Renault comes downstairs and tells Carl the waiter to make sure that Major Strasser gets the best table in the saloon. He then installs two guards at every door. Rick descends soon afterwards, continuing his pattern of conveniently not being present during heavily political conversations. Meanwhile, Renault joins Major Strasser, who orders champagne and caviar for the table. They prepare for the real-life drama that is about to unfold in front of them: The murderer of the German couriers is about to be arrested publicly, here at Rick's.
In the next shot, Officers surround Ugarte while he plays blackjack. Ugarte is shot from a high angle, making him look small and helpless, with the harsh lighting betraying his anxiety. At this point, he is certainly aware of his fate, and Ugarte asks the officers if he can cash in his chips. The officers follow Ugarte to the cashier's cage, which casts its lined shadows on his face, a sign of what is to come. As soon as he has his cash in hand, Ugarte bolts out the doors. The camera stays with him as he runs out of the cafe, capturing the moment when his panic turns into desperation. Ugarte pulls out a gun, and fires shots inside the club. Meanwhile, Major Strasser is impressed by this public spectacle.
Ugarte scurries back inside the cafe and pleads with Rick to help him. Rick refuses, saying that Ugarte will never escape arrest now. Rick keeps his hand right under Ugarte's neck, making sure the man keeps his distance, but also reminding the audience that Ugarte's goose is most certainly cooked. Rick steps out of the frame and lets the two officers descend upon Ugarte. They drag Ugarte out of the club, who is still screaming Rick's name. When a patron comments on Rick's display of hard-heartedness, Rick repeats, "I stick my neck out for nobody." He apologizes for the disturbance and tells his customers to sit down and enjoy themselves.
In the next shot, the scene inside Rick's has returned to normal. Renault introduces Rick to Major Strasser and Herr Heinz, both representatives of the Third Reich, and asks Rick to join them (but per his policy, Rick does not drink with the men). Major Strasser is interested in Rick's background. He already has a dossier on Rick and asks him some particularly pointed questions. We learn that Rick was born in New York City, is 37 years old, and came to Casablanca because he was fleeing Paris after the Nazis occupied it. Rick claims that he has no emotional connection to Paris, but the high contrast lighting, depth of field, and his isolation in the frame suggest internal conflict. We also learn that Rick cannot return to the United States for some reason and that he also has a record in Paris. Major Strasser keeps dangling emotional bait in front of Rick, trying to get a reaction out of him, but Rick remains as neutral as ever.
When Major Strasser brings up the Nazi's search for Victor Laszlo, Rick claims to understand the hunt from the perspective of "both the fox and the hound". He remains detached from the issue, claiming that he doesn't care if Laszlo comes to Casablanca. We learn that Laszlo is wanted because he was printing scandal sheets in newspapers in Prague, even after the Nazis invaded Hungary. He has escaped capture by the Nazis three times. Rick gets up from the Germans' table. Although Renault tells Major Strasser he has no reason to worry about Rick, Major Strasser responds with a loaded "perhaps".
In the next shot, a man enters with his female companion. They are both dressed in light colors. The camera tracks with them as they briefly disappear behind an ornate wooden screen before reaching the maitre'd. The man introduces himself as Victor Laszlo. However, it is Laszlo's female companion who invokes a distressed reaction in Sam. We know that this woman represents something significant, because Sam is shot in close-up as he shakes his head in disbelief. After Laszlo and the woman sit down, Victor comments that he doesn't see anyone of Ugarte's description. Clearly, these are the two individuals who had arranged to purchase Ugarte's stolen papers. A pointy man approaches Victor and Ilsa's table and tries to sell them his ring. Victor tries to dismiss him but then sees that the man's ring bears the Cross of Lorraine, signaling that he is part of the French Resistance. Now, Laszlo is interested. The ring-bearer introduces himself as Berger, a Norwegian who is there to assist Laszlo.
Renault appears behind Laszlo in a two-shot, framed so that the audience can see Renault even though Laszlo cannot. Renault introduces himself and welcomes Laszlo to Casablanca. Laszlo responds courteously, introducing his companion, who we learn is named Ilsa Lund. Cut to a medium close-up of Ilsa, with soft lighting and a shallow depth of field. Ilsa reveals that she knows Sam from Paris, and asks about Rick. Renault describes Rick as the kind of man that any woman would fall in love with, after which the film cuts to a tighter close-up of Ilsa as she lowers her eyes. Then, Major Strasser comes over but he does not sit down. Laszlo does not mince his words and proclaims that he is a Czechoslovakian despite the Nazi invasion of his country. He stands to look Major Strasser in the eye, and they plan to meet the next day at Renault's office.
Ilsa says she is afraid for Victor's safety, but he comforts her. Cut to a female singer on stage playing the guitar and singing a melancholy French song. While she sings, the film cuts between a two-shot of Laszlo and Ilsa, where Laszlo is looking around suspiciously, a shadowy medium shot of Berger waiting anxiously at the bar, and Sam, looking at Ilsa nervously. Lazlo goes to speak to Berger, and finds out that Ugarte has been apprehended by the French officers. Berger invites Laszlo to a meeting of an underground organization the following night. Meanwhile, Ilsa asks Sam to play some of the "old songs". She asks after Rick again, and Sam implores her to leave Rick alone because she is bad for him. Ilsa begs Sam to play "As Time Goes By." As Sam sings, the camera cuts in close and stays on Ilsa, her eyes heavy with emotion.
Cut to the door opening and Rick walking in briskly. He is angry that Sam is playing the song he had asked him never to play. At that moment, Rick sees Ilsa. They lock eyes in alternating close-ups. This time, Rick's close-up is softer, with less contrast in the lighting. They clearly know each other already. Victor Laszlo invites Rick to join them for a drink, and Rick, out of character, agrees. Renault is shocked, and sits down as well. Renault tries to prod Rick and Ilsa for information about their obvious history together. For the first time, Rick begins to reveal specific details about his life. Rick and Ilsa last saw each other the day the Germans marched into Paris. He even remembers the blue dress she was wearing, and has since put away.
In this section, there is a major change that occurs in Rick. There is a marked contrast in the way he behaves before and after Ilsa's arrival at Rick's Café Americain. Rick is seemingly impervious to Ugarte's plight when he is being apprehended. He underlines his policy of not "sticking his neck out" for anyone, and doesn't flinch even though Ugarte is wailing his name as he is dragged off to jail. However, from the moment that Rick sees Ilsa, everything changes. He starts to crack, and emotion begins to seep out of him. This is clear from the fact that Rick not only breaks his precedent by drinking with Ilsa and Laszlo, his customers, but he also pays for their drinks. By doing this, Rick throws aside his affirmations of neutrality and detachment. Renault serves as a Greek Chorus here, tipping off the audience to the subtext of Ricks' strange behavior, as he is supported by the beautified close-ups and longing glances between Rick and Ilsa. Their relationship is to become the backbone of the rest of the film.
Syd Field pinpoints this section as one of the film's crucial turning points, and part of what makes the character of Rick Blaine so powerful in American film history. "No matter what's in Rick's heart, it's his quality of character, his action, that drives the story line forward." Even though Rick does not help Ugarte avoid capture (to be fair, there was little Rick could have done) he does let Ugarte into the bar and agrees to keep his transit papers, even though it could be risky. Despite Rick's vehemence in proclaiming his neutrality, this action hints at his anti-Nazi leanings, which will become more prominent as the film goes on.
The key to Rick's transition is that even when he is detached, he still does small things that make him sympathetic. For example, when Emil the Croupier apologizes for allowing a patron to win 20,000 Francs, Rick barely reacts and actually comforts Emil while they go inside to retrieve the money from the safe. Similarly, when Ferrari offers to buy Sam, Rick responds, "I don't buy or sell human beings". Rick may turn a blind eye to the illegal dealings that happen inside his cafe (as Renault indicates), but he does appear to have an internal moral compass. One of the screenwriters of the film, Howard Koch, who was brought in to revise an existing screenplay, suggested that it would strengthen the character of Rick if "through-out the picture, we see evidences of his humanity, which he does his best to cover up" (Harjean 56). It was Koch who suggested the scene where Renault mentions Rick's background of rooting for political underdogs, indicating that "the cynical American is underneath, a sentimentalist" (Harjean 56).
This section also serves to lay the foundations for the interpersonal and political tensions that will escalate throughout the rest of the film. Curtiz does not rely solely on the script for this purpose, but also utilizes his visual tools, like framing, editing, and lighting, to create the uneasy atmosphere. For instance, after Rick has gotten up from Major Strasser's table, insisting that politics are none of his business, Renault reassures the Major that he needn't worry about Rick doing anything to undermine the power of the Third Reich in Casablanca. The camera tracks in towards Major Strasser as he replies, "perhaps." This indicates that Major Strasser has not fully accepted Rick's proclamations of neutrality, paving the way for their political conflict later on. Later, when Ilsa and Victor Laszlo enter Rick's, Curtiz makes a point to highlight Sam's reaction to seeing Ilsa. The camera tracks to follow the couple, but lingers on Sam, cutting back to Ilsa's nervous expression, and then back to Sam as he shakes his head with worry. Curtiz uses editing to emphasize the importance of Ilsa's arrival at Rick's and presage the difficulties this sets in motion.
When Renault appears behind Victor Laszlo, his shadow is projected on the wall above Laszlo's table before we see the man looming over Victor's shoulder, and before Victor himself knows Renault is there. This approach represents the power dynamic that is emerging here between Laszlo and the Vichy Captain. However, Renault does sit down with Laszlo and Ilsa and orders them a drink. Major Strasser stands above Laszlo, though. The staging and framing of this scene suggests that Renault is potentially amenable to compromise, but Major Strasser is unflappable. The tension between these men and Laszlo will come to a boiling point at the film's climax.
Finally, it is clear that Ilsa means something very important to Rick. She is lit softly and with a shallow depth of field, emphasizing her beauty and kindness. After her entrance, Curtiz chooses to present Rick's one-shots in a similar way, in contrast to the harsh lighting that defined his earlier scenes. When Rick says goodbye to Ilsa and Laszlo, Ilsa and Laszlo are in a frame together, and then the film cuts to a shot of Rick saying goodbye, but it is over Ilsa's shoulder. Ilsa is present in both sides of this conversation, foreshadowing the love triangle that will emerge between these three individuals later in the film. Rick's life is about to get complicated.