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Kofi Annan Out As Syria Envoy; Spain Busts Al Qaeda Suspects; Swimmers Back In Pool In London; Family Secrets Withheld From Diver; Olympian Rider Refuses To Retire; Rapper With Panda Mask Number One in Germany; World Markets Down; Governments Must Reduce Deficits; Fake Cash Seized; Questions Over Israel's Military; Cinnabon Opens Doors in Libya; White House Reacts To Annan's Quitting

Aired August 02, 2012 - 12:00   ET

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

SUZANNE MALVEAUX, CNN ANCHOR: Welcome to NEWSROOM INTERNATIONAL. I'm Suzanne Malveaux. And we are going around the world in 60 minutes.

Kofi Annan is out. He is quitting his post as the United Nations envoy to Syria. The former U.N. secretary-general was brought in to be the voice of the United Nations and the Arab League to try and diplomatically stop the fighting and the killing in Syria.

Well, nothing worked. He wrote and pushed for a six-point peace plan that existed on paper only. Richard Roth is with the United Nations right now.

Richard, first of all, Kofi Annan is out, and did anybody see this coming?

RICHARD ROTH, CNN SENIOR U.N. CORRESPONDENT: Well, nobody was talking about it though it is not surprising. It is interesting that it comes on this day when the U.N. Security Council is to discuss the fate of those U.N. unarmed observers who were pretty sidelined by the increasing violence there, just one aspect of the failure of his mission.

One diplomat from the west saying that you can't blame Kofi Annan for this, don't blame the man. It is Kofi Annan whose name who was on the six-point peace plan, but they really did not get to point one, and now Annan is off of the masthead on that plan.

The U.N. is going to look for a successor along with the Arab League. It will be intriguing to see if anyone wants to step into the breach to take that position. Annan met with President Assad of Syria a couple of times.

He implored the big powers that sit here at the U.N. Security Council to come together, to send a message with consequences to the Assad regime in an effort to quell the violence, but nothing really worked.

Annan may missed the glory days of the late 1990s when he was the secretary-general and seemed to have the magic touch, won the Nobel Peace Prize, but things have changed in the world in this post Arab spring and he was not able the bring his magic to this situation.

MALVEAUX: So Richard, I don't understand, why do they think that they will come up with anything quite frankly that is going to work to bring peace to Syria?

I mean, you have somebody here who clearly has diplomatic experience for decades, and you have got the plan here, but nobody really paid attention to what he had to say. The cease-fire was an utter failure. I mean, what can the United Nations do think they can put in to replace him?

ROTH: Well, I know journalists ask U.N. officials and diplomats that question. You'll never get them to say well, we give up. I mean, they say, we're diplomats. We will plow ahead. That's their job even in the face of unbelievable collapses or violence.

The people who work here say, well, we will do what our job is supposed to do and we'll keep talking. Now as you know, sometimes effective diplomacy is backed by force and very few of these countries that have been unable to agree.

They can't even agree on what to do even if they agree here, I mean, by perhaps showing more military force to Assad would he crumble like Milosevic or as others may prefer to do to let the two sides or the three or the four sides fight it out and see who is left standing?

There is no major diplomatic involvement here in this fight. You remember James Baker, pre-Yugoslavia, the former U.S. secretary of state saying, we don't have a dog in that fight, but later it turned out under the Clinton administration and after years of violence, they did have a dog.

MALVEAUX: All right, Richard, thank you. Appreciate it.

I want to bring Hala Gorani from CNN International. Hala, first of all, you know, by all accounts, it looks this is really just a total failure. It's a disaster, a diplomatic disaster.

They don't seem to even know who could possibly replace Kofi Annan, but looking at the big picture here, I mean, he was pretty close to those envoys in Russia and China.

The ones who were backing Syria, what do they do? Is there anything that can be done diplomatically to bring them to the table to say, look, we need to be more involved?

HALA GORANI, CNN INTERNATIONAL CORRESPONDENT: I think it is going to be interesting who succeeds or who takes over for Kofi Annan, because Ban Ki-Moon did say that he was going to have consultations with the head of the league of the Arab states, and with a view, quote, unquote, "to the prompt appointment of a successor who can carry on this crucial peacekeeping effort."

So somebody is going to replace Kofi Annan. It is not the U.N. and the Arab League completely throwing in the towel, but you said it. The expectations are so low. We were talking about a six- point peace plan by Kofi Annan.

And Richard Roth made the point that we didn't even make it to point two, and we didn't make it to point one. Point one being that the Syrian-led political process to address the aspirations of the Syrian people, and point two, end the violence, and that took hold for 24 hours. A little bit of a cease-fire when this plan was first introduced, and that was it.

MALVEAUX: What happens to those monitors? You have 150 of those U.N. monitors who are essentially sitting in hotels with no place to go and really don't have any kind of support or firepower to speak of to actually intervene in all of this?

GORANI: Well, their mission is extended a few weeks, and the question is going to be at the U.N. Security Council will that mission rollover?

You know, of course, that is an open question. Now everybody is going to be waiting to hear who will be appointed to lead this new quote, "peacemaking effort," but as the situation in Syria spirals more and more out of control and turns into a full-blown civil conflict, it is difficult to imagine any kind of political process.

But you to find somebody who like Kofi Annan is perhaps perceived a little bit by the parties as being able to negotiate, you know, between them, Russia, China, Iran, Syria, and we will see who they come up with, but it is certainly a story we are going to be following.

But on the ground while all of this is going on, there are reports according to activists of another massacre in a suburb not far from Damascus. So today after the execution of the suspected Assad militiamen, that video that surfaced.

Today, we are seeing bodies lined up outside of Damascus where people have to go to identify the bodies of their loved ones under sheets in the street. That is the level we have reached in the country.

MALVEAUX: That is unbelievable. Hala, talk a little bit about the region itself because we know that countries like Jordan, like Turkey and Saudi Arabia, many in these countries involved, they are trying to at least support the rebels.

If they're not outright arming these rebels that are inside of the country, what does that mean for them when you have tens of thousands of people spilling over into the borders to seek refuge and this could really turn into something that is a much, much bigger regional problem?

GORANI: Yes, it already is. I mean, you talk about Jordan. We understand upwards of 150,000 Syrians have already crossed the border into Jordan from Syria. Syria, of course, has its southern border with Jordan.

Lebanon as well where you are not seeing the clustered refugee camps per se. People scatter across Lebanon once they make it there also tens of thousands. The same thing with Turkey, and even as far as Algeria, the Syrian refugees are traveling all the way to that North African country to flee the violence.

It is putting an economic burden on those countries and politically this conflict is going to end up spilling over into Lebanon and other parts of the region. This is something that unless the violence is contained in Syria is near inevitable.

MALVEAUX: This is just a very significant and saddened event really turn of events. Thank you very much, Hala.

I want to bring in the White House now to get reaction from Kofi Annan's resignation. Brianna Keilar, first of all, do we know, I know President Obama is traveling at the moment.

Do they have any sense so far, do we know that whether or not they've been informed of Annan's resignation?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: I mean, no doubt. We don't have confirmation of that, Suzanne, but of course, President Obama is well aware of this. The president as we speak right now is on Air Force One.

He is headed to Florida for a campaign event. He just left the White House not all that long ago and we are expecting as the White House Press Secretary Jay Carney gaggles on board Air Force One.

He will, of course, be asked about this, and we will bring that information to you what he said as soon as we have that. Now the president as he left the White House I yelled a question at him.

It's pretty loud out there, Suzanne, as you know, because of the sound coming from the Marine I. He did not stop. He often does not stop, so we did not get to hear directly from him.

But I think this resignation is obviously an important symbolic nail in the coffin of pursuing the Annan plan, but remember we heard a couple of weeks ago, Jay Carney admitting saying that the Annan plan had failed. So even that was out there a couple of weeks ago -- Suzanne.

MALVEAUX: And Brianna, I understand that the White House has announced that they are at least going to give more humanitarian relief to the Syrian people. Do we know what kind of significant number this is and what this really represents?

KEILAR: They announced and this was about the time that Annan's resignation was breaking a short time ago that they will be giving $12 million more in assistance. That brings the number closer to $100 million total they have given.

But as you know the White House and the Obama administration is very careful to not really be involved in any sort of military way. They are relying on the allies, their Arab allies to be providing material assistance and arms to the Syrian rebels.

We do know that the president signed an intelligence finding, which allows covert assistance to Syrian rebels, but they are keeping it very much under wraps exactly what that might be.

They obviously at a time when the president is in an election year, when the electorate is very war-weary, the White House really wants the make sure that it is not talking about military intervention, but at the same time, Suzanne, President Obama is trying.

He wants to show leadership on this issue because obviously this is very serious. A lot of people are dying. To that end, he did speak on the phone the other day with Turkish prime minister talking about ways to accelerate essentially the transition of the Assad government.

He was carrying a baseball bat. I think you may have seen that picture. A lot of questions about exactly what that means and the White House hasn't answered yet.

MALVEAUX: Sticks and carrots, maybe. All right, Brianna, thanks.

KEILAR: Perhaps.

MALVEAUX: We appreciate it. Here is more of what we are work working on for this hour of NEWSROOM International. They had enough explosives to blow apart a bus with three suspected terrorists are now captured in Spain.

Take a look at all of this. This is a lot of money, too bad it is fake. That is right. More than $2 million found in Peru, and they are finding unique ways to try to get that cash into the United States.

Plus, sweet taste of gooey American goodness and yes, that is right in Libya now, Cinnabon, the first U.S. franchise in that country.

(COMMERCIAL BREAK)

MALVEAUX: A terror plot is foiled. Three suspects are now locked up today. They were allegedly planning an attack using explosives and remote controlled airplanes. Now this happened in Spain.

And the police say that the suspects were ready to act and that the investigation is not yet over, but there are actually may be more arrests.

I want to bring in Nic Robertson who is with us live from London. Nic, first of all, tell us about who these suspects are. Are they Spanish citizens? What do we know about them?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, we know that two of them are believed to be Chechens although according to police when they were picked up they didn't have identification documents on them.

They were picked up yesterday, and the other man is believed to be a Turkish origin. He was picked up today by the police, and the indications are that the police are maybe will get other people.

They say that they are searching through a computer database, a computer that they have found during their investigations, but they also say they are still searching for explosives as well -- Suzanne.

MALVEAUX: And Nic, tell us how this operation or this arrest went down. I know they are calling it one of the biggest operations against al Qaeda.

ROBERTSON: Yes, and it also sounds like it was not an easy arrest either, these two operatives who were traveling on a bus about 160 miles north of the town of Kadiz in the south of Spain according to the Spanish, might have been on a bus headed towards France.

But when the police try to get them off of the bus, they put up what the police described as fierce resistance. Now these two guys are believed to have had training at Jihadist camps in Afghanistan, Pakistan, and with ties to a Pakistani Jihadist group, and the other arrested in the town of Kadiz.

MALVEAUX: Who were the targets? Who were they actually trying to hurt?

ROBERTSON: You know, that isn't clear, but the information that the police have got that they have these manuals that were for light aircraft. Two of these men believed to have been preparing themselves for sort of using motorized paragliding equipment.

What the Spanish authorities believe is that potentially the target was a coastal U.S. joint Spanish naval base right there in the south of Spain or British naval base.

You know, they could use the advantage of the high mountains that overlook some of the port facilities, and that is what it seems they were doing -- Suzanne.

MALVEAUX: Nic, was it easy for them to operate underneath the radar here? Is Spain known for some of the cells, these sleeper cells inside of that country?

ROBERTSON: Well, the Spanish obviously had those attacks back in Madrid, 181 people killed by multiple bombs placed on trains back in March 2004. And these guys were not under the radar.

They probably thought they were under the radar, but for the past month other intelligence service, and western intelligence services inside of Spain have been tracking them.

And it even appears they had a bugging device in the apartment they were using in Kadiz, which really triggered the police to get involved because they heard one person telling the wife of one of the people arrested to clean out the apartment.

And that is to suppose to have led the police to believe she has taken the explosives out of the apartment, and explosives that the police are still looking for so they were not quite under the radar.

MALVEAUX: OK, all right, Nic, thank you very much. Appreciate it.

Right after the Chinese diver took home a win, she learned that the parents had been keeping a devastating secret for more than a year. Her grandparents were dead. Is that a white lie they had to tell for her to win the gold?

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MALVEAUX: World class swimmers are back in the pool today at the Olympic Games in London. Athletes from Bahrain, Iraq and Libya, three of the turbulent countries in the Middle East, well, they took place in qualify in first heat of the men's 100-meter butterfly.

Gold medalist Michael Phelps and Chad Leclos of South Africa qualified first and second in the second heat. On the women side, American Missy Franklin posted the fastest time in the qualifying heat in the 200-meter backstroke.

While Zimbabwe's Cristy Coventry who won gold in the past two Olympics qualified third. Right now, American gymnasts, Aly Raisman and Gabby Douglas are going for the gold in the women's all-around competition. Remember, of course, Raisman and Douglas helped the American team win gold for the first time in 16 years.

Now to a puzzling story of a family's decision to withhold some tragic news from an Olympic athlete until she won a gold medal. Yumen Chao of China captured her third Olympic gold medal in spring board diving. That happened this week.

Well, this is what happened afterwards, shortly after her family told her that the grandparents had died and that her mother is battling breast cancer. Now the family reportedly kept the secrets for several years.

Her father says, quote, "It is essential to tell this little white lie." Joining us to talk more about this, this is Gordon Chang, the columnist, author, expert on Chinese culture.

Gordon, this doesn't seem like a little white lie. This is a lot to keep from your daughter. When you heard this story, first of all, did it surprise you or sound like this is part of Chinese culture?

GORDON CHANG, AUTHOR, "NUCLEAR SHOWDOWN, NORTH KOREA": Well, it is cultural, all right, but it is not Chinese culture. It is communist culture. The Chinese sports system is closely modelled on the Soviet one and we saw the same behaviors in the Soviet Russia, East Germany and China. And the one thing that these countries have in common is a Leninist political system. We don't see this behavior in the Chinese society of Hongkong and we don't see it in other confusion countries like South Korea and Japan. So this is not Chinese culture.

MALVEAUX: What is the thinking behind keeping this kind of news a secret for years?

CHANG: Well, I think that essentially the parents knew that they could not get this information to their daughter anyway, and that the state wouldn't want it.

They want to keep these kids in isolation to sort of keep them sort of focused on the task at hand, which is to win an Olympic gold medal. So I understand when the parents say that it is no longer their daughter, I can understand that.

MALVEAUX: So, Gordon, explain that to us because I think that is a little confusing here when you say that the parents wouldn't be able to get the information to her anyway.

Explain to us the situation. She was in a diving camp and perhaps they didn't really have the access that you would think that parents would have with their own child.

CHANG: Yes. You know, Olympians in the U.S. often live with their parents, but in China, they are in these camps with other Olympic hopefuls in state-sponsored institutions, and they are kept away from not only their parents, but really from the rest of society.

Because the task is to win a gold medal and the belief is as it was in the Soviet Union that you separated the Olympians from everybody else. So this is why the parents would not have access to the daughter.

MALVEAUX: And Gordon, do we have a sense of this playing out here, what does this do for the competitor, for the athlete, for the family when this kind of news is disclosed?

CHANG: Well, this is obviously devastating and this is really one of the tolls that this system has. And that is why the Chinese people on the internet have discussed this thoroughly, and I think that most people really were concerned about this.

You know, the Chinese people are having national conversations for the first time in 23 years after Tinman massacre. This is one of the most healthy developments in the world. Chinese people are talking about it. So there is a real questioning of not only this, but other things in society as well.

MALVEAUX: Gordon Chang, thank you, Gordon. Appreciate it.

CHANG: Thank you.

MALVEAUX: This is an Olympian who refuses to quit even in his golden years. Japanese equestrian is 71 years old. That makes him the oldest Olympian in the last 92 years. He is competing today in the individual dressage with his horse Whisper.

The oldest Olympian ever was just a year older than him. But he may break that record four years from now. He says he is going to make a run for the 2016 games at the age of 75. Good for him.

The pressure is on for one man, can he save the euro? The make sure that the European currency does not collapse and send our markets into a tailspin, but can he make good on this promise?

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MALVEAUX: Welcome back to NEWSROOM International. We are checking out Germany where a rapper who wears a panda mask, yes, a panda mask is at the top of the charts. His song is number one.

Rapper Crow describes his style as a mix of rap and pop. He calls it rop. The song "du" has had more than 5 million hits on YouTube.

Economy is issue number one for people worldwide, of course, so investors, they were pretty disappointed today when the head of the European Central Bank failed to announce new measures to help lift Europe out of the debt crisis.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, ECB PRESIDENT: The euro is irreversible. In order the create the fundamental conditions for such risk premium to disappear, policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution building with great determination.

(END VIDEO CLIP)

MALVEAUX: So, the fact that there was no immediate action sent the stock into a tailspin and here is where the U.S. markets stand right now. All major indices are down.

I want to break it down a bit and bring in CNN International's Richard Quest who joins us from London. Richard, first of all, we heard from the chief of the European Central Bank just last week saying that the central bank was doing everything that it takes to preserve the euro.

We saw that the markets surged from those remarks, but one economist put it that it really was about a big bazooka that needed to be done to rescue these bond markets. So what were they talking about? What they expect that they really needed to get things going?

RICHARD QUEST, HOST, CNNI'S "QUEST MEANS BUSINESS": You know, it reminds me of my old grandmother who always used to look at you no matter what you have done and say, so what have you done for me lately?

And it is the same thing with Mario Draghi today. Here we have three pages of it. Believe me, I have waded through this stuff. And I can tell you that yes, he said last week, that he would do something.

His exact words were that it will be enough. We will do whatever it takes. Well, today, they come out by saying that over the coming weeks, we will design the appropriate modalities for such policy measures.

And try to stay awake, Suzanne, because it is gripping stuff, I promise you, but the truth is that the ship is sinking, and the best they can do is to say they will still design something in the future. And the real --

MALVEAUX: So why didn't they do anything today?

QUEST: Well, that is the question that people are saying. He said on the one hand that the EFS the bailout fund could do this, but on the other hand, we will look at that, but fundamentally, there is no guarantee, excuse me, that the ECB will act -- Suzanne.

MALVEAUX: So how are people reacting? Clearly the fate of Spain hangs in the balance, and it is trapped in a severe recession, and you have got banks that are extremely weak. What comes next?

QUEST: Well, what comes next is that Spain somehow has to find some form of funding, and that is the unknown. Where will Spain get the money? The government says it will not seek a full sovereign bailout because that would come with the IMF and it would come with rules, it would come with supervision. But the same time -- you have to excuse me -- all this talk about bailouts and banks and ECB has quite sent me throat into spasm because so much -- so much has been said lately about what might happen, what could be done, what should be done that whether it's the Fed, the Bank of England, the ECB, the truth is very little is actually being done.

MALVEAUX: Yes. Well, I can understand why you're having those spasms there, Richard. Obviously a lot of people reacting to this. And not -- and not reacting well I might say there. There's a lot of problems still. Richard, I'll let you go get a drink of water there and get over that.

Take a look at this. This is a lot of money. The problem is, it is not even real. And there is more of these phony 50s that haven't even been found yet.

(COMMERCIAL BREAK)

MALVEAUX: These are the scenes in Taiwan. Flooding, powerful winds, mud slides. Now Saola is closing in on China. Earlier today it was downgraded from a typhoon to a tropical storm, but it has already caused major destruction. At least 23 people died in the Philippines.

And take a look at this. Closed circuit video from Taipei. This man was killed when the ground collapsed beneath him. Saola is not only a threat to China, another storm Typhoon Damrey, is expected to hit China's east coast tomorrow.

And it is day two of Secretary of State Hillary Clinton's six nation visit to Africa. This interactive map, I want to show it to you, this is on the State Department's website. It shows Clinton's upcoming trips and where she has been. The red arrows are the past trips. She's done a lot of traveling. She -- here in Senegal yesterday, where she praised the country's strong democratic institutions. But today she is in Uganda. She is pushing democracy and peace. She's also going to be supporting the fight against AIDS.

In Russia, the trial of three members of a female punk rock band. Well, it has resumed. The court building was temporarily evacuated following a bomb scare. So, these women are charged with hooliganism for an incident that happened in February.

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MALVEAUX: All right, so what is this? The group performed a song criticizing President Vladimir Putin on the altar of one of Moscow's cathedrals. And opposition groups and family members say the trial is just one in a series of moves by Putin to silence the anti-Kremlin movement.

(BEGIN VIDEO CLIP)

PETR VERILOV, RUSSIAN ARTIST AND ACTIVIST: We're completely sure that it's only one man in Russia, the not the court, not the lawyers, not anyone else who will be deciding their fate. That's Vladimir Putin. Because no one else in Russia is capable of staging the protest this big and this powerful. And we expect him to give, well, a prison sentence to the girls of one, two, or three years in jail, because obviously in the situation, giving them a suspended sentence, not sending them to jail would mean that Putin basically got scared of all the international protests and of all the people inside Russia who have become insulted of the situation when three girls are put behind bars for singing in a church.

(END VIDEO CLIP)

MALVEAUX: If convicted, these band members could face up to seven years in prison.

Well, check this out. Rows and rows of $50 bills. They are brand new. They're crisp. But they're fake. That's right, they are fake. Police in Peru said they seized $2.3 million of counterfeit cash from a Peruvian gang. Supplies to make these bills, including special paint and paper, they were also found in a house in Lima. But officials here in the U.S. say there is a lot more fake American money that has not been found. And they say most of it is coming from Peru. I want to bring in Rafael Romo to talk a little bit about how this works.

You know, how do we know if this is real or not real? What is happening? How is this so successful?

RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR: Exactly. Well, what's happening in Peru is that enforcement has been lax for many, many decades and counterfeiters have moved in. Also, there's a national criminal organization that is very well known and that's what happened yesterday. They found a counterfeiting operation in a downtown building in Lima and they confiscated about $2.3 million. All the money was in $50 bills. And we're taking a look at some of the shots that were taken there at the police station in downtown Lima.

Now, this money was eventually going to make its way to countries like Argentina and Venezuela. And as you can imagine, eventually the money comes into the United States. The big problem with this is that every time that you have a shipment of $2.3 million, and in 2009 and 2010 they confiscated $30 million just in Peru, if you can imagine that.

MALVEAUX: Wow. Yes.

ROMO: The value of the dollar decreases and also it has an effect on inflation. So this is a very significant crime.

The problem in Peru is that if you get caught counterfeiting money, chances are you're going to get out of prison in maybe two to three years. And so people take the risk.

MALVEAUX: And so how does this money make its way to the United States? And how can you tell? How is it that they've gotten so good in replicating our currency?

ROMO: Well, the first question, they use all kinds of different merchandise that is being shipped to the United States, including toys, even baby cribs. Anything you can imagine that makes its way to the United States, not only from Peru, but from South America, hidden also in people's clothes. That's what happened.

The second question about the quality of the money --

MALVEAUX: Sure.

ROMO: They are incredibly sophisticated. These are networks that have been operating in South America for decades and they have perfected the art of replicating American money. So as you can see and we saw in those images, the bills are just -- they look just -- the real thing. And to somebody who is not trained in detecting fake money, they can be fooled.

MALVEAUX: Is there -- finally, is there anything that Peru, the officials there are doing differently to -- once they realize it is a huge problem?

ROMO: Well, starting in 2009, Peruvian officials have really strengthened enforcement. And also now they have the cooperation of the U.S. government. The Secret Service has an operation established in Peru that is working together with Peruvian authorities in an effort to identify, detect and ultimately punish the counterfeiters.

MALVEAUX: All right. Rafael, thank you. I hope that the money is good?

ROMO: Yes, it is.

MALVEAUX: We're counting on it. Thanks, again. Appreciate it. ROMO: Sure.

MALVEAUX: A mother's plea to leave her son out of battle. They are Palestinians who may have to fight for Israel.

(BEGIN VIDEO CLIP)

SARA SIDNER, CNN CORRESPONDENT (voice-over): Her worst fear is that her son would have to fight against his own people in the occupied territories, where clashes between Palestinian protesters and Israeli military are commonplace.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MALVEAUX: In Israel, the call to duty is turning into a public outcry. A controversial law which allowed ultra orthodox Jews to defer military service just expired a day ago. For the main political parties in parliament, it has caused now a split. But interestingly enough, the situation is also creating common ground between two fundamentally different groups. Sara Sidner looks into how Israel is grappling with the very difficult issue of who should serve in the military.

(BEGIN VIDEOTAPE)

SARA SIDNER, CNN CORRESPONDENT (voice-over): Abir Satel cannot stomach the thought of her son serving in the Israeli military. Up till now he hasn't had to. But that could change. The Satel's are Palestinians who hold Israeli citizenship. And as citizens, the law could soon demand that her son serve the state of Israel in civil service or in the military.

"This would mean that I would have to erase all the principles, values and thoughts that I have raised my son on. This would suggest that we become part of the occupation," she says.

Her worst fear is that her son would have to fight against his own people in the occupied territories, where clashes between Palestinian protesters and Israeli military are commonplace.

The Israeli defense force say there are over 5,000 Arab serving. By some accounts, that is 3 percent of Israel's military. But many of Israel's Arab citizens are absolutely set against mandatory service, saying the state has discriminated against them, taken their land and is now trying to take their identities, too.

ABED ABU SHHADEH, JAFFA YOUTH MOVEMENT: It's absurd that now they want to take more than what they've already taken. I don't see myself owing the state of Israel anything. On the contrary, I see the state of Israel owing me.

SIDNER (on camera): This year, Israel's supreme court declared unconstitutional a law that exempts ultra orthodox Jews from military service. And in so doing, brought on calls by some politicians to get rid of a policy that exempts Arabs as well.

SIDNER (voice-over): The fight by the ultra orthodox to avoid the draft to continue to study the Jewish holy book, the Torah, instead, has managed to tear apart Israel's coalition government. That is largely because secular Jews have bitterly complained they are shouldering the entire responsibility of the state while the ultra orthodox are allowed the study and live off state subsidies. For the majority of Israelis, when they turn 18, men are required to enlist for three years and women for two.

HAIM NUIMAN, YESHIVA STUDENT: I think what they do is an incredible thing. At the same time, I also am in the belief that the Torah and what the people in (INAUDIBLE) do is also a super important element to the safety of the country.

SIDNER: Many of Israel's Arab citizens have their reasons for not wanting to serve. In Nazareth, they protested through the arts, saying the draft is a tool Israel will use to further erode their identities as Palestinians. It turns out Arabs and ultra orthodox Jews, two minority groups, who would normally never mix, are both fighting a similar battle to avoid serving the state of Israel's military apparatus, albeit for very different reasons.

(END VIDEOTAPE)

MALVEAUX: Sara Sidner, she is joining us live from Jerusalem.

Sara, I think that's just an amazing story that you're telling there. Really fascinating when we take a look at how different those groups are. How do they -- how do they actually come together? How do they manage this new law now that they -- it looks like they're both going to have to serve?

SIDNER: Well, it's interesting because what is happening now is that the defense ministry is basically saying, well, we're going to have to go back to what the law was in 1986, before this new law that was put in place about 12 years ago, called the Tow (ph) Law, was actually enacted. So what they're doing is looking at how they can now draft the ultra orthodox.

And, by the way, in -- just to give you some idea of numbers. About 60 percent of ultra orthodox men do not work. And, of course, that has further upset the population here. They feel like they're not doing their fair share.

As for the Arab citizens, the Palestinians, who hold Israeli citizenship, it's still a question as to exactly how they'll be dealt with because the law does not specifically speak to them. Only the ultra orthodox Jewish population. The Palestinians, or the Israeli Arabs, as some people call them, who have citizenships, theirs is more of a policy. The defense department has (INAUDIBLE) always said, OK, some of the Arabs will be exempted.

So it will be interesting to see how this all plays out. But certainly, as you said, these two groups, not happy about what could happen to them and certainly not happy about the fact that they may soon be drafted.

MALVEAUX: And, Sara, just a quick follow-up here. These two different groups, very different. Are there any effort for them to get together and work together so that they don't have to serve?

SIDNER: No. And I'll tell you something which I found quite interesting. When I asked people from either group what they thought about the other not serving, they both said, well, they should serve in some way. So what you have here is a situation where they really see their own cause as valid, but don't really see the other people's cause as valid. So it's not as if they're going to come together, but they're certainly fighting a similar fight so that they are not drafted, either in civil service, which would mean that they would have to spend several years volunteering in places like hospitals or schools for the state of Israel, as opposed to the military, or the military itself.

So it really is quite an interesting quagmire. And the government is going to have to deal with it. By the way, the defense department says they'll put something in place to try and start drafting the ultra orthodox. However, they will wait also until a knesset (ph) convenes and that's when a law will be put in place that will stick.

Suzanne.

MALVEAUX: All right, Sara, excellent reporting, as always. Thank you, Sara. A fascinating story.

Less than a year after the liberation, the Libyan capital is being now treated to a sticky piece of American sweetness. That's right. Coming up next.

(COMMERCIAL BREAK)

MALVEAUX: It's a first for U.S. franchise Cinnabon. You know what I'm talking about. Love it, right, those warm rolls filled with cinnamon topped with rich cream cheese frosting. Delicious. That's the one. Cinnabon has a new store. It's opened up now in Libya. Planning to open even more locations over the next few years. Want to bring in Alison Kosik from the New York Stock Exchange to talk a little bit about the significance of this, right? We love them here.

ALISON KOSIK, CNN CORRESPONDENT: We do.

MALVEAUX: What made Libya attractive to Cinnabon?

KOSIK: And what made businesses attracted to opening in Libya, right? And you know what this has a lot to do with, Suzanne. It has to do with simple business opportunity that sort of opened up since U.S. sanctions against Libya have been easing.

Now, Focus Brands International, that's the company that owns Cinnabon, says it's already in every other major market in the Mideast. So Libya seemed like a natural next step. But, you know what, it hasn't been smooth sail because earlier last year, the company had already selected a location, shipments were on the way, but then civil war erupted an Cinnabon stopped everything.

Now, this Tripoli location finally opened a month ago and the company says it raked in $45,000 in sales in just its first week. Not bad. By the way, it also sells Carvel ice cream there. But, believe it or not, one trade group says American business interest in Libya is actually growing and a lot of it has been -- the interest has been coming from energy, infrastructure and health care industries. But franchises like Cinnabon are becoming more popular two. One trade group director says people in a new Libya are seeing franchising as a chance to become entrepreneurs.

Suzanne.

MALVEAUX: Tell us a little bit about some of these other companies. How have they done?

KOSIK: Yes. And, you know this, anything in business if it's a new venture, there's always an element of risk. But most companies in Libya right now seem to be doing OK. These American companies that have gone over there. They include Hard Rock Cafe, Subway, Baskin Robins. They've all opened their doors in Ho Chi Minh City, in Vietnam, and they all still operate there. McDonald's has a big presence across much of China and the Mideast. And according to the latest earnings report from McDonald's, it's seen its sales in those regions increase. So for these companies, they see it as a great way to diversity. These are areas that are actually now helping to offset weakness that is coming out of the U.S. and Europe.

Now, one place that an American company hasn't been so successful is Beijing's Forbidden City. Starbucks actually closed up shop there in 2007 after -- after sever years of being there amid controversy because China wasn't too keen on mixing its cultural history with an American coffee chain.

Suzanne.

MALVEAUX: All right, thank you, Alison. Appreciate it.

Now we've got reaction from the White House to the U.N. special enjoy Kofi Annan, who was bringing a peace plan to Syria. Well, he has since stepped down. He is resigning from his position. We're going to hear White House reaction to what this means for what is taking place in Syria. That's up next.

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MALVEAUX: U.N. special envoy Kofi Annan, he was working to try to establish a six-point peace plan in Syria. Well, he is stepping down from his position. I believe we have some fresh sound that we can listen to why he is making this move right now.

(BEGIN VIDEO CLIP)

KOFI ANNAN, U.N. & ARAB LEAGUE ENVOY TO SYRIA: When the Syrian people desperately need action, there continues to be finger pointing and name calling in the Security Council. (END VIDEO CLIP)

MALVEAUX: Kofi Annan earlier today described as frustrated in the failed peace process.

I want to bring in our White House correspondent, Brianna Keilar, to get some White House reaction.

Clearly this is a huge disappointment all around. When people are searching for a diplomatic solution in Syria after 17 months of bloodshed there. What are White House officials saying?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Yes, disappointment, and maybe not too much of a surprise, Suzanne, we heard a couple weeks ago from Jay Carney as he said that the Assad plan had failed. But today, reacting to the resignation of Kofi Annan, just a short time ago on Air Force One, he gaggled saying that this highlights Assad's brutality against his own people and his broken promises.

And he also took a very hard line on Russia and China. He said this also highlights the failure of the U.N. Security Council because of Russia and China to support a meaningful resolution against Assad. As you know, Russia and China have repeatedly blocked strong language by the U.N. Security Council against Assad, against his regime, concerned that it's a U.N. endorsement of sort of an outside enforcement of regime change.

He also, Carney, said that they, the administration, they don't believe that adding weapons to Syria is needed to bring about change. So the U.S., he says, they will not need to add weapons. That's been a big question if there would be some assistance in arming the rebels. Still, no, that's the answer, although we know that a lot of humanitarian assistance, $12 million more announced today, going to, as they put it, those most affected in Syria. But certainly Syrian civilians, as well as some rebels, for humanitarian assistance, Suzanne.

MALVEAUX: It's a difficult situation for the White House to be in, but clearly beyond humanitarian aid, that $12 million you mentioned, are they talking about doing anything else, making any other moves or they are going to wait and see who this new envoy will be when it -- when that person is named?

KEILAR: They're keeping a lot of what they're doing under wraps. But we do know that for an unspecified amount of time, the president has had the option, because he did sign, we've learned from sources, an intelligence finding, to provide assistance. Not just humanitarioan aid. We're talkling coordination, communication with the rebels. This allows the CIA to be involved. We're talking intelligence, but the details still very sketchy, Suzanne.

MALVEAUX: Okay. All right. Brianna Keilar at the White House.

Thanks you very much, Brianna. Appreciate it.