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Dow Plunges as Oil Price Drops Again; Dozen of Divers Join AirAsia Search; Report of Icing Possible Factor in AirAsia Crash; Tsarnaev Lawyers Failed to Reach Plea Deal; Tsarnaev Jury Selection Begins; Under Fire in Iraq; U.S. Imposes Sanctions

Aired January 05, 2015 - 13:00   ET

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

WOLF BLITZER, CNN HOST: Hello, I'm Wolf Blitzer in Washington. Wherever you're watching from around the world, thanks very much for joining us.

We've got some breaking news from Wall Street we're watching right now. Plunging oil prices are triggering a selloff of the Dow Jones. There, you see the Dow Jones down more than 300 points.

Right now, Alison Kosik is joining us from New York. She's got the very latest. Alison, what is going on? Why is the market in bad shape, at least right now?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Part of the reason, Wolf, has to do with oil prices. As we watch stocks fall, we are watching oil prices in free fall as well. If you look at how oil has been since July, oil prices have lost half their value since July falling from $100 to even below $50 a barrel today making up a little bit of ground still falling over four percent, however.

And the way Wall Street sees it, this is unsettling when one particular area of the economy is in free fall, that leaves a lot of uncertainty. And uncertainty about where the bottom is. There's really no sense of where and when oil prices will stop falling this much. Now, at the same time, Wall Street is uncertain about it and it's unsettling for Wall Street. For us who use gas to drive in our cars and to use it for our home heating oil, we're really enjoying it.

Right now, the average price for a gallon of regular is at $2.20. That's down from a high of $3.68 over the summer. And if you look at gas stations across the country, Wolf, at almost 40 percent of the gas stations in the U.S., gas is below $2 a gallon -- Wolf.

BLITZER: Alison, as you know, Goldman Sachs put out a little warning today saying professional investors may be unduly bullish. A lot of people have been expecting some sort of correction because the market has been going up and up and up. Is that what they're bracing for now, some serious correction?

KOSIK: I think that the market really thinks that -- at least investors think that the market is overdue for a correction. There is some question whether oil prices would be the lynchpin for that. I think you see other things globally that could be the catalyst for a -- for a correction. For one, you're seeing a slowdown in China. You're seeing a slowdown in Europe. That would affect the market more on a longer term basis than, let's say, oil prices.

Also, Greece is one of the wild cards as well. Greece had -- is expected to hold a national election at the end of January. And in this upcoming election, the worry is that it could be won by a party that's looking to renegotiate the terms of its country's international bailout. So, that's really a wild card in the mix as well -- Wolf.

BLITZER: All right. Alison Kosik, we'll stay in close touch with you. The Dow Jones industrials right now, here in the United States, down 312 points. We'll see what happens. But let's move on.

Let's get the latest now in the search for AirAsia Flight 8501. The search has been suspended for now due to bad weather and then darkness. Dozens of divers were dropped in the water to look for the wreckage. So far, murky conditions, strong currents have hampered those efforts.

But there are also reports of a possible break through. A captain of one of the search ships told Reuters he thinks they found the tail section. That's where the black boxes, as they're called, are located. But that news has not yet been confirmed by CNN. The batteries and the flight data recorders have around 21 days left to power the pingers.

Also, relatives of victims tell CNN they're being offered $24,000 as compensation from AirAsia. As we said, 37 bodies have been recovered, 13 of those have been identified.

Our Anna Coren has more now on the search for the wreckage and the victims of Flight 8501.

(BEGIN VIDEOTAPE)

ANNA COREN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Authorities wrapping up the search for AirAsia 8501 with crews scouring the Java Sea, both in the air and by water. By the afternoon, at least three bodies, two male and one female, pulled from the water and taken to land. Severe weather breaking long enough for officials to deploy a total of 57 divers to investigate several large objects detected by sonar imagery. The U.S. Fort Worth is also assisting using sonar equipment to scan the ocean floor.

Meanwhile, Indonesian authorities extend the massive operation east beyond the so-called most probable area where crews have already retrieved dozens of bodies and located large pieces of debris believed to be from the aircraft.

DAVID SOUCIE, CNN AVIATION ANALYST: The position of where they find the debris is extremely important because of the fact that you can determine whether there was an in-flight breakup or if there was a breakup -- the extent of the breakup once it hit the water. COREN: Now nine days since the airbus 320 went missing and so far no

signals have been detected to help hone in on the critical black boxes.

JEFF WISE, CNN AVIATION ANALYST: The voice recorder in the cockpit tells you what the people were saying. It also records sounds. You might hear a bang, for instance. And you've also got this data recorder that's telling you what kind of thrust settings the engines were on. So, you can really recreate, in a great level of detail, what was happening with the plane and why it came down.

COREN: Also, Indonesian officials revealing that AirAsia did not have a permit to fly the Serbia (ph) Singapore route on December 28th, clarifying that the airline was approved to fly the route only four days a week which did not include Sunday.

(END VIDEOTAPE)

BLITZER: That was CNN's Anna Coren reporting from the scene for us.

Let's continue the discussion with our panel of experts. Joining us, our Aviation Analyst and pilot, Miles O'Brien; former NTSB managing director, Peter Goelz; and CNN Law Enforcement Analyst, the former FBI assistant director, Tom Fuentes. Peter, this report from Reuters that the tail section -- we have not confirmed this. The tail section may have been found. That would be very, very significant.

PETER GOELZ, CNN AVIATION ANALYST: Well, that would be. And it would mean that the black boxes are not far away. It doesn't disturb me that they haven't heard the pingers yet. Sometimes they break loose, sometimes they're buried under debris. If you're not directly over them, sometimes you can't hear. But if they found the tail section, then it is likely that --

BLITZER: How close do you have to be to those black boxes and the pingers in order to detect them?

GOELZ: Well, in open ocean on a sandy bottom, four or five miles. But if it's buried -- for instance, in TWA, we were right over it at 100 feet and we could not hear the pingers.

BLITZER: What do you make, Tom, of this notion that the plane was not really authorized to fly on that day?

TOM FUENTES, CNN LAW ENFORCEMENT ANALYST: I think the only way that's an issue, in terms of the crash, Wolf, is if they weren't authorized because that was a day with crowded skies and they didn't want the extra aircraft in the air at that time. And that may have affected where they were allowed when they asked for permission to climb, that the traffic control said, no, you can't because other planes are up there. But other than that, if it didn't interfere with the flight path or the crowded skies weren't the issue, it's really an administrative function that may determine whether Indonesia fines the airlines, takes other administration action or whether it affects the insurance liability coverage which is another huge issue. BLITZER: I don't get it, Miles. A plane is not authorized to fly and

it fly and it fly -- a commercial plan. This is not a private little -- you know, a piper. This is a major commercial plane. It's not authorized to fly on that day but AirAsia lets it fly?

MILES O'BRIEN, CNN AVIATION ANALYST: Yes, I think you have to remember, Wolf, the context of where we are. This is an incredibly fast growing region for aviation. This airline is a low-cost carrier, trying to meet up with a lot of demand. It's having a hard time filling cockpits. They're running fast and they're running hard trying to -- well, it's the biggest aviation sector in the world now. So, have the regulations, has their systems gotten to the point where it's like it is here in the U.S. or Europe, I think they're still working on it.

BLITZER: Does that make sense to you? I mean, do they just have a lot of standards? They're a lot more lax than standards here in the United States?

GOELZ: I think -- I think Miles is onto it, that it shows that there may be the safety infrastructure. The behind the cockpit may not being keeping up with the growth of the industry. I mean, the plane takes off on Sunday, I mean, and it's not authorized, somebody's got to realize that. And it means that somewhere the paperwork is not being done and nobody cares.

BLITZER: Do you believe this notion that -- "The Wall Street Journal" has this report that icing may have played a role in bringing this plane down. You've looked into that?

GOELZ: We've all been talking about that and it is certainly something that could have occurred. You did have five planes in the general area. We need to hear from those pilots what they were experiencing. But it would not surprise us if icing or a heavy hail storm came in and caused disruption to the flight. But that's only the beginning of it.

BLITZER: Because, you know, one thing that worries me is that the cockpit voice record -- that whatever conversations were going on between the cockpit and ground control, it stopped, what, like at 36,000 or 38,000 feet and there were no more conversations, right?

O'BRIEN: Yes, and this is why I think we have to be careful when we talk about icing. What the early reports were and the indication that came out of the region there was that somehow icing caused the engines to flame out, that they -- and this is possible if you don't turn on what's called continuous ignition, which a pilot would do in that scenario. But let's assume that didn't happen or it failed. That aircraft is completely viable aerodynamically.

BLITZER: He can still communicate with ground control.

O'BRIEN: He can -- he can glide for a hundred miles, point toward land and communicate with the ground. Something, what Peter was talking about, where there was maybe hail involved, or ice that covered over some crucial instrumentation that allowed you to know air speed or altitude. I think ice might have been involved but I think it's much more catastrophic than a simple flame out of the engines.

BLITZER: When you say catastrophic, what does that mean?

O'BRIEN: Well, like hail breaking the windshield, like hail ingesting into the aircraft damaging aerodynamic surfaces, like pitot (ph) tubes, which measure air speed, being iced over. All of these things compounding and then add a lot of turbulence and a huge updraft, and you've got a much -- it's a much more complicated picture than it sounded in those initial reports.

BLITZER: The U.S. is involved in this investigation, I assume at several different levels, right, Tom?

FUENTES: Right. Right, the U.S. has warships in the area that are now looking for the -- for the debris and for the -- you know, have the sonar also searching. But, you know, in terms of what Miles just said about -- you know, that it could glide for a hundred miles, it's not impossible that that plane crashed. There's thousands of islands that belong to Indonesia, 18,000 as a matter of fact. And the coast line of Borneo is about a hundred miles from area where they're looking. So, it's not impossible, I don't think, that that plane could have glided and crashed in the jungle and the terrific torrential monsoon rains suppressed any smoke and fire and that it could be in the jungle and that's why it hasn't been found.

BLITZER: But they've recovered, Peter, as you know, 30 or 40 bodies already in the water.

GOELZ: Right. And we haven't seen the full report on whether some of the bodies were clothed, some were not, apparently, which would indicate some degree -- if they were not clothed, some degree of in- flight breakup. I mean, my guess is that the plane's in the water and then it might have broken up, at some late stage of the incident.

BLITZER: Yes, we know this investigation, obviously, only just starting right now. Guys, thanks very, very much. We'll stay on top of this story. More of it coming up later.

CNN teams, by the way, out on the stormy Java Sea joining search crews tracking down the missing Flight 8501. We'll take a closer look at the rough conditions they face. That's coming up.

And the accused Boston marathon bomber, Dzhokhar Tsarnaev, he's in court today as jury selection gets underway. We'll go live to the courthouse.

And North Korea's fiery response to U.S. sanctions slapped on the hermit (ph) nation following the hack at Sony Pictures. We have more. All of that coming up.

(COMMERCIAL BREAK)

BLITZER: Happening right now, the trial of the Boston bombing suspect, Dzhokhar Tsarnaev, is underway. It comes more than a year after the attack at the Boston marathon that killed three, injured more than 250 others. Some 1,200 people have been summoned to potentially serve on a panel of 12 jurors and six alternates. Opening statements are set to begin January 26th in a trial, prosecutors say, could last up to four months. We're also learning that Tsarnaev's attorneys tried and failed to reach a plea deal with government prosecutors. Our Justice Reporter Evan Perez is standing by. He's in New York.

Our Deborah Feyerick is outside the courthouse in Boston.

Deb, what's happening right now with jury selection? How long do we expect that to take?

DEBORAH FEYERICK, CNN NATIONAL CORRESPONDENT: Well, we can tell you, Wolf, that when the prospective jurors enter the courthouse, you can see they have to walk by this long line of cameras. This is no ordinary jury selection. It will be no ordinary jury trial, specifically because the death penalty right now is on the table.

Now, the afternoon session did get underway just a couple of minutes ago. The jurors - the prospective jurors sit on one side of a large glass wall, members of the media sit on the other side. Dzhokhar Tsarnaev saunters in. He's wearing crisp kakis, a black sweater, his hair is disheveled. He swings his arm and has somewhat of a long stride. He sits at a table flanked by his lawyers on both sides as the judge informs the men and the women who are sitting there that effectively the charges against him include the deaths of three people, along with the murder of an M.I.T. officer. He's also -- the judge also saying that right now there needs to be a news blackout. They are not allowed to look at television or radio, anything involving this trial. And they can certainly not Google any information on the trial either.

Now, it's a 100 question sheet that they have to fill out. That will then be reviewed by lawyers on both sides in order to whittle it down and select 12 jurors, along with six alternates. That process expected to take three weeks, Wolf. And then the trial itself, opening arguments expected at the end of January for what could be a trial that ends on the anniversary - or around the anniversary of the marathon bombing.

Wolf.

BLITZER: Deb, stand by.

Evan, you broke the news that there were serious discussions underway to get some sort of plea deal to avoid a trial. What do we know about that? Why did those negotiations collapse?

EVAN PEREZ, CNN JUSTICE REPORTER: Well, Wolf, the discussions centered upon the possibility of Tsarnaev pleading guilty and, in return, getting life in prison without parole. In the end, the government decided that it didn't - it did not want to take the death penalty off the table and wanted to proceed to trail.

Now, Wolf, as you know, Judy Clark, who's his -- the famous attorney who's representing Tsarnaev, has managed to make plea deals and save the lives of some of the most notorious criminals in American history. Everybody from the Unabomber, to Ted Kaczynski, To Jared Loughner, who was charged with - who was convicted, pleaded guilty to shooting Gabby Giffords, the former congresswoman. In this case, she failed to be able to make a deal with the government.

BLITZER: If the government would have accepted the notion of life without the possibility of parole, would she, the attorney for Tsarnaev, would she have accepted that?

PEREZ: It's clear that that's what she was pushing for, Wolf. It's not clear what else was on the table and what else the government was thinking about. Obviously, this is a case that everybody believes they know what the first outcome, the outcome of the first phase, that, you know, he will be convicted. It's the second phase, the second trial, if you will, that will be - that's up in the air.

BLITZER: The sentencing part to see if he would get life without the possibility of parole -

PEREZ: Right.

BLITZER: Or would be eligible for the death sentence. And that's, obviously, a sensitive issue. We'll see if those negotiations get back on the ground, even as this trial goes forward.

PEREZ: That's right.

BLITZER: Evan, thanks very much.

Deb Feyerick, we're going to be checking back with you, obviously. This is going to be a long process.

Up next, North Korea firing back against U.S. sanctions following that devastating attack against Sony pictures. We're going to have the very latest on what's going on.

Also, there are new developments in Iraq right now. New threats coming in apparently from ISIS. We're going to update you on what we've just learned.

(COMMERCIAL BREAK)

BLITZER: All right, this just coming into CNN. American troops in Iraq now are coming under regular fire from ISIS forces. This according to the Pentagon. It's happening at the Al Asad Air Base in the Anbar province. That's in western Iraq.

Let's bring in our Pentagon correspondent, Barbara Starr.

Barbara, I take it U.S. force, now they're in greater danger as a result of these strikes that are going at the Al Asad Air Base, is that right?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, this is the big concern now at Al Asad. It's a sprawling, huge base in western Iraq, but ISIS knows that there are U.S. troops there, 320 of them, along with hundreds of Iraqi forces. What U.S. officials are now saying very openly is that base is coming under regular rocket and mortar attack from ISIS. It's -- the attacks are not precise. The Pentagon's official word is that the attacks are, quote, completely ineffective.

But, nonetheless, there is growing concern because it's happening on a regular basis. There are 320 U.S. troops there. And the law of averages may not be on the side of those U.S. troops. There is a lot of worry that eventually, hopefully not, but eventually one of those troops could suffer injuries. There could be U.S. casualties there. The Pentagon not saying at this point whether it has changed security measures there.

The troops that are there, 320 U.S. troops, they are conducting training, advising, assisting for Iraqi forces trying to get them back in the fight. But the concern, of course, is that the fight doesn't come to the doorstep of those U.S. forces. President Obama vowing that U.S. forces will not be in a combat role. The concern about these attacks, these rocket and mortar attacks by ISIS, is that combat could come to the U.S. forces.

Wolf.

BLITZER: Well, I assume there is a contingency plan to evacuate those 320 U.S. troops if necessary.

STARR: Absolutely. There are what the military calls quick reaction forces all across that region, ready to move in if any of the U.S. troops at any of the points in Iraq, from Baghdad to Anbar province to this Al Asad base, another base, Taji (ph) base, 170 U.S. troops there, U.S. troops in Irbil. There's more than 2,000 U.S. troops across Iraq now. There are contingency plans if they do come under fire and it cannot be dealt with to get them out of there.

But, remember, there are a number of U.S. Apache helicopters there. These helicopter gunships are able to move in very closely, push insurgents back if they get too close. That did happen on one occasion in Irbil. We are told the insurgents have not come that close again. But the fact is, the bottom line is, that these attacks by insurgents are now happening on a regular basis where several hundred U.S. troops are located.

Wolf.

BLITZER: Yes. And these U.S. troops, they're relying on Iraqi forces for protection. And we know that there's not a high reliability given the fact that so many Iraqi troops have simply abandoned their positions over these past several months and left their weapons behind. If the U.S. is relying on these Iraqi troops, they could be in trouble.

Barbara, we'll stay in close touch with you. Thanks very much.

Still ahead, CNN exclusive reporting. We're there when rebels spring a surprise attack against the Syrian regime. We have harrowing footage from the front lines that you will see only here on CNN.

(COMMERCIAL BREAK) BLITZER: Welcome back to our viewers in the United States and around the world. I'm Wolf Blitzer, reporting from Washington.

The recent growing tensions between the United States and North Korea began with a big screen satire.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Take him out.

UNIDENTIFIED MALE: You want us to kill the leader of North Korea?

UNIDENTIFIED FEMALE: Yes.

UNIDENTIFIED MALE: What?

UNIDENTIFIED MALE: Hello, North Korea!

(END VIDEO CLIP)

BLITZER: And "The Interview," that's the name of the film, continues to have ripple effects on the relationship between the two countries. Pyongyang again insisting it is not, repeat not responsible for the massive cyber-attack on Sony Pictures and denouncing the U.S. for imposing new economic sanctions, calling them instruments of American hostility. Will Ripley has more from Beijing.

WILL RIPLEY, CNN CORRESPONDENT: Wolf, the North Korean government is firing back, issuing the same kind of fiery rhetoric that we're used to hearing out of Pyongyang. But one thing that they're focusing on is the international news coverage of the Sony hack and the skepticism among some cyber security experts that North Korea was even involved in the attack on Sony.

As we've reported on CNN and others have reported as well, some feel that the hack was an inside job and Pyongyang pounced on that, saying that the U.S. is launching these sanctions as a way to try and validate a shaky case against the North Korean government. But the White House, as you know, is standing firm here, launching these sanctions and saying that they have very credible evidence that North Korea was involved in the devastating hack on Sony Pictures. And that's why you see the U.S. targeting several different North Korean governmental entities and also 10 individuals, officials who are working on behalf of the North Korean government outside of the country in places like Iran, Russia, Africa and Syria.

Now, most of these individuals, in fact seven of them, were working in the weapons export business. This is one of the ways that the North Korean regime makes its money, by selling weapons to other countries. And by naming these individuals publicly for the first time it makes it a lot more difficult for them to do business.

And the White House is hinting, Wolf, that this may be the only first step and the United States is be prepared to take actions, sending a strong message that these kinds of cyber attacks won't be tolerated -- Wolf? BLITZER: All right, Will, thanks very much.

Will Ripley reporting for us.