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Tear Gas Fired At Cairo Protest; Turkey Seeks NATO Missiles; Dozens of Nations Possess Drones; Petraeus Approached About Presidency; UK Demands Taxes From Major US Companies; Israel to Continue Housing Development Plan

Aired December 4, 2012 - 12:00   ET

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


MICHAEL HOLMES, CNN ANCHOR: Welcome, everyone, to NEWSROOM INTERNATIONAL. I'm Michael Holmes, in for Suzanne Malveaux again. And we are, as usual, taking you around the world in 60 minutes. And here's what we've got going on for you today.

We're going to start with breaking news out of Cairo, Egypt. Thousands of protesters crowding the streets. Troops firing tear gas. Many people mad about the president's recent power grab.

Now, the country is less than two weeks away from voting on a new constitution. A controversial one to many people. Our Reza Sayah is in the middle of it all in Cairo.

Reza, this demonstration has been unfolding for a while. What -- what has been happening in the last half hour or so?

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: Yes, let's get you up to speed, Michael, on new information that we've gotten over the past hour. According to witnesses on the ground, protesters have broken at least one barrier set up with barbed wire that was arranged by police to keep protesters away from the presidential palace. Another witness telling us there's been at least one clash between protesters and police after demonstrators started throwing rocks, debris and other objects, you know, at police and police responded by firing at least one round of tear gas.

For the most part, these demonstrations near the presidential palace have been peaceful. But with this clash, we're going to keep our eyes on things to see if that leads to more violence. This is the first time these opposition factions have marched towards the presidential palace. This is, of course, part of today's big demonstration that opposition factions have dubbed the final warning. These are the seculars, the moderates, the liberals, the women's rights groups who are protesting the president, his decrees and the process by which this constitution has been drafted.

While that's happening at the presidential palace, you have another group of people, about 5,000 to 10,000 people protesting here in Tahrir Square again with chants of "cancel, cancel, we won't leave until he leaves." A reference to President Morsi, Michael.

The deck seems to be stacked against them and the moment seems to have shifted in favor of the president, Michael, but they still have their voice and they're coming out protesting again it looks like.

HOLMES: And, of course, this all relates back, to give people the context, to what some call the power grab, others call an expansion of powers by Mr. Morsi, which some in the judiciary oppose, others have approved of. All relates to a new constitution. Give us the synopsis there.

SAYAH: Yes, the president's position all along has been that he was elected to establish the democratic institutions after the 2011 revolution. He said he inherited the legislature and he announced these decrees to push through with the process of forming a constitution of establishing a parliament and avoiding what he called the impediment of the old judges and the remnants from the Mubarak regime who wanted to block his way.

And then you have these opposition factions who have described that process as a power grab. As the president's attempt, as the Muslim Brotherhood's attempt to monopolize power. They are very concerned that down the road an Islamist-led government could use this constitution to deny them their rights. They don't want to go ahead and vote on this draft constitution. That's why they're out here protesting at this hour, Michael.

HOLMES: Reza, as always, appreciate your reporting. There from Cairo, Reza Sayah.

All right. And there's another strong warning today for Syria's president not to use chemical weapons against his own people. NATO Secretary-General Anders Fogh Rasmussen said the use of such weapons would result in an immediate reaction, his words. He described the Syrian stockpiles as a matter of great concern. And President Obama, of course, has also been warning of consequences if Bashar al Assad makes what Mr. Obama calls the tragic mistake of using chemical weapons. Former British Prime Minister Tony Blair voiced his concerns a little earlier right here on CNN.

(BEGIN VIDEO CLIP)

TONY BLAIR, FORMER BRITISH PRIME MINISTER: I mean now the death toll probably would be around 40,000, since this began, since a large number of people. But if there was any sense at all that Assad was going to use chemical weapons or did use chemical weapons against his own people, I would expect a very tough response that would be military.

(END VIDEO CLIP)

HOLMES: And NATO is taking no chances by trying to protect one of its members. The alliance expected to authorize the deployment of patriot missiles to Turkey's border with Syria. I want to bring in CNN's Ivan Watson, joining us now from Istanbul in Turkey.

Ivan, the Turkish government asked for NATO's help after the Syrian government was shelling near the border in -- near -- and coming across inside Turkey on one memorable occasion. Do these missiles perhaps escalate border tensions or are they the deterrent that NATO claims, they're defensive, not offensive?

IVAN WATSON, CNN CORRESPONDENT: Who (ph) you talk to. If you talk to the Turkish government, I mean if you talk to NATO officials, they argue that this will help serve as deterrents, the deployment of these patriot missile batteries perhaps from the U.S., Germany and the Netherlands. This would serve to be a pretty firm warning to the flailing Assad regime to not (ph) basically to mess with the NATO member Turkey.

If you talk to some of the most vocal critics, though, of his proposal, and that would be the Russians who are in Brussels at that NATO meeting and who were here, Russian President Vladimir Putin in Istanbul meeting with the Turkish leadership yesterday, they argue that further militarizing this long border will only serve to escalate tensions.

Michael.

HOLMES: All right, Ivan, thanks so much. Ivan Watson there in Istanbul, who has been down near that border town that has been the subject of shelling, Razain (ph).

All right, moving on. Before the scandal broke, many people could have seen former CIA Director David Petraeus running for office. And now there is news that he was indeed approached. The way he was approached may surprise you.

Also, Israel standing firm on its decision to go forward with construction of new settlements in the West Bank and East Jerusalem. Hear what that might mean for the Mideast peace process, if that even exists.

(COMMERCIAL BREAK)

HOLMES: And welcome back, everyone.

Iran says it has captured a U.S. drone that ended its airspace over the Persian Gulf. And we can show you there, the Iranians showing off what they say is a ScanEagle drone made by Boeing. Iran says the drone was spying and that the Iranian navy brought it down by hacking into its electronics. But the U.S. Navy says, well, it's not missing a drone in the Middle East.

I'm joined now by Elise Labott in Washington.

Elise, first, the U.S. far from the only country to possess drones, even in that part of the world. Multiple countries do. Could the aircraft belong to someone else?

ELISE LABOTT, CNN FOREIGN AFFAIRS REPORTER: Well, certainly, Michael. The U.S. says that none of its drones are missing, so certainly that follows that it could belong to someone else. And, in fact, the United States has identify 76 countries that use this type of drone technology. And many U.S. allies in the Persian Gulf are also using it. But it's unclear how Iran --

HOLMES: You know, the --

LABOTT: It's unclear how Iran got a hold of it anyway.

HOLMES: Yes.

LABOTT: It's possible that it got lost or it had a mechanical failure. It's not really clear that it shot down.

HOLMES: Yes, exactly. I mean one of the questions that's been asked, and they've claimed to have done this before. In fact this announcement comes, I think, a day to the -- a year to the day after Iran claimed to have shot down another U.S. drone. And they say that that one crashed in the Iranian desert.

LABOTT: That's right. I mean it's a great propaganda for the Iranians to say that they shot down a U.S. drone. And last year they got so much bang for their buck by making a toy of this stealth drone and selling it on the streets of Tehran. Any time they can say that they've kept the U.S. at bay or been able to take down U.S. technology.

Now that stealth drone that you're talking about from last year was much more valuable piece of technology. This ScanEagle drone, no one is all that concerned about, that type of drone anyway, because it doesn't really have all that valuable technology. It's readily available on the market.

HOLMES: Yes, they're pretty small, too. But, you know, whether or not this latest one was American, it does look largely undamaged, which, you know, the Iranians say they hacked it electronically. If that is the case, what does it say about Iranian technical capabilities and, obviously, the need of the U.S. and others to combat that if they can hijack a drone in midair?

LABOTT: Well, right now, Michael, it doesn't say anything because nobody knows how Iran got a hold of this, like we said. So it doesn't really say anything about their technical capabilities. Last week, Iran -- several weeks ago, the U.S. claimed that it shot down -- tried to shoot out another U.S. predator drone. Again, that would be a much more valuable piece of machinery. But the Americans said that it didn't reach that drone.

And last year, careful to note that the Americans said that Iran did not shoot down that stealth drone. That that drone was the result of mechanical failure. So, obviously Iran is trying to shoot down and go after U.S. and other countries' drone technologies. It's just unclear right now how successful they are.

HOLMES: Yes, it is a drone world these days. Good to see you, Elise.

LABOTT: It completely is.

HOLMES: Elise Labott there. We'll bring you up to date on that if we can find out exactly what happened.

Let's move on, meanwhile, to an enlightening bit of audiotape that was never supposed to become public. Bob Woodward of "The Washington Post," you'll find in that name familiar no doubt, he reports today that in the spring of 2011 an analyst with Fox News delivered a personal message from her boss, the conservative media mogul Roger Ailes, to General David Petraeus.

I'm joined now by Jim Acosta from Washington. Jim, what was the message that that reporter, Kathleen McFarland, delivered in Afghanistan?

JIM ACOSTA, CNN NATIONAL POLITICAL CORRESPONDENT: Well, the message from that analyst over at Fox News to General David Petraeus was that Roger Ailes, a high-level executive over at Fox News, wanted the general to run for president. And just listen to some of the audio. It features K.T. McFarland, who is a national security analyst over at Fox News, and, of course, General David Petraeus. This conversation was had back in 2011 just before he was named to run the CIA.

I'm being told right now we don't actually have that audio ready to go. So let me read to you a little bit of what was said during that conversation as being reported by "The Washington Post." At one point, McFarland says, quote, "the other thing was just directly advised to me from Roger Ailes is," and David Petraeus interrupts and says, "I'm not running."

Actually I am told now we do have some of that audio. So let's play a little bit of that for you.

(BEGIN VIDEO CLIP)

K.T. MCFARLAND, FOX NEWS NATIONAL SECURITY ANALYST (voice-over): The other thing was just directly advised to me from Roger Ailes is --

UNIDENTIFIED MALE (voice-over): You want us to leave, sir?

DAVID PETRAEUS (voice-over): I'm not running.

MCFARLAND: That is not the question at this point. He says that if you're offered chairman, take it. If you're offered anything else, don't take it. Resign in six months and run for president. OK. And I know you're not running for president, but at some point, when you go to New York next, you may want to just chat with Roger and Rupert.

PETRAEUS: Well --

MCFARLAND: (INAUDIBLE).

PETRAEUS: Well, Rupert's after me.

(END VIDEO CLIP)

ACOSTA: So, I don't know if you heard that at the very end of that audio clip, Michael. David Petraeus says there to K.T. McFarland, Rupert is after me as well. That's referring to the chairman of News Corp., which is the parent company of Fox News, Rupert Murdoch. And -- but Roger Ailes did give a comment to "The Washington Post" saying that this was sort of a lighthearted conversation that went on between K.T. McFarland and David Petraeus. That this was never any intent on his part to convey to the general that he wanted him to run for president.

And it says here, "it was more of a joke." A, quote, "wiseass way I have. I thought the Republican primarily field needed to be shaken up and Petraeus might be a good candidate. It sounds like she thought she was on a secret mission in the Reagan administration. She was way out of line. It's someone's fantasy to make me a kingmaker. It is not my job."

And it goes on to say in that "Washington Post" article, Michael, that Roger Ailes offering to step down from his role over at Fox News to run the potential Petraeus campaign. He is denying that, as well.

We have reached out to Fox News for comment. We have not heard back from network. I've also reached out to K.T. McFarland. She has also not responded.

But there was a YouTube clip I can tell you that I found just a little while ago of her on Fox News talking about this conversation with David Petraeus in which she talks about how, you know, she asked him about the job at the CIA and talking about running for president. But there's no mention in this clip of K.T. McFarland on Fox News back in 2011 talking about this idea that Roger Ailes might come over and help him run for president. It's just not there.

Michael?

HOLMES: Yeah, of course, all moot now, of course. Jim, thanks so much.

ACOSTA: It is.

HOLMES: Yeah, different (INAUDIBLE) there.

Well, they are some of the world's most successful companies, but British lawmakers are accusing Starbucks, Google and Amazon of avoiding their taxes or at least minimizing them and not the right way.

We'll have a live report.

(COMMERCIAL BREAK)

HOLMES: Welcome back, everyone.

While Washington bickers over the fiscal cliff and who's going to pay more in taxes, in Great Britain, lawmakers are telling some American companies it is time to start paying their fair share there in the U.K. They're even throwing around terms such as "shame" and "outrageous" when talking about it.

Executives from Google, Amazon and Starbucks all appeared before a parliamentary committee looking into how international companies minimize the tax they pay in the U.K. Richard Quest is in London to explain it all. Now, Richard, we're not necessarily talking about tax evasion here. It's more like avoidance, minimization. What's the concern?

RICHARD QUEST, CNN INTERNATIONAL CORRESPONDENT: And that's exactly the point. The companies are at pains to stress they are not breaking the law. They are not doing anything wrong.

The accounts committee described their actions as immoral, claiming they have are so arranging their tax affairs so as to pay no tax in the country where the money is earned. This applies to Google, which uses Ireland, it applies to Amazon on the continent, and it applies to Starbucks in Amsterdam.

And what we learned is how these companies arrange their affairs. So even though the latte is bought in London, no tax is ever paid except on VAT and sales tax to the U.K government.

I need to demonstrate this to you. This is the example, if I may, Michael, this is the example ...

HOLMES: As only you can do, Richard.

QUEST: Well, it's -- this is the Starbucks example. So, here we have all of the various size, the venti, the grande, the tall and the .

HOLMES: Oh, come on. It's big, medium and small.

QUEST: Whatever. In this box -- now, imagine this is the billion and a third revenues that Starbucks says it's made -- revenues, not profits that it's made in the U.K over the last few years.

Well, obviously, the majority of it will go straight into overhead, salaries, lights, rents and the like. Then here's the bit. It pays a 4.7 percent royalty to its own company in Amsterdam. Well, that gets rid of quite a lot of money.

Then it pays a thumping big loan back to Starbucks in the United States and a 20 percent margin to a Swiss company that it buys its coffee from, 20 percent margin. That gets rid of a bit more.

So, when you finish it all and they come to declare a profit, oh, as you can see, barely a bean left.

Now, Starbucks says it's only made money in the U.K once in the last 14 years, 15 years, so this is an example -- look, what they are doing is perfectly legal and, certainly, Starbucks deny that they're doing it for the purpose of tax avoidance.

But there's no question in times of austerity -- and tomorrow we'll find out what taxes in the U.K are going to go up -- that this sort of finagling of the finances is most definitely not on.

HOLMES: I suppose you could call it "creative bean counters" behind all of that. Well, you could if you wanted to be silly. Britain actually has a bit of a big tax gap problem overall, right? QUEST: It does. And the chancellor of the exchequer, the finance minister, has now warned that he won't meet his deficit targets for -- austerity will have to continue. We expect higher taxes on the rich tomorrow, cuts in public spending and, in this environment, the multinationals like Google, Amazon, Starbucks, are very firmly in the firing line.

After all, what better than to attack big corporate America. And they're being told, smell the coffee. I can play that game, too, Michael.

HOLMES: Wake up and smell the coffee.

Always good to see you, Mr. Quest. And always making it simple for us. Thanks so much. Richard Quest in London. He probably didn't pay for that coffee.

Now, over the weekend, the Palestinians celebrated their new status recognized by the United Nations. The joy a little short-lived. How Israel's decision to pursue even more settlements in the West Bank and East Jerusalem may kill any hopes of peace. We'll dive deeply into this issue.

(COMMERCIAL BREAK)

HOLMES: Israel says it is not changing plans for that highly controversial housing development in east -- well, it's east of Jerusalem, also developments in East Jerusalem. This is despite getting a diplomatic smackdown most recently from Australia. Five European countries and the United States, also, bought in on this yesterday.

Now, here's why this is such a big deal. The proposed construction would effectively cut off the West Bank from cities of -- like Bethlehem and Ramallah, would cut them off from Jerusalem. And that's important for the Palestinians. It would mean that they couldn't get to East Jerusalem, which they would eventually claim as the capital of their nation if that is to be. But the large Israeli settlement town of Ma'ale Adumim would be connected to Jerusalem directly.

OK, let's bring in Aaron David Miller now. He's vice president for New Initiatives and a distinguished scholar at the Woodrow Wilson International Center. Always good to talk to you, Aaron.

Now, Israel still defiant, as we said, as the international opposition mounts. Do you buy the political posturing angle? There's an upcoming election. But if that is the case, it's a short-term domestic tactic while, you know, wider damage is being done to relations with the U.S., the E.U. and concept of a peace process, which is just a concept at the moment.

AARON DAVID MILLER, VICE PRESIDENT FOR NEW INITIATIVES, WOODROW WILSON INTERNATIONAL CENTER: It's true, Michael. Look, the reality that is that Benjamin Netanyahu's current circumstances, his politics and his ideology all conspire to basically create this most recent move on settlement activity, not only conceptually go ahead with E-1, but to increase the number of units in settlements in the southern -- southeastern portion of Jerusalem.

I don't think he's going to go through with E-1, but he is going to go through with some of the new neighborhoods. Givat HaMatos is one. I think there are over 2,100 new units which would be I think about 5 percent of all of the Israeli units constructed in East Jerusalem since 1967.

So I think Benjamin Netanyahu, worried about his right wing base in the wake of a cease-fire for which he's being criticized from his right and in anticipation of upcoming elections,, does what he basically has done. He's committed to a unified Jerusalem, so this is not an unusual, frankly, or an extraordinary step, even though it will bring him -- has already brought him into conflict with the Palestinians, with Europeans and maybe with the Obama administration.