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Prisoner Swap Brings Stunning U.S. Shift on Cuba; Interview with Ileana Ros-Lehtinen; Sony Cancels 'The Interview' Release

Aired December 17, 2014 - 17:00   ET


WOLF BLITZER, CNN HOST: Happening now, Cuba turnaround -- a prisoner release, a spy swap and secret talks leading to a stunning change, as President Obama moves to normalize relations with the communist regime.

Screenings canceled -- amid terror threats, Sony halts the release of a new movie which mocks the North Korean leader.

Have the cyber attackers won?

Mass graves and massive air strikes -- new evidence points to more ISIS atrocities, as the United States and its allies carry out dozens of raids in Iraq and Syria.

I'm Wolf Blitzer.


ANNOUNCER: This is CNN breaking news.

BLITZER: We're following two extraordinary stories this hour.

The breaking news, a spy swap and a prisoner release kicking off a stunning shift in U.S. policy toward Cuba. With Cuba's freeing of a U.S. contractor, Alan Gross, who had been jailed for five years, President Obama has announced plans to normalize relations with the communist state. He's already spoken with the Cuban president, Raul Castro. The two countries will be opening their embassies and the United States will ease an embargo that began half a century ago.

That sparked a protest in Miami. Some Republicans are accusing President Obama of appeasing tyrants.

Also, there are stunning new developments happening right now in the Sony cyber attack that sources say potentially could be traced to North Korea. Amid threats of a 9/11-style attack and cancellations by theaters all across the United States, Sony has now decided to pull. It's canceling its new film release. The film mocks the North Korean dictator.

A sharp critic of the Cuba policy shift, Congresswoman Ileana Ros- Lehtinen, she is standing by, along with our correspondents, our analysts and our guests.

But let's begin with the end to a half a century of U.S. hostility toward Cuba. After Cuba freed a jailed American, President Obama today made a major announcement. He announced he was going to restore full diplomatic ties with the communist nation.

Let's go straight to our senior White House correspondent, Jim Acosta.

He's been following the story all day -- Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Wolf, the cold war with Cuba is over. In a major diplomatic breakthrough for the Obama administration, the president announced he is normalizing relations with the island after top secret talks between the two governments that went on for more than a year.


ACOSTA (voice-over): Nothing says a thaw in U.S.-Cuban relations more than this -- the historic phone call between President Obama and Cuban leader, Raul Castro.

UNIDENTIFIED MALE: The Soviet military buildup on the island of Cuba.

ACOSTA: The first presidential level engagement, the White House says, since the Cuban revolution, more than 50 years ago.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will end an outdated approach that for decades has failed to advance our interests and instead, we will begin to normalize relations between our two countries.

ACOSTA: Senior administration officials say the secret U.S.-Cuba talks started in June 2013, with most of the discussions happening in Canada and led by Deputy National Security Adviser Ben Rhodes.

Those wheels were in motion when the president and Raul Castro shook hands at Nelson Mandela's memorial service last December. But one key sticking point remained -- the imprisonment of Alan Gross in Cuba.

OBAMA: A major obstacle stood in our way -- the wrongful imprisonment in Cuba of U.S. citizen and USAID subcontractor Alan Gross for five years.

ACOSTA: Last March, President Obama found a pivotal player to help broker the deal, Pope Francis. They discussed Cuba at the Vatican, something Mr. Obama did not disclose when asked by CNN.

UNIDENTIFIED MALE: And what were his concerns?

OBAMA: In terms of the meeting with His Holiness, Pope Francis, we had a wide-ranging discussion.

ACOSTA: Earlier this year, the pope kept the conversation going, sending letters to President Obama and Raul Castro. Then in October, the Vatican welcomed officials from the U.S. and Cuba to push the talks forward.

PRES. RAUL CASTRO, CUBA (through translator): I want to thank and recognize the support of the Vatican.

ACOSTA: The president had the bipartisan support of Senators Patrick Leahy and Jeff Blake, and Congressman Chris Van Hollen, who flew to Cuba to bring Gross home.

But Cuban-American leaders in Congress are fiercely opposed to the White House deal, from the outgoing Senate Foreign Relations Committee chairman, Bob Menendez, to Senator Marco Rubio to backers of the U.S. embargo on Cuba.

SEN. MARCO RUBIO (R), FLORIDA: This policy contradiction is absurd. And it is disgraceful for a president who claims to treasure human rights and human freedom. This president is the single worst negotiator we've had in the White House in my lifetime.

ACOSTA: Mr. Obama has changed his position on the embargo over the years, from his days as a state senator --

OBAMA: I think it's time for us to end the embargo with Cuba.

ACOSTA: -- to a candidate for president.

OBAMA: I will maintain the embargo.

ACOSTA: But in his final years in office, the president wants to turn the page.

OBAMA: But today, we are making these changes because it is the right thing to do.


ACOSTA: And in a sign of the times, a senior administration official said Cuba's former leader, Fidel Castro, was not involved in the negotiations for this deal.

As for a presidential tripe to Cuba, as strange as that might sound, the White House is not ruling one out, noting that Mr. Obama was in China last month, where democracy is not exactly on the march -- Wolf.

BLITZER: Yes, that would be pretty amazing if the president of the United States winds up in Havana during these final two years of his presidency.

All right, Jim Acosta, thanks very much.

Our global affairs correspondent, Elise Labott, she broke this story for our viewers in the United States and around the world earlier today.

Elise is joining us right now.

Five years in a Cuban prison, we're talking about Alan Gross. He's back in the United States. He's speaking out right now. He's obviously a pretty happy guy. ELISE LABOTT, CNN GLOBAL AFFAIRS CORRESPONDENT: He's so happy, Wolf. And you saw when he did this press conference today and he turned around and took a look at the American flag. The smile on his face, Wolf. And the fact this toothless smile, the man so frail. His health has been failing. He had about four teeth left. It just showed the toll that he had on his body.

But he said, look, I am so glad to be home. Freedom is not free. And he said he has no grudge against the Cuban people. He does have a very -- a lot of respect for them. He says they're not responsible for what me and my family suffered. It's the belligerent policies of both the U.S. and Cuba. And he's calling this a landmark day. And he hopes that things will improve between the two countries.

BLITZER: And the Obama administration, if you take a look at that fact sheet they put out, they've got a lengthy agenda of items they're going to go through with Cuba right now, including discussions to remove Cuba from the State Department's official list of countries that support terrorism.

LABOTT: That's right. Well, look, Wolf, for years, you know, the U.S. has said in its annual terrorism reports that Cuba doesn't have any links to terrorism. They've been on this list for political reasons. And the whole thing now is the U.S. is going to start treating Cuba like any country that's not mired politics. Diplomatic relations between two countries. If the U.S. has a problem, it can take it up at the -- between the embassy and the foreign ministry, or here with the ambassador in Washington.

And we were talking about a presidential visit. Secretary of State John Kerry already said he wants to be the first secretary of State to go to Cuba in more than 50 years. There's going to be be a lot of diplomatic activity over the next several months. And we're told it's a -- it could be a matter of weeks before the U.S. and Cuba move to start working toward opening those embassies -- Wolf.

BLITZER: Clearly, this was -- the president wanted this to be a legacy item for him on his agenda during these final two years of his administration.

Elise, thanks very much.

Let's go to Havana right now for an exclusive report.

CNN's Patrick Oppmann is the only United States network television correspondent in Cuba -- Patrick, so what's been the reaction on the streets of Havana and elsewhere?

PATRICK OPPMANN, CNN CORRESPONDENT: You know, it was a little bit surreal, Wolf, this morning. When the news broke in the United States, but still hadn't been reported here by Cuba's very restricted official state press. So it was really us journalists who were going out and telling people in the street that this major decision had been taken by their government.

And finally, at noon, Raul Castro emerged to give a state address, a very unusual and unprecedented address, where he talked about the United States using terms like respect and thanking President Obama.

Most Cubans had never heard anything like it. Many celebrated and many had tears in their eyes. Many are really hoping this helps improve the island's dire economic situation, allows them to see their family more regularly, allows Cuban exiles to return. You know, they realize that this isn't the end of the embargo, but they feel, Wolf, that it's the beginning of the end.

BLITZER: Are they gearing up already for U.S. companies, whether hotel, tourism-related businesses, airlines, to start bringing tourists in, restaurants, hotels, maybe maybe even gambling casinos?

Are they gearing up for that?

It's only, what, 90 miles away from the southern tip of Florida.

OPPMANN: Well, of course. And it would be an obvious and tremendous market. But, you know, for anybody who is thinking of coming to do business in Cuba, there's still a major obstacle, which is the Cuban government, which needs to approve every business transaction and every venture that's launched here.

And so far, they've had a very mixed record of doing that. They realize -- they just passed a new foreign investment law that will try to make it a more transparent way of doing business here.

But, you know, for Cubans that have opened their small businesses, they're probably the ones who are going to be able to take advantage of it. They're doing a better job than the Cuban government providing services, like hotels, like restaurants. So there's a real expectation that this will improve regular Cubans' lives.

And, of course, if it doesn't improve regular Cubans' lives, Wolf, then the question will be, why, if there have been a loosening of restrictions, why doesn't it improve regular Cubans' lives?

Because now, for almost, you know, 60 plus years, the Cuban government has been blaming all their country's economic woes on the U.S. embargo. And now, it will really be up to the Cuban government to improve the people's well-being -- Wolf.

BLITZER: All right, Patrick, thanks very much.

Patrick Oppmann, as I said, the only U.S. television network correspondent in Havana right now.

Critics have been quick to slam the president's shift on Cuba.

Senator Ted Cruz of Texas, he's Cuban-American. He's standing by.

But first, I want to bring in another Cuban-American, Ileana Ros- Lehtinen.

She's a Republican from Florida, a key member of the House Foreign Affairs Committee.

Congressman, thanks very much for joining us.

The president of the United States believes this will help all Cubans, it will improve the relationship and the oppression that 10 or 15 million Cubans now feel from their own regime will be eased as a result of what he decided to do today.

Do you agree with him?

REP. ILEANA ROS-LEHTINEN (R), FLORIDA: That is ludicrous. It is pathetic. What a myopic way of looking at the misery that engulfs Cuban society today.

I would say that your CNN correspondent did a very good job of earning the right to be the only news bureau operating in Havana, because he did all the -- all the talking points that the regime would like to have.

Mixed messages?

Come on. There's a very strong message in Cuba, and that is that dissidents are not allowed to express their opinions, that there's only one political party that can exist, and that's the Communist Party, that there are no elections, there's no freedom of expression, there's no free press, that everything comes with a caveat.

When -- and you were saying about mixed messages about small business, what small businesses?

Please. Everything is owned by the Cuban regime, no matter how you want to twist it. This is really appeasing a dictatorial regime.

BLITZER: All right.

ROS-LEHTINEN: We could have done this four years ago. We could have done this the day that poor Alan Gross was put into jail unjustly. And what the president did today is just insult our Cuban-American community. We want freedom --

BLITZER: All right.

ROS-LEHTINEN: -- and democracy to come to the Cuban people. This is not the way to get to it, Wolf.

BLITZER: Congresswoman, you make solid points. And you make a bad point about Patrick Oppmann. He's an excellent journalist. He was reporting what he saw on the streets of Cuba today. And it's unfair to say he's given talking points --


BLITZER: -- he's not giving talking points for the Cuban regime. He's an independent journalist. He's there. He's working hard. He speaks the language. He's been there for a long time. He knows what's going on. I don't want to have an argument over Patrick Oppmann.


BLITZER: What I do want you to do is explain why 50 years -- this was the president's argument -- for 50 years, the United States has slapped this embargo on Cuba. You yourself say it's a disaster.


BLITZER: The policy has not worked. It keeps being rejuvenated, if you will, but it doesn't work. The president says let's try something else.

What's wrong with that, since, for 50 years, it's been a disaster?

ROS-LEHTINEN: I will be glad to say it. And for all of those years that the United States has been the only country that has had the moral clarity of establishing that we do want to only do business with the folks who are going to respect human rights, now what has happened?

Every other country in the world -- there are about 190 plus countries. Every other country has been wheeling and dealing with the regime.

Have those interactions brought the Cuban people any closer to freedom and democracy?

You take that argument and you twist it on its head and the same argument can be said. Exchanges -- all of this currency going back and forth, telecommunications, has that improved the plight of the Cuban people?

Again, the Cuban people are no freer today than they were the first day of the Cuban regime. In fact, there have been more arrests lately than ever.

And now, when the CNN cameras are not going to be covering it, Fidel and Raul Castro will still be back to its old tricks.

Wolf, we've been around the block enough to know that we have seen these

Changes come about before. We've had the black spring in Cuba --

BLITZER: All right --

ROS-LEHTINEN: -- where they jailed 75 dissidents. And then when the world wasn't looking, they went back to jailing some more.

More things change, nothing changes in Cuba. And you know that. And these changes --

BLITZER: Do you --

ROS-LEHTINEN: -- only appease the Castro dictatorship. They don't help the human rights activists with whom I talked to all day today. And they are saddened that this has happened, because they say all of our sacrifices have been for naught.

BLITZER: So, clearly, you disagree with Pope Francis, who played a critically important role as an intermediary between the Obama administration and the Cuban regime. He welcomed this news today that the United States and Cuba were about to normalize relationship.

You believe -- correct me if I'm wrong -- that Pope Francis is wrong?

ROS-LEHTINEN: I believe that Pope Francis, along with all of the religious leaders of the world, have every right to express their opinion and to work for the unjustified jailing of Alan Gross. They were right to say free him now. And I thank the pope for everything he did.

I thank all the Jewish leaders who worked for Alan Gross' release. He should have never have been put in place. But to negotiate on Alan Gross's back and say that now Cuba is for sale, I think that that's wrong.

ROS-LEHTINEN: -- unjustified jailing of Alan Gross. They were right to say free him now. And I thank the pope for everything he did. I thank the Jewish leaders who worked for Alan Gross' release. He should never have been put in place, but to negotiate on Alan Gross's back and to say that now Cuba is for sale, I think that that's wrong.

I agree with Pope Francis. We would like to have a world where we can all hold hands and sing "Kumbaya," but Wolf, there are some regimes that human rights violations are just so extreme.

This is a regime that has killed U.S. citizens, that has killed U.S. residents who jailed Alan Gross unjustly. And now to get Alan Gross' release, we have to negotiate and give away everything that we could share with a free and Democratic Cuba. I think that we gave away too much. And I feel bad for all the human rights dissidents who are suffering today and will be suffering tomorrow and still have no freedom. We did not help the Cuban people get freer today by this deal.

BLITZER: Ileana Ros-Lehtinen.

ROS-LEHTINEN: I welcome Alan Gross. I'm glad that he's home.

BLITZER: All of us are glad that he's home, back here in the United States.

Ileana Ros-Lehtinen, a key member of the House --

ROS-LEHTINEN: Thank you, Wolf.

BLITZER: -- Foreign Affairs Committee. She's a Republican from Florida.

Let's get another perspective right now. Joining us in THE SITUATION ROOM, Senator Ted Cruz. He's also a Republican from Texas.

Senator Cruz, like Ileana Ros-Lehtinen, your father was from Cuba, so you have a personal stake in what's going on. You've obviously been very much involved in the whole nature of this U.S.-Cuba relationship.

But I want to follow up on a question that I asked her. I asked her why she would disagree with Pope Francis, who played a critically important role in trying to ease this relationship between the United States and Cuba.

I want to play this little clip. This is the spokesman for Pope Francis speaking to CNN earlier today.

Oh, let me read it to you. "Pope Francis, with that letter and with the spirit got it going. Pope Francis is all but -- all for building bridges. It's what he calls the culture of encounter. I'm sure not everyone in the United States is happy with what's happened here. There's no doubt about that. We've already seen that and yet, he," referring to the pope, "he says it's always better to be talking than not talking, and that's really what this was all about."

Your reaction to the role that Pope Francis played in trying to improve U.S.-Cuban relations?

SEN. TED CRUZ (R), TEXAS: Well, Wolf, it's good to be with you. I very much admire and respect Pope Francis. He's been a tremendous voice for the oppressed.

But you know, his responsibility, he's not charged with protecting U.S. national security interests. The president of the United States is charged with protecting the national security of our country.

And this action today continues a long pattern. It is the latest manifestation of the failures of the Obama-Clinton-Kerry foreign policy. What we've seen for six years under this administration is that we've been consistently alienating and abandoning our friends and allies and at the same time appeasing and coddling our enemies.

First it was Russia. Then it was Iran. Today it's Cuba. And that only makes America and the world more dangerous. This was a mistake.

BLITZER: All right.

CRUZ: This is throwing an economic lifeline to the Castros at a moment when their regime was vulnerable, and it was a serious mistake.

BLITZER: So you -- do you want the United States to sever diplomatic relations with China right now?

CRUZ: They're qualitatively different. For one thing, anyone doing business with Cuba has to do business through the government so all foreign currency has to go through the foreign government, be transferred into Cuban pesos. And that means that every economic transaction strengthens the regime that is oppressing, that is torturing, that is imprisoning its citizens; that allows no free speech, no free elections and, critically, is 90 miles off of the coast of the United States.

Listen, the Castro regime is an avowed enemy of America. They are allies of North Korea, of Iran, of Venezuela. In fact, they were just caught recently doing an arms deal with North Korea. And the idea that we would strengthen a regime that is a state sponsor of terrorism, that is exporting communism throughout Latin America and is working to undermine America, that only undermines our national security interests.

BLITZER: I want -- you obviously don't want the United States to sever diplomatic commercial ties with China. I just want to pinpoint that, right?

CRUZ: No, that's correct. It's a qualitatively different circumstance. For one thing in China, you can have direct economic relationships without going through the government. You're not required to transfer to Chinese currency.

And the relationship with China is far more complicated. The relationship with Cuba, the Castros have demonstrated manifest hostility and antagonism to America.

You know, it was striking watching President Obama's remarks today. He talked about the Bay of Pigs invasion, and yet he utterly omitted the Cuban missile crisis, one of the greatest threats to our national security in modern times that almost resulted in nuclear weapons right on our shore. And, you know, watching President Obama and John Kerry, it was -- it was yet again blaming America first.

Look, the condition of the relationship between Cuba and America is the direct result of an oppressive, communist dictatorship that has demonstrated manifest hostility to the United States.

BLITZER: Here is a clip ABC News has just released that their anchor David Muir sat down with President Obama, and they had this exchange on U.S.-Cuba relations. Listen to this.


DAVID MUIR, ABC NEWS ANCHOR: Alan Gross, America watched him come home today. He looked a lot healthier than images we had seen before. I'm curious, have you talked to him yet?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I did. I had a chance to talk to him on his flight home. And the first thing he says, "Mr. President, for you I don't mind interrupting my corned beef sandwich."

So I told him he had mustard on his upper lip, but we had a nice -- a nice conversation. He obviously is joyful about being reunited with his family.

MUIR: Will you visit Cuba in your final two years as president?

OBAMA: You know, I don't have any current plans to visit Cuba.

MUIR: Not ruling it out?

OBAMA: Well, let's -- let's see how things evolve.


BLITZER: So what do you think, you know? President Obama not ruling out the possibility of showing up in Havana. Some people are suggesting he wants this to be a legacy item for him like Richard Nixon had when he went to China.

CRUZ: Well, listen, all of us celebrate the release of Alan Gross. He has been wrongfully and unjustly imprisoned and mistreated, and I've called repeatedly for his release. I celebrate Pope Francis's involvement. I celebrate the involvement of so many Jewish leaders in America, and that is an unmitigated good thing.

But you know, just like the Obama administration's ill-advised deal concerning Bowe Bergdahl, where they released five senior Taliban terrorists, in this instance the Obama administration released three Cuban spies who were guilty of murdering four U.S. citizens, guilty of spying on Southern Command, on U.S. military installations, and that undermines our national security.

We should be negotiating from a position of strength. And the consistent failing of this administration is that it believes the way to deal with dictators and tyrants is through appeasement. I think weakness is provocative and I believe in peace through strength.

BLITZER: All right.

CRUZ: That's far more effective in protecting our country.

BLITZER: Senator Cruz, we have much more to discuss. I want you to be patient. We'll take a quick break. More with Senator Ted Cruz on this historic day. The president of the United States moving to try to normalize U.S.-Cuban relations. We'll be right back.


BLITZER: The huge breaking news today. An historic moment, President Obama directly opening the door to Cuba. The Cuban president, Raul Castro, responding saying he, too, wants to improve relations with the United States.

Once again joining us in THE SITUATION ROOM, Senator Ted Cruz, the Republican from Texas.

Senator Cruz, I want you to respond to Republican Senator Jeff Flake of Arizona. He accompanied Alan Gross on the flight from Havana to here in Washington earlier today. Listen to Senator Flake.


SEN. JEFF FLAKE (R), ARIZONA: I think that our policy has done more to keep the Castros in power than anything, and so I think it's high time for a change. Fifty years is long enough and that we ought to do this and do whatever we can so that ordinary Cubans can have more control of their destiny.


BLITZER: You know, there are a lot of other Republicans who agree with him. Here's the question. You'll have -- the Republicans will have 54 majority in the new Senate. Will you have enough support, do you believe, to substantively, practically change any of the president's decisions, for example, opening up a U.S. embassy, naming an ambassador, easing the restrictions on trade, tourism, stuff like that? Will you be able to block it?

CRUZ: Well, Wolf, I've been encouraged that, in response to the president's announcement today, there has been bipartisan condemnation.

I was encouraged to see Senator Marco Rubio, the Republican, and Senator Bob Menendez, a Democrat, both criticized the decision in unambiguous terms. Both of them, like me, are of Cuban-American descent, and both of them understand the enormous mistake this decision represents.

You know, Wolf, I think any fair and impartial observer looking at the last six years would have to conclude that the Obama foreign policy of leading from behind, it hasn't worked, you know.

It began with, in 2009 right when the president was elected, he was announcing that we were going to pull back and not install the anti- ballistic missile battery stations that were scheduled to go in, in Poland and the Czech Republic, and that was an effort to appease --

BLITZER: Let me ask, Senator. I want to interrupt, because I'm trying to get an answer. Will you practically be able to change what the president is trying to do? In other words, will you have the votes to stop funding, to take measures like that to block these initiatives?

CRUZ: It's not clear at this point where the votes will be, but I expect in the Senate to see a far more vigorous voice defending our national security interest. And I am hopeful that we will prevent a bad deal and a bad decision.

And the point I was making on this, there's a reason why I expect to see bipartisan cooperation to rein this in. In 2009, the appeasement of Putin didn't work, and Putin invaded Ukraine, a sovereign nation. Likewise, when President Obama went to Iran, Iran was --

BLITZER: I think we just lost that satellite connection with Senator Ted Cruz. We apologize, but I guess you guys got the point. He is fiercely opposed to what President Obama announced today.

We'll get other perspectives coming up. Much more on this historic news. Stay with us for that, but there's other breaking news we're following, as well. Sony Pictures, they have just decided not to release its controversial new comedy about North Korea. Is Hollywood being prudent, caving in to hackers, to terror threats? We're following the story right after this.


BLITZER: Following breaking news. Only minutes ago Sony Pictures Entertainment announced it's canceling the release of its controversial new comedy about North Korea, at least for now. It's called "The Interview," and the film provoked an unprecedented computer attack on Sony Pictures, then a threat of 9/11-type terror attacks against the United States.

Our justice correspondent, Pamela Brown, is watching the breaking news for us.

It is pretty significant what Sony has just announced.

PAMELA BROWN, CNN JUSTICE CORRESPONDENT: It's truly extraordinary, unprecedented, Wolf, Sony pulling the release of its controversial comedy on December 25 after most of the largest U.S. theater chains backed out today. Sony saying in a statement today that it is extremely disappointed in the outcome.


BROWN (voice-over): Sony is no longer standing by its controversial film about North Korean leader Kim Jong-un, "The Interview," this after the largest theater chains in the U.S. backed out of showing the film, and the New York premiere of the movie cancelled.

BRIAN STELTER, CNN HOST, "RELIABLE SOURCES": I cannot think of another moment like this in modern movie history. Usually the deals struck between studios and movie theaters are iron clad. Once the operators agree to put their movie on all their screens, they've got to stick by that deal, but this is an unprecedented situation.

BROWN: Today the State Department confirmed an assistant secretary of state did have a routine conversation with Sony executives, but say they do not weigh in on Hollywood productions.

JEN PSAKI, STATE DEPARTMENT SPOKESPERSON: We're not in the business of signing off on content of movies or things along those lines.

BROWN: The film is believed to be the impetus for a devastating hack on Sony's computer system and a new threat, purportedly from the hackers promising a bitter fate for moviegoers of the film.

U.S. officials with firsthand knowledge tells CNN North Korea remains the prime suspect in the hack, but so far the U.S. Government hasn't publicly pointed the finger at the reclusive country.

STEWART BAKER, FORMER NSA GENERAL COUNSEL: The only way that we will stop them is if they are persuaded that this was a bad idea, and so we have got to react in a way that deters future attacks of this kind.

(END VIDEOTAPE) BROWN: So the cyberattacks are still under investigation by the FBI.

Meantime, in this statement released by Sony, it says, "Those who attacked us, stole our intellectual property, private emails and sensitive and proprietary materials and also sought to destroy our spirit and our morale, all apparently to stop the release of a movie they did not like" -- Wolf.

BLITZER: That movie is not going to be airing, at least for now. Thanks very much, Pamela.

Sony did not even plan to show the controversial movie in South Korea or in Japan, where the company has its main headquarters.

CNN's Will Ripley is joining us now live from Tokyo with a closer look at how a low-priority comedy created this potential for international incident, threats of terrorism and a whole lot more.

So what's the reaction there, Will?

WILL RIPLEY, CNN CORRESPONDENT: This is a huge disaster here at Sony headquarters in Tokyo, Wolf, not only from a financial perspective, because the company stands to potentially lose hundreds of millions of dollars, but they've got themselves now in a geopolitical mess. They're getting heat from the Japanese government over greenlighting this production in the first place. North Korea is outraged.

And even more than that, there is now a new fear for North Korea perhaps launching more cyberattacks. This has really opened up the fact that companies are vulnerable to potentially catastrophic losses, humiliation and much more.

This is a country that militarily wasn't really taken seriously, but now this almost levels the playing field, Wolf, because if they can launch this kind of attack, what many are calling cyber terrorism, what else would they be capable of if, indeed, North Korea, is behind all of this?

BLITZER: Very quickly, Will, why was this film never even scheduled to be released in Japan?

RIPLEY: Well, we know from previous movies, including the 2013 Seth Rogen comedy, "This is the End," that type of humor doesn't translate well to Asian audience. They just don't go see the movie. It just -- it gets lost in translation. So it probably was more of a business decision than geopolitical decision.

But nonetheless, it is pretty significant that this movie causing so many problems here in Tokyo, the average moviegoer doesn't even know about, has never heard about this movie, "The Interview," here.

BLITZER: Will Ripley in Tokyo for us. Thanks very much.

While North Korea is suspected of being behind the unprecedented computer attack on Sony Pictures, there are now new indications Kim Jong-un's country may become even more aggressive. Let's bring in Brian Todd. He's working this part of the story -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, Kim Jong-un was supposed to be toned down in his aggression for the first three years of his leadership after his father's death. He quickly tossed that notion out the window.

Tonight we're coming out of that period of mourning, and observers are worried that this menacing, erratic young leader is going to do something very dangerous.


TODD (voice-over): He's now unshackled, free to be more aggressive as he comes out of the traditional three-year period of mourning for his late father. By Confucian and North Korean custom, Kim Jong-un was supposed to observe that period by being less aggressive, lying low. Many argue he never waited.

PROFESSOR SUE MI TERRY, COLUMBIA UNIVERSITY: In addition to executing his uncle, Jang Song Thaek, he has purged anyone who can question his leadership or his authority.

TODD: Kim's brazenly killed his powerful uncle, tested nuclear weapons and ballistic missiles, threatened South Korea repeatedly. What could he possibly do now that's more aggressive?

PATRICK CRONIN, CENTER FOR A NEW AMERICAN SECURITY: He is likely to have a fourth nuclear test. In the meantime, cyberattacks, asymmetric attacks of another nature, including some military provocation across the northern limit line at sea or with assassinations or terrorism, even.

TODD: Kim's regime did make some peaceful overtures recently, releasing three Americans from North Korean custody, sending top officials to visit South Korea. But those moves are now seen as part of a charm offensive aimed at staving off a U.N. vote to recommend prosecuting North Korean leaders for human rights abuses. The charm offensive didn't work. Now Kim could be even more dangerous.

JAMES FRANCO, ACTOR: Nice tank, is that real?

UNIDENTIFIED MALE: It was a gift to my grandfather by Stalin.

FRANCO: In my country it's pronounced Stallone.

TODD: North Korean leaders are furious over the new movie "The Interview," a film about an assassination attempt on Kim, which Sony Pictures has just pulled. So far North Korea has not been definitively linked to the massive cyberattack on Sony, as many have suspected. But analysts say Kim Jong-un's reasons for hating the movie go beyond being embarrassed by it. If any copies of the film were to leak out.

CRONIN: CDs are going to be pouring in across the border into North Korea from China. They will slip into the bags of elites, and they will be seen, of this movie. Regardless of where this movie is shown. And that will sow a potential movement, underground movement in the elite against Kim Jong-un. This is the paranoia that is driving this regime.

TERRY: If the public sees this, he's very concerned about what that would mean, because in North Korea Kim Jong-un is considered god or the son of god, like, his father, his grandfather. There's a little bit of religious tone to this.


TODD: Now that Sony has decided not to release "The Interview," at least for now, we're watching what the hackers are going to do next. If North Korea was behind the cyberattack, this might embolden them to launch more cyber campaigns.

Analysts say the North Koreans have a growing and improving team of government hackers. And they also outsource hacking to others, hiring freelance hackers to operate out of places like China and Thailand. Wolf, we're watching what comes next.

BLITZER: We certainly are, Brian. Thanks very much.

Let's continue our special coverage of the breaking news. Joining us, our CNN law enforcement analyst, Tom Fuentes, former assistant director of the FBI. Also, CNN senior legal analyst, Jeffrey Toobin; CNN political commentator Peter Beinart; and Kim Masters, she's editor at large for "The Hollywood Reporter."

Kim, Sony, as you know, the breaking news, pretty stunning. They're pulling the release of this film "The Interview." Did they have any other choice?

KIM MASTERS, EDITOR AT LARGE, "THE HOLLYWOOD REPORTER": No. I think they had no other choice. I mean, it wasn't going to be shown by the major theater chains in the country, so you know, it was a de facto decision that was already done for them. And I think to some degree they may have sort of had it that way. They kind of let the theater owners cancel, and then they said, "We're not going to release it." Well, they couldn't release it anyway.

BLITZER: This is part of the statement, Kim, that Sony put out: "We are deeply saddened that this brazen effort to suppress the distribution of a movie and, in the process, do damage to our company, our employees and the American public. We stand by our filmmakers and their right to free expression and are extremely disappointed by this outcome."

Basically, the theaters, Sony, they were really taking seriously this threat from someone out there that, if they showed the film, if people went to the theaters, they could wind up in another 9/11-type situation. Is that right?

MASTERS: I believe there was concern, certainly on the part of the theater owners. They were -- there was a warning and, therefore, if something happened and even if it was just some random lone-wolf crazy person, they have liability.

But a studio executive pointed out to me earlier today that also these theaters were concerned that they would be hacked, possibly shut down around the country and not just this movie.

So that leads to the question of how can you release it? I mean, would Amazon stream it? Would Netflix stream it? Who would be more vulnerable to hacking than companies like that? So I don't really know how this movie ever gets released except with perhaps piracy sites.

BLITZER: Kim, I want you to stand by. Everyone else stand by. We're going to continue our special coverage of the breaking news right after this.


ANNOUNCER: This is CNN breaking news.

BLITZER: A major development in the Sony computer hack attack.

Let's get the headline from CNN justice reporter Evan Perez.

You've been working your sources, Evan, and you've now nailed it. What do you have?

EVAN PEREZ, CNN JUSTICE CORRESPONDENT: U.S. investigators determined that the attack against Sony was the work of hackers working on behalf of the North Korean government. The question now is, what do we do about it? We expect that there's going to be an announcement tomorrow from the U.S. government that will assign attribution, as they describe it, you know, for responsibility for this hack.

And then question will be, what the U.S. government's response will be, because obviously, you know, nothing happens in North Korea without orders from the leadership of the regime. They control the Internet there. So there's no way this attack could have been done by anyone other than if it was ordered by the leadership of that country.

BLITZER: And what you're saying is, as early as tomorrow, either the FBI or the Justice Department here in Washington will issue a formal public statement saying the North Korean government is responsible for the cyber attack on Sony Pictures.

PEREZ: Right. That's been the dispute behind the scenes, Wolf, frankly among U.S. officials is whether or not to say definitively that it was North Korea. The question was, whether you can say we've determined that this was the work of people, we know who they are, whether you're going to say the words North Korea. And my sources tell me that they have determined that they have to do this.

You see now Sony has decided to cancel the distribution of this film, the opening of this film. And, you know, it's a major thing, because you're talking about U.S. freedom here, U.S. freedom of speech that is under attack basically from North Korea. BLITZER: Tom Fuentes, you're a former FBI assistant director. The

other day we were talking if the U.S. -- the cyber experts in the U.S. government were to determine it was a regime, a country like North Korea, you told our viewers that the U.S. would make that official. Wouldn't hedge any longer, maybe, possibly suspected, alleged or whatever, they would directly say who did it and now we're hearing from Evan they've made that conclusion, North Korea is responsible. So you're not going to be surprised when they name North Korea.

TOM FUENTES, CNN LAW ENFORCEMENT ANALYST: No. Not at all. The only question is when the timing occurs for naming a country like that is, whether it will interfere with tracking other hack attacks that they might have in progress or what the connections were world wide through various servers to initiate attacks. So that's the decision that you have in a case like this is do you take it down now or do you name names now, and maybe they start covering their tracks and find other things to do, or do you prolong the investigation long enough to be able to prevent this from happening to other companies?

PEREZ: Well, you know, they've been working on this for some time.

BLITZER: When you say they --

PEREZ: The FBI and U.S. government, every agency, intelligence agency, has been on this, Wolf, because this is a big deal. This is being handled by the Justice Department's National Security division, which tells you that this is a serious national security issue for the United States because these hackers would be part of -- likely part of a group called Bureau 121, which is a military unit that specializes in this thing. As you know, North Korea --


BLITZER: A military unit of North Korea?

PEREZ: Of North Korea. And this is not -- this is a country that doesn't have a lot of resources. They don't have a lot of money, but they're spending it on building basically cyber attackers who are previously had been specializing in attacks on South Korea. This is the first time we see this coming against an American company.

And, you know, the scary thing is, I've talked to people in the last couple of days about is, you know, if they can do this against a movie studio, imagine, imagine if they did this against a bank, a financial institution, a major financial institution against in the United States, what the repercussions would be.

BLITZER: Yes. And I know we spoke to the assistant attorney general for national security.

PEREZ: Right.

BLITZER: Here in THE SITUATION ROOM. He said boldly that if, in fact, this was a regime, a country, maybe 90 percent of all U.S. firms out there, U.S. companies out there are vulnerable to this kind of cyber attack. FUENTES: This is exactly the definition of asymmetrical threat. It

means that you have a country, they take a test missiles, they go 500 miles and go off course. He doesn't have enough nuclear weapons where he could threaten the United States or other major powers. But if he's got grade-one hackers and they can penetrate any computer network out there, then --

PEREZ: Right.

BLITZER: All right.

FUENTES: He puts in on par with a country like ours.

BLITZER: Jeffrey Toobin, if this is in fact the North Korean government responsible for the cyber attack, legally speaking, would this be seen as an act of war against the United States?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, I -- you know, act of war, we don't really declare war anymore in this country. We have individual congressional authorizations of the use of military force. And certainly there would be the possibility of some sort of military response if it would do any good. I mean, one of the problems with asymmetrical warfare is, you know, if this is somebody sitting at a computer terminal somewhere, a military response doesn't seem like it would do any good.

That's what it means to have this vast asymmetry between the very powerful United States and the weak North Korea, except for somebody with a computer.

BLITZER: What does it say to you, Peter -- Peter Beinart, that a top U.S. official at the State Department actually saw a rough cut of this film and really did not complain about it. Apparently had no objections. What does that say to you?

PETER BEINART, CNN POLITICAL COMMENTATOR: I think that's good. It's not the role of the United States government to be making judgments about movies. That's what freedom of expression is about. I'm sure this may well very be a stupid movie, it may to some be an offensive movie. When "South Park" made a movie that shows Saddam Hussein as Satan's gay lover, that was in pretty bad taste, as well.

The issue is that you can't capitulate to monstrous regimes. And this is a monstrous regime. This is a man who should be in front of The Hague in jail for the rest of his life for what he's done to his people. You can't capitulate when they try to use the same kind of thuggish tactics in which -- in their country that they -- that they're trying to use here.


TOOBIN: If I can just add to that.

BLITZER: Yes, go ahead.

TOOBIN: I mean, the lesson North Korea is going to learn from this experience is that these sorts of threats work. So the next time they don't like a newspaper story, they'll threaten a newspaper. And when they don't like a book, they'll threaten the publisher or they'll threaten an all-news cable network. And once you start capitulating, then it becomes very hard to stop. So I don't know if they made the right decision or not.

But the bar should be very high to give in to these sorts of demands. And they gave in here and it's a dark precedent.

BLITZER: All right. I want everybody to stand by. We're staying on top of the breaking news. You heard it from our justice reporter, Evan Perez, as early as tomorrow, the United States government, the Justice Department, the FBI is now expected to announce that North Korea is directly responsible for this cyber attack on Sony Pictures. The ramifications are enormous.

Much more of the breaking news right after this.