic cover, because linkages between Russia and China on the energy front, on the financial front, have been deepening steadily since 2014 when the Russians first attacked Ukraine, grabbed Crimea.

I think it's difficult to say where the Chinese are going to go. They've been flip flopping. Sometimes they make statements that say we stand by the territorial integrity and sovereignty of all nations, i.e., we oppose this. Other times they seem to be backing Putin. My best guess is that they will stay on the fence, but generally stand by their ally, Putin, because they see Russia as pushing back against an American dominated international system that they don't like.

But stay tuned. This is a work in progress. The decisions that the Chinese leadership make will have a big impact on whether or not Putin stays the course and whether or not Putin ends up suffering politically for what I think is a gross miscalculation and a war that is not going to serve his interest well.

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