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Coalition Forces Patrol Skies Above Libya

Aired March 21, 2011 - 14:00:00   ET



Coalition forces are patrolling the skies above Libya, for now, though the bombardment has stopped.

In Tripoli Moammar Gadhafi's compound is wearing the scars of a missile attack. Despite this damage the coalition says the Libyan leader is not a target. His government has promised for a second time to order the army to cease fire. But in the city of Misrata we are hearing reports of tanks, snipers and terror, as Colonel Gadhafi's forces waging what witnesses describing as absolute destruction and carnage.

Now, in less than an hour members of the U.N. Security Council are due to meet behind closed doors where they will discuss Libya's request for an emergency council session.

Allow me to continue updating you on the day's developments in this story. U.S. officials say they are ready to hand over control of the military mission. The coalition is still working out how that will be commanded, going forward. Colonel Gadhafi's compound was just one of dozens of targets struck over the weekend.

As of last night, Sunday night, coalition forces had fired 124 Tomahawk cruise missiles, striking Libyan air defense sites from Tripoli to Benghazi. This may be the peak of U.S. military action in Libya for this mission, at least. Apparently U.S. forces are now moving away from airstrikes into a patrolling phase.

Representatives of the coalition have been talking about the mission so far and what happens next. Those in charge generally agree the mission is achieving its goals.


CATHERINE ASHTON, EU FOREIGN POLICY CHIEF: While contributing in a differentiated way, the EU and its member states are determined to act collective and resolutely with all international partners, particularly the Arab League, which give full effect to these decisions.

We call upon Gadhafi to relinquish power immediately and to allow the Libyan people to realize their aspirations for democracy.

UNIDENTIFIED MALE: It was necessary because with others we should be trying to prevent him using military force against his own people. It was legal because as we have just discussed it had the backing of the U.N. Security Council. And I believe it was right because we should not stand aside while this dictator murders his own people.

UNIDENTIFIED MALE: I think our mission is clear and we are moving forward in, as I say, I think we are so far achieving our military objectives consistent with our mission.


QUEST: Now we, of course, need to consider the economic impact of what is taking place amongst other things. Now, the action that is taking place in Libya is driving up oil prices. If you look oil, and the moment, is now at-this is Brent crude-at $115.04. Just up less than a dollar on the day. That is a barrel, in London. The heat has gone out of the rally earlier in the day, Brent was trading at more than $116. Traders are looking beyond Libya and worrying about the impact of the unrest in other parts of the Middle East.

Now, as we consider the latest position, Arwa Damon is on the line for-at the moment.

Arwa, in the eastern part of Libya, the day has been active, politically, how has it been militarily?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Well, Richard, the city of Benghazi itself has been fairly quiet following those airstrikes that took place against Gadhafi's military amassed (ph) some 30 kilometers outside of Benghazi, that brought his military machine to a grinding halt. Militarily speaking, his forces then withdrew to the city of Ajdabiya, where there have been clashes with the opposition forces there. The opposition forces trying to drive Gadhafi's military out of the city, because they say that the residents there are being used as human shields, to a certain degree.

They have also, according to the opposition, managed to circle around as Ajdabiya and there are, we are hearing, opposition forces heading toward the city of Brega. So, the opposition very much capitalizing on the fact that they now have this air cover, those airstrikes did take place, trying to push forward militarily regained these grounds that they have lost, saying it is their duty to try to liberate all of Libya.

Also, a lot of concern now about the clashes, eyewitness reports that we have been hearing from areas like Misrata, and Zinsan (ph), where people say that Gadhafi's forces are carrying out a massacre. At a demonstration we were at earlier, at the courthouse, we say people chanting their support for the international community, thanking the international community for coming to aid, Richard.

QUEST: The Benghazi assault by Gadhafi was effectively brought to a stop, you were telling us yesterday. You saw the graphic-you reported the graphic sites of the convoy that had been attacked. Is Gadhafi's forces- are they in any position to regroup and launch another assault do you think, on place like Benghazi?

DAMON: That would be very difficult for them at this stage, simply because of the air cover that exists because of the fact that they had around 70, at least 70, of their vehicles destroyed. But most importantly, because of the fact that there are fighter jets, who would be coming to the rescue should they attempt to do such a thing.

Now according to the opposition they are saying that elements of Gadhafi's military have been moving into small areas in the southern part of the country to try to use residents in those areas, effectively, as human shields as well. It doesn't look as if Gadhafi's forces are willing to give up the fight at this stage, but that they are changing tactics.

QUEST: Arwa-

DAMON: The opposition, for its part, is countering by trying to move into certain areas, trying to win back ground, that they lost. But an attack on Benghazi at this stage is highly unlikely, Richard.

QUEST: OK, ah, if that is the case, though, Arwa, is it all likely that what transpires is some form of guerrilla operation, basically an onslaught of slaughter of people in streets and villages?

DAMON: Well, I mean, Richard, this could end up being a fairly long- lasting and very bloody battle. Of course, Gadhafi did announce yet again a cease-fire, which has not yet materialized.

QUEST: Right.

DAMON: He has requested a cease-fire from the international community, as well. The concern is that this is going to last for a long time. There are analysts who believe it could take months, if not years, to try to bring about some sort of a resolution. The opposition, for its part, does believe that this is going to be over fairly fast. They keep insisting that they don't want the fight. That they don't want anymore bloodshed; that they want nothing more than a peaceful resolution. And even though we have seen, for example, Gadhafi's army driven out and away from place Benghazi, the opposition has been expressing its concern to us about what it calls the Gadhafi sleeper cells.

QUEST: All right.

DAMON: Loyalists, who are in fact, embedded in various cities, to include Benghazi. Overnight they say the opposition fighters carried out a mission against the Gadhafi loyalists. They say they have a list of these individuals who have been carrying out attacks against the population. They say they detained a150 of them. And so that is, of course, concerning. And those types of tactics could make this last a lot longer, Richard.

QUEST: Arwa Damon in the eastern part of Libya for us this evening. Arwa, stay safe.

Now we need to go to Tripoli, the Libyan capitol, and that is where our Senior International Correspondent Nic Robertson joins me now.

The day has been-there has been an enormous amount of things spoken by the coalition, whether it is Cameron in parliament, military leaders in Brussels. What has been happening in Tripoli?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: It has been a quiet day. The last missiles we heard falling here, fell about 22 hours ago. In the center of the city, in Green Square, where you often find a lot of pro-Gadhafi supporters, not so many today, and more stores than normal, and cafes, down in the center closed. But if you go out to some of the neighborhoods you will find the stores are busy. There is plenty of traffic on the roads. People have been very scared by the missiles and the anti-aircraft gunfire.

But today, with nothing happening, people have been out and about. There certainly is a very real concern about what is going to happen next, but people seeming to make the best of what seems to be a quiet day so far, Richard.

QUEST: Ah, but it is quiet, the question of course is, calm before the storm. Particularly bearing in mind the coalition did attack Gadhafi's compound. And that, as you have reported, of course, does raise questions about the overall goal on this activity?

ROBERTSON: Well, and the difficulty of achieving those goals, I think, when we heard Prime Minister-British Prime Minister David Cameron answering questions in the House of Commons. And other officials, we have heard from the Pentagon, General Carter Ham answering questions about the operation from the journalists. The questions have centered on some of the difficulties the coalition faces. And I think perhaps if you look at the situation in Misrata, about two to three hours' drive east of here, where the opposition, the armed opposition has been holding out against the government forces for several weeks.

That perhaps puts a spotlight on the difficulty, General Carter Ham said, the difficulty there is the government-the coalition hasn't yet enforced a no-fly zone. It is hard to see where the troops are and where the opposition are, on the streets because it is a built up environment and, therefore, coalition is finding it difficult to intervene to help save civilians. We have heard Prime Minister David Cameron saying that Misrata is one of those cities that the coalition must save civilians in, and that the government forces must pull out.

Yet, at the same time, on state television here we've heard statements saying that Misrata is now been purified, as they say. It has fallen to the government forces and indeed, they are calling on people to come out in the streets and celebrate. So that gives you just a small focus on the difficulties the coalition faces around Misrata, and then all the other towns as well, Richard.

QUEST: Nic Robertson, who is in Tripoli this evening, and watching events in Tripoli. Many thanks, Nic.

Now President Obama is in Chile and he is expected to speak in the next 15 to 20 minutes or so. As you can see the preparations are already there. When the president speaks, it is pretty much inconceivable that won't refer to events in Libya, whatever trade issues he may be talking about with Chilean leaders.

One doesn't want to seem indiscreet, or distasteful, but we do need to put these into the wider context and that does mean what happening in the financial world.

I have already shown you what oil is doing, $113 a barrel. Just up 83 cents on the day. In the markets, which have been so volatile of late, and to put that into perspective, the Dow is having a very strong session. It is up over 179 points, 12,000 is over and above, 1.5 percent.

And the reason, of course, there was a strong deal from-a merger deal in the telecom sector, AT&T and T-Mobile. We'll get to that in a little bit, in a little while. We've got, perhaps, perhaps, better news on the Japan nuclear situation. But the Dow, certainly, is on somewhat of a bullish session.

When we come back in just a moment, we'll be talking, what it all means. Pulling the strands together, whether it is Japan, or Libya, the financial world and how it reacts, in a moment.


QUEST: To Japan, now, where smoke has been seen rising from the No. 2 reactor, the Fukushima Daiichi facility. Grey smoke was seen coming from the wreckage of reactor No. 3 earlier in the day. It has been earmarked as a top priority because it contains small amounts of plutonium mixed with uranium. And that is likely to cause more harm in the event of a possible meltdown. Concern remains high about radiation already emitted. The government has prohibited the sale of raw milk from the prefecture. It has banned the sale of spinach from neighboring Ibaraki. Both contain high levels of radioactive iodine and cesium, greater than government standards.

The chief cabinet secretary says the plant operator will likely have to pay compensation to affected farmers.


YUKIO EDANO, JAPANESE CHIEF CABINET SECRETARY (through translator): The amount of compensation, that will totally be depending on the length and the scope of this restriction, shipment restriction. But primarily, this is due to this nuclear accident, so we assume that Tech-Co will be primarily held responsible for this compensation. The government might take some supplementary action.


QUEST: The World Bank today underlined the scale of the challenge for Japan. It says the country may need up to five years to rebuild following the earthquake and the tsunami, citing private estimates of the damage. The World Bank put the figure at $122 to $235. That is a very wide range, with billions' dollars worth of damage. It believes 0.5 percentage point of GDP will be shaved from growth this year. But the World Bank does expect growth to pick in the second half of the year. So it is a-it's a classic V shape that it comes down very sharply but rebounds just as quickly. And that was very much the sort of point that Robert Zoellick, the chief executive, the president, of the World Bank, made when I spoke to him on Friday.


ROBERT ZOELLICK, PRESIDENT, WORLD BANK: I think, right now, I think this is a manageable aspect. But it goes to some of those uncertainties that we talked about, particularly related to supply chain and related to the overall affect of the nuclear radiation. But I-I think that under the standard issues, you would see a slowdown and then you would see an investment recovery. And, you know, the Japanese people have certainly shown the fortitude to be able to scrabble back. And they definitely have the resources to be able to do that.


QUEST: Now, Mohamed El-Erian is the executive of PIMCO. It manages the world's biggest bond fund. He joins me now.

Mohamed, I'm apologizing to you before we even begin, because we are now within a two minute warning for the president of the United States, who is going to start speaking. So, I'll interrupt you, if and when, as I have to. But let me just quickly, very quickly, get the idea of are you still concerned that Japan, or Libya has long-term effects?

MOHAMED EL-ERIAN, CEO, PIMCO: I am, unfortunately, Richard. And it is not just the human suffering, it is also the economic dimensions. This is a combination of a demand and supply shock.

QUEST: And I do beg your pardon. We should-perhaps we should have paused longer, but we are now the president of the United States, in Chile, is about to speak.


SEBASTIAN PINERA, CHILEAN PRESIDENT (through translator): Good afternoon, everyone.

Firstly, I would like to cordially and (INAUDIBLE) welcome a friend of Chile and a person, a friend, like President Obama.

I think that your visit, President, is very important and has enormous significance to Chile. It's the first time in more than 20 years that a president of the United States visits our country.

Of course we've had several multilateral summits of leaders, and this visit coincides with the celebration of 50 years of the alliance (INAUDIBLE) that was announced by President Kennedy at the beginning of the '60s.

We have had with President Obama a very open, frank and fruitful conversation, and we have been able to subscribe to many agreements of a different nature, but they do have something in common. They all contribute to a better life and better quality of life for our peoples like trade promotion, and to (INAUDIBLE) the free trade agreement that we have with the United States, cooperation in the field of education, and English teaching, as it's (INAUDIBLE) to make Chile a bilingual country.

(INAUDIBLE) use of energy and clean air energies in particular, renewable energies where Chile has enormous potential. And also collaboration in research, technology, and training of our engineers and technicians in nuclear energy.

But I want to be very clear and adamant. Chile is not going to build nor is it planning to build any nuclear power plants during our government, during our administration. The idea of this agreement is that we've made (ph), understand much better nuclear technologies to be able to train our engineers and technicians so that in the future, we may make more informed decisions, more intelligent decisions protecting the (INAUDIBLE) life of our population, the environment, and nature, and also that will allow us to ensure that the operation of our two experimental nuclear power plants be fully, fully safe.

Also, we have signed agreements to collaborate in natural disasters, in early warning mechanisms, and effective aid and rescue of several populations. We have much to learn from institutions like FEMA in the United States.

Another agreement is something addressing the only renewable resource in modern times, science, technology, innovation and entrepreneurship, that we need to strengthen in our country so as to reach the development stage that we are seeking.

And then, finally, agreements to better protect our nature, our environment.

I want to tell you, President Obama, that when you announced your visit to Chile, Brazil and El Salvador on the occasion of the State of the Union Address, you said you were coming to forge new partnerships for the progress of the Americas. And you said that throughout all the world, you were committed to those countries that assume their responsibilities.

Frankly, I think that Chile has assumed and will continue to assume its responsibility with our fate, with our (INAUDIBLE), with our country, and to the extent possible, with the rest of the world. And as we have been able to evidence in our conversations, not only today, but also in your country and in Asia, we have discovered that our two nations have a road of collaboration that can be built on rock and not on sand, because we coincide in that which is key, the values, the principles, the visions. That facilitates the vote, and with that we can convincingly embrace this new alliance, this new partnership between the United States of America and the rest of the American countries.

We are all Americans, an alliance that should be much deeper and forward-looking than the alliance for progress. And this partnership, this alliance, is one of our times of our 21st century of the society of information and technology.

QUEST: Well, that is the President of Chile speaking. And perhaps it is a little difficult for us to hear, more translation than we can actually hear-that is good for us at the moment. We are waiting to see-waiting to see what President Obama has to say.

Mohammed El-ElBaradei, I'm going to take-Mohamed El-Erian, I beg your pardon. I'm going to take my luck in my hands and ask you to start again, hopefully before President Obama starts speaking. I do apologize once again.

Let's talk again, we're talking about the risks for global growth at the moment.

EL-ERIAN: OK, Richard, first no need to apologize. There is so much going on that it has become a very unpredictable world.

In terms of the risks of global growth they come from two direction. One is the disruptions in Japan, which means that a consumer, a lot of consumers are going to be consuming less, and remember Japan is the third largest economy in the world. And vertical supply chains, particularly for technology and autos are being disrupted. So it is both a supply and demand shock.

And, of course, you have the Middle East, which is also supply and demand shock. Higher oil price mean higher input prices and they mean consumers, like you and me, have less to spend on other things. So there are significant headwinds. It is not enough to tip us into global recession. But we should keep an eye on it.

QUEST: But none of what you are talking about here classes as systemic, does it, in the sense of the recession from the banking crisis? They are all external shocks.

EL-ERIAN: They are external shocks but they are coming at a time when the global economy is still recovering. They are coming at a time when there are-there is a need for a transition from policy lead growth, fiscal stimulus, quantitative easing, to endogenous growth. And we are not yet at a point where we have reached critical mass, or what people like to call escape velocity. So we have to take these headwinds seriously.

QUEST: Looking at, I mean, PIMCO itself, you know, one of your funds is sold out of U.S. government bonds, made the position that it doesn't-it believes that U.S. Treasuries, which is the most liquid market in the world for sovereign debt, that is not exactly a rousing cause of faith.

EL-ERIAN: Yes, what we are saying, Richard, is very simple, that at current valuations we are finding better opportunities away from Treasuries. Now remember, fixed income-and this is a fixed-income fund- fixed income is a global asset class with lots of opportunities. And we just think that right now, for our clients, there are better opportunities elsewhere at the given price of Treasuries.

When, and if, that price changes we will perhaps buy again if it gets to an attractive level. But it is not attractive at this level. Why? QE is ending, which means a big buyer of Treasuries is going to stop buying. And secondly, there is-the issuance is going to continue. The fiscal deficit in the United States is very high and will remain high.

QUEST: Everyone is obsessed by the price of oil, at the moment; $115 on Brent, $100 and change on WTI. If we maintain these sort of levels does that do serious damage, do you think, to growth?

EL-ERIAN: It doesn't do serious damage. But it does slow global growth down. There is no doubt it is going to slow global growth down. For serious damage you would either need it to go much higher, which is a possibility if the unrest in the Middle East spreads. Or alternatively, you would need another endogenous shock. Remember the simple image, Richard, the world economy is this car, on a bumpy road, and we're running out of spare tires. So we cannot afford to have many more bumps on this road.

QUEST: Mohamed, many thanks indeed for joining us from California. We appreciate it. Our apologies again we had to interrupt you the first time, but it is good to finally talk in details on these matters. Many thanks, indeed.

Now, busy day as you can tell. The president of Chile is still speaking. We are still waiting for the president of the United States. Obviously, our concern here is what President Obama will say about Libya. We'll take a short break. We'll break in if he says anything and we'll go with the moment we can.


QUEST: The president of the United States is now speaking in Chile.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: ... the generous words, but also the outstanding hospitality that's being shown to me, as well as my family.

I want to begin today by noting that President Pinera and I discussed some urgent events unfolding around the world. Together with our partners, the United States is taking military action to enforce U.N. Security Council resolution 1973 and protect the Libyan people. Across the region we believe that the legitimate aspirations of people must be met and that violence against civilians is not the answer.

And across the Pacific, both Chile and the United States are supporting the Japanese people as they recover from the catastrophic earthquake and tsunami and address the situation in their damaged nuclear facility.

These events remind us that in our interconnected world, the security and prosperity of nations and peoples are intertwined as never before. And no region is more closely linked than the United States and Latin America. And here in the Americas, one of our closest and strongest partners is Chile.

Chile is one of the great success stories of this region. It's built a robust democracy. It's been one of the most open and fastest- growing economies in the world. The spirit and resilience of the Chilean people, especially after last year's earthquake, have inspired people across the globe.

And in my speech this afternoon, I look forward to paying tribute to Chile's progress and the lessons it offers as America forges a new era of partnership across the Americas.

I was proud to welcome President Pinera to Washington last year for our nuclear security summit.

Mr. President, I want to commend you on your decisive leadership in these first few months of office, in the first year of office, a time that's been obviously very difficult and has tested the people of Chile.

I want to thank you for the focus and energy that you've brought to the partnership between our two countries, which we have strengthened today.

We're moving ahead with efforts to expand trade and investment, as the president mentioned. Under our existing trade agreement, trade between the United States and Chile has more than doubled, creating new jobs and opportunities in both our countries.

But I believe and President Pinera believes there's always more we can do to expand our economic cooperation. So today we recommitted ourselves to fully implementing our free trade agreement, to include protections of intellectual property so our businesses can innovate and stay competitive.

We agreed to build on the progress we're making toward a trans- Pacific partnership so we can seize the full potential of trade in the Asia-Pacific, especially for our small and medium businesses.

And it's my hope that, along with our other partners, we can reach an agreement on the TPP by the end of the year, an agreement that can serve as a model for the 21st century.

We're expanding the clean energy partnerships that are key to creating green jobs and addressing climate change, which is evident in the glacier melt in this region.

As a member of the Energy and Climate Partnership for the Americas (sic) that I proposed, Chile is already sharing its expertise with solar with the region.

I want to commend President Pinera for agreeing to take another step, hosting a new center to address glacier melt in the Andes. In addition, a new U.S.-Chile energy business council will encourage collaborations between our companies in areas like energy efficiency and renewable technologies.

Our governments have agreed to share our experience in dealing with natural disasters, an area where Chile has enormous expertise, and which is critical to recovery and economic reconstruction.

The president and I discussed our shared commitment to expanding educational exchanges among our students, who can learn from each other and bring our countries even closer together.

And in my speech today I'll announce an ambitious new initiative to increase student exchanges between the United States and Latin America, including Chile.

Even as we deepen cooperation between our two countries, I want to take this opportunity to commend Chile for the leadership role that it's increasingly playing across the Americas.

Chile is a vital contributor to the United Nations' mission in Haiti, where we agree that yesterday's election is an opportunity to accelerate recovery and reconstruction efforts. And the Chilean legislature recently passed strong legislation to combat the scourge of human trafficking.

Under President Pinera's leadership, Chile is taking a new step today.

Mr. President, I want to thank you for offering to share Chile's security expertise with Central American nations as they fight back against criminal gangs and narcotraffickers. I'm also pleased that our two government will be working together to promote development in the Americas.

At the same time, Chile is assuming more of a leadership role beyond the Americas.

As part of last year's Nuclear Security Summit, Chile took the bold step of giving up its stockpile of highly enriched uranium. Chile is the first Latin American nation to join a new international effort to strengthen civil society groups that are under threat. And as a member of the U.N. Human Rights Council, Chile joined with us in standing up against human rights abuses in Iran and Libya.

In short, Mr. President, today we've proven again that when the United States and Chile work together in a spirit of mutual interest and mutual respect, it's not only good for the peoples of our nations, I believe it's good for the region and it's good for the world. And I'm confident that our partnership will only grow stronger in the years to come. And I'm very much grateful for the wonderful hospitality that you're showing me and my delegation.

Thank you very much.


PINERA: Thank you very much.

UNIDENTIFIED MALE: Now we will proceed to the questions from the media. We remind you that only three questions will be allowed and they have been decided on: one from Chile, one from international. The first question is (INAUDIBLE) on behalf of the Association of Journalists From La Moneda.

QUESTION: President Pinera, President Obama, good afternoon.

President Obama, you have emphasized and highlighted the economic management of Chile, the leadership in the region -- those were your words -- and even the successful transitioning to democracy in the difficult years of the '90s.

However, in Chile, President Obama, there are some open wounds of the dictatorship of General Pinochet. And do, in that sense, leaders -- political leaders, leaders of the world.

QUEST: So there we have President Pinera and President Obama, and although President Obama did talk about the air strikes and the military action taking place at the moment or over the last 24 hours, frankly, not a whole amount of new information, if any new information, a restating of the position. And it doesn't sound like the question-and-answer session is going to give us much more than we know about already, three questions and one of them seems to be on economic matters.

Let's go to Richard Roth, who is at the United Nations, where it is -- of course, the U.N. Security Council will meet today on Libya behind closed doors. Richard Roth, they've got 1973 in place. The action is under way. What have they got to talk about?

RICHARD ROTH, CNN CORRESPONDENT: It's really a meeting to talk about another meeting, but it could be a little bit more lively than that type of procedural thing, Richard, because Libya, the government of Libya, asked for a meeting of the Security Council. Libya, like any other U.N. member country, can't really demand a meeting on its own. First the Security Council has to have a meeting to discuss whether this request will be granted.

We've seen interesting comments coming from Russia today, Russian Prime Minister Putin comparing the operations by the U.S. and allies to a crusade, a medieval crusade. Russia abstained last Thursday night during that vote, 10 in favor of operations against Libya for the no-fly zone, five abstentions, including Russia.

So we may find out what countries really want to step up now and maybe protest, if they feel operations, military operations, have gone beyond the scope of the resolution. Some talk, of course, is for national country consumption. We'll find out this afternoon who wants to get angry formally, maybe with a protest. And there could be some interesting behind-closed-doors dynamics after that Security Council vote Thursday -- Richard.

QUEST: And Richard, econ (ph) -- let's have some blunt talk here. When they agreed 1973, countries even (INAUDIBLE) abstained, China, Russia and others, but they knew, didn't they, just what was about to happen.

ROTH: You would think they would have to have known. So a lot of people, including the Arab League over there, Amre Moussa, they're all talking or spinning for different reasons. You never know which way it's going to turn out in Libya. They had to know that -- it says "all necessary means" in the resolution could be used to establish this no-fly zone. And I heard from diplomats that missiles could be flying pretty soon.

They kind of -- they had to know. They've been around. They know what happened in -- eight years to the day with "shock and awe" in Iraq, a resolution that really wasn't agreed upon to (ph) here, depending on your viewpoint. So they all knew. It's no surprise. Someone may claim it is after this meeting. We'll find out.

QUEST: Richard Roth, who's in the -- or at the United Nations and will be monitoring and bustling (ph) around to find what they've talked about at those closed-door meetings.

Now, events in the Middle East and North Africa raise serious concerns for the energy sector. It's the uncertainty that's created by that U.N. authorization for force. A volatile industry, the oil industry. It is exceptionally volatile at the moment.

Now we need to talk in more detail. The head of oil and gas research at Oppenheim and (ph) Co. (ph) is Fadel Gheit, and he joins me now. Always nice to have you, and thank you for waiting and being patient while we -- we got to those other matters.

As we look at this -- oil at $113 on the -- on the Brent -- do you get the feeling that it is just itching, the price of oil, to go through the roof?

FADEL GHEIT, HEAD OF OIL AND GAS RESEARCH, OPPENHEIM: Well, it really depends what you think the roof is, or is it going to be $50, $150 or $200? It will depend on which regime in the Middle East is likely to fall next, whether it's going to be Bahrain, whether it's going to be Yemen, whether it's going to be Syria. Increased uncertainty will undoubtedly push oil prices higher. The question is not if, it's when and by how much.

QUEST: Now, that's the core, isn't it. So anybody who says oil prices are going to fall back is just -- is just delusional.

GHEIT: Absolutely. Very unlikely. The only way that you can bring oil or that oil prices will go down, if we have very sharp drop in economic activity across the globe, which is very highly unlikely.

QUEST: Japan and its temporary -- if you like, temporary problem of slowdown in growth as a result of lack of production -- Japan, of course, is a total importer of oil, but you'd expect that to unwind itself, wouldn't you, as things pick up again in the reconstruction effort.

GHEIT: Absolutely. There are a couple of things. The total energy consumption in Japan is likely to decline as a result of the hurricane (SIC) and the tsunami and all the destruction. However, we are going to see a shift going forward in the energy mix that Japan is going to use. They're going to be less nuclear, more LNG, natural gas, and more crude oil and coal. Although Japan has been limiting its use of oil, as well as nuclear, over the last 10 years, and increased its use of LNG and coal, I think this trend will continue.

QUEST: Give us a barometer, if you will -- because I'm never quite sure myself -- the rise in a barrel per dollar, or the per dollar rise in a barrel -- what effect do you think that has on global growth, if we go up $1, $5, $10? Can we quantify it?

GHEIT: It will -- it really depends on the growth rate (INAUDIBLE) China, India is different than the growth rate in Europe, Japan and the U.S. We are -- 1 percent of economic growth will equate to half of 1 percent of energy growth or less in the U.S., Europe and Japan. But it's almost 1-to-1 ratio when it comes to developing countries like China and India.

QUEST: So let me just finally -- because whichever way the numbers fall out, give me a -- give me a feeling for how worried you are about the state of the oil and energy market at the moment.

GHEIT: We don't have any imminent supply disruption, if you will. I only worry about supply if the largest oil-exporting country in the world is facing problems, and that's Saudi Arabia. Any other country is basically a secondary player, is not as important to the global energy supply. So therefore, with the Libyan production now almost off the chart, that means that Saudi Arabia and the rest of OPEC will be able to make up for any shortfall. The question going forward is, which other regime might fall and how much of the impact will have in the world of supply. Only Saudi Arabia that worries me. Other players are not as important.

QUEST: Fadel, lovely to see you, as always. And we thank you for joining us from Oppenheimer, Fadel Gheit joining me.

QUEST MEANS BUSINESS. It is the start of a new week. It is a Monday. And as you can tell, we're -- so we're off to the races already. Back in a moment.


QUEST: Deutsche Telekom made it clear that it wanted to get rid of T- Mobile in the United States for some time. Who was going to pick it up? Well, when AT&T and DT announced yesterday that they were doing a deal worth some $39 billion, not surprisingly, that gave the market a massive boost. The Dow is up 181 points.

So what and who gets why (ph)? Maggie Lake is in New York. We knew that T-Mobile was going, but the -- I mean, AT&T?

MAGGIE LAKE, CNN CORRESPONDENT: Yes, Richard. This is a bit of a surprise. There was an awful lot of merger speculation around there in the wireless department, but not everyone put these two together. And there's a reason why. Ma Bell is back. You'll remember the long history of AT&T. The government, when it was, you know, a more traditional phone company, split it apart because it was a monopoly. Fast-forward 30-some-odd years. They're back, a dominant force in wireless. And they're brokering a deal that's got regulators raising their eyebrows once again.


(voice-over): It is the largest global merger deal announced so far this year. If approved by regulators, AT&T's $39 billion purchase of T- Mobile would create the largest U.S. wireless company at a time when demand is exploding. The popularity of smartphones and tablets have pushed current networks to capacity. AT&T CEO says this deal will help meet that demand.

RANDALL STEPHENSON, AT&T CEO: And this produces something that no other transaction could produce, an immediate lift to capacity, an immediate improvement in service quality. It allows us to do something that's going to be very unique, and that is we're going to build mobile broadband, LTE, across 95 percent of the United States.

LAKE: Wireless experts say getting the pipes to push through more information is the key for AT&T.

MATT BUCHANAN, GIZMODO: If you imagine kind of airwaves as, like, a highway, we need more lanes to carry more data, more voices -- more voice traffic and that kind of thing. But there's only so many lanes. You can't just add on another lane. And by buying T-Mobile, AT&T gets access so their lanes.

LAKE: In another plus for AT&T, this deal will provide a big boost to its customer base. AT&T currently has 95 million customers. T-Mobile has 34 million. If this deal goes through as is, the new company's combined market share will shoot up to more than 40 percent, well ahead of competitors Sprint and Verizon. And that has consumer groups worried. Many have already openly criticized the deal, saying it will lead to higher prices and fewer choices for consumers.

Industry experts say some concerns appear valid.

BUCHANAN: You're talking about eliminating one of the four major wireless carriers, and particularly, you're talking about getting rid of the wireless carrier that's competed the most on price. So you're going to (INAUDIBLE) cheapest carrier.

LAKE: But AT&T's promise to pump billions into wireless infrastructure could appeal to an Obama administration intent on getting more Americans hooked up to broadband. As an example, AT&T says it could expand broadband access dramatically in the state of Texas alone. Antitrust regulators are sure to go over this deal closely, and AT&T may have to make major concessions if it is to gobble up T-Mobile, one of its biggest competitors. AT&T is not expected to get the OK for this deal for at least another year.


LAKE: Oh, and Richard, it's a big if. It's going to be closely scrutinized. And to show you that, AT&T had to put in that deal a $3 billion break-up fee they'll pay Deutsche Telekom if it gets turned down. That is historically very high. But investors think when it's all said and done, they're going to do it, AT&T and T-Mobile both trading up. The big loser here, Spring. It is down some 15 percent today.

QUEST: Maggie, we haven't got time to talk much about this, but there's just one statistic. Just think about it. Imagine having a customer base of 130 million people! If those -- if they only make one phone call a year to you to complain or to ask -- the size and -- ai-yi-yi!

LAKE: Which is why a lot of people are wondering, Richard.

QUEST: A hundred and thirty million. Maggie Lake is in New York. That's quite a sizable operation for any company.

Felicia Taylor is watching over events on the markets. How much can we say this AT&T deal has shifted the Dow to its triple-digit gains?

FELICIA TAYLOR, CNN CORRESPONDENT: Quite a bit, Richard. I mean, this is a merger Monday, as they call it, and Wall Street likes the fact when companies are active about -- about doing business on Wall Street. And certainly, that's what AT&T is doing.

AT&T shares are up more than 1 percent. Rival Sprint, as Maggie said, they're down now about 15.5 percent. Sprint is concerned that (INAUDIBLE) able to compete. But could Sprint make a counter-move, so that, you know, when she was talking about watching this very closely, you know, Sprint could force itself on -- align with somebody else like Clearwire (ph). Is Verizon going to look to partner with somebody else? That stock is also up. It's up about 2 -- almost 2 percent right -- 1 and two thirds percent.

(INAUDIBLE) a big ticket price, and that's why Wall Street likes this. They are actively investing back into the marketplace. Yes, the tensions in Japan are a little bit less than what they were last week. Things look like they're getting better in Libya also. So that is contributing somewhat, but that's not really what Wall Street's talking about today. Wall Street likes what it sees when it sees companies merging with one another.

The other thing is this has tentacles, iPhone and iPad. Apple stock could also benefit from this as it gets access to the customer base. And you just talked about this, the huge customer base of T-Mobile. It could be a negative, though, for handset makers like RIM and Nokia. So overall, that's what the rally is about right now. It'll take time for this to actually play out, and as Maggie said, it's not a done deal. The Department of Justice and the SEC need to approve it, so we're going to be watching about this for at least another year.

QUEST: CitiGroup has done a reverse stock split. CitiGroup, of course, took a -- took a huge amount of money from the U.S. government, paid it all back. So what are they up to now, a bit of shenanigans on the financials?


TAYLOR: Well, that's kind of the way Wall Street sees it. Exactly. I mean, it's kind of like propping up your shares slightly artificially. But here's how it works. CitiGroup announced a reverse stock split, 1 for 10 of the company's common shares. The bank will also reinstate quarterly dividends. So that's a very -- that's a positive.

The reverse split basically lowers the number of total shares outstanding. That boosts the stock price. For example, let's say you have 10 shares at $4.50. You will now have one share at $45. So the value of the company doesn't actually change. It'll bolster Citi's lagging stock price, which is down about 5 percent. And Wall Street doesn't like it, though! CitiGroup shares are down 1.5 percent right now. They're not so sure this is a good idea. But it will allow mutual funds to now invest in the stock.

QUEST: I have...


QUEST: I have never understood the logic of these reverse stock -- where you split the stock so the price goes up. I always used to think, actually (INAUDIBLE) you know, when you actually got a stock split in itself, it took the -- the stock would rise faster once it gets to a lower price. But by doing this, of course, they do the opposite.

TAYLOR: Right. Like I said, if you had 10 shares at $4.50, you'd now have one share at $45. The whole point of this is it allows mutual funds, other investments vehicles, to now buy the stock. Mutual funds don't really invest in stocks that are less than $5 a share, so that's the good news. But Wall Street isn't necessarily in favor of this kind of thing.

QUEST: All right. All right. Got a confession to make, Felicia. I think I bought Citi...

TAYLOR: What's that?

QUEST: I bought Citi many years ago at about $40 or $50 a share, when they were that price, never mind the reverse stock (ph). I think I'm nursing a loss of about 95 percent on my original investment.


QUEST: Felicia -- yes. Thank you. Don't laugh! Felicia Taylor at the New York Stock Exchange. In the interests of complete transparency, got to make that clear.

Now the global markets and the European telecom sector buoyed by enthusiastic (ph) reaction to that DT-AT&T deal. The announcement from Swiss Re about its estimated claims from the Japanese earthquake also saw insurance stocks post strong gains.

Normally, we go at this time -- remind you where (ph) the Asian markets, but obviously (ph), (INAUDIBLE) extremely important at the moment, bearing in mind what's happening in Japan. So it was traders that were most concerned about comments from Warren Buffett that Japan's earthquake has created a buying opportunity, markets boosted by reports Japan may be able to avoid the worst of a nuclear crisis.

Before we finish tonight, President Obama has been commenting on the situation in Libya. The president is on a visit to Chile, and a short time ago, this is what he had to say.


OBAMA: Because we're working with international partners, after the initial (INAUDIBLE) that has disabled Gadhafi's air defense, limits his ability to threaten large population centers like Benghazi, that there's going to be a transition taking place in which we have a range of coalition partners -- the Europeans, members of the Arab League -- who will then be participating in establishing a no-fly zone there.


QUEST: President Obama talking in Chile a short while ago.

The other big story we have, of course, been following is the weather forecast, and we'll have an update for you on how that is likely to affect the situation in Japan, where all eyes are still upon, of course, what is happening, the smoke that is happening and coming out of the nuclear power stations.

Jenny Harrison is at the World Weather Center.

JENNY HARRISON, CNN METEOROLOGIST: Hey, Richard, yes, of course, (INAUDIBLE) focusing very much on the winds, the direction and the speed of those winds. Right now, winds are (INAUDIBLE) in and around Fukushima, coming from the north at 2 kilometers an hour, and (INAUDIBLE) temperatures moderated out (ph). That wind not quite as cold as it was literally a few days ago.

You can see generally the winds that are (INAUDIBLE) stations all coming in from that northerly direction.

Now, the weather that's coming in, as well -- a lot of sea effect snow to come across the region in the next 48 hours, and most of it just the higher elevations. But it's this low, as well, which is really bringing in all the moisture, and of course, that cold air is (INAUDIBLE) that moisture over to snow.

But as that low works its way eastward, this is why we see such a variation in the wind direction. Now, this, as you can see, is the forecast over the next few days, saying (INAUDIBLE) it should be brightening up, drying up into Sendai, certainly as we head through Tuesday on into Wednesday. For the most part, the next 48 hours, the winds are fairly light, but really pretty much coming in on-shore, and then eventually by about mid-week, they should begin to head out towards the Pacific -- Richard.

QUEST: Jenny Harrison at the World Weather Center, we thank you for that.

As you can tell, it's been a very busy hour, and I thank you for taking the time and trouble to join us. QUEST MEANS BUSINESS. I'm Richard Quest in London. As always, whatever you're up to, that's profitable. "WORLD REPORT" is next, Fionnuala Sweeney.