21/07/2014 World Business Report


21/07/2014

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Rickie Fowler. Those are the latest headlines from BBC News. Now for the

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latest financial news with Sally Bundock and World Business Report.

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Increasing the pressure on Putin ` we look at the tougher sanctions

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that could be imposed on Russia as European leaders meet this week.

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Preparing to do business with Iran, as talks for a nuclear deal make

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tangible progress, companies in the Middle East get ready to take

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advantage. Welcome to World Business Report. I'm Sally Bundock. Also in

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the programme: We hear how the company Malaysian Airlines is set to

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weather this latest tragedy. But first: Increasing the pressure on

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Putin. The leaders of Britain, France and Germany are preparing to

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impose tougher sanctions on Russia. As international shock and anger

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intensifies over the shooting down of Malaysian Airlines flight MH17,

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so western leaders are calling for Russia to play its part in allowing

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accident investigators to have full access to the crash site in Eastern

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Ukraine. Tomorrow the European Union's Foreign Affairs Council will

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meet to discuss what measures should be taken. With me now is Nina Schick

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of Open Europe. There is a lot of pressure on the EU to impose more

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sanctions on Russia, particularly from the United States, what action

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do you think the EU might take? Well they could move very quickly on

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this, because now this has become an international incident. A lot of

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European citizens have died. So far what the EU has done is take

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targeted sanctions on 72 individuals, these are, dance, and

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asset freezes, on companies operating out of Premier `` visa

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bans. They could take more sanctions on companies close to Britain's

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inner circle, and also that have a massive impact on the economy ``

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President Putin's inner circle. The EU will also have to find agreement

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within the 28 member states, and that has not always been easy, which

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is why the EU has always been a step high in the US when it it comes to

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sanctions. Let's talk about that difficulty. For some EU member

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states like Germany, it isn't so easy to impose tougher sanctions.

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Will obviously Germany has always traditionally played as a bridge and

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mediating role between East and West. And the German public has been

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tremendously opposed to taking further sanctions on Russia. Now

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this might change things. I was reading in the German papers this

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morning, you know, saying this is a game changer. Germany does have

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strong economic links with Russia. However, in the last few weeks the

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German position has significantly toughened. They have banned exports

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of any weapons to Russia from Germany already. And I think we will

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hear what the fact had been established, some strong language

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from Germany as well. If we were looking at more full`blown

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sanctions, in the energy sector for example, how would that play out?

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Some countries in the Baltic states are almost 100% reliant on energy

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coming from Russia. Another thing the EU could do before resorting to

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fall on energy sanctions is to try and squeeze Russian companies out of

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capital markets. They could also target European exports to Russia,

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which Russia is dependent on. Things like machinery, medicine, these are

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things that Russia would be able to source easily from other places. If

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it came to full`blown energy sanctions, the EU is still 30%

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dependent on Russia for its energy imports. And it doesn't have the

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infrastructure in place to be able to source liquefied natural gas, it

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doesn't have the ports in place to be able to source that. However,

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they are working very hard to diversify their energy supply, away

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from Russia, and indeed that is one of the priorities for the new

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commission. We appreciate your analysis from Open Europe, very

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interesting. We will keep you across any developments in terms of what EU

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leaders decide, on BBC World News. So that's how leaders in the West

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are reacting to this tragedy. But how about the bosses of Malaysian

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Airlines? It's hard enough for an airline to rebound from one

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disaster, let alone two within the space of a few months. Last week

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shares in the company plummeted. Joining me now is Rico Hizon from

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our Asia business hub in Singapore. So Rico, does it look like Malaysian

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Airlines will be able to bounce back from this second disaster? Not just

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for the company, but for Asians in general, this is such an awful

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tragedy. Again, hitting the specific company but also for people thinking

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about travelling, for loved ones who have lost people, it is extremely

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difficult, isn't it? Absolutely. It really is. Very sad, what has

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happened to Malaysia Airlines, and when you speak with analysts here

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and with many Asians, they start to fear about travelling in the

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region. Especially given what happened to Malaysia Airlines. It is

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hard enough for an airline to rebound from one disaster, let alone

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to within the space of a few months. And even before the disappearance of

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MH370, Malaysia Airlines was already struggling `` let alone and two. Is

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there any hope that the carrier can rebound after such a rough year?

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Earlier I spoke with an aviation analyst who says the firm now has

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three options. Firstly, they can continue as is. They can pour money

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into the airline. But I don't think that is a viable long`term option. I

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think they can look at doing something similar to Japan airlines

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and could put it into bankruptcy. Thirdly, they could look at

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potentially privatising the airline. I also asked whether this recent

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incident could impact other Asian carriers, and regional travel? I

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think it will, without a doubt. Already long`distance travel has

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been challenged since the Asian financial crisis. Lack of safety

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should be the number one concern for all airlines, creating problems for

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consumers looking to travel those distances. After sharp falls on

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Friday of 11%, Malaysia airlines stock has slipped another 2.5%

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today. The share price is down about 40% on the year. Thank you very

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much. Diplomats have agreed a four`month extension to the deadline

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for an agreement between Iran and world powers on its controversial

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nuclear programme. Discussions have been taking place for months now,

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and on Saturday ended following tangible progress on some issues

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according to America's Secretary of State John Kerry. The US says it

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will unblock $2.8 billion in frozen Iranian funds, in return for Iran

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continuing to convert its enriched uranium into fuel. The new deadline

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is November 24th. The talks have aimed to persuade Iran to limit its

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nuclear programme in exchange for the lifting of sanctions. While the

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negotiators talk, companies have been busy re`building business

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relations with their Iranian counterparts, hoping that a deal

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will be done. Mark Lobel reports from Dubai, on the firms hoping that

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an opening up of trade with Iran is sooner rather than later. At this

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registration in Dubai `` at this freight station in Dubai's port,

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imports have been halted to placate American clients. Recently companies

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from across the world have signalled a change in direction by setting up

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potential investment fund sharing presentations, and initiating ties

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with this is in Iran. That has led this shipping group's vice president

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to believe that companies in the US may be left behind if sanctions are

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lifted. A view he is slowly waking up to. I would say there are a lot

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of regional offices here sending information back to the Americans,

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doing market research and studies, winding out what the runny and

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market needs. Investors are already focused on Iran's you'd oil

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reserves, and the many undeveloped statements of the economy in a

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country of almost 18 million people. Many large international

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companies are now exploring the possibility of doing business in

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Iran. Mostly at arms length. But many smaller ones from around the

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world have already made the trip to Tehran, and have been welcomed with

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open arms by representatives from the uranium chamber of commerce. I

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visited the Metro, which has an engineer I was very interested in.

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This structural engineer visited Tehran a few weeks ago with other

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French as men and women from Dubai. They met with representatives from

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small and medium`size companies. Several of them have come back from

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to me, and we are now negotiating agreements with them. They are

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expecting for me to bring obviously new technology, new design. But one

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senior risk advertiser who just visited Tehran said that even if

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sanctions go, companies need to abide by human rights and terrorism

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sanctions. You have to be very cognisant, because of the stifling

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bureaucracy, of the corruption risk. There is a Labour risk in that there

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is not an awful lot of talent and Iran, in Iran at the moment. Despite

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the risks. Companies across the world are now jockeying for

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position. Some analysts predict Iran could become the world's largest

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emerging market if it economic isolation ends. In other news: A US

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court has ordered the country's second largest cigarette company to

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pay $23.6 billion to the wife of a smoker who died of lung cancer in

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1996. During a four`week trial, lawyers argued that RJ Reynolds was

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negligent in informing consumers of the dangers of consuming tobacco.

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Emerging and frontier market countries have borrowed a record of

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nearly $70 billion in the first half of this year, even as central

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bankers warn that debt market euphoria could be storing up trouble

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for the future. After 97 years of family ownership, a majority stake

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in Forbes Media has been sold to a Hong Kong`based group of

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international investors called Whale Media Investments. Forbes Media,

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which includes Forbes magazine, was sold to Integrated Whale Media

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Investments for an undisclosed sum. That's the latest business news. I

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will see you soon to look through the papers. We will take a look at

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the papers, but first: The government will today set out how

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new pension reforms, announced in the Budget in March, will actually

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work. Under the new rules, retirees will be able to cash in their

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pension funds and spend the money as they please. And they will have the

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right to free and impartial advice to help them. Here is our business

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correspondent, Theo

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