Senior Fellow, Hoover Institution Niall Ferguson joins Yahoo Finance

Senior Fellow, Hoover Institution Niall Ferguson joins Andy Serwer, Yahoo Finance Editor-in-Chief to discuss Ferguson’s take on the current state of Russia and Ukraine, the possibility of Putin provoking NATO, and the stability within Russia and China.

Video Transcript

ANDY SERWER: I'm here with Niall Ferguson, best-selling author who's also the Milbank Family Senior Fellow of the Hoover Institution, at Stanford University. Niall, great to see you. Thanks for joining us.

NIALL FERGUSON: Good to be here, Andy.

ANDY SERWER: So no doubt, I want to start with Russia and Ukraine, and you're someone who studied the Cold War, and now it's Cold War Redux. We could argue, I guess, whether or not it ever went away, but I'm curious as to your take on the current situation and where you see things going.

NIALL FERGUSON: Well, the Cold War did go away. It ended rather remarkably with the defeat of the Soviet Union, in 1989 to '91. And we've now forgotten so much of that history that we don't realize that Cold War II began some time ago.

Cold War II's different, though, because in Cold War II, China's the senior partner, and Russia's the junior partner. And in Cold War II, the first hot war breaks out in Europe, rather than Asia. This is a bit like the Korean War was, in 1950, where suddenly discovering that cold wars sometimes run hot, but this time, Ukraine is the battlefield.

And it's very important that we understand that this is part of a cold war, because nuclear weapons are involved. This is not the kind of war we saw after 9-11, against regimes, Saddam Husseins, or the Taliban, which were actually very poorly armed. We're dealing here with Russia, and the fact that Russia has nuclear weapons radically alters the dynamics and creates much greater risks than the wars that we saw after the first Cold War.

ANDY SERWER: What should we say, Niall, to those who say or ask if NATO did, in fact, provoke Putin by trying to have Ukraine join-- or Ukraine did by trying to join NATO.

NIALL FERGUSON: Well, this is an argument that's been made by a number of people on both the left and the right. John Mearsheimer is the most famous scholar associated with this view. I'm just a historian, not a grand theorist of international relations, and I'm here to tell you that the theory is bunk.

First of all, let's remember that, from the vantage point of those countries that joined NATO after the end of the Cold War-- say Poland, but really all the former Warsaw Pact and former Soviet republics that ended up as NATO members-- they are all, thanking God that they were let into NATO, because that's the thing that makes them feel safe. Ukraine's problem is not that we made it a NATO member. Its problem is that we didn't. We promised, in 2008, that Georgia and Ukraine could be in consideration for NATO membership, and that was an insincere promise. There was never any serious effort to make that happen.

I was in Kyiv, back in September last year, and it was clear, it was never going to happen. And I said then, the worst possible thing that we can do is to talk about NATO membership without delivering it. That was what made Ukraine so vulnerable. So the key wasn't enlargement. It was the fact that we left Ukraine in limbo with the promise of membership but not the reality, and that's why they were vulnerable.

ANDY SERWER: All right. So how do you see this playing out? And let's speak to China being sort of the senior member of the other side partnership. How is it going to work?

NIALL FERGUSON: Well, a number of things are still unclear. First of all, it's not clear that Russia can win the more-limited war in Eastern Ukraine, in the Donbass, that Putin has now committed himself to. The Russian army has been so depleted in the last eight or nine weeks that it's not clear to me they can even win there.

So let's ask the question, what happens if Russia starts to lose this war, which it could? We've armed the Ukrainians to the teeth, and the Russian army has been decimated. And so there's an uncertainty about what happens next on the battlefield.

The second thing is the Russian economy. I think we oversold sanctions as a weapon. We argued as if Russia's economy would be brought to its knees quickly. It hasn't been.

The ruble depreciated and then rallied. The Russians continued to sell oil and gas to Europe. That brought them in about a billion a day. That may be coming to an end, because the Germans are finally accepting that they cannot any longer justify buying Russian gas and oil, while the Russians are perpetrating such horrors in Ukraine.

And finally, China. China's economic support is crucial, from Putin's point of view, but it's conditional. The Chinese are not willing to risk incurring the wrath of the United States by supplying weapons, and so it's quite striking that China's exports to Russia are way down, since the war began. So there's support for Putin. They're not imposing sanctions, but they're not helping them as much as he would like.

ANDY SERWER: How stable are both Putin and Xi Jinping, in terms of being able to maintain power in their country?

NIALL FERGUSON: Well, see, easier to answer the question about Xi Jinping, whose grip on power seems pretty unshakable in China. Even although he has a huge problem on his hands-- it's called Omicron, and it's testing China's zero-COVID policy almost to breaking point-- I don't think it's very likely that opposition in China, popular or elite, is going to stop him getting an extension of his term in office. Putin's more problematic.

We don't know much about Putin's health, but there are endless rumors about how good it is. We don't really much about what's going on inside the Kremlin, but if they aren't worried, I'd be very surprised. The situation is a dire one. We're even hearing stories that the principal military strategist, General Gerasimov, was wounded in a Ukrainian attack, just today.

So things have gone very wrong for Putin. However, he has a pretty iron grip on the Russian elite, and if one looks at popular opinion, you'd be surprised to find just how little dissent there is from this whole policy. If you're a dissident in Russia, chances are, by now, you're in jail, or you left the country. So there isn't really that big a popular threat to Putin's position. I think the thing he has to worry about most is the grim reaper, judging by the likely deterioration of his physical health.

ANDY SERWER: And finally, with regard to Russia and Ukraine, how likely is it that Putin resorts to using a tactical nuclear weapon?

NIALL FERGUSON: Well, I'm glad you asked that question, Andy, because for weeks, nobody was willing to talk about it. I wrote about this in my column, just a few weeks ago, pointing out that the worse things go for Russia in the conventional war, the higher the probability that he resorts to using a nuclear weapon. He's talked about it. He threatened it implicitly just the other day, and if he sees his army crumbling in Eastern Ukraine, I could see an argument for using a tactical nuclear weapon, say against Lviv in the west of Ukraine, in a desperate attempt to salvage something from what is turning into one of the colossal military disasters of the 21st century.

ANDY SERWER: And in that scenario, who knows?

NIALL FERGUSON: Well, nobody really knows what we would do. We don't really know, and the terrible thing is that, if this happens-- we haven't seen anything like this since 1945, a nuclear weapon used in anger-- the world will be changed immediately. And we do not have good options to respond and nor, of course, does Ukraine, because Ukraine gave up its nuclear weapons back in the 1990s.

One of the most interesting consequences of this war is that all around the world people are going to realize, we need nuclear weapons. Look what the Ukrainians did. They gave them up, and now they are in a terrible state. So the end of the era of nonproliferation is upon us. Whatever happens in Ukraine, we will see rapid proliferation of nuclear weapons all around the world, and that is going to make the world a much more dangerous place than at any time since the end of the last cold war.

ANDY SERWER: It's certainly sobering. Seguing perhaps-- I was going to say shifting gears-- but it's a segue to talk about Henry Kissinger, a Cold War era. You're writing "Kissinger, Volume 2." How's that going, and maybe also, why are people still fascinated by Henry Kissinger, who's still of course with us?

NIALL FERGUSON: Well, Dr. Kissinger turns 99 this month. He remains one of the most brilliant thinkers on foreign policy questions this country has ever produced, perhaps the most brilliant. And it must be said that, if you look at what's happening in Ukraine, and remember what he said in 2014, he looks very prescient. He argued in 2014 that we should abandon the idea of NATO membership for Ukraine and make Ukraine neutral, the way Finland was in Cold War I. I think he looks to have been right about that, and he continues to be I think particularly insightful and the question of the US-China relationship.

Back in 2019, he told me we're in the foothills of a cold war, and then just last year, he upgraded that to the mountain passes of a cold war. So if Henry Kissinger thinks we're in Cold War II, we're in Cold War II, and that's why I'm writing his biography. Because there's no better way to understand our current predicament than to go back to that period, from the late 60s through the 1970s, when he was a key figure. Many of the issues we grapple with today are the same issues that we grappled with back in the 1970s, and guess what, we even have the same economics to go with them, because we're back to the inflation problem that we had then too.

ANDY SERWER: Sounds fascinating. When can we hope to read this tome?

NIALL FERGUSON: In an ideal world, it's published to coincide with his centenary. That's just a year away. So I got to stop doing interviews and get back to writing.

ANDY SERWER: Not quite yet. You can stop doing them in a minute. We have just another question or two, Niall. You live in the Bay Area.

NIALL FERGUSON: That's right.

ANDY SERWER: In Silicon Valley, near Palo Alto, near Stanford. So I want to ask you about Twitter, Elon Musk. What is your take on Elon's takeover of Twitter-- or hoping to take it over at this point still?

NIALL FERGUSON: Well, I think the first thing to notice is that Twitter was broken. It had ceased to be a place for free speech, because increasingly, the people running Twitter intervened. And they did not intervene in what I would call a neutral way, to limit so-called hate speech. They began to intervene in a way that was highly politicized and skewed to the left.

So there's no question that Twitter was a broken platform. I use it, but I use it with care. I use it to follow the authors that I want to follow, and I simply use it to advertise for things that I write. I do not use it to engage in the kind of vituperative arguments that many people seem to enjoy, because very often, you end up arguing with a bot rather than a real person.

Second thing I would say is that Elon Musk is one of the world historical figures of our time. He has transformed not just one but potentially three different sectors of the economy. It never ceases to amaze me what that man can take on, given that we all get the same 24 hours a day. He seems to get an extra three days a week or something like that. So in many ways, it's exciting that Elon Musk is taking this on, because it takes somebody with his kind of genius and his kind of drive to fix something as broken as Twitter, and I wish him every success in it.

ANDY SERWER: And finally, Niall, you warned us about spending massive amounts of money in response to COVID. Certainly some is required, but I think I'm right when I say that you said it was becoming excessive. And I want to know if that is in fact still your thinking today, and if so, are we reaping the consequences of that at this point?

NIALL FERGUSON: Well, Andy, my most recent book, "Doom: The Politics of Catastrophe," has a chapter towards the end, when I say it looks like we are doing overkill in both fiscal and monetary terms, in response to the pandemic. And this was written, actually, in late 2020. The book came out last year, and nothing was easier to predict, perhaps, in my entire career than that there would be an inflation problem in 2022.

When Larry Summers wrote it back in February, I was in a full agreement with him. He was pretty much in a minority amongst economists, a very small minority, but now, here we are. We haven't seen inflation like this since Paul Volcker was trying to tame the great inflation of the at the Fed, and it's going to be very, very hard indeed for this Fed to tame this inflation. I'm not saying we're exactly in the 1970s predicament, but the combination of fiscal policy and monetary policy errors and a war really takes you back to that period, from '68 to '73, when the inflation genie got right out of the bottle. So we are back in the 1970s not only geopolitically, but unfortunately, we're back in the 1970s in terms of inflation and monetary policy.

ANDY SERWER: Much food for thought there. Niall, we're going to let you get back to writing your book. Niall Ferguson, thank you so much for joining us.