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Russia's Central Bank Doubles Interest Rate to 20 percent; Ukrainian Delegation Arrives at Border for Talks; Ukrainian Forces Hold Off Invasion of Kyiv; Biden to Hold Calls with U.S. Allies in Coming Hours; Putin Puts Russia's Nuclear Deterrence Forces on Alert; EU to Buy and Deliver Weapons and Equipment for Ukraine. Aired 4-4:30a ET

Aired February 28, 2022 - 04:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[04:00:00]

ANNOUNCER: This is CNN breaking news.

MICHAEL HOLMES, CNN ANCHOR: And welcome to our viewers joining us all around the world. I'm Michael Holmes here in Lviv, Ukraine, with your live coverage of the Russian invasion of this country. And we begin with that.

The Ukrainian delegation arriving at the Ukrainian/Belarusian border for talks with Russia, but as bitter fighting continues around the country, the Russian military just announced an open and safe corridor for civilians to leave the Ukrainian capital Kyiv. This is only just happened in the last few minutes.

Meanwhile, Moscow beginning to feel the impact of a slew of Western sanctions, today Russia's central bank more than doubled its key interest rate from 9.5 percent a year to 20 percent. We'll have more details on that in just a moment.

So far, though, Russian President Vladimir Putin, he doesn't seem to be backing down. He's put Russia's deterrence forces, including its nuclear arms, on high alert. A move quickly condemned by world leaders as they ramp up their support for Ukraine.

So far Ukrainian forces have managed to defend the capital Kyiv despite being out gunned and out manned. We've also just learned the city is lifting its curfew for now, allowing grocery stores and public transportation to open during the day, but urging residents to leave home only when necessary.

Meanwhile, Ukraine's armed forces say Russian troops have slowed their offensive but have not ended their attack. And we've got new satellite images there that underscore Russia's onslaught. They show a Russian military convoy stretching more than 4 kilometers, or three miles. This is on a road leading to Kyiv.

Now, CNN has reporters covering this from all angles across the globe. Eleni Giokos is following the impact on Russia's economy. We'll get to her in just a few minutes. Our Jim Bittermann in France with reaction from the European Union. And Jasmine Wright in Washington with more on President's Biden's call with U.S. allies. Also, CNN's Nick Paton Walsh is in the port city of Odessa. Fred Pleitgen is in Belgorod Region, Russia. Fred let's go to you first. Now talks between Russia and Ukraine they were to begin moments ago. Do we know whether it's actually started?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Michael, it certainly seems as though it's about to start. And you're absolutely right. They're actually supposed to start right about right now, a couple minutes ago. What we've seen so far is that the Ukrainian delegation certainly seems to have arrived. We saw some video images of the delegation arriving with two helicopters. That delegation is being led by the defense minister, by Oleksii Reznikov, also some senior officials the Ukrainian presidential administration and also from foreign ministry there as well.

As far as the Russian side is concerned, also some senior officials from Russia's presidential administration, the defense administration and the foreign ministry as well as those two sides are set for those talks. Those, of course, happening on the Pripyat River right in the border area between Ukraine and Belarus.

And it's been interesting to see the run up to this. The Russians obviously saying these talks are happening without any sort of preconditions. The Ukrainians in the form of the Ukrainian President Volodymyr Zelensky saying he doesn't expect much of these talks. But obviously, he's going to try and do everything or anything to try and lead about some sort of peaceful resolution to what is currently going on with that invasion in his country.

Very difficult to see whether or not there is going to be any headway made or whether or not there is going to be a breakthrough, or whether or not, Michael -- and this is a really big question -- both sides even are coming to these negotiations with the same idea as to what exactly they want to achieve. Do the Russians essentially want a surrender from the Ukrainians, then certainly this seems like something that definitely isn't going to happen. Obviously, President Volodymyr Zelensky having said over the past couple of hours that the Ukrainians will not lay down their arms as long as the Russian military is on their territory.

At the same time, you're absolutely right, Michael. The Russians saying on the one hand they established air superiority over Ukrainian territory. Also, impossible to verify whether or not that's true. The Ukrainians continuing to claim they have shot down Russian aircraft, and also have inflicted big casualties on the Russians as well. The Russians for now, by the way, for the first time acknowledging themselves that there have been Russian casualties. That's something that was sort of a first yesterday which they've announced.

And the Russian also announcing that safe corridor along a highway from Kyiv, the Vasylkiv Highway.

[04:05:00]

As they put it saying that they obviously want to keep civilians safe is what the Russians are claiming. Also claiming that the Ukrainians are the ones who are upping the ante by handing out weapons and using people as human shields. Obviously, those claims also appearing to be baseless from the Russians as well.

So, a lot happening on the diplomatic front. Obviously, on the military front as well. But I think it's interesting that you point out that the Ukrainians are saying that the offensive appears to have slowed down for now.

Obviously from our vantage point here on the border, impossible to verify whether or not that's true. The only thing I can tell you here, and I think that that certainly might be an indicator, there does seem to be there is less movement of vehicles this morning as were standing here. However, we are hearing right now aircraft in the air above us. Obviously, those in the past have been flying toward Ukrainian territory. So, it seemed as though this really is a decisive day, Michael. And right now, those talks shaping up is certainly what the world is watching at this point in time -- Michael.

HOLMES: And briefly before I let you go, Fred, this safe corridor, I mean, you can look at that two ways. The Russians are allowing civilians to leave the city in an orderly fashion, or it could be because they want the city empty and they are about to ramp up the ferocity of the attack.

PLEITGEN: Yes, and that's something that some Ukrainian officials have said they fear, that there could be a ramping up of the Russian invasion force and the ramping up of hostility as well. Certainly, some of the voices that we've heard out of Kyiv and from Ukrainian officials, they already fear that last night could have been one of those massive attacks. They could have faced some pretty stiff Russian attacks during that night.

It seems as though the past night, as far as Ukrainian officials are concerned, seems to have been fairly calm around Kyiv, and other areas of Ukrainian as well, even though some fighting obviously or a lot of fighting has been reported. But certainly, a lot less than Ukrainians had anticipated as the evening sort of kicked in. But you're absolutely right, that is the big question. Are they trying to empty the city out for some larger-scale assault?

I think one of the things that you mentioned in the lead-in to all this, certainly seems to be interesting right now, and that's that giant Russian convoy that seems to be north of Kyiv. That is something obviously is something that is of huge concern to the Ukrainians, huge concern obviously internationally as well. Of course, the U.S. and its allies also watching the situation unfold as well -- Michael.

HOLMES: Absolutely. Fred Pleitgen there on the Russian border. Appreciate it. Let's bring in Nick Paton Walsh in Odessa. Nick you've been reporting from that area for some time. Give us a sense of what's happening there.

NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR: Yes, I mean obviously places like this, Odessa, third largest city in Ukraine, vital port city. And where we were over the last 47, 72 hours, smaller towns Mykolaiv deeply concerned about the history of Russia using diplomacy. This is a country with a long history of talking just so it has a pause to advance its military gains. Is the offensive here going with the speed it hoped? That's unclear. We'll learn more about that in the days ahead. But one particular city, Mykolaiv we were in the last 24 hours saw firsthand exactly what it is like when Russian forces use their heavy onslaught to try to push into a densely populated area, they would subsequently they think like to have control over. Here's what we saw.

It's gone quiet.

HOLMES: All right. Nick, apparently, we don't have what you were waiting for their. What's likely to happen with the civilian population there now?

WALSH: Yes, I mean here in Odessa, we are seeing around some tense preparations being made in order for them to resist any possible move by the Russian military. There've been explosions intermittently since we were here at the start of the invasion. And there were reports of anti-aircraft fire being used to attack Russian jets flying overhead. I'm standing near some defensive positions. It's quiet. It's edgy, in a city that's normally bustling and thriving.

This is vitally important for the Russian government. If it fails, it could have any bids to try and control Ukraine and its economy entirely. And so, it's one of its more strategic objectives. But what we've seen, Michael, remarkably over the past days is this strange Russian attempt it seems to intermittently have a go at certain objectives. The town of Kherson initially where the strategic bridge, they had a go for that. They won, they got pushed back. And even as we left, that fight was still going back and forth even after local officials have said they'd actually -- defenses there had been overrun.

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The in Mykolaiv too the mayor there talking about the need for people to gather themselves together to get Molotov cocktails, to organize a circular defense of the city. Just now, this morning, he's appealed to locals to be calmed, to allow police to search them at checkpoints. The fear in every place we go to, Michael, is of Russian saboteurs, the idea that in plain clothes people are infiltrating towns to of course travel, to ask of sabotage, to essentially cause disruption that might facilitate the entry of Russian larger forces.

But we are here, obviously, after a lengthy trip across the Black Sea area where it appears despite the heavy nature of weapons being used, Ukrainian forces do often seem to hang onto territory the Russians a moving for -- Michael.

HOLMES: All right, Nick Paton Walsh in Odessa. Fred Pleitgen on the Russian border, thanks so much to both of you.

Now, in the last few hours, Russia's central bank announced it will raise a key interest rate from 9.5 percent to 20 percent a year. Now it says, quote, external conditions for the Russian economy have drastically changed. Now, this comes as Russia, of course, faces a growing list of severe sanctions from the West over its invasion of Ukraine.

Concerns over those sanctions have led to long lines at ATMs in St. Petersburg and elsewhere with many Russians worried their bank cards might stop working or that banks will limit cash withdrawals. I spoke earlier with Max Seddon, the Moscow bureau chief for "The Financial Times " about the interest rate hike.

(BEGIN VIDEOTAPE)

MAX SEDDON, MOSCOW BUREAU CHIEF, THE FINANCIAL TIMES: It's going to enormously increase the cost of imported goods in Russia. It's going to cause enormous headaches for anyone who has a loan or a mortgage because your price is more -- your rate is more than doubled. And of course, it's going to have very serious effects on GDP growth. I don't know how we're going to continue to finance our bureau quite frankly. But I think I'm the last person he's worried about because there are 20 million Russian people who live in poverty, and millions and millions more who live pay to paycheck. There are millions of labor migrants from countries like is Uzbekistan and Kyrgyzstan, who send remittances back home in rubles. And basically, that's just all been wiped out. People are going to be suffering with enormous inflation.

(END VIDEOTAPE)

HOLMES: Max Seddon there from "The Financial Times" speaking with me earlier. CNN's Eleni Giokos joins me now from Dubai to talk more about this. This is a pretty serious uptick, isn't it?

ELENI GIOKOS, CNN RESPONDENT: Absolutely. I mean, look, when you hike interest rates, it does two things. It does makes money more expensive. It means your loans, your mortgage becomes unaffordable, especially from 9.5 percent to 20 percent. But then the incentive is that you don't withdraw your money because technically you'd be getting really good rates on whatever money you have in the bank.

And that's what the central bank is trying to do. Trying to assert people from going to the ATM. And when we hear about the fears that they worried about their bank cards not working, that absolutely could be a reality. The fear is there's going to be a run-on banks in Moscow. The central bank has already pumped $9 billion worth of liquidity into the market.

But here's the wider story as well, Michael. And you got to keep in mind, these sanctions are going to be calamitous for the Russian economy. But it's going to have a contagion and spillover effect on global markets. I want you to look at what European markets are doing now. They are deeply in the red. We are seeing red across the board. Europe, FTSE 100 down 1.4 percent. The Dax in Germany, down over 2 percent. And this is because of fear of inflation coming through because you've got the oil price sitting at around $100 a barrel. And that is going to cause a lot of pressure in terms of recovery of economic growth and of course making gas and oil more expensive.

Russia is very important for energy in Europe. And of course, now that you're seeing sanctions against Russia with regard to the SWIFT payment system, that means that any trade that occurs specifically even buying or selling oil becomes almost impossible.

And then just taking the story to a wider perspective, and we've got to keep a mind on this, markets don't like the uncertainty but you're also getting remember that so many investors, pension funds, sovereign wealth funds have exposure to Russian assets. So, the sanctions that you're putting against Russia are going to have a spillover effect for many businesses and companies around the world.

For example, BP is trying to now divest 20 percent of its business out of the Russian market. The Norwegians are trying to get their money out from a sovereign wealth fund that has exposure to Russian assets as well.

The big question here isn't something I'm looking at. It's what China is going to do. They've already softened import rules for Russia. And then you've got to remember that Russia is trying to tap into $630 billion worth of foreign exchange reserves, its war chest, which is mostly in Europe and the U.S. But China has 14 percent of that.

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I'm going to be watching very closely to see what economic relationship, Michael, plays out between China and Russia as markets are in turmoil on the global level.

HOLMES: All right, Eleni Giokos, thanks for the update and major developments there. Thanks, joining us from Dubai there.

And this coming in to us here at CNN just a few moments ago. Ukraine is demanding from Russia an immediate cease-fire and withdrawal of their troops. Now, that statement from the Ukrainian presidency, coming as the country's delegation begins those talks at the Ukrainian/Belarusian border.

Meanwhile, the White House moving to coordinate the international response to this invasion. Coming up after the break we'll have details on all of that. Plus, President Biden's upcoming call with allies. We'll be right back.

(COMMERCIAL BREAK)

HOLMES: Now later today the U.S. President Joe Biden, he's going to be holding a call with U.S. allies to coordinate the response to developments here in Ukraine. That says more than 4,000 U.S. army troops who were deployed to Europe have had their tours extended.

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President Biden though has repeatedly insisted, of course, that American troops will not step foot in Ukraine.

For more on the U.S. response CNN White House reporter Jasmine Wright joins me now from Washington. What are you hearing there about what's likely to unfold today in Washington? JASMINE WRIGHT, CNN WHITE HOUSE REPORTER: Well, no doubt sanctions

will be a part of this phone call that President Biden has with allies and partners in the Situation Room later today at the White House when he returns from his home in Delaware. As the U.S. and its Western allies look to keep the pressure on Russia in face of their aggression.

Now, something else that is likely to be a topic of discussion on this phone call, Michael, is going to be Putin's latest threat after he ordered nuclear forces into a readiness stance. And we heard from White House officials on Sunday really trying in a lot of ways to de- escalate the situation. They did not match Putin's rhetoric of that threat. Instead, they took a step back and said, look, this is part of a wider pattern from President Putin with manufactured threats and unprovoked escalations. And now White House Press Secretary Jen Psaki I think summed up the administration's position very well here in an interview. Take a listen.

(BEGIN VIDEO CLIP)

JEN PSAKI, WHITE HOUSE PRESS SECRETARY: This is really a pattern that we've seen from President Putin through the course of this conflict, which is manufacturing threats that don't exist in order to justify further aggression. And the global community and the American people should look at it through that prism.

(END VIDEO CLIP)

WRIGHT: Now, Psaki added that the U.S. is ready to defend itself but the focus should really be on calling out Putin's rhetoric. Now this comes as Putin has faced a real united front from the West and Western allies as it pertains to condemning Russia for their actions, but also in terms of these intensifying sanctions that grow more crippling as they come. As U.S. officials say that they are proportional in their response to Russia's aggression as they really try to cripple the Russian economy here.

And now, of course, this threat from President Putin is going to be something that is top of mind for U.S. officials. They're taking it seriously and also assessing the tangible effect that it has. But they declined when asked by reporters, they declined really to update the current nuclear alert levels, instead saying that the U.S. is ready to protect itself and its countries.

And now one thing I do want to point out, I think it's a key statement that we heard on Sunday is from a senior defense official where they said that any miscalculation in this arena could make things much, much worse. So of course, all of these things are going to be on the president's mind as he heads into that phone call later today with allies and partners -- Michael.

HOLMES: Absolutely. Jasmine, good to see you. Jasmine Wright there in Washington with the very latest from D.C.

All right, Canada protesting a violation of its air space by a Russian flight. It's one of a growing number of countries that is off limits to Russian planes because of Moscow's invasion of this country. European Commission President Ursula von der Leyen confirmed on Sunday the EU would be shutting down the entire bloc's air space not only to Russian carriers, but to the private jets of oligarchs as well.

Now, we will have much more on the EU's response to the Russian invasion of Ukraine in just a moment. Our breaking news coverage continues after this.

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(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: For the first time ever, the European Union will finance the purchase and delivery of weapons and other equipment to a country that is under attack. This is a watershed moment.

(END VIDEO CLIP)

SOARES: The European Union taking unprecedented measures to help Ukraine fend off Russia's invasion. The EU says it will provide $500 million in lethal assistance to Ukraine.

(BEGIN VIDEO CLIP)

JOSEP BORRELL, EU FOREIGN POLICY CHIEF: I know that taboo has fold. The taboo that the European Union was not providing arms in a war. Yes, we are doing because this war requires our engagement in order to support the Ukrainian army.

(END VIDEO CLIP)

HOLMES: Now, that military aid comes as battles are raging throughout the country. Ukrainian troops seen here in Kharkiv on Sunday, meanwhile the Ukrainian delegation is now at the border with Belarus for talks with Russia. This coming as the Russian President Vladimir Putin has put the country's deterrent forces, that includes its nuclear arsenal, on high alert.

And despite deep ties to Moscow, Turkey acting to limit passage of Russian war ships to Ukraine through the Black Sea.

CNN correspondents have been covering all the global reaction. Steven Jiang standing by in Beijing following the backlash to China's response to the crisis. Jomana Karadsheh in Istanbul tracking Turkey's response on the war with Ukraine. But we begin with Jim Bittermann and the latest news from leaders in the European Union. And Jim, we're seeing a major shift for a lot of countries in Europe coming to Ukraine's aid. Fill us in.

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: In fact, Germany was probably the most major. The French European minister said this is a gigantic step forward for Germany because they have now said that they're going to -- Olaf Scholes has now said they're going to spend 100 billion in upgrade of their offenses over the next few years, 100 billion euros. This is something the U.S. has demanded of Germany, asked, requested of Germany for years, for decades, and now this attack from Russia has basically forced the hand and changed minds in Germany. So, they are going to increase their defense spending over the next few years.

One of the interesting things about that sound bite you played from Josep Borrell, the head diplomat for the European Union, he mentioned in that news conference, that in fact this is not going to be just $500 million in aid to Ukraine, it's not going to just be ammunition and small arms and anti-attack weapons but also could include fighter jets. Now this would be fighter jets that the Ukrainian pilots would fly. So, it would have to be Russian jets that maybe they trained up on. Perhaps a Mig 29 for example and there are a few of those around in some of ex-Soviet bloc countries that are now members of the West and European Union.

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