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ISIS Launches Deadly New Terror Attack; Source: Navy Boats Drifted Off-Course Into Iranian Waters; Interview with Senator Rand Paul; Outrage Over Iran Broadcast of Detained U.S. Soldiers; ISIS Says It's Behind Multi-Part Terror Attack; ISIS Claims It's Behind Indonesian Attacks; Ted Cruz Explains Failure to Disclose Loans; Russia Reveals Aggressive Military Plans. Aired 5-6p ET

Aired January 14, 2016 - 17:00   ET


JAKE TAPPER, CNN ANCHOR, THE LEAD: After a rough time re-acclimating to civilian life, Henry Hughes went to Los Angeles to pursue his dream. And now, he's living his dream. We could not be prouder of him.

That's it for THE LEAD. I'm Jake Tapper. Turning you over now to Wolf Blitzer in THE SITUATION ROOM.

[17:00:16] WOLF BLITZER, CNN ANCHOR: Happening now:

Starbucks attack. ISIS terrorists launched a multipronged assault near a popular coffeehouse in a major city, killing two and lobbing grenades at police as they move in. Has ISIS expanded its reach into another U.S. ally?

American embarrassment? New questions about Iran's seizure of ten U.S. sailors as officials reveal how their boats wound up in Iranian waters. The detainees paraded before cameras, possibly forced to apologize. Was Iran trying to humiliate the United States?

New nukes. Russia reveals aggressive new military plans, including new troops at Europe's doorstep. And nuclear missile regiments ready for combat. Is it a throwback to the Cold War, or does Vladimir Putin feel he was insulted by President Obama?

Savings or loan? Republican presidential candidate Ted Cruz facing questions about whether he used money from his personal fortune to fund a campaign, or did he take an undisclosed loan from the Wall Street giant where his wife worked?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.


BLITZER: We're following a deadly new ISIS attack with chilling echoes of the Paris massacre. The target, the heart of the Indonesian capital Jakarta. The killers detonating a suicide bomb outside a Starbucks and lobbing grenades at police. At least two people are dead and 19 injured.

We're also learning new information about Iran's seizure of ten American sailors whose boats drifted into Iranian waters. A U.S. defense official tells CNN one of the vessels experienced engine trouble and the Navy launched search and rescue mission.

And there's growing anger tonight at Iran for showing the Americans on television.

We're covering all of that and much more with our guests, including Republican presidential candidate, Senator Rand Paul. And our correspondents and expert analyst, they are also standing by.

Let's begin with the latest ISIS terror attack. This one targeting the capital of Indonesia.

Our Pentagon correspondent Barbara Starr has the latest.

Barbara, this was very similar to the Paris attacks.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: It is a scenario that is now being seen all too often, Wolf. The U.S. intelligence community trying to find out tonight everything it can about this latest attack.


STARR (voice-over): The moment of the attack in Jakarta captured on camera. ISIS claiming responsibility. It began with a suicide bomber detonating near a Starbucks in an area frequented by foreigners. At least two dead, dozens wounded.

People running in the streets of the world's most populous Muslim country.

The Jakarta police chief says Indonesian ISIS leader Bahrun Naim thought to be in Syria plotted the attack, sending money back home to finance the operation.

CHIEF TITO KARNAVIAN, JAKARTA POLICE (through translator): The gang behind this attack are fighters from ISIS based in Raqqa, Syria.

STARR: In an echo of the recent Paris attack, reports indicate after the suicide bombings, two foreigners were seized and shot. Attackers opening fire on the streets, tossing grenades at police.

JEREMY DOUGLAS, U.N. OFFICE ON DRUGS AND CRIME: So we ran -- rushed into the building. About a couple minutes later, as we're trying to get in the elevator to go up to our office on the tenth floor, a third bomb went off. And then, we realized this is really bad.

STARR: The latest ISIS assault 6,000 miles and two days after ISIS carried out a suicide bombing in Istanbul, just days after a Philadelphia police officer was ambushed and repeatedly shot in his car. An attack the FBI is now investigating as terrorism. And it comes just five weeks after the San Bernardino terror attack.

SETH JONES, RAND CORP: The Islamic State is expanding its operational capabilities. And it's expanding its geographic location where it's conducting attacks. This is a much more serious threat than I think people had anticipated, even a couple months ago.

STARR: Defense Secretary Ash Carter now raising the prospect the U.S. war may grow beyond Iraq and Syria.

ASHTON CARTER, DEFENSE SECRETARY: This defeat of ISIL in Iraq and Syria is a vital and necessary, although not sufficient, component of our worldwide campaign to defeat ISIL.


STARR: Well, it now is becoming apparently clear to the Pentagon and others that even though ISIS senior leaders are dug in in Syria and Iraq, they are extending their influence if not their operations as well across the world, Wolf.

[17:05:00] BLITZER: Barbara Starr reporting from the Pentagon -- thank you.

Let's go to our senior international correspondent Ivan Watson. He's joining us from Indonesian capital of Jakarta.

Ivan, show us where this attack took place.

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: That's right. It's before dawn here right now, Wolf. But the attack began over here. This is the Starbucks Cafe. The Starbucks where a suicide bomber walked in and self-detonated. And then this busy intersection, in broad daylight became a battle zone as the attackers moved through with guns, throwing grenades, attacking behind this barrier here a traffic police post.

Now, it's decorated with these floral condolence messages that are calling for unity among the people of Indonesia. And this one message, which is very important, that is an Indonesian hashtag right now, it says, "We are not afraid". That's something that the Indonesian president said. It's something I've heard from Indonesians who've come here in the dead of night to pay their respects to some of the victims here of this the worst terror attack the Jakarta has seen in six years -- Wolf.

BLITZER: Ivan, what have you learned about the man the authorities there believe orchestrated this attack?

WATSON: The Jakarta police say that this was carried out under the orders of an Indonesian man named Bahrun Naim who they believe went to Syria to fight alongside ISIS. And they claim that he's trying to start an ISIS network in Southeast Asia, in Indonesia, in Malaysia, in the Philippines.

Now, we've had warnings coming in the past, in recent months from the Pentagon, for example, from the Australian government that ISIS is trying to move in to Southeast Asia, to countries like Bangladesh as well. And now, we have the Indonesian authorities saying that, yes, this was in fact an ISIS attack. ISIS has claimed responsibility for this as well. The Indonesian authorities had a lot of success last decade, Wolf,

basically taking apart an al Qaeda linked group that carried out much more devastating terror attacks here in Jakarta and in Bali. Fortunately, this latest attack was much smaller in the devastation caused by the explosives, in the loss of life as well. And that could be either a result of incompetence on the part of the militants, five of whom died in this attack, or it could have been because of the swift response of the Indonesian security forces -- Wolf.

BLITZER: Ivan Watson in Jakarta, thank you.

Meanwhile, there's growing outrage at Iran for broadcasting video of ten American sailors it detained and what may have been a coerced apology by one of those sailors.

Our chief national security correspondent Jim Sciutto is working this story for us.

You're getting some new details on what U.S. officials believe may have happened.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: Right, in the moments leading up to this. We're learning now it appears it was both a mechanical problem with the boats and a navigational error, that from Defense Secretary Ashton Carter who's traveling today.

Our own Barbara Starr reporting that because of that mechanical problem by the time the sailors found that they were inside Iranian waters or might have been concerned, one boat having that issue, they couldn't get away in time as they were approached by those Iranian boats as well.

And we learned that the sailors in effect were surrounded. And it would be the decision of the commander there to protect his crew, very reasonable thing to do. It doesn't appear that he had much choice, wolf, to contest to fire back, wouldn't have been smart in that situation. No one contesting that.

But then, of course, there's also the controversy of the apology and whether that was under duress on Iranian state TV.

BLITZER: And there's also more fallout from Iranian state TV putting video on the air showing those American sailors with their hands over their heads, on their knees. What's been the reaction?

SCIUTTO: Well, this is the thing, because that was the part of this that wasn't obviously necessary. You might find, this has been said to be by many administration officials, defense officials as well, that if an Iranian Navy boat ended up in U.S. territorial waters, they would likely approach it as well, might very well board it, might very well take into custody those sailors and might even film it, but not then broadcast that film widely not just in Iran but around the world.

Of course, administration officials asked that question many times today. Here's, what the spokesman for the State Department, John Kirby, how he answered it. (BEGIN VIDEO CLIP)

JOHN KIRBY, STATE DEPARTMENT SPOKESMAN: The video on the face of it it's difficult to watch. There's no question about that. And nobody likes to see our sailors in that position. I can't speak for the motivations for why they did it, why they put it out there, if they did it for propaganda purposes.

[17:10:00] We would certainly join in those that are expressing concerns about that. But we got our sailors back in less than 24 hours. And nobody got hurt. And not a shot got fired. And they're all safe.


SCIUTTO: That is a point that administration officials have been emphasizing for the last couple of days that they got them out, and via diplomatic channels with Iran that didn't exist a couple of years ago before these nuclear negotiations.

Another question that has come up, was broadcasting these images a violation of Geneva Conventions because they of course prohibit parading prisoners of war, soldiers, sailors, et cetera, on camera. But State Department spokesman John Kirby answered this. I spoke to former U.S. commanders as well, and they said because the U.S. and Iran are not at war right now, the Geneva Conventions do not apply.

BLITZER: Jim Sciutto, thanks very much.

Let's get more on all of this. Joining us, Republican presidential candidate and senator, Rand Paul of Kentucky. He's a member of the Homeland Security and Foreign Relations Committees.

Senator, thanks very much for joining us.

I want to get to Jim's report about Iran's behavior with those American sailors in a moment. But first, the attack, the terror attack in Jakarta, in targeting areas like Starbucks, very popular tourist destination, is this seen as an attack literally against the United States and the West?

SEN. RAND PAUL (R-KY), PRESIDENTIAL CANDIDATE: Well, you know, I think it shows the enormity of the problem. That this is not an isolated area, that ISIS is not confined to one area of the globe. But really that it's not just ISIS, that I think it's a radical ideology. But also I think it shows the answer ultimately is going to have to be cooperation and help from civilized Islam.

I think civilized Islam needs to step forward everywhere and condemn these type of attacks louder and stronger than we've been hearing. I think in recent history actually some countries like Saudi Arabia have actually funded religious radicalism that's led to violence. So, I think Saudi Arabia and other Gulf kingdoms really need to step it up and say we don't support terrorism. We are no longer going to fund religious schools that preach this kind of hatred for the West. But it's a big problem. And it's not going away any time soon. But

it's also why I've said there has to be a little bit more scrutiny or significantly more scrutiny on those who travel here from a variety of countries that have significant Islamic terror problems.

BLITZER: ISIS has claimed responsibility for this attack in Jakarta, and maybe one of their intended terror consequences did occur. Starbucks has at least temporarily shuttered its coffee shops in Indonesia right now.

How do you fight against ISIS right now? Will this be a generational war?

PAUL: Well, it is an ideology. I mean, I think the ideology -- in order to defeat the ideology a lot has to come from co-religionists. We have to defend ourselves by all means necessary. Militarily, can we stamp out ISIS and will it happen? Yes.

But, ultimately, to have a lasting victory, I've been saying for some time that the lasting victory needs to involve civilized Islam, Arab boots on the ground. And they are going to have to be -- if you're going to take over cities like Raqqa and cities like Tikrit, the people actually doing the fighting and the new mayor of Tikrit, the new garrison has to be Sunni Muslims who live there.

And until that happens they're going to see all other victories, and we can have those victories, but they'll see them as temporary. If it's American soldiers garrison in Tikrit, another generation will slither forward and put bombs underneath our Humvees. So, really, we can help, we protect ourselves. But absolutely, we need to help those who live there who have to be the fighters.

BLITZER: In his State of the Union Address, President Obama said the fight against ISIS doesn't pose what he called an existential threat to the United States. Do you agree with him?

PAUL: Well, they're not going to come here with armies. And terrorists actually commit terror because they are weak. So I believe ISIS to be very, very weak. They have a little bit of military strength where they are.

But even where they are -- think about it -- they have 30,000 fighters surrounded by 190,000 Peshmerga in the Kurdish region, 190,000 Baghdad army to their west -- or to their east. We have a 600,000 Turkish army, a couple hundred thousand in Jordan, half a million to a million in Israel.

So, they are surrounded. We just need to coordinate our strategy to wipe them out. But even when they're wiped out, the ideology of radical Islam is going to have to be combated for generations. But it needs to come from within Islam.

I can't stress enough that civilized Islam has to step up and begin to more forcefully condemn in their mosques throughout the world and say that jihad is not acceptable. Violent jihad is not acceptable. BLITZER: We heard a similar statement from King Abdullah II of Jordan

yesterday when he was here with me in THE SITUATION ROOM. Jordan obviously very close friend of the United States.

[17:15:02] Senator, we have a lot more to talk about including those ten American sailors who were forced to put their hands over their heads, get down on their knees. One of them maybe was forced to apologize. We'll discuss that and more when we come back.


BLITZER: Disturbing images sparking outrage at Iran tonight for broadcasting video of ten American sailors detained after their boats drifted into Iranian waters. The video included one of the sailors making what may have been a coerced apology.

We're back with the Republican presidential candidate and Kentucky senator, Rand Paul. He's a member of the Homeland Security and Foreign Relations Committees.

[17:20:06] You have a problem, Senator, with the way the Iranians treated these American sailors?

PAUL: You know, I sure do. And it's one of the reasons why I opposed the Iranian agreement initially, is that I still wonder whether or not they are wanting to be part of the civilized world.

I'm glad that it ended peacefully, but you still wonder about a nation that is using, it appears, video of our soldiers as pawns in a propaganda war.

Now, I do agree that having it end peacefully was a great outcome, and maybe that's a sign that Iran is changing their ways. But the fact that they lined them up and used them as propaganda objects concerns me that Iran really hasn't quit her old ways. And that's what's going to happen.

But it means all more important that the Iranian agreement, that we watch them like a hawk to make sure that they actually are adhering to the agreement as it goes forward.

BLITZER: If the situation had been reversed, the Iranian sailors were caught in U.S. waters, how would the U.S. have treated those Iranian sailors?

PAUL: You know, I think there's a very good chance that someone in our waters with a military boat would have been picked up, would have been stopped, would have been detained, but I don't think the United States has ever sort of broadcast propaganda photos of them. And I don't think we would.

So that's what concerns me more, is the propaganda action here, as opposed to picking up our soldiers, releasing them in 24 hours. In some ways there is a success, and it does mean that we have better cooperation, better channels of communication open. So all of that's good, but it does concern me and, frankly, perturbs me that they would use our soldiers as sort of pawns in some sort of propaganda war.

BLITZER: You opposed the Iran nuclear deal, but as you know, in a few days, maybe even as soon as this weekend, Iran will be flush with cash as a result of the deal that was brokered, in part by the United States. They're going to get billions of dollars.

The national security adviser to the president, Susan Rice, told me not that long ago the Iranians can do with that money what they want. There's concern they could use that money for terrorist purposes. How concerned are you? And can the U.S. do anything about that?

PAUL: You know, this is one of the reasons why I opposed the deal. What I would have done, had I been negotiating this, is that I would have released the sanctions much slower over a several-year period and the same with the money, because I think that they are complying. In fact, returning our soldiers may well have been some compliance, trying to get the money.

But once they have their hands on the money, the question is are they going to continue to act in a civilized fashion? So I would have released the money much slower, and I would have also released the sanctions over a several-year period as we saw compliance from Iran.

But I do separate myself from many other Republicans in that I do hope that negotiation works, that really ultimately negotiations are probably only way we do get rid of the Iranian nuclear program. But we're going to have to watch them like a hawk. We're going to have to have great verification to see that they're actually doing what they have promised to do.

BLITZER: Senator Paul, thanks very much for joining us.

PAUL: Thank you.

BLITZER: Coming up, we'll have more on our top story. Today's bloody multi-part terror attack in the capital of a U.S. ally, where terrorists have hit before.

Plus, new threats from an old enemy. Can al Qaeda hit the United States again?


[17:27:50] BLITZER: Let's get some more now on our top story. ISIS claiming responsibility for today's bloody suicide bomb attack near a Starbucks followed by a shootout with police. The multipronged attack in a tourist district in Indonesia's capital city of Jakarta left at least two people dead and about two dozen wounded. It also raises disturbing questions about the terror group's global reach.

Let's bring in the former CIA official, the CNN counterterrorism analyst, Philip Mudd, along with our national security analyst, Peter Bergen, and the former chairman of the House Intelligence Committee, our CNN national security commentator, Mike Rogers.

Phil, let's take a look at the map. There's been one ISIS attack after another over the past several months. What makes this Paris- style attack in Indonesia different?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: I think there's a couple things you need to think about, Wolf.

No. 1, you look at the orchestraters of this attack. In this case it looks like it's an Indonesian operating out of Raqqah and Syria. In the case of Paris that was native-born Belgians in French who had emigrated -- their families had emigrated, typically, from North Africa.

So ISIS is developing the capability to draw on people from overseas who have familiarity in operating in foreign capitals to conduct operations.

The other thing I'd say is time. 2011 is when this civil war kicked off. You can guarantee that when a terror organization has stability and leadership -- and ISIS has had stability in leadership -- and has a safe haven -- that is a place to operate from -- the threat overseas will increase as terror leaders in those safe havens, like Baghdadi, the leader of ISIS, start to worry less about their local territory and more about how to expand the revolution to places like Paris and Jakarta.

BLITZER: You make a good point, because there are reportedly hundreds of Indonesians who have gone to Syria, gone to Raqqah to team up with ISIS.

Peter, you spend a lot of time reporting on these militant groups in Indonesia. Why would they target central Jakarta? Indonesia has the largest Muslim population in the world. Why would these ISIS terrorists go after -- they know they're going to kill Muslims.

PETER BERGEN, CNN NATIONAL SECURITY ANALYST: Well, they didn't obviously care. But, you know, there's a long history of these groups attacking American brand names in Jakarta. They attacked the J.W. Marriott Hotel in 2003, and again in 2009; they attacked a Ritz Carlton in 2009. They killed 200 western tourists in Bali in 2002. A number of Americans were killed there; 88 Australians.

So this is part of a long -- what's changed is the Indonesian government has done a very good job of cracking down on these groups. Unfortunately, you know, now you have Indonesians going to Syria recruited by ISIS and this is sort of a new iteration. And some of the people from these groups, Jemaah Islamiyah, which is the main group there. They've been in prison for a while, they're about to get out. So we may see a new wave of these kinds of attacks.

BLITZER: Mike, you tweeted today, "Getting shot at work, or at a concert, blown up visiting a tourist site or stopping at Starbucks is not the new normal we should stand for." What can be done?

MIKE ROGERS, CNN NATIONAL SECURITY COMMENTATOR: A lot of things. So if you -- and by the way, this new kind of bent in hitting Indonesia from Paris to Indonesia, you saw Istanbul this week. We saw that the big split between Zawahiri, al Qaeda, and al-Baghdadi now ISIS was over his -- Baghdadi's interest of using people on the ground in Syria to conduct attacks in other countries.

This was the biggest split. A lot of people thought it was because they were too violent. It was really about Baghdadi wanting to use the people that he had on the ground, including from all of these countries you hear about, and then reach back to these other countries for terrorist attacks.

If we want this to be the new normal we kind of yawn and move along and say this is going to be a long fight, we hope something happens. We are going to have to go after their narrative, that center of energy, command and control in eastern Syria and western Iraq. We have to disrupt their ability, A, to propagandize that they're winning this fight and recruit through social media in every other country.

If we don't do that, we're going to see a lot more of this and we'll have to start worrying about going to the mall, going to the Starbucks here in the United States. There are 50 states that have FBI investigations with ISIS related activity. That's a huge problem.

BLITZER: That's a huge problem indeed.

Phil, you say time is the enemy here in this fight against ISIS. Why?

PHIL MUDD, CNN COUNTERTERRORISM ANALYST: Because if you look at terror groups, their initial focus typically is in a short period of time how to defend themselves against a local enemy. The Syrian military, the Iraqi military, the Kurdish militias that are fighting them. Over time local terror groups especially that have this resource of foreign fighters who were familiar with places like Libya, with Europe, with the United States, with Asia, they start to say I think I have a handle on how to fight and how to stay safe against a local security services, let me think more broadly about how to absorb the lessons from al Qaeda, pushing the fight out to Europe and the United States.

So over time comfort with their local environment means more focus on the foreign environment. And that means more threat, Wolf, which is what we saw in Jakarta.

BLITZER: All right, guys, I want you to stand by. We're following this story, we're following other important stories as well. The Republican presidential candidates prepare for a night of political attacks. Will it be the end of the truce between Ted Cruz and Donald Trump?


DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: Ted Cruz, he's been really, really nice other than the last couple of days getting a little testy. I've been waiting. I've been waiting. Got a little problem. You know, got to sort of make sure you can run. You got to make sure you can run. A lot of lawyers said you can't run if you do that. You can't be born in Canada. You can't be a Canadian citizen. And I hope it works out for him. I really do.


[17:37:54] BLITZER: It's a big day in presidential politics. Senator Ted Cruz is explaining his failure to disclose hundreds of thousands of dollars in bank loans. The issue gives his rivals, especially Donald Trump, some new ammunition for tonight's primetime debate.

Let's go to CNN's Sunlen Serfaty.

Sunlen, it looks like the truce between Donald Trump and Ted Cruz is over, right?

SUNLEN SERFATY, CNN NATIONAL CORRESPONDENT: That's right, Wolf, it absolutely is. And this is a significant strategy shift coming from Ted Cruz. For so long he really avoided directly attacking Donald Trump, but not anymore. His campaign now saying they are entering into a new stage of this campaign where now is the time to start drawing much clearer contrasts.


TRUMP: Wow. Amazing. Amazing.

SERFATY (voice-over): With the detente broken, tonight the battle between Donald Trump and Ted Cruz could boil into an all-out war.

TRUMP: They'll all be attacking me like, you know, they attack. Hey, whatever, right? Whatever. But they don't understand that unlike this country I attack back.


SERFATY: Cruz shifting strategies no longer shying away from attacking the GOP frontrunner.

CRUZ: I think he may shift in his new rallies to play "New York, New York" because, you know, Donald comes from New York and he embodies New York values. And, listen, the Donald seems to be a little bit rattled.

SERFATY: Trump saying that attack shows his rival is frightened and nervous.

TRUMP: I embrace. Look, in New York we took a big hit with the World Trade Center. Worst thing ever. Worst attack ever in the United States. The way they handled that attack was one of the most incredible things that anybody has ever seen.

SERFATY: The showdown coming as Cruz faces questions about his failure to disclose hundreds of thousands of dollars in loans for his 2012 Senate campaign.

CRUZ: It is an inadvertent filing question.

SERFATY: Cruz saying he and his wife Heidi got the loans from Citibank and Goldman Sachs where she works by borrowing against their stocks and assets. But it's a narrative that cuts at the very core of the image Cruz has tried to cultivate, an outsider candidate running with a populous message.

[17:40:05] CRUZ: Heidi and I, when we ran for Senate, we made the decision to put our liquid net worth into the campaign. And so we did so through a combination of savings, liquidating our savings accounts, through a combination of selling assets and then we had a brokerage account that has a standard marginal loan like any brokerage account has.

SERFATY: Donald Trump on this one demurring for now.

TRUMP: Well, I heard it's a big thing, I know nothing about it. But I hear it's a very big thing. I hope he solves it. I think he's a nice guy and I hope he gets it solved.

SERFATY: But not relenting when it comes to raising questions about Cruz's Canadian birth.

TRUMP: Supposing he runs and everybody's banking on him, and then the courts rule that he can't run? That's not so good. What do you do? Concede the election to Hillary Clinton or to crazy Bernie? Right.


SERFATY: And Ted Cruz has specifically prepared for this potential faceoff tonight. His campaign says that he is ready and willing to respond. They say he will not sit back and in their words, let anyone impugn his record, Wolf.

BLITZER: All right. Sunlen Serfaty in North Charleston, South Carolina, for us. Thank you.

Joining us now here in THE SITUATION ROOM, CNN political commentator S.E. Cupp, our CNN Politics executive editor, Mark Preston, our chief political analyst Gloria Borger, also joining us our CNN political contributor, the Atlantic Media contributing editor, Peter Beinart .

Gloria, this NBC News-"Wall Street Journal" poll, I know you've taken a close look at it, nationally Trump remains first choice among Republicans. 33 percent, Cruz 20 percent, Rubio 13, Carson 12, everybody else way, way down. Your takeaway.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Well, first of all, right now we're all paying attention to Iowa and New Hampshire, not the national polls. This however if you're Donald Trump you would say it's huge. And one of the reasons you would say it's huge is not necessarily those numbers, Wolf, but the fact that the Republican Party really seems to be warming up to Donald Trump because now we see that 65 percent of Republicans now believe -- there it is, believe that they can see themselves supporting Trump. That is up from 23 percent last March.

So suddenly they're saying, wait a minute now, we're taking him a little bit more seriously. And, I know, S.E.'s giving me this look, and we might be able to actually support him. BLITZER: Mark, you're just back from New Hampshire. You spent some

time there. What's your takeaway on what's going on there?

MARK PRESTON, CNN POLITICS EXECUTIVE DIRECTOR: Right, so a couple of things. One is it's Donald Trump's to lose right now in New Hampshire. We see that from the polls. But what my takeaway was Ted Cruz comes into the state, New Hampshire is not a state that you would expect to embrace the Ted Cruz values.

I've got to tell you, I went to two events, one he drew about 300 people in the middle of the day in the biting cold outside. That evening in a blistering quick snowstorm close to 1,000 people. So what we're hearing now in New Hampshire from the people that I was talking to is that they want to coalesce behind the conservative candidate. The collapse of Carson right now, Rand Paul never taking off, Huckabee, Santorum not there, it's Ted Cruz's right now.

And I'll tell you what, Ted Cruz could come in second place in New Hampshire and that would be a huge victory.

BORGER: And win Iowa.

PRESTON: And win Iowa. Huge victory.

BORGER: Right.

BLITZER: He wins Iowa and comes in second in New Hampshire, that's a major --

PRESTON: Significant.

BLITZER: Great news for Ted Cruz. But he's got problems apparently right now, half a million dollars in loans from Citibank, from Goldman Sachs. His wife worked at Goldman Sachs, she's on leave right now. But he didn't apparently appropriately disclose to the FEC, the Federal Election Commission. You've taken a closer look at this, S.E.


BLITZER: Is it a problem?

CUPP: You know, he says it's a filing error. I don't know that it will slow his momentum any, however I do think it's a small ding in his persona as a populous regular guy, you know, homegrown America.

But here's the problem with personas. By definition they're not entirely real. And I've met Ted Cruz, he's very nice, incredibly smart, I never bought the regular guy persona. When you're top of your class at Harvard Law and your wife works at Goldman Sachs, you're not a regular guy. You've probably been in some pretty elite social circles. And I don't begrudge Ted Cruz that.

But when you try to paint over that with a persona, it's always going to come back to bite you. So if you're looking to take Ted Cruz down, I'm not sure this is fatal, but it certainly does, I think, chip away at, you know, some authenticity issues. BLITZER: Yes.

BORGER: So he's kind of running on his anti-resume, Wolf. You know, he's Princeton, Harvard Law.

CUPP: Yes.

BORGER: Clerkship at the United States Supreme Court, worked for the establishment George W. Bush.

CUPP: But he wears Dad jeans.

BLITZER: All right.

BORGER: Yes. But --


BLITZER: Peter -- let me bring Peter into this conversation.

Peter, what about that? Some of his opponents say he's hypocritical because, as Gloria points out, went to Princeton, Harvard Law School, clerked on the Supreme Court, worked in the Bush administration, was a lawyer at a prestigious law firm, Morgan Lewis. That doesn't sound like someone who's hanging out with Dynasty Duck or whatever.

BORGER: You mean "Duck Dynasty"?


[17:45:07] PETER BEINART, CONTRIBUTING EDITOR, ATLANTIC MEDIA: Look, if you don't think that President Ted Cruz will do exactly what Wall Street and every major hedge fund manager wants him to do, you simply haven't been paying attention. The "New York Times" had a story last year of a guy named Robert Mercer, he's been the largest donor to his super PAC, over $10 million. Robert Mercer owes $6 billion to the IRS, and you know what Robert Mercer and Ted Cruz both want to do? They want to shut down the IRS.

So this is no revelation. Ted Cruz's economic policy is 100 percent dictated by the 0.1 percent in this country, doesn't really matter whether he went to Harvard or Princeton, those are the people who were funding his campaign.

BLITZER: You agree with that, S.E.?

CUPP: Well, look, Ted Cruz came about right after the Tea Party wave in 2010. He was elected in 2012. And he came about at a time where challenging the establishment was kind of the way to crack in there. And it was a campaign that no one expected him to win in Texas. And he did it by taking on this persona.

Now I think in Congress he has been fairly true to that anti- establishment I'm going to take on, you know, the Boehner wing of the party. But I think there's some truth to what Peter's saying that if he were to become president, I think he'd get a lot cozier with the establishment than he has been.

BLITZER: His background is very elite, you got to admit.

BORGER: Well, it is very elite.

CUPP: And that's fine.

BORGER: And that's -- yes. There is --

BLITZER: Is it fine if you're trying to project yourself as an outsider?

CUPP: You've got to be you. You always got to be you because it will come back to get you.

BORGER: But wait -- but that's the issue about Ted Cruz. What is the you of Ted Cruz?

CUPP: Yes.

BEINART: I think --

BORGER: And people don't feel like they know who he is, if you talk to members of the Senate, they don't like him, right?

CUPP: Yes.

BORGER: They think he's all about Ted Cruz. And they -- I think you couldn't find one member of the Senate who would say, oh, he's about the little guy.

CUPP: Right.

BORGER: They would say he's about Ted Cruz. He's projecting a different image on the campaign trail. However, I have to say one thing. If you're going to run against anything and he's raising money off of this, run against the "New York Times."


BORGER: If you're a Republican, right?

CUPP: Sure.

BLITZER: He's trying to raise some money as you correctly point out. Go ahead, Peter.

BEINART: Sure. I mean, look, Franklin Roosevelt went to Harvard. Where you went to college doesn't actually matter nearly as much as the policies that you support. I defy you to find anything that Ted Cruz has done in the Senate that would not make Robert Mercer and other people who want this country to be even more unequal than it already is wouldn't make them happy. So it doesn't matter to me that he has -- that he went to fancy schools. That's neither here nor there. The question is, what are the interests that have allied behind him? That's really the important question. BLITZER: All right. Guys, there's a lot more politics coming up here


Also coming up, Russia's new nukes. We have disturbing new details about Vladimir Putin's latest military plans. Will they destabilize one of the United States' most important military alliances?


[17:52:23] BLITZER: Russia is revealing new military plans involving more troops deployed to Europe's doorstep and combat-ready forces armed with nuclear missiles.

CNN's Brian Todd is working the story for us. So, Brian, seems like a pretty aggressive new adventure for the Russian military.

BRIAN TODD, CNN CORRESPONDENT: It certainly is, Wolf. And it may also in part involve a personal grudge. Awhile back, President Obama clearly implied that Russia is no longer a super power. Now that angered Vladimir Putin. But tonight Putin is also seeing what he believes is a huge threat from the U.S. and NATO at his western border and bolstering his forces there.


TODD (voice-over): Russian President Vladimir Putin appears to be flexing his muscle and his missiles in a briefing with the Russian news media, Putin's Defense minister boldly declares his military will create three new divisions on Russia's western flank with Europe and will make five nuclear missile regiments ready for combat duty this year.

U.S. and NATO official tell CNN they're monitoring this, assessing the impact on western security. One NATO official says it's destabilizing and NATO is prepared to defend itself.

FIONA HILL, THE BROOKINGS INSTITUTION: We have to remember that Russia still sees NATO and the Western alliance as a major military threat and is a major threat to Russia's long-term existence.

TODD: The feeling is mutual. The top U.S. Air Force commander in Europe says Putin's big missile defense buildup along his borders with Eastern Europe is, quote, "very serious" because the buildup is denying NATO access to some parts of European air space.

Analysts tell CNN Putin is again flexing his military muscles including the nuclear deployment in part because of this comment.


TODD: A remark which apparently still rankles Putin but analysts also say Putin is sending strong internal signals to his people that he's their protector and to potential enemies in the Kremlin.

HILL: It's also very important to placate the Russian military because for many years the Russian military were disgruntled, they were dissatisfied obviously with their weakness both in terms of their full structure but in terms of their capacity, their equipment, everything was aging.

TODD: Experts say Putin is also signaling to President Obama during the week of his final State of the Union address that Putin is ready to move on from the man now in the Oval Office who he's never gotten along with to the next president.

DOUGLAS BRINKLEY, CNN PRESIDENTIAL HISTORIAN: If you're sitting in the Kremlin you're saying this guy has only got a year left on his watch. Let's just ignore him, he doesn't really matter and set yourself up to do business with the new president a year from now.


TODD: Now Putin is also hedging his bets with another leader, telling a German magazine it would be easier to give Syrian President Bashar al-Assad political asylum than it was to give asylum to NSA leaker Edward Snowden.

[17:55:10] Analysts believe that is a jab at the United States and a possible opening for Assad, although it's a little too soon for Putin to flat out offer Bashar Assad safe haven -- Wolf.

BLITZER: Are you getting a sense that Putin is pressuring Bashar al- Assad to leave?

TODD: Not quite yet but he might be paving the way for that. Analysts are telling us Putin is gaming the situation with Assad. He's trying to get his own assessment of Assad's staying power right now and figure out the optimal time to move on an offer if it comes. He also needs to make sure that if Assad is vulnerable, that he, Putin, can really deliver asylum for him. Putin does not want to be embarrassed.

BLITZER: Brian Todd, thank you.

Coming up, new details of a deadly ISIS attack in the heart of a major capital.