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Quest Means Business

Russia Shuts Down Nord Stream Pipeline For Maintenance; EU Ministers Agree To Tighten Visa Rules For Russians; World Reacts To Death Of Last Soviet Leader; U.S. Shale Producers Face Volatility, Market Opportunity; Most New COVID-19 Cases In Shenzhen Are Omicron BF.15; Quest's World Of Wonder. Aired 3-4p ET

Aired August 31, 2022 - 15:00   ET

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

[15:00:26]

RICHARD QUEST, CNN INTERNATIONAL HOST: Today is going to be four in a row, it would seem. Fourth day of losses on the stock market and heavy losses

now increasing, tootling not doing much during the course of the early part of the session, but now falling quite sharply.

The markets and the events that we are following closely: European energy is being squeezed even further, as Gazprom switches off Nord Stream for

three days.

The economic legacy of Mikhail Gorbachev. Bill Browder will join me tonight to discuss.

And Israel's Central Banker on the inflation challenge facing the startup nation, talking to him about that.

Live from New York. It's Wednesday, August 31st. Last day of August. I am Richard Question and I mean business.

Good evening.

Tonight, Russia is tightening its stranglehold on Europe's energy supplies as Gazprom shuts down the Nord Stream pipeline for the second time this

summer.

Gazprom says it is suspended for three days while it conducts maintenance. The pipeline flows directly to Germany, and was already operating at a

fifth of its capacity.

Shutting it down poses a major threat to European economies. European inflation rose this month to record 9.1 percent driven, not completely, but

it is a heavy component by the jump in energy prices as you can see. Food is also up sharply, but then energy feeds into all aspects of the

manufacturing process.

Anna Stewart is with me.

Does anybody -- Anna Stewart, does anybody believe Gazprom when they say it's for maintenance?

ANNA STEWART, CNN REPORTER: I think Gazprom does, Richard. But yes, it is hard to find people that truly believe that this pipeline is down once

again, for a three-day shutdown for maintenance, given it just had its annual 10-day maintenance, which was expected and was scheduled.

So, this one has taken certainly Europe by surprise and it has also raised concerns once again, that Russia is weaponizing gas, that it could reduce

gas supplies even further, and I think you mentioned that it was already running this pipeline at just a fifth of its usual capacity, and will it be

switched back on? That is the big fear -- and is Europe ready for it -- Richard.

QUEST: Right. But if it is not switched back on and Europe -- or the pain continues and Europe just weathers, bunkers down, hunkers down and get

on with it. Doesn't that remove Vladimir Putin's weapon? Doesn't he need to dangle it and occasionally just add a touch of fear with it to make it

truly effective?

STEWART: Arguably, that is what has already been done, but I would also say that Russia has other customers and with oil and gas at such elevated

prices, it doesn't need to sell that much to make up for lost revenue, does it?

So in that sense, not. I think what's interesting to see is whether Europe could survive a winter without Russian gas. They've actually done

extraordinarily well in terms of filling up their storage facilities. We've heard lots of positive news from European leaders over the last few days,

they're actually two months ahead of target in terms of storage.

But Richard, you know what? The gas storage that they've got at 80 percent, even if it were full, wouldn't be enough to see Europe through a winter

without Russian gas or more energy from elsewhere and it looks unlikely they would get it.

Gas storage only accounts for something like 25 to 30 percent of the gas use in a normal winter and what's normal? And will this one be mild? Or are

we going to get a cold snap? These are all the things Europe has to worry about right now.

QUEST: Anna Stewart in London. Anna, thank you.

As we were just mentioning, the fear because Moscow will find reasons to extend the shutdown beyond the three days announced.

The governments in Europe are prepared and bracing for a worst case scenario, which is turning -- Moscow turning off the taps permanently. If

that happens, the consequences could include energy rationing, blackouts, and recession, as the market scrambles to make up the lost supply, if

indeed that's very possible.

Several German companies have scaled back production in reaction to high energy prices.

Joining me as Kaushik Deb. He is the senior researcher at the Center on Global Energy Policy at Columbia University; previously, lead economist at

BP and worked at the energy think tank that is advising the Saudi government, the King Abdullah Petroleum Research Studies Center. He is with

me now.

Sir, thank you. The reality is: I'll ask you the same question. If Putin decides to shut down Nord Stream 1 to Europe, and hasn't he just fired his

biggest weapon, and once Europe is used to it, it's harmless.

KAUSHIK DEB, SENIOR RESEARCHER, CENTER ON GLOBAL ENERGY POLICY AT COLUMBIA UNIVERSITY: Well, that might very well be the case. I mean, this is

something that's been on the cards for a fairly long time, we've had a 10- day of maintenance period earlier in the summer. And thankfully, this maintenance -- three-day maintenance period is coming now, and not during

peak winter.

What does matter, I suppose to the Russian regime also is the fact that oil exports and revenue from oil exports are a much larger chunk of their

government revenues than gas. So, in some sense using gas as a lever, as a weapon in this case, is more impactful for the Europeans than for the

Russians themselves in terms of losing revenue.

QUEST: Right. And also, on Russia's oil and gas. There is already sort of the talk of the ban on Russian oil; it is gas, that's the hard part to

get agreement on.

DEB: That's absolutely true. So I mean, over the last decade or two, Europe has completely been sold on cheap, European -- cheap Russian gas, and as a

result has kind of completely become dependent on Russian exports. I mean, that wasn't the most prudent strategy, a diversified portfolio would always

have been better, even if more expensive.

QUEST: So, as a former economist to BP and with your experience, if Russia turned off the taps to Europe, how difficult would it be in Europe?

What will be the effect?

DEB: The most important thing we have to kind of remember here is that as Europe is scrambling for supplies from elsewhere, including trying to

revive production in Dutch fields, which are likely to be capped this year. Europe has to manage its demand, somehow.

Europe has to learn to live with less gas, Europe has to learn to live with less Russian gas. That's a transition that should have happened many years

ago, but it is about time that Europe weans itself from Russian gas now, even if it require --

QUEST: Right. But even if -- but it happened suddenly in the middle of October or November, in a cold winter, Europe will go into -- well,

obviously will go into recession, and it will become very, very difficult.

DEB: It will be a very difficult time and European consumers, especially poorer households would seem -- would need to be supported somehow. But

it's one of those risks that Europe will just have to learn to live with, at least for this winter, as it kind of tries to adapt and wait for more

time.

QUEST: So let's look at the people who can help out, say, for example, Saudi, and their willingness to pump more; the US with LNG and the ability

to actually get more on ships going across. All the other oil and gas producers to make up the difference.

Now, I know they can't completely make it up. But in your view, could these other countries be doing more?

DEB: There is a limit to which how much oil and gas can be produced, especially in a short time horizon and how much you can ramp up production.

But Richard, I think one of the missing pieces in the equation that you laid out is the fact that all of this will have to come out from other

parts of the world, which are also increasingly dependent on oil and gas.

So, all of these additional energy molecules that Europe is consuming are coming out of Asia, which means that Asia is going to be using a lot more

coal, and one would ask whether that's fair.

QUEST: The last question perhaps is, are we in really deep trouble here because of this? I mean, listening to your analysis, just then, if get more

oil and gas from Asia, then Asia has to use coal, which is an environmental disaster; if Russia does switch off the tap or switches off the taps, then

this will happen and we'll -- I mean, how much trouble are we actually in?

DEB: This is a fairly difficult point in time in history that I think is almost unprecedented in terms of both oil, as well as gas markets being hit

simultaneously, even the previous oil shocks are pretty much limited to one commodity, as extensive as they were.

And this is the point at which the world must pivot to cleaner technologies, to cleaner fuels and also be able to manage and reduce energy

demand to more sustainable levels. This is a signal that businesses usually cannot go on.

QUEST: No business as usual, Kaushik Deb, thank you. I'm grateful, sir.

EU Ministers say they are going to make it harder for Russians to travel to Europe.

[15:10:07]

QUEST: The Foreign Ministers have agreed to suspend a visa facilitation deal with Moscow. It falls short of the outright ban on Russian travelers

as called for by neighboring countries.

EU's top diplomat addressed a surge in Russian visitors to Finland and the Baltic States, saying: "We have seen many Russians traveling for leisure

and shopping as if no war was raging in Ukraine. It cannot be business as usual."

Fred Pleitgen is with me. He is in Moscow.

Fred, how much concern will there be in Moscow over the EU pulling this Facilitation Agreement?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: I'm not sure how much concern there actually is, but there certainly is a lot of anger here

in Moscow. In fact, just before we went on air, I was watching some of the Kremlin controlled media and there was definitely a lot of anger being

voiced there.

There was actually one panelist who said that the EU was simply afraid of Russians coming to Europe and telling them the truth about what was

actually going on. That was one of the things that was being said.

Now, that of course is, you know, something that's on state media, but there is certainly a lot of threats coming out of Russia as well. One of

the things that we heard from the Deputy Foreign Minister as well is said, they said that there would be a response from Russia and an angry response,

and the Deputy Foreign Minister said that that response could be symmetrical, or could be asymmetrical, as he put it, in other words, by

other measures than possible travel restrictions on Europeans, even though that was something that was dangled as well.

And of course, you know, the first couple of segments on the show, you've been talking about energy be one of those possible levers that the Russians

could adjust even more than they already have.

So certainly the Russians dangling out there, there is a lot of anger. I'm not sure how concerned they actually are because one of the things we have

to keep in mind is that only about 30 percent of Russians actually even have a foreign travel passport. But definitely this is something that's a

huge topic here in Moscow.

QUEST: Okay, so if we pull that, there is this difficulty or there is this ability of Europe to do this. Who is it going to hit most? Because you

just said 30 percent only has that.

The senior lot are already sanctioned directly, who has this hit and crucially, Fred, is that likely to be sort of one of the levers of pressure

that will be brought to bear?

PLEITGEN: I think it will be one of the levers of pressure that will be brought to bear, and if you look at the European Union right now, I mean,

they are saying they are going to do this, this is definitely going to make it more difficult for a lot of Russians to come to Europe, and simply

because the process gets a lot more difficult, the process takes a lot longer, and the process becomes a lot more expensive.

And on top of that, you also have Eastern European countries and North Eastern European countries that say, despite all of this, we might actually

go further and ban almost all Russians from coming across our borders.

And one of the things we have to realize, Richard is that right now, it is actually pretty difficult to get from Europe to Russia.

You can take flights, which are extremely expensive and very rare, quite frankly, because not many airlines are flying. But a lot of Russians are

going into Europe right now, by bus. They are coming from St. Petersburg, they're coming through Pskov sort of a little further south, they're coming

by a Finland.

And if those countries close that down, it will be very difficult, especially sort of for lower middle class or lower middle income Russians

to actually make it across the border. So, we'll make it difficult for some people -- Richard.

QUEST: Fred, and before I let you go, I do want to ask about Mikhail Gorbachev. We'll be talking a lot more detail about it after the break. But

in terms of Vladimir Putin, is he in an awkward position because he is basically unwound everything that Gorbachev did? Or is this one of those

occasions, can you feel in the temperature where everybody will do the right thing and say the right noises?

PLEITGEN: I think right now, Vladimir Putin is definitely not in an awkward position. I mean, I saw today, he put out a condolence letter for the

family of Mikhail Gorbachev. And essentially what he said there is that Mikhail Gorbachev was a respected, a larger than life -- a humongous, as he

put it -- politician of the 20th Century internationally.

However, he also did kind of indicate that for Russians, the view is a little bit different, that Mikhail Gorbachev, in many people's views here,

tried very hard in a very difficult situation, but essentially failed to save the Soviet Union, and to turn things around economically.

And of course, one of the things that happened after the Soviet Union fell apart was that this country, Russia, fell into enormous economic hardship

for a lot of people and uncertainty.

And I think one of the things that we can't really say enough as we are here on air is that, internationally, of course, Mikhail Gorbachev is a

hero, especially If you look to Europe, to the Germans, to other countries that got freedom, that got unity, that managed to peacefully have that

transition.

Here in Russia, he is not viewed that way by many people.

[15:15:10]

Many people equate Mikhail Gorbachev with weakness, with the country becoming weaker, with a feeling of international humiliation with Russia

being degraded militarily and economically as well.

So right now, Vladimir Putin by not coming out too favorably for Mikhail Gorbachev, certainly not in an awkward position really reflecting what a

lot of people in this country think -- Richard.

QUEST: Fred Pleitgen, thank you, sir, for putting the Russian point of view or at least putting the Russian perspective on that.

After the break, we will talk about Mikhail Gorbachev and the last man to lead the former Soviet Union.

(BEGIN VIDEO CLIP)

MIKHAIL GORBACHEV, FORMER PRESIDENT OF THE SOVIET UNION (through translator): I set the goal toward the end of the 20th Century of ridding

the world of nuclear weapons.

We had a plan. We were committed to that plan.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

QUEST: State media in Russia now says funeral services for Mikhail Gorbachev will be held on Saturday in Moscow. Gorbachev was the last Soviet

leader and he died at age 91.

His efforts to reform communism, indeed, indeed, lead to the end of the Cold War. It also brought about the Soviet Union's collapse for which at

home, he has never really been forgiven.

His tenure at the Kremlin caused a seismic shift in the world order. Gorbachev also tried to make the world a much safer place.

In 2007, I asked him why he chose to go down the path of cutting Russian nuclear weapons and therefore Russian power.

(BEGIN VIDEO CLIP)

GORBACHEV (through translator): We said, with President Reagan, that a nuclear war cannot be won and must never be fought, and we actually

declared that in writing. We said that to the world.

QUEST: When I stood in the United Nations and I watched you make that speech, pledging the first cuts, there was a feeling that life had changed.

GORBACHEV (through translator): I set the goal toward the end of the 20th Century of ridding the world of nuclear weapons. We had a plan. We were

committed to that plan.

QUEST: Was that a plan based on pragmatism or principle? Was it based on peace for peace's sake or because you couldn't afford to continue down the

road that you've been going along?

[15:20:15]

GORBACHEV (through translator): The principal fact was the nuclear danger, the danger of nuclear weapons. It was my intention to act decisively,

reduce and ultimately abolish nuclear weapons.

People in the Soviet Union when I traveled said to me (speaking in foreign language) "Do whatever you can, spend as much of money as you can to make

sure that we don't have to fight a war."

(END VIDEO CLIP)

QUEST: We have more thoughts on that interview in our "Profitable Moment."

While Gorbachev is lauded in the West, the legacy home, complicated, reviled at home by some, to the point of the collapse of the economy, as

Fred was saying and the country's diminished global state-ship.

The Iron Curtain was rolled up and that's caused problems.

In 2005, President Vladimir Putin described the Soviet Union's collapse as the biggest geostrategic tragedy of the last century. And whilst the reform

legacy is strong, opening up the West trying to end the arms race, Vladimir Putin has, to varying degrees, rejected those goals.

We've got an insight on the Russian economy since the invasion of Ukraine. Russia has shrunk by 0.4 percent in the first half of 2022.

Bill Browder is the CEO of Hermitage Capital Management, who ran the investment funds in Russia for many years and joins me now from London. We

will leave Vladimir Putin to the second, but if we look at Mikhail Gorbachev, arguably, you know, the reforms were brilliant, but business-

wise, it was Yeltsin afterwards that opened up the economy, and of course, eventually led to the kleptocracy.

BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Yes, indeed.

Well, I think we have to give Gorbachev credit where credit is due and, and what he did, most importantly, was what he didn't do. In other words, he

didn't start firing on his own citizens in the Soviet Union when they wanted to go their separate ways, when the Baltic people wanted to secede,

when East Germany wanted to end their occupation, et cetera, and so Gorbachev's huge, huge accomplishment was just leaving the guns on the

floor, and not killing his own citizens when the whole thing started to unravel.

And there was no way that it was going to stay together in any case. There wasn't the money to do it. Oil prices were at $10.00 a barrel. They were

effectively bankrupt. It was a hollowed out country, and that was his only choice, but him taking the choice not to kill his own people, was an

extremely brave move, and it led to 30 years of what I would call prosperity and the peace dividend for us in the West and also for Russia.

And so what happened after that was mismanagement in a spectacular sense.

QUEST: Now that mismanagement, can we blame Gorbachev? You know, the dominoes started to fall. He did what he did with the economy, but it laid

the groundwork, if you will, for the theft and the mismanagement.

BROWDER: Indeed, so the person who was the initially responsible for the mismanagement was Boris Yeltsin.

Boris Yeltsin was the President. He basically did a deal with the devil, where he said to 22 oligarchs, if you help me, get reelected President, I

will give you the country. And they did, they got him reelected, and they ended up with 40 percent of the GDP of Russia, and the average Russian was

living in absolute destitution and poverty.

And it was that destitution and poverty and that inequality that led to Putin showing up and he said, I will end this era of the oligarchs. But he

didn't. What Putin did was he became the biggest oligarch himself.

And so we now have had 30 years of oligarchy of a small number of people stealing all the money from the country, and I believe that's what's led to

the war.

I believe that Putin understands that at some point, the whole thing is going to crack. And the reason that he went to war with Ukraine was

basically to say, we have a foreign enemy, it is not a domestic enemy, it is not me. We should be mad at them. And that's what this war is all about.

QUEST: Which brings us really up-to-date in terms of the current environment. I mean, Gorbachev would have been horrified, probably was by

what he saw, first of all, in his speech of resignation, he talked about "What have I done?" I haven't shot my own people, I haven't invaded any

another country, and I've kept everything within our -- you know, I've not interfered in other nations. Everything that Vladimir Putin has

subsequently gone on to do in some shape or form. Would he have been horrified?

[15:25:14]

BROWDER: Indeed, so, I mean, these two individuals, Gorbachev and Putin are bookends on the opposite end of the library. So, you have Gorbachev who

brought peace to the world and peace to his own people. And then you've got Putin who is killing and waging war and redrawing borders and doing all the

things that Gorbachev didn't do.

And so, he would absolutely be horrified as many other people in Russia are, who have any sense of decency. It's a shocking situation what Putin

has created in Russia. It's a monster that he's created in. And he is going to end up creating a situation very similar to what Gorbachev had to

handle, which is that eventually they're going to be bankrupt again.

QUEST: Now, let's talk about that for the last minute or two. The ruble has recovered, Bill. There are -- I know, they've had to do all sorts of

shenanigans to do it, but the ruble has recovered.

The drop in GDP will not be as great as the IMF had originally thought, and they are selling the oil, albeit at a discount to China and India. So, is

there not an element of sustainability for Putin to keep this going?

BROWDER: Well, there is a little bit of that, but just remember that 90 percent of the energy exports are gas -- actually 90 percent of the gas

exports go to Europe. Europe is going to stop buying Russian gas eventually, because of this unreliability. They're going to all start

diversifying. Germany is building LNG terminals, et cetera.

I also believe that Putin is in his point of maximum strength right now in terms of raising prices of oil and messing with us. And eventually,

everybody is going to figure out how to do without him.

And when that happens, when the oil service companies stop servicing the oil wells, when the Germans stop buying Russian gas, the Russian economy is

going to be a shadow of its former self and there is nothing -- there is no way to positively spin that for anybody in Russia or in the rest of the

world.

And for what it is worth, I don't believe these minus four percent GDP statistics, I think is much worse than that and I think these numbers are

being massaged by the Russians, and it is not true.

QUEST: Bill, it is always good to have you with us. The perspective is important.

Thank you, sir. I'm grateful.

It is QUEST MEANS BUSINESS.

Trying to cool inflation. So, raising rates is now the Central Bank's mantra, but the Bank of Israel has been doing it further and faster in many

ways than most.

The Governor of the Bank of Israel with me after the break.

(COMMERCIAL BREAK)

[15:30:00] (MUSIC PLAYING)

QUEST: Allow me to revisit the top story tonight. Markets are sharply lower. Look at the Dow and you'll see exactly recession fears are rattling

investors' nerves.

Oil stocks have been among the hardest hit, as crude prices tumbled. A complicated pictures for U.S. shale producers. In shale, they've had to

weigh price volatility against production costs.

Shale, nontraditional fracking, whatever you want to call it. The break even price for shale, U.S. shale, is $56 a barrel. And the market has not

cooperated often. And that risk looms over producers looking to expand as customers turn away from it.

Look at this graph.

You see those sharp drops?

Those sharp drops in 8, in 20, they are what frighten the shale producers, that they will be caught out. I visited a shale drilling facility in Texas

in 2013. Then, oil prices were $100 a barrel and shale was fueling the recovery from the last financial crisis.

Chris Wright is the CEO of Liberty Energy, the second biggest fracking services company in the country. He joins me from Denver, Colorado.

This is a real fear, isn't it?

That they don't want to be on the wrong side of a dramatic price fall, because either OPEC suddenly produces more or China opens up or whatever it

might be.

CHRIS WRIGHT, CEO, LIBERTY ENERGY: Absolutely, Richard. We are a market with volatile prices. So supply and demand are finally balanced and they

move abruptly. I am thrilled that you visited the Permian. But I would say the outlook today, the risk of a great price drop is probably lower today

than it typically is.

QUEST: So since 2020, we look at that graph, we see the production increase again along with crude prices. Production does go up again. But

what we are not seeing in both in rig count at the moment and in terms of production from the U.S., we are not seeing a remarkable increase.

Why not?

WRIGHT: Yes, we've seen the remarkable increases in the past. Then the U.S. has flooded the world with oil and natural gas and process collapsed.

So yes, it's definitely more disciplined, more measured this time.

But we are still growing U.S. oil production at nearly 1 million barrels a day year over year. We are the dominant source of additional oil supply

globally. So we are still growing. But maybe not in the drunken sailor fashion you saw a few years ago.

QUEST: Can the U.S. do more to help Europe?

If so, how?

WRIGHT: Yes, we can.

[15:35:00]

Certainly Europe's bigger problem for sure is natural gas, even more than oil. The U.S. could easily, meaningfully grow our natural gas production.

Our problem is the pipelines to move that gas and the export facilities, the LNG compression facilities, to put that on the ship and send it over to

Europe.

I think the country would love to do. It but our country as your country in Europe have been gripped in this delusion that hydrocarbons are going to be

gone soon. So there has been opposition to building the necessary infrastructure to move this energy from where it's produced to where it's

needed.

QUEST: So let's talk about that. Your view is that hydrocarbons will provide the backbone of our energy requirements for the foreseeable future,

decades ahead. At the same time, everybody is rushing to EVs -- everybody is doing solar and you are saying it's not realistic.

WRIGHT: Yes. I began my career, I went to MIT to work on fusion energy. I worked on solar energy. I worked on geothermal energy. So I'm just an

energy guy.

But almost everything you hear about solar and wind -- we hear mostly about those -- or geothermal or nuclear, they are all in the electricity sector.

All of that combine is 20 percent of global energy. The other 80 percent of global energy does not come via electricity.

There is no solar or wind that is going to provide process heat to manufacture materials to fly airplanes. So we chip away slowly at the

energy but this belief that hydrocarbons will be gone in a decade or three decades, there is no possibility of that happening.

QUEST: How difficult do you think this winter is going to be in terms of oil and gas, if Russia does continue to throttle Europe, as we are seeing

with Nord Stream 1 today and with a shutdown tomorrow, if they do that in the middle of November in a really cold spell, even with full tanks?

WRIGHT: Extremely difficult. It's really a crying shame to see what is going to happen. Factories will be shut down and have already been shut

down. People are not going to be able to reasonably afford heating their houses.

That is something that happened a century ago. That is not something that should happen today. This is really the product of these bad energy

policies that have been naive about the ability to just change how an energy system works. And it's also a misunderstanding of climate change.

It's a real global phenomenon. But it's a slow, gradual process. We need much different to really change global greenhouse gas emissions. Wind

turbines and solar panels will barely move the needle. They're not the answer.

QUEST: Glad to have you with us tonight, sir. Very grateful. Thank you.

WRIGHT: Thanks, Richard.

In most parts of the world, city authorities and governments would be delighted, and a huge sigh of relief, if only 35 COVID cases were detected

in a day.

But that country is China, of course. That's how many infections were detected in Shenzhen on Tuesday, the second day of a snap lockdown that has

shut down the world's largest electronics market. CNN's Will Ripley is monitoring the situation from Taiwan.

(BEGIN VIDEOTAPE)

WILL RIPLEY, CNN CORRESPONDENT: As much of the world continues to return to what is a new normal post COVID, China is one of the last places on

Earth still clinging to this zero COVID policy which many scientists say is simply unsustainable with new variants becoming more contagious and more

transmissible, like Omicron BF.15.

It's been detected in the southern Chinese city of Shenzhen, a tech hub, home to 18 million people, that has in many areas ground to a halt because

of 35 infections, 11 asymptomatic, 18 million people.

There are neighborhoods that are under mandatory four-day lockdowns. They have shut down the world's largest electronics market. They have basically

categorized neighborhoods as high risk areas, which means strict lockdown orders.

Residential buildings blocked off with barbed wire fences. They're closing entertainment venues and public parks and banning all gatherings. They are

basically suspending service of public transportation; 24 subway stations, hundreds of bus stations.

All because this new subvariant was detected and they're worried that those 35 infections in a city of 18 million could grow into a much larger

outbreak that they would not be able to handle.

[15:40:00]

Because a lot of the high risk elderly in China still have not been vaccinated. And yet China is investing big in zero COVID. With digital

surveillance, mass testing, extensive quarantines, snap lockdowns, all of those resources to enforce a policy that is championed by Chinese president

Xi Jinping.

But that is dealing a heavy blow to the slowing economy in China. Youth unemployment hitting a record high; one in five young people are out of

work. And many of those young people with nothing else to do but sit in their apartments or their homes once again and ride out the latest COVID

lockdown in zero COVID China -- Will Ripley, CNN, Taipei.

(END VIDEOTAPE)

QUEST: Before we go tonight, I just wanted to show you live pictures from Wilkes-Barre in Pennsylvania. Joe Biden is addressing gun violence in

America. The U.S. President stops there before heading to Philadelphia on Thursday.

He'll give a major evening speech. He's calling it a continued battle for the soul of the nation. And as he speaks, we'll give you developments when

we get them.

That is QUEST MEANS BUSINESS. At the top of the hour, you and I will make a dash for the closing bell. Maybe a small saunter will be more appropriate

with the way the markets are looking. Before we get there, enjoy "World of Wonder."

(MUSIC PLAYING)

QUEST (voice-over): If you believe what they say, Lisbon is half on land, half on water. I spent a lot of time on land so now time to explore the

River Tagus on this magnificent boat. Portugal is rightly proud of its 500 years of sailing, exploring the world vastly beyond its shores, deep into

the unknown.

Are you the navigator?

RICARDO DINIZ, SAILOR (voice-over): Yes.

QUEST (voice-over): And all the others behind him?

DINIZ (voice-over): You will Vasco de Gama there, Magellan, Pedro Cabral.

[15:45:00]

This is the tower of Belem. Belem is this area of Lisbon.

QUEST (voice-over): This is Ricardo Diniz, our Portuguese seafarer, a solo sailor, now a corporate coach.

We're here in Lisbon and the one thing I do notice and the reason I'm talking to you, of course, is this relationship that this place has with

the sea, with the oceans.

How would you describe it?

DINIZ (voice-over): We're very proud of our past. We achieved something incredible over 500 years ago and we're reminded about this every single

day. We are on the ocean, we have this incredible river.

QUEST (voice-over): What makes Lisbon different?

DINIZ (voice-over): Well, Lisbon is the European capital of the oceans. It's the only capital on the ocean, on the Atlantic Ocean. We have this

very special light that attracts photographers and artists from all over the world.

The relationship with the river, with the water and the proximity to beaches, is a great location. It's a great city.

QUEST (voice-over): I always think that Lisbon is understated. Lisbon is - - it's not forgotten about but it doesn't have, if you like, the chaos and pizzazz of the other major southern European capitals. But that's its

attraction.

DINIZ (voice-over): I find that, in the last five years, especially, many people who come from abroad to Lisbon, are surprised at what they find. And

I think they are the true ambassadors of our city and our country.

It's people from abroad, talking beautifully about Portugal -- great food, very, very safe, wonderful people, very accommodating, very generous. So

it's a great country.

QUEST (voice-over): Do you see what you're doing as being the lineage to the great explorers?

Can you trace what you do to what they did?

DINIZ (voice-over): For me to have been born in the same country as Magellan, on the same day as Magellan, and some would say we even look

alike slightly, the nose, the profile, it's part of my power system to achieve what we need to achieve.

QUEST (voice-over): What do you feel, what happens inside Ricardo when you come under that bridge and you see this?

DINIZ (voice-over): When I come back here, it's almost like I'm feeling it from 500 years ago. It's that coming back to where it all started.

(MUSIC PLAYING)

DINIZ (voice-over): It's unassuming but you know we're getting (ph) --

QUEST (voice-over): Unassuming?

DINIZ (voice-over): Yes. We've caught up. The tourists found Portugal before the Portuguese found Portugal. And now we are like, oh, these people

from other countries are saying good things about us. Maybe we should take them seriously.

We weren't very good at saying good things about ourselves until others came and said good things about us.

QUEST (voice-over): There are a great many good things to say about Lisbon. Each is magnificent, both from the water and from high above the

city, where the golden hour of every moment enchants and leaves me wanting more.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST (voice-over): I've been in Lisbon a matter of days and I've got a confession. I'm loving the place.

(MUSIC PLAYING)

[15:50:00]

QUEST (voice-over): I'm totally disarmed by the charm, entranced by the friendliness. If you ask the Portuguese, it won't be long before they

remind you of the great explorers and age of discovery and will conveniently forget that that was 500 years ago and begs the question, well

what have they done lately?

I think much of that's changed in the last 20 years. There is a new spirit of confidence and looking to the future here. You can feel it.

(MUSIC PLAYING)

QUEST (voice-over): This confidence, it seems, comes from the very country itself, Portugal, which now embraces its own identity.

Now, Chef (ph), this looks like a very nice restaurant.

Do you know owns it?

JOSE AVILLEZ, CHEF (voice-over): I have an idea.

QUEST (voice-over): You do?

Acclaimed chef Jose Avillez knows all this well. He's championed Portuguese fine dining for years.

I've asked him to make a simple dish that speaks to the DNA, the backbone, the very meaning of this country.

The thing that that I was struck by during the festival, just the sheer number of sardines and meat sandwiches I ate. It's as if this is part of

the culture, the DNA, everything.

QUEST: Oye, avo sardines (ph).

AVILLEZ (voice-over): When the sardines arrive, the season starts right there. In Portugal, the fishermen start to bring the first harvest at that

time and it starts the chaos (ph).

QUEST (voice-over): When I said to you, we wanted you to make sardines, did you think, oh, bloody hell, not sardines?

AVILLEZ (voice-over): No, actually I have to tell you something. For us, sardines are something very, very special because it's something that we

have only three, four months a year. Because they are the fat of the island (ph), beautiful. And it's something that I started to try to bring to fine

dining.

QUEST (voice-over): Oh.

AVILLEZ (voice-over): I would say 15 years ago.

QUEST (voice-over): But without destroying the essential quality of it being a Portuguese sardine?

AVILLEZ (voice-over): That's the big essence of all it because when the Portuguese arrived to a continent bringing Portuguese welcome (ph), he

expects to have more than food but to have the soul of the Portuguese food. So we have a lot of respect for the sardines.

QUEST (voice-over): There's that word, "soul."

AVILLEZ (voice-over): Soul.

QUEST (voice-over): But there's a Portuguese word for soul, isn't there?

AVILLEZ (voice-over): Alma.

QUEST (voice-over): Alma.

AVILLEZ (voice-over): Alma.

QUEST (voice-over): These sardines are waiting for your attention.

What have you done with them?

AVILLEZ (voice-over): Well, we just got them this morning, very fresh, already very fat. We just took out the fillet and we marinate it with olive

oil and a little bit of vinegar.

QUEST (voice-over): And those sardines bring back memories of holidays with the family.

AVILLEZ (voice-over): So we have here, the sardines.

QUEST (voice-over): Oy, yoy yoy.

AVILLEZ (voice-over): They are slighted cooked with acidity. We are using the torch to offrate (ph) it. Well, here you start to having the smell of

the sardines.

QUEST (voice-over): Interesting. Interesting.

AVILLEZ (voice-over): This is our version of the very typical Portuguese sardines. And I can tell you, you close your eyes, you eat these sardines

and you have your own.

QUEST (voice-over): Well, my eyes are closed.

AVILLEZ (voice-over): You want to eat it now?

Want to try it now?

Let's go.

(CROSSTALK)

AVILLEZ (voice-over): No, no, no. Let's go.

QUEST (voice-over): Absolutely delicious. But it is a refined, elegant taste. But it is a sardine.

The sardines are delicious.

If you had to sum up Portuguese cuisine, in your philosophy, what would it be?

AVILLEZ (voice-over): I would say that Portuguese cuisine that is transmitted from grandmothers to granddaughters, from mothers to daughters,

is the art of bringing the flavors with simplicity, with love.

And it's what we decide to do, even if you do it very creatively, with a lot of creativity, what you need to bring to your guests is something

delicious. And I would say, 90 percent of the time, it's quite simple.

(MUSIC PLAYING)

QUEST (voice-over): Sardines alone cannot truly satiate. Of course, there needs to be a Portuguese custard tart, pastel de nata. Life is too short

not to have dessert.

AVILLEZ (voice-over): I promised you a dessert.

QUEST (voice-over): You say it's -- you did it right.

AVILLEZ (voice-over): We have here the dish called nata.

QUEST (voice-over): Oh, that pastry is very light. And the custard, nice and firm but not too firm.

I love it.

Now are you finishing yours?

(LAUGHTER)

AVILLEZ (voice-over): I'm talking too much.

[15:45:00]

QUEST (voice-over): We have to be careful with waste not, want not, don't we?

(CROSSTALK)

QUEST (voice-over): Don't you worry about me.

(LAUGHTER)

QUEST (voice-over): Lisbon is a feast and I'm hungry for more.

Ah, thank you, sir. There is always time for a final pastel de nata and an espresso before I leave Lisbon with my good friend, Fernando Pessoa, the

famous Portuguese poet.

Very nice hat, sir.

In the past, you might have been tempted to give Lisbon a miss, the city being overshadowed by more boisterous European capitals. Well, today, that

would be a big mistake because Lisbon has it all -- sophistication, elegance, charm, all wrapped up in Portuguese hospitality.

And so to the word I think that describes it, "alma," "soul." You've heard it said, again and again. And you're the one to come to Lisbon and

experience this soul for yourself. Lisbon, definitely part of our world of wonder.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST: With less than two minutes to go, let's you and I do a dash to the closing bell and see how we're looking. U.S. stocks now falling for a third

straight day. We are well off the lows of the day, down nearly 300 but we had been much more, as you can see from the chart there.

So the Dow is set to close down, more than 1 percent overall. The triple stack and you will see where we stand on that. A similar decline for the

S&P 500, now below 4,000. And the Nasdaq is down 1.25 percent or so.

Investors haven't like the Fed's signal on interest rates. Randall Kroszner explained.

(BEGIN VIDEO CLIP)

RANDALL KROSZNER, FORMER GOVERNOR, FEDERAL RESERVE SYSTEM: I do think that the Fed's credibility is on the line. That's one of the reasons why

they are now moving so rapidly.

They, as well as all the central banks around the world, were too late to see that the inflation was not transitory but it had much longer legs. And

I think to their credit, they basically said we didn't have the right approach back then. But we now need to move quickly to maintain our

credibility.

(END VIDEO CLIP)

QUEST: And the Dow components that shows where the damage was done, Dow Chemicals was down near 3 percent. Caterpillar, Chevron, and you get -- all

the big names were down. You have three on a frolic of their own that are each inched up. And that is the way the world looks in the financial world.

I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.

END