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First Move with Julia Chatterley
Four Killed in Russia's "Kamikaze" Drone Attack on Kyiv; Some Workers Express Frustration over Faltering Economy; Khara Expects more FDI as Imports Soften; PM Truss Apologizes for going "Too far and too fast"; Smith: We've Called for a Digital Geneva Convention; French Transit Workers Stage Walkout to Protest Rising Prices. Aired 9-10a ET
Aired October 18, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST: A warm welcome to all our First Movers around the world fantastic to have you with us this Tuesday. No shortage of things
to discuss including the ongoing fuss over Truss.
Her signature tax plan now under the boss of features U.K. leader less easy to sauce however, Liz Truss had apologized on TV for what she called going
too far too fast. On her U.N. finance to stimulus program and the ensuing market instability she vowed to fight on.
In London skyscraper terms the growth plan is in shorts short. And a conservative politics well, it's in a pickle. And it's called the Gherkin
of course but pays close enough what we're looking at although in terms of asset prices are stability.
The U.K. pound slightly softer today but context of course is everything Sterling is rebounded some 3 percent over the past week. As the budget
crisis eases the bigger point perhaps the U.K. Finance Minister sudden fiscal prudence on Monday helped broader market sentiment contributing to a
global stock rally. U.S. tech stocks saw their biggest gains since July.
U.S. stocks looking to add further to those gains of course on Tuesday as well in Europe is higher. Despite fresh recession fears more on that
shortly but as you can see in front of you green well and truly across the screen there and pre market in the United States. Earnings optimism is also
giving us a helping hand.
Goldman Sachs raising some 3 percent pre market after its results beat expectations driven by blowout results from his bond trading desk
offsetting investment banking, weakness, that's a broad and recurring theme across the entire sector. Goldman CEO David Solomon hailing the results,
while also voicing caution over the risk of future recession.
At the core of that, of course, the ongoing conflict in Ukraine. And that is where we begin today's show with 30 percent of Ukraine's power stations
destroyed in just eight days. President Zelenskyy says there are massive blackouts across the nation. In Kyiv three people lost their lives and a
missile attack on an energy supply facility that according to the prosecutor's office.
Nic Robertson is in the capital for us. Nic, just give us a sense of what it's like being there in terms of seeing this destruction to infrastructure
across the country and obviously, the impact on availability of both water and energy supplies.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, the capital Kyiv is suffering in some parts of the city here, particularly on the left bank
which is what you can see behind me, shortages of electricity. And that means there's the water is not pumping properly in many places.
So there's low water pressure, or some people don't have water at all, that's in the capital. That's something new in this war for people here.
It's happening elsewhere to Dnipro the power station was hit there.
Further to the west of Kyiv the power station was hit there as well cockup and in the east, an industrial facility was targeted there. So the Russia
really is doubling down it seems on the energy infrastructure now. The energy companies here say that they are being able to repair the damage
pretty much get a facility has turned around in the space of about 48 hours.
So they are repairing and replacing but of course, their inventory of replacement items will be limited. Russia will have an understanding of
these power plants. Because the power plants that are used in Ukraine, built very much on the same sort of Soviet design as they were in Russia.
So targeting the power plants means that Russia knows the weak spots, if you will, to go to where it can target the equipment that's going to be
harder to replace. So it is an uphill battle for the Ukrainians to keep the country supply with electricity, but they say it's what they're committed
to doing.
CHATTERLEY: It's actually incredible if they can get things up and running again as best they can even within the short space of 48 hours. I know the
city's Mayor in Kyiv was suggesting that people ration if they have access to supplies, and they do that. Nic, in response to the Kamikaze drones that
we believe have been used to carry out these attacks.
The belief now is that the U.S. Department of Defense is trying to speed up delivery of two. I think advanced surface to air missile systems to
Ukraine. Do we have any more information on that and on timing?
[09:05:00]
ROBERTSON: The timings aren't clear, and it's not clear that this advanced system will be the right system or the best system to target the drones.
The drones fly relatively slowly and are easier to target than cruise missiles that Russia also uses.
And part of what Russia is doing and been seen over the past sort of uptake over the past eight days or so. Of targeting these energy facilities is
some day's use swarms of drones. Yesterday over Kyiv 28 drones 24 of them shot down at least.
Today the power station in Kyiv targeted by missiles so Russia sort of mixes it up between the drones and the missiles to try to get through to
the targets. And they certainly learn what drones work for them and what drones are less successful and a fine tuning this sort of new phase in
their war of attrition against Ukraine's electrical generating capability and capacity.
CHATTERLEY: Nic Robertson, great to have you with us sir, thank you so much for that. And powerful explosions caused damage to the two Nord Stream gas
pipelines. That's according to Copenhagen police, who have now examined the damage in the Danish parts of the Baltic Sea.
Swedish and Danish authorities are investigating full holes in all. This underwater video was released by Swedish media claiming to show some pretty
extensive damage to Nord Stream one as you can see there.
OK, let's move on another recession warning in the United States this time from credit rating agency Fitch. The firm says the U.S. economy will be
pushed into a 1990 style recession next spring, thanks to suddenly high inflation and the Federal Reserve's aggressive interest rate hikes. It's
just the latest a number of warnings from JPMorgan Chase CEO Jamie diamond to the International Monetary Fund to name too.
Matt Egan joins us now on this story. Matt, great to have you with us! And just remind us, what are we talking about when we say a 1990-star recession
and particularly given we're only what a year out from the last recession, the pandemic induced recession? It's uncomfortable in any form that but
1990 specifically. What are we looking at?
MATT EGAN, CNN REPORTER: Well, Julia, we know that not all recessions are created equally, right? We have some of them have been melt downs, like the
2020 recession and the 2008 great recession. But Fitch is calling for something a lot more, mild much like the recession that began in the summer
of 1990.
Now one way to measure just how intense a recession is to look at how much the unemployment rate goes up. And you know, if you look, we saw this
massive spike in the unemployment rate that began in the spring of 2020. The rate went up by up something like 11 percentage points.
Also another really big and prolonged increase during the great recession but in the 1990 recession; it was a much smaller increase. Now, this is not
you should have minimized the pain here.
Any job loss, of course, is painful. But you know there are some reasons to be hopeful that maybe this recession might not be quite as destructive.
Fitch laid out a couple of reasons for this optimism.
One, the economy is sort of entering this period from a position of strength. I mean, the jobs market is historically strong. Consumer balance
sheets are pretty sturdy people don't have quite as much debt as they have in the past.
The housing market does not appear to be massively over supplied like it was in the mid-2000s. And also the banking system, thankfully, because of
regulation is a lot stronger than it has been in the past.
CHATTERLEY: Matt Egan Great to have you with us, sir. Thank you so much for that. Now slowing economy may also be worrying policymakers in Beijing.
China is delaying the release of key economic data, including its third quarter GDP statistics.
This comes of course as President Xi Jinping set to claim an unprecedented third term as the country's leader this week. Selina Wang joins us now.
Selina, we were talking yesterday about how optimistic and powerful that two hour opening speech was from President Xi.
We would and we're expecting the GDP statistics to be eye watering. Why on earth would you release them? In the middle of that having just announced
that opening speech so perhaps no surprise here? What do you think?
SELINA WANG, CNN CORRESPONDENT: Yes, exactly I mean this was a completely abrupt unexpected delay in that release of GDP numbers. And some experts
are saying, look, they're holding this off because the data probably isn't so pretty. And they don't want anything overshadowing this major Communist
Party Congress when she is expected to assume this unprecedented third term.
But the reality is, is that China is dealing with a sharp economic slowdown from these constant COVID lockdowns, a property sector and crisis, high
unemployment rate.
[09:10:00]
WANG: But Beijing wants to focus to be completely on sheet and the successes not all of the challenges the economy is facing. And the second
quarter we saw Chinese economy barely eke out growth at about point 4 percent growth. And economists expect that in this third quarter, we're
going to continue to see weakness.
China is expected to fall far short of its own full year economic growth target of 5.5 percent. So the thinking here is, why not delay those numbers
so we don't put more attention on all of these harsh economic realities.
(BEGIN VIDEOTAPE)
WANG (voice over): Migrant workers like Mr. Hue moved from Chinese villages to Beijing in search for better job prospects. On the lucky day, he can
make the equivalent of a few dozen U.S. dollars from construction work. Anything left over he sends home to his kids in the village.
He says the pandemic has made it harder to find work and China's economy is in bad shape because of all the COVID restrictions. The world's growth
engine is sputtering. After decades of unstoppable growth. China's economy is cracking constant COVID lockdowns, wrecking businesses and lives.
He shows us his rental home in Beijing, just four square meters. It's really small, he says. Since Chinese leader Xi Jinping took power in 2012.
He's pledged to reduce income inequality. But workers like who aren't seeing the benefits. He says I don't think it's a good idea for him to
continue to serve.
SUSAN SHIRK, CHAIR, 21ST CENTURY CHINA CENTER: I think there are a lot of people in China who have lost confidence and the pragmatic judgment of
their leader; it could become a big challenge to Xi Jinping.
WANG (voice over): Unemployment is skyrocketing, not just because of the pandemic. China's once vibrant private sector, suffocating under Xi Jinping
has cracked out to bring companies under tighter communist party control. Beijing insists the moves protect consumers and reduce economic inequality.
But instead, mass layoffs are sending youth unemployment to a record high of nearly 20 percent. Protests also erupted this summer in central China.
Thousands of depositors lost access to their savings at several banks in the region.
As police violently quashed the protesters they've been arrested hundreds of suspects, allegedly involved in the scandal and promised that depositors
would start to get their money back.
But many still have not. This is my family's hard earned money over the last 20 years, he says. Our lives depend on it.
WANG (on camera): How was this whole experience changed your perception of your country of China's leaders?
WANG (voice over): I'm like an ant that they can trample on. I have no hope, he says. Another crisis is unfolding in China's all important
property sector. Giant developers have defaulted. Home sales are dropping; homebuyers across the country are boycotting mortgage payments on
unfinished homes, fearful that their properties will never get built. These protesters chant evil developer give back my property.
KERRY BROWN, LAU CHINA INSTITUTE DIRECTOR, KING'S COLLEGE LONDON: The Chinese property market is probably the world's greatest economic assets,
single economic asset. If it does collapse, then we have a full blown recession, maybe even depression.
WANG (voice over): Xi Jinping is preparing to be ruler for life, claiming that his brand of authoritarianism will realize the China dream of strength
and prosperity. But for people like who all he wants is to make ends meet. And even that is a dream out of reach.
(END VIDEOTAPE)
WANG: And Julia we're seeing that a lot of Xi's own policies are actually making China's economic problems worse. But from that two hour opening
speech at the party congress, Xi made it clear that he's not going to change the direction he's taking the economy. And, in fact, in the third
term, expect to see even more communist party control over the economy over the private sector.
The sweeping regulations that he has put on the private sector, especially for technology companies it's sparked a lot of fears about the future of
growth, entrepreneurship and innovation inside China. And on zero COVID, which is absolutely up into the economy.
Well Xi hailed it as a success of that is expected to say critics here see a leader, who is putting now politics and ideology over the growth of the
economy. So instead of an era of reform and opening in China, they see an era of reform, but closing, Julia.
CHATTERLEY: A great success, but we're not backing it up with the data. Selina Wang, thank you so much for that.
[09:15:00]
CHATTERLEY: OK, straight ahead recession risks and inflation situations all over the world. But some nations like India approving surprisingly
resilient. Coming up the Chairman of India's largest private bank discusses digitalization and future growth. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move" as the global recession warnings around the world pile up. There remain a number of economic bright spots
and India appears to be one of them. Dinesh Khara, Chairman of the State Bank of India.
The country's largest private bank says India is unlikely to be hit as hard as by a global recession as other nations. The reason Khara says inflation
there is under control. And the economy is expected to grow 6.8 percent in the 2022-23 financial years.
Still Khara says the government is focused on dealing with risks like inflation, and its effects on the economy. And he joins us now. Chairman
Khara, fantastic to have you on the show! I actually know you've just been attending many meetings at the IMF and obviously in Washington D.C.
Can I ask just to begin what your strongest takeaway is of the broader situation in the global economy? And what your message about India's
relative resilience was to those attendees?
DINESH KUMAR KHARA, CHAIRMAN, STATE BANK OF INDIA: Thank you very much for having me on your show. And yes, when you talked about the IMF are back
meeting send the message. I would, the way I read the situation is that there are genuine concerns across many countries in the globe, about the
impact of the inflation.
And also the Central Banks are expected to increase the interest rates going forward. This is what I gather from while speaking to, many of the
bankers who participated in the IMF World Bank meeting. In that context, I would say that as far as India is concerned, that is it is certainly a
bright spot.
We have already seen a growth about 6.8 percent. The major factor which could be a matter of concern for us is essentially relating to inflation,
which to my mind is more transitory in nature. Essentially, we have imported inflation on account to the crude prices.
They have already started softening. And also the other important factor which is impacting the inflation apparently is essentially on account of
some bit of food inflation.
[09:20:00]
KHARA: And to my mind the kind of steps which have been taken by a government of India and terms of ensuring the adequate availability of food
grains in the economy that will also help in easing out the food inflation.
So, I think both on as far as inflation is concerned in India, it is essentially attributed to the supply side inflation. And it has not as much
to attribute to the demand side inflation. So, on the supply side capacity utilization being just about 71 percent.
Crude price inflation likely to get under control, food inflation also likely to be under check so, I think all said and done this August very
well, for the economy like India. And we are quite hopeful that we will have a decent growth around 7 percent in the current financial year.
And even next year also on with the increase base, the effect would be that it will be somewhere around 6 to 6.5 percent confer growth we expect to be
there in the next financial year.
CHATTERLEY: It's so fascinating, isn't it that mix between your import balance the domestic demand capacity within your own country, as well and
being able to offset that to some degree. You obviously have a Central Bank as well, that continues to raise interest rates in the same way that the
Federal Reserve does in the United States. We were having a conversation on the show yesterday about the danger of the rising U.S. dollar.
And the pressure that it's putting even just in currency terms on nations around the world. How worried are you by the global liquidity tightening
effect of the strength of the U.S. dollar which is beyond the relative interest rates, as we look around the world? How much of a concern is that
for you, whether it's India's economy or just in terms of credit and liquidity around the world?
KHARA: Well, of course, the U.S. has increased the interest rates by about 300 basis points. While in India, the Central Bank of the country, Reserve
Bank of India has increased the interest rates by about under 90 basis point. So, as I mentioned that the interest rate increases are essentially
to.
There are two different focus when it comes to U.S. the focus is essentially to contain the demand. Whereas when it comes to India, it is
essentially to maintain the parity between Indian rupee and the U.S. dollar. So, I think on that particular count, the way I look at it is that.
When it comes to a country like India, we have certain challenges in terms of imbalance on account of crude oil import. Which we have about 85 percent
of our domestic oil consumption is imported conjunction. But then also with the softening of the crude prices, the stress on the import will actually
come down.
And but yes, of course, exports also the global recessionary conditions will also have an impact on our exports. But overall, I expect that with
the kind of recession, which is expected, the import will probably come down and the cost of imports will come down. And also we will be in a
position to strike a reasonable balance.
I think with the demand being very, very robust in the country. We'll have a situation where the FTA and the foreign portfolio investment will once
again, look at India as a promising opportunity. And they will all be moving towards India, we already have got the distinction of having 104
unicorns in the country.
So I think that is something which will go a long way in terms of attracting capital from across the globe because they're in a position to
offer solutions to many of the corporates across the globe. So I think overall, the Foreign Institutional, foreign portfolio investment and
foreign direct investment will come into the country.
And also, our import will also be softening. So eventually, the pressure, which you're seeing on the currency, as of now, it will ease out and we'll
have stability in the rupee-dollar parity too. That why I read the situation.
CHATTERLEY: Yes, it's fascinating. What you just said about the unicorns, and the kind of environment that's been created, one that allows that
foreign direct investment to flow. But also allows, particularly firms that we've had on this show a lot from India, like in the FinTech space for them
to flourish and grow at an accelerated rate as well.
It's quite fascinating. And let's tie this all together there. And what it means for your business in terms of credit growth, ensuring perhaps that
deposit growth also catches up or at least matches at that at some point in the near future.
And I know, for you as a bank, you're also in a very shift process of digitizing much of the lending that you do, as well. It talked to me about
this how you're viewing, credit growth going forward.
[09:25:00]
CHATTERLEY: But also that sort of shift to facilitate Consumer Relationships and allow them to do much of this online. How are you
thinking about that Dinesh?
KHARA: Thank you, this is very interesting question and I would also like to mention here is that. When it comes to credit growth, we are expecting
to witness even much stronger credit growth going forward. Because one of course, on account of the improved capacity utilization.
And second, of course, there is a very clear focus in the Indian economy in terms of attracting investments into big tech. Already Apple has identified
India to a part of its global sourcing locations. And India's economy will be producing for the Apple and also various other big tech entities as
well.
We have already Foxconn has shown interest. We are having a huge opportunity for manufacturing of solar panels. We also got, we are seeing
that when it comes to the solar cells and these kinds of big tech opportunities, there is going to be a huge opportunity.
Indian Government is also investing into the performance Lincoln Center for encouraging manufacturing. And similarly, infrastructure is another major
growth area for the economy having said that, the real economy has got all these growth potentials.
And all these growth potential will also open up many opportunities for us in terms of the credit growth in the economy. Yes, when it comes to
deposit, of course, we have to ensure that we should remain relevant for our depositors also. And of the recent past, we have already started seeing
that the deposit rates have also started moving up.
Though when it comes to the loan rates, it has moved faster but deposit rates have also started moving up. The need is for having incremental
savings, which should be on her side.
I think with the increased per capita income in the economy when the savings also will go up which will also augment the resources lendable
resources for the banking system.
CHATTERLEY: Just the beginning of our conversation, come back into it to assume because as always, I have lots of questions particularly about what
the we've got the next 20 to 30 years looks like in India as well. We shall reconvene. Dinesh, great to chat to you! Thank you so much for joining us.
That is Dinesh Kumar Khara, the Chairman of the State Bank of India. Sir, thank you once again.
KHARA: Thank you very much.
CHATTERLEY: Thank you. OK, coming up here on "First Move".
(BEGIN VIDEO CLIP)
LIZ TRUSS, PRIME MINISTER OF BRITISH: I'm sorry for those mistakes. But I fix mistakes.
(END VIDEO CLIP)
CHATTERLEY: Apologies from the British Prime Minister. What's next though for her and the country's economy, up next?
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to "First Move". U.S. stocks looking good as Goldman in early trading days as good as gold. You see sometimes that just
need to wake up a little bit more. In the morning the major averages building on Monday's strong gains, boosted by solid results from financial
giant Goldman Sachs.
Goldman CEO David Solomon warning however today that there remains a good chance the U.S. will fall into recession, but - said in their third quarter
earnings reports that the U.S. consumer remains in pretty good shape. Consumer products Johnson & Johnson reporting today that all its business
segments topped forecasts and interesting indicator Pepsi also reporting strong results and raised its sales and profit forecasts last week.
Closely watched earnings are on top from two big corporate laggards to Netflix reports after the closing bell today; it shares down some 60
percent year to date. Tesla also out tomorrow little Musk momentum this year it shares have fallen more than 35 percent since January, a lot of
that of course tied to Twitter and the shenanigans with that too.
OK to the UK now. Prime Minister Liz Truss apologizing for her controversial fiscal policy pronouncements shortly after her new finance
minister or chancellor rolled out and rollback most of that plan.
(BEGIN VIDEO CLIP)
TRUSS: Now I recognize we have made mistakes, I'm sorry for those mistakes. But I've fixed the mistakes. I've appointed a new chancellor. We have
restored economic stability and fiscal discipline. And what I now want to do is go on and deliver for the public.
(END VIDEO CLIP)
CHATTERLEY: And Scott McLean joins us now, Scott, the question is, can she do this is a reshuffle of the Cabinet likely, what's been talked about in
the UK.
SCOTT MCLEAN, CNN CORRESPONDENT: Yes, just when you thought all of the drama from Downing Street Julia was behind us at least until the next
general election. Well, it is definitely back, Liz Truss that appears is on very thin ice with her colleagues.
And it seems like over the past few days, few weeks, maybe she's been sort of testing the waters to see what exactly it would take to regain the trust
of her colleagues and also, perhaps more importantly, the market. So first, she went back on her promise to axe the very top tax rate that would only
affect the very highest earners in this country.
And then she ended up firing her chancellor, her very good friend Kwasi Kwarteng, but that it seems still wasn't good enough. So now her new
Chancellor Jeremy Hunt, who I should mention is from the opposite end of the party than her, the more moderate end of the Conservative Party and
actually supported her opponent in the leadership contest,.
He yesterday stood up in the House of Commons and in just the space of a few minutes managed to get rid of almost everything that was announced in
that now infamous mini budget that Trump had announced. And so now, they have scrapped the planned basic income tax cut of 1 percent.
The plan cut to dividends tax, the planned income tax cut for the highest earners, the plan to cancel the corporate tax hike, all of this amounts to
an estimated savings of around $36 million that the government never actually had accounted for in the first place, which is why this was so
detrimental to the actual markets. Now, some smaller items in that mini budget managed to survive the call, but even the signature promise of that,
which was the energy price guarantee to cap the cost of energy with the government taking on the remainder of the cost of essentially subsidized
prices for people.
Even that is only going to survive in its current form until the spring, in which case it'll be replaced by something else, but something likely, very
much scaled down from what we've seen so far. The markets seem to like this.
The footsie got a bounce the pound got a bounce against the dollar, as well. But now we're sort of left in this awkward scenario, Julia. And
that's that, what do you do with Liz Truss, because here's a prime minister, who the main things that she campaigned on when it comes to her
economic platform have been done away with, they haven't worked at least they haven't worked at this time.
And so she's tried to sort of explain this way by saying, look, I went too far too fast. I still believe in, you know, fundamentally tax cuts, low
smaller government, things like that, but just now wasn't exactly the right time.
But that was precisely the case that her opponent Rishi Sunak was making in the leadership contest. And so that is why her leadership has been
described in the British press by some as an empty vessel and by others as rudderless.
[09:35:00]
MCLEAN: And so now potentially, she could be facing this leadership challenge some backbench MPS, this very small number of them have already
publicly called on her to resign. The polls are showing that the opposition Labor Party has more than twice the support of the conservatives and also a
junior cabinet minister was asked earlier today how many more strikes Liz Truss has until she's out and he said frankly, not very many, Julia.
CHATTERLEY: Yes, but you're right, though. I mean, it's not an empty vessel. It's a vessel full filled with - Rishi Sunak's policy ideas. Scott,
great to have you with us, thank you.
MCLEAN: You bet.
CHATTERLEY: OK, after the break, Microsoft President Brad Smith, tackling the big issues facing tech and World War, climate change and protecting
democracy is up next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move" and recapping one of our top stories today. Ukraine's President Zelenskyy says 30 percent of the
country's power stations have been destroyed in just eight days. Also this week we've seen so called Kamikaze drones fly over Kyiv and other places.
There are two fronts in this war, Russia relying on both traditional weaponry and those armed with keyboards waging a cyber-war targeting
infrastructure, carrying out espionage and influencing social media. Microsoft says the Cyber Defense of Ukraine relies on a coalition of
countries NGOs and companies.
And it's committed to warding off digital threats by investing in technology data and partnerships. For instance, Sony last week, its Threat
Intelligence Center found a new Ransomware campaign called Prestige, targeting transport and logistics companies in Ukraine and in Poland.
Brad Smith is Vice Chairman and President of Microsoft. He's also the Author of Tools and Weapons, The Promise and Peril of the Digital Age.
Brad, welcome to the show. As always, I shouldn't call it a book anymore. I should call it a crystal ball quite frankly.
You and I have often discussed the two sides to the wall that we're seeing in Ukraine that the physical and also the cyber threats and often that
precede the physical attacks. Just let's explain if you can this latest Ransomware attack and what makes this distinct or unique.
BRAD SMITH, PRESIDENT AND VICE CHAIR, MICROSOFT: Well, I think what we have also seen in Russia is the use of Ransomware groups that typically operate
out of Russia.
[09:40:00]
SMITH: In recent months, they have been more focused on targets in Ukraine and Poland, frankly, countries outside of Western Europe and North America.
But it focused on in at times, refugee groups, NGOs, critical infrastructure, the line between Ransomware, an attack that appears to seek
money and a destructive attack is often very narrow.
And a lot of Ransomware increasingly in this war is at times targeted to destroy critical infrastructure, a civilian infrastructure, just as these
drone attacks yesterday are going after civilian targets. And that's one of the real tragedies of this war. It involves cyber activity. And it involves
other forms of kinetic warfare as well.
CHATTERLEY: I know its early days, are you confident enough yet to see who's behind these latest attacks?
SMITH: Well, we're not confident enough to offer a public attribution. But I don't think that there are all that many surprises in store. You know, in
recent months, we've really seen the most vigorous cyber activity coming from frankly, either Russia or Iran. And ironically, what you're looking at
right now are drones that were built in Iran and delivered by Russia.
And yet this is something we have to defend against in cyberspace. It is also something that the Ukrainians are having to defend against literally
every day and not just against military targets, but against civilians as well.
CHATTERLEY: Yes, it reminds me and it goes straight to the heart of the book and what you were talking about this need for a sort of broader
digital Geneva Convention. Are we further away from that today, perhaps than we've ever been, whether we're talking about Russia, Iran, the United
States, China, is that something that in the broader mix of what we're talking about here would help but also feels, and you're my eternal
optimist, sort of relatively impossible at this point.
SMITH: I think there's two important points to reflect upon. The first is in the world today. And you captured it earlier, Julia, the defense of a
country, especially when it comes to its digital infrastructure, really requires an alliance between governments, NGOs and tech companies.
And that is what we have increasingly built around the world, that is a good thing, and it is protecting Ukraine and other countries every day.
Now, I think at the same time, we are taking a step backwards in the world. After World War II, every country came together with the Red Cross, and not
just made it a moral imperative, but a legal obligation that the military would protect civilians in times of war.
And that's been our fundamental plea when we've called for a digital Geneva Convention that in cyberspace, governments need to respect the needs of
civilians. We're not seeing that happen on the ground or in the air in Ukraine, we're not seeing it happen in cyberspace.
There are many days in many countries where we're not seeing it elsewhere. And we just need to bring ourselves back to that fundamental point, I
believe. And I will be optimistic and say there is hope if we can focus on doing the right thing.
CHATTERLEY: I expect that from you, Brad. So thank you for providing it. However, however, disheartening at times at the activity suggests, you
know, ever since you've been having these conversations about that the work that Microsoft specifically has been doing in Ukraine, and I mentioned as
sort of identification in the mitigation of these cyber threats.
I've never asked you the question, though, it's occurred to me afterwards about payment for it. And it's something that's sort of, again, come to the
surface over the let's call it noise with regards to the provision of Starlink satellites by Elon Musk, and by SpaceX.
And you don't have to talk specifically about that example. But it does raise a question about who pays particularly when it comes down to business
and you can never put a price on human life. And I think you said it best with the moral imperative that you often feel to help whether it's on
something like this or on things like climate change.
How do you even approach that conversation as a board of a business where you're, you're spending money, but you also perhaps do need partnerships,
government support, again to that point?
SMITH: So really, you go to a really interesting and important question, Julia. And at times, I think we've made our best decisions when we've just
moved so quickly, that we just felt compelled to identify and do what we regarded as the right thing. This was true when we decided to pay for
people to stay home in COVID even if they were hourly workers and couldn't work on our campus, and we jumped right in after the war in Ukraine began.
Microsoft has now spent more than $300 million supporting the government and people and NGOs of Ukraine. And that's some higher some than you'll
find in many governments.
[09:45:00]
SMITH: Now, obviously, the longer this war goes on, the more we're in a recession, the more difficult those kinds of commitments are to maintain to
sustain, we will continue to focus on them. I don't know that we should look to companies to profit from a war.
But I don't know that we should look to businesses to incur losses, either. And so the conversation that has begun maybe hasn't been the most artful
one. But it is perhaps a necessary one as the world thinks about what it takes to sustain and defend Ukraine for what could be years and not just
months.
CHATTERLEY: I agree completely, and diplomatically put, perhaps not done in the most artful way. But it's an important conversation to have. You raised
something else, which I want to move to now, which is we are a month out from COP 27. And we're watching countries all over the world make short
term necessary.
Let's say it, energy security decisions, perhaps though, at the cost of all our plans necessary plans for hitting climate targets. And Brad, I know you
have personal plans at Microsoft, and we often talk about them. But you are, I think, pretty unique in your disclosure in your adherence in your
discussion of those targets. Again, I guess I'm looking for the optimist, but one month out from COP 27, what are you thinking and are the alarm
calls louder than perhaps they were even a year ago?
SMITH: I am optimistic, even though the times would not seem to call for it. Let's face it; it could be a hard winter in Europe. This is a time of
year and a time in this decade, when people especially across Europe, quite naturally and reasonably will be more focused on getting heat and
electricity into their homes, they'll be more worried about their electricity bills.
But this is why I'm an optimist. All of these difficult steps are going to accelerate even more the energy transition that is just indispensable to a
climate friendly future. So every step that is going to make 2020 to feel more difficult, is going to move us faster to where we need to be in 2030
with more wind power, more solar power, frankly, more use of data and to innovate our way out of this climate mess.
And so it will feel like we're going backwards in the short term. But I think at the end of this decade, we will look back. And we will say we move
faster because of this difficult period of time.
CHATTERLEY: And technology is crucial aspect of that. And I know you spend a lot of time talking about how technology can facilitate that transition.
I mean, I lose track of the number of partnerships you signed, but one that caught my attention TerraPraxis, which is a strategic collaboration to try
and decarbonize coal, and I believe the hope is to take a fleet of 2400 coal plants and get them to then run on clean energy.
So I love this idea of investing in renewables, but also transitioning some of the dirtier forms of electricity production that we have and making them
cleaner. But how do you do that without China on board? Or are they on board?
SMITH: I believe that there will come a time when we increasingly will get every country on board. And when you look at a coal plant, a coal fired
electricity plant, there's two ways to look at it. One way is to say this is a plant that needs to close so it stops pumping carbon into the air.
The other way to look at it is the way the TerraPraxis is wonderful NGO, and Microsoft and MIT are looking at it and saying this is a coal plant
that can be converted to a new generation of nuclear power, small modular reactors. It's already connected to the grid.
It has a trained workforce, typically 1200 people in a rural community that know how to run a power plant. It's got water cooling capacity; you can cut
the cost of constructing a new nuclear plant by a third by converting these plants. And we can use the power of the cloud computing AI data to
accelerate all of that.
CHATTERLEY: OK, I'm on board. I like that idea. You're giving me the level of enthusiasm that's required. Final question on this and it is tied, as
you said it's difficult to make important moral, climate related and beyond decisions when economies are slowing and recession risks and fears are
genuinely present.
We've had another recession warning today from rating agency Fitch for the United States. Brad, what's your sense from the board at Microsoft? How
concerned are you about recession risk and what does it mean?
SMITH: I think the world is a diverse place. I was in Europe last week and obviously it's very challenging there. You know, in the U.S., you do see
this weakening across the economy especially in consumer spending. On the other hand you go to a place like India where I was a month ago and people
are very bullish about what they see.
[09:50:00]
SMITH: So we're not going to see uniformity around the world. We clearly are encountering economic headwinds. It is a time as we look at it, that
we're all going to have to find new ways to do more with less. You know, it is a time to harness the power of data and use technology to enhance
productivities in a way that will save money.
And so this is the difference again, between short term and long term. I think it's hard to be a short term optimist about the next quarter or even
year. But we do have the capacity as we pull through this to lay the foundation for what then can be the next round of sustained economic growth
if we do this wisely.
CHATTERLEY: Yes, such a great point. Think of the medium term and the longer term while you are trying to deal with the shorter. Brad, it's
always a pleasure, thank you.
SMITH: Thank you.
CHATTERLEY: Brad Smith, Microsoft President there. We'll speak to you soon sir, thank you. We're back after this.
(COMMERCIAL BREAK)
CHATTERLEY: And welcome back to "First Move" French president Emmanuel Macron under increasing pressure to ease the country's cost of living
crisis that has triggered large scale worker protests across the country. Transit workers are walking off the job today causing widespread commuter
frustration.
Eurostar services were affected too, all this, of course on top of the strikes at oil refineries that have led to serious gasoline shortages
across the nation. And Melissa Bell joins us now from Paris. Melissa, I can see people on the streets behind you just talk to us about what's going on
there.
MELISSA BELL, CNN PARIS CORRESPONDENT: Well, it had been a long time Julia since we've seen this many protesters out on the streets of Paris. As you
said it comes in the context of not just those petrol strikes, but the strike call today by the rail unions. As you can see here at the front of
this very considerable grade that we just walked the length of that is very well attended, the police have just stopped the protesters to try and keep
things calm.
But there are an impressive number of people out here. The strike not as crippling as the unions would have hoped, it is only in the worst hit parts
of France, according to the transport minister, one in two trains that is affected, but this, of course, much more worrying this anger.
And again, Julia it had been a long time since we'd heard it expressed on the streets of Paris, you'll remember the yellow vest protests had been the
most recent then COVID and now the protests and the strikes back had driven really by high inflation and the cost of living with the transport and some
public sector workers now demanding higher wages to be able to deal with that, Julia.
CHATTERLEY: Melissa, how do they solve this? What's the government doing? I mean, I know they've been in talks, but what can they do? It's not just
France; all nations are suffering with this.
BELL: Well, the trouble being have is that what they've tried to do so far and it is just one of the main unions that is carrying on with a strike. A
settlement had been found with many of the other workers 7 percent rise not the 10 percent that the trade unions had asked for.
[09:55:00]
BELL: So one union holding up. The trouble for the government, Julia, is that they've used the legal powers; they have to force some people back to
work. And that's really part of the anger that we're hearing here today. A lot of workers say that their right to protest is not being respected.
It comes in a very difficult political climate for Emmanuel Macron. You'll remember who won in May with a very divided France and a lot of voting on
the extremes of the French political spectrum, Julia.
CHATTERLEY: Just been a huge challenge. Melissa stay safe there, please. And yes, I can see you keeping track of what's going on around you. Take
care, please, Melissa Bell there in Paris. OK, that's it for the show.
If you've missed any of our interviews today, they'll be on my Twitter and Instagram pages; you can search for at @jchatterleycnn. I'll be back in a
few moments with "Connect the World", stay with CNN.
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