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QUEST MEANS BUSINESS

North Korea Fires Missile Towards Japan; Russia Retaliates Against U.S. Sanctions Bill; U.S. Growth Rebounds in Second Quarter; Pakistan Prime Minister Forced Out Thanks to Panama Papers; IAG CEO Remains Calm Over Brexit; Trump Tweet He's Named General Kelly as New Chief of Staff. Aired 4-5p ET

Aired July 28, 2017 - 16:00:00   ET

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


[16:00:00] ZAIN ASHER, CNN HOST: All right, and that sound marks the end of yet another trading day on Wall Street. Come over here for a second.

Let me show you how the market actually did. We started off a little bit in the red. We then moved slowly higher as well as well, ending the day up

32 points. That is by the way, a record high, a record high by the way for the third time this week, Wednesday, Thursday, Friday. Didn't close bay

record high by all that much. Overall had you Amazon disappointing corporate earnings dragging down the market and I believe a little bit of

profit-taking as well. My friends, it is Friday, July 28th.

Tonight, the North Korean threat is back. Pyongyang fire as ballistic missile towards Japan. And the Kremlin strikes back. Russia retaliates

against a new U.S. sanctions bill.

And U.S. growth is bouncing back. GDP is getting closer, a little bit closer to Donald Trump's target.

I'm Zain Asher and this, my friends, is QUEST MEANS BUSINESS.

Good evening, I'm Zain Asher. This is certainly no time for crisis inside the White House, while members of Donald Trump's administration trade

insults through the media. Tonight, the president faces very serious foreign policy challenges on three continents by the way. Japan is calling

on the world's biggest economies to bring more pressure to bear after North Korea launched a missile that came down in the sea in Japan's exclusive

economic zone. Russia is retaliating against a U.S. sanctions bill passed by congress. And Venezuela, already under U.S. sanctions is facing mass

protests ahead of a controversial election this weekend. Tonight, we'll be across the globe for you in both Caracas, Moscow and Washington, D.C.

I want to begin though with some major news in North Korea the Pentagon detected another long-range intercontinental ballistic missile launch.

Japanese officials say the missile flew for about 45 minutes and possibly came down inside its exclusive economic zone. South Korea says the missile

launched Friday, appears to be more advanced than the one it fired on July 4th, less than four weeks ago. Kim Jong-un has sped up his missile

program. This year alone he's actually conducted 12 tests. July 4 was his first intercontinental ballistic missile. Japan's Prime Minister said it's

time to be much tougher on Pyongyang.

(BEGIN VIDEO CLIP)

SHINZO ABE, JAPANESE PRIME MINISTER (through translator): As long as North Korea continues these provocations, the U.S., South Korea, China and Russia

and the whole international community must closely cooperate and apply additional pressure.

(END VIDEO CLIP)

ASHER: All right we're covering this story from all angles. Joining me live now is CNN's Alexandra Fields in Seoul for us. We've got our Pentagon

correspondent Barbara Starr in Washington, D.C. So, Alexandra, I want to begin with you. What do we know for sure, what do we know for sure about

North Korea's missile capabilities?

ALEXANDRA FIELD, CNN CORRESPONDENT: Well the U.S., South Korea and Japan are all in agreement that there was an intercontinental ballistic missile

that they were testing. That will be the second time that they've done this. And the second time in just a month. You'll remember the first time

happened was on July 4th, on Independence Day. It was something that North Korea called a gift to the U.S. on its birthday.

But what's raising some alarm here now, is that South Korea does in fact believe that this latest test does represent an advancement. They're

calling it a more advanced missile based on the greater range of this missile. So, you've still got a lot of analysts who are going to be trying

to really specifically determine what this kind of missile would be capable of hitting. How far it would be capable of going. But this has of course

prompted an immediate response really, coming from around the world. The condemnations from Japan, but also from South Korea.

These are usually tests launches that we see in the early-morning hours. This one actually happened in the middle of the night here in South Korea.

But the president immediately convened a meeting of the National Security Council. After that we heard from the Blue House here in South Korea. Not

only the condemnation that you're used to hearing, the aftermath of these tests, not only the calling for of greater and stricter sanctions and more

enforcement of sanctions on North Korea. But also, this continued to resolve to try to work with the U.S. to build up a deterrence capacity.

You heard the Blue House putting out a statement tonight, talking about exploring the possibility of getting more of these launch pads ready for a

very controversial missile defense system.

[16:05:01] You also heard from South Korean government officials tonight that we should prepare for the possibility to see more exercises from South

Korean and U.S. forces. That could come in the form of ballistic missile launch exercises. All of course designed to send a message to North Korea.

But the real headline coming from South Korea this evening, Zain, is the fact that South Korean official at this point do believe that this test

does represent an advancement.

ASHER: And certainly, raising alarm bells in Washington. I want to bring in Barbara Starr. So, Barbara, despite all the sort of tough rhetoric

we've heard from Washington, D.C. since President Trump took office, the painful truth is that the U.S.'s options are somewhat limited.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well they're limited in terms of, certainly, the risk the U.S. wants to take to global stability. Make

no mistakes, U.S. commanders recently updated military options, if it were to come to that, to give to the president exactly what you would expect,

especially if he needed to take some sort of rapid response action against North Korea. But the Defense Secretary, here in Washington, James Mattis,

has been very clear, that he does not want to see this go to a military option. His view -- which is shared by everyone we talked to -- is that it

would be catastrophic. North Korea, the regime could retaliate in any number of fashions, that could leave millions dead inside South Korea and

the region devastated.

So, don't look for that. It is a very tough question now, though. This is -- we said the first ICBM was a bit of a game-changer. Well now this one

coming so soon afterwards, really puts it into the Trump administration's court. What do you do about it now? Can you keep going about diplomatic

pressure?

ASHER: Yes, and the fact that they're advancing, in terms of technology, so quickly, so much more ahead of schedule certainly raising eyebrows. OK,

Barbara Starr, ladies, thank you so much. Alexandra Field, thank you as well. Appreciate that.

The U.S. says North Korea could have a reliable nuclear-capable ICBM by early 2018. A missile like that could strike targets up to 5500 kilometers

away. Meaning the U.S. state of Alaska, the U.S. state of Alaska would actually be within range. The Trump administration has taken a tough

stance on North Korea back in March. U.S. Secretary of State, Rex Tillerson, said Washington's longstanding policy wasn't working.

(BEGIN VIDEO CLIP)

REX TILLERSON, SECRETARY OF STATE: The diplomatic and other efforts of the past 20 years, to bring North Korea to a point of denuclearization have

failed. So, we have 20 years of failed approach.

In the face of this ever-escalating threat, it is clear that a different approach is required.

(END VIDEO CLIP)

ASHER: OK. You heard him there, Rex Tillerson there saying it is clear that a different approach is required. The question is, what should that

approach be. Sung-Yoon Lee is a Korean studies professor at Tufts University. He joins is live now from Massachusetts. Professor Lee, so,

you heard Rex Tillerson there that he was saying, listen, all of our diplomatic efforts in the past haven't worked. Fair point. What's it

going to take to get North Korea to the negotiating table? Give us your thoughts.

SUNG-YOON LEE, PROFESSOR, TUFTS UNIVERSITY: When you look at the past 20- year trajectory of North Korea's nuclear and missile development programs, there's been a cycle. A repeat of a pattern. A same tired old story of

North Korea's provocations and then return to negotiations, and reaping even greater concessions from the world's biggest powers. Clearly, that

approach has not worked. Clearly, off and on, on and off, diplomacy, half- heart the sanctions, have not worked, either.

The problem with North Korea as to the question of why. Why did I do these things? Is because they face an ultimate Korean state. One that is far

richer and freer and more legitimate in the eyes of the world and in the eyes of the North Korean people just across the border in South Korea. So,

this is not an option, a lifestyle choice for the North Korean leadership. They have to be a political factor. They have to cause problems. They

have to be menacing. They have to be able to credibly threaten to nuke a major U.S. city to push the U.S. to downgrade the alliance. Perhaps

abandon South Korea so they may be able to prevail over the south one day.

So, this is a serious problem. Another problem is, the United States and international communities have never really truly enforced sanctions in any

kind of meaningful uniform way. We think sanctions don't work because there have been some sanctions implemented but not really enforced by

anyone. Sanctions take time, like domestic law enforcement. They will take two or three years. It certainly took over two years to get Iran back

to the negotiating table.

[16:10:00] ASHER: So, then do you actually put the pressure -- how to you actually turn up the heat on China, then?

LEE: You enforce domestic laws. You enforce U.N. Security Council resolutions, not through moral persuasion, asking the Chinese to do the

right thing. Telling them they're a great power, a responsible stakeholder and so on. What you do is you give the Chinese some economic

disincentives, inflict financial losses on Chinese state-owned enterprises and banks by continuing to flout sanctions -- U.N. Security Council

sanctions -- and do business with North Korea. Basically, tell the Chinese, do you want to do business with us, the U.S., or with North Korea?

That's not been tried in any meaningful way. Which is astounding.

ASHER: I'm so curious just to get your take on how the leaders of the United States and South Korea will be able to work together. Because both

men have very different ideas about how to deal with North Korea. Moon Jae-in has talked about these sunshine policies, going for dialogue. He's

a bit more of a peace-maker. Donald Trump in an interview with "Reuters," actually said that a major conflict with North Korea is indeed possible.

And those comments raise alarms. How do these two men work together, do you think?

LEE: Certainly, the new South Korean president is very eager to return to negotiations, talks, economic cooperation, in spite of what North Korea has

been doing. North Korea's 12th missile test, with each test President Moon has called for more dialogue, return to peace negotiations and so on. Mr.

Trump talks very tough. But I don't know. You know, looking at the past, President George W. Bush, I remember, said he loathed Kim Jong-il, calling

North Korea axis of evil. But when North Korea caused a problem politically by escalating with its first nuclear test in 2006, the Bush

administration gave North Korea everything it asked for. Including the resumption of food aid, taking North Korea off the state sponsors of

terrorism list. Relaxing sanctions against North Korea. So, there may come a point when the Trump administration returns to easing damage control

diplomacy with another North Korean provocation. So, this game will continue and things will have to get a lot worse before they get better.

ASHER: That's an interesting point. All right, Professor Lee, live for us there, thank you so much. Appreciate that.

And by the way, there is certainly no shortage right now of difficult issues for the White House to grapple with, we've been talking about some

of the issues, pretty much all week from the crisis, with North Korea, which happened today and sanctions on Russia, to the domestic problems.

For example, the failure of the Republican health care bill that we heard about last night. In fact, top lieutenants complain that the president's

agenda simply isn't getting the attention that it deserves. Even as they, by the way, are consumed with in-fighting in the west wing.

The new communications director, the smooth-talking communications director Anthony Scaramucci has moved in next door from Sean Spicer's old office.

Remember, he resigned a week ago today. And Scaramucci's explosive comments about Steve Bannon and about Reince Priebus have shocked

Washington. And by the way if you haven't read that "New Yorker" article, I encourage you to do so.

In fact, clashes between Priebus, Bannon and Jared Kushner have been leaking out to the public for months. And overseeing all of these men is

President Trump, who is certainly not above the fray. This week Trump launched his own attacks on his own Attorney General, Jeff Sessions.

David Chalian is CNN's political director. He joins us live now. So, David, when you think about all of the in-fighting and dare I say it, back-

stabbing that is happening in the White House right now, how do they end up dealing with massive sort of international crises like what's happening in

North Korea that I just reported on?

DAVID CHALIAN, CNN POLITICAL DIRECTOR: Yes. They're ill-prepared to do so. I mean, they have people in place and they have obviously a Pentagon

and a State Department to report into the National Security Council. McMaster can manage a flow of information there, the national security

adviser. But you are right, this is a totally distracted White House from anything that crops up at the moment because they're consumed with this

internal warfare.

ASHER: And just speaking out about the politics of all of this. You know, my heart stopped when I read that "New Yorker" piece yesterday. As I'm

sure yours did as well. You know, he really humiliated Reince Priebus. But who has come to Priebus' defense so far?

CHALIAN: Nobody really publicly. Certainly, none of his colleagues from the White House. Some unnamed Priebus allies are quoted out there as

saying that Priebus wants to stick in there and see this through. And maybe let Scaramucci sort of twist himself into knots here. But what is

clear to me is that the president did not come out and say this is unacceptable behavior among my aides. The White House press secretary just

noted that Scaramucci said he sort of went outside the lines with his colorful language and he won't do it in this arena going forward.

[16:15:00] But there's been no retribution or punishment or even a hand- slap really of what Scaramucci said. Which to me means you have to read that as permissible behavior inside this West Wing.

ASHER: So, Priebus reads the article with Donald Trump's new favorite hire. Completely humiliating and insulting him. And he thinks what? Is

he, my question is, is he happy? Because Scaramucci essentially hung himself? Or is he upset and sad because someone who has the president's

ear is utterly destroying him to the international media?

CHALIAN: I can't imagine anyone can describe Reince Priebus as happy these days, necessarily. But you know, imagine what the Air Force One flight was

like from Washington to New York, with both Reince Priebus and Anthony Scaramucci on the flight? This is going to have to be resolved. And I

don't see a way for it to be resolved, where Steve Bannon, Reince Priebus and Anthony Scaramucci are still all working in the West Wing, day in and

day out. Going in and out of the oval office with the President. That seems unlikely. So, some resolution will have to come here. For what

we're seeing right now. While it feels like the sort of waters are getting very difficult for Reince Priebus to navigate, he right now says he plans

on sticking in there.

ASHER: David Chalian, live, for us there on a very rainy Washington day. I hope it's not like that in New York when I leave the building today.

David, thank you so much. Have a great weekend. Appreciate it.

President Trump says the surging stock market is a sign of his administration's success. On Wall Street, the Dow climbed through the

session to close at a new all-time high. It's the Dow's third record close in a row. The S&P 500 and the Nasdaq fell ever so slightly. The health

care sector saw the biggest gains for the day.

After decades, economic mismanagement Venezuela's humanitarian crisis grows more acute. We're in Caracas for you after the break where protesters are

vowing to hit the streets ahead of a crucial weekend. That's next.

(COMMERCIAL BREAK)

ASHER: Venezuela, despite oil reserves larger, larger than Saudi Arabia, the country is plunging further into an economic and humanitarian abyss.

It's now the world's fastest contracting, contracting economy. Has the second highest murder rate and spaces shortages of food and medicines as

well. And things by the way can get a lot worse by this weekend.

Clashes between military demonstrators continue in Caracas. Opposition leaders are calling for nationwide protests, despite a government ban.

This Sunday, a controversial election is taking place. Voters will elect a new assembly with the power to rewrite the constitution. Opponents of

President Nicholas Maduro said it's been designed to give him more power. Joining us live now is Leyla Santiago, who is in Caracas for us.

[16:20:00] So, Leyla, is there anything that the opposition can do to actually stop this vote from taking place on Sunday? Is that a pipe dream

at this point?

LEYLA SANTIAGO, CNN CORRESPONDENT: You ask president Maduro, he'll tell you no. You ask the opposition, those protests that you're seeing on the

streets right now -- that by the way are now considered illegal -- are what they are doing in order to make a statement in hopes of stopping this

election on Sunday. And hopes of having a voice in this.

But I tell you what we've seen just over the last 48 hours. A 48-hour strike has come to an end. We're inching closer to that election on

Sunday. And people are still very much vocal about it no matter which side you talk to. We were kind of in a pro-government territory earlier, and

they are very much still calling this something of democracy and freedom. And they believe this is what will bring peace along with the president and

the foreign minister.

And then you go into areas where opposition is very much a stronghold. And they are still protesting. Nothing is stopping them. They actually have

makeshift road barriers in which they are not allowing people to move about in the city. Because they're trying to make a statement. They're trying

to say listen, we're not going to bow down even if these protests are illegal -- Zain.

ASHER: What are the economic consequences for Venezuela for going ahead with this vote on Sunday. Ending up rewriting the constitution, which is a

massive power grab. What are the economic consequences? Because it will only lead to more international isolation.

SANTIAGO: Right. There is mounting pressure internationally. Colombia, Mexico, the U.S. President Trump has said that he will take swift economic

action if President Maduro moves forward with this election. He has already moved forward with some of the sanctions against 13 individuals

with ties to the president. But those are individuals. They are particular names in which sanctions with now in place.

But president Trump has said he will take swift economic action. We could see him potentially pull back on what is Venezuela's money-maker, on the

oil market. The U.S. buys a lot of oil from Venezuela. And if the President Trump moves forward with that threat, that could have an impact

for Venezuela, the government and its people.

ASHER: All right, Leyla Santiago on a miserable day in Caracas, in terms of the weather. And if you ask the opposition, they will tell you that is

metaphorical as well. Leyla Santiago, life for us there. Thank you so much.

And if you really want to understand, Leyla was actually explaining what things are like now. And if you really want to understand how exactly

things got to this point, you really need to take a look at Venezuela's history and the mistakes that country made in the past. So back in the

'60s and the 1970s, there was an oil boom in Venezuela. It was actually, by the way, one of the richest countries -- or the richest country in South

America. It had a healthy relationship with the United States. Then- president Kennedy visiting Caracas around 1961.

And as the good times roll the oil industry was nationalized. In fact, they brought up Citgo, a company with such deep American roots, its logo

still hangs in Fenway Park -- there it is -- in Boston. When Hugo Chavez came it power in around 1998 he established a socialist economy funded by

oil with very generous, very generous social programs. The country actually imported, pretty much everything and ditched the U.S. as an ally.

By the time Hugo Chavez died and Nicholas Maduro took over, Venezuela had overspent its wealth on welfare programs. It had failed to completely

diversify its economy and it had run up huge debts to both China and Russia.

And now here we are, and what the situation look likes today. This is the nightmare scenario. Oil prices have plunged to a fraction of their peak

levels. Remember a few years ago oil prices were about $100 a barrel. Those days are a long gone. So, the revenue has dried up. And President

Nicholas Maduro has chosen to spend little revenue the country has on paying the country's debts instead of feeding and caring for its people.

And Peter Wilson is a freelance journalist who spent the last 24 years in Venezuela. He joins us live now. So, just take us back. This is a

country Peter, where the '60s and '70s oil money was flowing in. It's very difficult for a lot of people to understand how a country that has such

huge oil reserves can end up in a situation it's in now. Explain that to us.

PETER WILSON, FREELANCE JOURNALIST: The thing is Venezuela has always failed to diversify its economy. Even when oil prices were high, they

relied, they over relied on oil. We had a similar crisis in the late '80s, early '90s when oil prices cratered. As a result, we had a major crisis.

The same problems, run-away inflations, huge unemployment, a cut-back of imports what have you.

[16:25:07] This time it's much worse because Chavez has created -- Chavez created so many social programs, which included government bailouts,

subsidies, aid to the poor, to the working class. Right now, that's been institutionalized. Venezuela is spending much more on these programs than

it actually takes in. Also, the falling oil prices exacerbated the current situation. But the problem remains the same. This government, the Maduro

government, like all the governments before has failed to diversify the economy. They have also nationalized many industries. Venezuela used to

produce many of its own goods that it consumed. Not now, that's not the case. With the advent of price and foreign exchange controls in 2002/2003,

the economy has cratered. That's not going to change any time soon.

ASHER: So, Peter, you know, just hearing this, just such a cautionary tale for any country that has huge oil wealth. Nigeria has hasn't experienced

what Venezuela is experiencing but it's learning from the same sorts of lessons. In your opinion how does Venezuela from this point get back on

its feet? I'm having a hard time seeing the road forward for this country.

WILSON: To be quite frank, even if the Maduro government would fall, there's no ready recipe for Venezuela cooperation. The opposition is very

divided. There's no, there's no common sight or vision of what to do if the government would fall. There are people in the opposition who are

socialists, in the European mode, Social Christians, what have you, Christian Democrats. And there are people who are very let's say

conservative. People like Republicans, Democrats, what have you, who are like have a very pro-market approach to the economy.

There's no consensus what to do if the government would fall. And I think that's one of the major weaknesses of the opposition. There are many who

support them, but they're leery about taking the to the streets and forcing Maduro out without a clear idea what's going to follow.

ASHER: Yes, in terms of a vacuum. It is scary stuff. All right, Peter Wilson live for us there, thank you so much, appreciate that.

A bill with new Russian sanctions has landed on President Trump's desk. We don't necessarily know if he's going to be signing it. But Vladimir Putin

is not waiting. He's already responding. We'll bring you his response after the break.

(COMMERCIAL BREAK)

ASHER: Hello everyone, I'm Zain Asher. Coming up in the next half hour of QUEST MEANS BUSINESS, the leaked Panama Papers lead to Pakistan's Prime

Minister being ousted over claims of corruption.

[16:30:00] And the CEO of IAG tells us why he's not worried about Brexit. But first, these are the top headlines we're following for you at this

hour.

The pentagon says the missile North Korea tested just hours ago was an ICBM. U.S. officials say it traveled about 1,000 kilometers before

splashing down in the ocean. Russia is offering its own assessment. They say it was a medium-range ballistic missile.

Police in Hamburg, Germany, say they aren't ruling out terrorism in a deadly stabbing attack. One person was killed when a man burst into a

supermarket and started stabbing customers with a kitchen knife. The suspect was arrested after he left and the left the store and began

stabbing people on the street.

Dozens of people have been hurt in a train crash in a major railway station in Barcelona, Spain. It happened during rush hour Friday morning. The

cause of the crash is under investigation. But emergency officials are calling it an accident.

And here's a sad one, the boy who touched the world has passed away today, those words from the family of baby Charlie Gard. The 11-month-old with

rare genetic condition died a week before his first birthday and a day after a judge's order to stop life-support.

And at least 82 buildings in Britain failed a fire safety test set up in the wake of London's deadly Grenfell Tower fire. Officials say immediate

action is under way to insure the safety of residents in these buildings. The government also announced an independent review of building regulations

and fire safety as well.

Moscow certainly lost no time responding to a bill from the U.S. Congress that would ramp up U.S. sanctions on Russia. Russia foreign ministry is

demanding the U.S. slash its diplomatic staff there and is threatening to seize two American properties. Right now, it's not clear, we still don't

know if President Trump is going to sign a bill or not. The scale of support for the bill in Congress means it would potentially override a

veto. Clare Sebastian is joining us line in Moscow. So, Clare, if this is Vladimir Putin and the Kremlin's response now, in terms of retaliation,

what is going to happen if Donald Trump actually ends up signing the bill?

CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: Right. Zain, I think that's an excellent question. You know the foreign ministry today as they announced

these two measures, the confiscation essentially of two diplomatic properties belonging to the U.S. in Moscow. That's a dacha, or a country

house and a warehouse facility. As it announced that it said it would not rule out further retaliatory measures in future. It is leaving that option

open.

But you know we asked the Kremlin today, it was asked on the regular conference call that the Kremlin spokesman held, whether or not this was in

direct retaliation to this bill or to those measures that were brought in by the Obama administration in December over election meddling.

The mirror image pretty much of what happened today, the U.S. seized two Russian diplomatic compounds in the U.S. and expelled 35 diplomats. And

the Kremlin and the foreign ministry are both saying it is in response to this new bill that's passing through congress at the moment, that president

Trump has yet to sign. And the calculation seems to be here in Moscow, Zain, that the overwhelming majority as you said in Congress of support for

this sanctions bill, which may well be enough to override a presidential veto. Coupled with the fact that this bill really does make it extremely

difficult for President Trump to cancel or lift any previous sanctions. That has really brought Russia to the conclusion that this is as good as

done.

The Kremlin today said they saw this bill now as almost final and that any changes would not alter the essence of the matter. But you know there were

extremely strong words from the foreign ministry. They said this was further proof of the U.S.'s extremely hostile foreign policy. They called

them arrogant and not taking into account the stances of other countries in doing this. So, I think we're really at a point now where after seven

months or so of waiting for this to happen, the Russian calculation is perhaps the Trump administration might be more open to lifting sanctions.

This really has seen those hopes reversed. And we see a much more defensive stance from Moscow today.

ASHER: In terms of how some European corporations, Clare, are responding to the sanctions bill. Just walk us through that. Because the sanction

bill would impact them as well. How are they responding?

SEBASTIAN: absolutely, this was the major cause for alarm in Europe. As soon as we saw there was an agreement between the two houses of Congress on

this bill last weekend. The European Union started to express its alarm.

[16:35:00] And it's not just because after three years of coordination with the U.S. on sanctions particularly over Ukraine, the U.S. seems to be

acting alone here. Because there is a genuine concern that the bill would impact companies that are evolved in energy projects with Russia. That it

would sanction anyone who is seen to be investing or supporting things like pipeline construction with Russia.

And we saw one French company, ENGIE, come out today, they are one of five companies along with Russia's Gazprom are financing construction of the

Nord Stream II pipeline that brings natural gas from Russia through the Baltic Sea to Germany. It's set for completion in 2019. They said that

the sanctions bill is signed by the president, they would pull out of that project. Now just to be clear, they're not going to pull out money they've

already invested. They would simply not put any more in. I think that's really the first shoe to drop here. And it really gives a sense of just

how wide the impact of this could be. But interestingly, not perhaps surprisingly here in Russia, they are latching onto the European objections

to this. Something that clearly adds weight to their own argument against the sanctions.

ASHER: Clare Sebastian live for us there. Clare Sebastian Moscow on the impact of the U.S. sanctions bill.

Meantime, let's focus on where I am, the U.S. economy celebrated in the second quarter, with growth hitting 2.6 percent. The figures show consumer

spending strengthened as employers carried on hiring. At this pace, growth is coming a little bit closer to President Trump's target of 3 percent a

year. Last month the IMF cut its 2017 forecast for the U.S. to 2.7 percent growth.

Joining us live now is Stephen Moore who comes to us live from Florida. Stephen, the economy is growing, second quarter is 2.6 percent, slightly

less than what President Trump promised. He initially promised 4 percent. Then rounded it down to 3 percent. How does president Trump actually get

it to the level that he wants? What are your thoughts?

First of all, 2.6 percent in a historical context for the United States is pretty, pretty mediocre, actually. But it looks really good after the last

ten years where we've averaged about 1.8 percent growth. And last year the growth rate of the economy is only 1.6 percent. I'm sure they're

celebrating today at the White House over 2.6.

STEPHEN MOORE, CNN SENIOR ECONOMIC ANALYST: You're right, it is lower than 3 percent. I worked with Donald Trump during the campaign and we talked a

lot about how we could get to 3 percent to 4 percent growth. As you know, the president had a huge setback last night. Because he didn't get his

health care bill passed. Or now they can't move forward with some kind of reform and repeal of Obamacare. That was a setback. It puts the focus,

Zain, on tax reform, tax cut bill, which I think is coming in September. The Republicans have to get their act together on that after this stinging

defeat on Obamacare.

ASHER: Stephen, I'm going to ask you my first question again. How does president Trump actually get it to the level that he wants? 3 percent or 4

percent, depending on you know, if you go on what he originally forecast.

MOORE: Well that's why the tax bill is so important, Zain. Because we believe that if he passes a tax cut, especially a business tax rate

reduction -- as most of your viewers know, the United States has the highest business tax rate in the world. We're losing a lot of businesses

and a lot of jobs as a result of that as businesses move overseas. That's a big part of it. Zain, is having the business tax cut, which we think

could increase growth by as much as one percentage point.

And he has a pro America energy policy. Redeveloping our coal and oil and gas production so we can become number one in the world. And then

deregulation which actually is happening. And I think it's one of the reasons we did get a bump up in growth. Is that there's been more of a

hands off of business approach in this administration.

ASHER: And on top of that, in terms of wage growth specifically, wage growth specifically, how do you get that to move higher? Because that's

going to have an impact on consumer spending, too.

MOORE: Wage growth has been the most difficult thing, Zain. We haven't seen wage growth that's kept pace with inflation for almost15 years in the

United States. In fact, I'd make the argument that's one of the reasons Donald Trump won the argument. A lot of angst, and anxiety and frustration

among middle class voters who feel like they're falling behind.

You need more jobs to create a tighter labor market to get wages to rise. You also need more productivity and more investment by businesses, that

gets back to the business tax cut. Because one of the aims is to get businesses to invest more so workers can be more productive and when

workers are more productive they can command higher wages. That is a big, big component of Donald Trump's strategy on the economy.

ASHER: Stephen, for the past three days the markets have closed at a record high. One reason is because investors have so much confidence

overall since President Trump took office that he's going to be the pro- growth president.

[16:40:00] If he doesn't get anything passed. If the promises don't really bear fruit, isn't there going to be a correction sometime soon?

Can he hear me? Have we lost Stephen Moore? OK, it looks as though unfortunately we can't hear me, but we have to leave the interview there, I

guess since he can hear me.

Coming up, the latest world leader to be forced out of a job because of a Panama Papers, Pakistan's Prime Minister is out. We'll bring you details

of his exit after the break.

(COMMERCIAL BREAK)

ASHER: Welcome back everybody. The Prime Minister of Pakistan has resigned after being disqualified from office by the country Supreme Court.

The court investigated the Nawaz Sharif's family finances following information that came out in last year's Panama Papers leak. It's not the

first time Sharif's term as Prime Minister has been cut short. CNN's Andrew Stevens explains.

(BEGIN VIDEOTAPE)

ANDREW STEVENS, CNN CORRESPONDENT (voice-over): Known as the lion of Punjab, Nawaz Sharif is one of Pakistan's richest people. He held several

posts in the Pakistani government in the 1980s, before being elected Prime Minister in 1990. A few years into his term, then-President Ghulam Ishaq

Khan dissolved the government alleging mismanagement and corruption.

But Pakistan's Supreme Court declared the president's move unconstitutional and the charges false. Sharif was reinstated but he and Khan both resigned

two months later to resolve a political stalemate. Sharif was re-elected prime minister in 1997. But two years later in midst of a weakening

economy, more accusations of corruption and a dispute with India, he was overthrown in a coup led by Pervez Musharraf.

In the wake of his outing Sharif was charged with hijacking and terrorism and sentenced to life in prison. The charges stemmed from his attempt to

prevent Musharraf's plane from landing in Pakistan when the aircraft was dangerously low on fuel. But he would serve only a few months behind bars.

In a deal brokered by the Saudi Royal Family, Sharif was released from prison and spent the next seven years in exile in Saudi Arabia. The

Supreme Court eventually reversed Sharif's conviction, permitting him to run for office once again. In 2007, he spoke to CNN about his vision to

lead the country again.

NAWAZ SHARIF, FORMER PRIME MINISTER, PAKISTAN: We have to be clear that there has to be a rule of law in Pakistan. The constitution has to be

respected. The judiciary has to be independent. The press has to be free. There is no compromising on these principles and these issues at all.

[16:45:00] STEVENS: But Sharif had to wait some five years for his return to power. In 2013, he was elected prime minister for the third time. But

after failing to complete a single one of his terms, Sharif is now disqualified from holding any other parliamentary position. And with no

chance now to redeem himself politically, Sharif's legacy is likely to remain overshadowed by allegations of corruption. Andrew Stevens, CNN.

(END VIDEOTAPE)

ASHER: So, Nawaz Sharif is one of the most powerful figures brought down because of the Panama Papers. Their impact has been felt all around the

world in Iceland, you'll remember Prime Minister Gunnlaugsson stepped down amid protests over his links to an offshore company. And in Argentina,

President Mauricio Macri came into office promising to fight corruption. In less than a year later he's facing investigation over his connections to

a company in the Bahamas. A judge said no evidence of money-laundering was found.

And in Panama itself, authorities raided Mossack Fonseca, the law firm at the heart of the scandal. The founders were arrested in February and face

charges of money-laundering. Jeffrey Robinson is the author of "Standing Next to History." He joins us live now. Just explain to us, I mean the

global political fallout over the Panama Papers has been swift and vast. It's happened over the course of a year. But this, we knew about Nawaz

Sharif's family last year. When the Panama Papers first came out. Why has it taken this long for this to happen?

JEFFREY ROBINSON, AUTHOR, "STANDING NEXT TO HISTORY": Because the military wasn't involved. And as soon as the military got annoyed, that's when he

goes. Because they really control things.

ASHER: So, this is political?

ROBINSON: Sure, it is. It's also a distraction. The Panama leaks, you talk about to Brazil now and the car wash scandal, which is huge. All came

from Mossack Fonseca. And some of the islands, like British Virgin Islands, where 40 percent of the companies they formed were there. And

it's not just money laundering. It's tax evasion and tax avoidance and it's corruption and all sorts of things.

You have to understand there was no moral reason whatsoever to have a politically exposed person with money hidden offshore. It's completely

immoral. And David Cameron even said as much. He convened a meeting of the G7 or 8 or 9 -- whatever they were calling themselves that week -- to

look at the offshore world. And he said morally reprehensible to have these accounts. And then it turned out his father had one and he was using

it at which time he said, that's a private matter.

ASHER: It's interesting if you look at all of these countries, the fallout has really ranged. Iceland was swift you know, the prime minister --

resigned right away.

ROBINSON: That's because there are only 14 people who live in Iceland.

ASHER: You had almost 14 people essentially protesting in the street. They forced him to resign. David Cameron, his father came up and people in

the U.K. pretty much shrugged it off. And now you have what's happening in Pakistan now it took almost a year. And as you mentioned, you think it's

just purely political.

ROBINSON: It's political and a distraction. Because the real problem is not some guy in Pakistan who loses his job over money offshore. It's the

money offshore. It's the political corruption. It's the corporate corruption. It's the money laundering, drug trafficking. And it's the

fact that Mossack Fonseca, who I exposed -- I was the first one to expose them in 1999 in Britain -- those guys have promulgated all this stuff. And

they helped the islands develop a system where they could get away with this stuff.

Just recently I've been doing some stuff, rewriting and revising a book 25 years ago called "The Laundry Man." And in the new "Laundry Man" I

contacted some people in the British Virgin Islands and they've just paid for a huge PR campaign in the form of a booklet or a report, an official-

looking report. That says we are not a tax haven. Now it's crazy to try to prove a negative. They're insane for putting their money in that. But

they are a tax haven. Because they allow certain things to go on and they do not publish a list of beneficial owners and that's a key to the whole

thing.

ASHER: So, Jeffrey, some good must have, has come out of this in that there has been a greater push for transparency. What has changed, since

the Panama Papers first came out last year?

ROBINSON: The words "beneficial owner." Those are the two most important words. Now people like the OECD and all sorts of nongovernmental

organizations, the European Union included, are pushing for all of these jurisdictions, to release publicly the beneficial owner of the phony shell

companies.

Now BVI says we demand that they tell us who the beneficial owner is. But we're not going to publish it just yet. Well, no, that's the whole point.

Now you know, if you and I want to open a funny company in the Bahamas or the Caymans or some someplace, to evade tax, that's illegal. If we want to

do it to avoid taxes, our government permits that. It's perfectly legal. If you have a problem with that, you got to go to congress or parliament or

whoever who passes the tax laws and allows this kind of fooling around. And you have to go to the islands and say the people who are really fooling

around need to be exposed. And if you're serious about this, you must publish a list of beneficial owners. The reason they don't is because

they're not serious about it.

[16:50:10] ASHER: But there has overall been a greater push towards transparency.

ROBINSON: Hopefully it will last a long time.

ASHER: Jeffrey, thank you so much. Appreciate it.

ROBINSON: My pleasure, any time.

ASHER: British airways' parent company IAG announced a big rise in earnings Friday. We'll bring you an interview with the CEO, Willie Walsh

and our Richard Quest after the break.

(COMMERCIAL BREAK)

ASHER: Welcome back everybody. The head of International Airlines Group says he's not worried about Brexit. IAG's profits rose by double digits in

the second quarter. If you overlook the impact of a big computer systems crash at British Airways back in May, which caused -- I'm sure you'll

remember -- a massive disruption. CEO Willy Walsh told our Richard Quest that business has otherwise been going well.

(BEGIN VIDEOTAPE)

WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: It is a good set of results. Customers are still getting great value. Fares have definitely

come down in recent years. But we've seen the oil price which has been a major sort of contributor to fares, that's stabilized in the past 12

months.

RICHARD QUEST, CNN CORRESPONDENT: Yesterday Air France announces it is buying 31 percent of Virgin. And Delta is buying 10 percent as China East.

You have some strong thoughts on the principles of equity, of taking equity in one's partners. And when you do that, does the fact that Air France,

Delta is doing this, make you think that maybe you and American or others should start thinking about equity exchange.

WALSH: Not really, to be honest with you. I think the circumstances that apply to Virgin are unique. You know, this is just a change in --

[BREAKING NEWS]

JAKE TAPPER, CNN HOST: What kind of preparation anybody inside the White House knew about this. What can you tell us?

SARA MURRAY, CNN WHITE HOUSE CORRESPONDENT: Well, look, we have been hearing from people last night as well as this morning, that the president

was not happy with his chief of staff. That he was being encouraged by people around him, including members of his family, who are senior adviser,

Jared Kushner and Ivanka Trump. That was time to make a change. They didn't feel that Reince Priebus was up to the job of chief of staff. There

were some close to the president who felt like Priebus wasn't carrying out the president's wishes. He wasn't effective in calming the West Wing chaos

and power struggle. But that he also wasn't shepherding the president's agenda through Congress.

Obviously, he had the president suffered a health care defeat last night. That was just a part of what we're talking about here. Now allies that are

close to Priebus were insistent today that the chief of staff would be safe. They were insistent that Priebus would not be resigning. So, it was

pretty clear that if there was going to be a change, it was something the president was going to have to decide to do. He was going to fire his

chief of staff.

[16:55:00] So far, at least on Twitter, we don't have a good indication of what happens next with Reince Priebus. Obviously, will look for more

details on that, Jake.

TAPPER: All right, Sarah, thank you so much. Bring us back more reporting when you get it.

I'm joined now by David Chalian. David, first of all, happy American Heroes week. That was the theme of this week. According to the White

House. Although the focus has been on almost everything but American heroes. Here we have this tweet at 4:50 on a Friday evening announcing

that the Department of Homeland Security secretary, retired Marine General John Kelly, a very respected man in Washington, D.C. that he is now the

White House Chief of Staff.

CHALIAN: Remember when the president was putting together his team during the transition, you remember his talk of how much he appreciated the

generals. Loved the generals. And put together -- with McMaster came in afterwards and Mattis and Kelly. This was sort of the core that was

supposed to calm the waters of concerns among Republicans and other Washington establishment types.

The question I have, Jake, last, I checked, you can change chiefs of staff. The president is still the person in the oval office. It is his impulses.

It is his direction. It is his focus on things or decidedly distracted focus on things that have been setting the tone. His Twitter feed. Is

secretary Kelly coming in as chief of staff going to stop tweets that roil the waters here in Washington? That's unclear to me. Obviously, we'll

have a lot to learn about how Priebus learned about this. Did he learn about it from a tweet that he's out of this job? This one move alone does

not seem likely to me to all of a sudden calm the waters into a fully functioning White House.

TAPPER: Let me read because President Trump five minutes after the first part of the tweet, which was --

I'm pleased to inform you that I've just named General/Secretary John f. Kelly as White House Chief of Staff. He is a Great American.

He now has tweeted the second part:

. and a great leader -- capitalized for some reason. John has also done a spectacular job at Homeland Security. He's been a true star of my

administration.

David, Secretary Kelly, who we should again remind people is a very respected retired Marine general. Serving as homeland security secretary.

Was on Air Force One with president Trump as he flew to New York today for this speech. These remarks he gave in front of a bunch of law enforcement

officers talking about the threat of the vile gang MS-13. It did not seem unusual for John Kelly, Secretary Kelly to be on that flight. Homeland

security obviously is focused on combatting gangs such as MS-13 and stopping undocumented immigrants from coming into this country and joining

gangs like MS-13. But it is certainly interesting timing. Given as we know, how impulsive President Trump can be.

CHALIAN: What we don't know is how John Kelly is going to come in and run this White House differently. Will he have the real latitude to do so?

There remains unknown. You know who else was on Air Force One today, was Reince Priebus, the current chief of staff. It's unclear just when he was

informed about this. How he found out about this.

This change is important. Donald Trump is clearly cleaning house. He understands what he was doing. Thus far is not working. John Kelly, as

you noted, he's running a department that actually is enacting some of the more successful areas of the Trump agenda.

TAPPER: Sure, the border crossings have lessened. And the wall, the first funding tranche was approved I think.

CHALIAN: So, he's looking to a place where some of his agenda is actually getting inactive and moving forward and now bringing that person inside the

West Wing.

TAPPER: Jeff Zeleny is at the White House for us as well. Jeff, people in the White House are learning about this via tweet just as the rest of us

are.

JEFF'S ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: That's right, Jake, I've been talking to a couple of senior administration officials and

staffers here. Since this news came out. And at least according to them this is coming as a surprise to them as well. One of the best ways of

course to keep it secret and to avoid leaks this did not leak, is to not tell anyone. And it appears that's what the president did. At least not

many people as he was flying back to Joint Base Andrews as we see Air Force One sitting right there.

So, this is coming as a major surprise to people here at the White House. Jake first and foremost, the people who were close to Reince Priebus had

absolutely no idea this was happening. We've been talking to them throughout the day as we've been reporting that the president was being

urged to have a change, in the chief of staff's office. And they insisted that he's not going anywhere. They insisted that Reince Priebus was going

to stick this out. And in fact, was going to weather this storm. Well that is not how this is ending up, Jake.

Reince Priebus has had a famous phrase that became a little bit rote over the past few months. He said look, I have nine lives, whenever anyone

asked him about his role as chief of staff. It appears that he used up I think most of those nine, Jake, perhaps even more than that. But his

loyalists, people who came here to the White House from the Republican National Committee where he had been the chairman for so many years, are

finding this very shocking in fact, in the words of one. So, it will be interesting to see, Jake, how many more RNC staffers follow him out the

door -- Jake.

TAPPER: All right, Jeff Zeleny. Thank you so much. It's a tumultuous day. President Trump in his first six months has gotten rid of his

national security adviser, his communications director, his press secretary and as of a few minutes of ago, his White House Chief of Staff --

END