03/03/2014 World Business Report

Jasmine. Those are the latest headlines. Now

for the latest financial news with and World Business Report.

The US confirms it will financially support the Kiev government as

Russia plays its trump card and threatens to stops sending cheap gas

to Ukraine. Flight to safety ` investors plough

their money into gold, the Japanese yen, and oil as the geopolitical

tensions ratchet up. Welcome to World Business Report.

I'm Sally Bundock. Also in the programme: The race to become the

European hub for trade of the Chinese currency. We'll take a look

at the options. First, amidst calls from the

Ukrainian Prime Minister for help as his country stands on the brink of

disaster, the US Treasury secretary, Jack Lew, has said he will provide

as much support as Ukraine needs. Ahead of the International Monetary

Fund's trip to Kiev this week, the US confirmed it was willing to give

whatever financial support Ukraine needs to get its economy back on

track. The G7 have since added that they will give strong financial

support to the Ukraine. But while the new Ukrainian government

reiterates it is willing to do whatever it takes, including

economic reforms in order to secure bilateral funding. Russia still has

a big trump card it started to wield over the weekend. Russia's gas

export monopoly Gazprom has threatened to end its supply of

discounted gas to the Ukraine, a move that would not only mean gas

prices would sharply increase in the Ukraine but could also impact the

supply of gas to Western Europe if a gas price dispute begins. Most of

the Russian gas used in Western Europe is sent via pipes that cross

the Ukraine. And America's response to this threat? So far, the US have

said they could impose sanctions, refuse visas, and even freeze

Russian assets. Also the UK and US have suspended preparations plans

for a G8 summit in Sochi. Let's get more details on how these

economic threats are playing out in Kiev. Andriy Gubachov joins me now

from the city. He is a banker and Ukrainian economy expert.

Thank you for being on the programme. We have not yet mentioned

the military intervention in Crimea which of course adds tremendously to

that pressure on this newly formed government. Give us your take on how

this will play out? The economy is on the brink of bankruptcy. That is

the big issue, isn't it? Yes, of course. There are have to be drastic

austerity measures. They have to ask the West for financial help

otherwise we will continue to see devaluation. In the long run, that

brings benefits to the economy by helping businesses, in the short

run, that affects the people negatively. What is the best plan

for this new government in terms of trying to get the aid it requires?

It is getting promises from the West and yet it is cut off from Russia?

There have been requirements from the IMF regarding gas prices for the

population. This can be accomplished with compensation. They should be

able to achieve that. As I said, in the long run, it is for the best,

especially having seen one prominent thinker and the Minister of the

economy who as promised to introduce investigations into how business is

conducted in Ukraine. We hope to see positive effects from that in the

next few months. What happens if Russia goes ahead with the threat of

intervention when it comes to the gas situation. That will clearly

create massive pressure on this new government. It is tricky to fix,

isn't it? I wouldn't worry too much about that actually because

subterranean gas tanks are afield to the brim. We are fine for the

winter. It is a clear question for the next winter. For the short term,

we are fine. That is actually not a problem? You can ride that for a

while in Ukraine? Yes. All right. Thank you for clarifying that. We

appreciate your time. It was interesting to hear that they have

gas through to the next winter. We will see how that affects the

threats from Russia. This geopolitical upset is not

limited to the Ukraine today. Reports are coming from South Korea,

claiming that North Korea has fired two short range missiles. The

markets are reacting and investors are going to safety. People are

pulling out of shares and going into gold and we'll? Tell us more. That

is correct. It is mainly the Ukraine which is affecting markets here. It

will drop into many markets in Asia. Losses in Japan and Hong Kong

currencies as well as in Australia. Investors are retreating to save

havens in stocks and assets. It has driven investors to the Japanese yen

which is seen as safe haven in times of turmoil. `` Japanese and Hong

Kong markets. That hit Japanese exporters which are lower today. The

traditional flight to safety in gold and treasury. The economy is far too

small to have a direct impact on the global economy but the main risk is

that it triggers this wider Russian`Western conflict. It could

potentially mean disruption to gas supplies in Europe. Europe gets

about 25% of the gas from Russia through Ukraine. This could affect

growth in the eurozone which is a big trading partner for many Asian

countries. Ukraine is also a big grain producer so weak futures are

being driven higher as well. Investors are at the moment are not

liking the uncertainty around the world. Before you go, tell us about

China. We had factory gate over the weekend and last week, the Chinese

currency was under pressure. The biggest drop in value on record last

week. Tell us about that. Investors were spooked by the factory activity

index from China. The official data was out on the weekend. There was an

eight`month low in February. The unofficial data on the index was out

of date, showing it falling to 48.5% in February. Any reading below 50

signifies a contraction. Manufacturing is a key driver of

Chinese growth. The date and may have been skewed by the Chinese New

Year. Many factories were shut and workers went home in late January

currency had the biggest one`day currency had the biggest one`day

fall against the US dollar last week, nearly 1%, the biggest decline

since 2005 when China introduced the currency regime and moved away from

the US dollar. Analysts say that this is as expected and it does not

signify much difference in how it is supposed to be trading. Thank you

for that. Let's focus more on the Chinese

currency suffering suffered from its biggest seven`day loss on record

last week. But whether it has embarked on a steady fall lower or

not, this won't make the yuan less vital to trade around the world.

After being a closed currency for years, the yuan has gone from being

the 20th most traded currency to the eighth in just 12 months. It will

doubtless soon rival the dollar or the euro and that's why the battle

is on to see where in Europe the renminbi will be hosted, London or

Luxembourg? Business correspondent Joe lynam went to find out which

city is set to win this competition. Thousands of dollars worth of yuan

are being counted. Not in Beijing or Shanghai but in the tiny print a

house in Luxembourg. The hitherto private currencies glueing `` going

global. Luxembourg wants to be loved. Luxembourg is the richest

country in Europe, wealth built on the back of banking. It used to be

where the French and German elite hid their money but nowadays,

Luxembourg has the skilled staff and the ambition and the place within

the eurozone to take on London in the battle for Chinese money

overseas. It is actively courting Chinese banks to set up here at

conventions such as this. In future, big pension funds can invest

directly in mainland China via Luxembourg. The Chinese have managed

the seamless way of doing business which you can have in a single

market as a key advantage. Three of the largest Chinese banks have their

European bases in Luxembourg. 35% of icy BC's profits are coming from

trades here. There have been here 16 years and we find that Luxembourg

offers attractive legal frameworks as well as social and political

stability. London is the financial centre in Europe. Why would the

Chinese bank anywhere else? There is a perception that there is

difficulty in the UK compared to Luxembourg. A new global reserve

currency is on its way into many banking cities want a piece of the

action. `` and many banking cities. It will not be long before yuan is

rolling off the time as easily as the macro `` as the euro or the

dollar. We will see you soon has we review

the papers. Two years after the death of Daniel

Pelka,