Victoria Nuland - US Assistant Secretary of State HARDtalk

Afghanistan to help Al Qaeda and the Taliban. Now it's time for HARDtalk.

Welcome to HARDtalk. Here at the US Embassy in London. What is

Washington's strategy to try and influence events in Ukraine? They

have seized Crimea, and is now pro`Russian rebels are in a violent

stand`off with the interim government. My guest today is

Secretary of State Victoria Nuland. Does she believe that pro`Kiev

forces have designed on eastern Ukraine? Assistant secretary

Victoria Nuland, welcome to HARDtalk. On cue, great to be with

you. How would you describe what is going on in Ukraine? You have

separatists fighting, holding government buildings and holding

independence referendums. What is most important that is happening in

Ukraine now is that the entire country is preparing for a

presidential election on 25 May. The vast majority of Ukrainian territory

is peaceful, and people are excited about their opportunity to vote. As

you said, we have parts of Ukraine in the east, near the Russian

border, where we have little green men and separatist trying to

decipher people rather than let them vote. Sergei Lavrov said that when

Ukrainians killed Ukrainians, that is as close to civil war as you can

get. Is it close? Absolutely not. As I said, there are some very hot

towns in Ukraine. Mostly in the east. In Sloviansk, in Kramatorsk,

there are is violence in eastern towns. But this does not represent

the views of the vast majority of Ukrainians. Even in the east, 75%

say they do not want any part of this separatism. We believe this is

inspired from the outside. That is 30% of the population, the people

following those men in green suits as you say, that is a lot of

people. You can't just dismiss them. Have to be incorporated somehow into

this dialogue. They absolutely have to be incorporated. That is why we

are gratified to see the Ukrainian government and officials from across

the space now working with us and the EU and the OSCE to institute a

national dialogue about the direction the country is going on,

talking about things like constitutional reform,

decentralisation of power. It was always the placed where Kiev held

all the money and power. That is not appropriate in a modern state. It is

also not appropriate to achieve political ends at the barrel of a

gun. As you say, Kiev has launched its dialogue with politicians and

civic groups trying to keep the country together. It does not

include many rebel leaders. One senior Ukrainian says that without

their participation the roundtables would just amount to declarations.

You need them there and they are not being included. Ukrainian acting

government says they do not want them there. In the first national

roundtable, that happened on 14 May, in fact, a broad cross`section of

politicians, civil leaders, were included. But folks who are holding

buildings and have armed themselves, have to put down weapons if they

want to be included. You can't on the one hand threatened and

terrorise citizens, and on the other hand say let's talk about it. You

have to accept amnesty first. But don't you think that somehow you to

incorporate those people? And the government in Ukraine doesn't seem

to be willing to do that. The acting president says they will not engage

in dialogue with those with blood on their hands who are prepared to

defend their interests by illegitimate means of persuasion.

But we will not fight terrorist saboteurs and criminals. That does

not sound conciliator enough to the people you need to bring into the

dialogue. Again, the vast majority of folks in the east don't want to

have this conversation about devolution of power through the

barrel of a gun. We are talking about a small number of guys who

have heavily armed themselves with outside support, who are saying we

know best. What these roundtables offer is a chance for a legitimate

citizens to work this out and say to separatists we can achieve our goals

without you, thank you very much. In fact, they are in cities across the

Ukraine, turning a games this. You remember this terrible tragedy in

Odessa. Since then, the citizens say that police are not strong enough.

They are going to police them themselves, because they want to

vote, and to settle their problems with Kiev politically. They don't

want guys from the outside, they don't want weapons on the streets,

they don't want Russia telling them what to do. That is why they are

supporting the right of Ukrainians to choose. You say there should be

devolution, how much? Should it amount to federalisation

virtualisation? The Russians have made that a bad word in Ukraine.

What they want and have talked about is the right of Ukraine's regions to

secede. In fact, they are asking for things in Ukraine they would never

allow and Russia. But what Ukrainians are now talking about is

actually devolving all of the powers of the state except foreign policy,

defence, and justice, to the regions. So they would be able to

collect their own taxes, and keep them, they would be able to decide

on local languages, collect their own leaders. But if that doesn't go

far enough for the separatists in eastern Ukraine, you will not have a

solution to the problem. They will continue to destabilise the

situation. What we are already seeing as a result of the

Roundtable, the dialogue the Ukrainian government has initiated,

and OSCE in Europe, and we are a part of it, as we are seeing

citizens in these towns are saying wait a minute. Who are you guys with

the guns? We can solve this and other way. You are seeing this

process separating the hard`core who don't represent the Ukrainian

people, from the population. That is a good thing. That the US think that

Russia wants to incorporate the Donetsk region in eastern Ukraine

into the Russian Federation? We have been concerned about it. As you

know, what has just happened in the east is very reminiscent of the

playbook we saw in Crimea. You instigate an independence movement.

You have a fake vote on two weeks notice, and then you declare massive

participation. And then you come in with your peacekeepers. We have to

take President Putin seriously when he says that Russia should think

about going back to the days of Catherine the great. We believe that

if you don't take leaders seriously when they say these kinds of things

than you are not prepared. If Washington believes in the

possibility that Russia may annex part of eastern Ukraine, what can

you do about that? What is the stick that you can wave at Russia? The

stick we have been waiting, the cost, as President Obama puts it, is

increasing isolation and increasing economic sanctions for Russia if it

continues to violate international law. And it takes pieces of another

country by force as it did in Crimea. So as you know, when

President Obama was here in March, he made clear that if Russia used

the 40,000 troops it still has deployed right on the border, that

would trigger even deeper economic sanctions from the US and our

European partners. But what we have seen with these little green man

causing trouble around the east, is that there can be plenty of outside

interference short of troops. And so when Chancellor Merkel was in

Washington recently, she and President Obama agreed that if these

elections were disrupted from the outside, then there will be even

deeper economic sanctions. And that was part of what we were in Europe

today to talk about. Said the sanctions stay as they are unless

Russia goes into eastern Ukraine and unless Russia disrupts the

presidential elections in Ukraine on 25 May. If there is continued

destabilisation in Ukraine there will be more sanctions. If there is

destabilisation of the elections there will be deep central

sanctions. A sickly, Russia has got away with an axing Crimea. The

sanctions stay where they are, and Russia can live with them as they

are. First of all, with regard to Crimea. We have continued to

escalate the sanctions there. The European Union put more sanctions on

Crimean officials and entities. Just a few days ago, the US did two round

of sanctions and will continue to add them if Russia doesn't roll back

from Crimea. That is one thing. Second, with regard to living with

them, they are talking tough in Moscow, but the numbers tell a

different story. The numbers show that Russia has already spent just

in the last couple of weeks, some $30 billion propping up their

currency. Their economy is hovering close to recession lines. Their bond

issuance is just above junk now. Inflation is rampant. They would

save us were that they want to keep Crimea. As the former Secretary of

State said in a British newspaper recently, understanding the Russians

and knowing what Putin is like, the chances are high that Britain will

never leave Crimea. If the United States going to accept that? We will

not accept the illegal occupation of Crimea, and nor will Europe. In the

same way that we never accepted the illegal occupation of... There is

nothing you can do about it apart from point out the cost of it.

Russia says they will live with it. There is not a great deal you can

do. Sanctions are a blunt instrument because they will hurt not only the

European Union but other countries in the world, just as much they will

hurt Russia. First of all, with regard to Crimea, the economy there

is already a basket case as a result of sanctions. And as I've said,

there will be more. Crimea will be a no`go zone for US and European

citizens if he does not roll back. But I would also say that we are

talking contentedly to the Europeans now on what we call scalpel

sanctions. We believe that given Russia's dependent on the European

market, which is 50% of their market as compared with 9% for Europe,

there are plenty of further measures that we can take. But if you look at

what the American ambassador to the World Trade Organisation has had

recently, he says Russia is increasingly building walls around

its economy. So it is doing that while looking more to what it

produces itself is what it buys. But also, as has been observed, it is

looking at new trading partners and increasing ties with countries like

Kazakhstan, Ella Roos, countries in their backyard. It can afford to

live without the West in due course. It actually can't. That is the

failure of strategy for Russia. That is back to the 19th century, and not

that 20th century. That is partly why the IMF is saying Russia is

hovering on the verge of recession now. `` Belarus. Those trading

partners are not at a growth strategy for Russia. They are back

to being a 20th`century gas station. Depending on forest and timber

timber and those kind of things. And it is an goes in that direction, the

Russian people will severely suffer. Russia will see growth decreased to

zero, but the Ukrainian economy is going to contract by 7% as a result

of the crisis and the sanctions which are going on. Ukraine depends

great deal on Russia for its energy. It is also the pipeline that goes

through Ukraine to other parts of Europe. That is the point, Russia is

so integrated into the European economy. Russia and you hurt

everyone else. Again, on the Ukraine, Russian energy, as the

major transit company for Russian gas to Europe, Russia cannot afford

to cut off its gas trade with Ukraine. As we saw in 2010, when

that blockade lasted for a couple of days, however, what part of the

strategy for Ukraine and part of the reasoned that Ukrainians went into

the street if they want to be less dependent on Russia and diversify

and be more integrated with Europe. That is going to take time though,

isn't it? Actually, one of the greatest gifts of the European

Union, one of its greatest exports, is its ability to associate with

countries on its borders. And the association agreement that the EU

has offered Ukraine will open up all kinds of new trading opportunities

and will give them far more choice than they have had in the past. And

that is partly why Ukrainians went into the streets in the first place.

You remember that Maidan movement began when their former president

told them they could not associate with the EU but had to stay in a

stranglehold with Russia. At the sanctions are limited. Many people

say that. Fred Kaplan said on 28 April that if western Europe doesn't

go along, these deeper sanctions are theatre. We see free sample the

French do not want to abandon selling their helicopters to the

Russians. They say that they need this. So you are not going to see

European countries really cool operating with the kind of sanctions

that you say you need. We are having a good conversation in a few

sectors, where we can share the pain and minimise the impact on us. All

European countries understand new defence investment in Russia is a

bad idea. We are talking about, at government level, what is happening

in the private sector. As I go around Europe until two businesses,

they have decided Russia is a bad risk for business. There are a few

loans. On that 1.2 billion euros sale of assault ships to Russia from

the French, is it OK for it to go ahead? We are all having a

conversation about appropriate defence relationships with a Russia

that would violate international law and go in and eat a chunk of its

neighbour's territory. Defence issues are on the table in the

conversation. Will they honour the contract? We have been clear about

how we feel about the sale. Which is what? We never thought it was the

best idea. There is a question of whether it can be stripped down or

whether there are other ways to handle that. The conversation is

ongoing. The French are not listening's they say the sale will

go ahead and that the sale cannot be applied retrospectively and that the

sale was signed before any of this happened. I think we can have a

profound impact on the Russian economy if need be. If they don't

make better choices in Ukraine, looking at future contracts and also

we are having a very good and clear conversation among ourselves about

the right posture in defence terms with Russia, with a Russia that

would do this. Does that also involve the state energy company in

Russia and the private sector oil companies, 2011, Exxon Mobil signed

a contract. Will that be incorporated in the deals we would

like to see? Given what we have seen and given the potential for even

more threats, we will have to. We can't take anything off the table.

We believe we can do this. We believe we can impact the Russian

economy more than they in fact ours. Exxon Mobil, BP, Shell,

companies with agreements with, they are OK. I call your attention to the

fact that there is a big energy symposium in Russia in the next

couple of weeks and virtually all of those companies have made clear they

don't intend their CEOs will attend `` Putin. `` Gasgrov. The way that

Europe's the economy is structured and individual nation states within

the EU's economy are structured, needs to be taken into account.

Everyone needs to do their own analysis. We are vulnerable in some

areas and Europe is vulnerable in other areas. That work is ongoing

now. It won't be identical, but they will be competent entry. As you came

to attention in February because of the leak... But conversation with

the American ambassador in Ukraine, when you discussed the nature of the

new interim government, you used a derogatory remark. You used a swear

word about the Europeans. Do you regret that and, what would you say

now? First of all, it was a private telephone conversation that was put

on the street by the Russian Federation. I don't think there is a

human in the US or the EU who hasn't used an unfortunate expression in a

private phone conversation in the past. We were expressing a temporary

frustration, where Ukraine was looking for an international

organisation to support the dialogue. The EU wasn't forthcoming.

We asked the UN to come in. As a broader matter, we have superb

relations with the EU. We have been working in lockstep, in supporting

Ukraine and their right to choose, and in preparing costs for Russia.

The president of France said in May of the radio that Russia might not

have been emboldened to seize Crimea for this reason, for this ``, I said

we must intervene even if there is no Security Council. Not having

stopped him at that moment has been a signal heard by others today. Does

he have a point? I reject that. The notion that we chose to negotiate in

order to remove chemical weapons rather than use military means gives

another country the right to use military means against its

neighbour? The logic escapes me. The Swedish Foreign Minister, when asked

recently why it Putin was emboldened, he said that the US was

seen as absent from the geopolitics of the Eurasian area. Not only the

French are saying this. Why do you think Putin has been emboldened? I

haven't been interested in getting inside the rain of Vladimir Putin.

That is about game. `` brain. When a leader violates international law

and continues to intimidate with 40,000 troops, the international

community need to say this is unacceptable and that this will have

cost is. `` costs. Looking at the issue raised about America's place

in the world, from the comments elsewhere, we know that Obama has

said he doesn't want to use the military option at all. He said, I

can't understand why everybody is eager for us to use military force

after we have been through a decade of war at enormous cost to troops

and the budget. We see the defence budget cut. US foreign policy begins

at home. You can't be active internationally. I would let's go to

NATO. `` I would reject that. We agreed we needed to make it clear to

President Putin that NATO space is inviolable and we will defend every

inch of it. You saw the deployment on land and on sea and in the air of

NATO assets to protect those frontline states including 750 US

troops in Europe, including a quadrupling of the assets in the

air, US ships in the Black Sea. I wouldn't say this has been a

challenge that has been devoid of military requirement. The US is not

a power in retreat? I would reject that. If you look at any serious

crises we deal with on the planet, the US is at the centre of the

international response and negotiations we have. The US and

Europe do this together. The US is at the centre of this policy of

addressing the challenge in Ukraine by supporting them on the one hand

and making it cost for Russia and keeping diplomacy open. You saw my

boss, John Kerry, in South Sudan, negotiating that conflict. You see

US forces helping Nigerians in the context of Boko Haram. We continue

with our role of galvanising the world and saying at the centre of

leadership. Victoria Nuland, thank you for coming on HARDtalk. Thank

you. Most of us will have seen hot

sunshine over the last few days. The heat has triggered thundery

showers. There are more to come. The hotspot was Heathrow Airport. 26

degrees. That was the highest temperature we have seen this year.

It hasn't been sunny