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QUEST MEANS BUSINESS

Russian Foreign Minister's Irritation with US; US House Approves Aid for Ukraine; Obama on Ukraine Crisis; EU and US on Ukraine; EU Response to Ukraine Crisis; US Sanctions Against Russia; Russian Stocks Down; European Markets Up Slightly; S&P 500 Hits New High; EBRD Ready to Assist Ukraine; ECB Head on Ukraine; ECB Interest Rate Decision; Breaking News: United Nations Meets on Ukraine

Aired March 6, 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: The S&P is at a record, the Dow has shown good gains. It's difficult to know what to make of these markets with the crisis in Ukraine. Hit the hammer, it is Thursday, it is March the 6th.

Tonight, the US and Europe take action on Russia. We'll ask Ukraine's foreign minister if today's sanctions and the measures they've announced, will they be enough?

Also tonight, Europe stands united. In an exclusive interview, the president of the Commission tells us why the action it's taken will help end the crisis.

And a multibillion-dollar makeover. The EBRD, European Bank for Reconstruction, tells me how it can help revive Ukraine's economy.

We have a very busy hour together, and I mean business.

Good evening. Let me begin by giving you the very latest on the crisis in Ukraine. Russia's foreign minister, Sergey Lavrov, expressed irritation with the United States' approach to negotiation.

Mr. Lavrov said talks over Ukraine are taking place in an aggravating atmosphere, with Washington threatening to place travel bans on unidentified officials. Mr. Lavrov, who met the US secretary of state John Kerry for a second day, this time in Rome, said it was impossible to act honestly under the thumb of ultimatums and sanctions.

Meanwhile in Washington, the US House of Representatives approved a financial aid package for Ukraine. It authorizes a billion dollars in loan guarantees. The vote overwhelming, 385 to 23.

President Obama spoke publicly this afternoon on the subject, stressing the crisis can be resolved by diplomatic means.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Let international monitors into all of Ukraine, including Crimea, to ensure the rights of all Ukrainians are being respected, including ethnic Russians.

Begin consultations between the government of Russia and Ukraine, with the participation of the international community. Russia would maintain its basing rights in Crimea, provided that it abides by its agreements and respects Ukraine's sovereignty and territorial integrity. And the world should support the people of Ukraine as they move to elections in May.

(END VIDEO CLIP)

QUEST: So much for the verbiage, if you like, and the statements being made by political leaders, but what about the action that actually took place today? Who did what?

Well, the US and Europe and announced some of the ways that they will make Russia pay for intervening in Ukraine. I want to show you, because these are measures more than sanctions. And here's today what we learned.

Let's start with the European Union, which is halting talks on scrapping visas. So, visa talks are suspended. It's highly controversial, it's something the Russians want, a visa-free to the European Union. Well, those talks are now suspended.

Other measures could go ahead if the diplomatic process doesn't proceed. For example, there could be an asset freeze on Russian financial assets. The oligarchs of London and Paris could feel the weight of that, to say nothing of some of the companies.

And there could be a travel ban on named individuals, but this one is still some way off. At the moment, these are the most likely.

The United States has gone for a visa ban. No entry visas for Russians and Ukrainian officials responsible for threatening Ukraine's sovereignty. We don't know who's on the banned list. It's believed that President Putin, as the national leader, is not on the list.

President Obama also signed a law authorizing financial sanctions against specific people and freezing their assets and property that are in the United States. And, of course, US companies could be ordered not to do business with those individuals.

As you can see, the gist of what's being talked about at the moment is far from full-fledged trade sanctions. It's freezes, it's visa bans, it's visa talks suspended. Becky Anderson has been speaking to the president of the European Commission, Jose Manuel Barroso, about these measures.

(BEGIN VIDEOTAPE)

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: Turchynov of Ukraine appears to us a very moderate, reasonable person. He said to us he has -- he wants to have a construction relationship with Russia, so we think as well we want to have a constructive relations with Russia, but of course, we cannot accept the kind of behavior that we have seen the last days.

So, what we are focusing on is precisely how can we help a peaceful negotiated solution for Ukraine, of course between the government of Russia and the government of Ukraine. And how can we support all the efforts for stability and peace in Ukraine.

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: And with respect, how can we still continue to conduct our business with Russia, as it were, Germany, the Netherlands, Italy, the UK, on a regular basis? This a very costly --

BARROSO: Very important.

ANDERSON: -- position --

BARROSO: You are --

ANDERSON: -- for many European countries, isn't it?

BARROSO: You are absolutely right. Let me tell you, I am now for ten years president of this commission, and I can tell you very openly and frankly that I saw today great convergence between all the governments of Europe. It's true that for historical and geographical reasons there are differences --

ANDERSON: I felt deep divides.

BARROSO: No. No, but you are -- I'm sorry, but probably you felt that before the meeting. After the meeting, I can tell you, and if you look at the conclusions, they show a great degree of convergence.

And let's not forget one thing. United States is one country and we are very much welcome the positions of the United States, working very closely with the United States, but we are 28 countries, you see?

ANDERSON: Sure.

BARROSO: So, we have to have a position that fulfills all the sensibilities. And I can tell you, it is a strong position, by the way. Nothing will be business as usual with Russia. We have decided not to continue with association -- with a new agreement with Russia, not to support the G8 consortia where we are also members of the G8.

We have decided, for instance, not to continue with the negotiations on visas that are very important. So --

ANDERSON: All right.

BARROSO: And we are ready even to go to other measures if there is not a constructive developments now.

(CROSSTALK)

ANDERSON: Let me put this to you. I wonder whether you feel that the US isn't out of lockstep with where the EU is at present. Already we see - - hold on, sir -- already we see visa bans on both Ukrainians and Russians that they believe have been complicit in this violence.

The president signed an executive order allowing for the groundwork to be laid for trade sanctions and asset freezes. That is not what we are seeing here. Have the Americans gone too quickly --

BARROSO: No.

ANDERSON: -- down one route here?

BARROSO: I think we are -- our actions are complementary. But of course, the United States are more distant from Ukraine. We, for instance, we could offer Ukraine something that the United States cannot do is this association agreement that we actually have with neighbor countries.

At the same time, if you look carefully to the conclusions, it is a step-by-by step approach. So we say that these are some measures that we are taking now, immediately, but if there is not constructive developments in the near future, we are ready to go on for other measures. But --

ANDERSON: If the US were to impose trade sanctions anytime soon, would that hinder rather than help --

BARROSO: No. No. I am not saying that.

ANDERSON: -- this crisis?

BARROSO: I'm not saying that. I'm saying that the United States are taking very important positions, and I think they are making their judgment, of course, also considering their interests. And we are making our assessment as well.

And I think the efforts are really complementary. The issue is not a competition between the United States and Europe. The issue is how can we promote peace and stability in Ukraine?

(END VIDEOTAPE)

QUEST: That's Jose Manuel Barroso speaking to Becky Anderson in Brussels tonight. Lisa Desjardins is in Washington for us. Lisa, the measures being taken by the US, the vote that was taken in the House of Representatives, is it grandstanding, or is it your understanding that actually these will have real teeth?

LISA DESJARDINS, CNN CAPITOL HILL CORRESPONDENT: There is certainly the will here, Richard, to have real teeth, but I have to tell you something that I don't think has been reported very widely, there is a sense of growing caution here in Congress that sanctions that the US may push forward on could hurt our European allies and could hurt the US, potentially, economically.

I just came back from talking to a conservative congressman, someone who I would certainly call sort of a Cold War hawk, I said first of all, where are you on Ukraine and Russia right now, he said, "Oh, we have to ramp up. This is essentially reopening the Cold War," full of rhetoric, full of very serious, strong words.

And then, I asked him right after that, Richard, "So, you want to move forward with tougher sanctions?" Pause. "I don't know yet, because I'm worried about the economic effects."

QUEST: Right.

DESJARDINS: So, there are two things. There are words and action. The US is moving ahead with action more quickly than Europe, but watch these steps. These are not yet very large steps. These are just the first initial steps.

One other thing, Richard, on timing to watch. The US Senate, of course, is the body that is toughest to get things through these days, and the US Senate leader said yesterday that he doesn't think there could be a vote on sanctions in his body for another three weeks. So that tells you that I think this body, the Democrats at least --

QUEST: Right. Lisa --

DESJARDINS: -- are making room for the president to act.

QUEST: Right, and we have this executive order --

DESJARDINS: Right.

QUEST: -- that has been promulgated, but I'm not sure the extent of this order. What can he do by fiat?

DESJARDINS: I think the -- we're seeing a White House right now that is trying to figure that out themselves. I wish I had a definitive answer, but we know for now what the White House believes they can do is set up a system where as situations warrant, we are told, they can start invoking some financial asset freezing on some people -- some Russians --

QUEST: Right.

DESJARDINS: And it's important to know, and I think you've said this, these are measures, not sanctions yet. They haven't actually put these into effect. They've only said we can do this, we're starting to lay the groundwork. And they've stressed it's situational.

So, I do wonder to some extent if these sanctions have been -- or so- called sanctions -- have been a little overblown so far. It's the US signaling they're ready to make serious moves, but I don't think making the tough moves yet.

QUEST: Is there unanimity between the political parties, or is it starting to fray?

DESJARDINS: I have to say, amazingly, so far, publicly, there is still unanimity on Ukraine. But even as we talk, discussions are going on behind the scenes over the tough stuff, over how far do you go?

And I will also say, behind the scenes, Republicans are using every opportunity to essentially badmouth President Obama, to blame him for this situation, to say his foreign policy is what got the world to this point. That's behind the scenes. In public, our lawmakers are trying to show a unified front.

QUEST: Lisa, good to see you. Thank you for joining us, putting it into perspective, the view from Washington tonight. We thank you.

DESJARDINS: Always a pleasure.

QUEST: We thank you for that. Now, stocks in Moscow fell on the session with the news coming out of the international sanctions and the discussions on that. The MICEX was down 1 percent. Year-to-date it's down 11 percent.

Europe's main markets were -- well, have a look at the numbers yourselves. They were up, but barely a smidgeon. If you take the DAX, which is the largest market, of course, in terms of the Russian significance, it's just barely changed. Little change in the Paris CAC 40.

Alison Kosik is at the New York Stock Exchange. We eked out a small record on the S&P and the Dow -- I think the best way to describe the Dow, it held its nerve.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, definitely. You know what's interesting about the situation in Ukraine in Russia and as far as investors go here? At least for today, they really don't seem to be too worried about the situation there, at least not for today.

If they are, they're certainly not showing it in the trade, because investors were clearly in a buying mood today, as you said, pushing the S&P 500 to get another all-time high. The Dow, by the way, is just 160 points from its all-time high, Richard.

The focus now is going to turn here to domestic issues: jobs, specifically, because tomorrow the government jobs report for February coming out. We'll watch everybody just blame the weather, Richard.

QUEST: The weather, whatever the weather, we'll weather the weather whatever the weather. Alison Kosik, who is at the New York Stock Exchange this evening.

Europe's bank for reconstruction and development says it's got a duty to help Ukraine get back on its feet, and it's willing to commit $5 billion and wants major reforms before the money is spent. You're going to hear from the EBRD after the break.

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(COMMERCIAL BREAK)

QUEST: The head of the European Bank for Reconstruction and Development says the bank is ready to help Ukraine get back on its feet and an even keel, promising to invest more than a billion dollars a year in Ukraine in the coming years. It was all announced as part of the EU package of money that was -- that we heard about in yesterday's program.

All of this dependent on the Ukrainian government committing itself to reform. Now, the EBRD set out its main goals: fiscal consolidation is top of the list. What does that mean? In other words, Ukraine has to spend and borrow less.

It also wants to see political stability and political stabilization. That's most pressing for everyone concerned with a heavily-armed neighbor in control of parts of the country.

And the bank wants in Kiev to foster the private sector. That's the specialty, of course, of the EBRD, investing in private companies, in this case, SMEs, small and medium size. It's essential, ultimately -- this is the word you need to look at: good governance. Root out corruption, and the interim authorities have made positive noises about that.

The bank says Europe stands ready to help in all these challenges. Jonathan Charles is a member of the executive of the EBRD. He joined me from London, and I asked, well, with all this money, what would the bank be doing with it in Ukraine.

(BEGIN VIDEOTAPE)

JONATHAN CHARLES, EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT: We are part of the international community's response, Richard. You'll have seen the announcement from the European Union, that's on what they're doing.

And then separately, they said what the wider international community would be doing, and we've said that we think over the next seven years, we could possibly invest somewhere around 5 billion euros of our money from the EBRD in Ukraine.

We'd be looking at all sorts of things. We're just assessing at the moment what the needs of Ukraine are, and that's a very complex matter. But clearly, it's very important to develop the private sector. If the country is to have growth, it really needs better and stronger private companies.

QUEST: There's no question, that 5 billion, 800 million a year or a billion -- that's being spoken about is longterm investment money, and Ukraine needs short-term bailout help. So, you're not on that side of the equation, are you?

CHARLES: Richard, what you've got to do is look at the whole international community response. You're absolutely right, what's needed right now is some immediate help for Ukraine, and that's why the International Monetary Fund -- and I certainly won't speak on their behalf -- they've got a team at the moment in Kiev, they're talking to the Ukrainian authorities about what needs to be done.

It's very clear that the country needs a macro economic stabilization program. It has big debts, and something has to be done about that, so it does need that short-term help. And in fact, what we say is let's get that short-term help in and then, of course, you have to start thinking about building the economy in the medium and long term.

And we are, in fact, doing some things in the short term as well. We'll certainly being have some investments in companies even in the months ahead, and we've already made some investments so far this year.

QUEST: Before you put any of the big bucks or the big euros, the 5 billion in, you're going to have to wait for some of the reforms to take place, the transparency, the corruption, all the things that prevented the Europeans from putting money in before but are now, obviously, have to some extent risen up the agenda. How long can you wait and what reforms does the EBRD want to see before you start paying over the money?

CHARLES: I think it's very important, Richard, that the new authorities in Ukraine, that they move forward very swiftly on reforms, in particular improving the investment climate, tackling corruption.

It was about a year ago that we went very public in Ukraine, in Kiev. We had a meeting with President Viktor Yanukovych, and we told him -- and then we went public afterwards -- and said the country's corruption problems were so serious that we were going to have to start cutting back on our investments in Ukraine.

Which is what we did last year, in order to send a signal to the government, and we would have done the same this year, to send a signal to the government they had to act on corruption at all levels, because it was becoming really quite problematic.

(END VIDEOTAPE)

QUEST: Jonathan Charles of the EBRD. The European Central Bank left interest rates alone, but everybody was keen to hear what the head, the president of the bank, Mario Draghi, said on the question of Ukraine. The eurozone economy should not suffer directly from the crisis, but that could change.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: We look at the amount of trade in goods, services, and financial services and flows and capital flows. We -- we have to say that the interconnections are not as important as to suggest a strong contagion from that region.

However, let me also add that this would be a limited way to look at the situation, because the geopolitical risks in the area could quickly become substantial and generate developments that are unforeseeable and potentially of great consequence.

(END VIDEO CLIP)

QUEST: Mario Draghi. Now, the policymakers, the ECB governors, decided to keep interest rates on hold. They're just a quarter of a percent. Draghi said the latest forecasts point to modest growth continuing. The projections are slightly more upbeat than they were in December, where the growth was nudged up just slightly, 1.2 and 1.5 percent penciled for next year.

The big issue, of course, is what's happening with inflation and whether or not the eurozone is going to suffer deflation, should the ECB council be doing more? I asked Philippe Gudin, the chief European economist at Barclays, whether the ECB was doing enough on deflation.

(BEGIN VIDEOTAPE)

PHILIPPE GUDIN, CHIEF ECONOMIST, BARCLAYS: I think deflation is a risk. It's certainly a risk, and I think it's probably underestimated by the ECB. So, for that reason, I think it's probably underestimated by the ECB.

So, for that reason, I think ECB should do more. I was a bit disappointed today that they didn't do anything. And the reason for the status quo today were not convincing, I must say. I still believe that the risk for inflation is at the downside and I don't believe that we really run a risk of a deflationary spiral like in Japan, for example.

But I think the risk is mostly to have a very long period of very weak inflation, possibly even zero inflation, which is bad news for debt sustainability.

QUEST: What would you like to have seen the ECB do?

GUDIN: I think there are three sets of measures which are available to them. The first one, of course, is to cut rates again and put rates definitely zero. It wouldn't do that much, but it would send a very strong signal that the ECB is acting.

The second one is to improve liquidity in countries in the euro area, and for that, they could possibly do another LTRO, not so much because there is a huge need of liquidity, but because there's an uncertainty regarding the end of the current LTRO and if risk needs to be pushed back.

And the third set of measures which could be envisaged is some sort of credit easing. Mario Draghi mentioned these measures today when he said that the ECB could intervene in the EBS market or could do a signing for lending scheme, and this is something which would definitely help to lower the risk of deflation.

(END VIDEOTAPE)

QUEST: Now, coming up after the break, how arashnids (sic) could spearhead a medical revolution. I'm not at all sure I've pronounced that word correctly. Arachnids. There, I knew somebody would tell me. I'm still not sure what they are, but anyway -- ah! Yes, I can hear you all just sort of screaming, ignoramus, they're spiders! Find about amazing strength of the spider after the break.

(RINGS BELL)

(COMMERCIAL BREAK)

VITALY CHURKIN, RUSSIAN AMBASSADOR TO THE UNITED NATINOS: -- to question himself, and I quote, "Russia" --

QUEST: Russian ambassador to the UN.

CHURKIN: -- "and at that time, Soviet Union, tried to press Western allies to recognize what you call Banderas and others that they were killers. Why Nuremberg process didn't recognize that? Because it was falsified. Because the position of the Soviet Union was not fair at that time," end of quote.

What I'd like to say is the following: massive documentary evidence proves that the organization of Ukrainian nationalists, OUN, and Ukrainian insurgent army, UPA, collaborated with the Nazis. They took part in mass killings of civilians and punitive operations against partisans in Belarus, Ukraine, and Poland.

On June 30, 1941, with the invasion of Ukraine by Nazi troops, Stepan Bandera issued the Act of Proclamation of Ukrainian Statehood, which declared that, and I quote, "the newly-formed Ukrainian state will work closely with the National Socialist greater Germany, which under leadership of Adolf Hitler, is forming a new order in Europe and the world," end of quote.

In 1941, Ukrainian Nazi collaborators provided the majority of the executioners who murdered over 150,000 Jews in Babi Yar in Kiev. Gypsies and Soviet prisoners of war were also executed there.

In 1942, OUN was involved in a campaign of ethnic cleansing in Volhynia, Poland. Over 100,000 women, children, and unarmed men were slaughtered. Polish historians calculated that 135 different sadistic methods were used to kill innocent people.

In 1942, OUN's campaign of mass extermination of Poles and Jews continued. On January 28, 2010, Simon Wiesenthal Center expressed, and I quote, "deepest revulsion," unquote, at the decision by then president of Ukraine to honor OUN's leader, Bandera.

And I quote, "who collaborated with the Nazis in the early stages of World War II and whose followers were linked to the murders of thousands of Jews and others," end of quote.

On February 25, 2010, the European parliament adopted the resolution in which it expressed deep regret for the decision posthumously to award Bandera, a leader of the OUN, which collaborated with Nazi Germany, the title of National Hero of Ukraine. The European parliament called on the Ukrainian leadership to reconsider such decision and maintain its commitment to European values.

Polish president Lech Kaczynski stated on February 7, 2010, that OUN and UPA, and I quote, "were engaged in mass murders of Polish civilians in the eastern territories of the second republic, killing 100,000 people. Poles were being killed for being Poles," end of quote.

It is deeply disturbing that the followers of Bandera are openly marching these days in Ukraine, displaying his portraits and fascist insignia and are wielding considerable political power in Kiev. Attempts to whitewash OUN and UPA are not only morally repulsive, they amount to encouraging nationalist ideology, extremism, and intolerance.

Now, I'll move back to our discussion today. As you know, we heard a briefing from Mr. Eliasson. I'm sorry Ambassador Lyall Grant, who requested the consultations, was not here, so I came to the stakeout first. I'll be very brief.

We appreciated the remarks which Mr. Eliasson made, where he is correct, his understanding of the situation. We welcome the fact that Mr. Simonovich (ph) is there in Ukraine now and hopefully will be able to meet with people who will give them their understanding of the situation with human rights in that country.

I also sort of continued the discussion we had at a previous meeting of the Security Council when some colleagues were talking about diplomacy - - democracy in Ukraine and were referring to the new authorities as legitimate authorities, so I went back to this transcript of the phone conversation between the foreign minister of Estonia and Baroness Aston of March 5.

I explained that I did it for two reasons. One, the foreign minister of Estonia confirmed that those were authentic remarks which she made. And two, unfortunately, that transcript, which created quite a stir in Russia and on some European media, was completely ignored by the mainstream American media.

And I specifically quote two elements of the remarks, which the foreign minister of Estonia made to his to Baroness Ashton.

The first one, when he describes the intimidation of the members of parliament of Ukraine when unwanted people visit them and the journalist who accompanied him saw a member of parliament being beaten up in broad daylight in downtown Kiev. So, you can imagine what is happening outside of broad daylight and the eyes of journalists.

So, under those circumstances, it's hard to imagine how such a parliament, operating under such circumstances, can be regarded as a legitimate parliament which can pass legitimate decisions on the future of Ukraine.

And the second quotation which I presented to members of the council was the one referring to the conclusion which the people in Ukraine came up to that it was one source of sniper fire which killed a large number of people during the final stage of the dramatic developments in Kiev. And of course it's not -- and also to the fact that the new authorities somehow are avoiding investigating this shooting and what happened in Kiev from the last days of the crisis which led to you know to the February 21 agreement for the dramatic developments. I suggested that maybe there's one reason why they are trying to walk away from the February 21 agreement, that it does provide for investigation as to who was the source of sniper fire.

You may have seen the footage on the internet -- I've seen it on television that there were clearly opposition snipers who took over a hotel in downtown -- in downtown Kiev who were working as snipers shooting at somebody in the streets. So now it's obvious that they were the ones who were killing both the policemen and those who were protesting in order to exploit even further protest and take power by force to execute this coupe in Ukraine.

And finally, going to the core of our discussion as to what can be done next, I simply referred colleagues to a statement which was made today by Foreign Minister Lavrov in Rome after he completed another round of discussions with Secretary Kerry and many other officials when he said, speaking about various possibilities of international role in dealing with the crisis in Ukraine that we need to understand better what our partners mean, those who suggest that they -- we create various mechanism, what would be the composition of those mechanisms. But he also emphasized that I encourage you to go to the original, that's it's very important for us what we'll be dealing with that we need to talk about implementing February 21 agreement, constitutional reform, presidential elections after the presidential reform from the National Coalition government and also it's crucially important to involve the regions. I have expressed agreement from various regions in all the processes which may be taking place in Ukraine in order to resolve that crisis. So these are my -- Matthew.

(REPORTER): Yes, sure. I wanted to -- this issue of the same snipers shooting at both, is -- do you think this is within the type of thing that Mr. Simonovi should be investigating and also the U.S. sanctions today -- I know that you sometimes say you'll only speak about the U.N. The U.S. announced that it has a travel ban list and new set of sanctions it can -- do you think it's useful for the process taking place there?

CHURKIN: Well, first of all I hope Mr. Simonovi and in fact Mr. Eliasson too can at least encourage this investigation, and that would be they're playing their part in implementing at least one part of the February 21 agreement. As to the sanctions, I don't want to go into it, it's a double- edged sword. And of course we cannot possibly regard it as something which is useful under any circumstances. Go ahead.

(REPORTER): Ambassador, thank you. Why are (inaudible) opposing to negotiations with the government in Ukraine and you are insisting on using force instead?

CHURKIN: No, we are not. We are not insisting on any use of force. What we are saying is that we do not recognize the current Ukrainian authorities as legitimate. We do have various working contacts -- we do have non- political contacts with them. As you probably know, Prime Minister Medvedev spoke to Prime Minister Yatsenyuk who -- several days ago discussing various aspects of the situation, and our government is under instructions from President Putin to continue dealing with various specific economic problems and maybe cooperation which we have with Ukraine. However, our political contacts were refraining from, especially at the high level of foreign minister and level like this, simply because we don't -- we don't accept the legitimacy of those authorities. But those -- the other important element of our understanding of how we need to deal with the current crisis and how we could find a way out is this reference to February 21. What we are going to discuss, what various groups which can be formed (inaudible) -- mentioning a contest (ph)group some other formations -- what are they actually going to do? We need to have a clear program of work. One question.

(REPORTER): I'd like to ask your permission -- your position -- on the referendum that has been called in Crimea on March the 16th. That's only ten days away, there are armed groups on the ground intimidating people including Mr. Serry. Could you possibly have a free and fair referendum in ten days?

CHURKIN: Well this is a decision which was taken by the Supreme Soviet of the Autonomous Republic of Crimea. They intend to call the referendum. As you probably know, I learned it from the media that there are two questions which they are going to put to the will of the people -- one joining Russia, another is staying in Ukraine within -- with sort of broader powers as an autonomous republic. So this is where things are. Other than that, I don't know --

(REPORTER): (Inaudible).

CHURKIN: I -- no, I mean, I am -- I am a Russian observer. They made this decision and of course our authorities will need to, you know, to make a decision how they are going to deal with that.

(REPORTER): One more question -- the Ukrainian ambassador suggested that it was Russians who were involved in this situation with Mr. Serry. And one other thing, a number of ambassadors that I've spoken to here privately said that they don't understand how Russia could suggest that these militias or military personnel in Crimea are not Russian -- the ones that are -- don't have any markings.

CHURKIN: I described -- I described -- the very complex set up which we have in the Crimea now in terms of military presence in the Security Council meeting on the 4th. I mean, you have to understand that there is the Black Sea Fleet and some military with the Black Sea Fleet, then there is -- there are people who are with the Ukrainian military presence there, and some of them have sworn allegiance to the authorities of the Autonomous Republic of Crimea and then there are also various self-defense groups which sprung up I think even before or like immediately after February 21 because of the -- what they perceived as the aggravation of the situation. As to what exactly who mal-(ph) handled Mr. Serry, I did say I was very relieved to see him back in Kiev safe and sound. I don't know exactly, but I think you should look at the last paragraph of Mr. Eliasson's conversation with you, I think, or some of you, on the 5th of -- as the events were unfolding -- when he described a rag-tag group of people who were accosting Mr. Serry Frankly to me, it does not sound like it was a group of Russian soldiers, on the basis of this description. Thank you very much.

RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: That is Vitaly Churkin, the Russian ambassador to the United Nations talking there about a variety of issues -- questions of whether some of the protesters and new government in Ukraine is supported by --

(BEGIN VIDEOCLIP PLAYING IN BACKGROUND)

CHURKIN: I call these consultations -

(END VIDEOCLIP)

QUEST: Nazi or near Nazi parties. We also had him talking about recognizing -- not recognizing -- the government in Ukraine as a legitimate government and measures on sanctions he didn't really address. Let's turn immediately now to Ukraine's interim leadership on Crimea and the country's acting foreign minister who is Andrii Deshchytsia who is live on the phone for us now. Foreign Minister, you've just arrived back in Kiev. You were very kind and spoke to us last night on the program, and we're grateful to have you again talking to us. You heard -- you heard Ambassador Churkin just there. It couldn't be clearer -- we do not recognize the interim government in Kiev as legitimate. If they don't recognize you, they're not going to talk to you.

ANDRII DESHCHYTSIA, UKRAINE FOREIGN MINISTER: Good evening. I'm very glad that I'm back on CNN -- they see me (ph) too. So, and I'm on the phone, I'm in Kiev right now, I've been in Paris two days ago and Brussels today and I am back in Kiev and I'm glad that I'm in Kiev now. And I would say there is no doubt -- we did not hear any question marks to say that we are a legitimate government. The Parliament just voted. It was the overwhelming majority for their government. So, not only the coalition parties but the opposition party -- party of Regions members of the Parliament -- forces for the Parliament -- for their government (inaudible).

QUEST: Now, are you content with the European Council decision today -- I mean, it's sort of -- you didn't get as much maybe in terms of hard measures against Russia that Ukraine might have liked, but you did get quite a lot of -- you got very strong support and where these questions of visa bans, travel restrictions. Are you satisfied?

DESHCHYTSIA: You know, (inaudible) great, long difficult and tough day in discussions, but at the end, on the way to Kiev, we learned that the E.U. issued a statement that the E.U. is was ready to find the political part of the association agreement. And it's a very good sign for Ukraine. It's a very good sign for the Ukrainian people who were standing in on streets and (inaudible) fighting and also supporting and looking for the European future and the European democratic values. So I think it's a good signal for them and they are -- I think that it's a good step forward in cooperation, relation with European Union and good step for what's on the way to the integration with the E.U.

QUEST: Did you attempt to have a meeting with Mr. Lavrov? Did you sort of suggest if you were in the same building at the same time, we could have a cup of tea?

DESHCHYTSIA: No, unfortunately I was not able to meet with my colleague Minister Lavrov for the last two days despite the fact that I was in Europe and Mr. Lavrov was in Europe as I understand. Please we know -- I know that we've been together in Paris at the same day and you know what? I can't wait in Europe before Lavrov to talk with him in a time when my country is invaded by Russian troops. So, I'm going back -- I'm actually - - I'm already back in Kiev and I'm ready to meet with Lavrov, and whenever he's ready.

QUEST: What do you think needs to happen to put the necessary pressure -- as it's seen from your country -- on President Putin to withdraw, back down, change the situation. There are sanctions already in place or measures are now in place, diplomacy is underway, all seemingly not terribly effective. So, Minister, what would you know like to see as the next step?

DESHCHYTSIA: You know, it's -- as we said -- as you know probably our (ph) position of the Ukrainian government, we strongly support the peaceful solution of this conflict. And we will use all diplomatic means to stay independent, integral and sovereign. And I think that there is a very good word in the recent history which already proved to be a success. It's a word of solidarity.

QUEST: Right.

DESHCHYTSIA: And I think what it needs now is international solidarity.

QUEST: Minister, I'm not making light of this when I say this, but we spoke to you last night, we spoke to you tonight, let's hope as developments move on, we'll make a habit of it and we'll speak to you again maybe tomorrow evening.

DESHCHYTSIA: OK. I am back in Kiev and I will be glad to not only talk to you on the phone but on live.

QUEST: Well, we're looking forward to that even more. So, Minister, thank you very much for joining us today -

DESHCHYTSIA: OK.

QUEST: -- from Kiev.

DESHCHYTSIA: Thank you very much.

QUEST: This is "Quest Means Business." We're back after the break.

(COMMERCIAL BREAK)

QUEST: It is a very busy day. We're waiting to see if the U.S. ambassador to the United Nations Samantha Power is about to speak. Ambassadors Power we believe is due to talk very shortly, and when she does, we'll bring that to you. While we're waiting for that, (inaudible) any time, the Italian coffee company Illy has signed a partnership deal with Samsung. Illy and where it's going the chairman and CEO Andrea Illy joins me now on the line from London. Good to see you -- good to see you, Andrea. Let me apologize in advance if we break off urgently with the U.S. ambassador to the United Nations, so I do apologize in advance. But while we -- we'll keep going in the meantime. Samsung. What is a coffee company doing getting into bed with a technology company that makes the world's most -- I beg your pardon -- no sooner had I started the question, let's go to the United Nations.

SAMANTHA POWER, UNITED STATES AMBASSADOR TO THE U.N. We have just received a very disturbing briefing from Deputy Secretary-General Jan Eliasson on the situation in Ukraine and the unacceptable treatment of Special Envoy Serry in Crimea. We condemn the attack on Envoy Serry and we have made clear over the past -- as we have made clear over the past few days -- getting monitors into Crimea is a critical task and one the Russians should welcome given their stated concern for ethnic Russians in Ukraine. We were also extremely concerned about reports that the so-called deputy prime minister of Crimea has called Ukrainian military units stationed in Crimea an occupying force. They are not.

As President Obama made clear earlier today, there is a way to resolve this that respects the interests of the Russian Federation as well as the Ukrainian people. Let international monitors into all of Ukraine, including Crimea, to ensure the rights of all Ukrainians are being respected including ethnic Russians. Begin consultations between the government of Russia and Ukraine with the participation of the international community. Supporting the people of Ukraine as they move to elections in May is critical so that they can choose their leaders without outside intimidation. That is the path of the escalation. And Secretary Kerry is engaged in discussions with all of the relevant parties including Russia and Ukraine to pursue that path. But if this violation of international law continues, the resolve of the United States and our allies and the international community will remain firm.

You saw that earlier today President Obama signed an executive order that authorizes sanctions on individuals and entities responsible for violating the sovereignty and territorial integrity of Ukraine or for stealing the assets of the Ukrainian people, among other things. And today in Brussels, our allies also took steps to impose costs on Russia. I am confident that we are moving forward together, united in our determination to oppose actions that violate international law and to support the government and the people of Ukraine. That includes standing up for the principle of state sovereignty, so I also want to say a word about the referendum that we've seen so much about today.

The proposed referendum on the future of Crimea would violate the Ukrainian constitution. The Ukrainian constitution makes clear that any measure altering the territory of Ukraine must be decided by an all-Ukrainian national referendum. We will not recognize the results of a referendum of this nature. Any discussion about the future of Ukraine must include the legitimate government of Ukraine. In 2014 we are well beyond the days when borders can be redrawn over the heads of democratic leaders. So, again, we want to make clear what is and what is not happening in Ukraine and why it's so important to get monitors into Crimea. And we call on Russia to allow U.S. and OSCE monitors to gather the facts on the ground so that they cannot continue to be twisted as we have seen. It is not too late, but every day, particularly with moves like that made today in Crimea the risk of military escalation increases. With that, I'll take a few questions.

(REPORTER): Ambassador, you just heard your colleague Mark Lyall Grant say that it's unlikely that the Security Council will produce any sort of product in the coming days. The Council appears quite clearly deadlocked on the issue. Does that bother you and do you see any point in continuing this exercise which sort of has cold war echoes to it and did you get any sense of the Russians changing their position? Is there any movement towards compromise? A few days ago, there was some hope that President Putin was indicating you know that they were moving in a direction that was more acceptable for Europe and the United States.

POWER: Thank you for that. First, let me say that I think the word "deadlock" suggests a kind of even 8-7 deadlock among Council members, and that's not at all the nature of the discussions as I think you heard in the public sessions as well where Russia finds itself extremely isolated. Every Council member has stressed over the course of the last few days the importance of the U.N. charter, the importance of territorial integrity, the importance of sovereignty, etc. and raised great concerns about the potential for escalation. So, I think there is utility in coming together in order to highlight, particularly in these public meetings, the extent of Russia's isolation as it takes the moves that it has taken. I would also note that of course part of what we're doing is also trying to engage the U.N. secretariat. So even without a Council product, we have succeeded I think as a Council over -- with overwhelming support within the Council -- if not unanimity -- we have succeeded in sending a message to the secretary-general and he has embraced the plea -- again, not just from the Security Council, but I think from the broader U.N. membership to get involved. And he's of course sent not only Robert Serry but then Jan Eliasson, the deputy secretary-general, the highest envoy, the Secretary- General himself could send, and now Secretary-General Simonovi will be there with a slightly larger team doing fact finding on the human rights and other fronts.

So, the challenge, I think is that, you know, monitors keep encountering the same resistance in Crimea. So the practical challenge is really about will Russia at some point stand up and call on the Crimean authorities and use their own authority that they've established on the ground with their military maneuvers and so forth to ensure the safety and the access for the international communities that are sent by this institution? And Russia is very much a part of this institution. And so that is, again, the message that we continue to send.

In terms of hope for, you know, a negotiated way out of this perilous moment, I would just say again that Secretary Kerry has continued to engage Foreign Minister Lavrov, European foreign ministers, we are certainly not giving up. You heard from President Obama today that while we have put an executive order down that would include sanctions for those violating territorial integrity and sovereignty of Ukraine as well as those who steal assets as well as those who commit human rights abuses, our goal here is to pull Russia back from the brink and to look out again for the interests and the welfare of the Ukrainian people. So our goal is what it has been from the beginning of this crisis which is that there's a diplomatic way out of this pathway.

(REPORTER): Ambassador, do you think the referendum is a negotiating point or do you think they really want to split the U.K. -- the Ukraine -- and make it part of Russia? And secondly, could you kindly comment on Central African Republic? Your position had been rumored as hesitating on building up peace-keeping forces, coming up with money. But today people said you were all for it. So, could you explain it?

POWER: Yes -- sorry, what was your first question on the referendum? My mind migrated to a different continent.

(REPORTER): Inaudible.

POWER: Negotiating, yes. I think what's important to state about the referendum is simply that it is illegitimate, illegal, under the Ukrainian constitution as I have described it. I'm not going to speculate on the motives either of those who have announced that they're going to hold a referendum or on those members of the Security Council -- the member of the Security Council -- who appears to be supporting the Crimeans in this maneuver beyond to say that this would be highly destabilizing and would further polarize the situation and greatly enhance the risk of escalation. With regard to the Central African Republic, I think there's been a lot of misinformation that have accompanied our negotiations over many, many months. As you know, I traveled to the Central African Republic in December. President Obama has made $100 million available to lift and equip and train African Union troops, and indeed I was present when some of those troops were brought in on American planes -- the Burundians. We've worked very closely with the Rwandans as well to get them in there in a timely fashion, and both of those troop contributors I think have done a heroic job in next-to-impossible circumstances on the ground. So, we always said that it was a false choice between strengthening MISCA and the question of whether and when there would be a U.N. peace-keeping force. I think now that you have a European Union force deploying alongside a French force, alongside an African Union force, alongside a U.S. mission, there's no question that bringing those strands together and creating a multi- dimensional, comprehensive peacekeeping mission is the right next step for CAR, and that's why we, upon reading the Secretary-General's report, you know, are in a position today to say very plainly that we support the transition as envisaged, and now we've just got to negotiate what the details of that mission are.

QUEST: That's Samantha Power, the U.S. ambassador to the United Nations. No major new ground covered there, other than to remind us the United States will not recognize the referendum being planned in Crimea by the Parliament there. Now, in Venezuela, anti-government protests are continuing on a daily basis. President Nicolas Maduro has been speaking exclusively to CNN's Christiane Amanpour.

(BEGIN VIDEOCLIP)

CHRISTIANE AMANPOUR, CHIEF INTERNATIONAL CORRESPONDENT FOR CNN AND HOST OF CNN INTERNATIONAL'S "AMANPOUR" SHOW: You are facing now some of the worst violence and disturbance in Venezuela in the last ten years. And even yesterday, even this week when we were watching you pay tribute to President Chavez after his one-year anniversary of his death, you again criticized the opposition and you called them fascists, you called them extremists. Is that really what you think about them?

NICOLAS MADURO, PRESIDENT OF VENEZUELA, VIA TRANSLATOR: You should know in the U.S. and your audience of this prestigious show that those who have started this violence plan is a minority -- it's a tiny group belonging to the opposition and they have put the rest of the opposition in serious -- in a dire situation. What would the U.S. do if a tiny group would say they're going to generate a revolution or a revolt to change the constitutional government of the U.S.? I guess the state will react within resort -- of to deport (ph) -- to restore order and peace.

(END VIDEOCLIP)

QUEST: Venezuela's president. You can see the whole interview, exclusive interview, with Nicolas Maduro on Friday as Christiane gets his reaction to protests against his government, the state of Venezuela's economy and whether better relations with the U.S. are possible. It's "Amanpour" Friday at 7 p.m. in London, that's 8 p.m. in Berlin.

A busy day. Many of the items that we'd hoped to bring you this evening I am sure you will well understand we weren't able to do so because of the breaking news and the interviews. But you did hear tonight on this program the Ukrainian foreign minister on the latest position. And that is "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I do hope it's profitable. (RINGS BELL).

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