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Quest Means Business
EU Says South Stream Talks Will Go Ahead; Russia to Enter Recession; Israeli Finance Minister Dismissed; Japan's PM Kicks Off Election Campaign; US Auto Sales Up in November; Dow Hits New Record; Takata to Create Quality Panel; Massacre at Kenyan Quarry; Cheap Oil Squeezes Economies; AI's Real- Life Terminator Scenario; Challenges of Artificial Intelligence; Future Finance: Protecting Online Data a Heartbeat Away; Van Gaal's Christmas Complaints; Ebola Cripples Economies
Aired December 02, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, CNN HOST: Stock markets close at an all-time high on Wall Street. It's Tuesday, December the 2nd.
Europe vows to press on with a pipeline from Russia. I'll speak to the EU's energy commissioner.
Also tonight, after months of speculation, Russia finally admits it's heading for recession.
And political unrest in Israel. Benjamin Netanyahu sacks his finance minister and calls an early election.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
Tonight, the European Commission says it will go ahead with talks on the South Stream pipeline. This comes one day after Russian president Vladimir
Putin said the project had been scrapped and blamed the EU for blocking it.
The tit-for-tat highlights Europe's dependence on Russia to keep the fires burning, and it lays bare Russia's vulnerability to sanctions and falling
energy prices.
(BEGIN VIDEO CLIP)
ALEXANDER LUKASHEVICH, RUSSIAN FOREIGN MINISTRY SPOKESMAN (through translator): You can't force people to like you. We will find other
forums to achieve our plans in connection to supplying gas to other regions.
(END VIDEO CLIP)
LAKE: The South Stream pipeline would have sent gas to Europe, bypassing Ukraine. As you can see on the map, it would have passed under the Black
Sea, then through Bulgaria, Serbia, Hungary and beyond. Those three countries stood to benefit from transit fees and a reliable supply of gas.
Bulgaria stopped work on the pipeline earlier this year after European officials said the project violated EU rules. In an announcing the
cancellation of the project, Mr. Putin said Bulgaria had not acted as an independent country. Bulgaria's president says it's not up to him to get
the project going.
(BEGIN VIDEO CLIP)
ROSEN PLEVNELIEV, PRESIDENT OF BULGARIA (through translator): The decision about South Stream is in the hands of Russia and the European Union. I am
pointing your attention to the fact that if Russia agrees to comply with European law, I do not imagine anybody having objections to this project.
(END VIDEO CLIP)
LAKE: In Serbia, the prime minister highlighted his country's steadfast support for the project, and he said Serbians had no cause to fear gas
disruptions this winter.
(BEGIN VIDEO CLIP)
ALEKSANDAR VUCIC, PRIME MINISTER OF SERBIA (through translator): We believe the project was beneficial for Serbia. We do not abandon it, even
under most adverse pressures. We are paying the price of a conflict among big powers.
(END VIDEO CLIP)
LAKE: Hungary is now scrambling to find a new source of gas to make up for the loss from South Stream. One month ago, lawmakers defied the EU,
passing a law allowing the project to go forward.
Well, joining me now is Marcos Sefcovic, he is the EU's vice president for energy. Thank you so much for joining us this evening, sir. It's a little
confusing for some of us. Russia said the project has been canceled. The EU says the talks continue. Is there still room for compromise?
MARCOS SEFCOVIC, EU VICE PRESIDENT FOR ENERGY UNION: I think that we've been very much surprised by the announcement that we heard from Russia's
side. The truth is that until the Ukrainian crisis started, we had regular -- and I would say quite intensive talks with Russia -- an all fields of
cooperation in the area of energy.
Of course, this included also our cooperation and the potential problems and challenges linked with the South Stream project. Because what was very
important for the European Union and for the European Commission that the project of this magnitude would clearly be in full compliance with EU law.
Because this European legislation has to be respected with all energy companies, and it should be respected by all the member states. Therefore,
that was the subject of our talks, how we can make this project really compatible in full compliance with EU laws, especially on ownership and
handling, third-party access, and on targets.
This has been the technical aspects of the talks, which were, unfortunately then, suspended when Russia started to question our legal base and the
European legislation and took us to the WTO.
LAKE: So, you can imagine, there are citizens sitting in Serbia and Hungary and Bulgaria who are, despite the assurances from their leaders,
concerned about having secure and reliable energy this winter. What do you say to them?
SEFCOVIC: I would say to them that this is just another reason why we should progress much faster on the building up of the European energy
union. This is actually the task I got as the vice president of the European Commission to progress on that project.
Because I think that European citizens and European businesses should not worry each summer what will come in the winter. Because of course it's not
very good for our citizens and for the economic climate in the European Union.
Therefore, we would press on, press ahead to be building the energy union. And of course, therefore, we need our gas stress test in Europe, and I
think that this winter, we are much, much better prepared than anytime before.
LAKE: Yes, everyone agrees that's needed long term, but in the short term, what are the alternatives if talks cannot resume? What are the
alternatives you can put in place in the short term to guarantee secure and affordable energy for Europe?
SEFCOVIC: As I said, in the short term, we just analyzed some vulnerabilities we have from an EU energy markets through this gas stress
exercise.
And I think that we can make sure that we can help the countries which would be in dire straits, and we have different kind of contingency
plannings to help these countries and to show necessary solidarity, as we already did in 2009. And as I said, now we are much better prepared.
And for the future, of course, diversification of the rules and of sources of supplies one of the top priorities, so we would work very intensely on
the south gas corridor project, on building up the Mediterranean gas hub. We should give us liquid alternatives so we will not be that vulnerable and
we would not be that anxious each summer about the potential problems which might come in the winter.
LAKE: I know you mentioned compliance and legalities in terms of the delays here, but the sanctions related to Ukraine loom large over this. Is
this a case of sanctions not being productive or hurting those that they were not intended to affect?
SEFCOVIC: Of course, that's very difficult to say. What I would say at this point, it's very difficult to speculate about the major reasons or
causes of this Russian decision. But we know one thing for sure, that this project was rather costly.
LAKE: Marcos Sefcovic, thank you very much for joining us. The EU's energy commissioner.
Now, the dispute over the pipeline is just the latest hit to the Russian economy. The Russian government now admits the country is headed for
recession next year. It would be the country's first recession in five years.
The government predicts the economy will shrink by 0.8 percent in 2015. The economy could contract as much as 4 percent, however, if oil prices
remain low. Russia's also facing huge capital outflows thanks to Western sanctions.
Joining me now is Gillian Tett, "The Financial Times" managing editor. Gillian, thank you so much for being with us tonight.
GILLIAN TETT, MANAGING EDITOR, "FINANCIAL TIMES": Nice to be here.
LAKE: I think a lot of people are watching this with concern. We keep putting references back, the ruble hasn't been hit like this since 1998.
Of course, that causes a lot of concern. And there are some reports that there are some pockets of panic in some financial markets.
Do you think that Russia has the tools, has the reserves to be able to make sure that this does not escalate into a full-blown financial crisis?
TETT: Well, this certainly is a very big challenge for President Vladimir Putin because it's not just the case that the ruble has fallen faster than
at any point since 1998, we've also seen the spread or the gap between the rate paid on US Treasuries and Russian debt widen to its biggest level,
which is essentially a sign that investors around the world are saying we just don't trust Russian debt.
Now, Russia is a fabulously wealthy country in the sense it has these reserves from the oil. But of course, these are being pressured at the
moment. And so, there is growing concern not just about the question of whether what this is going to do to the Russian national finances, but also
the very large number of Russian companies that have issued debt in currencies other than the ruble who are going to see their debt bills
actually rising.
LAKE: Now, Vladimir Putin has riding a wave of nationalism that has supported him, and the business community has been mostly silent. Is this
going to change that?
TETT: Well, that's one of the most interesting questions to watch right now, because up until recently, there was a sense amongst the business
community that they had a best interest ensuring that the current regime continued. And of course, there's been a great climate of fear, as it has
become clear that anyone who tried to defy him and the oligarchs could suffer very badly.
But there is a tipping point in Russian history that has appeared again and again where essentially the leaders discover the people around them no
longer feel they have Russia's best interest in keeping the system going as it is.
And the question of whether or not businesses are going to start to see these capital outflows becoming very significant, whether they're going to
start feeling the squeeze from the falling ruble and the oil price, and whether that's actually going to force some active protest is absolutely
critical in the months ahead.
LAKE: It certainly is. Gillian, none of us know what is in the mind of Vladimir Putin, but from people that you talk to, from people who are
watching closely and within Russia, do they think that this will make Putin more likely to reengage with Europe, with the West, over the situation in
Ukraine?
Does it appear there's much they can do about the oil situation at the moment? They weren't able to get to a deal with Saudi Arabia in terms of
production. Will he look to try to reopen dialogue on the sanctions front?
TETT: Well, the problem right now is there's an awful lot of pride at stake, not just in terms of the individual, the man, but a sense of
national pride as well. And unfortunately, history shows that in the case of Russia, when you do have pride at stake, there tends to be a lot of
reactions, a lot of lashing out, a lot of destructive moves.
And the fact we've had this debacle come up in the last 48 hours in terms of the South Stream pipeline shows that you can expect a lot more in terms
of lashing out and sudden destructive measures going forward.
At the moment, there's very little public sign that President Putin is actually looking to try and get the sanctions watered down through any
tangible, proactive concessions from themselves.
LAKE: Gillian Tett from the FT, thank you so much for joining us tonight. Appreciate the insight.
Benjamin Netanyahu's coalition government has collapsed after he fired his ministers for justice and finance. We'll have a live report from Jerusalem
next.
(COMMERCIAL BREAK)
LAKE: Israel's finance minister has been fired. Prime Minister Netanyahu dismissed Yair Lapid, along with justice minister Tzipi Livni on Tuesday.
He also called for early elections after dissolving parliament.
Tensions have grown between Lapid and Netanyahu in recent weeks. The prime minister accused Lapid of attacking his government policy and said he
cannot tolerate divisions in his cabinet. In October, Lapid told this program that things were getting heated.
(BEGIN VIDEO CLIP)
YAIR LAPID, RECENTLY-FIRED ISRAELI FINANCE MINISTER: We are in the middle of a very tense period, both with the Palestinians and with the American
administration, and this is very bad timing. So, these are emotional and very -- these are emotional subjects in Israel and in every period, and
especially now. So, of course, sometimes it happens that the talking about those issues becomes emotional and personal.
(END VIDEO CLIP)
LAKE: Ben Wedeman is live in Jerusalem for us. So, Ben, this election was not supposed to happen until 2017, really pulling this forward. What does
Netanyahu hope to achieve? What is his strategy?
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: In fact, this -- the elections, last election took place only 22 months ago, so this
announcement comes as a bit of a disappointment for many people who were hoping for a period of political stability.
For Netanyahu, what he wants to do is basically create a new coalition, because his Likud Party simply doesn't have enough seats in the Knesset to
form a majority. But clearly, after weeks of intensifying squabbles, the prime minister had simply had enough.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, PRIME MINISTER OF ISRAEL (through translator): A month and a half ago, I convened in my offices the head of the opposition
parties, and I said, this has to come to an end. These attacks have to come to an end. If you want to carry on together, let's move on together.
Unfortunately, those attacks that I've just described increased yesterday, today. And that is why we have to vote in a new and stronger government.
(END VIDEO CLIP)
WEDEMAN: The hope, of course, is to vote in a new and stronger government, but there's really no guarantee. Now, he ended up 20 months ago forming
this very unwieldy coalition because he could not form the sort of right- wing government allied with religious parties, so he ended up marrying with the center. That obviously didn't work out.
But given the contentious nature of Israeli politics, there's no guarantee that when the election is finally held, probably sometime in mid-March, the
outcome is necessarily going to be to his liking. Maggie?
LAKE: And then, this is happening at a time where there are a host of problems Israel is dealing with, security issues from within, a peace
process that's stalled. A controversial nation-state bill, as well as some economic concerns.
WEDEMAN: Yes, indeed. The Israeli economy, which really was quite strong when -- during the deepest, darkest days of the recession. Western
economies were ailing, the Israeli economy was doing quite well. Now, it's starting to slow down, and the worry is that without political paralysis on
top of that, the economy could get even worse. Maggie?
LAKE: So Ben, who are the -- who should we look at, when we're looking for this election, Netanyahu doesn't -- does he have a formidable opponent? Is
he -- he wants to come out of this with a clear mandate to lead. Would we expect that to be true, or could we actually see him weaken? Where does he
stand in the polls?
WEDEMAN: He's down in the polls. I think in mid-November, a poll was held that found that only about 35 percent of Israeli voters felt he was doing a
good job. If you recall during this summer, the war in Gaza, he started off with very high approval ratings, but after that war went on for 50
days, it really plummeted.
So, it's a risk for him. And keep in mind, however, this is a man, he served as prime minister for three times. He is a -- in Israeli politics,
he's a towering figure.
But there are others sort of biting at his heels. On the right, you've got his foreign minister, Avigdor Lieberman, his national economy minister,
Naftali Bennett, who are very ambitious men who would, some believe, like to push Mr. Netanyahu aside. So keep an eye on the right.
On the left, you have others, like Livni, like Lapid, who are ambitious, but in a sense, don't seem to command the sort of passion that the
supporters of those politicians on the right do. So, Netanyahu still a significant figure not to be taken lightly. But there are many others who
would like to take his place. Maggie?
LAKE: And of course, all this coming at a critical time for the country. Ben Wedeman for us live tonight. Thanks, Ben.
Japanese prime minister Shinzo Abe is pitching himself as the man to help save the nation's economy as he begins his campaign for reelection. In
less than two weeks, Japan will vote for a new parliament, and the future of Abenomics is on the line. Our Asia-Pacific editor Andrew Stevens
reports form Tokyo.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN ASIA-PACIFIC EDITOR: It's lucky that the Japanese prime minister, Shinzo Abe, has such a large majority in parliament,
because he's likely to need it as he goes to the people to ask for four more years in power.
The campaign for the December 14 election kicked off Tuesday, with Mr. Abe in Fukushima, promising that he won't forget rebuilding there after the
devastating 2011 tsunami. But the real issue here is the economy.
Mr. Abe swept to power two years ago promising to change things, to pull Japan out of its seemingly endless economic under performance. And this
election really is a referendum on his performance so far.
But if you look at the headline economic number, it's a shocker. Japan, after two years of Abenomics, is actually back in recession. Talk to some
economists, though, and they'll tell you if you scratch behind those numbers, you'll see that, in fact, Abenomics is working.
JESPER KOLL, DIRECTOR OF JAPAN EQUITY RESEARCH, JPMORGAN: The key issue is what do you have to watch out for? Is the economy creating jobs? The
answer is absolute yes. This economy is creating about 130,000 new jobs every month since Abe's been around.
On top of that, do you find that corporations -- are corporations making more money? The answer is an absolute yes. Corporate profits in Japan
over the last two years have basically doubled.
STEVENS: But Abe still has to sell that story to voters, and on top of that, he's also got to convince Japanese to ignore a new ratings downgrade
from the credit ratings agency Moody's. Moody's says that Japan's credit risk is now greater than both China and South Korea. But, he still does
have things working for him.
(CROWD SHOUTING)
STEVENS (voice-over): Together with his coalition partners, he controls nearly 70 percent of the powerful lower house of parliament, and that is a
big cushion to protect him. He's also being helped by a very weak opposition. Recent polls show the rival DPJ Party's approval rating of
less than 10 percent.
Even so, Abe's people are playing down any expectation of a sweeping victory. They now say a simple majority is enough to prove that Abenomics
has the support of the country.
Andrew Stevens, CNN, Tokyo, Japan.
(END VIDEOTAPE)
LAKE: US auto sales are up. We look at why buyers are flocking to their local dealers next.
(COMMERCIAL BREAK)
LAKE: Well, it was a November to remember for US automakers. Last month was one of the best for car sales in the last eight years. Here to break
it down for us is CNN Money's Peter Valdes-Dapena. Peter, great to see you.
PETER VALDES-DAPENA, CNN MONEY CORRESPONDENT: Good to see you.
LAKE: So, Black Friday, we know we see people knock themselves over to get the TVs, get all the deals, but Black Friday now extends to the auto
sector?
VALDES-DAPENA: Oh, yes. Well, auto dealers don't want to be left out. And so, you've got automakers offering really good deals, you've got auto
dealers doing everything they can to get people in to buy cars. It's turned out to be a really good weekend.
LAKE: And it seems to be working. The discounting had a lot to do with it. We've seen in other areas, that's great for moving the vehicle
numbers. Are we in a situation where we're going to see the auto industry sort of get back, hooked on that heavy discounting type of operation?
Because they seem to have moved away from that in recent years.
VALDES-DAPENA: Yes, I don't think we're ever going to get back to that again, when GM was having the red tag sales and employee pricing. I don't
think we're going to get to that area for a number of reasons. The economy is much better.
And frankly, the products are a lot better than they used to be, particularly domestic. Ford, GM, and Chrysler products are much more
competitive than they used to be, and that's where a lot of the heavy discounting came from, and they're not doing that kind of stuff anymore.
LAKE: So, when we look overall, it was a great month for automakers. Is there anyone who seems to be pulling away from the pack? I know Ford
looked like they were the softest, but that has a lot to do with them transitioning to the new pickup truck.
VALDES-DAPENA: Right. Ford is transitioning to the new F-150, and also, they're competing in some very competitive spots. Their mid-sized sedan,
the Fiesta, not doing as well as it has in the past because of that. So, they have a number of things going on.
Chrysler has had great numbers. The SUVs are really popular. Small and subcompact SUVs are really big, so the new Jeep Cherokee was just really
taking off. They've done well. Ram truck sales are also doing really well.
LAKE: Now, I notice something you're saying here. Truck, SUV, truck. Talk to me about how gas prices are influencing -- or are they influencing
what people buy? Or are they actually making them go out and make a purchase?
VALDES-DAPENA: Well, it's a couple things going on. One thing is, people are spending less money on gas, that means they've got more money in their
pocket to spend on a car. But also, they can now consider larger vehicles, which is also coinciding with something else.
Both General Motors and Ford have recently redesigned their big, full-size SUVs. So, they're a much more attractive product. Someone who wants that
kind of big vehicle now goes into the market, they have an all -- very new, nice-looking Suburban to choose from, maybe a Cadillac Escalade. Ford's
got new Lincoln Navigators out there. So, they've got nice stuff to do.
Plus, on the smaller side, compact SUVs and subcompact SUVs are just a huge thing. Almost any automaker that comes out with a compact SUV right now
has a hit on its hands.
LAKE: Yes.
VALDES-DAPENA: Lincoln MKC doing really well. Buick Encore doing really well. So, that's another segment. SUV doesn't mean what it used to
anymore.
LAKE: Yes, it doesn't mean a gas-guzzler anymore.
VALDES-DAPENA: Right.
LAKE: And when I hear good sales, good financing, good discounts, and cheap gas, that means good news for the consumer, so we'll see if the
manufacturers can hold up on the bottom line. Peter, thanks so much for joining us tonight.
VALDES-DAPENA: Thank you.
LAKE: Well, a big day on Wall Street. Dow Industrials closing at new records after retreating on Monday. On the NASDAQ, Biogen Idec rose
sharply on news of an experimental drug for Alzheimer's. Nice looking day, though. Triple-digit gains for the Dow.
Embattled airbag maker Takata says it will create an independent panel to review concerns about safety and quality. Takata says the review will be
chaired by the former White House chief of staff and transportation secretary Samuel K. Skinner. CNN's Jim Boulden has more on Takata's
troubles.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Takata is one of those companies which you would not know. It sells parts to the big
automakers behind the scenes.
Then, this happened. When some driver's side Takata airbags deployed, they exploded, hitting passengers with shards of metal, shrapnel. This has
happened mostly in warmer climates in the United States. A climate that appears to make the problem worse.
BOULDEN (on camera): Here are the numbers behind the Takata airbag controversy. Takata supplies about one-fifth of all the airbags worldwide.
The US government believes at least four passengers have been killed by shrapnel hitting them when a Takata airbag inflator incorrectly deployed.
That led to a recall of some 4 million cars in the warmer regions of the United States. Many of the cars were made by Honda, that's Takata's
largest customer. And Honda says the first injury of a passenger from a Takata airbag happened back in 2004.
And since 2011, Honda cars built as far back as 2001 have been recalled. And around 2.6 million of them were in Japan.
BOULDEN (voice-over): Up to now, Takata has insisted that a nationwide recall in the US is not necessary, as the problem is confined to warmer
states. It also faces a US Department of Justice investigation on how Takata has handled the whole problem.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
LAKE: Well, cheap oil isn't just hurting Russia's economy. We'll look at how the African and South American countries facing economic storm.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. This is CNN, here are the top world news headlines we're following for you.
Kenyan president Uhuru Kenyatta has accepted his national police chief's resignation and has sacked his interior minister following a terrorist
attack. The bodies of at least 36 quarry workers were discovered this Tuesday near the border with Somalia.
Members of the terrorist group al-Shabaab raided the quarry in Kenya, separated workers based on their religion, and then killed those who were
non-Muslims. Now, a warning that viewers may find some images in this next story disturbing. CNN's Nima Elbagir reports.
(BEGIN VIDEOTAPE)
NIMA ELBAGIR, CNN INTERNATIONAL CORRESPONDENT (voice-over): They were caught by surprise, asleep in their tents when gunmen attacked in the early
hours of Tuesday. The 36 bodies here are of non-Muslim quarry workers, separated from their Muslim colleagues, and executed.
Those who survived were taken to hospital, some telling of watching their friends beheaded. Al-Shabaab was quick to claim responsibility for the
massacre, saying it was in retaliation for mosque raids carried out in Kenya by security forces last month.
But the quarry attack in Kormey, near the Somali border, is just the latest in a string of brutal killings by the Islamic militants. On November 23rd,
the group ambushed a bus in the same region, killing at least 28 people after they failed to recite verses from the Koran.
A campaign of terror, designed to put pressure on the Kenyan government to withdraw troops fighting Islamic extremists in neighboring Somalia. The
Kenyan president remains resolute.
UHURU KENYATTA, PRESIDENT OF KENYA: We will not flinch or relent in the war against terrorism in our country and our region.
ELBAGIR: Kenyans had feared this latest attack and fear more still.
UNIDENTIFIED MALE: Everybody's getting scared of what is happening. So, we were listening to today's -- our president's speech. He gave us another
assurance, assurance that things will be OK. So, we want to see again what is going to happen.
UNIDENTIFIED MALE: If you are a good parent, you have to protect your area first, your home first, then your community. Then you go beyond your
village.
ELBAGIR: It's the kind of criticism that prompted sweeping changes in Kenya's top security ranks in the hours following Tuesday's attack.
President Kenyatta announcing that national police chief David Kimaiyo had resigned and that he was also appointing a new interior minister. Action
that has been long awaited.
KENYATTA: We also acknowledge some weakness in our security architecture. In light of this, last week, I directed my government security actors to
engage with members of the relevant committees of the legislature with a view to rectify administrative and legal hurdles that limit our ability to
deal with this very real and existential threat that we face.
ELBAGIR: It may go some way to winning back the trust of the Kenyan people, who again prepare to bury more loved ones lost to a lingering war
on terror. But can it guarantee their safety?
Nima Elbagir, CNN, London.
(END VIDEOTAPE)
LAKE: Now, the rest of the day's headlines. Israel's prime minister has sacked his finance and interior ministers, saying he will not tolerate any
opposition. He also called for parliament to be dissolved, triggering an early general election.
One of the wives of the ISIS leader Abu Bakr al-Baghdadi has been arrested by Lebanese forces as she was trying to cross into Syria. A CNN source
says al-Baghdadi's wife is a powerful figure heavily involved in ISIS. One of their children is also reportedly detained.
European Commission says it will go ahead with talks on the South Stream pipeline. Russian president Vladimir Putin yesterday said the project had
been scrapped and blamed the EU for blocking it. The South Stream pipeline would have sent gas to Europe, bypassing Ukraine. Europe's vice president
for energy told me it is important to press ahead.
(BEGIN VIDEO CLIP)
SEFCOVIC: European citizens and European businesses should not worry each summer what will come in the winter. Because of course it's not very good
for our citizens and for the economic climate in the European Union.
Therefore, we would press on, press ahead to be building the energy union. And of course, therefore, we need our gas stress test in Europe, and I
think that this winter, we are much, much better prepared than anytime before.
(END VIDEO CLIP)
LAKE: Falling oil prices are putting pressure on a number of economies. Stocks in Nigeria fell just over 1 percent today. They're down around 20
percent since July. The currency touched a record low against the dollar before rebounding slightly.
In Venezuela, stocks ended the day down around 1 percent. They are still up sharply from the summer. The Venezuelan bolivar hit a fresh low against
the US dollar. Venezuelan consumers face rampant inflation and a shortage of basic supplies.
Joining me now, Mike Wittner is managing director of -- global head of oil research at Societe General. Mike, thanks so much for coming in today.
MIKE WITTNER, GLOBAL HEAD OF OIL RESEARCH, SOCIETE GENERAL: Thank you.
LAKE: We are really seeing as this power play takes place between OPEC and the US, really, trying to put pressure, we are seeing some of these
economies really hit hard. Let's start with Venezuela. They are so dependent on oil being at a much higher price. How much pressure is this
going to put on Maduro?
WITTNER: It's going to put a fair amount of pressure on him. A country like Venezuela needs oil prices that are well north of $100 a barrel to
balance their budget --
(CROSSTALK)
LAKE: Some say close to $120.
WITTNER: Yes. Yes, yes. Venezuela is like that, Iran, Libya, Russia. These are a variety of big exporters that are in the same boat, basically.
LAKE: Any ability for Venezuela to make up the difference? They don't have control in terms of that. Where is the state of their oil
infrastructure? Can they go somewhere? What sort of tools does he have at his disposal. If you're talking about cutting spending, that is not going
to go down well with the people of Venezuela.
WITTNER: No, it's not, but unfortunately, I think that's the only choice he has. As far as the oil infrastructure, what he has the ability to do.
The bottom line is, Venezuela has no spare capacity. They literally don't have the ability to pump more to try to make up for lower prices with
higher volume. So, they're in a hard place right now.
LAKE: We also see the situation in Nigeria, this is the fallout from not diversifying away from oil. What kind of economic situation does this put
them in?
WITTNER: Pretty much the same thing. They -- they're going to be hit with what they can spend domestically. It's going to -- as you mentioned, hits
the currency. Any number of fronts, they're stuck. These countries are so highly dependent on oil, and like you said, there's really no recourse.
The only thing they can do is hope that Saudi Arabia has it right and that over a period of time that it will -- the current strategy will kind of
take a bite out of US production, and over time, it'll kind of boost oil prices. The problem is that, we're talking a couple of years.
WITTNER: Well, this is the thing. And can they weather that? This is, in a way, a war of attrition to see who can last the longest. We are hearing
US producers put on a pretty defiant tone saying, hey, we can do this, we've gotten more efficient. Maybe we'll have to shutter some, but we're
not going to cut production, we're going to cut back investment.
I heard that from a representative today from Texas saying he doesn't think it's going to make that much of a difference. What does it do to countries
like Nigeria and Venezuela? Can they hold out for years while they wait for this strategy? And what does it do to the policies of OPEC?
WITTNER: For Nigeria, Venezuela, like I said, it's going to be really difficult, but they're going to have to figure it out, because they really
don't have a choice. They're not calling the shots. It's really the Saudis versus everyone else in OPEC -- well, versus other people in OPEC
and also versus the US and other countries that are growing their production.
That's where we come out. The US, despite what some of the US producers are saying so far, we think that as we get into January, as they talk about
their fourth quarter earnings results and give some more details on the year to come, they probably are already going to have to cut back on
spending. And it probably will start to reduce growth.
The key is, it's not going to to reduce output right away, it's just going to slow down the level of growth. So, that's why it's going to take a
while.
LAKE: I heard someone say that we're not even close to the peak in terms of glut in supply. That will come next year. How low do you think oil
prices are going?
WITTNER: Well, our forecast -- and we've been saying this for a few weeks -- is that prices will probably stabilize out roughly where we are, Brent
around $70, WTI around $65. But the reason why those numbers are important, $65 a barrel is where most US shale oil production has its
break-even cost.
So, again, the Saudis have said, hey, we're not going to do the job anymore of trying to balance the market, we're going to let the market itself take
care of that. And that means prices need to go down to a level that will gradually start to have an impact on US production. And we think that the
sensitive number there is $65, maybe $60, something like that. So, that's our forecast.
LAKE: And we can tell we're in for the long haul, here, because there are some saying, hey, we can do it at $40.
WITTNER: That is -- that's --
(CROSSTALK)
LAKE: That is what they're saying --
WITTNER: No --
LAKE: -- so there is a lot of verbal jarring going on as well.
WITTNER: It's true. We -- the number I just threw out there is kind of a central point there --
LAKE: Right.
WITTNER: -- but obviously, some people will have better cost structures, and some people will be a little more expensive. It kind of depends. But
--
LAKE: So important for all of us in the global economy. Mike, thanks so much for coming in today.
WITTNER: You're very welcome.
LAKE: It's the market we're all watching closely.
Well, that robot in your workplace may someday take over for you. In fact, it may take over for all of us. We'll look at why one famous physicist
thinks that artificial intelligence may turn into a real-life science fiction nightmare.
(COMMERCIAL BREAK)
LAKE: It's the kind of sci-fi scenario that has kept us entertained for decades, a Terminator built by machines sent to kill human beings.
The Arnold Schwarzenegger classic may not be that far removed from reality. Physicist Stephen Hawking has warned that artificial intelligence could
eventually spell the end of humanity. Hawing, who suffers from a debilitating nerve disease, made the comments in London while unveiling a
new system that will help him communicate faster.
Hawking told "The Financial Times" that AI could design improvements to itself and outsmart all of us. In May, Hawking co-wrote an op-ed in
Britain's "Independent" newspaper, saying that the future of artificial intelligence relies on who controls it. That's assuming it can even be
controlled at all.
Joining me to discuss the challenges inherent in artificial intelligence is Erik Brynjolfsson. He is the director of the MIT Center for Digital
Business and co-author of the book "The Second Machine Age." Thanks so much for being with us. We have heard --
ERIK BRYNJOLFSSON, CO-AUTHOR, "THE SECOND MACHINE AGE": Thank you.
LAKE: -- I think this is a debate that sort of grips all of us, because it is from a plot pulled right from Hollywood. And Stephen Hawking is so well
respected. Elon Musk has also been sounding the alarm bells. And they seem to be getting more and more concerned. Are we being too complacent
about artificial intelligence?
BRYNJOLFSSON: I can understand why they're concerned, because I can imagine a time in the far future where artificial intelligence is extremely
powerful. I don't see it as a concern in the immediate future. I think we have some more immediate concerns at the way technology is affecting jobs
and wages. But it's something we need to start thinking about for the longer term.
LAKE: And yet, Erik, the ethical discussion about it has not really been taking place outside that sort of limited science community, and a couple
of these very high-profile people who have a pulpit. Why is it that the research and the development of it is running so far ahead of the ethical
discussion?
BRYNJOLFSSON: Well, part of it is just that the research is advancing so remarkably quickly. I think a lot of us have been caught off guard by how
quickly we got things like self-driving cars, and now some of the deep learning algorithms are able to recognize faces and language far more
rapidly than many people predicted. And it's time for us to think more heavily about the ethical and economic implications.
LAKE: Erik, is it possible to create benevolent artificial intelligence, self-operating robots that will help us, that will contribute to humanity,
as opposed to try to wipe us out?
BRYNJOLFSSON: I'm sure it's possible, and I think it's even likely. But it's not guaranteed. And I think that given the stakes involved, we want
to make sure that we eliminate every possible doubt that things can go wrong. We've all written computer programs where we thought they were
going to work right --
LAKE: Yes.
BRYNJOLFSSON: -- the first time. And then they went --
(CROSSTALK)
LAKE: Erik?
BRYNJOLFSSON: -- awry.
LAKE: Unfortunately, as much as I am obsessed with this topic myself, we're sort of losing you on the audio, so we're going to have to leave it
there, but we will have you back, and we'll come see you in person so we can talk about this. This is such an important issue for us. Thank you so
much, Erik.
While the idea of future battles pitting man versus machine is being debated, a real fight that has already begun is protecting your online data
from cyber criminals. The best for of defense may be your own heart and its unique rhythms. Jim Boulden has the latest in our Future Finance
series.
(BEGIN VIDEOTAPE)
BOULDEN (voice-over): In the heart of London's financial district, foot prints are being monitored. Digital footprints that undermine a company's
security.
ALASTAIR PATERSON, CEO, DIGITAL SHADOWS: In the old world, it was all about keeping your data in the center of a network and building walls
around the edge as high as you could. Your firewalls, anti-virus, all these boundary controls. Today's world, it just doesn't work like that
anymore.
BOULDEN: The rise of social media, the Cloud, and mobile devices means business are more vulnerable. Cyber intelligence company Digital Shadows
monitors over 80 million sources of information across 26 languages.
PATERSON: So, this dashboard is showing live all the information that we've picked up that's leaked outside companies' boundaries. Here, we can
see that there's been multiple documents have leaked out on a misconfigured device.
So, unknowingly, if you back up your work laptop to that device, you get thousands of corporate documents exposed on the internet.
BOULDEN: But it's the computer technology of the future that's likely to have the most disruptive affect on security.
PATERSON: I think we're only maybe two or three years away from some very large institutions having the ability to use constant computing to track
all of the very traditional, internet-based security. As soon as that starts to happen, we're in another era, really.
We need to be building constant security, which is the counterpart of this, which will make it very hard to change data without it being noticed
due to the properties of compute.
BOULDEN: In the race to keep one step ahead of the criminals, biometrics are delivering more reliable forms of ID. Our bodies are becoming our
password.
PATERSON: There's a lot of palm ATMs being rolled out, where they look at the veins in your hand and the flow of blood through your veins in your
hand, and that's far more effective than using a fingerprint.
It's almost a game of cat and mouse, where the cat is obviously the criminals. The mouse is you and your account information, and the banks
are trying to continually to arm the mouse with more and more guns and ammunition to keep the cat away. What we really have to get away from is
passwords themselves.
BOULDEN: Canadian startup company Bionym believes it has the answer: a wristband activated by the unique rhythms of your heart.
KARL MARTIN, CEO AND FOUNDER, BIONYM: Everybody's heart has, essentially, electrical activity. It's a muscle which produces a little electrical
impulse when it beats. And that's different for everybody. So, using this kind of technology, we can establish a very high level of trust, because
it's so closely tied to the body.
BOULDEN: Bionym believes passwords and PINs will become a thing of the past. Apps installed on your wristband will unlock everything, from your
computer to your house, your car, and even your money.
MARTIN: So, our vision of the future is, essentially, everything that can be intelligent will be personalized to you and will behave differently
based on who's there. So, fingerprints you leave them everywhere, right? You actually leave this impression, which can be copied.
With the electrocardiogram, you actually have to be in contact or very close to the body to pick up the signal. In the future, you don't actually
have to go through any of the friction of pulling out a credit card, or anything like that. Your name pops up when you walk up to the ATM. You
don't have to enter a card or a PIN, because it knows who you are.
BOULDEN: It seems accessing our money in the future could be controlled by the unique key of our hearts.
(END VIDEOTAPE)
LAKE: You're watching QUEST MEANS BUSINESS, we'll be right back after this short break.
(COMMERCIAL BREAK)
LAKE: Welcome back. We've managed to reconnect with Erik Brynjolfsson to talk about the challenges of artificial intelligence. He is the co-author
of the book "The Second Machine Age." Erik, thanks again for joining us.
I want to left off what we were talking about before the break about this idea of whether it's possible to create a benevolent artificial
intelligence, something -- whether it's a robot or whatever form it takes, that cares for us, that helps humans as opposed to tries to destroy us.
Can you program morality into artificial intelligence?
BRYNJOLFSSON: I think you can, and I think you have to, actually. As these technologies get more and more powerful, they're going to be faced
with ethical decisions. A self-driving car has two drunk drivers coming at it or motorcycles, and it has to decide who does it hit, who doesn't it
hit.
We have to give it the rules. We have to put our morality in there and tell that machine what we want it to do. And the situations can get more
and more complicated as they get more and more sophisticated.
LAKE: And I think that's why so many people are fearful or at least talking about caution. I just want to re-circle and end on timeframe. You
said in the short term it's not an issue, it's a long term. But we've all been shocked at the pace of development.
What are we talking about in terms of reality? Some of the robots we've been showing are very much operated by humans. What are we talking about
until we have independent artificial intelligence?
BRYNJOLFSSON: Well, there are areas where machines, of course, are already much smarter than us, whether it's playing chess or the game of Jeopardy.
And then, there are other areas that it's going to take much longer, decades or more.
I share your concern that things can happen unexpectedly quickly. The self-driving car that Andrew McAfee and I rode in, we didn't think that was
going to happen nearly as quickly as it did. So it pays to put a little bit of time, little bit of attention on these ethical, these economic,
these moral issues starting from right now.
LAKE: Absolutely. And we're counting on you within the tech community to help start that conversation. Erik Brynjolfsson, thanks so much for
joining us again.
BRYNJOLFSSON: My pleasure.
LAKE: Well, from technology to sports. Chelsea manager Jose Mourinho has told Louis van Gaal to get used to working over Christmas. The Manchester
United boss has been complaining about not being able to see his family this year because, unlike most European teams, English clubs have a busy
schedule of games over the Christmas period.
He said -- the manager said, "I have to adapt, and I shall adapt, but I don't think it's good for players or for the families." "World Sport's"
Patrick Snell is live at CNN Center. Patrick, you thought he might have looked at this in the contract before he signed on.
PATRICK SNELL, CNN SPORTS CORRESPONDENT: Hey, Maggie. Get used to it, Louis van Gaal. But in his defense, he's 63 years of age, he's a
grandfather himself now. I think he's just looking at the fact that he wants to protect his players as well. I think he's a football man, this is
very, very key to him.
No, look. He knew what he was signing up for when he joined Britain's biggest football club, and he knows exactly how it plays out. And he's
very good at dealing with the media and feeding them nuggets like this. We saw it last week with the Manchester United official Twitter account when
he very publicly ticked them off.
But to be fair to him, United do have a tough run of fixtures. They have something like 9 matches in 36 days. We've been breaking down the
congestion that the Dutchman is actually referencing, and just look at the fixtures that they do have to deal with.
As I say, on the 26th of December, that's the day after Christmas, they take on Newcastle United. Five days before Christmas, they will have
played Aston Villa.
And this is the one that's really got King Louis' goat: it's the 28th. It comes two days after that Boxing Day clash, as we call it back in the UK,
and then on New Year's Day, it's another one, Stoke City away. And then, on January the 3rd as well, they've even got the third round of the FA Cup.
But you know, I don't have too much sympathy for him. I grew up in England, and Jose Mourinho has got a very, very good point. Football is
big business. Some of the biggest games, some of the juiciest live games take place over the Christmas period. They spill over into the new year.
And the viewing figures in the UK and, indeed, worldwide, because football fans all over the world, Maggie, it's their only live place to see games,
they can tune in. And you look also at where Louis van Gaal has managed in the past, you look at countries like Holland, Spain, and Germany. No live
footie there over the Christmas over the winter break.
So, I don't have too much sympathy as well, because also, at the end of the day, United are also out of the League Cup, and they're not playing in
Europe either way. So knuckle down and enjoy it, Louis van Gaal. Back to you.
LAKE: Oh, that's right. And they're getting well-compensated, let's remind everyone --
SNELL: Oh, yes.
LAKE: -- as well. So, all right, Patrick, thank you so much. We'll be right back after this break. Stay with us.
(COMMERCIAL BREAK)
LAKE: The World Health Organization says there are more than 16,000 confirmed or suspected cases of Ebola in West Africa and nearly 6,000 have
been fatal. The vast majority of these are in Liberia, Guinea, and Sierra Leone.
The virus is crippling the economies of those three nations. The World Bank had predicted healthy growth in 2014 for all three countries before
the crisis began. Guinea, 4.5 percent, Sierra Leone, more than 11 percent, Liberia, nearly 6 percent.
After the Ebola crisis, we're looking at a very different story. Those numbers drop sharply. The World Bank projects growth could even contract
next year.
And that is QUEST MEANS BUSINESS. I'm Maggie Lake, we'll see you next time.
END
