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QUEST MEANS BUSINESS

US Stocks Stage Huge Rally; Putin Seeks to Ease Russian Fears Over Economy; Western Companies Worry Over Ruble; European Markets Up; US May Be Ready to Blame North Korea for Sony Hack; Hack Aftermath; New Era of Warfare; Make, Create, Innovate: Smelling With Super Sensor

Aired December 18, 2014 - 16:00   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: Now, that is a cheer as the market has its best performance since 2008, the best for some six years. The closing bell is

ringing. Hit it again!

(CROWD CHEERS)

QUEST: We're just going to get one. I'm just going to show you this number before I give you the date, because this is significant. The market

is up 2.4 percent, a gain of 419 points on the Dow Jones Industrials. Trading is over. It is Thursday, December the 18th.

It's a worldwide rally. The Dow has its best day of the year for the second time in a week and the best in six years.

The markets are bullish. This president is bearish. Russia's president says the country is like a wild animal.

And preparing to point the finger. The United States is about to name who's behind the Sony attack. We'll put it all in a big pot and make sense

for you.

I'm Richard Quest. I mean business.

Good evening. In the last ten minutes or so, we've pretty much thrown out the program that we were going to bring you and instead we're going to

point out --

(RINGS BELL)

QUEST: -- the stock market's best day of 2014. A spectacular rally that added to another strong performance. Join me at the super screens and

you'll see exactly what's been happening. A buying frenzy that fueled by the Fed's pledge to be patient in raising interest rates.

The market is just -- the last numbers are ticking over, but we're now up 420.4, a gain of 2.4 percent on the Dow Jones. And as you can see, the

entire session was in the green, and we've ended, I think -- well, not I think, I know -- we've ended at the best point in the day. Its triple-

digit swings every day this week.

Now, on Monday, it was down 100 points. Tuesday, 112. Wednesday, up 228. Look at how the market overall has performed. Let's take the Dow

first of all. That's today's performance straight up. This is the key bit. It was right at the start of trading, went straight up like a rocket,

and it stayed up.

But if I put it into the week overall, you see again -- now look at the month and you get a very sharp fall, and it comes back up again. What

on Earth is going on with this market? This is year -- one year graph so far. Let's talk to Paul La Monica, who joins me. Sir.

PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: A bit dizzying, isn't it?

QUEST: It's a bit. A bit. What's going on?

LA MONICA: I think you just have right now euphoria about the Fed. Everyone is very excited that Janet Yellen has talked about being patient

with rate hikes. There had been concerns that the rate hikes could come sooner in 2015 rather than later.

Now it really seems that unless there's a shock in the economic data, the Fed's going to be on hold for the first part of probably 2015, and the

market really likes that. Because they've just gotten addicted to zero percent interest rates, because we've been there since 2008.

QUEST: It was a very good choice of words. "Patient." Patience -- we're going to be patient. We can be patient in deciding the future, was

the words of the Fed. But that's a perfect word. It's a soothing word.

LA MONICA: Yes, I think she did a great job of reassuring the market that she will focus on the data, but they're not going to be making any

decisions based on the calendar or based even on what the financial markets want or think should happen. They're just going to wait, bid their time,

and when it's the right time to raise rates, that's when they'll start doing it.

Because in the past, the Fed has sometimes gotten burned from going too aggressive too quickly with rate hikes, and I don't think she wants to

repeat those mistakes.

QUEST: And you've only got to look at other countries that have done similar. You have Australia that did it, you certainly have the fiasco of

the ECB, which started to raise rates. You had Israel that raised rates after the Great Recession, all of which had to reverse track.

LA MONICA: Without question. And I know that Yellen is aware of that, and Stanley Fischer, who is the vice chair and who had been at the

Bank of Israel, obviously aware of that as well.

QUEST: We're going to talk about Russia in just a second, but I just need to put it into context. Does Russia play into this? Or is Russia now

basically its own side issue?

LA MONICA: I think Russia stabilizing has helped. Seeing what's happened with the ruble has probably calmed down some of the fears about

there being a possible contagion to Western banks. And Janet Yellen yesterday also said that any spillover from Russia would likely be minimal,

so I think people are reassured by that as well.

QUEST: Good to see you, sir.

LA MONICA: Thank you so much.

QUEST: I appreciate it. Now, if we take a look at how the Moscow situation developed during the course of this very exciting day. You've

got to admit, it's not every day you see 400 points on the Dow.

Now, this is how the RTS -- let me grab my pen -- performed during the course of day. You've got to put this into context. In Moscow, the bulls

overpowered the bears, and it's because investors were watching the Russian president's end-of-year news conference.

So, we have the RTS, which on Tuesday comes down very sharply, Wednesday bounced up a bit. But this is really where Putin is speaking.

It jumps 6.5 percent. This is a dollar-denominated gauge. It's added more than 20 percent over the last two sessions.

As for what the president said, there was nothing tremendously dramatic about it. He did say Russia is like a bear trying to protect its

forest. Vladimir Putin used the analogy describing the annexation of Crimea. And Mr. Putin said, "If the bear sits still, his teeth and claws

will be pulled out."

He also insisted Moscow was ready to resolve the Ukraine crisis using political means, and he spoke at length about the deteriorating economy and

the collapsing ruble.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): It promised to be more like a Hollywood blockbuster than an annual press

conference. The PR machine around Vladimir Putin not missing a chance to cast him as the hero.

But with Russia in the grip of an economic crisis, all eyes were on its president for reassurance. And he gave it, promising to diversify the

Russian economy away from oil and spend currency reserves on supporting the ruble.

VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): We are going to use the measures we used in 2008 quite successfully, and in this

situation, we'll have to focus attention on those people who need it. Social problems, tensions, salaries of budget employees. If things develop

unfavorably, we'll have to make adjustments and reduce something. Our economy will overcome the current situation.

CHANCE: But overcoming doesn't apparently involve climbing down. There was no U-turn on Russia's actions in Ukraine, nor any softer tone

towards the West. When asked if Russia's economic crisis was the result of sanctions, the price of annexing Crimea, he rejected it outright.

PUTIN (through translator): No, it's not the price we pay for Crimea. It's what we have to do to preserve our nation and maintain our state. If

we want to maintain sovereignty and fight, we have to further work. Do we want to achieve that, or do we want our bear to become a stuffed animal?

CHANCE (on camera): Well, this was yet another classing Putin performance, polished and confident even in the face of an economic

meltdown. And there wasn't even a hint of compromise. If you were waiting for Vladimir Putin to back down in the face of economic pressure, you'd

have been disappointed.

CHANCE (voice-over): The issue of Russian military flights probing NATO defenses a case in point. President Putin rejecting allegations of

Cold War-style aggression in the skies. It is the United States, not Russia, he said, that's the aggressor.

PUTIN (through translator): The budget from the Ministry of Defense has grown. It's about $50 billion, and the Pentagon's budget is ten times

more, $575 billion. And you're trying to say we are pursuing an aggressive policy?

CHANCE: It's the kind of jab that's resonated with Russians in the past, making Putin a popular hero. But will it be enough to comfort

Russians now mired in economic tape?

Matthew Chance, CNN, Moscow.

(END VIDEOTAPE)

QUEST: Well, there were some very real, live effects taking place of what's been happening with the ruble and the Russian economy. As the

currency plunges, the volatile exchange rate is now causing Western companies to panic.

For example, let's take the automobile industry. GM has stopped deliveries to Russia. Audi, Jaguar, Land Rover, have all suspended sales

for one simple reason: they've agreed to pay and send cars that have already been sold, but as the price devalues against the cost of making the

cars, so they've decided to bring down the shutters.

Also, Ikea has halted sales of kitchen furniture and appliances. Again, too many orders were coming in because the prices were changing so

fast that Ikea has basically said for the time being, here we go -- no more sales.

And Apple itself, well, Apple has already shut down the online store and is currently reviewing and rewriting prices. Last month, it increased

the price of the iPhone in Russia by some 25 percent. Now the iStore is closed -- it's all gone bad.

Joining me now on the line, Mikhail Kasyanov, a former Russian prime minister. He's now a leader of the liberal opposition party. Sir, the

situation as outlined by President Putin, he refuses to recognize it as a crisis, but the markets are saying otherwise. Or is he right?

MIKHAIL KASYANOV, FORMER PRIME MINISTER OF RUSSIA (via telephone): Yes, that's right. Unfortunately, business community expected that Mr.

Putin would make some special, I would say, orders, and would recognize some kind of mistakes the government undertook just last month.

But Mr. Putin in return said that everything was right, the government did everything right, and just all the problems we have are external

enemies, like the United States of America and the West as a whole breaks into Russia.

QUEST: Right.

KASYANOV: And moreover, he again restated his recent conclusion that the United States and the West would like to deprive Russia of its

sovereignty. Therefore, annexation of Crimea was the right step --

QUEST: OK, but let me ask --

KASYANOV: -- to defend it. That's absolutely unacceptable stance, and the business community lost all confidence.

QUEST: So, you say the business community's lost all confidence, but when does the business community tell the Kremlin, if they do indeed, that

the policies have to change? Or maybe they're too scared. Which is it?

KASYANOV: The system Mr. Putin built up during the last ten years, I call it capitalism for friends, this system doesn't allow the business

community to say anything to Mr. Putin as a recommendation. They can say how difficult for them, but they cannot complain and make some kind of

recommendation to change the policy.

Therefore, Mr. Putin has been like a child, the only person who makes decisions. People don't believe the central bank is independent and could

perform its duty. People don't believe that the minister of finance is independent to a certain extent and can perform the duty.

That's why just all eyes of people and business community in particular just had it with Mr. Putin. And Mr. Putin said everything is

all right, the United States should be blamed for everything.

QUEST: Right, but you are obviously in the political opposition to the president, so I can hear the critics say, well, he would say that,

wouldn't he? But the truth be told, it's not entirely Russia's fault. A 40 percent drop in the principal commodity of oil that's your main foreign

currency revenue raiser, that would tax any economy anywhere in the world.

KASYANOV: Yes, but the problem is that the main reason is not the drop of the price. The main reason of the problems is just the policy Mr.

Putin issued the last ten years. As I said, just no -- any action or diversification of economy depends on the state and federal budget in

particular of oil price increased dramatically. Now, the federal budget depends on the oil price more than 50 percent.

QUEST: All right.

KASYANOV: During just ten years, the dependence has grown dramatically. And on top of that, now we have acceleration of problems

caused by drop of oil price and sanctions. Mr. Putin admitted to that. He had to admit that. They're just -- the sanctions started to work.

QUEST: Right.

KASYANOV: He's already called to the people, keep patient, and in two years, everything will disappear by itself.

QUEST: Mr. Kasyanov --

KASYANOV: That is absolutely not heading in any way, just he lost leadership at all.

QUEST: Mr. Kasyanov, forgive me interrupting you, the time moves on. We need to say thank you, sir, and we most certainly look forward to having

you join us again on QUEST MEANS BUSINESS, joining us from Moscow, former Russian prime minister with some forthright views.

It's been a roller coaster market everywhere. A sharp swing in Europe, recovering from big losses earlier in the week. Look at those

numbers.

(RINGS BELL)

QUEST: Paris up over 3 percent, Germany up nearly -- over 2.75 percent. In Switzerland, a stunning move by the central bank announcing

first negative deposit rates on the excessive reserves. Those negative rates designed to force people to lend. And, of course, designed to make

the Swiss franc a less attractive investment by the SNB.

It's a new chapter in international warfare, and if you think the Sony hack was bad, wait until you see what's coming along. Some insight from an

expert in the field. This is QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: US investigators are zeroing in on North Korea as the likely culprit behind the massive hacking attack on Sony pictures. A White House

spokesman made it clear that Washington may be close to naming whom they think is responsible.

(BEGIN VIDEO CLIP)

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: This is something that's being treated as a serious national security matter. There is evidence to

indicate that we have seen destructive activity with malicious intent that was initiated by a sophisticated actor and is being treated by those

investigative agencies, both at the FBI and the Department of Justice, as seriously as you would expect.

(END VIDEO CLIP)

QUEST: Samuel Burke is with me. Samuel, what are they waiting for?

SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: I think there is an important question that hasn't been answered yet, and may not be even

answered once they name North Korea publicly: who did it? They keep on saying "North Korea."

Sources are telling CNN North Korea ordered it, but that doesn't mean North Korea did it. They need to find out not only who was behind it but

which group, which actor, which nation-state actually carried it out, and that group may not be North Korea.

QUEST: Is it over?

BURKE: That's a very important question. This has been going on for days and weeks now. They could keep on punishing Sony.

QUEST: Well, not really. Let's face it, what else can -- well, you could arguably say we don't know until it comes out, but short of some

risque pictures in flagrante delicto, it's hard to know what else there is to come out.

BURKE: Well, I think more could come out. I really hope it's over, but more could come out. Another consequence is another film canceled, a

film that was going to star Steve Carrel, who's the star of "The Office," the American version, was also going to center around North Korea, another

film canceled.

QUEST: On the question of the canceling of the release and the theaters, where is the consensus at the moment? I know between Hollywood,

it's a first amendment issue and they're angry at Sony. But generally, from your gauge, where's the consensus? Was Sony right?

BURKE: Well, Sony only did this -- they were going to -- to their credit, Sony was going to go on with the release until the theater chains

backed out. So, I think if you're going to blame somebody for capitulating, it has to be the theater chains. They're the ones who pulled

out. Sony was moving ahead.

So, we might be setting a very dangerous precedent. If this is how America is going to react to this, Richard, other states are going to be

watching, other hacking groups are going to be watching, and I think many people are hoping that this isn't how America reacts again.

QUEST: Samuel Burke, thank you. Security experts are saying that the Sony hack, as Samuel was suggesting, has marked a new era, in this case, in

industrial warfare. I talked to Alec Ross, who is the former senior advisor for information to Secretary of State Hillary Clinton. He has some

extremely strong views, not only on wireless warfare, but also what it means.

(BEGIN VIDEOTAPE)

ALEC ROSS, FORMER SENIOR ADVISOR, STATE DEPARTMENT: I think the weaponization of code is the most significant development in combat since

the weaponization of fissile material. The biggest difference is that to develop a nuclear arm, it takes billions of dollars and yeas and access to

the scarcest scientific talent and trans-uranium elements.

To develop a really sophisticated hack, it takes a tiny, tiny fraction of that. And so I'm really worried that malignant code is the weapon of

the near present and certainly of the future.

It's already causing hundreds of billions of dollars worth of damage, and I think that the damage is going to grow worse. And I think all 500 of

the Fortune 500 companies are going to have to account for it to a degree to which they are not today.

QUEST: And that's the interesting part, because we're a business program, so let's talk about that. The -- what you said in your recent

article that every member, every board will have to have a cyber expert on it.

But if we talk about this year, it's been the year of the hack. Whether it's Home Depot, Chase, there's hardly a citizen in the United

States that hasn't received a letter warning that their personal information has been appropriated.

ROSS: 2014 is going to be a lot better than 2015. 2015 is going to be a lot better than 2016. Look, our networks are too insecure, cyber

security is lagging way behind cyber offense at this point. So, if we think that 2014 was the year of the hack, people have no idea what's

coming.

Again, I hate to be so pessimistic. I'm an optimistic guy. And I think that a lot of the people working in cyber defense are very smart and

sophisticated. But the simple fact of the matter is that cyber offense is easier than cyber defense, and that means things are going to get worse.

QUEST: Ah, but to your point in your article, the crucial point is that the board of directors cannot aggregate that responsibility. They

have to have specialized knowledge about dealing with it in the same way as they would on audit, compensation, and any other issue.

ROSS: That's right. Beginning about 15 years ago, if you had an audit failing on -- in your company, the board of directors couldn't just

throw up its hands and say, oops, we don't have an audit expert on the board. I guess maybe we should have had one. No, if you did that, it was

bad governance, and people were held to account.

I think that in the next three years, in the same way in which you must have finance and audit experts on a board of directors today, so too

will we take it completely for granted in three years that you must have a cyber expert on your board.

Because one of the greatest threats, one of the greatest existential threats posed to any large business that relies on intellectual property is

rooted in cyber.

QUEST: Do you think CEOs are quaking at the prospect of what's ahead? Or do you think that there is still -- the scales haven't fallen from their

eyes that they, too, could be at risk? Because the size and scale of the Sony dump, everybody's thinking, well, that couldn't happen to me. Sony

was just stupid.

ROSS: Right. That's a great question, Richard, and here -- and my answer is, the really smart CEOs are beginning to quake in their boots.

The less smart CEOs will be in six months.

(END VIDEOTAPE)

QUEST: Alec Ross talking to me with some very serious thoughts. In a moment, dogs can out-smell humans. It's one of their superior qualities.

Now, a new chip, a super smeller, will give dogs a run for their money. And it may give scientists a new way to detect diseases through odor with

Make, Create, Innovate.

(COMMERCIAL BREAK)

QUEST: Ah! The sense of smell. It may be the least appreciated of all the senses, yet the science behind it holds the promise of detecting

disease from the very scent of your breath. Scientists have created a kind of smelling super-sensor. It's strong enough to detect a drop in an

Olympic-sized swimming pool. Nick Glass with today's Make, Create, Innovate.

(RINGS BELL)

(BEGIN VIDEOTAPE)

NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: Go on. Come on. Come, Bella.

GLASS (voice-over): Loyal, companionable, and in one particular respect, superior to us. The primary sense in dogs is smell, and it's

infinitely better than ours.

GLASS (on camera): But with the help of scientists, we're suddenly catching up with our four-legged friends here. An extraordinary sensor has

been developed to help us humans sniff the air around us for anything dangerous, including disease.

ANDREW KOEHL, OWLSTONE NANOTECH: We have invented a microchip to detect chemicals in the air. It's essentially a microchip with a sense of

smell.

GLASS: An American engineer, Dr. Andrew Koehl, is absolutely single- minded. At 25, he knew he wanted to turn his PhD into a business.

KOEHL: Smell is an under-valued sense. I was looking to develop a solution right after September 11th happened, so that got me thinking about

the security side of things, detecting things like explosives, toxic chemicals, threats that might occur.

GLASS: The microchip is essentially a tiny digital nose, sniffing for a specific chemical. The sensor creates a picture, a so-called spectra of

what chemicals are in the air, and identifies by its unique fingerprint the chemical you're looking for among all the molecules present. And if it is

above a set level, it triggers an alarm.

KOEHL: Well, there are a couple of ways we can use our sensor. One is to detect different sorts of smells. So, here I have an orange. I hold

it up to our system, see the alarm that says orange. So we can look at both what is present and how much is present.

We can do a demonstration where we're detecting the smell of a marker from a distance. And what's happening is, once we open the cap, the smell

of the marker will drift over to the system and cause it to alarm. We can detect down to parts per billion levels. To give you an analogy, that's

about equivalent to one drop in an Olympic-sized swimming pool.

GLASS: Combining expertise in chemistry, electronics, and nanotechnology, the microchip has been developed at the research lab in

Cambridge. Their technology is already used by BP and Shell and in the food industry by Coca-Cola and Nestle.

While the sensor is already tiny, smaller than a one-pence piece, work continues to shrink it further for the next big market: health care. They

hope it could help detect disease.

KOEHL: There have already been a number of research papers published suggesting we can do these sorts of things, detection of cancer, detection

of tuberculosis, detection of asthma, for instance. So, we're talking to a number of manufacturers of mobile phones and mobile phone components.

GLASS (on camera): Is it to -- I'm really surprised by this.

KOEHL: Sure. What's amazing is that there really are compounds on your breath that indicate an illness.

GLASS (voice-over): This test is still a few years away. This is precisely how Dr. Koehl imagines our future, devices we use every day will

all have a sense of smell.

KOEHL: You can put it into home appliances, such as refrigerators, microwave ovens, to detect food smells in your fridge, you might want to

know when a food is going off. You might want to have some help identifying which food is going off. And it is coming. It is something

that is very possible and something that we will get there.

(END VIDEOTAPE)

QUEST: Absolutely riveting and fascinating. The microchip that'll give you the smell that will help you detect whether you've got disease.

Absolutely -- as he said, he said it just there. It's coming. The only question is when. The sooner the better.

Now, new European sanctions on Russia. The United States has already signed in. President Obama signed a whole new raft, all at a time when the

Russian economy is deeply under pressure. QUEST MEANS BUSINESS.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in a moment. This is CNN and on this network the news always comes first. A

hundred and eighty-five women and children are missing from a village in Northern Nigeria after an attack by Boko Haram militants. Insurgents

struck the town of Gumsuri, killing dozens of men before carrying out the kidnappings. It's the latest in a series of Boko Haram attacks that are

hitting the region over the recent months.

The Russian President Vladimir Putin says Russia must actively protect its sovereignty. It was his end-of-year news conference. It lasted three

hours. And Mr. Putin said external factors were to blame for Russia's economic struggles. (Inaudible) oil prices and Western sanctions.

The White House says the cyberattack on Sony Pictures is being treated as a serious national security matter. U.S. authorities are preparing to

announce that North Korea was behind the attack. On Wednesday, Sony canceled the release of its controversial comedy "The Interview" which has

angered Pyongyang.

U.S. airstrikes in Iraq have killed three senior ISIS militants close to the group's leader Abu Bakr al-Baghdadi. This according to a U.S.

military official. One was al-Baghdadi's deputy in Iraq and the other his military emir in Iraq and the third the emir in Mosul.

It was a dazzling day. The Dow Jones Industrial average jumped 2.4 percent up 421 points - it's the biggest gain in three years. As always

probably the result of the Fed which has promised patience when it comes to raising interest rates.

A record-breaking day on the markets. Join me at the Super Screens and you'll see for the Dow it's the best day since 2011. I think I might

have said 2008 at the beginning of the program, but we've clarified the dates and the times and all that and it is actually 2011. And the best

reason right at the open the market went up - the Fed saying it was going to be patient. Optimist Fed projections for 2015. Now let's just very

quickly put this into context for you for how the Dow is over the last six months. You have this very sharp drop in the market where people were

wondering whether it has been a major correction. But the market has come back to its prevision position and more. Another quick drop there, but

obviously the resilience of the bulls is quite clear from the grass.

Now the Russian market also rallied today. They've been pummeled recently. Some U.S. companies though - well I say some, we're choosing

Google of course. Google has a market cap of $336 billion. Well it's more than the entire market cap of the Russian market. But if you take a look,

this Google versus the Russian market, it's according to Bloomberg News. But Russia's market has absolutely been pummeled in recent days as a result

of what's happened. Today there was a gain of 6 percent. I asked the chief financial officer of Moscow Stock Exchange if investors are shying

away from Russia.

(BEGIN VIDEOCLIP)

EVGENY FETISOV, CFO, MOSCOW STOCK EXCHANGE: What we've seen is definitely volatility. There is a lot of volatility across EFT RSX/process

(ph). But we also see out of - what we see volumes - we see trading volumes going through, again, across most of the EFT/process (ph). We have

fixed income which had suffered a lot in terms of the volumes, but this is natural given the current market conditions. But foreign exchange equities

derivatives are faring extremely well. So all of these are being traded by both local and international investors, so we see appetite to trades, to

take risk, to hedge risks. And we've just been on the road in the U.S. and the U.K. in the last two weeks, and we spoke with investors which were

particularly interested in Moscow exchange. What we've heard is that people are interested in buying Russian EFTs. They find certain companies

very attractive in terms of the valuations, and they're just on the sidelines waiting for hesitation (ph) to be more clearer and for the

exchange rate to stabilize to actually get into the market and invest.

QUEST: This crisis will come to an end, of that there's no doubt. Even the president admitted it might be a few quarters or a couple of

years. So it will come to an end, but your reputation about how you handle this crisis - that could last a lot longer. And you must be very aware of

that.

FETISOV: Right. Absolutely. Now what we - again - what we're focused on is to be there, stay open, be reliable, be proactive in terms of

managing the risk and let people create under any conditions. I mean, no matter what the volatility is and how scary the investors and see other

coins (ph) must be so they can, again, take the risk. They will like or hedge the risk that they don't like.

QUEST: If funds like the Morgan Stanley Emerging Fund - if funds and indices start to delist or disinvest from Russia, -- for example, the

threat of capital controls is causing some to suggest that they will pull out of the market, -- what will you do?

FETISOV: What we've done actually in the past two years, we've built out infrastructure, we've created Russian Central Securities Depository,

we've - we - continue to integrate into the global capital markets. And I think there is just one way safe path that we're taking. We actually see

liquidity flowing back into Moscow. And I think the overall - the whole issue of - capital controls is overblown.

(END VIDEOCLIP)

QUEST: Chief financial officer of the Moscow Stock Exchange. Well he may have more to worry about - more sanctions are on the way for Russia.

The E.U.'s unveiled a new ban. It's a ban that involves barring Europeans from investing in Crimea. Angela Merkel said further economic sanctions

would be "unavoidable" in her words if President Putin continues to violate international law in Ukraine. "Unavoidable" is the key word from Merkel.

Leaders of Europe are meeting in Brussels to discuss the next course of action. Lord Peter Truscott is the former trade and energy minister for

the United Kingdom and a biographer of Vladimir Putin. I have no doubt Lord Truscott was watching very closely Mr. Putin's press conference today.

Did you see a man who was rattled, confident, or belligerent?

PETER TRUSCOTT, PUTIN BIOGRAPHER: He was confident actually. You saw a president in reassurance mode, and believe it or not, despite some of the

recurring themes of, you know, Russia being pushed into a corner, you know, the Russian bear being chained up by the West. He was actually very

moderate for Vladimir Putin in terms of the stance he took, referring for example to respecting the political unity of the Ukraine and that Russia

would do its best to bring aback -- about -- a diplomatic solution that all these -

QUEST: Right.

TRUSCOTT: -- storms that we're seeing on the economic front. A sort of caused by external factors, that he was essentially in reassurance mode

that Russia may be going through a difficult patch, it may last a couple of years, but they'll come through.

QUEST: Right. Now we've got today President Obama signing in new sanctions, but saying he was going to wait to see what more. You've heard

just me talking now about the European sanctions. They've got to be very careful both the U.S. and the E.U., don't they? Because arguably Russia's

economy is teetering and more sanctions could push it over.

TRUSCOTT: Well, yes that's right. I mean, Vladimir Putin said during his press conference that he thought that the sanctions were responsible

for about 25 to 30 percent of Russia's economic woes and the estimates have been that the drop in the oil price is costing Russia something like $100

billion. And the sanctions are costing Russia $40 billion. So you can see Vladimir Putin's figures were about right. And of course if they ratchet

up the sanctions, --

QUEST: Right.

TRUSCOTT: -- then that will have an even bigger impact on the Russian economy.

QUEST: So -

TRUSCOTT: But it's primarily the fall in the oil price which is hitting Russia very badly.

QUEST: So, let me ask you - in this environment, how delicate is it - let's forget from the Russian point of view - we can see their problems.

But from Obama and from the Europeans and from now Donald Tusk of the European Commission -- from their point of view - the council - how

difficult is it knowing what to do next?

TRUSCOTT: Well I think it is quite tricky because there is a danger of pushing Russia and President Putin into a corner from where they think

that the only thing they can do is become more isolationist in their approach. And, you know, if it comes to the point where they think well

they may have to introduce capital controls and default on some of their foreign debts, well that would have an impact on this West as well. And

there is a danger I think economically and politically that Russia could be put back forty since the collapse of the Soviet Union despite, you know,

the fact that Russia hasn't developed a full market economy or a Western- style democracy. There have been real improvements in terms of openness and global trade and all the rest, and we don't - I don't - think anyone in

the West to see Russia to go back to a command economy - a sort of closed economy. And that's of course one of the options that the Russians and

Vladimir Putin will have -

QUEST: Right.

TRUSCOTT: -- if they're totally closed off from Western markets. Lord Peter Truscott. Thank you, sir, for your insight. Much appreciate

you joining us tonight. If you look at the damage that's being done of course from the Russian economy and you start to see the ripple effects,

perhaps you can see it nowhere than in London which is home to many Russians. And while oligarchs are the stereotype, ordinary expatriates are

also feeling the pinch. CNN's Jim Boulden now looks at how the economic pain at home hurts Russians abroad.

(BEGIN VIDEOCLIP)

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Feeling the pinch 1,500 miles from Moscow. Ignaty Dyakov is one of an estimated 150,000 Russians

living in London and he's no oligarch. The 31-year-old set up a consultancy to advise small and medium British firms that wanted to do

business with Russia. That is until sanctions kicked in.

IGNATY DYAKOV, RUSSIA LOCAL LTD.: We had some sort of ongoing projects which we've finished `til June, but we haven't picked up any new

clients for consulting job or for fund work since then and to an extent that I had to fire my staff around this time as well.

BOULDEN: Even though, the consultancy work he was doing did not violate any sanctions.

DYAKOV: Nobody knows what will happen next in terms of sanctions on this side and anti-sanctions from the Russian side. People don't want the

risk and our clients were small and medium-sized businesses normally. So in their situation, they can't risk - they can't risk it here.

BOULDEN: With the consulting arm shut down, Dyakov is now providing translation services to Russians and is teaching Russian to those in London

who want to attract the wealth of those Russians moving to London. Especially the small wealth management firms in the west of the city who

want business from the influx of Russian expats.

DYAKOV: The interesting move is now that I'm teaching more in Mayfair than in the city which I guess is an interesting indicator of what is

happening.

BOULDEN: Because that's more hedge funds and private equity.

DYAKOV: Absolutely.

BOULDEN: And real estate?

DYAKOV: The real estate to an extent, family offices, --

BOULDEN: Right.

DYAKOV: -- more law firms - the boutique law firms.

BOULDEN: Real estate firm Knight Frank says the number of Russians looking for London properties costing more than $15 million has soared in

recent months. Russian children are now one of the biggest groups of non- British students in pricy British schools. There is even a debutante ball for Russian young ladies. All a silver lining perhaps for Dyakov who might

restart his consultancy firm to help these incoming Russians.

DYAKOV: Whether we can restructure our consulting work and do inwards direction rather than outwards - it's a good business opportunity

definitely. People would be interested in buying property in London, investing money here, you know, making sure that their families are all

settled here.

BOULDEN: Dyakov is worried about friends and family who are struggling with soaring prices and fewer goods on the shelves. His goal

has been building business by building bridges between the West and his beloved homeland - a goal he acknowledges that has now been put on hold.

Jim Boulden, CNN London.

(END VIDEOCLIP)

QUEST: A day after the United States said it will ease travel and trade restrictions, we're now learning more about what that will mean for

the Cuban economy - -but don't be breaking out the Cuban cigars just yet. After the break, a former U.S. commerce secretary tells us why things may

not be as straightforward. Put the cigars away for the time being.

(END VIDEOCLIP)

(COMMERCIAL BREAK)

QUEST: There was an initial amount of jubilation at the prospect of normalization of relations between the U.S. and Cuba. But as I said a

moment ago, keep the Havana cigars firmly locked up for the moment because there could be a great deal of opposition before this goes through. Carlos

Gutierrez is the former United States commerce secretary, and indeed was born in Cuba. He joins me now from Washington. Well, barely was the

announcement made, Mr. Former Secretary, and many - maybe yourself included - are saying `not so fast.'

CARLOS GUTIERREZ, CHAIR OF ALBRIGHT STONEBRIDGE GROUP: Yes, this is not what it appears to be. You know, some of the headlines this morning

were saying, `Well, the Cuban crisis has ended and we're now friends.' This has been a prisoner exchange. The Cubans clearly won this round - we

have given them so many concessions - remittances, expanded travel policy, we're going to review whether they should stay on the terror list even

though we caught a boat going from Cuba to North Korea this year. You know, all these things that we -

QUEST: Right.

GUTIERREZ: -- gave Cuba - nothing was given in return.

QUEST: What do you want in return? I mean, you - in the sense that, you know, the goal here is as the Pope said normalization of relations

between these two countries. If you're going to get quid pro quo, you've got to start somewhere.

GUTIERREZ: Well, but what we have always asked in return and what is in the law - in the Helms-Burton law is human rights. That they have a

semblance of human rights of freedom, of freedom of speech, a freedom of religion that, my goodness, they actually hold elections. Cuba is a brutal

dictatorship and we have always, always stood behind the Cuban people and the Cuban people have never seen any benefit when Castro's resources have

increased.

QUEST: So if you - if you - accept the point that the United States has diplomatic relations with many countries who's had appalling human

rights issues -

GUTIERREZ: True.

QUEST: -- and whose democracies are a sham and an abomination, that's a, per se, sir, is not grounds for not having -

GUTIERREZ: I - Richard, I understand that. And look, I totally understand why you would say that. The difference with Cuba is that when

we normalize relations with China, both sides wanted it. Cuba exists because they are the anti-American hero. They are going to protect the

Cuban people from the Yankee empire.

QUEST: Right.

GUTIERREZ: They don't want to make friends with their enemies because -

QUEST: OK, but -

GUTIERREZ: -- if not, then they lose a reason to exist.

QUEST: This morning -

GUTIERREZ: They're really different.

QUEST: -- you're in a minority this morning, aren't you, sir, as I look at the newspapers - "The New York Times," I look at. You'd probably

say they're liberally -

GUTIERREZ: Well, but you know, come one. But you know what? Fifty- five years of history proves me right, Richard, and I think the same thing is going to happen again. This thing is going to blow up and the Cubans

will find a way of making it blow up.

QUEST: Sir, thank you. I'll keep the cigars for another day.

GUTIERREZ: Hold the cigar and hold the rum.

QUEST: When you're happy and everybody else is happy, then you can join me on the set and we'll break the rules in the studio and we'll light

a cigar.

GUTIERREZ: I love it. Thank you.

QUEST: Thank you, sir. "Quest Means Business." We continue in a moment. (RINGS BELL).

(COMMERCIAL BREAK)

QUEST: Time to look into my crystal ball. Aw, there you are. And ahead I see meccas of fine art popping up in the Arabian Desert. I see a

cruise in the river in Asia and a rare eclipse halfway to the North Pole. It's the hot spot travel destinations, and in my crystal ball, we have a

passport to 2015.

(BEGIN VIDEOCLIP)

QUEST: It's 2015 and Abu Dhabi is ready to step out of the shadow of Dubai's towering Burj Khalifa and hit new heights itself in the art world.

It's the Louvre Abu Dhabi, and it's due to open in the Saadiyat Island District in December. There's also plans from the Zayed National Museum

and the Guggenheim to follow. The Emirate is well-placed to become one of the cultural capitals of the Middle East and beyond.

Europe can't seem to decide on its cultural capital in 2015. So it's chosen two of them. The Belgian medieval city of Mons expects to welcome 2

million visitors to its Calendar of Arts Events Museum opening. Not to be outdone, the Czech Republic celebrates the cultural claims (ph) of Pilsen.

Famous for its beer, the West Bohemian city will be alive with street festivals featuring giant puppets, modern circus acts, and the restoration

of its Cathedral Bells. First time in 70 years.

The river cruise is ascending popularity charts at a rapid rate not seen in recent years. And now in Southeast Asia, the rivers flow next

year. Companies such as Viking, Haimark and Avalon Waterways will extend their fleet to the Mekong and Irrawaddy Rivers. You'll be able to relax as

their vessel steers the passages through Myanmar or across the Vietnamese border into Cambodia.

In the Faroe Islands on the Norwegian island of Svalbard, you can join the elite (inaudible) just two places where you'll rest your feet on terra

firma and watch next year's total eclipse of the sun. Tours and cruises are already setting a course for the most remote locations east of Iceland.

The whole event will last just a couple of minutes, so don't miss it. If you do, it won't happen again in Europe until 2026. So, sun spotting is

the hot spot 2015.

(END VIDEOCLIP)

QUEST: I will see you at some of those destinations and I'll see you for a "Profitable Moment" after the break. Ah.

(COMMERCIAL BREAK)

QUEST: Well, we'll pause for breath for tonight's "Profitable Moment" and a very profitable moment - 421 of the Dow Jones Industrials - a gain of

some 2.4 percent - the best day of the year and one of the best performances for the last three or four years. The reason is very simple -

- patience, dear, patience. When Janet Yellen used that phrase yesterday - she didn't say `patience, dear,' she used the word `patience' about the Fed

raising rates, -- that was a close indication that higher rates are not going to come any time soon. Probably the middle of next year, and if you

look at the projections, the gain will be slow for the foreseeable future.

This is what the markets wanted. They've got an element of certainty, and the markets have lived on the fuel of cheap money for ages. But it

doesn't mean that of course there won't be volatility. As long as Russia continues to be an issue, low oil prices create certain uncertainties in

different parts of the world, Europe remains slow and sluggish, the ECB still hasn't decided what it's going to do. As long as all these issues

are there, well, don't be too quick to count the profits. But at least it's better to see the market up 400 than down. And that's "Quest Means

Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's probable (ph). Let's get

together tomorrow.

END