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CONNECT THE WORLD

The Human Toll Of Israel-Palestinian Conflict; ISIS Takes Territory In Kurdish Controlled Iraq; Oscar Pistorius Trial Closing Arguments

Aired August 7, 2014 - 11:00   ET

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


JIM CLANCY, HOST: Thousands of people are in headlong flight as Islamic militants storm their minority communities in Iraq. These are

pictures of the exodus underway right now. We're going to take you live to a location near Erbil in the north of Iraq with more details.

Also, that cease-fire seems to be still holding in Gaza, but as the people of Israel and the Palestinians take stock, the cost of this conflict

is coming ever more into question.

And he's had the top job in Turkey for 11 long years. We're going to examine why Prime Minister Recep Tayyip Erdogan now wants to win this

Sunday's presidential election.

ANNOUNCER: This is the hour we connect the world.

CLANCY: France is calling for an emergency Security Council meeting to counter the sudden burst of ISIS strength in Iraq. Right now tens of

thousands of terrorized Iraqis, both Christians and Yazidis, another religious minority, are fleeing for their lives.

Islamic State militants have seized more territory, more towns in the Kurdish north. It appears the Kurdish army known as the Peshmerga is being

pushed back in its defense of that region.

Ivan Watson joins us now on the phone line. He's at an abandoned construction site where refugees are gathering on the outskirts of Erbil,

Iraq.

Ivan, what is the scene like? What's happening there?

IVAN WATSON, CNN CORRESPONDENT: Jim, actually this is one of more than a dozen unfinished high rises, gas stations, empty warehouses,

basically spots on the side of the highway that families, hundreds of families have just holed up in and unloaded and for want of any other place

to go, all of them basically arriving within the last 24 hours fleeing an ISIS offensive that took control of several additional towns and pushed the

Kurdish Peshmerga forces back to the Zab River west of the Kurdish capital of Erbil.

The ISIS militants have taken control of the town called Guere (ph). We know that there have been reports of fighting with the Peshmerga in that

town today, but that's within 50 kilometers of Erbil, which has traditionally been a safe zone.

The Kurdish Peshmerga that I talked to at the gates of Erbil they say that they've counted more than 10,000 people fleeing into their city within

the last 24 hours. And I'm seeing more cars full of families arriving every minute.

CLANCY: Ivan, is there any indication that the Peshmerga are preparing for some kind of a count attack? That would seem uncomfortably

close to their capital there in Erbil?

WATSON: I've certainly seen, you know, gunships, cars, armored vehicles moving around and a number of Peshmerga fighters moving in the

direction of the front lines. I've heard from Kurdish officials saying that they're bolstering their forces, that they're preparing for some kind

of counter offensive.

And they've had to reassure their own community, their own population, because there was panic last night, fears as these civilians started

arriving here that ISIS would be coming to the gates of Erbil itself, which clearly hasn't happened. I've seen no signs of that.

But the population here is in jitters. There is fear and concern here. And it definitely what everybody is talking about right now. I'm

watching a pick-up truck roll past right now, Jim, with about four children in the back and the belongings of a family and three people piled into the

cab of the pickup truck. That's a scene that I've seen here all day, a car behind it packed with probably 10 people, a family in it.

And there's clearly no plan for where these families will go. I've seen a bit of water being distributed, some cookies to some of the people

here who are in this shell of a building of just one of I estimate dozens that I saw where people are just stepping out of their cars and trying to

find a spot of shade, a respite from the enormous -- the terrible August heat here.

CLANCY: Ivan Watson reporting for us there on the line from near Erbil, the Kurdish capital, as ISIS militants pushed tens of thousands of

people from minority communities across the north.

We have diplomats, politicians all around the globe that have spoken out in concern adding his voice to that today Pope Francis at the Vatican.

Let's turn now elsewhere in the Middle East. Diplomats are huddled behind closed doors in Cairo trying to extend that humanitarian cease-fire

between Israel and Hamas.

The Egyptian government is mediating the negotiations between the two sides. They're not talking directly. There's no word of any breakthrough.

A Palestinian official says progress is being made. The 72 hour truce is now in its final day in Gaza. The break in the violence has given

people a chance to absorb the human cost of this conflict. Palestinian officials say more than 1,800 people were killed in Gaza, many of them

civilians. 64 Israeli soldiers and three civilians in Israel were also killed.

The UN and human rights groups have condemned the tactics used by both Israel and Hamas. They say it's possible both sides violated humanitarian

law.

CNN is covering this story form all sides. A little bit later we're going to hear from Reza Sayah in Cairo at the talks where they're taking

place, but first, though, Martin Savidge is monitoring developments this hour in Gaza City. He joins us live -- Martin.

MARTIN SAVIDGE, CNN INTERNATIONAL CORRESPONDENT: Jim, we wanted to find out about that human cost you've been talking about. And we made our

way down to Rafah for the first time since the cease-fire went into effect.

Rafah, of course, the southern most portion of Gaza, also the last place where the Israeli military operation was underway. And there have

been talk of a high death toll down there. Here's what we found.

(BEGIN VIDEOTAPE)

SAVDIGE: There are many ways to measure the intensity of conflict -- destruction, that's definitely one of them. And this is another.

We are on the outskirts of Rafah. This is the cemetery. We are only a couple of hundred yards, maybe a couple of hundred meters from Egypt.

And let me show you, there's one, two, three, and here makes four rows and these are all relatively fresh graves. We're told that these were the

graves that were dug in the first few days of the fighting down here. We've been told there are well over 100 people here.

And you can tell that they were done so quickly that they didn't have time to do the burial properly. The headstones are just simple bricks.

And in some cases they just tried to record what they know about who is buried here, and maybe later families can figure it out and properly bury.

But this isn't the only part I wanted to show you, the other part is just up here.

This is the newest section of the cemetery, the city has actually been working to make this happen to bury the dead, so many of them and quickly

in time with keeping with the Muslim tradition. He's just finishing up here, these young men are helping to care for these graves. These were

actually yesterday.

And then there's more over here. These are the open graves, which is an indicator that they still expect many more bodies to be found. In fact,

just this afternoon, a few minutes ago, we witnessed the burial of several people there. They actually died, the family says, over three weeks ago

early in the conflict, but their bodies were only found just today. And this was how they could take care of them.

This shows you that there's a lot more anticipated. This here is the next row over and there's even one more row after that. And the men

looking after this cemetery here pointed out each one of those graves is not for one body, but for three. It's clear those taking care of the dead

here have been very busy.

(END VIDEOTAPE)

SAVIDGE: We should point out something else, Jim. You know, I was watching that gravesite ceremony as it took place. There were no shouts of

revenge, there were no screams against Israel, there was no vitriol at all, all you witnessed was very intimate, very personal pain over loss -- Jim.

CLANCY: Martin Savidge reporting for us there live from Gaza. Thank you, Martin.

World Health Authorities are on alert right now in an effort to try to stop the Ebola epidemic that one U.S. expert says is rapidly spinning out

of control, his words.

Liberia has declared a 90 day state of emergency. This is one of three West African nations, bearing the real brunt of this outbreak and

crisis. Sierra Leone and Guinea are the other two. The WHO says 932 people are believed to have died since this latest outbreak began. A

handful of infections has now been reported in Nigeria. Officials in Saudi Arabia say one man died there after making a trip to Sierra Leone.

Well, right now in Spain doctors are treating Europe's first Ebola patient, a priest who fell ill in Liberia and was then transported to

Madrid. It was a little bit earlier today.

Erin McLaughlin joins us now live from London with that story -- Erin.

ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: Hi, Jim. That's right, 75-year-old father Miguel Pajares has arrived earlier today. We

understand from Spanish authorities that he is in stable condition showing no signs of fever or hemorrhaging, although he said he was a bit

disoriented upon his arrival.

He arrived on a specially equipped Airbus A310 which was equipped with isolation chambers just for this journey. Spanish defense ministry

releasing a video that showed him being transported from the plane on a stretcher to an ambulance to be taken to the hospital.

Accompanying him on this journey was a fellow missionary and colleague Juliana Bohi, Sister Juliana Bohi. Authorities saying that she actually

tested negative for the Ebola virus in Liberia. They are nevertheless are concerned about her condition and want to monitor her as well as retest

her.

Now they are both being treated at a hospital in Madrid, the sixth floor of the hospital according to Spanish media reports has been cleared

out for their treatment. And it's a repatriation that really is not without controversy, some associations, doctors and nurse associations in

Spain have questioned that hospital, La Paz Hospital's ability to care for Ebola patients, but so far authorities in Spain are dismissing or

downplaying any fears of possible contagion. Take a listen.

(BEGIN VIDEO CLIP)

MERCEDES VINUESA, SPAIN'S DIRECTOR GENERAL OF PUBLIC HEALTH (through translator): We worked with a more broad margin of safety, because it is a

highly lethal disease, that is why I say the probability is never zero or 100. The probability of being contagious is very low, absolutely low but

above all, because we work with a margin of safety and very well trained professionals.

(END VIDEO CLIP)

MCLAUGHLIN: Now regarding that special serum that had been administered to two American patients in the United States that seemingly

helped to improve their condition, well Spanish authorities say they are aware of the ZMapp serum, but they want scientific evidence that it is in

fact effective before possibly requesting the United States for their -- to be able to use it for treatment -- Jim.

CLANCY: Erin, rapidly moving story. We really appreciate your coverage on this. CNN has reporters on this story in West Africa, across

Europe, and of course right here at the Centers for Disease Control our own Sanjay Gupta. Dr. Sanjay Gupta following it very closely.

All right, still to come, it's a five month long courtroom drama that has captivated South Africa, and for that matter the rest of the world.

And coming up, the Oscar Pistorius murder trial enters its very final phase.

Plus, Turkey is going to choose its next president in a matter of days. And many Turks think they already know the outcome. We'll explain

what we're talking about straight ahead.

(COMMERCIAL BREAK)

CLANCY: You know, Turks are preparing to head to the polls on Sunday. This is going to be the country's first ever direct presidential vote.

Despite the historic importance of the poll, there's little excitement about it really. Many believe the result is already a foregone conclusion.

There's little doubt Prime Minister Recep Erdogan will win this election. In fact, his lead in recent public opinion polls is in double digits.

His most serious opponent is Ekmeieddin Ihsanoglu and -- I'm not sure I pronounced that correctly -- and he's a joint candidate for the two

largest opposition parties.

And then the third candidate is this man, Selahattin Demirtas, a Kurdish Politician and leader of the People's Democratic Party.

Well, until now the roll of president in Turkey has really been largely ceremonial with executive power really laying primarily with the

office of the prime minister. But if Mr. Erdogan becomes president things could be a lot different.

Our emerging markets editor John Defterios if familiar with this story. He's been covering politics and economics in Turkey for many years

and he joins us now live -- John.

JOHN DEFTERIOS, CNN CORRESPONDENT: Hey, Jim.

Thanks very much, Jim.

In fact, this election is not creating a stir because of the polls as they stand right now. In fact, Prime Minister Erdogan is polling at 55

percent -- if that holds he could win in the first round on Sunday, as you're suggesting -- but because it could consolidate his grip on power.

You know, he came into office, Jim, in 2003 as the moderate face of Islam and one who could serve as a major player in the Middle East

Political seen and as a NATO member. Now that image has been tarnished over the last two years because of events in Syria, his backing for the now

ousted Muslim Brotherhood and even the strained ties in Israel. He used to have very close ties to Israel, so serving as that bridge between Europe

and Israel and from the Muslim world to Israel.

Because of that, the main opposition candidates suggesting they need a more moderate tone during the first direct presidential election. This is

Mr. Ihsanoglu.

(BEGIN VIDEO CLIP)

EKMEIEDDIN IHSANOGLU, TURKISH PRESIDENTIAL CANDIDATE: From the east to the west, from the north to the south of this big country, people from

our party they come and say we are supporting you. So because -- you know why they are supporting us? They want a man who will represent their

values, but who has a different style, who is more calm, more rational, more dignified, doesn't demonize others, doesn't quarrel (ph) them.

(END VIDEO CLIP)

DEFTERIOS: Doesn't quarrel. There's been a lot of quarreling, Jim, over the last year in particular, in Turkey. Of course we remember all the

protests in 2013 because of the development plans in Gezi Park, but more recently we've had the investigations into allegations of corruption

leading right to the top of the AK Party, the ruling party in Turkey. So it's been very controversial and many didn't think that Prime Minister

Erdogan would have the chance to stand for this presidential election after what's transpired over the last six months.

CLANCY: OK. Quickly, I mean, is it fair to say that Mr. Erdogan is looking towards his legacy at this point?

DEFTERIOS: Well, most people think that this is what the presidential election is all about, and I'll tell you why, he has history in his sights

right now. Say he wins the election in the first round next week, he can serve up to two terms, 10 years. That would put him into power for better

than 20 years. But more importantly for him and the history books, he could stand in power on the 100th anniversary of the modern Turkish republic,

Mustafa Kemal Ataturk, a name endeared, of course, in Turkish history.

Erdogan wants to be seen in that sort of category. And he is suggesting in an interview that he did with Becky Anderson while she was in

Instanbul that he's just starting to hit his prime. Let's take a listen.

(BEGIN VIDEO CLIP)

RECEP TAYYIP ERDOGAN, PRIME MINISTER OF TURKEY: So our life has always been politics. And right now I am at a dynamic state, to be honest.

I'm at a productive state in politics. In terms of serving my country, I will continue serving my nation and my motherland until no more leaves are

left in the calendar.

(END VIDEO CLIP)

DEFTERIOS: Think about it, Jim. When he was seeing those investigations and the critics from outside really pushing to have

investigations within the police and the judicial authorities in Turkey, nobody thought he would be standing for the election on this Sunday, but

he's proven those critics very wrong over the last few months, Jim.

CLANCY: An interesting one, one that everybody is certain to watch. John Defterios, thank you very much.

Well, John has much more on Turkey's social, economic and political future. You can find it on our website. For to the Europe section of

CNN.com and read his blog about the challenges facing Erdogan as he looks for a new role.

Up next, the prosecution and the defense get one last chance to make their case in the Oscar Pistorius murder trial. We'll have details.

(COMMERCIAL BREAK)

CLANCY: Welcome back everyone. You're watching Connect the World. I'm Jim Clancy at the CNN Center.

Well, after months of gripping emotional testimony, courtroom drama that included screaming and crying and a very lengthy adjournment, the

Oscar Pistorius murder trial nears an end. The defense is going to continue its closing arguments tomorrow.

Earlier, prosecutor Gerrie Nel made his final case. He started off by alleging that Pistorius has been a deceitful witness who is incapable of

taking responsibility for any wrongdoing. And he noted what he said were inconsistencies in Pistorius's own statements saying the accused -- and

these are his words -- "tailored his version of what happened."

(BEGIN VIDEO CLIP)

GERRIE NEL, PROSECUTOR: I think it's not in dispute that the deceased died as a result of multiple gunshot wounds. My lady, in this matter there

are only two people in that house, one was killed. There's one survivor and there was no (inaudible) on the accused (inaudible). It's not our

argument that he bears any onus whatsoever, but my lady in electing to give evidence one would expect him to give an honest account, an honest version

of what happened. If he elects to give evidence, and he's found to be a lying witness that is of his own doing, and not because of an onus, my

lady.

(END VIDEO CLIP)

CLANCY: Now the defense argues that Pistorius mistook his girlfriend, Reeva Steenkamp, for an intruder when he shot her through a door. South

Africa does not have a jury system, so Pistorius's fate is going to rest in the hands of the judge.

Robyn Curnow has been following the trial from the very beginning and she joins us now live from Pretoria in South Africa. Robyn, what can you

tell us?

ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT: Well, what a day. I mean, this has been five months of court time, 40 court days in all. And

again we had a very intense, very strong day from the state. You heard Gerrie Nel go through a very impassioned plea to the judge to convict Oscar

Pistorius of premeditated murder.

And at the real core of his arguments, his closing argument, Jim, is his assassination, essentially, of not only Oscar Pistorius's character,

but also his credibility. Take a listen to how he described Oscar Pistorius's performance on the stand.

(BEGIN VIDEO CLIP)

NEL: It was an appalling witness. In summary, the (inaudible) was vague, his responses argumentative and that his mendacity was perhaps best

exemplified with his evidence--

(END VIDEO CLIP)

CURNOW: Now, I was in court. It was more than six hours, about six hours of testimony watched on of closing arguments, watched on not only by

a full bench of the Pistorius family, but also representatives from Reeva Steenkamp's family. Her father there for the very first time sitting next

to her mother.

And it was very clear that Gerrie Nel had put a lot of effort into preparing, of course, his closing argument and besides being the pitbull,

the bulldog that we'd become so familiar with, he was also quite descriptive in his language, a lot of metaphors coming out. I think that

really gave us a sense of how he felt about this.

And I'm going to read some of them to you, because he said that Oscar Pistorius had created a domino effect of lies, a snowballing of lies. He

talked about how the baton of truth had been dropped. He had talked about how this was all a gruesome mosaic of events of Oscar Pistorius's version

of events is not found to be true. And very importantly, he referred to a baker's dozen of inconsistencies, 13 lies that he pointed out from Oscar

Pistorius's own testimony on the stand that he says creates a track record of inconsistencies that the judge must surely take on as that his testimony

shouldn't be believed and that she should convict him of murder.

So it's going to be very interesting to see on Friday. The defense is going to continue their closing arguments. And of course they're coming

back just as strong, Jim.

CLANCY: You know, as we look at this case, I think it's important to note, very briefly can you tell us, it takes months sometimes for a judge

to rule in South African court cases. Is this one any different?

CURNOW: You know, South African court cases general take quite a long time. And I know a lot of people have said that these five months of the

Pistorius case has been quite long winded, but actually it's been quite fast, considering the general length of court cases.

That said, the judge -- the justice system here has all along wanted to get this wrapped up. They know that this needs to be finalized

speedily.

The judge really wants -- and we really have got a sense from her -- that she wants this to be done and dusted. But of course the court process

has to go through various procedures.

We don't know when she's going to come with her verdict, but it's probably within the next few weeks, certainly not months. We get a sense

from court officials here. We will know she will set a date at the end of court on Friday, so we will have a sense, then, on when the verdict will be

delivered.

CLANCY: Robyn Curnow reporting to us there live from Pretoria. Thank you very much. We're looking forward to see this case as it concludes.

It's one that's fascinated the world.

Well, the latest world news headlines are just ahead.

Plus, fighting in eastern Ukraine forcing investigators to suspend their work at the crash site of Malaysian airlines flight 17. We're going

to bring you a report from Donetsk next.

(COMMERCIAL BREAK)

CLANCY: This is CONNECT THE WORLD, I'm Jim Clancy, and here are your headlines this hour.

Doctors in Madrid are treating the first known case of Ebola in Europe. A Spanish priest who contracted the virus while in Liberia was

flown home aboard a specially-outfitted military plane.

Some 40 years ago, after the Khmer Rouge carried out the genocide of nearly 2 million Cambodians, two former leaders of the regime have been

sentenced to life in prison. The defense teams for Nuon Chea and Khieu Samphan say they plan to appeal that verdict.

The defense beginning closing arguments in the Oscar Pistorius murder trial. Prosecutor Gerrie Nel made his case earlier. He described the

Olympic sprinter as an appalling witness who was essentially devoid of any truth.

Diplomats in Cairo trying to push Israel and Hamas to extend their 72- hour cease-fire in Gaza. Both sides say they want conditions, their own conditions, to be met first. Israel is calling for the demilitarization of

Gaza, while Hamas is demanding an end to Israel's blockade of the territory.

Let's go now to Egypt for an update on the truce negotiations. Our Reza Sayah standing by for us in Cairo. Reza, any progress to report?

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: Well, at this point, it's not clear if they're making an progress, but the clock is ticking.

Based on our count, about 13 and a half hours to go before these two sides can make something happen. So, you sense the drama is building, the

pressure is growing for the Israelis and the Palestinians to come to some sort of agreement.

According to a Palestinian official, the Palestinian negotiating team has been in and out of closed-door meetings with Egyptian officials

throughout the better part of the afternoon.

Of course, it's been extremely challenging to monitor and gauge these talks because these are indirect negotiations that have been held in

secret. But based on the information that we've gathered, here's where things stand.

According to a Palestinian official, the Palestinian delegation is waiting to hear back from the Israelis through the Egyptian mediators, and

that seems to suggest that the Palestinians have put forth some sort of offer, some sort of proposal, and they're waiting to hear back from the

Israelis.

A Palestinian official telling CNN that depending on what they hear back from the Israelis, they could have some sort of announcement by 10:00

PM local time --

(AUDIO GAP)

SAYAH: -- tonight. That's roughly three and a half hours. Not just here in Egypt, but around the world, anxious to see what happens in the

coming hours, if this cease-fire is extended or if they reach some sort of agreement.

CLANCY: Reza Sayah reporting there, live from Cairo. Reza, thank you.

A Dutch mission to the MH17 crash site has been suspended due to heavy fighting in eastern Ukraine. Officials say investigators came dangerously

close to the gunfire on Wednesday evening. Ukraine's government says it's scrapping a cease-fire near that site until the international mission

restarts.

Ukrainian government forces are closing in on pro-Russian separatists, meantime, in the eastern city of Donetsk. Senior international

correspondent Nick Paton Walsh has more on that.

(BEGIN VIDEOTAPE)

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): The day after the violent night before, and the scan of what may be ahead

dawned on Donetsk. This is what a bomb did when it didn't detonate. This when it did. We think here they were from a jet we heard.

While nobody was killed near these garages, the hope the heaviest weapons wouldn't be used in this fight died. Closer to the city center,

one man was killed here waiting for a tram.

Someone posting a parody of the Ukrainian anthem. "Ukraine isn't dead yet," it says, "but it already smells, and we can see its end." Just

around the corner, another man died from shelling.

WALSH (on camera): Places like here, these shells land and while both sides blame the other for he loss of civilian lives, it's almost impossible

in places like this -- markets, homes all around -- that the fight for Donetsk will happen without a lot of innocent Ukrainians losing their

lives.

WALSH (voice-over): Who fired these shells, separatists or Ukrainians, was the question nobody could answer as they queued to get out

late pensions. "That's the interesting question," one woman says. "They don't advertise who does it. It's hard to tell."

In the city center, too, the remains of a night gun battle we heard. Unclear who was fighting so hard to control this local government finance

building.

A rare appearance from a separatist leader tried to bolster morale, but did not explicitly appeal for Russian military help.

WALSH (on camera): We're hearing now the Ukrainian army advancing every hour. We hear explosions in the town as we speak. How can you win

without Russian help?

"We think we're holding out OK," he says. "For over a hundred day, the entire war machine of a state has been crashing down on our young

republic of Novorossiya. If they lose part of the territory, they are defeated, and this is a huge victory. And we think we have this victory,

as Ukrainian society doesn't want to fight."

But outside, in the blue, another Ukrainian jet flew overhead. The sky is starting to fall in on this uprising, as the moment for Russia to

bail out the rebellion it started seems about to pass.

Nick Paton Walsh, CNN, Donetsk.

(END VIDEOTAPE)

CLANCY: Some news just coming into CNN. NATO secretary-general is warning Russia that further intervention in Ukraine will lead to what he is

calling, and I'm quoting here, "further isolation." Anders Fogh Rasmussen says that that could mean tougher economic sanctions that would really hurt

Russia's economy.

Meantime, Russia is biting back on the sanctions front, banning meat, vegetables, and dairy products from the US, the EU, Norway, and Australia.

Let's get straight to Phil Black, who joins us now, live from CNN Moscow. What's the discussion there in the Russian capital?

PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Well, Jim, on the streets, when you talk to consumers here, there is some fear. But there

are certainly a mix of views.

There are those who believe this is a good thing. Throw up the walls, keep out Western food, as this decree and this government retaliation to

Western sanctions says should now happen, because they believe this will kickstart local production in a way that has never really been able to

happen.

Russia is not in a state right now where it can feed itself. That's why it relies on food imports, particularly from the West. The Russian

agricultural industry is not really efficient, not really cost-effective. So, there are those who believe this is a good thing, and that's certainly

the spin that the Russian government is trying to put on this.

But there is also concern, because there is now a gap, really, in Russia's food supply that is going to be made up partially, perhaps, by

domestic production. They're also going to have to turn to other import markets, perhaps from other regions like Asia and South America.

But in the event that that gap isn't filled successfully, then there is a fear of food shortages and price rises. Inflation is already a

problem here with this economy. There is great concern that this very tough retaliation against international sanctions could make that worse,

Jim.

CLANCY: Phil, the sanctions aside, 24 hours ago, we were all talking about Russia allegedly having 20,000 troops poised on Ukraine's border,

ready to invade. What have the Russians said about that now?

BLACK: The Russians have really denied it in very strong, absolute terms, accusing the West, and in particular, the United States, of beefing

up their assessment, both in terms of numbers and what the intention of those forces may be.

Russia says it has simply been impossible to gather the sorts of numbers that the United States and NATO is talking about in that region.

And they've acknowledged something of a military presence without talking about specific number.

But they say those figures are there because that border area is not secure. Ukraine --- Ukrainian shelling, they say, is striking Russian

territory. On one occasion, it has killed a Russian citizen, they say.

And so, given that, it's a very natural reaction to have some sort of increased military presence there. But they do deny in absolute terms this

possible assessment from this -- from the West. Or really, it's a fear.

No one knows for sure. No one can say precisely what Russia's intentions are. But the fear is, the intention -- or the possibility could

be that these forces could be used to intervene in that conflict in eastern Ukraine and disrupt the momentum that has really been going all the way of

Ukrainian government forces in recent weeks, Jim.

CLANCY: All right, Phil Black, there, reporting for us from Moscow. Phil as always, thank you. It's an important story, it's a dangerous

situation, and we're going to continue to follow it.

Well, Russia's import banning is Vladimir Putin's -- just his latest move to show the West he's not about to back down in the face of

international pressure over Ukraine. CNN delves into the personality of the former KGB agent turned president in a special report, "The Power of

Vladimir Putin." That airs Friday at 7:30 PM Abu Dhabi time only on CNN.

Well, yesterday we brought you the latest from a Scottish independence debate. But in case you're Scottish and haven't decided how you're going

to vote, well, a few celebrities -- well, that's what celebrities are for, they're out there to lend a hand. Our producer Nicol Nicolson explains.

(BEGIN VIDEOTAPE)

NICOL NICOLSON, CNN PRODUCER (voice-over): There are certain things in life that are just meant to go side by side. Cheese and wine, Laurel

and Hardy, Kermit and Miss Piggy. Add to that list, celebrities and politics.

UNIDENTIFIED MALE: Thank you, thank you, thank you to the United States of America.

NICOLSON: Try as you might to keep them apart, they just can't help but be drawn together. On Tuesday, Scotland's top politicians had their

say on the subject of the country gaining independence. Now, we bring you news of a letter signed by 200 famous names who don't have a vote in

September's referendum but who want Scotland to stick with the union.

Mick Jagger knows you can't always get what you want, but wild horses wouldn't stop him signing the letter. Judi Dench famously played Queen

Victoria in "Mrs. Brown." Perhaps she doesn't want to pack her passport every time she goes back to Balmoral.

Simon Cowell may be television's Mr. Nasty, but he's full of affection for the land that gave us Susan Boyle. Sting, Sir Patrick Stewart, and

Lord Andrew Lloyd Webber are among the others lamenting the possible loss of Scotland.

Non-resident Scots don't get a vote, and many are signatories, with one notable exception. The name's Connery, Sean Connery, who over the

years has donated millions to the cause of Scottish statehood.

UNIDENTIFIED MALE: I want you to know, this is Scottish television. Nice to meet you.

SEAN CONNERY, ACTOR: Uh? Thank you. Didn't know they were still here.

NICOLSON: We'll find out whether this Bond is broken six weeks from now.

(END VIDEOTAPE)

CLANCY: All right, I guess we will find out, and it won't take long, about 40 days. I'm Jim Clancy, that was CONNECT THE WORLD. Thanks for

being with us.

(COMMERCIAL BREAK)

LEONE LAKHANI, HOST: This week on MARKETPLACE MIDDLE EAST, Byblos meets business. Amidst the regional turmoil, how the ancient city of

culture manages to bring in the crowds for its annual music festival. And we speak to the town's business tycoon about his economic vision.

Welcome to MARKETPLACE MIDDLE EAST, this week coming to you from the ancient town of Byblos. This has always been a draw for visitors, but over

the years, an annual music festival set amongst these historic ruins has helped Byblos carve a niche for itself as a music-lover's haven.

(BEGIN VIDEOTAPE)

LAKHANI (voice-over): Byblos, or Jbail, as it's known in Arabic, is believed to be the first Phoenician city, and dates as far back as 7,000

BC. Now, this ancient site bustles with activity every summer, as a 600- person production crew comes together to get the Byblos International Festival off the ground.

Naji Baz has been the festival's producer and art director since 2003. He says it's a full-time job, which he and his core team of two spend all

year working on for free, compensated only by their love of music.

It's that passionate commitment that has allowed Baz to convince international stars like the Gorillas and Snow Patrol to perform at Byblos.

NAJI BAZ, ARTISTIC DIRECTOR, BYBLOS FESTIVAL: The regional situation doesn't help, but I'd say that Lebanon and this particular venue, Byblos,

for those who have experienced it, has a particular aura. And artists do talk to each other. So, each one who came here over the past 13 years has

become our best ambassador.

LAKHANI: The festival first began in the 1960s and ran periodically through the next four decades. Today, Baz said the historic setting,

perched along the Mediterranean coast, is the festival's defining feature. But it doesn't come without challenges.

BAZ: We're in a site that's 2,500 years old, so each time you need to use a hammer, you have to get proper written authorization from the

Ministry of Antique and Tourism and stuff, because it's very much a protected site.

LAKHANI: Set before a crusader castle built in the 12th century, tonight's show has special resonance. The headlining act is the

internationally-acclaimed oud player Marcel Khalife --

(MARCEL KHALIFE SINGING)

LAKHANI: -- who hails from these very shores, although he's never performed at the festival before.

MARCEL KHALIFE, OUD MASTER AND COMPOSER (through translator): Everyone is asking me, "Why are you so nervous? Every day you have

concerts and performances in different cities around the world." But it is different when you are performing in your own home. My emotions now are a

mix of memories, nostalgia, love, hope -- a lot of different feelings.

LAKHANI: Khalife will be accompanied on stage by the Lebanese Philharmonic Orchestra.

KHALIFE (through translator): I always play with large orchestras, it's not my first time. However, it isn't easy to carry out this sort of

work in Lebanon during these difficult times here. Those who come do so cautiously because maybe some problem happened or there was an explosion.

So, it was difficult.

LAKHANI: But these collection of 160 musicians and singers come eagerly. They know this will be a historic night as they fine-tune their

instruments four hours before showtime. Soon, the crowds start coming in. This concert is nearly sold out, which is a relief, says Baz. He says most

festivals rely on ticket sales for a third of their income. Here, they make up 75 percent.

BAZ: The cost to put together this festival every year, I mean, this year, at least, is between $4 million and $4.5 million. From these,

between public funds and sponsors' funds, we generate about $1.5 million, which leaves $3 million to ticketing and box office, which is a lot. So,

we need to sell 40,000 tickets to break even on expenses.

LAKHANI: There's a capacity for 7,000 people in these stands. Baz says it can be a challenge to fill the seats. The volatility in the region

doesn't help, with visitor numbers dipping since the war in Syria began.

BAZ: We're relying almost solely on locals, but we're achieving our quantitative goals year after year, because Lebanon has got a strong middle

class and a strong need for cultural events.

(APPLAUSE)

LAKHANI: After months of preparation, a packed audience cheers Marcel Khalife onto the stage.

(MARCEL KHALIFE PLAYING THE OUD)

LAKHANI: Another success for the festival Byblos can enjoy before it's time to start all over again.

(END VIDEOTAPE)

LAKHANI: Traditionally, businesses in this town have reaped the benefits of this festival, but ever since the crisis in neighboring Syria

began, visitor numbers have dropped dramatically, and many here tell us they're suffering the consequences.

(BEGIN VIDEOTAPE)

LAKHANI (voice-over): This seaside restaurant is an institution. Set amongst the town's ancient harbor, Pepe Byblos Fishing Club first opened

its doors in the 1960s. It's been welcoming heads of state and Hollywood stars ever since.

Owner Roger Adeb says the busiest months are in the summer, especially as tourists come in for the annual Byblos music festival.

ROGER ADEB, OWNER, PEPE BYBLOS FISHING CLUB: Four thousand people, they will be floating around the harbor. This place will be packed. It's

normal. The festival attracts too many people. From all over the world, they come to visit.

LAKHANI: This year is different. There are still visitors coming in, but they're mostly from within Lebanon. A spate of recent bombings in the

country, as well as the unrest in the region, has scared away many outsiders.

AYOUB BARK, VICE PRESIDENT, MUNICIPALITY OF JBAIL-BYBLOS: When things are good, we have more than one million visitors coming to the city. But

when things are not good, we have around 200,000 or 200,050.

LAKHANI: The government said numbers were down 16 percent in the first three months of 2014, compared to the same time last year. Monita

Jmeyl is a shop assistant at this store operating in Byblos for 20 years. She says business is up 20 percent in the summer months, but today, few

come by.

MONITA JMEYL, SHOP ASSISTANT, MARCEL DU BYBLOS (through translator): (inaudible) the number of tourists now is less than before. There were

more tourists before when the security situation was better. Now there are less people. But of course, the festival helps bring people to the town

and shops.

LAKHANI: Promises of discounts and special deals do little to lure customers into this bar. Eventually, a few trickle in. But the bar

manager says he expects more in the evenings, when the festival concerts are on.

FADY, MANAGER, FROLIC BAR (through translator): The festival season has an impact. It's about five or seven nights a year. On evenings that

the festival is on, we have more activity than on other days.

LAKHANI: But in this volatile region, Lebanese businesses are used to making sure the show still goes on.

(END VIDEOTAPE)

LAKHANI: We're in Byblos this week for MME. Coming up after the break, Roger Edde, the owner of a luxury beach resort and restaurant in

Byblos, about how his plans for the city are shaping up.

(COMMERCIAL BREAK)

LAKHANI: He's already made his own fortune, and now, property developer and business tycoon Roger Edde wants to turn around the fortunes

of his hometown of Byblos.

(BEGIN VIDEOTAPE)

ROGER EDDE, PRESIDENT, EDDE SANDS RESORT: Byblos had a mythological nomination that has given me an encouragement to start the Byblos city era.

And then, we started at the Sands because a beach was needed in Lebanon.

And the idea for a destination where you can stretch from the shores of Byblos, beautiful sandy shores, to the hills of the Byblos area, where

you have ski resorts that can be developed into another Sands model.

LAKHANI: You want to replicate your Byblos models elsewhere in Lebanon?

EDDE: Absolutely. And this is what many Lebanese leaders today in every opportunity, they give that example of the success story we were able

to make in Edde Sands in the old Byblos, and now extending it to the whole region to emulate it for every region of Lebanon. Not to wait for the

government to do everything.

LAKHANI: Who's your target customer?

EDDE: Our prime customer, we suffer when they are not here, are definitely the elite of the Arab world, from the Gulf to Egypt, as well as

Iraq and Syria and Jordan.

LAKHANI: When the Gulf Arabs have stopped coming to Lebanon since the start of the Syrian crisis --

(CROSSTALK)

EDDE: Our income went down 40 percent.

LAKHANI: So, do you have to keep investing in these businesses yourself --

EDDE: Yes.

LAKHANI: -- to keep them going at these kinds of times?

EDDE: This is what I do. And I do it with a great satisfaction.

LAKHANI: Well, but if you're having to pump in money into your businesses yourself, how long can you sustain that?

EDDE: Indefinitely. Because whatever I am pumping as money, for me, because I have made my business internationally in major places around the

world, and I have done very well, and I can afford it.

LAKHANI: That's not real economics, though, is it?

EDDE: No, it's not economics. That's an act of love. But acts of love can be also very rewarding. I am a supply-sider thinker when it comes

to macro economics, and I believe that supply side has made so many success stories in the last -- for the last generation or two that we can really

believe in it.

And in Lebanon, we did it. But I think that the best story remains Dubai. Dubai is supply side economics story, nothing else.

LAKHANI: But if you want people to replicate the Byblos model --

EDDE: Yes.

LAKHANI: -- your business model, that's a very hard model to replicate if people don't have lots of cash, isn't it?

EDDE: We have people who have a lot of cash. And they don't have to make it the way I make it. You can do it economically. It's very easy

also for me, if I want to do it economically, but there is a measure of prestige that for me is a prestige for my country more than for myself.

(END VIDEOTAPE)

LAKHANI: That's it for this edition of CNN MARKETPLACE MIDDLE EAST, coming to you this week from Byblos in Lebanon. I'm Leone Lakhani, thanks

for watching.

END