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Top U.S. Defense Officials Speak After Russia Downs U.S. Drone; U.S. Stocks Tumble Amid Banking Sector Fears; Key Inflation Measure Down More Than Expected In February. Aired 2:30-3p ET

Aired March 15, 2023 - 14:30   ET

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

[14:30:00]

GEN. MARK MILLEY, CHAIRMAN, U.S. JOINT CHIEFS OF STAFF: As President Biden and Secretary Austin and many others, to include all the leaders of Europe, have said many times that we will remain committed for as long as it takes.

Thank you and I look forward to your questions.

UNIDENTIFIED MALE: Thank you, gentlemen.

First question will go to Associated Press.

UNIDENTIFIED REPORTER: Thank you.

Mr. Secretary, you said you spoke with your counterpart. Can you give us a sense of the Russians' reaction to the call? Did they suggest to you their defense that this was an accident or intentional or that it never happened? Can you just give us a better readout of your call?

And General Milley, have you spoken to your counterpart? Are you intending to do so? And do you believe, after what you've seen, that this was intentional? Is this considered an act of war?

GEN. LLOYD AUSTIN, DEFENSE SECRETARY: Well, thanks for the question. I won't speak for Minister Shoigu, nor will I get into the details of our discussion.

I will just reiterate that the United States will fly and operate wherever international law allows.

Now, we take any potential for escalation very seriously. And that's why I believe it's important to keep the lines of communication open. I think it's really key that we're able to pick up the phone and engage each other and I think that that will help to prevent miscalculation going forward.

MILLEY: So thanks for the question.

On the intentionality, I don't know. I do plan to talk to my counterpart. We have a scheduled call. We will see if that works out.

So was it intentional or not? I don't know yet. We know that the intercept was intentional. We know that the aggressive behavior was intentional. We also know it was very unprofessional and very unsafe.

The actual contact of the fixed-wing Russian fighter with our UAV, the physical contact of those two, I'm not sure yet. That remains to be seen.

But I can't -- I can tell you with certainty, though, that we have absolute evidence of the contact and the intercepts, et cetera, and it's very aggressive. You have heard about the dumping of the fuel and everything else. We have video evidence of all of that.

There's no question that that part of it was intentional. The actual physical contact of the aircraft, that I'm not so sure. We will have to figure that out. We are not positive of that yet.

As far as an act of war goes, I'm not going to go there. Incidents happen. And clearly, we do not seek armed conflict with Russia. And I believe that, at this point, we should investigate this incident and move on from there.

But we will continue to exercise our rights in international air space.

UNIDENTIFIED MALE: Let's go to Dan, "Washington Post."

UNIDENTIFIED REPORTER: Gentlemen, thank you for your time today.

Secretary Austin, announced presidential candidates have already said that Ukraine should not be a priority.

Given that the Biden administration has promised to support Ukraine for as long as it takes, are you concerned that election rhetoric could undermine support for Ukraine in Congress or with the American people?

And then, Chairman Milley, the MQ-9 came down in the Black Sea where the United States has not had any military vessels for more than a year. Is it fair to say that the U.S. will not recover this MQ-9?

And do you have any concerns about what value it might have to Russia either strategically or for propaganda? Thank you.

AUSTIN: Thanks, Dan. I would -- in terms of the importance of Ukraine, first of all, we've seen bipartisan support for providing security assistance to Ukraine throughout, up to this point. I expect that we will continue to see that going forward.

We've heard some senior leaders on both sides of the fence say that, and so I expect that that will continue to enjoy that support.

You know, Dan, Ukraine matters. It matters not to just Ukraine or to the United States. It matters to the world.

This is about the rules-based international order. It's about one country's ability to wake up one day and change the borders of its neighbor and annex its neighbor's sovereign territory. As we've seen, countries around the world don't think that's a good

idea and that's why you've seen 50 countries, not only come to the initial meetings of the Ukraine defense contact group.

But they continue to come back and they continue to work hard to ensure that Ukraine gets everything that it needs to be successful. And that will remain our focus going forward.

MILLEY: So, Dan, on the recovery piece, we know we are landed in the back sea, probably 4,000, 5,000 feet of water, any recovery option is difficult at that depth by anyone. That's first point.

[14:35:08]

Secondly, it's true we don't have any ships there but we do have a lot of allies and friends in the area. We will work through recovery operations. That's U.S. property and we will leave it at that at this point.

But it probably broke up. There's probably not a lot to recover, frankly.

As far as the loss of anything of sensitive intelligence, et cetera, as normal, we would take -- and we did take mitigating measures. So we are quite confident that whatever -- whatever was of value is no longer of value.

UNIDENTIFIED MALE: Next question will go to Ellie Watson, CBS.

ELLIE WATSON, PENTAGON REPORTER, CBS NEWS: Thanks for doing this.

Secretary Austin, General Milley mentioned the video, we've heard reports there you're work to go declassify video of the incident. What does that video show and when will that video be released? Why hasn't it been released yet?

General Milley, Secretary Austin talked about the pattern of behavior. How often is Russia conducting these harassing maneuvers and has it increased in recent weeks?

AUSTIN: Thanks, Ellie. As you know, as you've said, we are still going through videos and photographs to ascertain what we can release, what we can provide.

But in terms of what the video shows, we remain confident in the facts that we have conveyed thus far. That will not -- that will not change in terms of, you know, what happened and how it happened.

And so, again, we will work through as quickly as we can to evaluate videos. And we will let you know when we have something in terms of video or stills that we can provide you.

MILLEY: In terms of the pattern of behavior, Ellie, yes, this is a part of a pattern of behavior.

The United States and Russian military forces operate in proximity to each other throughout the world. We are operating in the Middle East, in Syria, for example. We have areas up in Alaska that routinely either maritime or aerial vessels come in contact in the maritime areas outside of Hawaii, for example, but also obviously in Europe and particularly in Ukraine.

So the fact that we operate in proximity to each other is not particularly unusual. And we do try to establish deconfliction channels in order to make sure that our forces are physically separated and we don't have incidents like this.

But there is a pattern of behavior recently where there is a little bit more actions being conducted by the Russians. We think we haven't completed our analysis as to why that's happening.

It wasn't just involving us. There were some incidents earlier with the British and some other nations as well.

So there is a pattern of behavior going on here and we have to figure out exactly what the way ahead is.

I think that was one of the fundamental reasons for the secretary's call to Minister Shoigu and one of the fundamental reasons for my call to my counterpart.

UNIDENTIFIED MALE: Go to Nancy Youssef, "Wall Street Journal."

NANCY YOUSSEF, NATIONAL SECURITY CORRESPONDENT, "WALL STREET JOURNAL": Thank you. General Milley.

I was wondering if you could clarify something you said earlier, you said the U.S. has a lot of allies and friends in the region referring to the Black Sea.

Am I to take from that the U.S. is prepared to request ships to go in and survey and possibly recover the drone or is the expectation that the U.S. does not intend to recover the drone or is the expectation that the U.S. does not intend to recover the drone?

Secretary Austin, I'd like to go back to some comments you made in Brussels, you said that Bakhmut was largely symbolic.

Are you concerned that the Ukrainian investment in Bakhmut potentially takes away resources that could be applied to the spring offensive and risks the outcome of that offensive? Thank you.

AUSTIN: If you don't mind, I will go first.

Nancy, I -- first of all, let me applaud the valor, the persistence that we've seen from the Ukrainian soldiers. They have done amazing in Bakhmut.

I think the Russians have been working to take Bakhmut for some seven months or so now and they haven't been very successful. And that's because of the diligence, the commitment, the focus of the Ukrainian soldiers. In terms of the significance of Bakhmut, I would say -- I would point

to the fact that President Zelenskyy is fighting this fight. And he will make the calls on what's important and what's not important to his forces and whether he needs to reposition or remain in Bakhmut.

The point that I would make is, if he does make a call to reposition at some point in time, it doesn't mean that the war is lost. It may mean, and probably will mean, that he is positioning himself to maintain advantage. And so I think that's the real key there.

[14:40:02]

But whether or not he stays there or how long they stay there, that's President Zelenskyy's call and not -- you know, not anybody else's.

And, again, our goal is to make sure that we're supporting him in whatever decision -- battlefield decision he's going to make.

By the way, we're generating combat power to a degree that we believe that it will provide them opportunities to change the dynamics on the battlefield at some point going forward.

Whatever point that is, whatever -- you know, whatever they want to do in the future, I think the platforms, the training, the sustainment, the maintenance that we are providing will make a significant difference.

As we work through all of this with our allies and partners in detail today in the meeting, we are on pace. And that's, in large measure, due to the professionalism of our forces, who are conducting the training and equipping, but also forces around the -- around Europe.

As the chairman pointed out, there are a number of countries that are conducting training in their countries, providing various platforms. And we're really focused on how we're going to sustain those platforms as well.

MILLEY: Nancy, on the question of the recovery piece, I wouldn't read too much into what I said. We do have allies and friends in the region. We don't have any naval surface vessels in the Black Sea at this time. And we will work up options.

As I said at the outset, this is probably 4,000 or 5,000 feet of water and it probably -- I don't know for certain yet. It will be days before we have actual facts on the impact on what debris is there. Probably sank to some significant depths.

So any recovery operation, from a technical standpoint, would be very difficult. If there is reason to believe that we could recover something then we will work up options for the secretary and president to consider and will move from there.

But we do have options and we do have friends and allies in the region.

UNIDENTIFIED MALE: We have time for one more. (INAUDIBLE) UNIDENTIFIED REPORTER: Thank you very much for your time, gentlemen.

I have two questions.

Chairman Milley, you were in Syria earlier this month and that was -- a lot of headlines in Turkey and eventually the Turkish minister of foreign affairs summoned ambassador flake to the ministry to provide an explanation. What was the message behind your visit, sir?

And to Secretary Austin, Turkey has requested to buy new F-16s and also modernization kits for its existing fleet. And Ankara is saying that lack of approval as soon as possible will not only undermine the Turkish nation's security but also the security of NATO.

So I would like to ask your - assess your insights on this assessment and your thoughts about providing Block 70 F-16s to Turkey.

AUSTIN: Turkey is a NATO ally and we have a strong -- a long-standing strong relationship with Turkey. And we intend to do everything possible to keep it that way.

It's real important to us that we maintain interoperability between our NATO allies. And so that will always be a focus. It will always be a priority.

As you know, typically, we don't comment on any pending equipment sales prior to Congress being notified. So I don't have any comments to make on that particular FMS case.

But, again, I would just highlight the fact that Turkey remains a very valuable partner. And we will make sure that we're doing everything we can to continue to strengthen our relationship.

MILLEY: And for my visit, it was nothing more than a troop visit to determine the task, purpose, mission, to go out and check on that, see how we're doing, and to assess things like force protection, et cetera.

We've got almost 1,000 troops in Syria and they are at risk. They are attacked from time to time with the various types of munitions by various actors that are in the area of Syria.

So I wanted to go over and check on that to make sure the mission is validated and report on the secretary on what that is.

With respect to Turkey, Turkey and the United States have a common interest and we have had a common interest for years. And the common interest is to ensure the enduring defeat of ISIS. Isis, the caliphate, was destroyed. But the organization is still remnants of that organization over there.

There are still refugee and prison camps that are there that we're helping out folks, training folks to secure those.

It's in our interest and it's in Turkey's interest. And it's for sure something that I needed to do. [14:45:05]

And it's perfectly appropriate for the chairman to go check on how the forces are doing, especially when they are in harm's way.

UNIDENTIFIED MALE: Secretary Austin, General Milley, thank you very much.

Gentlemen, this concludes the time we have available today. Thank you very much.

(CROSSTALK)

VICTOR BLACKWELL, CNN HOST: We've been listening for about 30 minutes now to the defense secretary, Lloyd Austin, and the chairman of Joint Chiefs, Mark Milley, there talking not only about this Ukraine defense contact group meeting today, the tenth since the invasion, but also this clipping of a U.S. drone by a Russian jet.

Let's bring in our team here. Jim Sciutto, CNN chief CNN national security correspondent, retired Major General James "Spider" Marks, CNN military analyst, and Steve Hall, CNN's national security analyst.

Jim, let me start with you.

The secretary started by calling this a troubling episode, called it reckless, unprofessional. Also talked about not too many details but talked about his call with his Russian counterpart Defense Minister Shoigu.

What were your top take aways from what we heard?

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: I think the biggest is they are not certain that the Russian pilot intended to clip this drone and take it down.

He said, General Milley, directly, was it intentional or not, we don't know yet. We know the interception was intentional and what he described as aggressive behavior by the pilot. But the actual physical contact of the aircraft, we are not so sure.

So that's notable there because there's a difference between those two things. The reckless behavior is dangerous by its nature but we have seen that before.

We have not seen a pilot deliberately clip an aircraft like this one you're seeing and take it down. They're still looking to conclude that.

Milley did say there has been what he called a pattern of behavior by Russian pilots recently in terms of increasing their aggressive behavior around U.S. aircraft.

So that's notable, something they've been tracking, but key because it gets to exactly what was intended by the Russian side. BIANNA GOLODRYGA, CNN HOST: And we also, once again, to your point,

Jim, heard both of them describe past history of intercepts, dangerous intercepts and reckless intercepts that Russia has conducted for years, even prior to this war.

General, it was interesting also to hear the defense secretary say that he told the Russians repeatedly in that he told Shoigu repeatedly that the U.S. will continue to fly wherever international law allows.

Interesting because the Russians are claiming this is their territory, even though it's not.

MAJ. GEN. JAMES "SPIDER" MARKS, CNN MILITARY ANALYST: It is international waters and international air space. The United States operates in both with complete freedom and has done it for years and will continue to do it.

Look, these are semantic discussions that are really, really important. As Jim indicated, this is a distinction with a difference to the Russians. To us, it's not.

This is incredibly provocative activity. They dumped fuel on the UAV. Whether they then got behind it and clipped its propeller, that's to be determined.

In my mind that's irrelevant. This was irrational, incompetence, incredibly dangerous, provocative stupidity on the part of the Russians.

Yet, it's important. That's why you see Secretary Austin and General Milley in a very calming way describe these incredibly inflammatory incidents.

BLACKWELL: Everything up to the clipping, they say or they know was intentional. So whether the actual punctuation at the end of it, the clipping of the drone was intentional, they've been doing this not only on this day but for a period leading up to this.

And we heard from General Milley, not just with the U.S. but British forces and others.

Jim, let me come back to you.

What we heard from the secretary about the commitment to Ukraine. He said we will continue to look into our stocks and our budget to make sure that the Ukrainians have what they need.

As we heard from soon to be, likely, very likely, presidential candidate, Governor Ron DeSantis, talk about that this territorial dispute between Russia and Ukraine is not in the greatest U.S. interest.

SCIUTTO: I mean, it's quite a way to describe a deliberate invasion of a sovereign government as a territorial dispute.

You have seen Republican lawmakers, particularly Senators, come out publicly to disagree with DeSantis' declaration.

You heard Austin saying that, to date, it has been largely a bipartisan issue in this country in terms of supporting Ukraine with both financial support and weapons.

But, listen, this is something they're going to have to acknowledge because the two leading Republican -- potential Republican nominees for president in 2024, both have positions like DeSantis, Trump and DeSantis, in terms of questioning that support whether it's in U.S. interest there.

So, you know, as far as -- that may be wishful thinking by the defense secretary given the potential changes in 2024. We just don't know.

[14:50:04]

GOLODRYGA: Yes, and the U.S. has, thus far, provided over $30 billion worth of aid. But it was notable to hear the defense secretary say, quote, "We keep looking into our stocks and our budget."

Steve, everything that I keep hearing - I mean, we heard that Sweden will now be giving 10 Leopard tanks. There will more systems as well that are going to be delivered.

That having been said, every single thing I'm hearing is that Ukraine is desperately in need of artillery ammunition and need it yesterday.

One report suggests they are expending 3,000 shells per day, Russia expending probably double that, if not more.

Realistically, Steve, how soon can that get there in terms of what Ukraine is planning to do in the spring?

STEVE HALL, CNN NATIONAL SECURITY ANALYST: Well, I wonder whether we should turn that question around and say, given everything you've said is true about that in terms of them using a lot of ammunition and resources, when they can actually go back with some sort of counteroffensive or move aggressively against the Russians?

I think the decision on the Ukrainian side of that will be driven largely by their capacity to actually do it, which means receiving the platforms, ammunition and the other things they need assistance from the west to do. That is a key part to it.

Ukraine - as Russia has decided this is a war of attrition Ukraine is going to have to plan for the long term with the help of our NATO allies so they can hold out.

GOLODRYGA: All right, Steve Hall, Major General "Spider" Marks, thank you so much for your time.

Jim Sciutto, as well.

We'll continue to cover this story in our next hour.

Meantime, another big story we're covering. BLACKWELL: Yes. Stocks are sinking after another bank lands in some

trouble. How this all impacts you. We'll get into it, next.

(COMMERCIAL BREAK)

[14:56:11]

GOLODRYGA: You have been watching markets in the red all day today on Wall Street as concerns about the banking sector escalate. Right now, the Dow is off its lows for the day down about 300 points. Still concerns though about what is going on in this sector.

Credit Suisse's stocks crashed more than 20 percent to a record low today - that is a European bank - after its biggest shareholder appeared to rule out providing any more funding for the embattled lender.

BLACKWELL: CNN's Matt Egan has more now on the volatility.

Really, a tumultuous few days. What is going on now?

MATT EGAN, CNN REPORTER: Everyone is clearly on edge, just kind of waiting for the next shoe to drop here after that implosion of Silicon Valley Bank.

What we've seen is Credit Suisse has gotten a lot of attention today. As we just showed, that bank down 20 percent, kind of record lows.

This European bank has been in turmoil for literally years. One Wall Street veteran likened it to a slow-moving car crash.

What is new is they warned of material weakness in their financial reporting earlier this week.

And then today, their biggest backer, a Saudi bank, came out and basically said they're not interested in putting any more money into this bank.

This is just adding to the concern we've seen about the banking system.

U.S. officials are watching this closely. The Treasury Department says they are monitoring the Credit Suisse situation and have been in touch with their global counterparts.

Regional banks are also in the red here in the United States. First Republic Bank pledging around 20 percent. This is after Fitch and S&P downgraded this bank's credit rating, worried about the deposit outflows.

Other regional banks down. Big banks notably, they're also in the red, though they are experiencing an influx of deposits.

We should remind people who are kind of nervously watching what's going on with these bank stocks that the FDIC protects your money in the bank up to $250,000. That is per borrower. For most of us, we're good.

In fact, in the last few days, just with this rescue of Silicon Valley Bank, we've seen they are willing to go out and protect people above the $250,000.

We should keep it in perspective that we can have both things be true. Bank stocks can be down yet money in the bank is safe.

GOLODRYGA: The Fed has also enacted this emergency lending facility, basically telling banks we are your back stop if you ever need it -

(CROSSTALK)

EGAN: Exactly. Trying to keep this from happening again.

GOLODRYGA: On what would have been just more good news, perhaps had it not been for the bank story, is we got some relatively positive inflation data today.

EGAN: Absolutely. Another sign that inflation is cooling off. Producer prices actually declined month over month. That was a surprise. Year over year, this clocked in at 4.6 percent. That is the eighth straight month of cooling inflation.

It is a big improvement from a year ago when we had almost 12 percent wholesale inflation. You can see it on that chart, really cooling off very significantly.

Other numbers out today on retail sales showing that retail sales dipped in February after a big increase in January. But this is another sign I think that the economy is cooling off.

The question now is, what does the Federal Reserve do, right? Because, all along, the risk was that they could raise interest rates so much that something breaks either in the economy or in financial markets. And now it looks like something has broken in the banking system.

So there's a lot of debate over what they're going to do. A week ago, it looked like they'd raise interest rates by 50 basis points. Now the market is basically split 50/50 between either raising interest rates by a quarter point again or doing nothing at all.

This is shaping up to be a pretty suspenseful Fed meeting. So much is on the line when it comes to the economy.

[14:59:56]

GOLODRYGA: Fed Chair Powell in an unenviable position right now. That meeting and decision will come next week.

Matt -

(CROSSTALK)

BLACKWELL: Yes. It's unenviable. And, in fact, it's gotten even harder. GOLODRYGA: Matt Egan, thank you.

EGAN: Thanks.

GOLODRYGA: And don't miss "CNN PRIMETIME TONIGHT, BANK BUST, WHAT'S NEXT FOR AMERICA'S MONEY?"