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QUEST MEANS BUSINESS
Searching for MH370; Weather in Search Area; New Search Day Beginning Near Perth; Crimea Crisis; Economic Impact of Sanctions; EU Sanctions; US Stocks Rally; European Markets Mixed; Economic Outlook
Aired March 20, 2014 - 17:00 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)
RICHARD QUEST, HOST: The market closed, it was a strong rally on Wall Street, having been down the previous session. For now Fed fears seemingly put to one side, the market was up more than a hundred points on the day of Thursday, March the 20th.
Tonight, they're calling it a "credible lead." Nearly two weeks after the Malaysian jet went missing, the search for flight 370 is about to resume.
It's tit for tat measures. Russia and the United States slap sanctions on each other, and the president warns of serious damage.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: These sanctions would not only have a significant impact on the Russian economy, but could also be disruptive to the global economy.
(END VIDEO CLIP)
QUEST: And tonight, Ukraine's new economy minister is joining us live from Kiev to assess the impact to his country as an international standoff continues.
It's going to be an extremely busy hour. I'm Richard Quest and yes, I mean business.
Good evening. In just over an hour, it will be daybreak in Perth, Western Australia, and the search for Malaysia Airlines Flight 370 will resume in the sea far off the Australian coast. You'll be aware, satellites have spotted large pieces of debris, something floating in the Indian Ocean, two pieces of debris. Look at the sizes, approximately five meters for one of them. They're 14 miles apart.
The authorities say they can't be sure it's got anything to do with the missing Boeing 777, but these two options, these two pieces of debris, are the best leads so far.
Now, we could be looking at pieces of container, but these pictures seem to be the best lead to find the airliner and those that were onboard.
What did it all mean? Look and see and I'll show you exactly how far this is going. We're talking about a vast difference and a vast distance. Joining me to make some perspective and to give me some idea, David Soucie, one of our aviation experts. David --
DAVID SOUCIE, CNN SAFETY ANALYST: Hello, Richard.
QUEST: -- good to see you. Now --
SOUCIE: Good to see you.
QUEST: Here we have a very powerful graphic interpretation of it. We start with KL. We've got the point of turn, the last-known contact. We've got Perth, Australia over here and we have --
SOUCIE: This is where we have the pieces, right?
QUEST: This is -- so talk me through --
QUEST: -- the airliner scenario that makes this possible.
SOUCIE: OK, well there's a couple of different scenarios first of all, Richard. We -- what we can do is, let's take one or two, but I want to point out, when we do scenarios like this, it's not to say we think it's this, we think it's that.
What we're trying to do is narrow down where this is going to be, where these parts are, and from that we can go backwards --
SOUCIE: -- and see where we might have had the impact.
QUEST: But even this distance here from Perth to the debris -- or the potential debris -- that's the same as London to Moscow.
SOUCIE: Yes, 1400 miles, 14 miles, Richard.
SOUCIE: So, you're talking a long time. Now, when we talk -- well, let's go back to the airplanes first.
SOUCIE: Let's go back to this. So, this airplane's coming up. Remember, it's night. It's dark. Dark dark. They can't see anything outside of the aircraft, they're flying up here like this. Now, for some reason, when they transfer over --
SOUCIE: -- this is about where they were when they transferred over from one control area to the next control area.
QUEST: There, yes.
SOUCIE: All right? So, they're calling ahead, they're talking to the next controller, and they're -- they're talking to this controller --
SOUCIE: -- and they're saying, "I'm going to be going this way." So they transfer over.
QUEST: But they turn around here. What's likely to have happened that brings it all this way so far? Are we still looking at the so-called mechanical? Are we still looking at the nefarious means? And how would a plane make this sort of journey and end up there?
SOUCIE: Well, it's got a lot of fuel in it. A lot of fuel in it. This airplane could go anywhere in this whole big circle that you see here.
SOUCIE: So, if it turned -- if it makes this turn, from that point over, you have a couple of pings in here, you have some radar hits in here. So what is happening here? Now, one theory is that if there was a fire onboard or all the equipment went off, then at that point, the aircraft could potentially have continued to fly.
Remember, even without the autopilot, this airplane can fly, because you're trimming it in. You're trimming in all the ailerons, you're trimming in the rudder, you're trimming in everything about that airplane so that you can literally take your hands and feet off the wheels and let it fly, even without the autopilot.
QUEST: So, it's -- we've got to be a little bit wary on all of this.
QUEST: We're not talking about a scenario here -- or are we? -- where the plane can just literally fly until it runs out of fuel somewhere in the south Indian Ocean.
SOUCIE: Certainly that's possible. There's nothing else to stop that aircraft at this point, especially if the autopilot is still kicked in. Because like I said, if they had it well trimmed, which any good pilot would, and he is a good pilot --
SOUCIE: So, we're coming to a cross here, it's easy to think that that might have happened.
QUEST: OK, now, assuming something happened here --
QUEST: -- and these are just vast assumptions.
QUEST: Something happens here, but we have the debris down here. Now, we know the satellite picture was three -- I think it's three or four days old before we saw it.
QUEST: So, we're really not only working out where this debris is now, which could be another three days further on.
QUEST: But we've got to work out where it was three days ago and where the plane might have been -- please God -- ten days before that.
SOUCIE: Right. So, here's kind of what we've been looking at here. Remember, to get this area down here, the search area?
SOUCIE: That came from NTSB, FAA, everybody working together to say potentially how much fuel did it have, if it hit here, where would the currents take it, where would the winds take it, all of that. So, that's how we figured this out in the first place. Now what we've got to do is kind of work it the other way around.
QUEST: So, the Royal Australian Air Force, the RAAF, they have been down there, they've been dropping basically detectors --
QUEST: -- buoys --
SOUCIE: Sonar buoys.
QUEST: Sonar buoys --
QUEST: -- here because they want to know which way the currents and the temperature is. Now, if that's the case, we really are, David, looking for something that's not here or there, but here.
SOUCIE: Well --
QUEST: And it could be --
SOUCIE: I'm sorry, let me back up on that a little bit --
SOUCIE: -- because remember, we talked about if it drifted, it could be anywhere in here, but when we were searching for it. Now that you've pinpointed it, you turn the diamond around -- or you turn the angles around the other way.
So, when you're coming back this way, this material here could potentially be anywhere from here to there, from here to there, from here to there, or from here to there.
QUEST: This is -- I'm going to be talking to Jenny Harrison in just a moment --
SOUCIE: Yes, she would know better than I.
QUEST: -- because if we look at the objects, they may have been degraded, those objects, specifically so we don't know the intensity of whatever satellite capability it is. But the sizes involved, 24 meters, 5 meters, with the Chinese version, everybody said it was too big. But I remember with Air France 447, the first piece they found was the rudder and the tail.
SOUCIE: Yes. Right.
QUEST: So, is that likely?
SOUCIE: Well, the rudder and the tail on that was not as big as this --
SOUCIE: -- but very close. So, yes, it's definitely likely, and particularly because you're not talking about one big piece of metal that's sitting out there floating. It's very potentially that these are small pieces that were broken up and held together.
Remember, it's a composite aircraft, it has filaments that hold it together, so when it breaks, it doesn't just break off like a piece of glass. It's still going to hold itself together, if possible, with cables, with filaments, and with electrical systems.
QUEST: There -- it's always difficult to ask this last question, but there's never a good place to search for a plane crash.
SOUCIE: Yes. Good point, yes.
QUEST: But this seems to be amongst the very worst.
SOUCIE: Look what's around here. There's nothing here. This is literally the most isolated place in the world, right here. There's no other place you can go and not be that -- perhaps polar -- the polar caps.
SOUCIE: But that's it, 1400 miles here. And look. Look how far this is now. You're talking four hours out --
SOUCIE: Four hours. Four hours. That plane flew for -- has a potential to fly for seven or eight hours, so this is where we're going to focus. This is where they have to focus, right there.
QUEST: David, thank you very much.
SOUCIE: Great. Thank you, Richard.
QUEST: David Soucie making sense of what's been happening. Now, let's get an idea of the weather conditions in the ocean and the currents in the search area. Jenny, you've seen what we've been talking about here, you've seen the situation. I need your analysis, now, to help us understand what this means.
JENNY HARRISON, CNN METEOROLOGIST: Yes, well, as you said, Richard, it's all about the currents, tracing it back, and then obviously looking ahead as to where other bits of debris, if that's what we're looking for, may well have traveled, too.
The conditions in the actual search area have been not bad over the last few hours. This area of cloud here, this is a cold front that's been coming by, obviously bringing with it some stronger winds. That will help to move the waves as well.
And at the same time, some rain as well, managing to stay south of Perth. And the reason I mention that, of course, is because -- what is it? -- about an hour and fifteen minutes now until sunrise.
Here is the distance you've just been showing on your map. There again is just another view. The water temperature as well is something 12 to 15 degrees Celsius.
But this view, this shows you that the ocean depth, the base of the -- the bottom of the ocean here, and these are actually tectonic plates. There are diversion plates in this region, they're pulling away from each other, the two main plates.
And of course, it is what is going on below the ocean, how deep is it? Well, it could be as much as three kilometers deep, which is nearly two miles, to get down there to the bottom of the ocean.
Now, when it comes to weather conditions, this is obviously very crucial as well for Perth, for all those flights departing from there in just -- what? -- an hour or two. We've got the winds coming out from the east, but the good thing is, visibility. It is good, it is clear. The wind should have died down, it will stay fine and dry for the next couple of days. That's good visibility as well.
This is a model -- we have just an exclusive model we've got here, a high resolution model we're using on CNN. And this shows you in and around the search area the weather, of course, that is coming in.
This is about 48 hours out. And in fact, that system coming through, is going to be taking place Saturday into Sunday. The winds, obviously, will pick up with that. The rain is fairly negligible in terms of what is accumulating.
The currents, Richard, you mentioned the currents. Well, if you look at it on this big scale, first of all, let's just concentrate on this, because as we know, you have this main circulation around the search area.
And that search area a few days ago was further to the north, where the currents are actually much, much weaker. It is now, as we know, much further to the south, so getting close to this current, here. This is known as the ACC, it's the Antarctic Circumpolar Current.
And that is the concern, of course, Richard. If it gets caught up in this, then that potentially could pull any debris much further over towards this east. And as you said, that is why they have dropped these buoys into the ocean to really begin to monitor and track what is happening with the ocean currents so they can do all of this and extrapolate out the information to help them search.
QUEST: Jenny Harrison, we thank you. You'll be back later in the program for our usual weather forecast for Europe and an update. Thank you, Jenny, for that update.
It is the usual 12 hours difference, just after 5:00 AM in Perth, Western Australia. Kyung Lah is there tonight. Good morning to Kyung. We know the -- tell me the conditions. I think I can tell just by looking and listening. It looks grim.
KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Yes, you can hear. It's quite grim here. The conditions as these planes are going to be taking off is not the best. You can see that there is rain, there's a lot of wind, and this has rolled in in the last about 45 minutes or so. But they still do have about an hour before the first P-3 Orion takes off.
What we have heard from the base here this morning is that they do have two planes planned to take off at 6:00 AM local time, that is in about an hour, and 8:00 AM local time.
We've been talking about this for hours, now, the conditions that they are going to be going through. But the people are going to be boarding this, they've been here already for several hours and they're briefing. They're going to board.
Then, they've got to take a four-and-a-half to five-hour flight over there. And we keep talking about how remote this area is. They only have two hours to circle, to look in this area, before they have to return when they run out of sunlight. There is some good news --
LAH: -- because they do have that Norwegian plane -- Norwegian ship, rather, Richard, on the ground, and they've been working throughout the night. Richard?
QUEST: Kyung Lah, who is in the rain. Kyung, we'll let you get on with some news gathering and finding out what's more about it. Kyung joins us now live from Perth, Western Australia.
And remember what Kyung was just saying about the distances involved. From Perth -- remember, Perth out over here. The four hours flying time to the region where they will search. They only get two hours worth of search time before they have to go back again.
And remember, these pictures here, or these -- this bit of debris here -- is three or four days old, the picture, so they've still got to work out where that might be three or four days further on.
QUEST: Now, we'll turn subjects in just a moment when we come back. Tensions are high in the United States, rolls out more sanctions, and Russia hits back. It's classic tit for tat. The EU is joining in. We'll be live from Brussels. This is QUEST MEANS BUSINESS.
QUEST: The standoff over Ukraine is turning into the biggest crisis in East-West relations since the end of the Cold War. Russia's lower house of parliament has approved a treaty to make Crimea part of the Russian Federation. That prompted President Obama to expand US sanctions.
(BEGIN VIDEO CLIP)
OBAMA: This is not our preferred outcome. These sanctions would not only have a significant impact on the Russian economy, but could also be disruptive to the global economy. However, Russia must know that further escalation will only isolate it further from the international community.
(END VIDEO CLIP)
QUEST: And so Washington says the sanctions announced today affect key people in Russia. They named 16 people it described as members of Vladimir Putin's inner circle, not including the president himself. It also put the bank Rossiya on the sanctions list, saying the bank's used by top government officials in Moscow.
Russia has responded a few moments later. Key US lawmakers, including the Senate House majority leader Harry Reid, the Speaker John Boehner, and Senator John McCain, were some of the people singled out, as well as various aides to President Obama.
In Europe, the German chancellor, Angela Merkel, says more sanctions are to be expected if the situation isn't resolved.
(BEGIN VIDEO CLIP)
ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): The EU summit today and tomorrow will make clear that we are ready at any time to introduce phase three measures if there is a worsening of the situation. And this will certainly include economic sanctions.
(END VIDEO CLIP)
QUEST: Any sanctions could have a major impact on the Russian economy. And the question, of course, is which economy suffers worse, Europe or Russia? Fred Pleitgen gives us the Moscow view.
FRED PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): The situation around Ukraine remains volatile, with the American guided missile cruiser USS Truxtun conducting exercises right off the Crimean coast, while Russian forces consolidate their presence in Crimea after formally annexing the territory in a move most of the international community says is illegal.
But the economic sector is also an important battleground in the Ukraine conflict. Jaroslav Mitrovsky is an analyst for Deutsche Bank in Moscow. He says Russian business leaders are very worried about the current state of play.
JAROSLAV MITROVSKY, ANALYST, DEUTSCHE BANK: The mood is deteriorating because the worst thing for the business sector, for the business community is uncertainty. So, clearly, we're in the period of very sizable uncertainty that is very hard to gauge.
PLEITGEN: So far, it's sanctions and counter sanctions against Russian individuals, US individuals, and one Russian bank. But the specter of escalation is there, aimed at whole economic sectors, like Russia's oil and gas industry, something that has the attention of the CEO of Russian gas giant Rosneft.
IGOR SECHIN, CEO, ROSNEFT (through translator): Looking into expanding sanctions is something that will only make the conflict worse. It doesn't help solve the problem and isn't productive. We hope for measures that actually produce results. We are not hurrying and are looking calmly at the situation.
PLEITGEN: At the same time, Vladimir Putin has urged Russian companies to move their assets back to Russia, a policy experts call de- offshorization.
MITROVSKY: Some of the observers here in Russia are actually saying that perhaps this external pressure that there is right now on the Russian economy may be productive in the sense that it will force Russia to look for these tremendous resources and potential in terms of productivity, growth, and efficiency gains within the economy.
PLEITGEN: But that is a risky calculation, and most Russian business leaders seem to acknowledge cutting ties with the West would do considerable and long-term damage to Russia's economy.
QUEST: Now, EU leaders are meeting in Belgium and discussing their next steps in the sanctions escalations. Nina Dos Santos joins us live from Brussels. The talk is more people on the sanctions list, Nina. What else are they discussing?
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: Yes, up to about at least ten people more, according to some sources, on that sanctions list. The real key issue, though, Richard, will be whether they're actually close enough to Vladimir Putin to sway his mind either politically or people from the business world.
Because really, the issue at hand is that money talks. The problem is is that money also walks, as you well know, and sanctions are a two-way street. We could also see Russia already posturing to try and impose its own sanctions in the other direction towards Europe.
The key thing they're trying to avoid, though, is trade sanctions, because these two blocs have around about $500 billion worth of trade, reciprocal trade, on the table, and jeopardizing that would be just one step too far.
I got the chance to speak with Alexander Stubb, Finland's EU minister and trade minister, and asked him how economic sanctions were likely to play into these talks this evening.
(BEGIN VIDEO CLIP)
ALEXANDER STUBB, FINNISH EU MINISTER AND TRADE MINISTER: It's very difficult to go immediately into economic sanctions, and the reason is very simple. It's economics. Because we go into a negative spiral of sanctions, that will hit European economies, that will hit the Finnish economy, that will hit the Russian economy as well.
(END VIDEO CLIP)
DOS SANTOS: So, we're into phase two of these sanctions. We could be seeing up to four phases of sanctions, the logic being that they'll ratchet up the pressure gradually. And at each stage, they'll see how Vladimir Putin responds.
Before all that, though, I might add that it's not just the United States that has crystallized things in people's minds here in Brussels by adding to their own list, especially attacking the financial world with the banks on that list, Richard.
QUEST: Right, but --
DOS SANTOS: Standard & Poor's has also decided to downgrade Russia's credit worthiness, and that again will make it more expensive to borrow on the open market.
QUEST: OK, but the sanctions against, for example, Bank Rossiya. At what point -- or, indeed, the individuals, the bankers, the personalities - - at what point do they feel the effect of not being able to get to London for business, to Italy on vacation, to Germany to do trade? When do those sanctions bite?
DOS SANTOS: Well, there's a big school of thought that dictates that it's not just these people you need to actually implement sanctions on. And by the way, Richard, they have to be the right ones. They have to be the people who don't just run the country, they own the country as well, which many analysts say is two sides of the same coin in Russia.
Many people are also advocating targeting their families as well. Because remember, a number of these people keep their assets outside of Russia, they keep their families outside of Russia, and targeting both sides of the equation as well as their families who don't actually live in Russia, will certainly help to put pressure on Vladimir Putin's mind.
That is the key thing that they are trying to achieve here, putting pressure on Vladimir Putin as mired by the business community rather than actually having to hit trade with an embargo.
QUEST: All right, Nina Dos Santos joining me from Brussels tonight. Nina, we thank you. We'll be back with more in just a moment. This is QUEST MEANS BUSINES, good evening.
QUEST: Investors in the US calmed down a bit after a session a day after comments from the new head of the US Fed gave them somewhat of a fright.
QUEST: Shares regained most of the ground they lost on Wednesday. The market was up 108 points. It fell after Janet Yellen talked about the prospect of official interest rates starting to rise. And she appeared to say it could end within --
QUEST: -- excuse me -- within six months of the ending of stimulus. On Thursday, investors took the new view that it didn't amount to a concrete timeline.
Positive in Europe. The main markets were higher at the close, except London's FTSE down just a half a percent. Some big stocks there were down, including BP, Barclay's, and GlaxoSmithKline, which announced a setback for an experimental cancer drug.
Ken Rogoff is professor of economics at Harvard University, always good to have Ken with us. He joins me.
KEN ROGOFF, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: Same, pleasure.
QUEST: Now, good afternoon to you. Did she misspeak when asked what her "considerable time" from the ending of QE to the raising of rates, she said, "Oh, considerable, six months"?
ROGOFF: I think if she probably could do it again, she'd have said less or said six to twelve months. But look, this is quite a job to take over as chairperson of the Federal Reserve. It's her first press meeting.
Greenspan had his gaffes when he started. Bernanke had his. All-in- all, I think it wasn't so bad in that context.
QUEST: Oh, it wasn't bad in that sense. I suppose the argument was she'll get better at facing the world's press in that sense. But do we think -- do you think we have a view now on what the Fed believes will be a time scale, all things being equal, between the ending of QE and the starting to really think about raising the Fed funds rate?
ROGOFF: Oh, we definitely saw governors, the voting members' forecasts of what they thought they were going to do, and that surprised people. Because it didn't look like a considerable time. It looked like it was faster and more aggressive. And it's not happening tomorrow.
But once she was dealt that -- and she had to show that to everyone -- it was a little hard to come out and say, well, don't worry, they're not going up, because it was pretty clear what her board was thinking, for right or wrong.
QUEST: If we ignore whether she spoke or not and just go to the core blunt economics, there's a very strong reason to say take a quarter point off the table now. This almost promiscuous accommodation is no longer needed.
ROGOFF: Oh, that is hard to say. Nobody knows. Inflation is very low. It's not like it's around the corner. Unemployment's hard to read, but it's not good. There are a lot of people underemployed.
And I think the Fed over the last couple of months has taken the view, well, some of those people aren't coming back. Maybe wages and prices are going to start rising sooner than we were thinking before, and their latest forecast shows that. But it's very hard after this sort of once-in-a- lifetime recession to know what's going to happen.
QUEST: Ukraine, if we could just touch on this. These sanctions that are being offered up at the moment and the measures being taken, this has a potential, economically, maybe not to be damaging to the United States, but it does have a potential to spiral out of control.
ROGOFF: There's a very precise diplomacy going on. Obviously, if it gets emotional and people start doing things that are crazy and self- destructive, it could be very bad if Russia cuts gas off to Europe.
They had to do something. They certainly didn't react intensely or aggressively. So, that's how I'm reading it at the moment. But it's very emotional, especially in Russia.
QUEST: And the way this plays out could have longer-term economic impacts for Europe, because if Russia and the EU do start embarking on a round of tit for tat sanctions that escalate ever greater, Europe's -- Europe will survive better than Russia on the economic front, but even so, Europe's growth is fragile.
ROGOFF: Europe's growth is fragile, and you know what this really points to is they've been scaling down their military, the average age is really -- I think it's over 50, even, of their soldiers in some countries. And they're going to have to do something different.
They've been trying to cut budgets, they've been trying to scale back spending. No. Not after we see this. That's really going to be the longterm impact. They can't just sit there and let more happen --
QUEST: So you'd expect to see increase in defense spendings --
QUEST: -- once again?
ROGOFF: Some big pressures on that in Europe, no doubt about it.
QUEST: One final quickie, if I may. When do you think the Fed makes its first move on rates?
ROGOFF: Well, it certainly looks like it'll be in the first part of next year, with what they're saying and what they're thinking. I would rather they would hold off as long as possible.
QUEST: Good to see you again.
ROGOFF: Thank you, Richard.
QUEST: Thank you very much, indeed. Now, some might call it Mission Impossible. Sorting out Ukraine's economy is no easy task. In a moment, I'll talk to the man in charge of it all. We're live in Kiev after the break.
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes first. Search teams based in Australia are about to resume the search for Malaysia Airlines flight 370. It's raining in Perth, Western Australia, but planes will be soon leaving to focus on scouring a remote area in the southern Indian Ocean. Satellite photos revealed two large unidentified objects in the sea about 1,500 miles southwest of Perth.
President Barack Obama has announced further sanctions on Russian officials over Moscow's annexation of Crimea. He also put a Russian bank on the sanctions list. Russia responded within minutes announcing sanctions of its own against U.S. officials and members of the U.S. Congress. A day of violence in Afghanistan has left at least 11 people dead. In the capital of Kabul a gunfight erupted between police and unidentified gunmen inside a hotel popular with foreigners. The Taliban has called for a tax ahead of the presidential elections next month.
The founding pastor of a church in Kansas known for its anti-gay protests at public events has died. Fred Phelps died of natural causes. He was 84 years old. Westboro Baptist Church says it has picketed tens of thousands of events including concerts by Lady Gaga and even military funerals.
It is half past 5 in the morning in Perth, Western Australia. We need to bring you up-to-date on the search for Malaysia Airlines flight 370. Planes from Perth and the U.S. will soon be taking off for another day searching the waters southwest of Perth. Satellites spotted two large objects floating in the Indian Ocean. Excuse me. Malaysian officials say they can't be sure it's anything to do with the missing aircraft. They're calling it a credible lead. Search teams failed to locate them on Thursday. Visibility in the area was poor.
Ukraine is caught up in a political crisis. It's facing an economic disaster as well. Its new leadership recently appealed for tens of billions of dollars from foreign lenders to stave off bankruptcy. I'm joined now from Kiev by Pavlo Sheremeta, the newly-appointed economy minister who joins me now. Minister, it's good to see you, sir. Thank you for joining us, and we have two issues that we need to talk about and we need to divide them firmly.
PAVLO SHEREMETA, UKRAINIAN ECONOMY MINISTER: Hello Richard.
QUEST: Thank you, sir. There is the political in Crimea and then there's the economic. Let's do Crimea first. How long before Ukraine has to accept this is now a fait accompli?
SHEREMETA: I don't think Ukraine will ever accept that it's fait accompli. We treat Crimea as an integral part of Ukraine, and we will treat it forever like this.
QUEST: But you're going to -- and the sanctions that are being imposed by the E.U. and the U.S. Do you wish those sanctions would be ratcheted up even faster -
SHEREMETA: I -
QUEST: -- instead of such a measured way? Would you like to see -
SHEREMETA: I don't hear.
QUEST: Sir, are you hearing me? No, we appear to have lost the minister for the moment. Be assured we will redial the minister in Kiev immediately because there are seriously important issues that we need to talk about, not only on the sanctions question but also of course on the economy and how much money they're going to need from the E.U. This is "Quest Means Business," good evening to you.
QUEST: Now, straight back to the minister, we've reestablished communications. Let's make sure you can hear me. Minister, Richard Quest here. Are you back with me?
SHEREMETA: Good. Yes, Richard, I hear.
QUEST: Good, sir, let's talk economics. How much money do you need for Ukraine to help restructure the economy and how quickly do you need it?
SHEREMETA: Well, the needs -- the Ukrainian needs are quite significant and that they are quite quick actually because the public finance is in a pretty desperate situation after the past regime. So we are on the fast-track negotiations with IMF. IMF mission is here so we are continuing our discussion with them. We are delighted and happy to hear from the World Bank that they increased their portfolio in Ukraine six times, six-fold for 2014, committing $3 billion to Ukraine, large funds coming from the E.U. and the U.S. So all together it constitutes a significant amount of money that should be enough to jumpstart the Ukrainian economy.
QUEST: But you -- there's two, isn't there? There's two sections of this money that you need. You need short-term money to pay the bills now and you need long-term restructuring money. So has the money started to flow into your accounts yet?
SHEREMETA: Well, the discussion with IMF still continues, so that's something that we are still discussing. So this money will come -- if we agree of course -- a bit later.
QUEST: What are the IMF demanding from Ukraine by way of conditionality and structural reform?
SHEREMETA: Well I would rephrase that question if I may actually because it's us demanding from ourselves. We need to cure the Ukrainian economy. Ukrainian economy is sick. It's deficit-addicted. So the first thing we need to do is just make sure that we cure this issue, we cure this problem. And IMF is willing to help. We are discussing the exact conditions and exact peculiarities of the program because we need to move boldly with the budget cuts, but we need to move wisely with its cuts. Because, as you know, the external situation around Ukraine is quite precarious and we need just to move wisely with such an unpleasant thing as budget cuts.
QUEST: Right, but here's the problem. The rest of Ukraine may see Crimea getting lots of economic aid, lots of money, lots of infrastructure projects -- basically bribes and greed from Russia to make them feel good about their decision. Meanwhile, the Ukrainian people are being told jam tomorrow, jam tomorrow, austerity today.
SHEREMETA: Well, look, there are precedents already with similar situation and we can see on the regions like Abkhazia and Ossetia and Transnistria, and we don't see much of any economic aid coming from basically anywhere. So I would be by the way quite cautious if I'll be in Crimea about any kind of aid. I would rely on ourselves actually because Crimea is actually such a -- such a beautiful region, such an attractive region. It actually doesn't require too much aid. It just needs to gets - - to get its -
SHEREMETA: -- economy in order. And we were absolutely ready to discuss this with Crimeans.
QUEST: At Davos in January, the former prime minister of Ukraine basically said they turned down E.U. proposals because it looked like Ukraine would be turned into the next Greece. Are you worried that the conditionality that the austerity measures -- to use your own phrase -- the work that you're going to do yourself will impose grinding austerity on Ukraine?
SHEREMETA: Well we can see from the countries around that this medicine works. No, it will not turn Ukraine into any other country. It's just it will turn Ukraine into healthy and prosperous economy. There is another thing we need to do. It's not just austerity. What we need to do is we need to unleash the creative, the entrepreneurial potential of Ukrainian people which was blocked for so long by the way -- by the former government, by red tape, by overregulation, by unjust courts. We just need to deregulate the economy, make business much easier and much less expensive to be done in Ukraine and this will push the Ukrainian economy as well.
QUEST: Minister, very good to have you on the program. I know one thing, you and I will talk many more times on these issues in the days, weeks and months ahead. Thank you, sir, for joining us from Kiev tonight. Standard & Poors is warning it may lower Russia's credit rating. It switched its outlook for Russia from stable to negative as the U.S. and E.U. said they would isolate the country economically if it remains defiant on Crimea. S&P says sanctions could, in their words, "reduce the flow of potential investment, trigger rising capital outflows and further weaken Russia's economic performance."
Now, let's consider the impact of tit-for-tat sanctions on Russia and the U.S. Join me at the super screen and you'll see what I mean. Now, let's see -- let us put it into perspective. The U.S. Treasury said it's taking measures against Russia's Rossiya Bank. Now what's it going to do? It's going to freeze the assets of Bank Rossiya and it says the U.S. transactions will be affected. It comes under U.S. jurisdiction and under this sanctions it forbids U.S. companies or citizens from doing business with Bank Rossiya. The measures will clearly make it harder for the bank to function normally. And bearing in mind that Rossiya on its website specifically talks about international letters of credit, it talks about foreign exchange capabilities. If Bank Rossiya is unable to within, say, the E.U. and the U.S. perform properly, then you're talking about a very serious effect on the rush -- on the bank. Now the effects on Washington, well the impact of Russian sanctions at tit-for-tat doesn't look quite so great. Senator John McCain and House Speaker John Boehner don't have second homes in Russia as far as we know. Diplomatic visits are off the agenda for the moment. Anyway, and frankly they don't seem to care. Senator McCain joked about being barred from Russia. He wrote on his website, "I guess this means my spring break in Siberia is off, my Gazprom stock is lost and my secret bank account in Moscow is frozen." So, what you have now is very clear. You have sanctions out of Washington, you have sanctions out of the E.U. and you have sanctions of course from Russia themselves. And between them all, you're going to end up with tit-for-tat rising escalation in the weeks and months ahead.
One Russian oligarch has already taken steps to avoid being caught by sanctions. Gennady Timchenko who's on today's U.S. list, sold his shares in Gunvor, one of the world's largest commodity trading companies. Frederik Pleitgen is with me in Moscow. Fred, so he sold his stock in Gunvor, which really makes the point, surely, that more than one person has said 'those involved knew what was coming and they didn't allow money to be lying around in bank accounts in London, Frankfort, Paris or New York.'
FREDERIK PLEITGEN, BERLIN CORRESPONDENT FOR CNN: Well it certainly appeared as though they knew what was coming. I think that once it was clear that Russia was going to ratify the treaty between Russia and Crimea, Richard, that allowed these oligarchs that are pulling their money out of companies that they -- that they had stock in in the West. So they certainly knew what was coming. But at the same time, of course, it is something that is very painful to a lot of people who are very close to Vladimir Putin. If you look at the Rossiya Bank, the CEO of the Rossiya Bank is someone who's very close the Vladimir Putin. He's also on that list. Another person on the list is the head of Russian Railways who was making large inroads into the West previously and now all of a sudden also finds himself basically banned from doing any sort of business in dollars with the United States. And he's actually one of the people who didn't go on the web and mock all of this. He said that he was quite surprised to find himself on the list, that he was only stating his opinion when he said he was favorable to the Crimea takeover.
So, clearly these sanctions against the Russians are something that --
PLEITGEN: -- sting a lot more than the sanctions that we've seen in the past. But let me just say this -- one of the things that we have to keep in mind -- that the tradeoff for this for Vladimir Putin is that he is going to be enshrined in Russian history as the man that brought back Crimea to this country. And the question is whether these sanctions -- the first round of sanctions, the second round of sanctions against a couple of people -- as painful as they are, is not something that he's willing to take into account -
QUEST: But --
PLEITGEN: -- to get his place in history because that's what it's about for Vladimir Putin.
QUEST: But in a word, just -- I just need to understand, Fred, in a sentence, the sanctions that are imposed -- they freeze assets, but do they stop these businessmen from traveling to Europe and traveling to the United States?
PLEITGEN: Yes, they also -- they also involve travel bans to the United States. I'm not sure what the hype (ph) list to Europe is concerned -- I think the European Union's still talking about it. But that would potentially also involve a travel ban to there. So it is something that is pretty wide-ranging -
PLEITGEN: -- will make it very difficult for these people to conduct business and lot of them, quite frankly, they travel a lot to the United States as well. They travel a lot abroad. This is definitely something that's going to hurt these people.
QUEST: Fred Pleitgen is in Moscow for us tonight. We've been talking about a new lead in the search for flight 370. It's little comfort for the families of all those missing people. When we come back, you're going to hear from a man whose gone through his heart breaking, waiting for answers. (Inaudible) it's extraordinary.
QUEST: Malaysia's prime minister has met the man who led the investigation into the loss of Air France flight 447 nearly five years ago. Najib Razak tweeted this photo of the meeting. The country's acting transport minister says he's taking advice from French officials. Robert Soulas knows what it is like for the families of Malaysia 370. He lost his daughter and son-in-law in the Air France crash. Robert now helps to run a support group for relatives of the crash victims. Earlier, he spoke to me about the trauma of waiting for answers.
ROBERT SOULAS, VICE PRESIDENT, AF447 FAMILY SUPPORT GROUP: First of all, I want to send my -- all my sympathy to the family of the Malaysian aircraft because we share the same situation five year ago, and it's very, very tormenting. So, we are facing also the same situation. We have a lot of confusing information, the lack of understanding and I think it should be very, very difficult for those families more than for us because you know for us just a few hours after the disaster, we had been informed by Air France that there was no hope about the passengers and so we knew almost immediately that everybody was dead onboard. So it's a little bit different because I think these people have still hope to find their loved ones safe.
QUEST: The lack of information that the families get, to anybody outside we can say well, the authorities don't know or the authorities are doing the best they can to find the plane. But for those families, they see this in a very different way, don't they?
SOULAS: All of this confusing information lead to anger in fact. Because the family don't understand that the situation and don't understand why we cannot find the plane in this situation. We all were searching with satellite, we've rack off message (ph) -- messages (ph) and so on, so I suppose they understand and they think about the lack of really that information.
QUEST: What would your advice be -- not only to the families but also to the airline and the authorities about how to handle and how to deal with the families?
SOULAS: Difficult to give advice as you know. What I only can suggest that they keep after to find their loved ones safe.
QUEST: What was the one thing that you learned from the awful experience of going through 447. And I covered 447, so I was one step removed, but from your whole experience of this, what was the thing that you take away -- you took away from it -- most of all?
SOULAS: We have been facing exactly the same situation, well you know with a sea search and it's very, very cruel because anybody can speech (ph) about this, anybody can find a pallet -- a floating pallet -- in the sea and telling you that it's a piece of wreckage. So, you're facing confusing information and it's very traumatic to understand it.
QUEST: We'll be back in just a moment.
QUEST: Look at the market numbers and how the Dow Jones Industrials finished today. Having opened lower, they then rallied quite strongly. We nearly closed at the best of the session of 108 points, more than half a percent. What is significant about this for tonight's "Profitable Moment" is of course this was a reflection -- a straightforward reversal of view on Janet Yellen's comments yesterday. But even so, it's a little bit odd as the U.S., E.U. and Russia go for tit for tat sanctions, that the market isn't a little bit more upset about what's going on. John McCain may make jokes about summer residences and holidays in Siberia and secret bank accounts in Moscow, and the Russians who have now been sanctioned may not feel it's terribly important. So what does get over this? It's really very simple. You have to hit people hard and you have to hit people where it hurts. It's the only way sanctions have ever worked. So the bankers in Russia who may be going to London on business, Washington to lobby, New York to raise money, Milan to buy clothes, the Riviera on holiday -- if -- I'm not say they should do this by the way -- but I am saying if you are going to have sanctions, you've got to make them hard, fast and stick and you have to hit people where it hurts which is in the pocket and you have to hit them fast. Otherwise, you end up with years of sanctions, and frankly, they do no good. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.