Return to Transcripts main page

Connect the World

Iran War Overshadows Countdown to Trump's China Visit; Iran War Looms Over High-stakes Talks Between Trump, Xi; Embattled British Pm Tells Cabinet He Will Not Resign; Syria Courts Billions in Investments to Rebuild Economy Post-Assad; Region Looks to Syria for Future Trade Routes to Avoid Hormuz. Aired 9-9:45a ET

Aired May 12, 2026 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[09:00:00]

(COMMERCIAL BREAK)

BECKY ANDERSON, CNN HOST, CONNECT THE WORLD: Right, a live look at the White House, where the U.S. President is prepping for his visit to Beijing.

He begins his trip in about five hours. The U.S. war with Iran will loom large over this trip. It is 09:00 a.m. in Washington.

It is 05:00 p.m. here in Abu Dhabi. From our Middle East programming headquarters, you're watching "Connect the World". We are also watching

Downing Street this hour, where it is 02:00 p.m. Will the British Prime Minister survive in the face of massive political pressure and cabinet

resignations?

Well, the stock market in New York opens about 30 minutes from now, we'll see how the markets react to the latest CPI data showing inflation

increasing in the United States outpacing wages. All right, well, all of those stories throughout the next two hours here on "Connect the World".

But we begin with a mystery in exclusive reporting debuting here on this show. A CNN investigation finds that a Russian cargo ship, likely carrying

two submarine nuclear reactors destined for North Korea sank in unexplained circumstances off the Coast of Spain. Here is Nick Paton Walsh's exclusive

report.

(BEGIN VIDEOTAPE)

NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT (voice- over): A mystery in the Mediterranean. The possible torpedoing of a Russian ship to stop the Kremlin handing submarine nuclear reactors to North Korea

begins in a quiet Spanish port.

WALSH: This really is the craziest of stories about a Russian shadow fleet ship that sank off the coast here, in the strangest of circumstances, whose

Russian Captain confessed to investigators here that it was carrying two nuclear reactors, possibly for a submarine headed for an unknown

destination, the wreckage of all of which the Russian military spent a huge amount of time and effort destroying.

WALSH (voice-over): The incident is shrouded in silence, but concerns the most serious of issues, weapons proliferation, between two nuclear powers

and force being used to stop it. The Ursa Major shift loaded up near St. Petersburg in early December 2024 on paper, bound for Vladivostok with a

cargo of two huge cranes and over 100 empty containers.

It made another stop loading two large manhole covers. You can see them in blue here, along with two white pill shaped objects which will later prove

important, it set sail a shadow fleet ship used by Russia in Syria. The Portuguese Navy followed it from above. You can see the blue covers here

until just before it ran into trouble in Spanish waters.

WALSH: It was way further out to sea when the Ursa Major on the 22nd of December 2024 suddenly slowed. And Spanish rescuers noticed this, and they

radioed to ask if anything was wrong. The ship insisted it was fine and could deal with the situation.

WALSH (voice-over): But about 24 hours later, it made a sharp deviation and issued an urgent call for help. The boat was listing this video shows

filmed from a nearby tanker, but probably not going to sink too fast. The captain of the ship later told investigators he'd seen a 50 centimeter by

50-centimeter hole in the hull, the damaged metal facing inwards.

A source close to the investigation said the captain said it had been followed by three explosions on the starboard side of the boat, killing two

of his crew.

WALSH: So, the Russian military arrive in force, and they tell everyone to stay two nautical miles away from their ship, the Ursa Major. But the

Spanish know they need to conduct rescue operations, so they send this ship to pick up 14 Russian survivors who were brought back here, and that

includes the Russian Captain, who, it seems, starts to help investigators piece together some of what's happened.

But it's hours later that day that the mood changes over the Ursa Major ship and the Russian military fire flares over it, and then a series of

explosions follow, which Spanish seismic sensors picked up and they send the ship to the seabed floor.

WALSH (voice-over): Moscow demanded their crew back too fast, but it didn't happen immediately.

WALSH: Spanish rescuers brought the 14 Russian surviving crew to this hotel, and it's here where the Russian captain started telling

investigators key information. Now there's been this silence from the Spanish government about this incident, but they recently released this

statement, confirming that the Russian Captain confessed here to investigators his ship was carrying two nuclear reactors.

[09:05:00]

Probably meant for submarine use, and he also said he simply wasn't sure if those reactors had fuel in them.

WALSH (voice-over): There's no evidence of any contamination. The captain also told investigators he thought he would not stop first at Vladivostok,

but instead be told to divert to the North Korean port of Rason, according to the investigation source, that could explain why the extra cranes were

needed to help lift the reactor safely.

Russia was in North Korea's debt at that time, Kim Jong Un had, two months earlier, sent troops to help Russia's invasion of Ukraine, leaving analysts

curious as to what the Kremlin had given him in return. In December 2025, North Korea would claim to have built this, their first nuclear powered

submarine.

The Spanish investigation surmised a likely reactor would be this, the VM- 4SG shown in a Russian submarine here on state TV. Its dimensions are not public, but CNN analysis shows reactor vessels match the shape of at least

one of the white objects seen in St. Petersburg's container port on December the 4th, both gone by December the 11th when the ship had left.

MIKE PLUNKETT, SENIOR NAVAL PLATFORMS ANALYST, JANES: If these reactors have come out of de commission submarines, then they will be radioactive,

although obviously not as much as if they were fully loaded with fuel.

WALSH: How incredibly rare is this kind of transfer of technology? This is quite serious stuff, right?

PLUNKETT: It's not something that's undertaken likely, and it's only something that's ever done between very close allies.

WALSH: So, it's a major move by Moscow to do this.

PLUNKETT: Absolutely, very, very --

WALSH: Troubling?

PLUNKETT: Potentially, yes, particularly if you're South Korea.

WALSH: Everything may have been on the bottom of the sea, but the Russians weren't done yet, and according to a source familiar with the

investigation, about a week after the incident, a Russian research vessel called the Yantar linked in the past to all sorts of allegations against

Moscow sat over the wreckage for about five days, and four more explosions followed.

Possibly the Russians destroying what was left of the wreckage.

WALSH (voice-over): In the months after, the U.S. may have shown interest in the site twice, sending a rare WC 135R Constant Phoenix, usually

secretly sniffing out traces of nuclear activity in Russia's Arctic or over Iran, over the path of the Ursa Major weaving low at 5000 feet.

One had flown a similar route 13 months earlier, perhaps suggesting its routine. The aircraft's U.S. base declined to provide any details. Spanish

lawmakers have urgently sought answers, but got few.

JUAN ANTONIO ROJAS MANRIQUE, SPANISH OPPOSITION POLITICIAN: When someone doesn't clearly and fully provide the information that you request, you at

least suspect that they are hiding something, of course. We have been told that the black box sank with the vessel and is at a depth of 2,500m and

that due to the high risk, the operation to recover it is impossible.

I think someone has the black box, but we don't know whether it's Spain, or the Russians themselves, who have located it.

WALSH (voice-over): So why did the ship sink? The Spanish investigation said the first impact was likely from a projectile called a super

cavitating torpedo. The -- in front of itself to reach very high speed. Others point to something simpler.

WALSH: The hole in the hole that the captain talked about half a meter by half a meter.

PLUNKETT: Yeah.

WALSH: What could make something like that?

PLUNKETT: From the description I've seen the description you've given that hole to me, sounds like a limpet mine. It sounds like a shaped charge

explosive that was placed against the hole by somebody or something and detonated.

WALSH (voice-over): The Russian owners immediately called the sinking a targeted terrorist attack. They, the Russian, Spanish and British

militaries did not reply to a request for comment, and the Pentagon declined to. There are a few Western militaries operating there capable of

noticing tracking and stopping a cargo like this all sides.

It seems happy for this secret to stay on the sea floor. Nick Paton Walsh, CNN, Cartagena, Spain.

(END VIDEOTAPE)

ANDERSON: And you can find details of this story, including all the evidence that the CNN team found leading our website right now and stay

with us next hour when Nick will join us to answer questions about his reporting. Well, U.S. President Donald Trump set to leave for Beijing and

his summit with President Xi Jinping in the coming hours, with the Iran war looming large.

He says the ceasefire now in its second month, of course, may not last much longer.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES OF AMERICA: I would say the ceasefire is on massive life support, where the doctor walks in and says,

sir, your loved one has approximately a 1 percent chance of living.

(END VIDEO CLIP)

[09:10:00]

ANDERSON: Well, he spoke after Iran delivered it's a counter proposal to a U.S. peace plan that Mr. Trump had called a piece of garbage that being the

Iran counter proposal. Jennifer Hansler is at the State Department. Jennifer, according to your reporting, just how close is Mr. Trump to

relaunching the war?

JENNIFER HANSLER, CNN STATE DEPARTMENT REPORTER: Well Becky, according to sources who spoke with Alayna Treene and myself, he is getting closer than

he has been in weeks to making that decision to restart military operations, but he has not yet taken that decision.

Now, according to these sources, there are various camps within the administration that are presenting different recommendations to the

president, some, including those within the Pentagon, are pushing for a more aggressive, kinetic approach here, including targeted strikes.

However, others are saying that diplomacy should be given a fair shake here. Now, of course, the president has not been shy about airing his

frustrations about the course of these talks, including in those comments we just heard, he also called that Iranian response unacceptable.

Now, according to a regional official that I spoke with, there is a group of regional countries, as well as Pakistan, that is trying to convey to the

Iranians that they should take this very seriously, that this could be the last chance for diplomacy, given Trump's mounting frustration.

However, according to this official, it's not clear that Iran is taking those threats seriously. This official noted that, of course, the two sides

are operating on very different timelines and tolerances for how long this conflict could go on. Iran, of course, has withstood decades of economic

pressure.

So, this mounting pressure campaign by the administration to impose sanctions is likely not going to be felt by the regime any time soon, in a

way that would drive them to the table, according to this official. Now, the president met with his national security team yesterday.

However, it is unlikely that he is going to make any sort of significant decision on the way forward before he leaves for Beijing later today,

Becky.

ANDERSON: And an Iranian spokesman and advisor to the supreme leader, apparently trolling the president ahead of that Beijing trip saying, and I

quote here, Mr. Trump, never imagined that by taking advantage of Iran's current calm, you will be able to enter Beijing triumphantly.

What are you hearing from the White House about how, what is expected from this Beijing trip, and how Iran might sort of feed into the narrative at

this point?

HANSLER: Well, according to an administration official this weekend, they are going to bring pressure on Beijing when it comes to the war. Of course,

they could serve as an effective interlocutor with the Iranians to try to drive them to the table, and a former senior official said that it is

almost inevitable that Trump will be asking Xi Jinping for help on next steps.

Now, of course, this is likely to overshadow a lot of this trip. Trump, of course, wanted this conflict to be wrapped up already before he went on

this trip, he already had to postpone it once due to the war. Another former official said this is likely to suck up a lot of the social capital

that he would have wanted to go in and speak to Xi Jinping about other issues.

However, this is, of course, the most pressing one on the table. Now, in the lead up to his departure later today, we have seen the administration

imposing sanctions on Chinese entities and individuals for what they say is support for the Iranian regime. China has been helping Iran when it comes

to revenue and dual use items.

CNN also reported last month, if you remember, that intelligence was indicating that China was preparing to potentially ship defensive materials

to Iran. So, there is going to be a lot to discuss here, and a lot to watch in terms of how much the president does push Xi Jinping to try to bring

Iran to the negotiating table amidst all of these other deals that he is saying he wants to make while he's there, Becky.

ANDERSON: Yeah, absolutely. All right, well, we will continue to monitor what we hear out of this trip and report it back to our viewers here on

CNN. Thank you, Jennifer. Defiance, on Downing Street and battled Prime Minister Keir Starmer says that he is staying in his job despite major

calls for resignation from within his own Labor Party.

Mr. Starmer told a Cabinet meeting on in Downing Street today, that he will, quote, get on with governing despite the party's poor showing in what

were local elections last week.

[09:15:00]

There was a flurry of activity outside number 10 earlier as many ministers pledged support for Starmer. Three though have quit demanding new

leadership. CNN's Clare Sebastian has been watching that action from Downing Street, and she joins me there now. Just what more did Prime

Minister Keir Starmer have to say today?

And what sort of pressure Do we believe he is under now, given that we have seen the resignation of at least or three Cabinet members at this point and

maybe more to come, who knows?

CLARE SEBASTIAN, CNN CORRESPONDENT: Yeah, look, Becky, I think it's clear that this rebellion that started to snowball over the course of Monday,

despite that big speech from Keir Starmer that was supposed to be a moment of reset, has continued today with these resignations now of three junior

ministers from their positions in government.

But what we've seen alongside that is a coordinated fight back of sorts. While the Cabinet meeting in 10 Downing Street behind me was underway this

morning. We got these comments that came out from Keir Starmer. I want to read you a portion of that. He said, the Labor Party has a process for

challenging a leader, and that has not been triggered.

And he continued, the country expects us to get on with governing. That is what I'm doing and what we must do as a cabinet. So, he is making clear, as

he did on Monday, he has done all along that he is not going anywhere. But we are hearing from some of these junior ministers that have now come out

and resigned this afternoon.

Jess Phillips, who is the safeguarding minister, has come out, and there's some interesting parts of her statement. I want to read some of that as

well, saying I think you're a good man, fundamentally, who cares about the right things. However, I have seen firsthand how that is not enough.

The desire to have an argument means we rarely make an argument, leaving opportunities for progress stalled and delayed. She goes on to point out,

of course, labor governments come around rarely. That is the constant refrain, she says at the moment, but I'm not sure she goes on that we are

grasping this rare opportunity with the gusto that's needed.

So I think this speaks to a potential culture, and this, again, is just the voice of one junior minister within the Keir Starmer Administration. And

one that is being felt now, I think, around the country, and which showed up in those results of the local elections last week, that they are simply

not being bold enough, that the change that was promised has not started to materialize quick enough.

And I think despite this coordinated fight back, that statement from the prime minister. Ministers then came out of cabinet afterwards, several of

them to show their support say that they need unity and stability. Despite that, the questions that he's facing have not been answered.

This rebellion continues to progress. The key challenges to him, it should be noted, have been relatively silent today. And all that less than 24

hours before this major set piece event in the British political calendar, the State Opening of Parliament and the king's speech, which is supposed to

lay out the legislative priorities of this government.

It is still, I think, Becky, a critical and somewhat precarious moment for the prime minister.

ANDERSON: It's fascinating, isn't it? It's good to have you, and we will continue to cover this. We may not have seen the last of the story today.

Thank you, Clare. Up next, and before I get you to the break, folks, I do want to just have a little look at the British pound is doing on the dollar

and on the euro, down against both currencies, trading at 1.35 on the dollar at 1.15 on the euro.

Right. We're going to take a look at the Arab country that could be key to this region's economic future after the Iran war, Syria, I want to get you

to Damascus, up next.

(COMMERCIAL BREAK)

[09:20:00]

ANDERSON: Amid the fallout of the Iran war, one of the most important economic stories in this region is playing out in Syria, after the lifting

of U.S. sanctions last year. The geo strategic country is now at the heart of billions of dollars in regional and Western investment pledges to

rebuild after the fall of Bashar Al-Assad, and that has been on full display this week.

Syrian officials were in Brussels on Monday as the EU agreed to restore, fully restore trade ties. While in Damascus, a UAE-Syria Investment Forum

is now in its second day. It's the first time that Abu Dhabi, which had been skeptical of the new government, has sent a delegation of officials

and business leaders there.

I want to bring in Mahmoud Toron from Damascus now. He is an Economic Advisor to the Syrian government. He spends much of his time in meetings

like this. Mahmoud, thanks for giving us your time. I know things are very busy there of late. Syrians struggling with soaring food and gas prices, of

course, made worse by the Iran war.

So, what's the economic picture for the country right now? And how far along are investments at a time when, frankly, people desperately need some

relief and a sort of vision for the future?

MAHMOUD TORON, ECONOMIC ADVISER TO SYRIAN GOVERNMENT: Look, thanks, Becky. I've watched your show for years. I never thought that I would be in

Damascus talking to you and talking about Syria so that, by itself, is huge achievement for us now.

Let me get straight to the point. I think the best way to describe Syria today is that it's a nation in rebirth, and such a phenomenon is nothing

that can happen, and we've not seen that in modern history. And when we do say that we actually mean every single word of it, because we've inherited

a country that is in complete ruin, and everything needs to be built back from scratch, whether it's economically, infrastructure, politically,

society, you name it.

About the situation right now we are facing, yes, we are facing very difficult economic challenges. The economy has not yet restarted. In

economic fundamental terms, the poverty is really causing a major challenge for the government. But did we cross a significant path towards

restabilizing the country?

Yes, we did, during a very short period of time, yes, we were able to not going to say, sign contracts, but pave the way for infrastructure

reconstruction programs to the country. We do need critical infrastructure investments. We were able to establish a very important internet backbone

contract with STC, the Saudi firm.

In terms of ports, we have the two major ports in Syria, which are now under major operators. We have DP World in charge of Tartus Port. We have

CMA CGM in charge of Latakia port. We have a second while operator now undergoing a major optioning operation under international best practices.

And that's just going to pave the way for more and more activities on the ground. Now, just a quick word on international organizations as well. The

World Bank and the IMF has been significantly involved in Syria. We were able to succeed, to succeed in achieving around $500 million of grant

projects from the World Bank.

More is yet to come in the pipeline. The IMF has conducted several missions in Syria. They signaled very important messages. One of them was paving the

way for Article four consultation. So that's by itself, in one year, could be considered as a major achievement for the country.

ANDERSON: So --

TORON: Yes.

[09:25:00]

ANDERSON: And that I get and you have listed a significant amount of inbound investment, much of which underscores the interest of the Gulf

countries, Saudi, Qatar, the UAE, where I am, in getting involved in rebuilding, they see Syria as a massive investment opportunity.

I want to look just elsewhere for a moment and get a sense from you about the appetite from, for example, Europe and the U.S. Visa and MasterCard

have just resumed credit card payments in Syria. That was a hugely symbolic moment for a country that's been cut off from the global financial system

and relying on cash for 15 years.

So, what appetite on top of that are you seeing from, for example, American companies to come to Syria. What's Washington telling you at this point?

TORON: Well, let me start with U.S. angle. We were in Washington recently the Spring meetings, and we've had in seven days, we've had 105 meetings at

Washington, with all sort of companies, organizations, financial institutions. The sentiment in Washington today is that Syria is an

important country.

Syria is a potential partner country, and the fact is, we've been listening to this word multiple times in Washington, our Syrian partners, and that by

itself, is a major headline. Now, there is a last and final barrier that is preventing U.S. companies from officially engaging in Syria, which is the

SST, the State's Sponsor of Terrorism Act.

ANDERSON: Yeah.

TORON: However, that has not prevented U.S. companies from making all necessary preparations to engage in Syria as soon as this act is officially

lifted. So, what they are anticipating is that very soon, in initial period of time, this act will be lifted, and will lead that to politics and

diplomacy.

But as soon as it is lifted, major U.S. companies are fully ready to engage next day in Syria, if I have to go back to Europe as well.

ANDERSON: That's fascinating.

TORON: For Europe, Syria isn't strategic.

ANDERSON: Yeah, go ahead.

TORON: For Europe, Syria is a strategic country, and they do realize how strategic it is, especially when it comes to trade and energy and now data

corridors, and that is being strongly considered by our European partners and some --

ANDERSON: So, I want to look at that. Let me just stop you there for a moment. Yeah, let me just stop you there, because this region, as it looks

to its long-term future, and I talk about this region as a whole, you know, the Gulf and Middle East, there is a real push to rethink trade corridors

away, for example, from the Strait of Hormuz and towards land riots.

Syria sits right at the heart of that. With support from Saudi Arabia. I know that Syria is working to install new fiber optic cables in the

SilkLink project, and it's part of a railway project with Saudi Arabia, Turkey and Jordan. Can we just speak, just briefly to those efforts and

their significance?

I mean, you brought up how important is to Europe that Syria sits, you know, at the sort of sweet spot of these trade links through this region

where I am.

TORON: I'll tell you what's happening on the ground right now as we speak. SilkLink project, which started with an initial valuation of $300 million

at the time of signing, has been concluded in the excess of $1.1 billion. This is the first of its kind, regional connectivity project initiated by

Syrians.

What it actually does? It provides data traffic by bypassing the Red Sea and the Yemen and the Houthis risk, which is a major national security risk

for the Arabian Gulf countries. But in terms of what it can do. Just imagine that, Becky, for a second. You've got a surgeon sitting in the

United States operating on a patient in a robotic surgery anywhere in the Middle East.

This is now possible because of the latency that this project provides for the -- for the reason and this takes the region to completely different

levels when it comes to data and region and connectivity and communications.

ANDERSON: Got it.

TORON: Now on the other side, look what happened in Iraq, for example. Today, Syria is the major transit route for the export of Iraqi crude oil.

We've got Iraqi crude oil and petroleum products flowing from Basra all the way to Baniyas' port terminal, loading terminal, and then export it.

We've received significant requests from companies to invest in storage infrastructure and loading terminals because they spot is going to

continue.

[09:30:00]

And let me finish by that we have designed right the data flow, the data traffic flow, west, east. Spot is going to continue. And let me finish by

that we have designed.

ANDERSON: Right.

TORON: The data flow, the data traffic flow, west, east, in order to align with the pipeline network that connects Iraq in order to secure data and

energy security in the country.

ANDERSON: Got it. And I've got to get the bell in. That is the bell on Wall Street. It's been fantastic having you on. You provided some real insight

for us on what is going on in Syria and how that impacts, you know, not just Syria, but the region and beyond, and why it is that so many people

are intent on investing?

Thank you for that. It's the Walt Disney Company CEO just tomorrow ringing the bell to start the trading day on Wall Street. After this short break,

we're going to see how investors are reacting to an uptick in inflation. And that is the result that's coming out of the CPI latest data, what that

means and what may happen next, after this.

(COMMERCIAL BREAK)

ANDERSON: Right. Wall Street investors and others sifting through the latest U.S. economic numbers. The annual rate of inflation rose to 3.8

percent in April in the States, prices up more than half a percent on a monthly basis. Let's see how Wall Street is reacting these three main

indices.

Of course, the ones we tend to look at, the DOW, the NASDAQ and the S&P, all trading slightly lower today. Oil prices are climbing after U.S.

President Donald Trump called Iran's latest counter proposal to end the war, quoting now a piece of garbage. Tehran reportedly wants to be in

control of the Strait of Hormuz.

Here in the UAE, a major gas facility says it won't return to full capacity until 2027 processing giant ad not gas, says Iranian strikes have knocked

out about 40 percent of its production. One of the world's -- even as prices rise, one of the world's largest private market firms says investors

are still focusing on opportunity over fear.

I spoke to the CEO of Partners Capital, which oversees around 75 billion in assets. Arjun Raghavan, who says geopolitical risk, artificial intelligence

and private credit are now the three key pillars slash risks shaping the global economy.

[09:35:00]

Have a listen.

(BEGIN VIDEOTAPE)

ARJUN RAGHAVAN, CEO OF PARTNERS CAPITAL: Geopolitical risk is absolutely real. We think it's heightened in this environment relative to maybe three

months ago or four months ago before the conflict started. We thought inflation was always going to be a sticky issue, but what's happened here

is clearly meant that there's a stagflationary shock across the world.

Right, so, inflation is going to be stickier. There's going to be a hit on growth, which essentially means that you need portfolios to be a lot more

resilient than you thought they would need it to be three, four months ago, because growth is not guaranteed. So that's the biggest issue we're seeing.

But we're always very diversified. We're always building for multiple scenarios, and so we think that's even more important going forward.

ANDERSON: In that context, can I just get your view on private credit at this point? Jamie Dimon, the Chairman of JP Morgan, famously, recently

warned about credit cockroaches. When you see one cockroach, there's probably more. You know, a metaphor to describe hidden, looming defaults

within the near $2 trillion private credit markets.

How are you thinking about private credit? And do you share his concern, or do you believe that this is a market being unfairly targeted at present?

RAGHAVAN: I think there are two separate issues in private credit. Number one is fundamental, and the number two is technical, right? So, if you look

at the fundamental issues, there are some real issues in private credit. There are some vintages, 2020, 2021, in particular, where the credit

issuance was quite weak, in the sense that it was not done with proper when I say weak, I mean weak covenants.

And therefore, I think those vintages are going to take hits. We don't have that exposure because we were operating a much sort of different end of the

spectrum. We don't do the big syndicated parts of the market which were the biggest distrust is going to be. So that's a fundamental issue.

And I think there's no hiding from the fact that you're going to see some defaults there. But then there's a technical issue, which is what people

are also worried about, which is down to these BDCs and evergreen structures, where there's a lot of capital that's gone in, assuming it was

going to be liquid.

But the reality is that they have gates, and they're not as liquid as people expect them to be, but I think they were potentially miss sold to

certain types of retail investors, and so that, we think, is a technical issue, but it might create some distress selling, but it doesn't actually

mean that the defaults are going to spike in that end.

ANDERSON: AI represents a strategic foundation first, economic transformation. For this country, the UAE, and for other countries around

this region, you will see this as well from a sort of global perspective, what's the risk, reward appetite for AI investment with your clients

globally and increasingly with the new office here locally?

RAGHAVAN: The appetite is strong. The danger, I think here, there's two dangers to think about. Danger number one is, it's a transformative

technology, but there's going to be winners and losers, so it's not what you'd call a beta trade. You can't just go and buy the AI theme.

You need to know what you're doing in that space, because definitely going to be those that do well, those that don't do well. So, the first thing is

passing through that and making sure you're investing the right AI companies. And the second aspect is something called factor risk.

So, if you're not careful, you're going to have AI sitting everywhere in the portfolio. You're going to have it sitting in private credit, because

you're backing data centers, you're going to have to have it sitting in liquid credit, because a lot of the investment grade bonds are actually

backing AI themes.

You're going to have in public credit. If you invest in the S&P, you're essentially getting a huge amount of exposure to seven or eight AI stocks.

So, you can have it sitting everywhere in the portfolio, and that's dangerous, because then you haven't got diversification, you haven't got a

resilient portfolio.

So, we say, embrace it. By all means, it needs to be part of the portfolio, because this is going to transform the world, but you've got to be --

you've got to calibrate how much you're doing, and you've got to know where you're investing within that.

(END VIDEOTAPE)

ANDERSON: And despite weeks of regional conflict and growing geopolitical tensions, Partners Capital says it remains fully committed to the Gulf,

opening a new office here in Abu Dhabi, and describing the UAE as a strategic global hub.

(BEGIN VIDEOTAPE)

RAGHAVAN: We think the UAE is a critically important player in the globe. In particular, we think it's a strategic hub. We've been watching how the

UAE has developed the region over the last 10 years or so. And really, we think of it as a bridge between the global north and the global south,

right?

And so having a presence here to serve the pools of capital, we think, is a very important thing to do.

ANDERSON: Given what has been going on in the region over the past eight or so weeks, and that we don't have a resolution to that, no concerns.

[09:40:00]

I mean, when you look at the Middle East, look at the conflict its impact on the global economy at the moment, concerns about inflation. I mean,

there's a geopolitical risk out there, of course, isn't there? Doesn't affect the decision?

RAGHAVAN: Absolutely not, because the key thing is to distinguish between what we consider volatility and what we consider long term vulnerability

from what the policy makers have done in the Middle East, particularly in the UAE, over the last decade, they've really sort of invested in creating

a strategic hub where it's open for business, there's rule of law, and it's very attractive for global talent and global capital to come and be based

here.

So, we think of it as a blip. We think of it as volatility, but we don't think it changes. We're absolutely sure it doesn't change. We want to --

where we want to go from a longer-term perspective.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ANDERSON: Don Riddell, now with all the NBA news and a lot more for you on "World Sport" that is up after this short break. I'm back with more.

"Connect the World" in about 20 minutes time.

(COMMERCIAL BREAK)

[09:45:00]

(WORLD SPORT)

END