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Quest Means Business

U.K. Threatens Sanctions if Ex-Russian Spy was Poisoned; North Korea is Willing to Talk to U.S. About Giving Up Nukes; European Airlines CEOs Look for Common Ground at A4E. Aired 4-5p ET

Aired March 06, 2018 - 16:00   ET

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

[16:00:00] (CNN Domestic simulcast)

[16:20:00] ZAIN ASHER, CNN HOST: Hello, good evening everyone, I'm Zain Asher. I want to get to some news we're following out of the U.K. A spy

drama is replaying out in the small English city could have major economic consequences. A former Russian spy and his daughter were found slumped

over a bench after being exposed to an unknown substance. Foreign Secretary Boris Johnson seems to suspect that Moscow could be to blame. He

is promising certainly a robust response which could, by the way, include more sanctions if it turns out the pair were poisoned. Here's what we know

so far about this case. So, 66-year-old Sergei Skripal and his daughter Yulia, are now in critical condition at a Salisbury hospital. And Russia

is denying any involvement in this whatsoever and -- get this -- they've actually offered to help find out what happened. Foreign Secretary Johnson

appears unconvinced and is promising action.

(BEGIN VIDEO CLIP)

BORIS JOHNSON, BRITISH FOREIGN SECRETARY: If those suspicions prove to be well founded then this government will take whatever measures we deem

necessary to protect the lives of the people in this country, our values and our freedoms. And though I am not now pointing fingers, it would be

careless, Mr. Speaker, to point finger. I say to governments around the world that no attempt to take innocent life on U.K. soil will go either

unsanctioned or unpunished.

(END VIDEO CLIP)

ASHER: CNN's Phil Black joins us live now from Salisbury in the U.K. So, you've heard Foreign Secretary Boris Johnson there basically saying,

listen, I'm not pointing fingers. I'm not saying that it was any country specifically, but he did not mince his words. Just walk us through what

the -- if it is linked to Russia, Phil, and I want to emphasize the word if, what could indeed be the possible ramifications in terms of Russia-U.K.

relations and sanctions, as well?

PHIL BLACK, CNN CORRESPONDENT: You heard Boris Johnson in Parliament today, saying walking this very delicate line between not directly pointing

the finger at Russia, as you heard him say there. But at the same time saying if it does turn out to be Russia there will be consequences. And

there's no doubt that the shadow of Russia hangs all over this because as Boris Johnson also pointed out in Parliament that there are echoes of the

poisoning death of Alexander Litvinenko in 2006. Now he was another former Russian agent poisoned in central London. In that case with a very

radioactive substance, polonium 210. In a plot where the authorities here very firmly believe there was a link to the Russian state. The public

inquiry found the plot went all the way to the very top of the Russian state, probably, president Putin himself.

Now, what Boris Johnson said today was that if it is replicated again here, with the same sorts of links are suspected then there would have to be some

sort of appropriate, robust response. What could happen is a big question mark. Because there are many who believe certainly a school of thought

that says Russia and the U.K. did not respond strongly enough to the Litvinenko case itself.

In that case they sought the extradition of two Russian nationals, Russia refused. When that happened they simply expelled a bunch of diplomats from

the Russian Embassy. Things got frosty in their relations with each other for a few years and still are to a significant extent because of that

incident. But not a lot else. If, in this case, yet another person is deemed to have been seriously harmed or if his condition deteriorates and

potential killed in the U.K. as a result of actions by the Russian state, then I think there will be very strong voices calling for some sort of very

tough, strong response beyond simply expelling diplomats as happened last time.

But you will also hear a counter argument to that and that is that the U.K. simply cannot afford to not be on speaking terms with Russia for various

economic reasons to do with Russian money and the British economy. But also because of the important role that Russia plays in various region,

notably around Syria and Iran and so forth. So, these have always been the two competing arguments as Britain and Russia have knocked heads in recent

years. But you can imagine those sorts of arguments being repeated with greater strength if -- and I know we're stressing if tonight -- the British

police do believe that there is a firm link to the Russian state because of the events that took place in the park just behind me.

ASHER: It's important to stress that, you know, we still don't have all of the details. Especially, we still don't know what the substance was that

they may have taken. All right, Phil Black live for us there. Appreciate it. Thank you so much.

As the U.K.'s investigation intensify, in Washington the U.S. Treasury Secretary has said new sanctions against Russia are coming soon. Steve

Mnuchin insists President Trump actually supports punishing Russia for interfering in the U.S. elections.

(BEGIN VIDEO CLIP)

[16:25:00] STEVE MNUCHIN, U.S. TREASURY SECRETARY: I expect in the next several weeks we will be moving forward with sanctions on Russia as a

result of the act. So, I can assure you that both in my discussions with the President, he is fully supportive of the work we're doing, and we have

a large team working on it as we speak.

(END VIDEO CLIP)

ASHER: Treasury Secretary Steve Mnuchin speaking there. Joining me now -- let's talk a little bit more about this. Bill Browder who has been dubbed

Vladimir Putin's enemy number one. Browder has actually led the charge for a tougher stance against Russia. He's an investor and businessman who was

deported from Russia after exposing corruption there. So, I want to talk about the specific case in the United Kingdom because the Russian

government is denying any involvement and to top it off, they're actually offering to help British authorities figure out -- I see you smiling there

-- figure out what may have happened to this man and his daughter. Obviously, you know, when you look at this and you see that someone who is

a major enemy of the Kremlin, a major enemy of Vladimir Putin, has become critically ill in very sort of suspicious circumstances, you know, it is

easy to look to the Kremlin for answers.

BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Well, let's just look at this very starkly. Putin kills people he deems to be traitors. This man

was a traitor. Putin uses poison on people who he considers to be traders. This person was potentially poisoned. And so, the first line of theory,

the first major theory that one should assume when you look at this situation, is that this man was poisoned in an assassination attempt by the

Kremlin.

Now, again, we are at the early stages of this whole process. We don't know for sure. But I'm saying that as a rational investigation begins that

would be the main theory that any rational investigator would pursue. And Putin, he makes no bones about it. He goes after people he doesn't like in

foreign countries and so, it's not some big leap of faith to think that that's what happened here.

ASHER: When you think about the fact that Skripal was a high-value asset to MI-6 are people like this usually given security, and if so, what

happened with that in this case?

BROWDER: Well, I think the main issue is not so much -- I don't think he had a bodyguard or anything like that. I think the main issue here, which

you referred to in the lead-up to this interview, is that in the past when Alexander Litvinenko was murdered in 2006 using nuclear material and it was

traced right back to the Kremlin, nothing happened afterwards. It was embarrassing that there was no consequence for Russia. And because of that

it effectively sent a message to Vladimir Putin which is, that if you want to kill your opponents, you want to kill your enemies in the U.K., you can

do so and there won't be anything bad that happens to you.

And so, it's nice to hear all this tough talk right now and I hope that it follows through. Assuming that this is the worst -- if the worst comes to

the worst here. But I am not confident that it will. Just based on the fact that the Russians effectively conducted an act of nuclear terrorism by

using plutonium to 10 on Litvinenko and nothing happened. So, we'll see.

ASHER: You are not buying what Foreign Secretary Boris Johnson just said then?

BROWDER: Well, I'd like to think that is the case, but I've seen all this on one hand, on the other hand type of stuff that goes on here. And I can

easily imagine that nothing happens. And so, of course, I'm going to be working hard on all of my political contacts to make sure that there's an

absolute, devastating repercussions for this. And I have a lot of supporters in Parliament that feel the same way. But we'll see how the

government ends up behaving if the worst comes to the worst here. And I am not confident based on past experience.

ASHER: So, if the worst does come to the worst, and there are all linked to the Kremlin in all of this -- and I want to emphasize if. Because we

really don't know at this point

BROWDER: Yes.

ASHER: Why would this happen now to Skripal after over a decade? Why now?

BROWDER: One should never assume great efficiency on the part of the Russian FSB, the Russian secret police. Maybe it just took them this long

to do it. The one thing I can say is that it's very important for Vladimir Putin in order to keep all of his people in line to create absolutely

devastating consequences for people who are deemed to be traitors. And it is very important because it's not just for the person who is the traitor,

but it's for everybody else who is thinking about it or is slightly disloyal in his ranks. He wants to absolutely terrify these people that

terrible, terrible things will happen to them. And so, there's a real motivation for him to do this.

[16:30:00] And you know, why did it take eight years? Who knows? But here we are in this situation where this man and his 33-year-old daughter in a

matter of 20 minutes, collapsed in critical condition having been exposed to some type of foreign substance.

ASHER: Just in terms of this press conference that we just had about 15, 20 minutes ago with President Trump appearing alongside the Swedish Prime

Minister, he did mention at the end of the press conference that he believes that the Russians absolutely had no impact on the U.S. election.

When you think about all that's been said and done in terms of the Russian investigation and the Mueller investigation, does it concern you that

nothing has actually been done or put in place as of yet to stop the Russians doing this again in terms of meddling in another election?

BROWDER: Well, so -- OK, so, we're here in the U.K., we've seen nothing happen on Litvinenko and then all of a sudden potentially there is another

comparable situation. We are in the United States and we see nothing happened as the result of the 2016 election hacking and so why shouldn't it

have happened in 2018? And so, every -- pretty much every intelligence agency in the United States -- I think every intelligence agency has deemed

that the Russian interfered. The President's own national security adviser, McMaster, said it was beyond a doubt that Russia interfered. So,

it's quite essential that the United States has a strong and devastating response to what Putin tried to do with the election or he will do it

again.

ASHER: And Treasury Secretary, Steve Mnuchin, did actually say that he does plan on implementing sanctions against the Russians. All right, Bill

Browder, always good to see you. Thank you so much for your perspective, appreciate that.

We'll have much more news after the break.

(COMMERCIAL BREAK)

ASHER: Hello everyone, I'm Zain Asher. There's more QUEST MEANS BUSINESS in a moment. First though, these are the top news headlines we are

following for you at this hour.

All right, 39 people died when a Russian transport plane crashed in Syria, Tuesday, according to Russian state media. The plane crashed while landing

at the Hmeymim Air Base in Latakia province. Russia says, the crash may have been caused by a technical malfunction.

A London police counter terrorism unit is leading the investigation into the strange illness of a Russian former double agent and his daughter. But

officials say it hasn't been declared a terror incident yet. Sergei and Yulia Skripal were found unconscious on a bench in southern England. They

are hospitalized and they're in critical condition.

[16:35:00] And Israel's Prime Minister said darkness is descending on the Middle East in the form of Iran. Benjamin Netanyahu warned a pro-Israel

group in Washington that Tehran is working to expand its influence. He says the U.S. is set to walk away from the Iran nuclear deal and restore

sanctions.

All right. Let's talk about how the U.S. markets ended the day because it was certainly a very choppy day on Wall Street. Let's take a look at the

QUEST MEANS BUSINESS trading post. Can we get green lights, please? We ended the day up about nine points. But as I mentioned, it was certainly a

very choppy day. On the one hand, there were fears, renewed fears, I should say about tariffs and a possible hovering of a trade war. But also

Wall Street was, in terms of the positive aspect of all of this, very much focused on potential reconciliation with North Korea.

Because there has been a remarkable development there. South Korea is saying that the North is willing -- it's willing to talk to the U.S. about

giving up its nuclear weapons. This follows an unprecedented meeting in Pyongyang between Kim Jong-un and South Korean delegation. North Korea has

also agreed to suspend nuclear and missile tests while in talks. I want to bring in Will Ripley who is joining us live now from Beijing. So, Will,

just walk us through this because some people might say that this really does sound a bit too good to be true. Is it justified for people to look

at this with skepticism? What are your thoughts

WILL RIPLEY, CNN CORRESPONDENT: Absolutely. Look, North Korea is suspending the tests of missiles and nuclear devices. But they're still

building those weapons. There is intelligence from the North Korea Watchdog 38 North that activity was picked up at the Yongbyon nuclear

reactors where they produce plutonium that they used to make nuclear bombs. I mean, North Korean leader Kim Jong-un has built up this nuclear force.

He has it written into his constitution. You travel to Pyongyang, you are surrounded by propaganda praising the North Korea's nuclear sword, as they

call it. And they justify the existence of these nuclear weapons as defense against the United States which has troops stationed at their

doorstep, joint military drills that they view as a dress rehearsal for an invasion. So, I spoke with in an official who has deep knowledge of North

Korea's mindset here. And what this official told me is that yes, North Korea is willing to engage with the United States and then will talk about

possible denuclearization if there are assurances made for the North Korea's security. For the protection of their national sovereignty.

But what they expect to happen is for U.S. troops to leave the Korean Peninsula and for those joint military exercises to stop and be scaled back

dramatically. They're going to make a very strong demand, according to this official. And it's hard to see unless there is a drastic change in

the U.S. and South Korean policy how that would ever actually happen.

So, talks are a good thing. This will be a historic moment when Kim Jong- un travels to Panmunjom, the truce village along the demilitarized zone. And he sits down with South Korean President, Moon Jae-in. They had a very

friendly dinner at the headquarters of the Workers' Party of Korea in Pyongyang. The fact that South Korean's were even allowed in that very

important building in the North Korean capital, highly significant. But at the end of the day, the United States is insisting that North Korea give up

their nukes and North Korea perhaps might be willing to consider that if the United States clears out of the Korean Peninsula. It's just hard to

see how those two expectations are going to square here.

ASHER: And in just terms of timing here, just walk us through why you think that Pyongyang is making these overtures now. Is this past evidence,

that you know, after all sanctions may indeed, have worked?

RIPLEY: Certainly, in the short term, Kim Jong-un has calculated that diplomacy is his most effective way forward given what he's facing.

Increasingly crippling economic sanctions that sources on the ground say are working. You know, they give the analogy -- I talked to a source here

in Beijing who said there used to be a hundred trucks traveling from China to North Korea and now there are ten trucks. That's taking a bite out of

the economy. Then you have the messaging from the Trump administration that if diplomacy doesn't work and North Korea finalizes their nuclear

missiles, so they can actually prove that they can have a warhead re-enter the earth's atmosphere, the United States not willing to let that happen.

And therefore, they will move to a military option which could be catastrophic for North Korea.

And Kim Jong-un's goal is to stay in power for many decades to come. Long after President Trump is out of office and President Moon is out of office.

So, for the time being it serves him and his national interest to engage in diplomacy and to say, sure, we can discuss denuclearization. But this is a

country that prides itself on its nuclear arsenal. It's a treasured part of what makes North Korea what it is. At least from the government

perspective. And so, this is a very complex situation. You have to limit your expectations about what's going to happen and how quickly it's going

to happen.

ASHER: At that point, Will Ripley live for us there. Thank you very much.

ASHER: All right, still to come here on QUEST MEANS BUSINESS. The CEO of IAG, which owns British Airways, says that he's actually not concerned

about business after Brexit, but the CEO of Ryanair says that he's in denial. Our Richard Quest is at the Airlines to Europe Summit in Brussels.

(COMMERCIAL BREAK)

ASHER: Welcome back. The chief executives of Europe's largest airlines now meeting in Belgium, temporarily putting their differences aside to take

on the issues facing aviation at the moment. Richard Quest is at the Airlines for

Europe summit in Brussels, take a listen.

(BEGIN VIDEOTAPE)

RICHARD QUEST, CNN HOST: Airlines for Europe is the main new lobbying group for

all the major airlines groups in Europe against the regulators, the airports and puts forward the voice of the industry. There are many issues

of which the airlines disagree, but there are several core issues where they are as one. For instance, airport charges, infrastructure growth and

air traffic control. I heard from Carsten Spohr, the chief executive of Lufthansa Group who is also head this year of A4E that progress had been

made.

CARSTEN SPOHR, CEO, LUFTHANSA: It was overdue at that time aviation industry speaks with one voice and we have been split up before in various

associations. It was time that initially the big five got together who represent 44 percent. You have others to join. It is now 75 percent of

European aviation speaking with one voice, and secondly, there is no fast progress on fundamental issues in our industry as in other industries, by

the way, as well. So, I think it takes patience, but without a single focused voice, there is no progress at all and that's why we founded A4E

and that's why after two years we have a positive result.

QUEST: And there is enough common ground on these issues even though, you know, you compete like hell outside of this arena, but on these other

issues like infrastructure, ATC, taxes, there is sufficient common ground?

SPOHR: Well, the competition remains of course, and any industry association has these factors part of its existence that the members

compete and that's fine. We even compete in star lines so that is something I'm worried about, but you rightly point out it's a common

ground, this association is based on, and one of the key success factors we discuss in the very beginning is leave the two maximum, three issues where

we don't agree outside and focus on the vast majority of things where we have a joint interest.

QUEST: If we take a look at Lufthansa at the moment, the group is doing extremely well, the restructuring is well advanced.

[16:45:00] I do wonder what is Eurowing's role in the future? What is in your view, the -- is it long-haul, low cost, is it leisure? Is it a

JetStar type of operation? What is Eurowings?

SPOHR: Lufthansa as a key brand needs to focus needs to focus on premium again. To allow that to happen you need to create a secondary brand for

the other markets which Eurowings serves as. Then, of course, our home markets are not as much focused on huge mega hubs as some of my

competitors, the power of Germany, Austria, Switzerland, Belgium is more spread out. So, we need a brand that creates presence in the secondary

markets. Which also Eurowings does. And then there is also on long range nowadays the very price sensitive customer base which we want to address.

That's why we are basically the European leaders in low-cost inter-cont.

QUEST: Would you agree that the -- look, things never stay the same in aviation. That's a given, but that there is something going on at the

moment, that the model is changing, that the -- that the underlying shifts, tectonic shifts are taking place?

SPOHR: I would agree with that. I would agree that we structurally change the industry and many of us including our group, and that hopefully we'll

prove to be right also in the next crisis, which eventually in a volatile industry will be around the corner one day and that will be the ultimate

proof of concept, who is really healthy and who is just pretending to be healthy and obviously, we'll see.

QUEST: There was one issue that bedevils all of the airlines in Europe at the moment. It is, of course, Brexit. And how the change of the U.K.

leaving the European Union will affect the various airlines. For instance, flying to and from the United Kingdom or third country like the United

States and the bilateral treaties and then there is the ownership question. The British airlines that have majority, European ownership how they fear

and fare after Brexit? I spoke to Willie Walsh, the CEO of IAG, owners of British Airways, Iberia, Aer Lingus and Vueling and Level. Well and truly

up to his eyes in Brexit.

WILLIE WALSH, CEO, IAG: The U.K. says they're very confident and the U.S. says they're very confident, so you have two countries and two governments

who are I believe, aligned in wanting to see an open skies agreement between the U.K. and the U.S. which is in the interest of consumers and is

in the interest of airlines based in the U.K. and the U.S.

QUEST: But will you have to modify in some shape or form the ownership structure so that BA becomes a predominantly British-owned airline?

WALSH: BA is already. The structure we have in place which we put in place at the time of the merger demonstrates that, and we have to comply

with requirements outside of the EU and the U.S. that have been covered by this comprehensive agreement in other countries, where they don't recognize

the concept of European ownership.

I am confident that we can comply with the requirements or any future requirement and quite honestly, I thought it was interesting when you hear

members of the commission and members of the support team talking about the need to review some of these issues because they need to check are they

still fit for a purpose? I don't believe, and you've heard me talk about this for a long time, ownership and control industry it is a requirement of

an efficient industry. It's there because for historical reasons. It doesn't have a place today Just

QUEST: A4E is new. The agenda is pretty clear and those areas that the airlines can all agree on as being the common issues necessary for -- for

putting the point of view to the commission and regulators, but is any progress actually being made?

WALSH: Yes, I believe progress is being made and you make an important point. We are 2 years old. We came together because we believed our

industry's voice was fragmented and therefore wasn't being heard, and we needed to speak with one voice on key issues where we could all agree. I

think that's a huge achievement, and I give credit to Michael O'Leary and Carsten Spohr of Lufthansa who came together with this idea, so we have

seen -- where we speak with one voice and our focused on key issues, we are making progress.

QUEST: Yet, you are obviously very fierce competitors at the same time, competing on issues where often you are also having to lobby, such as, my

airport is better than yours and I have better runway capacity than you have, I don't have a curfew, but you do.

WALSH: No, we hate one another.

[16:50:00] But what we are saying is my airport is more expensive than yours and I want your cheaper costs, airport charges. We realize that as

an industry we've got to work against the airports lobby. I don't mind airports making money, in fact I would encourage them to be profitable.

What I do mind is that they act as monopoly providers, they don't have the genuine focus on customer service.

And they take advantage of the fact that we are a fragmented industry. So, what we're trying to do is balance that. They've had a powerful voice in

Brussels and the ACI has been very effective in arguing the case for airports and we needed to balance that and therefore coming together to

argue a common cause is important.

QUEST: It is often left to enfant terrible of European aviation, Ryanair's Michael O'Leary for some blunt speaking and so it was on Brexit where he

recognizes that Ryanair has its own issues.

MICHAEL O'LEARY, CEO, RYANAIR: The threat of Brexit to aviation is massively understated by people who are essentially in denial, now this

would be a transition period, but one way or another what's coming down the road of aviation is there is going to be restrictions on flights between

the U.K. and Europe. Either because of flight rights. I think flight rights we get agreed pretty quickly, but the ownership restrictions and

that will be imposed, and it will be imposed because the Germans and the French are pushing very hard for a firm interpretation of the ownership

procedures which may mean the break-up of IAG. BA will be forced to sell Iberia and or Aer Lingus. And EasyJet's Austrian AOC will not be able to

fly, and there will be no EasyJet inter European flights.

QUEST: But the whole aviation structure has been based on a nod, nod, wink, wink. Air France KLM was created, and Northwest and KLM were

created, the JVs have been created. Everything has been created on a nod, nod, wink, wink, if you have a sort of supervisory and this board and that

board on top of it. The rights are held by somebody else.

O'LEARY: I think that's fine until the interests diverge. At the moment you are seeing divergent interest between the French and Germans who want

to see the very strict interpretation of ownership rules and I don't think they'll turn a blind eye to U.K. shareholders. A, because of Lufthansa and

Air France have very few U.K. shareholders and they see a significant opportunity to disrupt the business models of British Airways and EasyJet.

QUEST: Willie says BA already comports, it's not a problem and it's going to be difficult, he sat where you are 10 minutes ago and said it's not a

problem. It's a fuss about nothing.

O'LEARY: I love Willie dearly, but Willie is in denial. What he says publicly is somewhat different from what IAG people we tell you privately.

They are very concerned about it. They are very concerned about finding a solution. Which I hope they do find.

QUEST: You have a problem as well, because you know, your British flights and your U.K. flights are done under the Irish AOC.

O'LEARY: Yes.

QUEST: So, you are now going to have to get a British AOC which I'm sure you're working on?

O'LEARY: No. That's not the challenge for us and we are working on a U.K. AOC but ultimately with an Irish AOC we will be a European carrier. I

think there will be reciprocal flight rights between U.K. and Europe. I don't see that changing. The challenge for us is we probably, if you add

are U.K. shareholders to our American shareholders we probably have about 60 or 64 percent of our shares are held by what would be non-EU

shareholders.

We have a challenge and we may have to force some of our non-EU shareholders to sell a proportion of their stake or disenfranchise them

when it's a hard Brexit comes about. It's the ownership restrictions I think is the much greater for airlines like BA, EasyJet and to a lesser

extent, us. Not the flight rights.

QUEST: Getting all of these airline CEOs into the same room at the same time is no

mean achievement. Getting them to agree on certain core issues is an even greater sign of success but make no bones about it. There's still fighting

for every passenger, every dollar, every euro, every pound spent in the air and as Carsten Spohr reminded me, it's only when the going got tough that

we'll truly find out who has made the true, necessary changes for success.

(END VIDEOTAPE)

ASHER: Thank so much to our Richard Quest for that, we will have much more news after the break.

([16:55:00] COMMERCIAL BREAK)

ASHER: All right. Just time for a quick recap of the markets before we love and leave you. The Dow, as you can see, they had a pretty choppy day.

Positive, negative and back up again as well. Closed the session flat as traders waived the prospect of a U.S. -led trade war which they certainly

fear. In the past hour President Donald Trump has said regarding that, we'll have to wait and see.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We're behind on every single country. Trade wars aren't so bad. You understand what I mean by that.

When we are down by 30 billion, 40 billion, 60 billion, 100 billion, the trade war hurts them, it doesn't hurt us. So, we'll see what happens.

(END VIDEO CLIP)

ASHER: All right, my friends, that is QUEST MEANS BUSINESS. I am Zain Asher and for my colleague Richard Quest, thank you so much for watching.

END