Return to Transcripts main page
Quest Means Business
US Economic Spring; US Fed Statement; US Economy; Argentina Nears Default; Ebola Outbreak
Aired July 30, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Closing bell is ringing on Wall Street. The Dow is down some 30 points in what's a very busy day on the news agenda. Today
is Wednesday, it's July the 30th.
Spring in its step. A second quarter surge for the US economy. We'll give you the numbers -- and they are surprising -- in just a moment.
Also, darkening prospects. Argentina approaches a midnight deadline to avoid a costly debt default.
And an investigation in limbo. A CNN crew reaches the crash site that's deemed too dangerous for the investigators and inspectors.
I'm Richard Quest. I mean business.
Good evening. There are new figures on the US economy, and they should paint an extraordinary picture. Join me at the super screen, and
you will see. Spring has spring in the United States.
After a bitter, bleak start to the year, the economic growth for the second quarter now looks positively tropical. The economy expanded on an
annual rate, which is how the US does it, by 4 percent in Q2, well ahead of forecasts.
And not only that, there was also an upwards revision of that depressing first quarter as a result of the bad winter. And consumer
spending, which accounts for two-thirds of the US economy, just look at this. This is very interesting.
Consumer spending, the blooms are everywhere. Consumer spending was up 2.5 percent. Business investment was up 5.5 percent. Exports, a major
thoroughfare of the US economy, they were up some 9.5 percent.
Although the economy has added nearly 1.4 million jobs this year, when you look at this picture of blooming buds all over the economy, the US
president said the labor market is still feeling lingering chills.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: That's what's at stake right now, making sure our economy works for every American. See, I'm glad
that GDP has grown, and I'm glad that corporate profits are high, and I'm glad that the stock market is booming.
But what really I want to see is a guy working 9:00 to 5:00 and then working some overtime, I want that guy making more than a minimum wage.
(END VIDEO CLIP)
QUEST: Now, not surprisingly, it's not all rosy in the garden, and when it comes to seasons, the Fed isn't quite ready to put away the
sweaters, although it's slowly ditching the winter coat of tapering has gone. Taper is just about almost gone.
It's announced it will still plan its gradual withdrawal of bonds purchase programs, and it's vowed to keep interest rates near historic lows
for a considerable time. The statement from this Fed meeting, virtually identical, word-for-word, to previous statements. So, we now know that
rates stay low, tapering continues, and there's no realistic possibility of a rates increase anytime soon.
Investors, not surprisingly, they like what they saw. Just look at this -- let me get my pen out. We had a nice rally on the GDP number later
on. And then, of course, the market sank back, and it continued to sink back a little bit over 2:00, or when you get the Fed result, a little bit
of a rally as well, up some. But again, it wasn't able to hold the whole market.
So, let's put it all together. Joining me now, Randall Kroszner is the former governor of the Fed. He's now professor at the University of
Chicago's Booth School of Business. Good to see you, sir. The spring, summer blooms are everywhere.
RANDALL KROSZNER, FORMER FEDERAL RESERVE GOVERNOR: Even in Chicago.
(LAUGHTER)
QUEST: I'm sure it's roasting in Chicago at this time of the year. Listen, Randall, explain to me. I mean, this number, this 4 percent
annualized growth, this is what you had been hoping for, and this is what the economy needs to see.
KROSZNER: For sure. We're happy that we're starting to see some of these blooms, but of course, there are a few -- there are still a few storm
clouds. A lot of the growth that we saw this quarter was from firms building more inventories, and actually a lot of the reduction in the first
quarter, certainly some of it due to cold weather, but was to a drawdown of inventories.
So, a lot of the ups and downs have to do with sort of this inventory cycle, which is very hard to predict and doesn't really tell us as much
about underlying economic strength.
QUEST: Right. But if inventories continue to grow, but consumer spending remains robust, then the two sort of cancel each other out. As
fast as consumers take things off the shelf. We've still got a debt leverage hangover on consumers.
KROSZNER: So, if we can't have the ideal scenario that firms are still putting lots of stuff on the shelves and consumers are trying to take
it off even faster, that's great. I hope we can achieve that. I'm not sure that we have the data yet to have a firm foundation for that.
And as you mentioned, things are better for consumers. The housing market has certainly stabilized. But it's kind of after a couple of strong
years has flatlined a bit. And so, we're not going to be getting as much of a boost from that and as much of a boost to consumer confidence.
QUEST: Right.
KROSZNER: But consumers seem to be doing OK.
QUEST: The Fed continues tapering. It goes right the way down. We've got another couple of months, depending on how they decide to do the
last $15 billion. So, the Fed continues to taper, rates stay low for an extended period of time.
If this 4 percent confirms in subsequent quarters, does -- do rates still remain low for a considerable time?
KROSZNER: Well, it's both about GDP and about the labor market. Because there was one -- just as you had said before, the FOMC statement,
the Fed statement, was almost identical, but there was one very important change. They added in a sentence about under utilization of labor market
resources.
So, in some sense, that's a little bit of a pivot away from focusing just on GDP and growth and having a laser focus on the labor market. And
by a number of measures, some of these broader measures that Janet Yellen and others look at, there's still a lot of slack in the labor market.
QUEST: I want to look at the markets. Stay where you are, Randall, I want to just refer to the markets. Now, if you look at the markets, you
would think things have been almost universally rosy for the longest time. Stocks in the US, Germany, even Argentina, have all risen this year.
Only Russia's MICEX index is lower, which perhaps for obvious reasons. Trading on Moscow's exchange was mysteriously interrupted for around two
hours on Wednesday. It's not clear what caused the halt. The MICEX has been investigating.
Randall, as I look at these markets at the moment, is there a disconnect, or is there a logic to these rallying markets, even on the back
of low interest rates?
KROSZNER: So, certainly they suggest there's a lot of optimism going forward, that the way that the European Central Bank will be able to deal
with the deflation there will work, that the Fed will have a smooth exit, and that even things are rosy in Argentina, which I find a little bit
difficult to believe, but I'll live it up to the Argentines to decide that.
And so, it's suggesting a fair amount of optimism. And also, we see very low volatility, which just given what's going on in the Middle East --
QUEST: Right.
KROSZNER: -- and Russia, and all the change -- differences in central bank policies, with the ECB having to provide more support, the Fed
starting to pull back. This seems like a time of at least average volatility if not slightly higher than average volatility.
QUEST: We'll talk more about that in the future, sir. Thank you very much. Make sure it's the factor 30, I think maybe even factor 50, if
you're going out in the sun in Chicago. Thank you, sir.
(LAUGHTER)
QUEST: When we come back after the break, Randall was talking about Argentina. We will talk more about it. The country says the vultures are
circling. It's refusing to give them their pound of flesh. It's almost certainly heading back to the desert of default. This is QUEST MEANS
BUSINESS, live from New York.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: We started our program talking about an economy that's growing robustly. Now, we turn to an economy on the brink. There are less than
eight hours to go to the deadline for Argentina to pay its debts. If it fails to do so -- and all the implications are that it will -- the country
will have defaulted for the second time in 13 years.
There was a last-ditch effort to avoid this technical tripwire. Representatives from Argentina have been meeting with the hold-out
creditors. More about them in a moment. The government must strike a deal tonight, or win more time from a US court to reach a settlement.
Here's today's court-appointed mediator, Daniel Pollack, what he had to say as he walked to the meeting.
(BEGIN VIDEO CLIP)
DANIEL POLLACK, COURT-APPOINTED MEDIATOR: It's a beautiful day, it'll be a more beautiful day if the parties can reach an agreement.
(END VIDEO CLIP)
QUEST: A more beautiful day if the parties can reach an agreement. It seems unlikely at this late stage. They've been talking for many weeks,
if not months.
In Argentina itself, the hold-out bondholders, now they are the ones who refused to accept the debt restructuring back in 2001. They've been
demonized as vultures. Adverts like this have gone up around the country. It reads: "Enough vultures! Argentina for a united national cause." This
is how the crisis is perceived in Argentina, that if the country defaults, the bondholders will be to blame.
So, what's it all based on, and how have we got here? Come over to me at the super screen, and you'll see what I'm talking about. The first man
to remember, of course, is the judge, Thomas Griesa. We'll put him up here.
Now, Judge Griesa basically ruled that Argentina had to treat the holdouts and the restructured bondholders the same. The restructureds
could not get money if the holdouts didn't get theirs. That's the scenario. His ruling started this whole process, in terms of heading
towards default.
The man mediating is Daniel Pollack. He has been between the two sides, trying to get them to reach an agreement. Meanwhile, the finance
minister in Argentina, he has been saying, if they have to pay one, it'll bankrupt them from paying the others.
It's a nasty, messy situation, and today, for the first time, the two sides met directly, face-to-face. No agreement has been reached. Daniel
Pollack is still in the middle. He's still claiming it'll cost them a fortune. And the dear judge sits at the top of the table, waiting to
declare Argentina in default.
Complicated? You bet. Miguel Kiguel is the former undersecretary of finance for Argentina. He joins me now from Buenos Aires. Sir, I did my
best to make it simple, but the long and short of it is, tonight, unless Argentina pays, it will go into default. Is that what's going to happen?
MIGUEL KIGUEL, FORMER FINANCE UNDERSECRETARY OF ARGENTINA: Yes, I think that default is almost unavoidable at the moment, because by now, the
banks have closed, there's no way to transfer the money to New York. So, the outcome is going to be a default.
Now, my view, and I think the consensus here in Argentina is that the negotiations are moving forward. Argentina has sent a delegation of
bankers to New York. We're willing to put a guarantee, and the hope, at least, that we have, and that's how the markets have reacted today, very
positively, is that there's going to be a very short default that can be remedied relatively quickly.
QUEST: Because we can see how this default has happened, and we can see the technical nature of it, the judge, the ruling, the holdouts -- it's
not really your classic default, is it? It's not a case of haven't got the money, won't pay the bill.
KIGUEL: Right. This is not a default in which Argentina is an insolvent country that doesn't have the money. In fact, Argentina has sent
the money -- has already transferred the money to the Bank of New York so that they can pay the bondholders.
The problem is that the judge says that if Argentina doesn't also send the money for the holdouts, the Bank of New York cannot disperse the money
to the bondholders. And that's where we are at the moment, because Argentina only sent the money --
QUEST: Right.
KIGUEL: -- for the bondholders, didn't send the money for the holdouts.
QUEST: But the thing is --
KIGUEL: So, we are in this limbo.
QUEST: Right. You're in this limbo, but Argentina has been shut out of debt markets for many years anyway. Only a limited amount of borrowing
is now possible. So, I wonder, sir, from -- with your experience, does this default have any practical effect?
KIGUEL: A new default would have a practical effect because Argentina is very close to turning the corner around. We are at the point in which
money was starting to come in, people were starting to think about a new Argentina, especially when you get a new president in 2016. The money was
getting -- basically, the checks were ready to be written.
And the problem now is, if the country is in default, and the default is long, then all that process is going to be postponed, and obviously the
losers are going to be the Argentines. We -- the employment is going to be -- we're not going to get more jobs, the economy is not going to grow. In
fact, we are in a recession now.
We're going to see reserves continue to grow up, and that would impair our ability to continue to service the debt --
QUEST: Right.
KIGUEL: -- which we are still paying. So, you can imagine all sorts of problems for Argentines. So, we Argentines are all betting on a
solution to this problem, and I think that the bankers are there because they are willing to put the money to help. We'll see.
QUEST: Right.
KIGUEL: It's uncertain. This is a very tough negotiation. We'll see.
QUEST: Sir, thank you for making sense of it and helping us understand through the thicket of difficulty. Thank you, sir, I appreciate
your time from Buenos Aires this evening.
When we come back after the break, Liberia is taking serious measures to prevent the spread of Ebola. I'll be talking to the country's
information minister when we return. This is QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
QUEST: In the face of the deadliest Ebola outbreak in history, West African nations, as well as the international community, are ramping up
their efforts to contain the virus, which has killed more than 670 people in the region since March.
The United States is considering issuing an alert that would discourage all non-essential travel to the area. As two doctors infected
with Ebola continue to fight for their lives, the US-based missionary groups that sent them are pulling all non-essential personnel out of
Liberia.
Asky Air and Arik Air have suspended flights to and from Sierra Leone and Liberia. The director of global migration and quarantine at the CDC,
the Center for Disease Control, in the United States told Isha Sesay the global community must help the fight.
(BEGIN VIDEO CLIP)
MARTY CETRON, DIRECTOR OF GLOBAL MIGRATION AND QUARANTINE, CDC: It takes an international effort and coordination to support controlling an
outbreak. Even smaller outbreaks of Ebola can be extremely challenging to control in resource-constrained settings.
But outbreaks that are this large are multifocal, that are involving capital cities that have a lot of travel between countries can be
especially challenging.
And of course, as I said before, when there's an epidemic of disease as lethal as Ebola, it can be followed by an epidemic of fear and panic,
and a lot of stigmatization, and they occur in a social context in which some of those factors contribute to challenges in getting an outbreak under
control.
(END VIDEO CLIP)
QUEST: Liberia has taken significant measures to stop the spread of Ebola. All schools are closed until further notice. The country shut its
borders and has set up testing centers. Public gatherings are banned. Hotels and restaurants are playing Ebola safety videos.
I'm now joined by Liberia's information minister, who joins me on the line. Minister, can you hear me? Let's test the connection first. Can
you hear me, Minister?
LEWIS BROWN, LIBERIAN INFORMATION MINISTER (via telephone): Yes, I can, Richard. Thank you for having me.
QUEST: Thank you, sir. These are difficult times. Let's first begin with the measures that are being taken by your country at the moment. The
latest one are the schools now being closed. What else is happening?
BROWN: Well, the president has attended -- led a government delegation to attend the US-Africa -- historic US-Africa summit. She's now
canceled her participation to oversee this fight against the Ebola virus. She's instructed the Ministry of Health to consider certain areas for
quarantine, and to also to begin to consider the cremation of bodies.
QUEST: Right.
BROWN: Because we want to make sure that there's no underwater infection that can be spread.
QUEST: Now, let me ask you: do you know, have you determined how Patrick Sawyer became infected? And also how many people he will have
contacted or put at risk as he traveled to Nigeria?
BROWN: Well, not only has he traveled to Nigeria, but even as he interacted here on the homefront. The reports are now that his sister was
infected, and of course, the signs flu -- the normal signs that we have at this time of the year, including symptoms of Malaria, typhoid, dysentery
and the like. And so, it is easy to assume wrongly that some of these cases are Malaria as opposed to Ebola.
QUEST: Right.
BROWN: And so, he -- the suspicion is that he may have been infected from his sister. The history of this case is that the highest level
incidences are among health care workers and those who care for others, including loved ones.
QUEST: Now, is it your belief that the current situation is going to get worse before it gets better?
BROWN: Unfortunately, yes, Richard. It is the belief of the government that this situation, our health facilities, our heath care
workers are overtaxed and certainly overstressed. The matter here has reached a crisis point.
It is now rather than just a Liberian problem or a Sierra Leonean or Guinean problem, it evidently is an international problem. We need all the
international help and assistance we can get. And the dire prognosis is that it will get worse before it gets better.
QUEST: Is there a sense of fear in the cities, in the communities? Obviously, in some of the villages and towns that are affected, but is that
sense of worry and concern, which is obvious, is it transmitting itself through the country into fear?
BROWN: Well, yes. In many places, especially in urban areas, there is -- you get the sense of increasingly fear. But in rural parts, we're
still struggling with the denial, because quite frankly, this dreadful virus attacks the way people have always lived. And so, it comes with a
sense of trepidation, but also denial.
QUEST: And Minister, what -- let's turn more positively. What do you need? What does Liberia need from the international community, in concrete
terms, sir?
BROWN: Well, we need everything we can get. We need PPEs, the protective equipment to help health care workers save themselves, which is
a priority, even as we care for the afflicted. We need experts. We need sanitation and hygiene experts.
QUEST: Right.
BROWN: We need health care workers, we need doctors. That is why we continue to join the family of the two doctors and health care workers who
are now afflicted, we join their family in prayers that they can come through this.
QUEST: All right.
BROWN: And become another shining example that if care is taken, one can come out of this.
QUEST: Minister Lewis Brown, thank you very much for joining us. Obviously, we appreciate your time and we'll talk more about this. Thank
you, sir, for talking us tonight.
CNN's chief medical correspondent is Dr. Sanjay Gupta. He joins me now from the CNN Center. Well, I think the take -- the bit I wrote and I
noticed, and I noticed you were writing down as he was speaking, this is going to get worse before it gets better.
SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: The -- you can project and predict how these things are going to behave, and typically, you start
to see these ebbs and flows in terms of numbers of cases.
But as you know, Richard, it's already the worst outbreak of Ebola in the history. The first outbreak being in 1976. A third of all the cases
over the last 40 years have now been from this outbreak.
And even after the cases start to dwindle down, it's still at least a month and a half after that before you can be sure that the outbreaks --
QUEST: Right.
GUPTA: -- is over. So, there are several considerations.
QUEST: Sanjay, they need everything. I mean, they need personal protection equipment. They need doctors, they need medical staff, they
need -- look, they need everything.
GUPTA: The interesting thing, Richard, is that I was talking to some colleagues, and I was in Guinea, as you know, a couple of months ago.
There are a lot of different resources that are obviously important. The suits that you see us putting on there. You need to cover every inch of
your skin.
What is so striking to me, Richard, though, is even now, at four months into this, part of the problem is that there is still a lot of
misinformation and mistrust. So, you have, for example, in remote villages, funerals that take place where as part of the ritual, you have
the laying on of the hands.
That's why you heard the information minister say they're going to oversee funerals so they can educate people not to touch the bodies,
because that is a source of infection. And you get these tragic stories of people, entire families --
QUEST: Right.
GUPTA: -- essentially becoming infected. But that information campaign is probably as important as the things you're seeing there on the
screen.
QUEST: Sanjay, finally, people watching tonight around the world, everybody -- let's get this down to absolutely brass tacks, here, Sanjay.
People fear that this is suddenly a strain of virus that's going to erupt in a major European city, such as it has in one of these countries in
Western Africa, which is dreadful enough. Is that likely?
GUPTA: I think what is possible is that we'll see a headline over the next few weeks that says Ebola has traveled to a European country or to the
United States or somewhere around the world where it hasn't been. I think that's possible.
That is the world, Richard, as you know better than anybody else, that is the world in which we live. A global world, that people travel around
like that. And it can take 21 days from the time someone's exposed to the time they get sick. In 21 days, you can be all over the world.
But the second part of that is, I don't think it's going to erupt in one of those cities in Europe or in the United States. It's difficult to
spread this, despite all things that you're seeing now. It just -- it doesn't spread until someone is quite sick. When they're quite sick,
they're usually in bed or in a hospital somewhere, they're not up walking around, shaking hands in an airport.
QUEST: Right.
GUPTA: So, that eruption is unlikely to happen.
QUEST: Sanjay Gupta, thank you, sir, for joining us. Thank you, Doctor.
Still to come, QUEST MEANS BUSINESS tonight, we turn our attention -- it's a very busy day, as you can tell -- we must deal with the question of
sanctions and Russia. The West is ratcheting up the pressure, and Russia says, well, it won't work.
And later in the hour, we'll return to the crash site of MH17. Our correspondent managed to get there. The investigators haven't.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes
first.
The Gaza Health Ministry says 17 people have been killed in a shelling near a street market in Northern Gaza. A humanitarian window declared by
Israel came to an abrupt end in the last few hours. The military has responded to continued rocket fire by Hamas with more airstrikes. CNN's
John Vause is now with us live from Gaza City where he's been reporting as Israel resumed airstrikes after a brief lull in the fighting. John.
JOHN VAUSE, ANCHOR AND CORRESPONDENT FOR CNN: Well, Richard, it is relatively quiet here right now, especially compared to the last two
previous nights when Israel really hammered many parts of Gaza. It still is very tanked in artillery, continued to fire, especially in the south.
Many of those areas, though, have in fact been evacuated, and a few targets have been hit by Israeli airstrikes in the last few hours. Hamas continues
to fire those rockets - 84 in all today, that according to the IDF, the Israeli Defense Forces. Sirens were heard in towns like Ashkelon and
around the Beersheva, region inside Israel.
And according to Hamas-controlled media, there are ongoing clashes right now in the Beit Hanoun and area in the northern part of the Gaza
Strip between Hamas militants and Israeli soldiers there on the ground. There's no confirmation of that though from the IDF. And earlier the
Israelis did declare a four-hour humanitarian window. That lasted less than three hours, maybe about two and a half hours. The Israelis had
warned that if Hamas continued to fire its rockets which they did because they never accepted the ceasefire - in fact they fired 26 rockets in all
during that temporary truce, then the Israelis would respond and they did. And they hit a market downtown Gaza City. As you say, 17 people killed
there at last. This is according to officials here in Gaza, more than 200 wounded. Richard.
QUEST: John Vause in Gaza City tonight for us. Thank you, John. Leaders from the G7 have warned Russia that it faces more sanctions unless
it changes course in Ukraine. Russia today criticized Europe for intensifying sanctions described as thoughtless, irresponsible steps that
will drive up energy prices.
Foreign diplomats and workers are being evacuated from Libya. France and Germany have closed their embassies and evacuated the remaining
citizens that were in the country. The British Embassy remains open despite the chaos in Benghazi. Liberia's security force has been ordered
to enforce tough new action plan by the government to prevent the spread of Ebola. All schools across the country will be closed. Nonessential
workers are being put on compulsory leave for 30 days. A short time ago, the information minister told me the situation will get worse before it
gets better and they need all the international help they can get.
The U.S. economy is firmly back on track after that rough patch in winter. In the second quarter it grew 4 percent and reversing the
contraction seen earlier this year. Eight close associates of President Vladimir Putin have been added to the E.U.'s sanctions list a day after
both the E.U. and the United States unveiled a new round of sanctions - in those cases targeting banks, energy companies and exports.
In the last few hours, the G7's released its statement and it promises to "further intensify the costs" to Russia if it does not choose the path
of de-escalation in Ukraine. So much for what the West is saying. A prominent lawmaker Alexei Pushkov has tweeted that, "U.S. President Barack
Obama will make history not as a peacekeeper, but as the statesman who started a new cold war." The United States says this all shows the U.S.
means what it says. David Cohen is the U.S. Treasury Undersecretary for Terrorism and Financial Intelligence, the man in charge of deciding how
U.S. sanctions will be implemented. I put it to him that these latest sanctions were noticeable - ratcheting up the pressure.
(BEGIN VIDEOCLIP)
DAVID COHEN, UNDERSECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE: I think this is a significant step up in the pressure with respect to what
Russia is doing in Eastern Ukraine. You know, as you know, we have been working for several months now, going back to March, when the Russian's
first invaded Crimea, to steadily but quite deliberately increase the costs on Russia for its adventurism in Crimea initially, and now in Eastern
Ukraine. And as the Russians have continued to supply the separatists in Eastern Ukraine with arms, continue to train them, equip them and support
them, we've been very clear we will continue to increase costs. And that's what we did yesterday along with our counterparts in Europe. We've been
working very hard -
QUEST: Right.
COHEN: -- to bring together the Europeans with us on this effort.
QUEST: On that point, do you now feel much more satisfied that the Europeans are on the same page. Previously - my words, not yours - there
may have been some recalcitrance from the Europeans to engage in heavier sanctions which might have European economic impact.
COHEN: Well the Europeans have been acting all along as well. They've imposed sanctions on the separatists, they then imposed sanctions
on those in Crimea, and we have been working - President Obama has been working himself - through the G7 and he's been working the phones with his
counterparts to bring along a very formidable coalition including E.U., but also including our partners in Japan, our partners in Australia, in Canada
to work together to impose serious sanctions on the Russians.
QUEST: What if President Putin decides to brazen it out?
COHEN: Well, look, I'm not going to predict what might happen. I think President Putin, like any leader, needs to take account of the
economic situation in his country. And as the economy in Russia continues to deteriorate, you know, from what was predicted to be a low growth to now
a zero growth or even a recession environment, as foreign capital flees Russia, as the ruble weakens, as the cost of borrowing increases, you know,
that all I expect will play on President Putin's considerations and, you know, will make it increasingly clear to him of the choice that he has
between continuing to arm and support the separatists in -
QUEST: Right.
COHEN: -- or to choose the path of de-escalation.
QUEST: One of the banks that you've sanctioned is a domestic bank and says the U.S. sanctions will have no effect. The other -- one of the
others is VTP and says it's disappointed but it will have no long-term effect on its funding requirements. Now, you might arguably say, `they
would say that, wouldn't they?' But if they are able to circumnavigate them or it's not going to have any effect, you've wasted your time.
COHEN: Well, the reality is those banks are heavily funded in dollars, upwards of 70, 80, 90 percent of their financing comes in dollars.
And in order to get that dollar financing, they need access to the U.S. market. Now, they may try and find financing from other sources. They
won't be able to find it in Europe, they won't be able to find it in the United States, but the cost of that financing - which they need in order to
continue to operate - is going to steadily increase. It's going to draw down I think on the Russian Central Bank which will be called upon to try
and fill the hole that's going to be created by their inability to access the U.S. market or the European market. And that will - that will impose
another cost on Russia for its activities.
(END VIDEOCLIP)
QUEST: That's the undersecretary to Treasury - the man who helped put together the list, who sits at the table. As sanctions are now starting to
wall off the Russian economy, companies are warning they're feeling the effects. We already know BP and Renault -we told you about their earnings.
They both warn about potential implications. McDonalds has been slapped with a lawsuit alleging it's violated consumer safety, whether justified or
not. So these are the ones we already got, but others -- bricks are being added. Total has stopped buying shares of natural gas producer Novatek.
Total has huge interests in Russia. It is deeply imbedded into the country. Meanwhile, Airbus and Boeing, who are selling vast amounts of
planes as Russian fleets are upgraded, they both say they are exploring different alternative ways to receiving their titanium supplies because
Airbus and Boeing rely on titanium from Russia.
Think about it. If the sanctions eventually hit industrial production and metallic production and raw materials, then these companies will be
badly affected. As for Peugeot Citroen, it says, the chief exec, a fall in Russian consumer confidence will weigh on the market. It's extraordinary.
You will start to see this wall built ever higher as the sanctions start to bite. Now there is one company - think of it as the French company, the
Defense Contrata (ph) DCNS. It's become under fire because of its deal to sell warships to Russia. The company said - the chief exec said - that the
deal to sell those warships to Russia would go forward.
(BEGIN VIDEOCLIP)
HERVE GUILLOU, CEO, DCNS, VIA TRANSLATOR: The industrial contracts are currently being executed in accordance with our commitments. The first
ship is nearing completion, the second ship is about halfway there. And like any normal industrial company, we strive to satisfy our customer and
to execute the contract. Politicians can decide what they want to, but today the president told us that the first ship must be delivered.
(END VIDEOCLIP)
QUEST: Interesting point to note. The sanctions that were introduced in principle yesterday for an arms embargo to Russia only relates to new
exports of arms, new orders of arms. In other words, the DCNS deal wouldn't be covered. One can only wonder perhaps how much pressure the
French put for the `new' to be added to the restrictions. After the break, we check into a hotel without stopping at the front desk. It's "Quest
Means Business." We're live in New York.
(COMMERCIAL BREAK)
QUEST: Hilton Worldwide has launched a new app which enables customers to check in, pick a room, even order food, all from a Smartphone.
Not the first of course. Marriott, Starwood and others have a similar option. Only this week Choice Hotels announced drivers can make
reservations from some Ford vehicles. You get an idea now that the hotels are integrating smart technology ever faster into the hotel and hospitality
experience. The chief exec of Hilton told Laurie Segall the hotel business has lagged behind other industries when it comes to adopting technology.
(BEGIN VIDEOCLIP)
CHRISTOPHER NASSETTA, CEO, HILTON WORLDWIDE: This is really about revolutionizing the way that we engage with our customers. From the first
time they dream about taking a trip, to booking a trip, to checking in, during their stay and post-stay. And it really is about giving them
unprecedented levels of choice and control in how they interact with us.
LAURIE SEGALL, TECHNOLOGY CORRESPONDENT FOR CNNMONEY: Take me through specifically what we're going to be able to do now.
NASSETTA: So what you're going to be able to do, OK, is you're going to be - these are things that we have been testing and working on and
rolling out in smaller ways around the U.S. and around the world over the past three to five years. And now it is sort of culminating in what we're
doing today with the rollout of our newest technology initiatives.
And that is going to allow you, by the end of the year, to have e- check-in, specific room selection, just like you select a seat on a plane, you can select on the map of the hotel, you can select your room. It's
going to allow you to do upgrades, it's going to allow you to order things for your room pre-arrival, it's going to allow you to interact while you're
with us, it's going to allow you to check out. And all of this is going to happen at global scales. The final step in the - in that chain is being
able to go straight to a room so that you can use your smartphone as your key so you don't have to go to the front desk. So we now have the e-check
in, we have room selection, checkout. The next step is straight to room. We have developed proprietary technology that is fantastic, it's been fully
tested and we'll start rolling that out actually in January of 2015.
SEGALL: Hotels have been a little bit slower to adapt to the technology. Obviously the stakes are very high when you're looking at this
kind of thing. When I think about my Delta app, I can go on and pick which seat I want. And this is almost groundbreaking that you guys are doing
this. I can now go on my phone and choose what room I want. Why does it take so long to adapt to technology for this industry?
NASSETTA: I think you're absolutely right. The hotel industry has been historically behind the game on technology. And I think it has to do
with a lot - a lot of different factors. I think the most important one is that the hotel business, certainly for those of us that are very big in
scale and global, is a complex model, unlike an airline that is pretty traditionally a Delta or American or whatever, they sort of, you know, have
control over their aircraft, they have X number of 737s, X numbers of triple 7s, whatever, you know, sort of more limited inventory and that
inventory is sort of under their control. Our business, if you think about it, we have properties that we own which is a minority, we have properties
that we manage, we have properties that we franchise with third parties. And they operate those properties and they're in 100 countries, and every
hotel is a little bit different.
(END VIDEOCLIP)
QUEST: That's the chief exec of Hilton Hotels. Jenny Harrison with the World Weather Center. How nice to see you, Ms. Harrison.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Very nice to see you as well, Richard. You look - you look a bit healthy to me I have
to say. Haven't seen each other for a month, but yes, nice weather. That's obviously where you got your tan from, but I have to tell you that
of course in some parts of Europe the weather perhaps a little bit too warm for some. Let me start by showing you the satellite because we've had some
pretty torrential rain as well which is typical when you get this really hot just building and reducing some pretty strong thunderstorms. You can
see in the last few hours, Central Med pushing into the southeast. In fact, some warnings in place here as we continue Wednesday into Thursday.
Clearing skies out across the west and very warm and sunny across eastern regions as well.
Now, the rain that came down in the U.K., this was really on Monday but it came down in such a short space of time. Forty-three millimeters to
Great Dunmow as you can see, in Isfield we've got 37 millimeters. Nearly a month worth of rain in one hour. It caused all sorts of problems, real
disruptions on the roads, also Gatwick Airport for times when the flights were postponed and delayed because of the weather conditions, and some of
the towns in the south as well. We're so inundated with water that underpasses were actually literally fall out.
But once the rain had cleared, well, lots of lovely weather to do this - summer sightseeing. You see the Millennium Wheel in the background and
this other contraption the girls are on. But if that looks a bit like (ph) too much sort of effort, well then you just and find yourself a nice deck
chair - look -- in Hyde Park. The weather's continuing very nicely.
At the same time - some very strong storms, a very dramatic picture here. This one in the South of France in Nice. You can see those
thunderstorms really coming across the sky. And indeed, there was some very heavy rain all throughout the week. And these are the latest totals
just this Wednesday - 85 millimeters, 94 in Zadar in Croatia, so, again, you get the general idea. The system bringing the rain has been working
its way across Western Central and eventually southeastern portions of Europe. So do expect some delays with your travel, particularly by air.
The roads of course as well because the rain's been so heavy. We've had some very localized flooding, so it might look OK in most areas, but,
again, flash floods have really been coming up over the last few days. This is the system - some very heavy rain with that system - but still very
hot ahead of that rain as it heads its way eastwards. And you can see where the warnings are. Very heavy rain, hail, strong winds, particularly
in all these areas, particularly on the coast of course as you can see there in areas of the southeast.
Now again, this day a very, very warm one - 33 Celsius in Moscow, so 10 degrees above the average, we've got 30 Celsius in Tallinn in Estonia.
And so what do you do when you've got to try and stay cool? Well here's what people have been doing in Moscow - jumping in the fountain - probably
not allowed, really, are they to do that? They tend to come and get you out, but you can see it hasn't stopped this couple having a bit of fun.
And the next few days no real relief in sight from those temperatures. Remember, this is all really ahead of that next system. We've got 33 for
the next couple of days - Friday and Saturday - in the mid to high 20s in Helsinki and Warsaw actually warming up most certainly as you head into the
weekend. And then just finally, the Commonwealth Games continuing. Quite a bit of rain. It's dry right now in Glasgow. Unfortunately, there's
plenty of rain in the forecast. So, we've got quite a few showery days ahead as we continue over the next few days. This of course now into the
first full week of the Commonwealth Games. Rain on just about every day. Not much there in the way of sunshine. Richard.
QUEST: Oh, it's such a shame, isn't it? Such a shame when (inaudible) events. Thank you. All right, Jenny Harrison at the World
Weather Center. Thank you, Jenny. And good to have you back. Nice having you back, indeed.
Now, when we come back, unsafe conditions in Eastern Ukraine. It's kept investigators from the MH17 site. It's the fourth consecutive day.
Our team on the ground found their way to the site. We will show you in a moment.
(COMMERCIAL BREAK)
QUEST: Some might say too little too late. There is at least a sliver of humanity visible tonight at the crash scene of Malaysia flight
17. CNN's Nick Paton Walsh and his team got exclusive access to the site, even as investigators stopped on their way and turned back, citing unsafe
conditions. The CNN team sent back this image - teddy bears, rose petals placed next to the debris from the wreckage by locals to honor the fallen
victims. Nick Paton Walsh now joins me from Donetsk. Good evening, Nick.
NICK PATON WALSH, SENIOR INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL: Richard, it seems increasingly unlikely the inspectors will
get access in the days ahead. We heard as much in a statement from the Dutch today. We saw ourselves the reason why. Black smoke from many
different points and horizon around the crash site. It itself, abandoned but still ghostly in what remained.
(BEGIN VIDEOCLIP)
WALSH: The road isn't easy past shelling, eerie separatists checkpoints. But where it leads is harder still. In beauty nothing surely
could spoil lies a horror still unresolved. Twelve days since MH17 was blown out of the sky, it remains here, a monument to cruelty to how 298
souls, some shipped in parts away on a separatists' train have yet to find complete rest.
Questions left -- what or who else did they love? What did they feel in their last moments. The silence in these fields is that of a tomb-like
sorrow and loss have isolated it from the war around it. But you really have to stand here and see the things that people wanted to take with them
on holiday, and horrifyingly, even now smell the stench of decay. To understand the urgency from relatives of those who died here must feel to
get inspectors to this sight and get some kind of closure.
In the hour we were there, no separatists, inspectors or Ukrainian soldiers at this site. Just distant smoke, but explains why the
inspectors' large convoy has not for the fourth day running got here. "God save and protect," us the sign asks. Not here, still reeking of jet fuel
where you can see the heat of the inferno, they fell from the sky. Strangers have tried to mourn. The scene of this crime has been abandoned,
evidence tampered with. What must be shrapnel holes, visible in the cockpit's remains. A wallet emptied, a cell phone looted. Traces of
daydreams that fell from the Jetstream into a war whose daily horrors drowned out that which took their lives, whose blind hatred has yet to find
space for the minor dignities they deserve.
(END VIDEOCLIP)
QUEST: Nick, in a brief sentence or two, who is doing the fighting?
WALSH: The Ukrainian army are moving very quickly to retake as much that they can. They're not moving as fast as they want, the separatists
are tenacious. They have heavy weaponry. I think at the end of the day, - - call it the cynical viewpoint - the Ukraine government wants to be the ones to offer access to that site and at the end of the day, I don't think
inspectors will get it until the Ukrainians have advanced and secured it. Richard.
QUEST: Nick Paton Walsh. Thank you very much for joining us. We'll have more after this break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." If you look on the report from Standards (ph) & Poor's, and you look under Argentina, you see the foreign
currency rating is now put at `selective default'. That means that the country has now been ruled to be default on its bonds. The question of
course is how this plays out. What happens now the country's on selective default, and how the two sides - the bondholders, those that are holding
out, the judge, the country itself - how they resolve themselves. One thing is certain for the people of Argentina, the fact that the country has
now for the second time in two decades been put in default -- even if it's technical - is a serious matter for their economy. And that's "Quest Means
Business" for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. Please join me tomorrow.
END
