This is a rush transcript from "Special Report," December 4, 2014. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: He has been improvising himself into a nationalist, backward-looking approach to Russian policy that is scaring the heck out of his neighbors and is badly damaging his economy.
VLADIMIR PUTIN, RUSSIAN PRESIDENT: For Russia, Crimea, ancient Korsun, Chersonesus, Sevastopol have a major civilizational sacred meaning, the same as the Temple Mount in Jerusalem has for those who confess Islam and Judaism. And this is exactly how we will treat it from here forever.
(END VIDEO CLIP)
BRET BAIER, ANCHOR: Russian president Vladimir Putin today in essentially their state of the union saying and talking about the importance of Ukraine as that action continues by Russia. The president here talking about sanctions and their effect and the effect it's having on the Russian economy. But perhaps an even bigger effect, take a look at this. Oil prices dropping. Look at that, 26.3 percent since October 1st. And that is having a big effect.
We we're back with the panel. George?
GEORGE WILL, SYNDICATED COLUMNIST: Well, Putin's truculence varies inversely with the strength of his position, and he's very truculent these days because his position is suffering terrific economic damage by Southern Ohio and North Dakota and other places like that that are producing this geyser of oil that is supplanting Russia as the principle producer of petroleum products. The restrictions, I think the sanctions we put on the banking ones are particularly having an effect also, but what this is demonstrating to the world, and it's good to learn this again, is that Russia is a third world economy with first world missiles. There is no consumer product except vodka and caviar you'd buy from that country. They make nothing. They have a hunter-gatherer economy, which is to say they are primitives. They extract things, including eggs from fish for caviar. But it's a simple extraction industry, and it's extremely vulnerable there for to the sway of one price, the price of oil, and it's just devastating his position.
CHARLES LANE, OPINION WRITER, WASHINGTON POST: Well, if you can't deliver the goods to your people, you talk about spiritual benefits, things like ancient lands that you have reconquered. So he spent a lot of time going into this business about Crimea. But George is absolutely right about the pivotal nature of the oil price. There are many people who believe that what brought on the collapse of the Soviet Union in the late 1980s was the Saudi's decision to quadruple oil production in the second half of 1985 which put Mikhail Gorbachev in a cash death spiral and led him to curtail military spending.
Vladimir Putin lived through that experience. I think he's determined to avoid it. I think he sees this as another one of those, a repeat of that experience, and maybe a conspiracy by the West and the Saudis to destroy him. But the fact remains he can't balance his budget at the oil price Saudi Arabia is now targeting, which is $60 a barrel. Maybe the difference between him and Gorbachev is that is he is prepared to crack down on his people and remain in power with the iron fist as opposed to relaxing and liberalizing as Gorbachev did.
BAIER: In fact, today, Judge, he said if they hadn't gone into Ukraine the U.S. would have come up with another excuse to issue sanctions on Russia to try to keep them down. We did have a lot of people tweet in, and a message on Facebook, Darwin writes, "Putin the roadrunner, Obama Wiley Coyote." Boo Radley writes "Can you can be outmaneuvered if you don't even get in the game?" People think that perhaps Putin has gotten the better of President Obama.
JUDGE ANDREW NAPOLITANO, FOX NEWS SENIOR JUDICIAL ANALYST: We were talking during the break, would you rather deal with a smart devil or a foolish one? This is a very, very smart devil who is becoming very, very desperate. And as economics get worse, he either will lose power or he will become violent. I don't think he voluntarily gives up power. I don't see a coup coming about in that country. I see him becoming violent and authoritarian as you indicated, perhaps not even leaving office.
Here is my fear. I don't think that Barack Obama, John Kerry, and Ashton Carter are the best three people in the United States of America to confront this. But these are the people we are with. These are the people that are going to be dealing with this in the next two years.
BAIER: Does this come to a head?
WILL: I think what we're dealing with is a man who understands that the pedigree of all European nations is complicated. And you can make a case that all of them are put together in a way that leaves revanchist claims from others. And he is going to exploit this. He is doing it in Crimea. Now he is doing it with the rest of the Ukraine. The danger comes when he gets to the Baltics which are members of NATO and Article Five commits us to defend them.
NAPOLITANO: Will we defend them?
BAIER: We will talk about that, I'm sure, again. That is it for the panel. But stay tuned for a lesson in the power of persuasion.
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