Ambassador Ian Kelly, the former U.S. Ambassador to Georgia, joins Yahoo Finance Live to discuss the Russian attacks on Ukraine, the response from the U.S. and its allies, and the outlook for Russia's economy following tougher sanctions.

Video Transcript

- For more on the pending sanctions that we're expected to hear more about from President Biden in just moments from now, I want to bring in Ian Kelly, former US Ambassador to Georgia and currently Ambassador in Residence at Northwestern. Ian, thanks so much for making time for us today.

So look, we don't know exactly what President Biden is going to say with regards to these new, more severe sanctions. But to your mind, what needs to be done by President Biden and our allies to force Putin to retreat?

IAN KELLY: Well, I mean, I think that it's very important that the president and our European allies follow through on our warning to Putin that we would impose a massive and painful sanctions package. I don't really think that necessarily will deter Putin from continuing his full invasion of Ukraine.

I think that he's already kind of calculated the sanctions into his plans. They have, of course, a large rainy day fund, over $600 billion, I think, which they will use to defend the ruble and compensate some of the oligarchs who support Putin. But in a broader sense, it's really time for the West to say, no more.

The West didn't do enough with the invasion of Georgia in 2008. They did a little more in 2014 with the annexation of Crimea. But those were very targeted sanctions. Did not really target the Russian financial sector, as these sanctions, I believe, will. So it's time to show both the Putin regime and the Russian people that this direction that he's headed into, this massive aggression, this redrawing of borders, the shredding of the European security framework, is really leading them down the road to isolation and impoverishment.

So I think this is really the time that we just have to say, no more. We will do everything to stop you from continuing down this terrible, terrible road.

- You have to wonder how much sanctions will have an impact on Putin because, as you say, he seems very laser focused on changing the regime in Ukraine. And I'm wondering, how important is it to inflict personal sanctions on Putin and his inner circle? And at what point do Russians sort of stand up and say, you know, this isn't for us. This is not what we wanted. Because these sanctions are going to hurt them more than anyone else.

IAN KELLY: Yeah, exactly. And I think that this action of Putin really undermines, I think, his own regime's security. He has portrayed himself to the Russian people as somebody who is going to stand up for Russians, for Russian security, but what we're seeing in Moscow today are people going to banks, lining up at ATM machines, trying to get dollars because they see the ruble in freefall.

And the conclusion they're going to draw is, this man is not necessarily defending my economic security. And I think we'll start to see an erosion of support for Putin.

- Ian, what retaliatory actions do you expect Putin to take? I mean, I know up until very recently, he had promised not to cut off oil supplies. If you look at the way the oil market has been reacting, it doesn't seem like traders are believing him. But what might he do in retaliation for these more severe sanctions?

IAN KELLY: Well, I think we can feel very confident that he's not going to shut off oil and gas supplies. I mean, oil and gas exports account for around half of his budget. So I don't see that happening. The thing is with Vladimir Putin, is when he reacts, he overreacts. So I think we can count on some asymmetrical moves in the economic area.

We're already seeing, of course, cyber attacks on the Ukrainian government and Ukrainian banks. I'm pretty confident that the Biden administration is working with the American financial structure to try and forestall such attacks. But I think right now, NATO planners are looking at how to shore up deterrence for NATO members who are on the front line.

And of course, those frontline states are the Baltic states, the three Baltic states, Poland, and Romania. And of course, Poland and Romania share large borders with Ukraine. So Vladimir Putin loves to be unpredictable. So it's impossible to predict what he will do. But he will do something.

- Ian, very quickly, I want to ask you, the UK earlier pushed for saying that SWIFT payments for Russia should be ended. And then Germany's Olaf Scholz said that's going too far. Do you think that SWIFT payments should be on the table as a sanction? And where do you think the US stands on that?

IAN KELLY: It's very hard for me to say. Up to now, the Biden administration has put a real premium on doing these kinds of sanctions together. So if there is one major European economy that doesn't want to do something, like SWIFT, I think it's unlikely that we will do that. And I think that, you know, again, this is-- being cut off from SWIFT, I think, is something that they've already taken into account, in terms of using alternative ways to do their trading.

I really lean on doing as much as possible in one big action. And I hope it's today. But I do understand the need to do things in solidarity to show that we, the US, and the transatlantic community are united in pushing back against Putin.

- All right. Ian Kelly, former US Ambassador to Georgia. Thanks so much for your time today.

And again, just a reminder. We are waiting for comments from President Biden. He's expected to address the nation from the White House moments from now. Yahoo Finance will bring that to you live, and we'll learn much more there, Karina.