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Quest Means Business
Israel-Gaza Cease-Fire; ISIS Advances in Syria and Iraq; International Response to Iraqi Crisis; Fighting ISIS; Brazilian Presidential Candidate Killed in Plane Crash; Sup App; Russia-Ukraine Conflict
Aired August 13, 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: Strong and robust. The market went up around 10:00 in the morning, and it never really looked back. The Dow Jones
Industrials gaining more than half a percentage point. The man hits the gavel. Three brings it to a close on Wednesday, it's August the 13th.
And tonight, we're following three major geopolitical crises. A cease-fire in Gaza has just one hour to run and the truce may already have
been broken. We'll be there in a moment.
Also, the international effort against ISIS. Countries around the world sending guns and aid to Iraq. And we have for you --
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: It is news for Russia, it is news for Ukraine, and it's news for the West.
(END VIDEO CLIP)
QUEST: As Russia's aid convoy advances on Ukraine, investors now having cause for concern. We'll put it into the investment portfolio.
I'm Richard Quest. I mean business.
Good evening. Just hours before the end of a three-day cease-fire and Israel's military says Palestinian militants have launched a rocket into
southern Israel. There have been no reports of injury or damage. Egypt is pushing Israel and Gaza to extend the truce, which is set to expire at the
end of this hour.
Our correspondent Fred Pleitgen is in Gaza. Good evening, Fred. So, Israel says that a rocket has been fired, but can we say that the truce is
over even before it's officially over at the top of the next hour?
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Richard, yes, things certainly are looking dire at this point in time. The two sides
right now, of course, in conjunction with the Egyptians leading the negotiations, have less than an hour to find some sort of 11th hour
solution to this problem if, indeed, that is something that is still in the cards. Right now, we haven't been getting an definite signals from those
talks there in Cairo.
And as far as those rocket launches are concerned, it was about an hour and a half ago that we were sitting here in our position in Gaza City
when all of a sudden we heard something that seemed to sound like a rocket launch.
And indeed, only a couple of minutes later, the Israel Defense Forces came out and said that yes, indeed, a rocket had been launched on the Hof
Ashkelon area, which is in the south of Israel and is right on the border with northern Gaza.
There have been varying reports since then. Hamas, for their part, are saying that the rocket was not launched by them. The Israelis,
nevertheless, are blaming Hamas. There have also been some conflicting reports as to whether or not the Israelis have taken any retaliatory action
yet.
QUEST: Right.
PLEITGEN: There have been some reports of explosions in northern Gaza. So far, those are absolutely unconfirmed, and the Israelis are
saying they have no word that any sort of explosions have taken place, Richard.
QUEST: This brings into very sharp relief, Fred, the difficulty that Israel and Hamas both face here. If another renegade or rogue
organization, guerrilla organization, is firing the rockets, Hamas says our hands are clean. Israel says, well, it doesn't really matter, somebody's
firing rockets. It's difficult to see that a truce could ever sustain this sort of nonsense.
PLEITGEN: Well, certainly, it does make things very difficult. At this point in time, we do have to say, the ball does appear to be in the
Israelis' court to see how they react to all of this. Are they going to retaliate against this first rocket that was fired? Could there be
additional rockets that will then be fired as well?
So, certainly, it makes the situation a whole lot more difficult, one that has been hard during the entire day and during the past 72 hours
anyway. The positions seem to be very far apart. On the one hand, Hamas and the other groups that are negotiating there are saying that they want
the blockade of Gaza to end immediately.
The Israelis for their part are saying, OK, then in return, Hamas has to completely demilitarize. Can some sort of negotiation, can some sort of
middle ground be found in between all of that? It seems as though at this point in time, that is not the case.
And there have been wild rumors flying around Gaza City today as to what could actually happen. Could there be an extended truce? Could there
be an additional 72 hours of truce? Could there be a longer-term agreement, or could everything fall apart at this point? As I said, it
seems quite dire.
And certainly, the rockets -- or rocket, which there's only been one confirmed so far -- that has been fired is something that makes things
even more difficult, there's absolutely no doubt, Richard.
QUEST: Thank you, Fred. And obviously, in this crucial hour, come back at the moment there is more to report, whether further rockets are
heard, or you hear more news on what will happen at the top of the hour. We will come to you and take you as soon as you do. Fred Pleitgen in Gaza
City.
Now, also tonight, ISIS says it has killed men in large numbers, and it's holding more than a hundred women and children. This is very
distressing. As the political crisis in Iraq deepens, the militant group's influence continues to grow.
Over the border in Syria, ISIS has taken control of several villages outside Aleppo, following clashes with rival Islamist groups. The UK-based
Syrian Observatory of the Human Rights reports heavy casualties on both sides.
On Mount Sinjar, tens of thousands of refugees are waiting for aid. The international community is preparing plans to move them to safety. The
UN's warning a genocide may be imminent.
And in Baghdad, the prime minister, Nouri al-Maliki, defies calls to leave quietly. He's calling moves to replace him a "conspiracy woven from
inside and out." Our senior international correspondent Nick Paton Walsh is standing by with the latest.
Nick, I want to put, if I may -- I want to put the politics to one side at the moment, and we can get to that if we've got time, but it seems
to me that ISIS's claim of killing men in large numbers, holding women and children -- and I suspect more terror and murder to come -- is by far and
away the most distressing aspect tonight.
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Certainly, although I have to say, mass executions are commonplace, frankly, what ISIS
have been doing in the past few months or so.
When we first started reporting on them towards the end of last year, they were mostly beating activists who opposed them, then it suddenly went
to amputating thieves to whipping people who were smoking.
And then suddenly, now, this year we're into public crucifixions, the beheading and placing on spikes in public of those soldiers who oppose them
who they conquer and kill, and many videos of mass executions.
So, the notion that the Yazidis didn't escape ISIS's brutality shouldn't come as too much of a surprise. But given the focus,
internationally, on this particular crisis, the fact that now a senior ISIS commander telling our producer, Roger Raziq (ph) that yes, they have at
least 100 women and children in Mosul.
Not specifying the exact number or the exact location or locations, suggest that they are aware, perhaps, of the currency of the people that
they are holding. And of course, as ever, unashamed to mention they've killed large numbers of men in this instance, saying that that was after
they went into Sinjar. And then, of course, they pulled these women and children out.
QUEST: Right.
WALSH: Most important part of this message, though, regards the fate of them to come. They have, they say, been called to Islam. Whether they
accept that or not, who knows, Richard?
QUEST: With the attacks and with the aid being dropped by the international community, and the bombings took place by the United States,
has the -- has it made any difference in slowing down or arresting the move forward of ISIS?
WALSH: In that specific area around there, there's been a change in certain dynamics, some towns have fallen back to the Kurds. But at the
same time, a town to the south, Jawwalah, has fallen to ISIS, away from Kurdish lines. So, they advance in some areas, while they retreat in
others.
Around Baghdad here, there is a fear that they may soon be more in evidence around the capital, but I have to say, there seems to be a very
close ring of steel around it. That's not stopping car bombs, I say, though, going off. A real fear there are ISIS sleeper cells across the
capital city.
The issue with ISIS, Richard, that you have to understand, this is not a conventional army. They are not held back by mass losses. Most of the
people in ISIS joined because they want to die in battle, because that is their ideological calling as they see in the Islamic faith.
Warped, perhaps, in the eyes of many other Muslims, but that's why many of them join ISIS. They want some notion of giving their life in the
service of jihad. That's what makes it such an impossible, to the eyes of some, foe on the battlefield, despite how many of them actually lack
genuine military training. Richard?
QUEST: Nick Paton Walsh, once again, thank you, sir, for putting it into context, giving us the wider picture. It's much appreciated.
Now, the international response to the crisis is finally starting to come together. If you join me over at the super screen, you'll see what I
mean. Now, France says that it will supply weapons to the Kurds in the coming hours. It's also delivering 20 tons of humanitarian aid, including
medicine, tents, water treatments, all the things that you would need, basically, for basic survival of life.
The British prime minister, David Cameron, in the UK has cut short his holiday to put together what's described as a detailed plan. The UK's
carried out a third round of emergency air drops to Sinjar Mountain.
And 130 US advisors -- US military advisors have arrived in Erbil to assess the crisis. The US is considering air rescue, as Nick Paton Walsh
was discussing, for the Yazidis that are in the -- on the mountain at the moment.
The rapid advance of ISIS has stunned the Iraqi government and observers around the world. Joining me now is Juan Zarate, who served as
deputy national security advisor in the Bush administration and assistant secretary for treasury for terrorist financing. Sir, good to see you, sir.
Thank you.
JUAN ZARATE, FORMER US DEPUTY NATIONAL SECURITY ADVISOR FOR COMBATING TERRORISM: Likewise, Richard.
QUEST: We'll come to financing in a moment, but this is just breathtaking, that after so many years of treasure and blood in Iraq, that
we should be facing this. What has gone so dramatically wrong?
ZARATE: Well, you have an absolute disaster that's met between the conflict and vacuum in Syria and the human toll there, and what has
happened in Iraq in terms of the sectarian breakdown and the advance of ISIS.
And so what you have is ISIS having grown from the ashes of al Qaeda in Iraq, gained momentum in Syria, has really grown in adherence and with
financing and resources in a way that's much more dramatic and with more momentum than anyone had anticipated.
(CROSSTALK)
QUEST: How --
ZARATE: And the US president has admitted that.
QUEST: How -- let me interrupt you. Let me interrupt you, sir, if I may. How can we not know that there are a large number of bloodthirsty
murders waiting to commit genocide in the country?
ZARATE: Well, I think we should have know. I think part of the problem, Richard, is that we -- the US, at least, lost a physical footprint
in Iraq with the withdrawal of troops, withdrawal of some of the intelligence infrastructure that we once had. We lost some sensibilities
of what was happening on the ground.
And certainly not having more touchstones in Syria did not give us the ability to understand how quickly this group was evolving. It shouldn't be
a surprise, though, Richard. You're right. This is a group that took over Fallujah and held it in the face of the Iraqi military before they then
advanced into Mosul and into northern parts of Iraq.
QUEST: All right. There will be many learned men and women like yourself in various policy institutes and think tanks that will tell me to
my face that this is very complex, there's tribal factions, there are different regimes, it's a mess going back many decades. I need you, sir,
to tell our viewers tonight, how do we get out of it? How do we solve it?
ZARATE: Well, there is no easy solution, and I think solving the Yazidi problem, the humanitarian problem, is sort of the tip of the
iceberg. Defending Kurdistan, Erbil, supporting the Peshmergas, the next layer.
But I think the broader issue, now, Richard, is you have a group that has established a physical footprint, has gained weapons and material, runs
a war economy, largely built off the oil infrastructure and the economy on the ground. So, it will take, literally, the dislodging of this group from
their hold of physical territory.
QUEST: Right.
ZARATE: That's difficult. But that requires, then, a regional approach to solve both the Iraq and Syria problem, which no one wants to
think about, because of all of the blood and treasure already put into those regions.
QUEST: All right.
ZARATE: But that's what's going to have to happen.
QUEST: Finally, then, we are looking at a situation, whether it's Syria or in Iraq, whether it's up in Kurdistan, whether it's ISIS, where
putting it crudely, we're going to have to get our hands dirty again.
ZARATE: I think that's right. I don't think it has to necessarily be the US on the ground. I think the Peshmerga forces are willing to fight,
they are fighting ISIS. I think re-energizing the Iraqi military is something that has to happen from the south to defend Baghdad and other
parts of Iraq.
Getting the Turks involved. They now realize that the forces that they had once supported in Syria are beginning to threaten the very
stability and security of southeastern Turkey. And so, this now has to be a coalition effort. And as you described, France and the UK, with US
leadership, are now following.
QUEST: Sir, thank you for making sense of it all, and at least giving us into some perspective. I appreciate it.
ZARATE: My pleasure, Richard.
QUEST: Now, in the last few moments, we've learned the UN has declared a level 3 emergency for Iraq. That's the highest level of
humanitarian crisis. The hope is it will help to ensure more effective humanitarian response.
When we come back, the challenger for the presidency of Brazil has been killed in a plane crash. We're going to be in Sao Paulo to get the
details.
(COMMERCIAL BREAK)
QUEST: Sad news this evening. One of the leading candidates in Brazil's forthcoming presidential election has been killed in a plane
crash. Eduardo Campos was on a private Cessna aircraft that went down in the southeastern city of Santos. There were seven people onboard, all were
killed. Campos was regarded very much as a friend of the business community.
Our Brazil bureau chief, Shasta Darlington, joins me now from Sao Paulo. Very sad news in this environment. But you and I have to discuss
the implications of what this means, both politically and economically. So, where do we begin?
SHASTA DARLINGTON, CNN BRAZIL BUREAU CHIEF: Well, Richard, obviously this is -- I think Brazilians themselves don't know where to begin. The
markets have been up and down. Eduardo Campos was a popular figure in the northeast, which is where he's from.
But he was something of an unknown. He'd come out with this sort of market-friendly discourse, but you have to remember, his running mate is
Marina Silva, a kind of a firebrand environmentalist.
So, how much could he have really done if he'd ever gotten in the position on a sort of national political stage will never be known. I
think what people want to know now, when we talk about politics, is who will run in his place? Will it be Marina Silva? She's very religious,
very strong on environment, but not necessarily as friendly -- business- friendly as Eduardo Campos was.
And what will that mean for the remaining candidates? Eduardo Campos was third in the running with 9 percent in the latest poll. That was
expected to rise as he became better known on the national stage.
But this could be a boost for the incumbent, President Dilma Rousseff, or for her main competitor, Aecio Neves. This -- we'll have to see whether
or not this means that she has more -- basically a more difficult time against the opposition candidate --
QUEST: Right.
DARLINGTON: -- will he get a lot of the vote that was going to go toward Eduard Campos? It's really unknown where this will go. And at this
point, Dilma Rousseff was the favorite, continues to be the favorite, and that doesn't change, Richard.
QUEST: Now -- that was a --
(LAUGHTER)
QUEST: As always, Shasta, you have beautifully anticipated my question as to whether this change is the electoral likelihood of Rousseff
getting another term.
DARLINGTON: Not so far. Again, we have to see who replaces Eduardo Campos. Marina Silva, his running mate, has a strong following. It's not
the same following that Eduardo Campos had. In some ways, they're a little more radical.
But could that mean that she ends up being the main opposition candidate? Could that take away from Aecio Neves? Again, a lot of
questions in the air. And it's interesting, because as we get closer to the elections, it seems that Dilma Rousseff has less and less support.
A year ago, it looked like there may not even be a runoff vote. Now, it looks like a runoff vote is inevitable. We're going to have the first
round on October 5th. It will likely go to a runoff vote that will be in the second half of October. Who will the runoff be against? And once it's
narrowed down to two candidates, do they really have, perhaps, a chance of beating Dilma Rousseff?
And these are questions we can't answer at this stage. According to the polls, Dilma Rousseff is still in the lead, Richard.
QUEST: And you'll be watching that. You have a busy autumn ahead of you. Thank you. Shasta Darlington joining me. This is QUEST MEANS
BUSINESS, live from New York. Good evening.
(COMMERCIAL BREAK)
QUEST: Welcome back, QUEST MEANS BUSINESS. Now, having your smartphone's camera hijacked is probably the stuff of nightmares. But an
app is using exactly the same technology to take people anywhere in the world.
The app is called Sup. I suppose it's an abbreviation for "What's up?" or something similar that millennials are so keen to use. Anyway, it
allows users to have access to friends' smartphones, cameras, and see through their eyes in real time for ten seconds. You can even request the
user to flip the camera around and snap a selfie.
So, we tested it out. We've already set up with one of my colleagues in the UK. Here he is. I've sent him a request asking him to -- Samuel --
Samuel Burke, we've requested that he does it.
We have the CEO of Sup who's here with me, and he's going to -- tell me. While we wait for Samuel to hopefully -- oh, he's answered! Oh, here
we go, it's connecting. Where did you get the idea from?
BART STEIN, CEO, SUP: Yes, sure. So, I was actually with my co- founder and we were watching the movie "Being John Malkovich."
QUEST: Right.
STEIN: Which is a classic movie from the 90s where you can jump into the eyes of John Malkovich. And we were thinking, that was in 1990 -- the
1990s, but today, there are 500 million phones with video cameras.
QUEST: And there's Samuel. There's Samuel.
STEIN: Oh.
QUEST: I'm going to keep pushing this so we keep seeing. So, I --
STEIN: I can't see, but it looks -- I'm sure you're having a good time. There you go.
QUEST: Get right in there.
STEIN: So, if you press the heart, you extend the time. It's a ten- second live feed.
QUEST: Oh, and look that that, he's actually looking at me on air.
STEIN: And the cool thing is --
QUEST: During this.
STEIN: -- your -- if you swipe on the screen left to right, he'll actually get instructions. So, move right, move left. And so on his end,
he's seeing what you're telling him to do.
QUEST: There we are. And that's us on -- hang on.
STEIN: So, it's sort of like having this remote control camera, and right now, you're seeing London live, which again, is a pretty amazing
thing that this movie, "Being John Malkovich," happened in the 90s, but today, it's actually possible.
QUEST: All right.
STEIN: So, we wanted to build something that made that possible if you want to see anything in the world.
QUEST: Samuel, since you're probably listening to us on television, show us the screen. Anyway, that's how it works.
STEIN: Yes.
QUEST: Why?
STEIN: So, I mean, if you think --
QUEST: I mean, why is this better than Skype, which is free --
STEIN: Yes.
QUEST: -- for Skype to Skype.
STEIN: Sure.
QUEST: Why is it better than Face Time, which is free?
STEIN: Sure. So, this is free.
QUEST: Yes?
STEIN: And the real lies, if we think about it, how cool would it be to see anything that's happening in the world. And we're here on CNN and
thinking about journalism. Seeing a breaking news event of something that's happening and being able to SUP someone who's on the scene there and
get a live feed.
You can't do that on Face Time. Face Time is a conversation that you have with a friend or your mother or grandmother. SUP is interactive, and
it's with people you don't necessarily know, but you have the user name of. So, it's a totally different social graph than what Face Time is.
QUEST: It's designed -- it's a totally different --
STEIN: Social graph. So, Face Time, its social graph is the people you use it with. On Sup, you can just find the user name of someone and
discover them and Sup them through that interesting place or nearby something interesting. But Face Time --
QUEST: Is this designed for friends, or is it designed for strangers?
STEIN: It's designed for both, just like Twitter. So, Twitter, if you think about it, you're on Twitter, you follow people you know and
friends, but you also follow you to get interesting updates about what's going on in the world of news.
So, we're building Sup in the same fashion. We want you to be able to use it for something as boring as just seeing what your friend is doing,
but also something as interesting as seeing what's going on in a place in the world that you aren't.
QUEST: Right. But here's the difficulty you've got with Sup.
STEIN: Sure. What is it?
QUEST: Versus the Twitter syndrome.
STEIN: Yes.
QUEST: The Twitter syndrome, you can tweet and tens of thousands will see at once.
STEIN: Yes.
QUEST: That's why Twitter has become, if you like, the news agency for the millennial world.
STEIN: Yes.
QUEST: Sup is one to one.
STEIN: Yes, it is. So, that's something we're working on. So right now, it's one to one. But in the future, it's very easy for us to turn on
the ability for someone who's an established journalist or someone who's at somewhere really interesting to have their Sup be broadcast to more than
just one person.
QUEST: It's growing quite quickly.
STEIN: It's growing quite fast. It actually has been taking off very fast in recent weeks, which is why I think you guys heard about it.
QUEST: Right.
STEIN: But it's actually been out for a couple of months, and it's been growing very quietly and organically.
QUEST: Please tell me that Sup isn't this "Whassup?"
STEIN: Sup is actually -- I think people think it's -- Google was a stupid name when it started, too.
QUEST: Sup.
STEIN: Things sound silly --
QUEST: Sup.
STEIN: -- when they first start. But Sup actually makes a lot of sense. It's actually what you're doing, and you want to see what's going
on.
QUEST: When do you sell out and become a billionaire?
STEIN: We're trying to build a company for a very long time.
QUEST: Oh, like -- if I had a dollar for every time --
(RINGS BELL)
QUEST: -- I've heard that answer! Good to see you, sir.
STEIN: Thank you very much.
QUEST: When we come back after the break, 280 Russian trucks, they're heading towards the border with Ukraine. There's a fierce debate about
what they are carrying. Will they be allowed in? It's after the break, QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes
first.
With a cease-fire due to officially expire in a matter of minutes, Israel says terrorists from Gaza have launched a rocket into Israel. An
Israeli military spokesman says there were no injuries. Hamas denies firing the rocket. The 72-hour cease-fire between Israel and Hamas is due
to expire at the top of the hour.
The United Nations has declared a level 3 emergency in Iraq, the highest level of humanitarian crisis. The militant group says -- ISIS says
it has killed Yazidi men in large numbers and is holding more than 100 women and children.
One of the front-runners in Brazil's presidential elections has been killed in a plane crash. Eduardo Campos and six other passengers were
killed when their plane came down in Santos in Brazil. The election campaign's been suspended for three days. Campos was 49 years old.
Police say at least six people were injured when a train partially derailed in the Swiss Alps. A police spokesman says a landslide was to
blame. A rescue operation is currently taking place.
Vladimir Putin met with Russian security officials in Crimea on Wednesday. It's the president's second visit to the peninsula since he
annexed it earlier this year. There's fierce debate over a convoy of 280 Russian trucks that are heading towards Ukraine.
Moscow says the vehicles are carrying humanitarian aid. Ukraine fears Russia's trying to smuggle arms to rebels. A Russian Foreign Ministry
official told CNN Kiev and the Red Cross approved the mission.
(BEGIN VIDEO CLIP)
KONSTANTIN DOLGOV, RUSSIAN FOREIGN MINISTRY: It hasn't been coordinated. From what has been said many times, not just by Russian
officials. All the details, all the parameters of this humanitarian convoy have been meticulously discussed and agreed upon between Russia, Ukraine,
International Committee for the Red Cross.
(END VIDEO CLIP)
QUEST: Now the Red Cross has denied any involvement with this effort. European stock markets were higher. The rebound was muted over the
concerns of what's happening in Ukraine and sanctions. The DAX which is sharp - has fallen the sharpest - did rally the most - down 1.4 percent.
E.ON shares soared nearly 5 percent. There's great concern now over what - not only what the Ukraine-Russia sanctions situation means geopolitically
but also how it will play out in the investment portfolios of everyone around the world. Mohamed El-Erian is the chief economic advisor Allianz,
and he's now warning an escalation in the Russia-Ukraine conflict will affect markets and investment decisions, writing an article that argues
sanctions should prompt a rethink on Russian investments.
(BEGIN VIDEOCLIP)
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: Whether you are a company that imports things that are now banned or whether you are a
company that exports to markets that can no longer be accessed, the bottom line is the same - your profits go down. Because either your costs go up
or your revenues go down, or in many cases, both things happen.
QUEST: And yet, one's tempted to say because the sanctions are diversified over many countries in different ways, do you think it actually
hits anybody very badly?
EL-ERIAN: Oh, certain companies have been hit very hard and certainly investors in Russian corporates in particular have been hit very, very
hard. I think the issue is whether this escalation will continue. The sanctions started just the West on Russia and it was specific individuals
and specific companies. Now we are in a state where there are whole sectors being targeted, and in addition, we now have counter sanctions.
And the issue everybody should be asking, Richard, is will this process continue or will be - or we will - will we have a de-escalation of
sanctions. And so far, there's little to suggest that we will have a meaningful de-escalation.
QUEST: In that environment, the only option is to disinvest from those risky assets which are, if you like, in the firing line of sanctions
or have exceptionally tough nerves to brazen it out.
EL-ERIAN: Correct. And you're seeing four different behaviors. One is tough nerves, I can underwrite the volatility, I'm staying in those
companies. Second is, I don't think these sanctions are going to be there for a long time, so I'm just ignoring them. The third is people are
exiting, but the fourth is really interesting. You also have investors exiting, not because of commercial risk, but because of reputational risk.
The Norwegian Sovereign Fund is looking at its holdings in Russia because it becomes very difficult to explain politically why you are investing in a
country that is behaving the way it is, and you also have Russia itself starting to question whether it wants to invest so much of its reserves in
European and U.S. government securities.
So you also get non-commercial behavior, and what is very hard to predict is when do you get a tipping point of all these things coming
together.
QUEST: Pulling the strands together here, it is very difficult to see a way out at the moment when President Putin is digging himself in further
just in Crimea today for his security council meeting. And the West - Angela Merkel, pardon the phrase, has the bit between the teeth.
EL-ERIAN: Right. And that's why the fashion in which investors are shrugging off the sanctions is a reason to be more cautious and think more.
And that's why I wrote the article. You know, investors have a tendency of arguing that rationality will prevail, and it is rational to stop a process
that is lose, lose, lose from an economic perspective. It is lose for Russia, it is lose for Ukraine and it's lose for the West. However, this
is not an economically rational discussion. This is a politically- motivated discussion where national security takes precedent over economics. And I'm a little bit worried that investors have shrugged off
these geopolitical issues without really thinking through the consequences.
(END VIDEOCLIP)
QUEST: My word, always good hear to the view of Mohamed el-Erian, particularly on the subject as important as that, talking to me earlier
today. U.S. markets (RINGS BELL) - they rose on Wednesday. Investors see sluggish retail sales as a sign the Feds won't raise interest rates any
time soon. S&P's up .6, the NASDAQ was up over 1 percent. In fact, you can see the gains ever greater than we started the program - up more than
1/2 a percent.
The cruise industry says it's on course for record passenger numbers this year. After the break, we're all at sea. Time to sample some
switching off. It's August for the "Business Traveller." Take a break (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Ah, it's all hands on desk on the SS Quest. Perhaps you'd like a dip in the pool. Wherever we go these days, there's just nothing
but relaxation. After all, it's August, and even if the jacket is off, it's definitely time for relaxing, and taking a cruise is rapidly becoming
one of the most popular forms of going on vacation. Now, look at the new rules. Dubai, for instance, is looking forward to welcoming more cruise
passengers. New rules in the UAE makes it easier for tourists to get around - multiplicity visas for cruise passengers which all makes it a lot
more simple. Add into that ports in Abu Dhabi, Dubai, Qatar and everywhere else, and you start to see the globe is starting to become one big cruise
industry to accommodate more visitors.
Regional tours of authority are joining forces to raise awareness of the Gulf as a destination. In other words, cruising is very much one of
the key forms of vacation. On the SS Quest, I discovered what life's like on a cruise line, and frankly, there really was only one way to find out.
It's 1969 when the mighty Queen Elizabeth II arrives in New York. A maiden voyage heralding the dawn of the modern cruise age. Nearly half a
century on and cruising has been brought to the masses with these floating cities. Good grief, it's vast. Nearly 22 million people are expected to
board a cruise ship this year. It's a relatively small number of passengers because there's only around 400 ships cruising the world's
oceans and rivers.
Carnival Corporation is the biggest player with nine brands.
(BEGIN VIDEOCLIP)
ARNOLD DONALD, CEO & PRESIDENT, CARNIVAL CORPORATION: We have an armada of 102 ships, offering a variety of cruise experiences that can
cater to any taste.
QUEST: The industry's been affected by a series of incidents - sickness, power failures, fires, and of course the Costa Concordia
grounding with the loss of 32 lives. It shook consumer confidence for the cruise. Not only do they have to get their reputation back, they've also
got to learn to appeal to a younger generation, balancing demographics with psychographics.
DONALD: You go on our ships, you'll find people of all ages and all incomes on the different lines. What differentiates the lines is the
actual nature of the experience. So psychographic is what kind of experience do you enjoy?
QUEST: And that experience means having a party when there are four and a half thousand of your closest friends here. The high ropes course
onboard the ship is a good example of how the cruise lines are having to adapt and change. It's not just enough to offer a voyage at sea - no,
these days you've got to have high wire adventure. Help! The entertainment never stops. And like the food, it's also evolving.
MATT MITCHAM, CRUISE DIRECTOR, CARNIVAL BREEZE: It's all about the new graphic plasma screens, LED screens that project these great effects up
on the screen. We're trying to offer a little bit () but we went to keep them short , sweet and with a bang at the end that makes them want to come
back for more and more each and every time.
Male: Five, six, five, six, seven eight! Rock that (inaudible) everybody, rock, rock (inaudible).
QUEST: Keeping in step means providing more berths for an industry growing at 7 percent a year. The problem is ships are expensive to build,
and from design to launch take many years which is why the industry is now far more ruthless about where it bases its ships.
DONALD: China is an amazing opportunity. That market is going to grow exponentially over time. Early on, there are so many people in China
that we can take a product that serves Europe or the North American markets as well and put it in China and still have a lot of interest and
experience. Over time as we expand into the broader Chinese population, it's going to have to be tailored.
QUEST: Passenger ships have evolved from a mode of transport to a destination in their own right. The ships may not get any bigger, yet
there's still plenty of room for expansion on that wide horizon.
(END VIDEOCLIP)
QUEST: Now, while you were watching that, some news just in to CNN. A senior Hamas official in Cairo who's part of the Palestinian Delegation
has told CNN, and I'm quoting now, "The cease-fire has been extended for another 72 hours to give more time to reach an agreement on the issues
between the two parties." You'll remember at the beginning of the program, we talked about the ceasefire was due to expire at the top of the hour.
Rockets had allegedly been fired from the Gaza into Israel. Israel was waiting to see what was happening and (inaudible) for. So far, there had
been no retaliation. These are live pictures from Gaza at the moment.
And the question was what was going to happen at the top of the hour? Was there going to be an extension? Well we now know we haven't really
heard it from the Israeli side yet, but we have heard it from the Palestinian delegation that the ceasefire's been extended for another 72
hours to give more time to reach an agreement on the issues between the two parties. No word yet from Israel on the agreement. We'll bring you more
details as and when we get it. This is CNN, because the news never stops and neither do we.
(COMMERCIAL BREAK)
QUEST: Let me recap the news for you this evening. It's just been announced, or we've just heard, from the Palestinian delegation in Cairo
that there - an agreement - has been reached between Israel and the Palestinians to extend the ceasefire by a further 72 hours. the ceasefire
was due to expire in just 14 minutes from now, and there've been allegations that the Palestinians or at least Hamas has already fired some
rockets earlier in the hour, but that's not been confirmed yet. But in any event, it does appear as if the ceasefire has been extended. We're waiting
for Israel's response and confirmation from their side if that is indeed the case. We'll bring it to you as soon as we get it. Now, the weather
forecast. Ms. Harrison is at the World Weather Center there. It's been very busy for you.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: It was. A lot going on, Richard. A lot of rain out there and that much I can certainly
say. I think perhaps your (inaudible) fairly light this morning on your commute in to work. But have a look at this because it really began Monday
- and Monday evening actually -- in Detroit. And in fact the governor of Michigan has said that this flooding is described as flooding of historic
proportions. And so certainly three counties he's declared a state of emergency for three counties in Michigan.
This is the situation in the last 12 hours - a lot of heavy rain worked its way through Boston and now pushing over into the far northeast
into New England and eventually up into eastern areas of Canada. But have a look at these pictures too because this was the commute in and coming out
of Long Island on this - what day is it? - this Wednesday morning. So very, very deep water, really too deep to driving in. That minivan seems
to have got stuck, but plenty of other cars are trying to get through, but it does look extremely deep and of course we will say to you don't do this
because you really don't know what is in the water when you can't see and it is that deep. So that has been the situation, but also, if we go back
onto Friday, have a look at this video because this is actually in Nebraska. Huge amounts of water and actually in fact what's going on -
this is a waiting room - a cafeteria waiting room area I a hospital. The flood waters have built up to such a level outside that eventually it just
burst through the glass. Luckily the people who were there managed to get out of the way, but you can see the damage that was done. No reports of
any injuries. But that happened on Friday. The hospital has just released that video, so there it goes again. My goodness. So very terrifying which
is why you need to be really careful of course whenever you're around water.
But look at the amount that's come down. Detroit on Monday - in just eight hours - 115 millimeters against an August average. That's the total
month of 76 millimeters. Even more than this came down in six hours in Baltimore on Tuesday - 155. August average there is 84. But by far the
biggest amount, Islip in New York - 333 millimeters in nine hours. That's over a foot of rain and it's three times the average for August, and in
fact, the National Weather Service has said that for New York state, it has been the wettest 24-hoour period ever on record. So that is how much rain
has been coming through.
The warnings are in place, particular again - take particular notice of the flash flood warnings. The system, as I say, continued to work its
way up into the northeast, and as it does so, a lot of that heavy rain beginning to peter out, but still it is pretty wet. And of course as you
might expect, the main airports there in the northeast - LaGuardia and Newark - have some pretty long delays that've been like that throughout the
day. So there's the rain clearing up into the northeast. And actually there's some flash flood watches in place across the southwest too, because
we've got some fairly strong thunderstorms coming through there in the next 24 to 48 hours.
Meanwhile in Europe, again quite a bit of heavy rain. It's been coming through particularly through these central areas of Europe, and
especially here of course in Switzerland - 136 millimeters of rain. Now I say especially in Switzerland because as we know, there was a landslide
that derailed a train and it was actually traveling from St. Moritz towards the north. And of course we're talking about some very mountainous areas.
This is actually the train track. You can see it - it's not a great resolution this, but there is the actual train tracks so you get an idea as
well. It's heavy amounts of rain - why you might see a landslide in an area such as this.
So there's more rain in the forecast. It eases off for a while and then you get one or two areas where we could see some heavier amounts of
rain, so that is what you just need to be aware of, and unfortunately it's pretty much the same pattern as we continue through Thursday. And there
are more warnings, too, Richard, across this particular area of Europe - more heavy rain, thunderstorms, hail and possibly even some tornadoes. So
a lot to be aware of.
QUEST: Tornadoes, large hail, damaging winds and heavy rain. And it's only August.
HARRISON: Yes, well it's - I guess it's typical for August -
QUEST: Right.
HARRISON: -- because of the thunderstorms, the heat that builds up, so we see a lot of this in August.
QUEST: Mistress Harrison, thank you very much indeed. Thank you. Now, Canada has offered the World Health Organization up to a 1,000 doses
of an experimental vaccine in a bid to contain the Ebola outbreak. The WHO panel has concluded this week - we reported - although it's experimental,
making the vaccine available is the right thing to do. CNN's David McKenzie reports from Johannesburg.
(BEGIN VIDEOCLIP)
DAVID MCKENZIE, INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL BASED IN BEIJING, CHINA: After criticism, the World Health Organization
has said that it will allow experimental drugs and vaccines to be sent to West Africa for those areas worst affected by the unprecedented Ebola
outbreak. The WHO says both these drugs have not been fully tested on humans. They do represent a chance to help those most in need. The
Canadian government has said it will send between 800 and 1,000 vials of their vaccine treatment that also hasn't been approved into the region
through the WHO. In the meantime, the governments in the region are heavily criticizing the international response. The president of Sierra
Leone saying, "We have not been provided with enough equipment, resources, qualified health workers, and have lost our only expert in the Ebola
virus."
But some have said those countries worst affected didn't use their resources early enough, with several months going by before the seriousness
of this outbreak was known. David McKenzie, CNN Johannesburg, South Africa.
(END VIDEOCLIP)
QUEST: Let me update you on the various developments that have been happening over the last hour or so. You'll recall that the ceasefire in
Gaza between the Palestinians and the Israelis were supposed to expire in just eight minutes from now. Earlier I told you that the ceasefire had
been extended according to one Palestinian delegate in Cairo by 72 hours. Now it seems it's been actually extended by five days says the chief
Palestinian negotiator, and the Palestinians are now saying they hope after that, it'll be a lasting ceasefire agreement in the coming weeks. Fred
Pleitgen who we spoke to at the beginning of the program is now back with me. Fred, five days or 72 hours - which is it?
FREDERIK PLEITGEN, CNN CORRESPONDENT: At this point what we're hearing from senior Hamas officials and also from the Palestinian
delegation is that it's indeed five days for further negotiations. Of course you've said it, Richard, there are still a number of points that are
very contentious between Israel and Hamas and indeed the Palestinians as a whole.
The Hamas of course want Israel to lift the siege of Gaza whereas the Israelis are saying well in return then, Hamas must completely de-
militarize itself. There's some other issues that are very important, especially issues of course pertaining to Gaza's economy. Hamas wants to
build a seaport here to actually get goods into the country. There's also the talk of lifting or at least easing some of the other things of not
allowing goods into the country, allowing additional things into Gaza as well.
So there are certain things that are on the table. There are negotiations that seem to be very difficult, and now it seems as though the
sides have come together and said that they want some additional time to try and make all of this happen. What I can also tell you, Richard, just
really quickly is that we are seeing some action here in the sky over Gaza tonight. We saw what we believe - just a couple of minutes ago - believed
to be possibly an iron dome intercept of what might've been a mortar or a rocket fired here from Gaza. It was a flare that was up in the sky and
then an explosion that could be heard afterwards. So we have heard some reports of rockets being fired into Israel. Certainly that is something we
appear to be seeing here on the ground. It wasn't many, it was only one intercept that we saw ourselves. So we'll certainly continue to monitor
that situation, Richard.
QUEST: Fred Pleitgen in Gaza. Thank you. Fred, we'll be back with you when there's more to report. The reason I'm cutting Fred just
marginally short, I need to go to Reza Sayah who's in Cairo and who joins me. Reza, five days on the agreement and really it depends now on their
ability to negotiate these other issues without the ceasefire being broken by either side.
REZA SAYAH, CNN'S CAIRO-BASED INTERNATIONAL CORRESPONDENT: Yes, and I think if you look at this announcement, the positive news is that they've
reached an agreement to extend the ceasefire. Presumably, there's isn't going to be any fighting in Gaza. However, when you look at the big
picture, the glaring problem is that the sticking points, the reason for this impasse, this conflict that has lasted for years, they're still there.
They haven't gone anywhere. I'm mean, you know, the demands are the same but the core demands from neither side is budging on one side.
You have Hamas. They're still demanding a lifting of the economic blockade, the opening of the border crossings, they want a seaport, they
want an airport. They say that's the only way to get access to the outside world, the only way to live a life that's dignified.
On the other hand, throughout these talks, Israel's position has remained the same - that we're not going to talk about those issues unless
the security concerns are addressed, until and unless Hamas disarmed, and Gaza is de-militarized. So those issues are going to be on the table again
in these indirect negotiations throughout the next five days. It's not clear if they're going to reach any agreement on these core demands.
However, the good news - and they literally waited until the 11th hour to announce this. The good news is another ceasefire in place - this one
for five days, 120 days - 120 hours. Azzam Al-Ahmad, the head of the Palestinian delegation, held a news conference just minutes ago. He says
the delegation will go back to the West Bank, consult with Palestinian officials there, and then they're going to come back to Cairo and they'll
go at it again.
QUEST: OK, but, Reza, the - these - negotiations are now - are they face to face? Or are they still proximity talks?
SAYAH: No, they're absolutely not face to face. Obviously Israel views Hamas as a terrorist organization, that's why they will never sit
across from them at a negotiating table. These have been indirect talks held in secret. They've been very difficult to monitor, engage and
presumably when they come back and start talking again in Cairo, these indirect negotiations are going to be the same format.
QUEST: This from the Egyptians' point of view - from President Sisi's point of view - this is a major coup, isn't it? Because Egypt having had
such enormous difficulties itself with its election and then its coup and now another election, to be playing this central role is crucial for the
Egyptian president.
SAYAH: Yes, this is a big moment for Egypt, a big test for this country and its new president, the former military general, Abdel Fattah
el-Sisi. Of course this is a country that's played the perennial role of mediator in this conflict. When you look at Washington, the Western
powers, they view the value in Egypt that they've - the perception is that they've kept stability in this region, that they've kept some sort of peace
between the Israelis and the Palestinians. Obviously it hasn't always worked out, but with this new regime in place - with Abdel Fattah el-Sisi
in place - this is a big test for them. He hasn't passed it yet. They haven't established a permanent truce, but he gets a little bit more time -
Sisi does. His country gets a little bit more time in playing the role of mediator, -
QUEST: Right.
SAYAH: -- they have five more days to see if they can make anything happen.
QUEST: We've got a minute or so left, Reza. But as I see it tonight - I'm just looking at what's coming through on the wire services now -
several - according to Reuters - several fire alerts sounded in Israel as Palestinians announced extension of Gaza truce. It's been hard enough
keeping a truce for 72 hours, now 120 hours when we have reports of missiles - of rockets being fired out of Gaza. How easy would it be for a
renegade Palestinian group to scupper this by basically continuing military action?
SAYAH: I think that is certainly a possibility, that's certainly a concern that everyone has. But when you look at these past two 72-hour
stretches - these past two ceasefires - last week and this week. They've relatively held in place until the last hour. A couple of hours before the
72 hours were up today, there was one rocket fired. Hamas denied that was responsible for it. Eventually as far as we know, no more rockets have
been fired. So it looks like when a ceasefire goes into place, both sides abide by it, but we'll see. We'll see what the next five hours brings -
five days bring.
QUEST: Reza, I appreciate you bringing us up to date. Thank you very much. Now of course just to bring you up to date - a five-day ceasefire
extension announced in Cairo between the Palestinian delegation and the Israelis. We'll obviously have continuing coverage. Now "The Situation
Room with Wolf Blitzer."
END
