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Mykolaiv Braces For Potential Russian Ground Attack; Deadly Russian Attacks Hit Cities Across Ukraine; Joe Biden To Announce New Military Assistance For Ukraine; Some Women Who Fled Ukraine Are Heading Back. Aired 12-1a ET
Aired March 16, 2022 - 00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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[00:00:42]
ANNOUNCER: This is CNN Breaking News.
HALA GORANI, CNN ANCHOR: Hello, and welcome to our viewers all around the world and in the United States this hour, it's just past 6:00 a.m. in Lviv, Ukraine. I'm Hala Gorani.
The capital city Kyiv is now under a 35-hour curfew. As CNN's team on the ground has heard air raid sirens and a lot of explosions overnight. Many of those Russian attacks on Kyiv and its suburbs, hit homes and apartment buildings, killing a number of civilians. Four people died in the shelling of a Western neighborhood in Kyiv.
And amid the fighting, the prime ministers -- and this is quite a bold move, the prime ministers of Poland, the Czech Republic and Slovenia went all the way to Kyiv to meet with the Ukrainian President Volodymyr Zelenskyy in the middle of this war. The Czech leader says the main purpose was to tell Ukraine it's not alone in its fight with Russia.
And this is video from Ukraine's second largest city Kharkiv in the East. Local officials report 65 instances of shelling on Monday alone, with 600 residential buildings destroyed since the invasion began.
Civilian evacuations were interrupted on Monday by the renewed attacks. Kharkiv's mayor says 50 schools, plus medical facilities and hospitals have all been attacked.
(BEGIN VIDEO CLIP)
IHOR TEREKHOV, MAYOR, KHARKIV, UKRAINE (through translator): Unfortunately, shelling is continuous both in the center part of Kharkiv and in suburbs, it just continues incessant shelling and firing. And it seems like it has actually increased towards the evening. And we've had more air strikes. And it seems like more of them actually hitting a residential blocks and buildings infrastructure of the city. So basically, the situation is dire.
(END VIDEO CLIP) GORANI: Well, the situation is dire also in Mariupol, the Southeastern port city. People there also desperate for help. A local official says Russian troops are holding doctors and patients against their will at a hospital.
(BEGIN VIDEO CLIP)
MAXIM BORODIN, MARIUPOL CITY COUNCIL DEPUTY: The situation is catastrophic. I speak with my friends who today is go out -- like to go out from Mariupol. And it's terrible. Because Russians terrorists, not military, they are terrorists. Taken as hostages not only people in the hospital, they take hostages all 300,000 people with Mariupol for about 10 days.
(END VIDEO CLIP)
GORANI: Well, farther West, satellite images show at least three Russian helicopters destroyed by Ukrainian forces at the airport in Kherson. Several military vehicles were also hit.
People in Mykolaiv are desperate to escape as Russian forces close in. The port city in Southern Ukraine is a critical route on Russia's advance toward Odessa. And now fears are growing that a ground assault on Mykolaiv could come at any time.
CNN's Nick Paton Walsh has our story.
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NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): This is the road down which Russia's war of annihilation may lurch. And its emptiness speaks only of what is to come from Russia held Kherson up here to the vital port of Mykolaiv. They know what it is to be in Russia's way.
Out of 18 homes, 10 are left in our village, she says. no electricity, gas, water or heat. The only ones left are those who can't leave, another adds.
They're young, edgy, guns raised, unsure who we are. Press written on our vests and our press card slowly calms them down and they apologized.
[00:05:05]
WALSH: But this is not an army in full control of its destiny.
The trenches are where the rockets land every night, some from Odessa, Moscow's eventual target here, others from just down the road.
He's saying his house is just over there.
It's important to see what tools Ukraine has been left with by a world that seems so concerned. They fight for their homes but tell me they captured Russians who seemed unaware why they were even here. They said they can't understand what's going on, he said. They can't
go back because back there, they're being shot for retreating. So, they advanced or surrender.
Dust in Mykolaiv has sounded this way for weeks. But unbroken morale takes different forms. And this is a police chief driving a birthday gift to the governor with a captured Russian machine guns soldered onto it.
It does not distract from the seriousness of the Twilight world in which his colleagues work.
Any drunk or man changing his car battery after curfew could be a Russian saboteur they fear, there really is no way to check by looking at phones and in trunks.
The city is dark, bar their lights and the flash of the distant enemy's bombs.
An urgent hospital call for blood has gone out. They rushed to help. The savagery of Russia's targeting measurable in how dark this four- floor hospital keeps itself at night. Invisible, not from a power cut, but to avoid Russian bombs.
Mykolaiv has been fearing encirclement for days. There is heartbreak for those who leave. Amid the shared agony, still a tussle to get on two buses to Moldova. The men stay.
UNIDENTIFIED MALE: This is my wife Tanya and my daughter (INAUDIBLE). She goes to Poland. Because after combat -- of course after combat (PH).
WALSH: What will you do?
UNIDENTIFIED MALE: This is my country. What I want to do is focus here, Poland -- no Poland. This is my home.
WALSH: And there is heartbreak for those who stay. Svetlana (PH) lost her husband in a rocket attack Sunday that killed nine outside of shop. The violence here is a chain of moments of blinding grief.
UNIDENTIFIED FEMALE: The rockets landed, and my husband just exploded and the blood came out from his head. And he is still lying there in the blood and they took me here.
WALSH: Pieces left to wander alone.
Nick Paton Walsh, CNN, Mykolaiv, Ukraine.
(END VIDEO CLIP)
GORANI: Such powerful reporting. Robert English is the Director of Central European Studies at the University of Southern California. He joins me now from Los Angeles.
What's your assessment now of the battlefield advances of Russian troops they -- on the ground they're not advancing, they're using other methods now?
ROBERT ENGLISH, DIRECTOR OF CENTRAL EUROPEAN STUDIES, UNIVERSITY OF SOUTHERN CALIFORNIA: They're losing. They're losing this war. They can steadily grind forward. But they can't really take territory. They can't conquer. All they can do is terrorize and destroy civilian targets, civilian homes and hospitals. They're losing this war.
GORANI: So, what happens next? I mean, when you say they're losing, they're obviously still present in the country, still shelling, still using missiles and airstrikes. They are killing civilians as you said, they are terrorizing civilian areas. Where do we go from here?
ENGLISH: I think we stay the course. I'm going to get personal now and say what I think. But, again, Ukrainians with Western support are winning, right.
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ENGLISH: Putin doesn't see it in his delusion that he's now experiencing what we could say is diminishing returns, right?
For every bullet, that they're firing at Ukrainian defenders, a hundred bullets are going to come back at any Russians who attempt to occupy and impose a puppet government, right.
For every additional dollar they waste on this fantasy, a $100 of vital foreign investment will never return to help the Russian economy and for every protest, for every Russian protest with the Putin arrest at home, a thousand young scientist, engineers and entrepreneurs will leave the country and never return and hollow it out.
Putin is doing his country to a generation of second or third-rate status. That's what I mean when I say he's losing, even if they grind forward and continue to kill.
GORANI: But the problem is he -- you said it yourself. And in fact, people who know him who've spoken to him would agree with you that he's perhaps not completely grasping the reality of the situation on the ground, and how on the backfoot, his troops are in some parts of Ukraine in the way that you describe.
But a delusional person does not follow logical thinking in the way that you might or that others might when they assess the situation cold headedly. Could he use the most extreme type of weaponry? I mean, could he start leveling parts of cities like he helped Assad do in Syria?
ENGLISH: He could. And you could also reach for the nuclear weapon, a small nuclear weapon to destroy Ukrainian city, a larger nuclear weapon to threaten NATO. That's why we are desperate not to provoke him in this, you know, state of delusion and probably confusion as he tries to come to terms as his military, his intelligence, his political advisors try to sum up the courage to tell him it's not working, we are losing, we have to change course, we have to sign a ceasefire, we have to pull back, we have to find some way to declare victory and go home. Because if they just confront him perhaps, that it's doomed, then
maybe he will reach for the ultimate weapon. We're winning but we haven't won because he still has weapons of mass destruction.
GORANI: Sure, I spoke with a mayor of Lviv yesterday where I am in Western Ukraine. And we were able to film him, talking with the mayor of Mykolaiv, which is encircled by Russian troops and getting hit very, very badly by artillery barrages and shelling.
And the mayor basically told him, we're able to counter attack in some limited cases. So, it's not just that we're defending, we're able to push back.
To what do you attribute this Ukrainian ability, despite the fact that their military is so much smaller than the Russians?
ENGLISH: They're defending their homeland. They're defending their wives, mothers, their homes and schools from a foreign invader.
You know, Putin might have thought that his army would fight that way, because Russians have a reputation as fierce fighters in defense of what's theirs. But the Russians there now are demoralized, dispirited, they don't believe in what they're doing. And the Ukrainians have that power of dedication and defense of what's theirs that makes them Superman on the battlefield.
GORANI: And I have to say, I was very, very -- I mean, I've covered other conflict zones, and I was very impressed with how organized suddenly everybody was. Not just militarily, but in terms of organizing refugee flows. I mean, you're in a city like Lviv that has taken 200,000 internally displaced Ukrainians. You wouldn't really -- you wouldn't know unless someone told you that a city the size of Lviv has absorbed 200,000 people.
There is tremendous organization and discipline. For instance, alcohol sales are banned throughout the country. So, people stay sharp and continue fighting.
I wonder, I mean, this is -- this war is not even three weeks old, and this country has organized itself in with such discipline. Why do you think that is?
ENGLISH: I think it's the same thing. They are -- they are acting on the battlefield, in logistics, in organizing civilians and everything you just described. They're acting with grim determination and sober dedication.
The Russians, they're drunk. Putin is drunk with power and I think half of the soldiers are probably drunk with something else to try to dull the pain. Again, of what they know is doomed.
It's amazing what humans, what societies can do when it's a matter of life and death. And boy, did Putin underestimate the Ukrainians.
GORANI: Robert English, thanks so much for joining us, we really appreciate it. [00:15:01]
GORANI: Well, President Zelenskyy is just hours away from delivering a wartime speech to the U.S. Congress, he's expected to reiterate his call for a no-fly zone and fighter jets requests the U.S. and NATO has so far resisted, the no-fly zone in particular.
Mr. Zelenskyy called NATO's principal of collective defense weak on Tuesday. And he suggested he doesn't expect NATO membership soon, which is interesting thing for him to say publicly. Ukraine never joining NATO was a repeated demand by Russia in the run up to this invasion.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): For years, we've been hearing about how the doors supposedly open to NATO membership. But now we hear that we cannot enter that door. And it is true, and it must be acknowledged. I am glad that our people are beginning to understand this and rely on themselves and on our partners who assist us.
(END VIDEO CLIP)
GORANI: Well, after Mr. Zelenskyy's speech to Congress, the U.S. president is expected to announce another round of assistance to Ukraine. This comes as Joe Biden plans a trip to Europe next week to attend a meeting of NATO leaders and the European Council. Kaitlan Collins has details from the diplomatic front.
KAITLAN COLLINS, CNN CHIEF WHITE HOUSE CORRESPONDENT (on camera): Yes, President Zelenskyy and President Biden both expected to give major speeches on Wednesday. First, Ukrainian President Zelenskyy is going to address the United States Congress where we know he's going to thank the United States for the support that they've given to Ukraine since Russia invaded.
But he's also expected to ask the West for more assistance. And two of his major demands have been to create a no-fly zone over Ukraine and also to send the Ukrainian Air Force more fighter jets. Two things that have been firmed nos from the White House so far, citing conflicts that they believe that could draw the United States into, and of course, the high-risk situation of transferring planes into Ukraine as Russia is attacking it.
Of course, Zelenskyy could ask for other assistance in the speech that he is going to give to Congress. And we will hear from President Biden later on where he is going to announce $800 million in new assistance to Ukraine that would bring the total in the last week to about a billion dollars in new lethal assistance that the United States has provided to Ukraine.
Obviously, they will try to get that in as quickly as possible. We'll still wait for specifics from President Biden on what that's going to look like whether or not it includes those armed drones that Zelenskyy and other Ukrainian officials have talked about that they need at this time.
And of course, both of these speeches come as the White House says President Biden is preparing to travel to Brussels for an extraordinary meeting with the leaders of NATO next Thursday on March 24th. That's going to happen before a European Council meeting as well, potentially a trip to Poland where of course President Biden could come face to face with some of the millions of refugees who have fled Ukraine.
Kaitlan Collins, CNN, the White House.
GORANI: Our coverage of Russia's invasion of Ukraine continues in just a moment.
Coming up, while tens of thousands of people flee Ukraine each day in search of safety, we meet some women who are returning back into the war zone.
(BEGIN VIDEO CLIP)
MARIA HALLIGAN, KYIV RESIDENT: If you know what you need to do, it's impossible. I feel nervous or something like this. If I have to do this, I will do it for my country, for my relatives, for my friends.
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GORANI: The U.N. says that more than three million people now have fled the violence in Ukraine since the invasion started nearly three weeks ago. Poland has taken in the most refugees by far, almost two million as of Tuesday.
This map shows the other neighboring countries where Ukrainians are fleeing. As we've reported, the majority of people leaving are women and those who are vulnerable like children and the elderly.
Even as the refugee numbers continue to grow, CNN has found some women are now heading back to Ukraine to lend their support in the fight. CNN's Ed Lavandera reports.
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ED LAVANDERA, CNN CORRESPONDENT (voice over): The rail line from Ukraine ends at platform five at the train station in Przemysl, Poland. After refugees walk off, this same train will go back.
For weeks, it's mostly been men returning to join the Ukrainian fight against Russia. But in front of the sign reading train for Ukraine, women are waiting hours for a ride back into the warzone.
Near the front of the line, we found Tatiana Varamchenko, she came to Poland three days ago to bring her two adult daughters to safety. Now, the 40-year-old is going home to a town in Eastern Ukraine near the Russian border.
Ukraine is equally important for men and women, she says. We're the real Ukrainians. Women have the strength and will and the heart as well.
By our count, women accounted for about half of the passengers in this line waiting to cross the border back to Ukraine.
Erina Orel (PH) brought her grandchildren to Poland. She's returning now to be with her family in Odessa.
How worried are you about your safety?
I'm anxious, she says, but the feeling has become dull over time. I just want to be next to my family.
Do you feel like this is a way of fighting for your country?
Of course, she says, we have all become united during this time, each one doing what they can to help our military. Women are doing it and men as well.
Standing was several women, we met Maria Halligan (PH), she's going to Kyiv to be with her husband and family to fight. In her words, Russian terrorists.
HALLIGAN: If you know what you need to do, it's impossible. I feel nervous or something like this. If I have to do this, I will do it for my country, for my relatives, for my friends.
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LAVANDERA: And what stands out to me in this line of people going back to Ukraine is that there are so many women, why do you think that is?
HALLIGAN: I'm not men, I can't kill. I'm a woman and my work keep balance and help and be kind and care about relatives, family, friends in all we can but now it feels that all Ukrainians my relatives.
LAVANDERA: Before she leaves, Maria shows us a heart shaped Ukrainian flag given to her by Polish children to protect her.
Those returning walk past a carriage that reads safety above all, with the train leaving platform five disappears into a war zone where safety is a dream.
Ed Lavandera, CNN, Przemysl, Poland.
(END VIDEO CLIP)
GORANI: Well, if you'd like to help people in Ukraine who may be in need of shelter, food and water, we've curated a list of organizations assisting refugees and others, go to CNN.com/Impact and you'll find several ways you can help. Millions of dollars have been raised already. Still ahead, as explosions ring out in Kyiv, several European leaders
travel to Ukraine's capitol to meet with the president. Here are their message for other members of the E.U. after the break.
Plus, my interview with the mayor here in Lviv why he's unbowed after Sunday's deadly attack on a nearby military base.
(BEGIN VIDEO CLIP)
GORANI: You told me earlier that this will end in victory for the Ukrainian.
ANDRIY IVANOVYCH SADOVYI, MAYOR, LVIV, UKRAINE: I believe in our victory 100 percent.
(END VIDEO CLIP)
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GORANI: Welcome back. I'm Hala Gorani live in Lviv, Ukraine.
[00:31:05]
Our top story this hour, CNN crews in Kyiv are reporting a busy night of explosions in the capital. The city is now under a strict curfew until Thursday morning.
It comes after Russian attacks hit at least four residential buildings around Kyiv within the space of an hour on Tuesday. The city's mayor says several people were killed in the attacks.
And we're also getting a new look at the damage left behind in some cities. And it is absolutely breathtaking. This is drone footage from a town in northeastern Ukraine, where shelling and bombs have ripped open massive craters in the ground and reduced homes to rubble.
Meanwhile, the Ukrainian president, Volodymyr Zelenskyy, will address U.S. lawmakers in the coming hours. He's expected to ask them for more help, including additional weapons for Ukraine.
And CNN has learned that the U.S. president, Joe Biden, is expected to announce even more security aid after Zelenskyy's speech, stopping short of his request for a no-fly zone.
And on Tuesday, several E.U. leaders traveled to Kyiv to meet with Mr. Zelenskyy, which is a bold move during wartime, reaffirming their support for Ukraine's fight and calling on the E.U. to grant candidates status quickly to the country.
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PETR FIALA, CZECH PRIME MINISTER: You are fighting for your lives, your freedom, but we know that you are also fighting for our lives and our freedom. And it's, for us, very important.
JANEZ JANSA, SLOVENIAN PRIME MINISTER: We are bringing here full support for your future. Not only European pact but E.U. membership.
MATEUSZ MORAWIECKI, POLISH PRIME MINISTER: It should be agreed over the next couple of days or weeks, and the candidate status will be given to the end of this year at the latest.
(END VIDEO CLIP)
GORANI: Well, Lviv has largely been spared the worst of Russia's invasion. But Sunday's strike on a nearby military base has residents worried they soon could be caught up in the fighting. I spoke with Lviv's mayor about how his city is coping.
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GORANI: Meet the mayor of Lviv, Andriy Sadovyi, if you can keep up with him.
From a morning meeting with the Polish mayor of Lviv's twin city and a Ukrainian aid organization --
ANDRIY SADOVYI, MAYOR OF LVIV: (SPEAKING FOREIGN LANGUAGE)
GORANI: -- we follow him at a fast pace into a waiting van. And it's off to the main Lviv train station to check on Ukrainians evacuating to Poland. He has five free minutes. So he calls the mayor of besieged Mariupol in southeast Ukraine. No answer.
A quick call to another friend, the mayor of Mykolaiv.
UNIDENTIFIED MALE: Hello.
SADOVYI: (SPEAKING FOREIGN LANGUAGE)
GRAPHIC: Sasha, hello. How was your night? How are you?
UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)
GRAPHIC: It was OK, we were bombed a bit in the evening and before the morning. Basically, we are OK.
SADOVYI: (SPEAKING FOREIGN LANGUAGE)
GRAPHIC: Are they attacking? Are they hammering you? Or are you hitting back?
UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)
GRAPHIC: We're defending our positions, and we are hitting back.
GORANI: At the station, a lightning visit. Handshakes, hellos to some of the people in line for trains to Poland, and an update on the situation from volunteers.
Sadovyi is a wartime mayor now, his city hosting hundreds of thousands of displaced Ukrainians.
SADOVYI: People are happy about a peace city.
GORANI (on camera): I think one of the ladies said, "I am happy to be alive," she said.
(voice-over): We finally catch up with him long enough to ask a few questions on the station platform. Not as packed as in the first days of the war, with chaotic scenes of Ukrainians fleeing the bombing. They have assisted to evacuate people now, he tells me.
(on camera): What do you think your responsibility is today?
SADOVYI: It is my responsibility to arrive everyone's citizens like my mother, my father.
GORANI: You're convinced, you told me earlier, that this will end in victory for the Ukrainian people.
SADOVYI: I believe in our victory 100 percent. It is --
GORANI: You have no doubt? No doubt?
SADOVYI: No. Never give up. Only victory.
GORANI (voice-over): Shortly after the station visit, it's onto a church for the funerals of three of the service members killed in Sunday's attack on a training facility in Yavoriv in western Ukraine, not far from this city.
Mayor Sadovyi touches the casket of the fallen soldier, while reciting a prayer and bows in gratitude to troops attending the funeral service.
But the moment of reflection doesn't last long. An air raid siren goes off outside of the church, and the mayor and his staff return to city hall and down to the basement shelter, where they discuss housing for Ukrainians displaced by the war.
A priority for the mayor of Lviv, whose city has already welcomed more than 200,000 people, with the expectation that 100,000 more could join them.
But there's no time to linger on that thought too long. Mayor Sadovyi has no time to waste.
(END VIDEOTAPE)
GORANI: We'll have more from Lviv Ukraine at the top of the hour, but first, let us bring in John Vause in Atlanta.
JOHN VAUSE, CNN INTERNATIONAL ANCHOR: Thank you, Hala. We'll see you again soon. In the meantime, we'll take a short break. But when we come back, the Kremlin offering rubles to pay its foreign debt, but no one is buying. That means default could be just hours away.
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VAUSE: Official interest rates in the U.S. are widely expected to rise by a quarter point Wednesday. But the bigger unknown is how many rate increases the Federal Reserve is planning for the rest of the year.
With inflation at a 40-year high, analysts say the Fed could announce up to eight rate hikes for the year.
Well, Russia is now on the brink of a sovereign debt default, with a $117 million interest payment due on Wednesday, and the payment must be made in U.S. dollars.
But western sanctions have frozen Moscow's foreign currency reserves, and so the Kremlin has warned it could pay in rubles, the country's struggling currency, which has plummeted in value over the last few weeks.
Here's CNN's Anna Stewart, reporting in from London.
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ANNA STEWART, CNN INTERNATIONAL CORRESPONDENT: Russia hasn't failed to pay back international investors of its sovereign debt since the Bolshevik Revolution over a century ago.
Now, it might not just be a lack of willingness to pay back investors from countries that Russia now deems unfriendly, it may not be able to do so. One of the rounds of western sanctions targeted its central bank, and that essentially means that around half of Russia's foreign reserves are frozen. That's around $315 billion.
Now, that is why Russia says it can only repay creditors in rubles. That is the local currency, and it's lost around half of its value against the dollar this year.
That sort of volatility doesn't just make the ruble less attractive for investors. Using it to repay this debt would be considered a default, and here's why.
Moscow is due to pay $117 million in interest payments on dollar- denominated government bonds Wednesday. Now, although Russia has issued bonds that can be repaid in multiple currencies since 2018, these payments must be made in U.S. dollars only.
These interest payments do come with a 30-day grace period, but credit ratings agencies could declare Russian to be in default before that period ends, if Moscow makes clear that it doesn't intend to pay.
Now, the potential consequences of a default are unclear. Economists say the market has already prepared for the default scenario, so financial shocks should be limited.
And while there's some concern that western banks that have lent to Russia could suffer, the IMF says the default would be unlikely to cause a financial crisis. However, if the Russian government defaults on its debt, it is
possible that Russian companies follow suit, and they own international banks, more than $121 billion.
That's according to the Bank for International Settlements.
Now for Russia, the main cost of a default on sovereign debt is being locked out of capital markets and facing high costs for borrowing money overseas. But of course, due to sanctions, they already are.
Anna Stewart, CNN, London.
(END VIDEOTAPE)
VAUSE: With us now from New York is Rana Foroohar, CNN global economic analyst, as well as associate editor and columnist for "The Financial Times." It's good to see you again.
RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: Great to see you.
VAUSE: Here is the latest from the White House on the impact Western sanctions are having on Russia's economy.
(BEGIN VIDEO CLIP)
JEN PSAKI, WHITE HOUSE PRESS SECRETARY: The ruble is less than a penny. It's the worst performing emerging market currency. The Russian stock market has been closed for nearly three weeks, longest in its history, as they try to prevent a market crash.
Inflation in Russia has been rampant. Some forecasters are predicting 20 percent inflation for Russia by the end of the year. And the Russian -- and trillions of dollars of businesses have been disrupted by sanctions, putting the Russian financial sector under severe stress.
(END VIDEO CLIP)
VAUSE: And so now you can add an almost certain Russian default, you know, either to be on Wednesday or 30 days from Wednesday. What is the misery index for life in Russia? And what's been the economic impact of this? And how much likely -- how much worse is it likely to get?
FOROOHAR: You know, the misery index is about as high as it could be. It already was, even before we had this -- what is going to certainly be a default.
You know, Russians are asking to pay their debt in rubles, which as Jen Psaki says, is the worst performing emerging market currency. So nobody really wants to take that.
One thing I'm concerned about is I think that it is hard to make things worse than Russia, but you can make things worse in the rest of the world.
[00:45:07] And the fact is, if Russia defaults, that has a knock-on effect
throughout the planet, really. You know, Russians were meant to pay this debt. They have creditors. There's always a creditor on the other side of a debtor.
And if payments do not come through, or they come through on a currency that was worth a fraction then weeks ago, that's going to mean that somebody else can't pay their bills. So that kind of ping- pong effect is something that could get worse in the coming weeks.
VAUSE: What we're being told, though, is that because even before Western sanctions, Russia's economy was relatively isolated from the rest of the world. They're saying that means that there won't be any sort of trigger, like you know, a Lehman Brothers collapse, perhaps. But you see it a little bit differently. Why is that?
FOROOHAR: You know, it's not a Lehman collapse. I want to be clear. I'm not talking about a systemic problem within the global financial system that brings down an entire economy or a series of economies.
But what I am talking about is the notion that, because Russia can't pay its bills, that leaves somebody else around the world, in some way, be it a company, be it a country, holding the bag.
And there are -- you know, there are always creditors and debtors. And we don't know, as all this pays out, how the balance of payment effect is going to work out.
Yes, Russia was pretty much isolated, particularly from the U.S. Europe, a little less so. Germany had probably the deepest ties. But you know, it remains to be seen.
The last time we were in this situation was in 1998. And that's when we saw the fall of Long-term Capital Management, the hedge fund that went under. So you know, we're still unspooling this threat. And we're not quite sure where we're going to end up.
VAUSE: So what we have right now, though, is a lot of economic instability, which was there from the war in Ukraine. The rollercoaster rise of energy prices.
And now add into this soup, this COVID outbreak in China, which is serious enough to shut down major industrial cities like Xinjiang. This does seem like it would have a significant impact, not just on China's economic recovery, but as well as supply chains, inflation and a whole lot of issues.
FOROOHAR: Well, yes. And John, you're spot on. And we spent a lot of air time talking about Russia. But really, what's going on in China and with supply chains and de-globalization, that is the big story here.
I mean, Russia is part of the story, but China is a bigger part. And absolutely, we're going to see more supply change disruptions because of what it's happening in China in Shenzhen. But you know, one thing I'm seeing, that I'm fascinated by and I'm
going to be spending some of my own reporting time on, is the way in which western businesses are starting to adapt. You know, you're seeing the stocks of 3-D printing companies going up, you know, because they can circumvent supply chains and make things in locations.
You know, the hubbing of production and consumption, local made for local. Companies are calling. It so, more doing things on the ground where you are. It's fascinating. I think we're going to see a lot more that's the opposite of the world is flat.
VAUSE: And so in this sort of environment that we're now heading into, how aggressively can the U.S. Fed raise interest rates, when the economic outbreak is just so unpredictable.
FOROOHAR: Yes. Well, that's the magic question. That's really going to move markets.
I'm going to be watching not much so for a rate hike, because we know there is going to be a rate hike. But how many there are going to be in the course of the year. Are we going to see three? Are we going to see four? Are we going to see seven?
What is the language that's going to come out in the Fed announcement this week. That will tell us a lot about where we're going to be and just how bumpy the year ahead is going to be.
VAUSE: Obviously, the great fear is a global recession on the horizon. so this federal reserve would be very important. So Rana, thank you so much. We appreciate it.
FOROOHAR: Thank you.
VAUSE: With the worst outbreak of COVID since Wuhan sweeping across China, many are now questioning the high price of containment there with millions under lockdown and the economy set to take a major hit. Details when we come back.
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[00:53:20] VAUSE: A wave of new COVID infections in China has forced some changes in Beijing's pandemic playbook. Health officials say isolation and testing policies will be eased for patients with mild and asymptomatic cases.
The move is designed to ease some of the pressure on the healthcare system. Live from Beijing, CNN's Steven Jiang has the very latest.
And with these changes, there are also questions about this zero COVID policy and is it really worth it.
STEVEN JIANG, CNN BEIJING BUREAU CHIEF: It's interesting, in terms of the timing of the release of these updated guidelines. Because on one hand, given the highly contagious nature of Omicron, which is raging across the country right now.
This is being taken by a lot of people as the health authorities' willingness or at least they're prepared to loosen things up somewhat, by not only changing where they put mild and asymptomatic cases, but also in terms of discharge criteria and the health monitoring requirements after their release.
But on the other hand, these guidelines are being published as the Beijing authorities seem to be doubling down on their zero-COVID policy, as again, we see millions of Chinese residents across the country being placed under various forms of lockdown.
And that now applies to Shanghai, the country's biggest city, which up to this point, had prided itself on its less destructive approach to COVID containment. But Shanghai residents are now telling us the authorities there seem to be adopting a so-called rolling lockdown strategy. Basically meaning they're locking down a batch of neighborhoods at a time, sealing off residents in their homes for at least 48 hours and requiring them to undergo two rounds of COVID testing.
And those neighborhoods would only be reopened when everybody inside test negative twice within two days.
And the authorities there are already warning about possible delays in reopening those neighborhoods because of the city's increasingly strained testing capacity.
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And remember, that's considered the most lenient approach in this country. But at the end of it, John. I think the authorities here are aware of the economic impact and also, of course, the concern about the relatively low vaccination rate among the elderly, as well as the questions among the efficacy of their vaccines.
But the bottom line here is their priority is this Communist Party National Congress later this year, and so they want to ensure absolute social stability before that. Because this year, of course, is where we are going to see Xi Jinping, the leader, takes an almost unprecedented third term and paving the way for him to rule for life. And before that happens, everything else is secondary -- John.
VAUSE: Got to have priorities, I guess. Steven Jiang, Beijing bureau chief, thank you, sir.
I'm John Vause. We'll be back next hour. Our breaking news coverage returns after the break. You're watching CNN.
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