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First Move with Julia Chatterley
Youth Unemployment Hit a record High of 19.3 Percent in June; Biden Heads to Saudi Arabia as WH braces for MBS Meeting; Second Quarter Growth the Slowest Since 2020; Biden Wants Oil Exporters to Supply more Crude; Italy's President Rejects PM Draghi's Resignation; Airlines Struggles as Summer Travel Woes Intensify. Aired 9-10a ET
Aired July 15, 2022 - 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, FIRST MOVE: You're watching CNN. Welcome to 'First Move'. I'm Becky Anderson in Jeddah, Saudi Arabia. President Biden
leaving Israel and he is on his way here right now as he continues his Middle East trip. We'll bring you the very latest first though Julia
Chatterley is in New York, Julia?
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: Thanks, Becky. A whirlwind day another whirlwind day actually for President Biden and a worrisome new job
for everyone concerned we're headed for a global recession.
The world's second largest economy, China reporting surprisingly weak growth for the second quarter, we've also had big U.S. banking results
following yesterday's lead from JP Morgan and that means they looked pretty mixed.
And the U.S. consumer however, it remains a relative bright spot all the details coming up for now let me give you a look at what we're seeing for
the Wall Street pre market picture? Attempting a pre-market comeback after five days of losses for the DOW and for the S&P 500 helped along I think by
some soothing Federal Reserve peak and signs that the Central Bank not yet ready to hike by a 4 percentage point at the next meeting despite this
week's dismal read on inflation and all the wild speculation in that vein.
Meanwhile, U.S. retail sales rising 1 percent in June, a touch stronger than expected context as always, is key on these things. A lot of the gain
coming from higher gas prices there's no inflation adjustment on this numbers.
So if the prices are higher, it's going to look like more buying and a busy day on the earnings front two Citigroup results coming in at market
friendly but Wells Fargo disappointing unlike JP Morgan yesterday they're saying that are going to raise the amount of money that they hold in
reserve in case some of their lending and those loans go bad.
Now Europe, in the last Friday, fast lane shrugging off the resignation of Italian Prime Minister Mario Draghi; Draghi dragged back into the fold
after the president refused to let him go. I think outside of Italy never mind internally, there's recognition that now is not the time for
leadership change in one of Europe's most indebted nations amid COVID a pricing crisis and the risk of a winter without Russian gas.
We'll discuss later in the show but truly setting the tone today. China's data deluge Beijing reporting that its economy grew a mere four tenths of a
percent in the second quarter. That's way down from the almost 5 percent growth rate reported earlier this year in the first quarter and the weakest
quarter in fact, since the start of the COVID crisis.
The investor response well as you would expect negative. Chinese stocks finishing the week down more than 1.5 percent and heavier losses for the
HANG SENG. Selina Wang joins us now.
Selina I think we should go through some of the details because it's not just the growth report there are the contours within that too talk us
through it.
SELINA WANG, CNN CORRESPONDENT: Yes, Julia that 0.4 percent growth for the second quarter that is the weakest GDP growth since early 2020 when China's
economy was virtually at a standstill because of that initial COVID outbreak in Wuhan.
Now what this number reflects? It reflects those harsh COVID lockdowns in several major cities across China during this spring, including that brutal
two month lockdown in Shanghai which is of course China's major financial and shipping hubs so that had ripple effects across the country and across
the world.
But from here on out what investors are focusing on is the future and it's not looking like a smooth recovery because zero COVID it is here to stay
in. In fact, with this new, more contagious Omicron variant discovered in China.
Well, we are seeing more cities go into either partial or full lockdown. Even Shanghai now is seeing more targeted lockdowns, spreading more fears
of a wider lockdown, and all of that uncertainty and anxiety. Well, it's bad for consumer spending. It's bad for investor and business sentiment.
Now, if you dig into the numbers further, you notice that there are pressures on all fronts on the economy. There's self-inflicted pain from
zero COVID. There's a regulatory crackdown on the property sector on the technology sector as well and also social unrest growing from these bank
runs in Hunan Province.
And if you look at those property numbers will property investment fell more than 9 percent in June from a year earlier. And in recent days, we
have seen people in several cities across China basically refusing to make payments on mortgages for unfinished homes.
This comes as there have been more of these delayed and stalled projects because of a cash crunch. And the concern from economists is that if this
spreads, well, if threatens financial stability and could also create more social unrest, and the slower recovery.
The slower growths in China well it has implications for this fragile global economic recovery China this time around cannot be relied upon to be
the global growth engine to alleviate all of the pressures and the rest of the world, Julia?
CHATTERLEY: Yes, I mean, there's so many great points in there. Some of these things that they can adjust that they can be less harsh over whether
it's the crackdown in the property sector or the technology sector in some of the big giants there too but with zero COVID politically very difficult
as we've discussed many times to adjust. I think it was Nomura on zero COVID.
[09:05:00]
CHATTERLEY: There's around a 25 percent of China's GDP now contained in some form of lockdown or heightened control. That's up from 15 percent a
week earlier. A huge challenge, very quickly the other thing that stood out to me Selina, the youth unemployment rate and we always have to couch data
that comes from China, and this is what's the official data versus perhaps the reality on the ground 19.3 percent youth unemployment rate in China.
That's hugely worrying too surely?
WANG: That is a new high record, that number is absolutely staggering. And part of this reason why this number is so high is because of zero COVID
that hit the services sector, which is a big employment of young employer of young people.
Also the crackdown on the tech sector on the education sector they're also big employers of young people. So you've got more than 10 million college
graduates that have walked into this brutal rough jobs market.
And this youth unemployment number is concerning because it impacts skill building, it impacts productivity, and it can put pressure on the future
growth potential of an economy. And some experts have put it this way that what this number represents is that it means basically businesses are not
willing to hire new talent to put investment to train new people because of all these COVID anxieties, basically, it makes it a risk to invest in the
future.
CHATTERLEY: So many pressure points. Selina great to have you with us thank you for that context! And for more on this later this hour I'm joined by
Kevin Rudd, the President of the Asia Society and Former Australian Prime Minister. For now I'll hand it over to you Becky and I believe President
Biden is officially now on his way over to you in Jeddah.
ANDERSON: You are absolutely right, just taken off from Tel Aviv where in - on the first leg of his trip to Israel and the West Bank. He met with the
Palestinian Authority President Mahmud Abbas in Bethlehem, where he reiterated his support for a two state solution to the Israeli Palestinian
conflict. I'm referred to what he called the indignities that Palestinians have suffered.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES OF AMERICA: I know that the goal of the two states seems so far away. Well, indignities like restrictions on
movement and travel, or the daily worry of your children's safety are real and they are immediate. The Palestinian people are hurting now. You feel
you can just feel it your grief and frustration in the United States. We can feel it. But we've never give up on the work peace.
(END VIDEO CLIP)
ANDERSON: Well, the President also said he is asking Congress for an additional $100 million in support for the East Jerusalem Hospital Network.
But perhaps, or many Palestinians were most eager to hear him address was the death of the Al Jazeera journalist Shireen Abu Akleh.
The President called her death an enormous loss in view of the importance of sharing Palestinian stories with the world and said the U.S. will
continue to insist on a fallen transparent investigation into her killing.
Well, an empty seat facing the podium where Biden and Abbas were speaking carried a large portrait of the late journalists where she would have been
sitting. Other journalists wore T-Shirts with her face on them.
Well, let's bring in CNN's Hadas Gold who was in Bethlehem back now in Jerusalem this hour. And a very poignant image we heard the President
acknowledge the slain journalist. Do you believe that what he said was enough for her family and other Palestinians grieving her murder?
HADAS GOLD, CNN CORRESPONDENT: Well Becky, I think he had to say something. It was impossible for him to avoid the subject because it was staring him
in the face actually he drove right by a giant mural on the separation wall of Shireen Abu Akleh.
There were signs all throughout Bethlehem posters up about her with her face. As you noted, reporters at the press conference wearing T-Shirts with
her face, they left a seat open for her because if Shireen Abu Akleh was still with us. She would have been at that press conference covering this
visit as a reporter.
So it was quite obvious that he needed to talk about it also because her family had demanded that President Biden meet with them while he was here
on his visit. That obviously did not happen and said Secretary of State Anthony Blinken has invited them to Washington for a meeting. And so
everybody was very much looking to see what he would say.
And I think that they were probably happy to hear him at least acknowledge her acknowledge what she meant to the Palestinian people. But there are
still a lot of frustrations over how the United States has handled this investigation and how it's all come about?
And there's questions still about what the U.S. will do further to for the Palestinians what they believe is hold Israel accountable. Because now the
Americans have acknowledged that they do you believe it's most likely that an Israeli - it was Israeli gunfire that killed Shireen, Becky was?
[09:10:00]
ANDERSON: What, if anything, was new in what we heard from either the U.S. President or indeed, Muhammad Abbas?
GOLD: So I think that there were a few moments that are important from President Biden him acknowledging how difficult it can be for Palestinians.
He talked about the indignity of restrictions, the fear of your children's safety every day.
And I do think that it was important to him noting Shireen Abu Akleh. He was, you know, frank about the fact that while he still supports a two
state solution, that it's might not be in the near future from President Abbas.
He did call for an end to the Israeli occupation, calling for a capital of the state of Palestine in East Jerusalem. And he talked about several of
those sorts of items on the list that the Palestinians were hoping President Biden would start doing because some of them had been promised to
them.
Things like reopening the American Consulate in Jerusalem that largely served Palestinians, we heard last year several times Secretary of State
Anthony Blinken says that what the Americans wanted to do. We didn't hear that mentioned at all from President Biden.
And I also think it's important that President Abbas did say that he extends his hand to the leaders of Israel for peace, that's likely
something that the Americans and Israelis would be happy to hear. Another thing we learned from the readout, so not necessarily from the press
conference, from the read out from the White House, is that President Biden reiterated his position that Jerusalem is the Capital of Israel.
But that it continues to be the policy of the U.S. that specific boundaries of sovereignty in Jerusalem will be resolved through final status
negotiations. Keep in mind that President Biden visited that hospital in East Jerusalem and it's actually the first time that a U.S. President in
recent memory has gone that far into East Jerusalem.
And there was a question about whether that was him recognizing Palestinian claims to East Jerusalem, maybe rolling back with the Trump Administration
did recognizing Jerusalem as Israel's capital.
Also, several in the Israeli media noted that President Biden's presidential limousine had removed the Israeli flags when they made that
visit to that East Jerusalem hospital, but President Biden reiterating that they still believe Jerusalem is Israel's Capital.
And he was specifically asked about that at the press conference yesterday with the Israeli Prime Minister Yair Lapid asked if the move to if going to
East Jerusalem visiting this hospital some sort of recognition of Palestinian claims and he said simply no.
ANDERSON: Fascinating and no word of the reopening, of course of the U.S. Consulate in Jerusalem, which acts as a de facto U.S. mission for
Palestinians. Hadas thank you, Hadas Gold is in Jerusalem for you!
Well, the U.S. President, then in the air, he will be arriving here in Saudi Arabia soon. It is a direct flight, the first for a U.S. President.
My colleague, Nic Robertson, joining me now with some analysis and when you speak to people in the Arab world in it, there is a recurring question,
what exactly is American foreign policy in the Middle East? Understandably, there's some been some confusion through Obama, Trump and Biden.
They've all made it clear that the Mideast isn't the U.S. national security priority that it wants war. So is it clear at this point what Biden brings
to the table when he meets leaders from around the region?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: You know, that's the question they're all asking, of course, because there's a sense that Biden
in particular has been absent from the region, in particular, absent in giving direction and strategic you know, instruction to his to, you know,
to people within the administration, specifically about Saudi Arabia, because he came in saying that he would turn them into a pariah state
because of their human rights record, all of that baggage.
But then it does go back to the last president, President Obama, who talked about pivoting to Asia. But there's a real sense here that this region in
that time span has come alive is energized, is changing. That's what Obama's going to hear. That's what President Biden is going to hear when he
gets here.
So they'll say that the region has changed. But we need to understand from you essentially, you cannot pivot to Asia without involving the Gulf. Or
important partners and players in economies in security and global energy security, global food security, to involve us in that conversation, but let
us know what it is. So yes, to your point, it has been something of a vacuum.
ANDERSON: Yes, absolutely. At the same time, of course, there is a real sense of confidence aren't talking around the region because there is some
real weakness around the region but when you're here in Saudi, with the oil prices as high as they are this is a country on the move, as is of course
Abu Dhabi and the UAE where I live.
The discussions about energy clearly a priority for Joe Biden but from the Saudis perspective, the U.S. Saudi oil for security paradigm is an old and
reductionist one and I steal that line from the Saudi Ambassador to Washington who has written an op-ed in POLITICO today. They want to see a
wider more nuanced relationship built on energy security.
[09:15:00]
ANDERSON: And that includes energy diversification, education, investment in technology, infrastructure, as well as the security guarantees. This is
what we understand the region wants to hear and get from the Biden Administration. To a certain extent, it feels like the White House, the
Americans playing a little bit of catch up on the region?
ROBERTSON: They certainly feel that in Saudi Arabia, and they certainly hope that this meeting will be a springboard to reset partially or get back
on track some of that catch up. You know, you talk about that confidence and we've both seen it and people here.
And we both had the advantage of having traveled here through the past decade. And we've seen the changes. And I think for an administration that
hasn't put a lot of energy, and time and effort into this region as people here with like.
They are absent of understanding how much those changes have happened? And I think you and I both had those conversations, where we heard from Saudi
officials, you know, six years ago, we've got this vision we're going to change the country we're going to do that. And we all stood back and said,
you know, sort of, we've heard that before. You're talking the talk. But let's say you walk the walk.
Well, I think when you and I come back here today; we see the walk is happening. We see the changes and we see the changes in attitude of people
about their daily lives and towards the government.
ANDERSON: CNN speaking to officials understands that the White House acknowledges that this trips the optics of this trip, and let's be quite
frank, because we've been reporting on this now for four years. President Biden arrives here he meets King Salman, who was the Leader of Saudi
Arabia.
He then goes on for a meeting with the Crown Prince here who - will tell you are the de facto leader and his advisers. White House officials telling
CNN that that is going to be difficult, as far as the optics is concerned, not in this region it has to be said that back home.
ROBERTSON: Yes. And I think also the Saudis recognize that this is a moment where the focus is going to be on the killing of Jamal Khashoggi, which the
CIA said that the Crown Prince Mohammed bin Salman was responsible for that.
They understand here, that this is a narrative that persists they feel it's the wrong narrative that it misses the point. So I think part of that is
going to be reinforced, you know, the President gets off the plane, he'll go to the royal palace, just down the coastline.
And we're kind of looking at the complex right behind us over there who go there. And he'll meet with - he'll meet with the King first, and then he'll
meet with the Crown Prince. But I think the key here is, he's not meeting with the Crown Prince alone, he is meeting with the Crown Prince with the
ministers.
But what is the real subtext of that message, not that President Biden can't meet MBS, the Crown Prince alone, but actually MBS is with the
ministers that report to him that he is running the government he is running the country right now. His father is sort of over watch, if you
will.
But that's what President Biden will get in that meeting that MBS is the person in charge and for delegating down in detail in haste in a hurry he
wants to get things done in his country, to his minister.
So I think that's what's going to come across there for President Biden and the optics of the image there, whether or not there's a public handshake,
which both sides are saying don't get hung up about the reality from the Saudi perspective is they think the page is turning. They think the
relationship is going to be good
ANDERSON: Until a certain extent we have heard that from the president himself. Nic Robertson, with me in Saudi couldn't do better than I have
CNN's International Diplomatic Editor, with me on the show. Thank you very much indeed Nic. That's it from me for the time being. Let's get you back
to Julia, who is in New York for you.
CHATTERLEY: Thanks so much, Becky. And I couldn't agree more, by the way about Nic. Thank you. OK, let me bring you up to speed some of the other
stories making headlines around the world.
It's finally official Sri Lanka's Parliamentary Speaker has accepted the resignation of President Gotabaya Rajapaksa. The Prime Minister was sworn
in as the interim leader earlier and vowed to protect the constitution and sought to calm tensions by saying he supported peaceful demonstrations.
Ukrainian President Volodymyr Zelenskyy, asking the international community to officially recognize Russia as a terrorist state it follows Thursday's
brutal missile attack on the Ukrainian city of Vinnytsia 23 people were killed including three children, relatives of people still missing and now
submitting DNA samples to help officials identify those lost.
OK, straight ahead here on "First Move" China's challenge, Former Australian Prime Minister Kevin Rudd says dire growth numbers are partially
the governments' own doing but there's more at play clearly. We'll explore next.
[09:20:00]
CHATTERLEY: Another transforming economy Saudi Arabia ahead of President Biden's visit that examines the kingdom that's cross roads, stay with us,
that's coming up.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back and returning to our top story now in China's slowing growth in a country where youth unemployment stands at a staggering
19 percent. My next guest Kevin Rudd of the Asia Society say some of the problems are of China's own doing but there are of course external
influences too.
He points to a crisis in the country's property market, which makes up nearly a third of GDP. Investors are spooked after at least 10 real estate
developers defaulted on their debts.
Then of course, there was the government crackdown on the tech sector. And the market cap of China's 10 biggest tech firms has plunged by more than $2
trillion over the past year plus Russia's invasion of Ukraine sending energy and commodity prices soaring bad news for a country that's number
one in the world for manufacturing exports and energy use.
And finally, Beijing's insistence on the zero COVID strategies forced nearly 380 million people into some kind of lockdown since April. The areas
affected 45 cities in all generating over $7 trillion in annual GDP.
Kevin Rudd is the President of the Asia Society. He's also a former Prime Minister of Australia, and the Author of The Avoidable War, which looks at
the risks of a conflict between China and the United States.
Kevin always fantastic to have you on the show, you are warning about the risk of a global slowdown in China since the beginning of this year, but I
don't think anybody expected it to be quite this bad.
Surely their prospect of five and a half percent GDP growth this year is unobtainable.
KEVIN RUDD, PRESIDENT, ASIA SOCIETY: Well, on the basis of the growth numbers just released for the second quarter, we would think so. But Xi
Jinping interestingly, underlined the fact that China wouldn't realize 5.5 percent growth this year.
If that's to be the case, as officials have already indicated this would require extraordinary stimulatory measures by the Chinese government for
the second half of the year to come close to the 5.5 percent growth number projected.
I think the other factor is this. Economists also predicted in order to simply sustain unemployment where it is rather than have it deteriorate
further; they would need at least 4.6 percent growth for the year. So there is a lot of catch up to do in the second half.
CHATTERLEY: So they can be incredibly aggressive about stimulus they can relax some of the constraints they've put on the property sector as I
mentioned there. They can relax the tech sector, but they're not going to adjust on COVID.
[09:25:00]
CHATTERLEY: And the latest estimates around 25 percent of China's GDP again, currently under some form of lockdown or restriction, it's a
delicate balancing act. And certainly with that latter policy, it's simply not something politically that Xi can change.
RUDD: If we stand back and ask ourselves this question, what's causing the massive slowdown in growth; there are three factors at play here. One is
what I described as a shift in the center of gravity of Chinese economic policy towards the left over several years now.
And we see that through a range of policy measures which the government has introduced, and that has, frankly spooked the Chinese private sector. The
second and more immediate cause is what you've just referred to, as zero COVID lock downs.
And, of course, the prospect of a further repeat of that, at least in partial form in Shanghai now. And the third factor, again, of which they've
got no control, is now the emerging shape of the global economy and China still depends on net exports to fuel so much of its overall growth.
What can they change are that mix zero COVID, no, state of the global economy not so long as Vladimir Putin, Xi Jinping's friend has anything to
do with it in Ukraine.
But on the first set of measures, which is or causes, which is his leftward shift in economic policy. I think the only measure that's really available
to the government in the absence of large direct stimulatory measures would be to simply take the foot off the Chinese property sector and allow it to
resume its normal activity.
CHATTERLEY: I couldn't agree more with you. But I also think that when the prospects of further lock downs and the uncertainty over that is a constant
knock to confidence for the private sector for the consumer too.
And it's not so easy just to tell people to go out there and behave normally under the threat of sort of imminent, being imminently being told
to stay in your home and not go out again, for us for several weeks.
RUDD: Well, then all of our economies, whether it's in a communist system, like China's or in a capitalist system, like much of the rest of the world,
there are two big drivers of growth at the end of the day, one's called consumer confidence, and the others call business confidence.
And if you stand back and look at the numbers, consumer confidence, ultimately reflected in domestic consumption adds up to some 50 to 60
percent of GDP.
And then for the business sector, private fixed capital investment represents another huge slab to growth under normal circumstances. So in
both those areas are affected by crises of confidence, and they depress growth for the private sector.
It's also a question of once bitten, twice shy. And so if there is to be a U turn, or a course correction, and some of the left leaning economic
policies brought in by Xi Jinping, in recent years, there's an open question as to whether the Chinese private sector would simply say, well,
that's terrific. We're back to normal now, or would they say, Aha, what will happen after the 20th Party Congress when Xi Jinping is reappointed in
October or November this year?
Will we then be heading ideologically back towards the left? That's why we have a problem in terms of long term confidence.
CHATTERLEY: I mean there's so much in there too. And I also continue to think back to what you said about stable employment requiring growth of
four and a half percent.
And I mentioned in the introduction, they have a youth unemployment rate that they admit to let's be clear of more than 19 percent now. I guess the
big fear is that that President Xi perhaps turns to distractions, whether it's greater nationalism, it's the way that he behaves in terms of foreign
policy to reassert himself domestically and, and distract from some of the domestic challenges. How likely is that, Kevin? And how big a worry is that
for you?
RUDD: Well, as a matter of logic, it is a concern to many analysts. But as we look forward to the 20th party congress this October, November, this is
an event which happens every five years.
And this is a unique event for Xi Jinping, because it'll determine whether he's reappointed for a record third term, thereby breaching the two term
limits imposed upon his predecessors.
As we move towards this critical event in Chinese politics, most of us who look at these things closely are beginning to see early signs that Xi
Jinping's sway over central leadership appointments is still very strong.
His control of the political apparatus, the security apparatus, the intelligence apparatus is formidable.
[09:30:00]
RUDD: So my argument would be this, even with a radically reduced growth number, and with rising unemployment, and addition to that some
inflationary pressures in the economy as well. I do not think fundamentally Xi Jinping at this stage is in real political trouble.
Therefore, the necessity to flip the switch to nationalism or foreign adventurism, I think is reasonably limited at this stage.
CHATTERLEY: Yes, by design, that consolidation of influence and power to this point, Kevin, always fantastic to get your wisdom and perspective.
Thank you. Kevin Rudd, Chairman of the Asia Society and former Australian Prime Minister, sir thank you once again. We're back after this.
(COMMERCIAL BREAK)
ANDERSON: Right, you're watching "First Move" in just about an hour. President Biden will land here in Jeddah in Saudi Arabia, and he will find
a rapidly changing Kingdom.
The country of course known for its oil, but the Saudi public investment fund, for example, is making large strides investing domestically and
internationally in a whole swathe of business and industries.
Saudi leaders signaling that this is an economy focus not just on oil, but on energy more broadly and the transition to a post oil era. But as Biden
prepares for his first meetings in Saudi Arabia, he will be focused on finding the short term relief he needs back home.
(BEGIN VIDEO CLIP)
BIDEN: No, I'm not going to ask him. I'm going to ask there are all the Gulf States --. I've indicated to them that I thought they should be
increasing oil production generically not to the Saudis particularly.
(END VIDEO CLIP)
ANDERSON: Joseph McMonigle is Secretary General of the International Energy forum that is the world's largest organization of energy ministers. Members
include both the United States and Saudi Arabia.
[09:35:00]
ANDERSON: So it couldn't be a better person to ask, what's your assessment of the possibility of Biden getting any short term oil commitments from the
Saudis or anyone else here this weekend and if not, why not?
JOSEPH MCMONIGLE, SECRETARY GENERAL, INTERNATIONAL ENERGY FORUM: Well, look, I think it's too soon for any kind of specific announcements
regarding oil or energy deliverables. But I do think it's important that the top two energy oil producers in the world are getting together.
And I think, you know, I think you --why we may not see something concrete here on oil, we couldn't see a lot of concrete things regarding energy
transition, investment in energy infrastructure.
But I think, at the end of the day, I think what we have to be looking for here is the increased dialogue and coordination between the two biggest
energy producers in the world means a lot for energy stability, market stability, and energy security.
ANDERSON: You could argue that, in wanting to reduce gas pumps back at home, the prices of gas at the pump, the U.S. president lacks an
understanding of the way the gasoline market actually works.
In the end, am I right in saying this is less an issue about subprime whether there's spare capacity in the UAE or Saudi and more about refining
capacity actually?
MCMONIGLE: That's right. Yes, global refining capacity has actually declined over the last two years. And that's mainly because of
decarbonization policies, investor pressures, on ESG.
But also COVID has really accelerated sort of CAPEX cuts in maintaining these refineries. So a lot of them have closed or converted to other
facilities.
ANDERSON: I want our viewers to have a listen to what the UAE ruling had to say, on energy security. You made a point, it's less about oil, the story
we're hearing here, and more about energy security, energy diversification. That's what you hear a lot of. And this is what Mohammed bin Zayed had to
say just earlier this week in an address to the nation.
(BEGIN VIDEO CLIP)
MOHAMMED BIN ZAYED AL NAHYAN, UAE PRESIDENT: You also continue to consolidate our nation's position as a reliable energy provider, and
support global energy security as a fundamental driver of global economic growth and development.
(END VIDEO CLIP)
ANDERSON: Mohammed bin Zayed will meet Biden on Saturday along with other leaders of the GCC plus and that being Jordan, Iraq and an Egypt pledging
there to be a reliable energy provider to support global energy security. What did you make of that? And does that reflect a wider narrative here?
MCMONIGLE: Yes, well, look, I think the key word there is reliable. I mean, I think the world, you know, especially in Europe, had viewed Russia as a
reliable producer. And now we're seeing maybe that is not the case anymore.
We're seeing that certainly, we're seeing the war impacts and sanctions involved in that. And so I think countries now are going to be looking at
not being dependent on one source for oil be not just oil, all energy, and diversify, not just the types of energy sources, but where the sources are
coming from.
ANDERSON: So, let's talk about that the high price of crude let's be quite frank, no - DOW, helping the big producers invest heavily in their
economies and in their people.
And we see that here in the kingdom, when vision 2030 was launched, quite frankly, the oil price was about a quarter of what it is now. You know
where it is and where it stands today helps Mohammed bin Salman execute on this vision.
The message here is that Saudi is heavily focused on energy transition to a post oil era. And there is frankly, some confusion when you speak to people
here and around the region about how the West is, to a certain extent, reneging on its climate commitments to move away from fossil fuels.
When this region is steadfast about it, that they build energy transition into the pillars of growth going forward, your thoughts?
MCMONIGLE: That's right. Well, certainly UAE is one of the leaders, where your home is. But Saudi Arabia is doing a lot here as well on the energy
transition. And I think it's important to realize that, yes, the countries like UAE and Saudi Arabia have a very unique role.
They have to be trailblazers in terms of the energy transition, but they still have to invest in supply to keep the world power, the world economy
power today.
So I think it's a unique role. It's a very good thing that the president's coming here it's very historic, but I'm not sure we should pay as much
attention to him being here.
There's been a lot going on behind the scenes over the last several months that I've been privy to. So there's been a lot, I think this is a
culmination of a lot of engagement.
ANDERSON: So let me, I'm going to give you this, because--
MCMONIGLE: OK.
ANDERSON: And that is gruesome. It really is hot, Joseph, but just before I let you go, so you have been privy to a lot of discussions. You've got some
of these ministers on speed dial, speed WhatsApp these days, so.
[09:40:00]
ANDERSON: Let me ask you this. Do people in this region to the ministers in this region, quite frankly, feel that the White House and America is
playing catch up at this point to a region on the move?
MCMONIGLE: Yes, I mean, I think there's a lot of countries, not just the U.S. administration, but a lot of countries are playing catch up to this
whole energy crisis, and what spurred it and the world is adapting.
And I think we've learned a valuable lesson. But unfortunately, I think the second half of this year is going to get much worse. I mean, especially on
the gas side of things, the gas crisis is already in full swing.
Last winter, the war in Ukraine really is just poured gasoline on that fire, and it's affecting other parts of the world. And we've said Pakistan
who had an LNG tender for a billion dollars, and didn't get any sellers for it.
I mean, it's just extraordinary. So the pricing is pricing to more vulnerable parts of the world out of the market. And so there's a lot of
big problems not just in Europe, but in other parts of the world.
ANDERSON: Which is why I'm having you on is extremely useful. Thank you for your insight and your analysis. I'm sorry I can't do anything about the
humidity here.
MCMONIGLE: No problem.
ANDERSON: This is a country on the move, but the weather believe me, remains quite tough in July, but it's great to have you thank you very much
indeed.
Well, while energy is a top priority, then for President Biden on his Middle East trip, he has emphasized that security and stability of the
region is really what is dominating his agenda.
He says the U.S. is committed to bolstering security guarantees for regional partners, especially against the threat of Iran's nuclear
capabilities. You can read a lot more about that in our Middle East newsletter.
Meanwhile, in the Middle East, it's a terrific read sign up on cnn.com/mideast newsletter. Well, I know you're likely already signed up if
you aren't Julia.
CHATTERLEY: I just did.
ANDERSON: So I want to say that for the second time in the show. CHATTERLEY: Fantastic, thanks Becky. All right, we're going to take a
break. Coming up on the show, resignation rejected instability in Italy yet again, can Prime Minister Mario Draghi survive it, we'll discuss, stay with
us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move" in an action packed Friday on global markets. China's growth is shifting into a lower gear but U.S.
consumers delivering some signs of cheer.
[09:45:00]
CHATTERLEY: In Europe, Mario Draghi wanting to disappear, but Italy's President extending super Mario's Korea - Friday, but arriving for you that
story in just a moment.
But first, let me give you a look at what we're seeing for U.S. stocks rallying in early trade clawing back some of their losses from earlier this
week. Week Chinese GDP data out today stoking fears of more global recession risk.
But as JP Morgan Chase or Jamie Dimon pointed out yesterday, the U.S. consumer remains in good health and this is a strong point a positive I
think for Investors too.
As we mentioned earlier, U.S. retail sales rising a stronger than expected 1 percent rate in June sales were higher, even when stripping out energy
and autos. Bank earnings however, still coming in pretty mixed.
Citigroup is rallying after reporting actually stronger than expected earnings. That's the picture but like JP Morgan yesterday, they're
suspending stock buybacks as they navigate an uncertain economic environment.
Wells Fargo also hired to despite reporting disappointing results, it's also boosting its loan loss reserves, fears perhaps had been worse after
yesterday's results coming into these.
In the meantime, Mario Draghi remains Italy's Prime Minister after the nation's president rejected his resignation Thursday. This follows month of
tensions within the unity government there and now raises the prospect of early elections to overcome the political impasse.
Anna Stewart joins us now it all rests on the speech in Parliament next week Anna, by Mario Draghi. But whatever the challenges and there have been
clearly many domestically in the decisions that Mario Draghi has made tough ones, I think on an international stage, he's bought a great degree of
stability and economic confidence. And arguably, it's not the time to lose that.
ANNA STEWART, CNN REPORTER: Yes. And I think that's exactly why President Mattarella refused his resignation. How extraordinary given in many parts
of the world, including the UK Prime Ministers have been asked to resign many times over and I've refused.
But here we have the exact opposite. Now Mario Draghi, of course, isn't really a politician, not in the traditional sense. He's not affiliated to a
political party. He's a technocrat.
He is an economist, and he was appointed to lead a unity government through this pandemic and out of it. And really to implement some key reforms so it
could unlock, you know, post pandemic recovery funds from the EU.
And this is a very heavily indebted economy, one of the biggest economies in the Eurozone, of course. So I think the EU we watching this very
closely, and certainly it's got a long way to go on the economic front, I think we don't have to look back very far.
The ECB said it would raise rates in July, a few weeks ago, and we saw borrowing costs for Italy spike. And if we look at the spread between
German and Italian bond yields, you can see they've come up a lot since then, largely on the anticipation of the ECB, so called anti-fragmentation
tool.
You can see at the end of that chart, though, that borrowing costs did rise a little bit over the last 24 hours, has a little bit of a ceiling on that.
But you need a strong government.
And clearly Mario Draghi feels if the five star parties aren't on board, he cannot lead a united government.
CHATTERLEY: He made that very clear. He said without the backing of a unity government, he didn't want the role because he wouldn't be able to enact
the change that he needed to do. And he's a man of action.
He's not going to sit there not being able to do anything and what next very quickly.
STEWART: Well, very quickly, yes. What next, if he insists on resigning next week anyway, and if President Mattarella doesn't appoint another prime
minister, in the meantime, we'd be looking at snap elections in the autumn. So it takes some time in Italy.
However, I imagine by that stage, there'll be many calls for the Five Star Movement to come on board with all this be brought to heel, not least
because if there was a snap election, they probably wouldn't fare very well. Current polls suggest that would be a lurch to the right, Julia.
CHATTERLEY: Anna Stewart, thank you very much for that report there. OK, coming up on "First Move", come fly with me. Let's fly, let's fly away. If
only spotlights on the summer of travel chaos next.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: Welcome back to "First Move". A plane filled with 1000 bags and zero passengers is that if you remember was Delta Airlines creative attempt
at solving a lost luggage nightmare.
A sign of the times for sure the latest data shows airlines have canceled over 25,000 flights for August alone. Over 15,000 of those canceled flights
in Europe and on the United States side.
Pete Muntean joins us now from Newark International Airport where passengers have suffered their own fair share of cancellations. Pete, I
feel like nothing can be as bad as the July 4 weekend, but I'm afraid to tempt fate.
PETE MUNTEAN, CNN AVIATION CORRESPONDENT: Yes, it's best not to Julia, you know this is a big hub and a big hotspot for cancellations. Newark is
number one for flight cancellations in the U.S. since Memorial Day airlines put some of the blame on the federal government.
Federal government puts the blame back on airlines sort of a combination of factors but it's really passengers who are caught in the middle.
(BEGIN VIDEOTAPE)
MUNTEAN (voice over): The summer of travel pain keeps growing with struggling airlines canceling 30,000 flights since Memorial Day. Now new
data shows where issues are the worst. A flight aware analysis for CNN shows New York airports leading the nation for flight cancellations.
8 percent of all flights leaving Newark have been canceled since Memorial Day.
KATHLEEN BANGS, FLIGHTAWARE: The pain is not spread out evenly. Some airports have much bigger problems than others.
MUNTEAN (voice over): For the airports take three of the top 10 spots for flight delays. A third of all flights from Orlando had been delayed this
summer. This new breakdown comes as passengers are packing planes and levels not seen since before the pandemic.
But short staffed airlines say the federal government is also short staffed at air traffic control facilities.
SCOTT KIRBY, CEO, UNITED AIRLINES: New York Newark and Florida really are air traffic control challenges. They're different issues. So at some other
airlines but those two places are really struggling.
MUNTEAN (voice over): The FAA puts blame back on airlines staffing issues, as well as bad weather and heavy air traffic.
JOHN LUCIA, FEDERAL AVIATION ADMINISTRATION: We may have to slow this stuff coming out of Florida.
MUNTEAN (voice over): At its round the clock Command Center in Virginia, the FAA showed us how Florida airspace can become clogged with flights like
a traffic jam on a highway.
LUCIA: If you have a couple of thunderstorms right over the center of the state. Now you got limitations on where you can go especially in the
summertime. If you want to get there on time, try to get them for lunch.
MUNTEAN (voice over): Airlines argued $50 billion in pandemic aid would make them ready for this rebound.
BILL MCGEE, SR. FELLOW, AMERICAN ECONOMIC LIBERTIES PROJECT: The airline industry is broken right now. And it's failing every taxpayer.
MUNTEAN (voice over): Transportation Secretary Pete Buttigieg tells CNN he is seeing improvements, but still expects airlines to do better.
PETE BUTTIGIEG, U.S. TRANSPORTATION SECRETARY: We are counting on airlines to deliver for passengers and to be able to service the tickets that they
sell.
(END VIDEOTAPE)
MUNTEAN: United Airlines says that Newark is bad because there are simply too many flights scheduled here for the airport they handle. In fact,
United is even scaling back its summer schedule here at Newark.
But this problem goes beyond just here rounding out the top five for the top cancellations since Memorial Day, LaGuardia Reagan National in DC
Raleigh, North Carolina and Cleveland in Ohio, Julia.
CHATTERLEY: Yes, Pete and fascinating as it is and challenging as it is, the challenges in the United States pale in comparison to what's going on
in Europe at this moment.
MUNTEAN: It's so true. You know if you thought it was bad here in the U.S. really look at Europe, especially what's going on at London Heathrow. In
fact, officials there reached out to airlines earlier this week to tell them stop selling tickets to cap capacity on flights there.
You mentioned on the way in the fact that Delta Airlines had this problem with piles and piles of bags, mountains of bags at Heathrow, and they flew
this plane an Airbus A 330 earlier this week, from Heathrow back to Detroit. No passengers on board only bags.
Delta says now it's going to distribute all those bags to customers here in the U.S. but that's another problem too. The luggage has become a really
big issue, that's what Julia is next.
[09:55:00]
CHATTERLEY: And the moral or one of the morals of this story is that precisely hand luggage only, Pete - and that away.
MUNTEAN: Right.
CHATTERLEY: Pete great to chat to leave on. Peter Muntean at Newark International Airport, sir thank you for your time! And finally, are we
wary of world yet, it's the vocabulary game often played on phones, and where you try and deduce a five letter word in up to six tries.
Now the games owner, the New York Times is joining with Hasbro to turn it into a board game which can be played individually or in teams. And you can
expect it to arrive in shops by October.
I was going to react with the word bandwagon. But I can't of course because that's nine letters long. That's it for the show. If you've missed any of
our interviews today, they will be on my Twitter and Instagram pages. You can search for @jchatterleycnn. For now "Connect the World" with Becky
Anderson live from Jeddah is up next. I'll see you on Monday.
(COMMERCIAL BREAK)
END
