tv Real Money With Ali Velshi Al Jazeera March 4, 2014 3:30am-4:01am EST
terrain, pushing themselves, dogs and humans in what is known as the last great race race, the iditarod. >> as calls, lots more on the website aljazeera.com. the latest on all the stories we are following. ♪ >> the escalating political crisis in ukraine threatens to spill beyond boarders, it's effecting oil, gas, bonds, and wheat. and i'll head to america's heartland in a family farm with a big stake in russia. i'm ali velshi. this is "real money."
♪ this is "real money," you are the most important part of the show, so join our life conversation for the next half hour on twitter and if you like facebook. tonight i'm going to help you understand the economic implications of the conflict playing out in ukraine, pitting vladimir putin against the united states and its allies in europe. there are a lot of moving parts, and i'm going to try to make clear which parts effect americans directly, and which one coulds have an indirect but possibly more important consequence on the u.s. if the situation gets out of control. today's drama involve conflicting reports that russia has tightened its grip on
crimea, and the u.s. is considering sanctions against russia, and i'll discuss why sanctions may not work, and why the u.s. might not get its allies to go along with them. right now the crisis is having a negative effect on global financial markets. stocks fell across the globe. the dow falling nearly 1%, and the nasdaq problems about three-quarters of a percent. the ruble dropped too, and russia increased its interest rate, that of course hurt russian consumers and the glo l global -- companies that serve them. people piled into u.s. treasuries too, causing interest rates here to fall, and worries
sent weak prices jumping nearly 5% because ukraine is the fifth largest wheat exporter this year, russia is number four and suppliers are worried and trade sanctions. russia is also one of the world's largest oil producers, so it has had an impact on oil. and today worries about supplies sent energy prices rising. oil jumps 2.3%, not a huge price, but enough that you might see a bit of an increase in gasoline and home-heating prices in the next ten days or so. the effect was more dramatic on natural gas prices in europe. america's natural gas is.com nesticly produced so the u.s. is not effected directly by prices in europe. but a sharp and sustained prize in energy prices in europe would
raise the unlikely but scary possibility of europe's fragile economy being pushed back into recession that could deal a direct blow to u.s. companies, investors and consumers. calls for sanctions are increasing. sanctions worked against libya and iran, but russia is closely tied to europe through those pipelines that carry crucial natural gas, so while the idea may appeal to americans, they are a harder sell in europe. the european union gets a quarter of its natural gas supplies from russia and half of that is routed through ukraine's pipeline network. any disruption would hit germany which defends on the gas to run its factories, especially hard. and if prices of germany
out put increases that would rock europe. russia could shut off supplies pre-emptively in response to the threat of sanctions or step things up militarily sending troops into eastern ukraine which is part of the natural gas transit route to europe. >> crimea isn't really on the transit group, however, the east ukraine, a lot of russian speakers there, if the kremlin seeks to broaden those conflict, we could see fireworks in terms of energy prices here in europe. >> europe depends heavily on russian natural gas. europe has tried to diversify away from russian energy by investing in pipe lines to the caspian sea and north africa, and exploiting gas fields in norway, but growth in demand for
natural gas will eat up much of the supply. >> because the domestic supplies from these critical producers are declining, really the pipeline supplies that will be available for europe will be largely from russian gas. >> european leaders understand this, and that's why they are calling for dialogue with, not sanctions against russia. any disruption to energy supplies to europe would hurt russia too. it receives about half of its budget revenue from sales of oil and gas, however, the leverage russia holds is clear, the energy markets are on edge because of the conflict, but what else is a stake for russia's neighbors and more importantly for the global economy? let's ask an analyst at a geopolitical intelligence firm
that provides analysis and forecasts to it clients, and i'm assuming your clients want to know. this is not on the top of everybody's tongue. not everybody understands what the conflict is, and certainly crimea, but this business of russia controlling gas flows into europe is very serious. >> absolutely. russia is a major producer and exporter of energy that goes to europe, and ukraine is major transit for that energy, so anything that happens in ukraine are russia moving militarily in crimea with hins of other things happening possibly political moves or military moves, ukraine europeans. >> and we don't know -- we wonder about the economic health of europe, but we know that germany does well. germany is a manufacturing powerhouse in the western world
by all standards and one that depends very heavily on natural gas. play out some scenarios for me on how this could effect germany and how it effects the economies of russia. >> right. germany is actually somewhat mitigated from this crisis because russia has a direct natural gas pipeline that came on a few years ago that goes across the baltic sea. and this happened after there were several cut offs from ukraine to europe. while germany may not be severely effected, country such as poland, hung -- hungary, these countries are quite dependent on russia for the natural gas, and they could see the freeze and certainly be hurt. and germany is worried about having some sort of impact. >> eugene i am not going to tell
everybody the sky is falling. this could end up being contained, people could see these market drops as a opportunity to buy stocks. this could go nowhere, what is the other side of the equation. what happens if russia pre-emptively stops gas from flowing into europe because of the threat of sanctions or something happens the sanctions impose a limitation on gas and other things flowing. scenario? >> sure. there are several reasons for russia not to turn the screws on the natural gas -- >> because they make a lot of money on it. >> exactly. and a lot of the europeans have tried to diversify somewhat to offset that pain. but russian could try to basically in response to any sanctions or pressure from the
west, they could decide to go in further to ukraine. i'm speaking militarily, although i think that's not the likely scenario. it's not clear that they could easily take over eastern ukraine as easily as they did in crimea. i think russia is trying to put the pressure on mainland ukraine, after some of the moves we have seen basically to prevent ukraine from going further with the west and engage in some sort of diplomatic negotiations with countries to basically have some sort of standoff ukraine. >> let us hope you are right. thanks for joining us. >> thank you. in many ways the crisis in ukraine is a tail of two economies. we'll look at whether it could
have an effect on you. and we will go to a firm in the united states midwest with ties to russia and the ukraine. >> tafficked labor on the front lines? >> they're things...they're commodities... >> we go undercover... >> it isn't easy to talk at this base... >> what's happining on u.s. bases... >> the taxpayer directly pays the human trafficker. >> fault lines... al jazeera america's
hard hitting... >> they're locking the doors... >> groung breaking... >> they killed evan dead. >> truth seeking... >> they don't wanna show what's really going on... >> breakthough investigative documentary series america's war workers only on al jazeera america we are focused on the on the crisis in ukraine. i have been telling you how this political conflict could touch you and your family, and a lot of that has to do with the global economy. i want to help you understand first the smaller picture. first ukraine is a country on the brink of economic default. it's wants a rescue to keep its economy going.
representatives have begun a 10-day visit to consider their consider. phil this is not the country's first bailout, another one was actually in the works until this recent turmoil. so this really did start with economic options. some of the protests were about a deal with europe that didn't go through? >> reporter: no, absolutely, ali. we look at the political strife and the military situation on the ground, but we forget where this started. and it all started with a trade deal on the table from brussels that the ukrainians were going to sign but then at the last minute were pulled back, many people say under the influence and pressure of moscow. that trade deal was supposed to bring ukraine more towards the west in a trade deal, but russia is equally trying to set up a
trading block that would consist of many former soviet blocks. and now they find themselves in economic dire straits. we are learning about the former administration, and apparently they spirited away billions of dollars, ali. it is anticipated possibly $70 billion having been taken out of this country. those coffers are empty. so now you find a fledgling government. and instead of meeting with the army or the security forces, today who did the prime minister sit down with? business leaders. because it's very clear here in kiev that if they are going to make this new government and country basically, function, they have got to get the business leaders on board, and have people making money, making again. >>
it's the new way -- >> that will be a tall order and they are going to need help. secretary of state kerry is coming tomorrow with an expected stimulus package. but it is all down to trying to get money and get the country functioning in a very stressful period. >> phil ittner thank you for that. it's not only ukraine's economy that is in trouble, russian's economy has started to stall, and russians face pressure because of this crisis in ukraine. story. >> reporter: as russia flexes its military muscle, it faces a threat at home to its own struggling economy, with global markets rattled and the international community condemning russia's actions, the bank stepped in and raised interest rates saying it did so
to maintain financial responsibility. >> they were absolutely desperate to try to stabilize the currency and prevent a vicious flight of capital from russia, which would undermine's russia story in ukraine. >> reporter: long before the ukraine crisis, russia's growth was week, its economy grow by just 1.3% in 2014, compared to 3.4% any previous year. analysts point to weak growth as a result of lack of business confidence, back of consumer confidence, corruption, red tape, and dispense dance on oil and natural gas exports and little else. what is murky, say analysts is where growth will come from since russia has an aging
population with many young people choosing to live someplace else. one of the biggest threats? investors fleeing the country. investments of businesses in russia fell by 7%. >> people view the putin administration as relatively cautious and pragmatic, and i think the risk is that we see western sanctions, that would undermine the willingness of western companies and investors to put money in russia. >> reporter: mary snow, al jazeera. well, not much more than a month ago in january, the argentine peso plummeted, and that hit other emerging markets in what was the single biggest decline in those country's currencies since 2009. could that happen again if
russia's economy stumbles more than it has? it could but there would need to be a perfect storm says andy, who joins us now. good to see you. thank you for being with us. >> thanks for having me. >> we want to look at the danger of russia itself sort of coming apart. we saw the currency drop, and the stock market drop by 11%, we saw the central bank raise interest rates, today the russian consumer has higher power? >> absolutely. they came in today and intervened in the vicinity of $10 billion as well as raising rates 150 bases points. and this is right after they just paid $51 billion for an olympics for an economy that really is not growing, it's just basically an oil-based economy
with very little infrastructure. russia defaulted in 1998, who says it can't happen again? i don't think so, but it certainly can happen. >> while the soviet union is no more, russia still has a lot of client states around it. states to which it sends natural resources, and gets natural resources. if it stumbles, lots of places could stumble. >> oh, sure, kazakhstan, the ba baltics, there's a lot of activity that goes between them. so we're really concerned on what is going to happen in the next few days. >> so when you see what happened in u.s. markets today where the dow was off about a percent in the end. it was a rougher day earlier, one almost thinks these days that markets react to everything.
is there a real fear of contain again that ends up reaching into viewers. >> what you have is 18 straight weeks of outflows from emerging markets. and the fed has tapered twice, and unless we have a really out of sync unemployment number on this friday, the fed is going to taper again. so yeah, there is that -- that potential, and it can happen. i don't see it happening in the near term. i think markets will start to reverse. in fact when i walked in here, i see the s&p futures were actually up. >> so you don't want to see that it's 2% every day. >> no. >> what changes that? in this equation that you are looking at with russia, and the sanctions that the u.s. wants to impose, the idea that europe may not go along with sanctions because they buy all of most of their natural gas from russia.
what worries you and what puts you at east? >> the thing that puts me at ease is to have some sort of agreement in the next 24 to 48 hours, that the there is no capturing of personnel by russian troops. people get killed, the russian army attacks, the ukrainians attack the russians and the russians come back at them, and then what you just said, it's a all about natural gas. russia needs the money. the question is does it need the money more than europe needs the natural gas. >> and that's the question? at the moment it looks like russia has a good amount of leverage in this. andy thanks for being with us. far away from ukraine workers and a small factory outside of chicago is watching this closely.
coke and pepsi. u.s. businesses have about $10 billion invested in russia. a figure some analysts say by the way is too low. over the weekend, secretary of state john kerry and american businesses may want to think twice about whether they want to do business with a country that behaves like russia. let's talk with an american manufacturer who has businesses in russia and ukraine, who is now worried about doing business in that part of the world. the is a manufacturer of metal balls and float assemblies, he says if the situation continues to get worst he might pull out of russia and ukraine. jason we just checked in with you last week. i didn't know -- for all of the talking you and i have done, i didn't know you had interested in both russia and ukraine. tell us about that. >> yeah, thank you for having us back. this is a bigger float.
>> i like that every time you come on the show you show me a bigger float. >> that's right. we have a business outside of moscow, and a business in ukraine. >> do you know much about the crimea peninsula, were you aware of this degree of tension that was existing? >> you know, we have been over there for a couple of years, and i know it's very much leaning -- i from our location can see russia, literally from our roof, so it's very close to russia, and i had known that going there. >> all right. what happens now. your plant in crimea is sunflower oil plant? >> yeah, we have a division of our company that makes sunflower oil in the crieeia peninsula. >> so what is going on? >> we're monitoring the
situation every day. and our factory is kind of removed from the capitol, but it is a concern, and we have been evaluating day-to-day on what we're going to do. >> you also have a company in russia itself, has any of the stuff that happened today have business? >> the devaluing of the ruble certainly helps u.s. exporters because it makes our exports cheaper. but we have almost pulled out, because it's very difficult to do business in that country and it is not getting any easier. >> do you have any particular goes? >> it seems to change hour by hour. but i just know as a person who has business in both countries, having stability is key, and having -- not knowing what is going on, certainly doesn't want
me to put more money and resources in these countries. >> what got you there in the first place, though? >> there is a huge market for our products in the developing oil sectors of russia and the ukraine. and that's really what got us there. but all of the bureaucracy has really kept us out. >> all right. jason. we'll be in touch with you. >> thank you. my final thoughts tonight. i chose to do something we don't often do on this show, focus on one topic, the looming tension between russia and the ukraine, markets around the world tumbled, the price of oil and natural gas jumped, interest rate is higher for russians and their currency is worthless. as we have all learned from the great recession, and greece, and cyprus, when a
butterfly flaps its wing somewhere economic impact can around across the globe. tonight my point is simple, i didn't dedicate this entire show to talk about your money. i need it because you need to know about it as an informed global citizen who cares about the rights of countries to chart their course. a lot is at stake. educate yourself and care about the problem, even if it doesn't have a direct connection to your prosperity. while the president's budget matters to you even if it has little chance of getting through congress. i'm ali velshi. thanks for joining us. ♪
>> rousha justifies its presence in crimea, revealing a letter at the security council from the former president. >> hello, welcome to al jazeera, live from doha. also on the program. we are in venezuela, looking at the financial forces behind protests there. saudi arabia insists all foreign fighters must leave syria and will face justice if they commit crimes. plus... >> 3, 2, 1, go. >> some cal