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QUEST MEANS BUSINESS
Trump Disputes Iran's Claim on Catching CIA Spies; Puerto Ricans Block Highway in Protest of Governor; Voting Closes in Contest to Replace Theresa May. Aired 3-4p ET
Aired July 22, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: Small moves on the Dow, 60 minutes before the end of trade, and we've been bouncing
around between positive and negative. One stock, Boeing is drawing the Dow down. We'll talk about that during the course of the program. Otherwise
just up 10 points, middle of the summer. That's what you expect to see. That's the market.
The reasons why NASDAQ and S&P are up. The British politics is at a knife edge in London. Voting has now finished in the Tory leadership contest. A
new Prime Minister will be announced in the next 48 hours. To cut or not to cut. That's the question facing the Fed while under unprecedented
scrutiny. And Britain is mobilizing a European mission to protect ships in the Strait of Hormuz.
Tonight, we are live from London, where it's Monday July, the 22nd. I am Richard Quest, I mean business.
Good evening. Tonight, we're only hours away from finding out who will be the next British Prime Minister will be and as the current government
grapples with divisions over Brexit and escalating tensions with Iran, which is why we're in the British capital tonight.
The Foreign Secretary Jeremy Hunt says the U.K. will increase its military presence in the Gulf amongst other measures. We will be talking about that
and hearing more of that within the hour.
We begin though with the politics and related to the politics of course are the financials. The balloting has closed a few hours ago in the leadership
Boris Johnson, the former Foreign Secretary is the clear favorite is expected to win. The prospect of a Johnson Premiership has top officials
resigning or promising to resign. Philip Hammond, Chancellor -- gone. Justice Minister gone. International Development Secretary gone. Foreign
Office Minister gone or will be. Now, that last one Alan Duncan, he launched an unsuccessful attempt to block Boris Johnson's Premiership.
Bianca Nobilo is following all the developments in Downing Street. Bianca, let's just clear the decks here. Will it be Boris Johnson?
BIANCA NOBILO, CNN CORRESPONDENT: Yes, Richard, I think barring some sort of political miracle that I can't imagine myself, it will be Boris Johnson.
That's because he has been the favored amongst the membership for so many years now.
So, it's expected that he'll win with a margin upwards of 68 percent. Now the greater that margin is, the more of a mandate he might feel that he has
to do what he wants with his Cabinet and take a bit more of a stronger tone.
So, that will be key because as we both know, the beginning of the leadership campaign for Johnson was rocky because he had allegations of
avoiding media scrutiny and lots of commotion and public prying into his personal life after the police were called to his girlfriend's apartment.
So, we'll have to see what that margin is tomorrow.
QUEST: Okay, so there are two issues amongst many that we would have on the Prime Minister's agenda. The first is the Iran issue and the taking of
the tanker. The second, of course, is Brexit. He doesn't have a honeymoon before he has to deal with either.
NOBILO: No, he's got to hit the ground running. And in fact, these escalating tensions in the Gulf over the seizure of the tanker just
underscore how this next Prime Minister is going to be faced with challenges from day one.
It's also incredibly delicate and coming at a time where Brexit is still in a very confusing place, where Britain will need its E.U. partners, but also
to work with the United States.
From day one, the Prime Minister is going to have to choose his key Cabinet members, the great offices of state who is going to be Minister of Defense
to help oversee this? Who is going to be Foreign Secretary? Chancellor and so on? And we can expect to see that on Wednesday coming out in the
evening and on as the week goes, we should get more junior ministerial positions, find out who the Brexit negotiator is going to be.
QUEST: But Bianca, the reality is, is there any -- is there any anti- Brexiteer who is going to be in the Cabinet? I mean, he can't makeup a Cabinet entirely of those who want Brexit or the harder Brexit. The party
won't stand for that, will it?
NOBILO: Well, Boris Johnson has said from the beginning of the leadership campaign that he wants all of his key Cabinet members to sign up to a
pledge that Britain will leave the European Union by the 31st of October.
[15:05:00] NOBILO: Now, some figures in British politics such as amber ride, who are well known remainders, who also take a much softer line when
it comes to Brexit have said that they would serve the
festival October. Now, some figures in British politics such as Amber Rudd, who are well-known remainers, who also take a much softer line when
it comes to Brexit have said that they would serve in Boris Johnson's Cabinet.
So it is going to be tricky. I don't think it will be just like Theresa May's where we saw the striving for a balance between leavers and remain in
this compromised approach. Clearly, that's considered not to have worked by the Conservative Party.
So, Boris Johnson is going to have a direction of travel towards Brexit probably towards a harder Brexit around him, but he will still need to
pepper that Cabinet with influential figures that command a lot of respect in authority within the Conservative Party, who may not be Brexiteers.
QUEST: All right, Bianca. Thank you. The Chairman of the Brexit Party warns that neither candidate can deliver Brexit. Richard Ty spoke to me on
"The Express." I asked him though, if he could live with Boris Johnson as Prime Minister, given that Johnson has promised to get Britain out of the
E.U., at the end of October come hell or high water?
(BEGIN VIDEO CLIP)
RICHARD TICE, BREXIT PARTY CHAIRMAN: Well, let's hope he does. But of course, his track record is to say and write one thing and then actually do
another. I mean, you look back to the votes on the withdrawal agreement, he was writing articles in "The Daily Telegraph," saying that we were going
to be in some form of vassalage, like sort of slave state, he rejected it twice.
And then a third time of asking when, you know, when it really came to it, the crucial moment, he bottled it. He wimped out.
So, you know, we are very skeptical.
QUEST: Well, he voted against the Prime Minister's deal several times until the end.
TICE: Yes. But then he voted for it. He voted for the worst deal in history. So, how can we trust someone who says they're going to do one
thing and then actually, when it comes to it, they do another?
QUEST: What do you want?
TICE: We want to carry out the will of the people, which is to leave the European Union. And the decision, let's say was with or without a deal.
And let's remember, the MPs themselves twice said we're going to leave on March 29th with or without a deal.
QUEST: Right. And then thereafter, they voted that they would not leave without a deal.
QUEST: So we've gone into this. So, the status quo at the moment is Parliament has said, we will not accept no deal.
TICE: But the legal status quo, legally, let's be very clear, legally, we leave unless something else happens. That's a really important point. The
default is we're leaving without a deal.
QUEST: Right, but if the E.U. said, "Okay, we will relook at all of this, but we can't do it by the 31st of October. So, let's have another
extension for you while we relook at the whole thing of getting a deal," would you be in favor of that? Or do you want out hell or high water on
31st of October.
TICE: We've always said and we just want a national election on the basis of a WTO Brexit. That's the platform that we stood on. We got 50 percent
more votes than anybody else. Let's be very clear. If there is an extension, frankly, it's the end of the Conservative Party in the U.K. as
(END VIDEO CLIP)
QUEST: James Blitz is with me, the Whitehall Editor for "The Financial Times." Excellent writing, James, your Brexit briefings. If you haven't
signed up, then you really must. They are excellent. James.
JAMES BLITZ, WHITEHALL EDITOR, THE FINANCIAL TIMES: Thank you.
QUEST: Boris Johnson, and for the purposes of this discussion, that's assuming he gets the job. Boris Johnson is going to face exactly the same
issues that Teresa May did. There hasn't been one jot of change on the other side. What makes anyone think he can actually pull this off?
BLITZ: I don't know. That's the short answer to your question. It's a very good question. And it's not clear at all what's going to happen.
Basically, he said, we're going to be out of the European Union deal or no deal by October 31st.
In terms of getting a deal with the European Union, the sides look like they're miles apart. Johnson is saying I want to rip apart May's deal. I
want to rip apart the so-called Irish backstop. The European Union is saying, look, we can make some changes maybe to the political declaration,
which sets out what the future framework of the relationship will be between the U.K. and E.U., but nothing else.
And so that is the reason why people are saying we're on for a no deal.
QUEST: Right. And the problem there, of course, is as he gets to no deal, then all the issues that she faced, yes, Parliament didn't stop it a couple
of times. But finally, they did when they passed a bill saying we will not allow no deal. What does he do then?
BLITZ: Well, it's not clear what's going to happen. I mean, at the moment, what Parliament has said is very strongly we want to be around
first of all, when we get to no deal, you're not going to dissolve Parliament just push this thing through.
So, they're going to be there first of all. What the mechanism is that actually stops no deal isn't clear. They've got to find some kind of
mechanism to do that. My personal view though is, is he really going to do it. It's such a gamble with his Premiership.
QUEST: But even -- he would see it as being -- it's even a bigger gamble of his Premiership if he doesn't, because if he -- I mean, it will be very
difficult for him to be Prime Minister on November 1st, having said, if he doesn't take us out on October 31st.
[15:10:00] BLITZ: I agree. That is the reason why people are getting very nervous because he has made it all very binary. He has basically said
we've got to be out with deal or no deal on October 31st.
But at the same time, to go down that road, I mean, no deal would be an extraordinary gamble. His Premiership could come to an end very quickly.
QUEST: So van der Leyen and Juncker at the E.U. and the new Commission and the new Council, which sort of won't be in place, but it's going to be
messy because there's going to be a lot of decision makers on the other side. Are they in a mood to dance?
BLITZ: They are in a mood to dance if he goes down a road for some modest changes, as I say to the political declaration, but if in the next few
weeks, he is going to go all guns blazing, saying you've got to rip up everything that May did, or else we're going down the no deal road, they're
not going to be in a mood to dance.
And one of the miscalculations he could make is to think, well, if I go down, no deal, they'll then do a whole lot of stuff to mitigate the
economic damage for the U.K. and the E.U., I'm not sure they're going to do that either. The no deal is four times more painful for the U.K. than it
is for the Europeans.
QUEST: And as everybody keeps -- well, it was you who made the point actually, you made the point that even if he does go through no deal, and
there is a no deal, when it comes to renegotiating the new arrangement after we're out, they'll still want us to implement all the original part
of the original agreement.
BLITZ: Yes, exactly. Well, if we had a new deal, and we leave without any kind of accord, we're not just going to sit there in the United Kingdom in
the middle of nowhere like North Korea doing nothing. We're going to have to have some trading arrangements with a bloc of 500 million people next to
us. So, we're going to have to deal in some way.
QUEST: And they're going to want exactly the same terms.
BLITZ: Correct. That's why the British are in a tough position.
QUEST: Good to see you James, as always, thank you. James Blitz. European stocks mix. Oil and gas did well. Investors awaiting Thursday's
ECB. President Draghi will detail the rate cuts, we believe and QE plans.
As we continue, the Dow is climbing ahead of a mix of a rate cut by the Fed. Jeffrey Sachs will join us on that and his proposals for new Bretton
Woods. When the world's financial system was devised 75 years ago, it fell apart over the following decades.
But now of course, there's always somebody who says Bretton Woods 2.
QUEST: On Wall Street, the Dow had been struggling to stay above water all day. We've seen a spike here in the last few minutes. Boeing -- now
Boeing is dragging the Dow down or rather, the Dow would be higher, but for Boeing.
[15:15:08] QUEST: There's a report on Wednesday, of course, and we've also got the impending Fed decision, which is also weighing on the market.
Jerome Powell and his Board at the fed, the FOMC have their interest rate cutting scissors at the ready when they meet next week.
Now, from Wall Street to the White House, there's keen interest and some confusion of what they'll do. These are the options. They could leave
rates alone. Don't cut, highly unlikely. Not only would that defy Donald Trump, who tweeted today, don't miss it again. But more importantly, all
the comments that the Fed has made all the various members, including the chairman, suggesting that there will be a cut -- no cut would scare the
So, a quarter point cut is the likeliest scenario. There's a don't-cut- away 78 percent chance of that happening. Many indicators remain strong. Trade conditions though have worried the Fed they are getting worse. A
half point cut, only 22 percent say there will be a half point cut interest rates.
Donald Trump's Fed nominee G. Judy Shelton, she wants it, but nobody else does. Jeffrey Sachs, an Economics Professor directs the Center for
Sustainable Development at Columbia. Jeffrey, always good to see you.
JEFFREY SACHS, ECONOMICS PROFESSOR, CENTER FOR SUSTAINABLE DEVELOPMENT, COLUMBIA UNIVERSITY: Thank you.
QUEST: So, I assume you -- whether rightly or wrongly, you'll go along with the idea that the Fed will probably cut a quarter point when it meets.
In your opinion should they?
SACHS: Well, yes, they are going to do that. That's what they've been saying. I probably would not have done it. I think we have reached the
end of pushing money and no monetary stimulus as the way to properly manage.
So, I probably would have held still, but they are cutting and Donald Trump has bullied and bludgeoned as usual, and he's going to get a rate cut. I
don't think it's going to do much good and it probably puts a little bit more risk of an eventual financial reversal, that's really the problem.
QUEST: Right. But on this question of the strength of the U.S. economy is pretty strong. Unemployment is low; inflation is low; arguably, you can
justify a cut on inflationary grounds to get us back towards two percent. But you know, what worries you most about the economy at the moment?
SACHS: Well, the self-inflicted wounds of these tech and trade battles that Trump has launched with China, it's absolutely ridiculous, and not
just with China, with everybody. So, the economy is at greater risk because the White House is absolutely unpredictable and because Trump has
taken steps to break out the international trading system to create new Cold War divisions with China, which are dangerous, they are adverse to our
economic interests. And they are adding a great deal of uncertainty.
And then of course, the Fed tries to compensate that, but you learn in basic economics, you can't really compensate real shocks with the monetary
stimulus the way that they want. We should stop the real shocks to the real economy.
QUEST: You talk about the International Monetary System or financial system. Stay with me, Jeffrey, because the interesting part about that is
Bretton Woods, which of course -- I mean, I realize you're not talking about it per se, but the Bretton Woods monetary system was designed to see
off the rise of protectionism and the competitive devaluation of currencies, and Bretton Woods itself in New Hampshire, a fascinating place
to visit, I filmed "Business Traveler" there back in 2015, and got a chance to walk through not only the wonderful colonnades, but actually through the
room where they had the meetings and where they held the meetings over there.
Clare Sebastian now looks back -- we'll talk to Jeffrey about that -- but Clare Sebastian now looks back at how the agreement was born.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): It was the summer of 1944. In Europe, Allied forces were advancing into Nazi occupied
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Forty-four allied and associate countries arrived for the opening of the United Nations Monetary and Financial Conference.
(END VIDEO CLIP)
SEBASTIAN (voice over): And in the mountains of New Hampshire, Allied finance chiefs were crafting a new post war world order.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: He discussed our plans for the stabilization of world currency.
(END VIDEO CLIP)
SEBASTIAN (voice over): The task at Bretton Woods was not just to rebuild countries ravaged by World War II, it was to avoid a repeat of the 1920s
and 30s, a period of economic depression, widespread protectionism and ultimately, the rise of totalitarianism.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: These meetings are designed to promote trade in the post war world and to create a foundation for lasting peace.
(END VIDEO CLIP)
[15:20:05] SEBASTIAN (voice over): That foundation came in the form of two institutions -- the International Monetary Fund, which established a system
of fixed exchange rates centered on the U.S. dollar, which was pegged to gold and the International Bank for Reconstruction and Development, now
part of the World Bank.
Led by British economist John Maynard Keynes, this new financial system championed open markets and international coordination.
(BEGIN VIDEO CLIP)
RICHARD NIXON, FORMER PRESIDENT OF THE UNITED STATES: We must protect the dollar from the attacks of international money speculators.
(END VIDEO CLIP)
SEBASTIAN (voice over): While the fixed exchange rate system ended in the 1970s, the Bretton Woods Institutions have survived to face new challenges
-- the rising influence of China.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We are finally putting America first.
(END VIDEO CLIP)
SEBASTIAN (voice over): And the emergence of leaders who advance nationalism over that spirit of global cooperation that underpins those
summer days of 1944.
QUEST: Bretton Woods, Jeffrey, was the backbone for decades until it sort of fell apart spectacularly. Does the world need a new Bretton Woods?
SACHS: Well, first, it was a spectacular accomplishment, global cooperation to replace the gold standard. It worked. It didn't just fall
apart. The U.S. ended it unilaterally on August 15, 1971, that short clip of Richard Nixon that we saw was unilaterally breaking the dollar gold
standard, which was the Bretton Woods system.
But this spirit of cooperation is really the most important message of this 75th anniversary. And it was not only on trade and on reconstruction or
the World Bank, but also the General Agreement on Tariffs and Trade on an open trading system, that's also being broken.
These shocks that are occurring right now, unfortunately created deliberately by the United States right now, the country that led the
global cooperation 75 years ago.
QUEST: But the United States, I mean, you know, is also the reserve currency and I know your view is that, well, the dollar really shouldn't --
I mean, it shouldn't be as strong as it is, if you look at the relative to trade to dollar value, but somebody has to lead and arguably the U.S. would
say, well, they did lead and look where it got them.
SACHS: Well, we shouldn't be politicizing the dollar the way we are. We're using the power of the dollar as the settlement currency to try to
pursue foreign policy goals vis-a-vis Iran or towards Venezuela or other countries, this is a big mistake, because people are losing good trust in
Others are now setting up alternative systems, it's inevitable, when you stop treating the dollar for what it should be as a reliable, secured means
of payment, but rather as a political weapon.
And so again, this question that is really the essence of our moment, is are we going to have a retreat to nationalism? Which is exactly as your
segment showed, what was so devastating or are we going to stay on a multilateral track? We couldn't even have a Bretton Woods 2 in the middle
of a trade and tech war. It's unthinkable. We need to cooperate. And that is really the message of today.
QUEST: Jeffrey, good to see you, sir. Thank you.
SACHS: Great to be with you.
QUEST: Jeffrey Sachs in New York. Thank you. So, Equifax will pay up to $700 million in fines over that 2017 data breach that affected 150 million
people. The hack was the largest in U.S. history. It exposed names, Social Security numbers, and addresses.
CNN's Brian Fung joins me now from Washington. That $700 million sounds a lot of money. But then I think of the billions that say Facebook is facing
and I wonder whether or not Equifax is getting off light.
BRIAN FUNG, CNN TECH REPORTER: Well, in fact, even that $700 million isn't what Equifax will actually pay out initially. Equifax will be paying 300
million into a fund that will go toward reimbursing consumers for expenses like free credit monitoring or, you know, fraudulent charges that showed up
on their accounts as a result of the breach.
You know, and then you also have fines being paid to state officials and the Consumer Financial Protection Bureau that add up to $275 million. So,
you know, even that is kind of a far cry from the $700 million, which Equifax will end up having to pay if you know, the $300 million fund runs
Equifax has said it'll add $125 million if consumers end up taking up a lot of that money.
[15:25:10] QUEST: But Brian, the reality is this was a very nasty -- this was a very nasty hack for a company that maintains a lot of important
private financial information on hundreds of millions of Americans. And arguably, it's sort of as just -- it was big news at the time, but it's
drifted off into some sort of oblivion.
FUNG: Yes. You know, one of the things that was raised at the press briefing during the announcement of this settlement was, you know, Equifax
shows many of us as customers, and the customers didn't necessarily have a choice in the matter.
They had their credit card information or their Social Security numbers hoovered up and then you know, accidentally leaked by this company that
failed to patch its security systems.
So, the fact that Equifax is out there, you know, paying this amount when consumers didn't really have very much you know, a choice in the matter is
kind of interesting and you know, worth following here.
QUEST: Brian, good to see you, sir. Thank you in Washington. As we continue, you and I, tonight, Kenya's Finance Minister has been arrested on
corruption and fraud charges. There are also 27 officials accused. Fresh reporting in a moment.
QUEST: Hello, I'm Richard Quest, a lot more QUEST MEANS BUSINESS as we continue in a moment. Britain steps up maritime safety through the Strait
of Hormuz and "Avatar" has lost its crown as the highest grossing movie of all time. And will tell you who has taken that honor and how they did it
in the next half hour.
As we continue, this is CNN and here on this network, the facts always come first.
President Trump says Tehran is lying about breaking up a network of U.S. spies. Iran says it caught 17 people who are working for the U.S. Tehran
says some of the alleged spies will --
[15:30:00] QUEST: Iran is lying about breaking up a network of U.S. spies. Iran says it caught 17 people who were working for the U.S., Tehran
says some of the alleged spies will be executed. Donald Trump called the story propaganda. In a meeting with Pakistan's Prime Minister, President
Trump suggested the only way to end a conflict in Afghanistan would be with a U.S. military campaign that would, quote, "kill 10 million people."
Mr. Trump said, if he wanted to win the 18-year war, in his words, Afghanistan would be wiped off the face of the earth and he didn't want to
go that route. Thousands of Puerto Ricans have blocked a major highway and launched an island-wide strike.
They're demanding that the Governor Ricardo Rossello step down over homophobic and misogynistic chat messages. He is refusing to resign,
although he says he won't seek another term. Here in the U.K., the race to replace Theresa May as Prime Minister has ended.
A couple of hours ago, the polls in the Conservative Party leadership race closed, the winner is to be announced on Tuesday. Boris Johnson remains
the strong favorite. Lawmakers are already resigning in protest against a possible Johnson victory.
Alan Duncan has quit as Foreign Office Minister and the Chancellor of the Exchequer Philip Hammond says he intends to resign if Mr. Johnson is
confirmed as Prime Minister. Cristiano Ronaldo will not face rape charges over an incident ten years ago in Las Vegas. Local prosecutors say
allegations of sexual assault against him cannot be proven beyond a reasonable doubt. The football star has always claimed and denied the
As tensions rise in the Persian Gulf, so oil prices rise with them. A short time ago, Iran released a video of what it says is the crew of the
Stena Impero; the British-flagged tanker seized in the Strait, we don't know when this was filmed or the circumstances.
The company that runs the tanker told us, it can't vouch for its authenticity. Meanwhile, the U.K. is ramping up military presence. There
are concerns about supply hitting the energy market, Brent is up just over 1 percent to $63 a barrel. Matthew Chance is on the Gulf of Oman in the
UAE, joins me now.
This idea that the U.K. is going to lead a European protection mission -- more ships, more war ships. Do we know how this is going to work?
MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: Well, not a great deal of detail. But it seems to be an initiative by Britain to get together a
whole bunch of other countries including many European countries to provide escorts to convoys of tankers, for instance, that ply their trade along the
busy trade routes that cut through the Persian Gulf through the Strait of Hormuz, exactly the area just behind me here or where that British tanker
was seized by Iranian forces on Friday.
Jeremy Hunt; the British Foreign Minister when he announced that said that look, you know, this is the price that Iran is going to have to pay for its
actions, not because Britain wants confrontations with Iran, but because the maintenance of those free trade routes is a priority for the country.
And what Hunt also said though -- and this was I think really interesting, is that this sort of military setup, this Naval patrol group was not going
to be part of the maximum pressure policy that is -- you know, of the United States. You know, the British --
QUEST: Right --
CHANCE: Still feel that there are diplomatic channels to be explored with Iran with its nuclear program, Richard.
QUEST: But the problem, Matthew is whatever Britain says, the Iranians have lumped the U.K. in with the Americans over the whole sanctions policy.
The Iranians seemingly are making small differences in the terms of the GCP -- JCPOA and the different parties and unlike the others, the British are
holding a ship with supposedly sanctioned oil.
CHANCE: Yes, indeed, and I think that probably was one of the main motivations for the Iranians to seize this British-flagged tanker. They
wanted a bargaining chip to secure the release ultimately of that property in the form of that oil on board the ship which was carrying -- which was
being carried -- carrying that oil to Syria in contravention, the British say of European Union sanctions.
They've got that potent bargaining chip. And so, you know, if there's going to be a diplomatic resolution to this particular crisis, between
Britain and Iran, it could well --
QUEST: Right --
CHANCE: In the medium term involve a straight swap of this tanker for that oil.
[15:35:00] QUEST: Matthew, what's the mood? How -- I mean, to those of us, thousands or a few thousand miles away, it sounds very serious with the
potential to add a great deal more bellicose with a -- and a huge amount of room for mistake and unfortunateness. What's it like where you're actually
CHANCE: Well, I think there is a very real sense of tension. And I think, you know, if you look at what Iran is doing with its announcement earlier
today that it cracked open a CIA spy ring -- it seems to be sort of bracing itself for the tensions to escalate even further.
And so I think there is a real mood that when you look at all of the events that have taken place over the past couple of weeks, the limpid minds on
the tankers in the Persian Gulf, the downing by the United States and Iran of each other's drones, there is a real sense that bit by bit slowly, this
region is inching towards something much more violent, something much more kinetic.
QUEST: Right, Matthew Chance who is in the UAE and the Gulf of Oman. Thank you sir. Now, in Kenya, CNN can now report the Finance Minister is
in custody after handing himself to the police. Henry Rotich was arrested on Monday on charges of corruption, it relates to the construction of two
dams. He is due to appear in court on Tuesday, he faces charges alongside 27 other officials.
He denies any wrongdoing, he did so back in March. The arrest of a sitting minister is unprecedented in a country notorious for corruption. After
all, last year, the Kenyan president told me he's committed to cracking down on the issue.
(BEGIN VIDEO CLIP)
UHURU KENYATTA, PRESIDENT, KENYA: We have really pushed, we have worked and we've worked with various agencies across the world who have been very
supportive to our investigative and our prosecutorial bodies. And that's why we are saying, where the ball squarely lies today and where I and the
majority of Kenyans are looking forward to is the judiciary now.
(END VIDEO CLIP)
QUEST: Eleni is with me in Johannesburg, Eleni Giokos; our correspondent there. Is this arrest and this corruption investigation, is this as a
result of Kenya's crackdown on corruption?
ELENI GIOKOS, CNN AFRICA CORRESPONDENT: Well, one would hope that it is, Richard, but actually the order to general(ph) -- for a very long time has
actually been talking about corruption within government, corruption in the procurement process, corruption with regards to patronage.
And in fact, this investigation has been going on for a very long time. So, one is hoping that, yes, in fact, this is part of the corruption
crackdown, but there's also many say a political game that might be playing out here as well. Remember that this government has built itself on the
fact that it's going for big-ticket infrastructure projects.
And a lot of these projects in terms of what they've been paying for -- very expensive prices coming through -- many saying who are signing these
off. So, this is not new. It's surprising that it's coming at this time. And remember, this is a Finance Minister that has been very trusted, he's
been the man that has being taking the investment story out to the rest of the world.
He's been dealing with the IMF, he's being dealing with various other bodies, and here you've got a sitting Finance Minister, Richard, currently
in police custody.
QUEST: What happens next because these dams and these infrastructure projects, Kenya has made a huge --
GIOKOS: Yes --
QUEST: Deal about the fact, particularly using Chinese money in many cases --
GIOKOS: Yes --
QUEST: Or Chinese investment to rebuild the infrastructure of the country.
GIOKOS: Yes, exactly. And I mean, in terms of those Chinese projects, of course, in terms of the price tag, many are questioning, you know, how do
people even come to those numbers. And then when you look at these two infrastructure projects, these two dams, it relates to an Italian company -
QUEST: Right --
GIOKOS: And we're talking about a company that was undergoing voluntary liquidation at the time where it actually got the project and of course got
signed off. But we're talking about 27 people here, Richard, that we implicated. You're talking about corruption that occurred from the very
top to the very bottom as well, and the judiciary is going to be important here in terms of its independence.
QUEST: So, let's look, South Africa, where you are is in the midst of, of course --
GIOKOS: Yes --
QUEST: A major investigations on state capture. Kenya, the third largest, arguably economy there has this particular one. Nigeria has numerous
investigations. Are these evidence of the situation getting worse or African governments finally cleaning up their act?
GIOKOS: You know, Richard, when I saw that sound bite from the Kenyan president saying we're going to clean up, guess what? We've been hearing
this from every single African leader. We want to clean up, we heard it from Nigeria, we're hearing it from South Africa as well.
[15:40:00] But what is it that you're going to take? You've got to get these people in a court. You've got to get people to be held accountable
and you've got to see people jailed. Right now, we actually haven't seen anything like that happening in South Africa, in Nigeria, and even in the
likes of Kenya.
So, yes, they're talking the talk, they're saying that they want accountability, but we actually haven't seen that happening as yet. And
sadly here, Richard, is of course, the people in these countries that suffer the most because they don't get to benefit from the economic --
QUEST: Right --
GIOKOS: Prosperity in these economies.
QUEST: Eleni, thank you. Eleni is our business editor in Africa, thank you. Protests are mounting in South Korea. The trade war with Japan has
opened up older wounds -- we investigate the potential global impact in a moment. It is QUEST MEANS BUSINESS tonight, we're in London.
QUEST: Japan is one of Washington's two strongest allies in Asia. And right now, it's in a trade war with the other one, South Korea. CNN's
Paula Hancocks tells us, you have to fully understand and to understand the current conflict between Tokyo and Seoul, you have to understand their
PAULA HANCOCKS, CNN CORRESPONDENT (voice-over): Making a point with Kimchi. A protester dressed as Japanese Prime Minister Shinzo Abe takes a
fermented-cabbage beating by fellow South Korean protesters. Others pour out Japanese beer and sports drinks. Part of a growing boycott against
Japan after the country imposed export restrictions on three chemicals used to make high-tech materials such as display screens and memory chips.
Materials which are vital to South Korean companies including the world's biggest smartphone maker Samsung, the consequences could be global.
ROB KOEPP, DIRECTOR, THE ECONOMIST CORPORATE NETWORK: South Korea doesn't have a lot of inventory of these chemicals, so unless something is done, we
could start seeing very rapidly a disruption in the supply chain.
HANCOCKS: Samsung says they are assessing the current situation to minimize the impact. Earlier this month, Japan announced the restrictions,
citing national security concerns, a claim South Korea rejected, and said it's gathering evidence for a complaint to the World Trade Organization.
Seoul sees the restrictions as retaliations for a series of disputes dating back to the early 20th century when Japan occupied Korea. Late last year,
South Korea's Supreme Court ruled that Japanese companies have to pay compensation to Korean victims of forced labor during the second World War.
[15:45:00] (on camera): Japan challenged that ruling saying that all wartime disputes had been settled under a 1965 treaty which established
diplomatic ties between the countries. Japan denies that this has anything to do with its current export restrictions.
HIROSHIGE SEKO, MINISTER OF ECONOMY, TRADE & INDUSTRY, JAPAN (through translator): We have made it clear that our move to carry out export
controls appropriately is for national security purposes, it's not a counter-measure.
HANCOCKS (voice-over): Tokyo has also proposed removing Seoul from a wide list of trusted trade partners.
MOON JAE-IN, PRESIDENT, SOUTH KOREA (through translator): The vicious cycle of actions and counteractions is not desirable at all for either
HANCOCKS: The potential for escalation and global repercussions has the attention of a key ally for both countries, the United States.
KOEPP: Number one, you have the U.S.' two most critical allies in Asia who are also side-by-side neighbors to each other and China, add to that, the
North Korea issue where South Korea and Japan also play a very important part. So, there's a lot of interest for the U.S. in seeing this matter
HANCOCKS: Japan and South Korea have struggled to come to terms with their past for decades, but this dispute can reverberate around the world. Paula
Hancocks, CNN, Seoul.
QUEST: Now, there's been a stellar debut for the tech focus Star Market, its builders China's answer to Nasdaq. The 25 companies listed have surged
on average 140 percent, one went up as much as 500 percent. CNN's Sherisse Pham is in Hong Kong.
SHERISSE PHAM, CNN TECH & BUSINESS REPORTER: Shanghai's new tech board soaring on its first day of trading on average, the 25 stocks listed on
Star Market gained 140 percent. One company that makes semiconductor products shot up quadrupled in price up 400 percent. Now, the Star Market
is China's answer to the Nasdaq.
The new tech board is meant to feature companies that line up with Beijing's made-in-China 2025 plan. That's a plan to dominate the
technologies of the future by 2025. And Chinese regulators want the country's high-tech companies to raise money from local investors.
They also hope the new Star Market will convince home-grown tech giants like Alibaba and 10 cents to return from stock markets in New York and Hong
Kong. To do that, the new board is trying out some U.S.-style techniques like streamlining the process for initial public offerings, giving issuers
and investors more control over the price and timing of IPOs.
And China has been encouraging companies to be less dependent on foreign money and technology. That campaign has taken on a new urgency, given the
ongoing U.S.-China trade war and the Trump administration's blacklisting of Chinese tech firm Huawei. Sherisse Pham, CNN, Hong Kong.
QUEST: The last few moments of trade on Wall Street in a real see-sawing sort of day. I mean, just look at that. This mid-morning time of down and
then up and then down, looks like we will end up positive, we have 13 minutes still to go. The broader markets are more positive overall. The
S&P and the Nasdaq -- and we are in the middle of course, this major week for earnings, that's the Dow industrials.
You can see he's top heavy with green which is good, Intel is at the top. Boeing is well worth pointing out -- where are we? Boeing is down of course
and has been down over the course, and that's the big weight on the market. Fitch has cut the credit outlook to Boeing to negative, even though the
majority of people believe it's still credit worthy and strong even though it's putting 5 billion aside for a cost of Max planes.
Ten years ago, James Cameron's "Avatar" was the talk of the town, and in doing so, it set a new record for the all-time top-grossing film. There's
a new king at the Box Office, we'll tell you who it is after the break.
[15:50:00] (COMMERCIAL BREAK)
QUEST: It's a remarkable achievement. For ten years, one movie has held on to the title of the highest-grossing film ever. "Avatar" earned more
than $2.7 billion at the global Box Office. It's lost its crown to another blockbuster movie.
"Avengers: Endgame" approaching $3 billion in ticket sales worldwide. Frank Pallotta joins me from New York. Frank, I don't want to rain on the
parade of this story, but is -- just if you take inflation, eventually somebody is going to beat Avatar just on the simple price of tickets, more
movie theaters. But if you do pro rata, if you actually find the method of proportioning it, is this movie actually doing as well?
FRANK PALLOTTA, CNN BUSINESS MEDIA REPORTER: Yes, I mean, the inflation argument is two-fold. So, if you really want to talk inflation, the
biggest movie of all time and if you include inflation, it's actually gone with the wind from 1939. But you have to kind of take in account that
competition has ramped up in ten years.
There wasn't Netflix the way there's Netflix now when "Avatar" was in theaters. There wasn't as much social media, social media was still kind
of in its infancy back about ten years ago. So yes, "Avatar" would be ahead of "Avengers: End Game", but that doesn't make what "Avengers" did
any less triumphant.
It took -- it made nearly $3 million worldwide. It is the culmination of ten years of movies, more than 20 movies all coming together. But on the
"Avatar" side, it has to get a lot of credit as well because that was a work of pure imagination coming from James Cameron while the "Avengers" is
part of Marvel cinematic universe. It doesn't really matter because they're both Disney anyway now.
QUEST: Yes, I was just about to say -- I mean, you -- whatever one may think personally or privately or whatever about Disney, you just have to
hand it to this profit, money-making colossus.
PALLOTTA: I mean, you just look at it this way. I wrote over the weekend that "Avatar" may have just lost its title, but it's going to have a chance
to get its title back in the next ten years because we're going to have not one, not two, not three, but four "Avatar" sequels between now and 2027.
And these are very anticipated movies -- I mean, some people didn't like "Avatar" when it first came out, and it's kind of cooled since then.
But it's anticipated because it's James Cameron --
QUEST: Right --
PALLOTTA: James Cameron is a visionary, he has made some of the biggest blockbusters in history, and now it's combining --
QUEST: What is it?
PALLOTTA: With Disney. So, we're going to see something interesting in the next ten years definitely at the Box Office.
QUEST: Disney obviously competes with our own "Warner Brothers" which is a part of AT&T like ourselves. What is it about Disney? What have they
managed to do that other studios are very successful, but nobody is in Disney's league?
PALLOTTA: They really understand their audience and they really understand their product, and they know how to sell that to the audience in a way to
build up this type of event, type atmosphere. We're at a point now where if you look at it this way, Disney this year alone -- I mean, this happened
on the same weekend that "Lion King" came out.
[15:55:00] "Lion King" made $190 million, Disney has about a 35 percent market share domestically of the Box Office receipts. It just really kind
of owns the Box Office, it's dominating and it's not even that much. We're talking about five or six movies here this year.
It's only "Avengers", "Aladdin", "Toy Story 4", "The Lion King", and still, it eats up immense amount of the Box Office just because it knows what its
audience is, it knows what these brands are, it knows how to market them, it knows how to innovate, and most importantly, it turns these things into
So, when people are staying home more than often to stay at Netflix are really coming out for these films.
QUEST: If you are right than the Disney streaming service, the rest of everybody should be -- should be terrified.
PALLOTTA: I mean, look at it this way, over the weekend was another big announcement from Disney, they had San Diego comic-con where Kevin Fagy;
the president of Marvel studios came back and announced phase four. Phase 4 is the next phase of Marvel movies over the next decade.
And a lot of them were not even movies. A lot of them --
QUEST: All right --
PALLOTTA: Were Disney-plus products. There's one show that actually you have to watch on Disney Plus to understand one of the movies and see how it
connects. That's how Disney gets you, it's really Disney's world and you're just kind of living in it --
QUEST: All right, Frank, good to see you, thank you.
PALLOTTA: Thank you.
QUEST: We will take a profitable moment after the break.
QUEST: Tonight's profitable moment. This time tomorrow night, we will know who is going to be the new Conservative Party leader in the U.K., and
therefore by definition, who will be the next Prime Minister to replace Theresa May. Tomorrow night, please do join us at this hour. We will be
broadcasting as well all day from College Green outside the houses of parliament with all the analysis.
Make no bones about it, this is an extraordinary day if as expected, Boris Johnson gets it because here you have a Prime Minister-to-be that people
say is not detail-oriented, flies by the seat of his pants, is bellicose, intelligent, but ultimately has a set of policies that are completely
against what Europe says it's going to do.
Does that put him on a collision course, and an inevitable one? But we'll find out in the future, but it all starts tomorrow as the announcement of
who is the leader, who is the Prime Minister and we hear what happens next. It promises to be a fascinating development in the history of British
politics and Brexit.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in London, whatever you're up to in the hours ahead, I hope it is profitable.
The Dow is barely up, the Dow -- the bell is ringing, the day is done.