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QUEST MEANS BUSINESS

High Oil Prices Threaten Global Economy; Dior Suspends John Galliano; Oscars Handed out Sunday

Aired February 25, 2011 - 14:00:00   ET

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


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: An oily shadow, high prices are threatening the global economy.

Dior suspends John Galliano for fear his drunken outburst will snag the brand.

An Oscar campaigning enters its final stretch, until Sunday everyone's a winner.

I'm Richard Quest. It may be a Friday, but I still mean business.

Good evening.

As protestors seize oil facilities in Eastern Libya, the Saudis are stepping in to fill the gap from Libya's oil production. And official at the port of Braga told CNN protestors are in control of the city and its oil terminal. Meanwhile, there are reports, from agencies like Reuters and the "Petroleum Intelligence Weekly", which says that Saudi Arabia is ramping up production to some 9 millions barrels a day. Now that would be an increase of around 400,000 barrels on its existing production. Its absolute maximum, Saudi's maximum production is believed to be 12 million, but that is a long way off. And there will be many technical and logistical problems for Saudi to reach that, so even pushing 9 million is raising eyebrows.

Oil traders pause for breath on the markets with gains around 1 percent for Brent and the New York NYMEX crude. But investors should be feeling a touch edgy at the situation. According to a new report by HSBC, the bank; it has released a report with shows the link between the sharp rises in oil prices and recessions in the United States.

I want you to look at this. This graph shows the annual percentage rise in oil prices. And the fundamental thesis is this: When oil prices have risen by 100 percent, a recession has followed, apparently, almost regular as clockwork. Here, here, here, here, there were a couple of anomalies around here, in '87, but they are basically discounted because there was a stock market crash. The rule according to HSBC holds. A 100 percent rise in oil prices and a U.S. recession follows. I spoke to the author of the report, HSBC's chief economist Stephen King. And I asked him why he felt comfortable throwing the R word around?

(BEGIN VIDEOTAPE)

STEPHEN KING, CHIEF ECONOMIST, HSBC: There is a good reason for this. Which is that look back at the history of big increases in oil prices over the last 30, 40 years and what you find is that if you have a doubling of the oil price over a year or so, it is not unusual to find that you end up with a recession in the U.S. shortly afterwards. There are some varieties of stories that (UNINTELLIGIBLE) that rule of thumb, but the broad picture is true, you have a doubling of oil prices, the situation is not good, typically points to recession.

The only real exception to that, really, was back in 1987, when there wasn't a recession, but there was, of course, an almighty stock market crash.

QUEST: Of course, it is cause and effect, isn't it? But we don't know which lead to which? Did the oil price rise create a slowdown in economic growth? Or were there other factors underneath? Of which that was just a symptom.

KING: Well, this is one of the problems of trying to analyze rises in oil prices. Are they a result of strong demand in various parts of the world? Or are they instead the result of a constrain on supply. Now last year one could reasonably argue that most of the increase in oil prices also have to do with the Federal Reserve printing money, and also very strong growth in the emerging world. Whereas this year, given the events we have seen taking place in the Middle East, it is much easier to argue that much of this is now a supply side, rather than a demand side problem. And that matters because when you have a supply side constraint it is one of the obvious reasons why oil prices go up, but also it is something which really hits the incomes for commodity oil importing nations.

QUEST: But there is no evidence of a supply problem at the moment. What you are not factoring there, perhaps, as much as the sheer speculative risk element in this current run up in price.

KING: Well, part of the problem of course is the tremendous amount of uncertainty. At the beginning of this year we didn't know that the story in Tunisia would then spread to Egypt. And we didn't know that the story in Egypt would spread through to Libya. The reason why Libya is a particularly important from the point of view oil is it is the first of the major oil producers to have been hit by this unrest. Now, at this stage it is very likely that Saudi could actually cover the losses that might come through in Libya. What we don't know, though, is that if the unrest were to spread to other parts of the Middle East, whether Saudi could really match losses of production elsewhere. And that seems a lot less certain. So, consequently the risk is partly the unknown if you like. The danger that oil prices rise because of the tremendous uncertainties now coming through in parts of the Middle East.

QUEST: Is this a report that you hope you are proved wrong in terms of a doubling of prices in a recession, ex post.

KING: I think it is important to stress that we're not actually forecasting a doubling of prices. If you are going to get there, you have to have prices up to $150 a barrel, which we are not there yet. So, yes, absolutely, I would hope that oil prices don't rise any further. I hope they will come down again and the Western world will be able to cope reasonably well. But the problem at the moment is that because of the financial crisis over the last two or three years, the West is actually poorly positioned to cope with yet another shock. And that really is a big problem that we're seeing currently.

(END VIDEOTAPE)

QUEST: That is Stephen King, the chief economist at HSBC.

We heard more defiant words during the course of the day from Moammar Gadhafi in Tripoli. Ben Wedeman is in Benghazi, 650 kilometers east of the capital.

A city, Ben, that we now know is under the opposition control. But I'm wondering, how are things getting back to anything resembling normality?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: I wouldn't say normality. You have to remember that this is a city that just a few days ago was a battleground between pro-Gadhafi forces and peaceful protestors who were trying to overthrow his rule. But by and large it actually is fairly-it is peaceful. We did hear these statements by Saif Islam Gadhafi, the son of the Libyan leader, saying Benghazi is in a state of chaos and anarchy. That obviously is not the case.

What we have seen is that this local committee, based in the courthouse, has very effectively restored life-not, as I said, to normal, but they have ensured that there has been no looting. There has been very little in the way of any sort of crime or violence against people from the former regime. They are making sure, for instance, Richard that the garbage is being collected, that banks have been protected. We haven't see the sort of just wild looking like we saw in Baghdad after the fall of Saddam Hussein. There is law and order. There are traffic police in the street. There is security outside of government buildings.

So, I would say, given the circumstances the situation is very calm and controlled, Richard.

QUEST: If we turn to Tripoli, all those kilometers away, at what point, Ben, does this move into the next decisive phase. I mean, how long can Gadhafi keep this thing going, basically?

WEDEMAN: Well, I think the end game is near, because you have to keep in mind that many diplomats, Libyan diplomats, have resigned over the violence here in Libya. Many of the senior members of the government, the justice minister, the interior minister have joined the anti-Gadhafi forces. Many soldiers and officers have gone over to the other side. There is now discussion of a no-fly zone over Libya. There are discussions of freezing Gadhafi's assets abroad. He can't go on much longer when you take into account that half of the country is in a state of open rebellion. And the other one, he is struggling to try to maintain control.

Now, I spoke with one person yesterday who said, he pointed out, Zine El-Abidine Ben Ali of Tunisia left on a Friday. President Hosni Mubarak of Egypt resigned on a Friday. And they were hoping that this was the Friday when Moammar Gadhafi, in form or another, one way or another, would go. (UNINTELLIGIBLE) Libyans who thought this was the day will probably be disappointed. But I think the consensus is that that day is coming, Richard.

QUEST: Ben Wedeman who is in Benghazi for us tonight. Ben, we thank you for that.

Now, when we return in a moment, one of fashions most famous eccentrics has caused controversy in Paris. He received more than a dressing down from Dior, he's been suspended, Galliano, after the break.

(COMMERCIAL BREAK)

QUEST: The world famous fashion house Dior has suspended its chief designer, John Galliano, after an incident in Paris. Galliano was arrested and briefly held for an alleged assault and making anti-Semitic comments in a restaurant in the French capital. At least, that is the allegation. Dior say they have suspended him for all his duties. In a short statement their chief executive Sydney Toledano said, "Dior affirms with the utmost conviction its policy of zero tolerance towards any anti-Semitic or racist words or behavior."

What on earth did take place in that restaurant in Paris? And what is he alleged to have said? Certainly whatever it was has caused a storm right in the middle of fashion world's big weeks. I spoke to the "Woman's Wear Daily" editor James Fallon a little earlier. And I asked him how much we all knew about this Paris incident?

(BEGIN VIDEO CLIP)

JAMES FALLON, EDITOR, WOMEN'S WEAR DAILY: Well, that is what is being determined at the moment. I mean, it is uncertain whether John Galliano was indeed arrested by the police. Evidently there was an altercation at a restaurant in Paris, between John Galliano and a couple. The nature of that altercation, the nature of the remarks is said to have said to the couple, is what is being determined at the moment. Clearly what happened though was with all this uncertainty, LVMH faced really no alternative but for at least for the moment to suspend John Galliano from Dior because of the potential damage that it could do to the company and one of its premier brands.

QUEST: That, of course, is really the interesting part isn't it? That LVMH, the parent company, did decide to take what is frankly a fairly dramatic and drastic step against one of their top names.

FALLON: Absolutely. And I think, though, if you look at all the case histories of damage to brands, one of the reasons that a lot of brands in these circumstances do tend to get damaged is that they wait too long. And so, obviously, John Galliano's lawyer has issued a statement saying that he will contest any accusations against him, but I don't think LVMH could afford to wait until six months down the road to see the facts that came out. Especially with the bloggers and the Tweeters and the Internet and all of that, as it already has gone crazy with the various accusations that are being flung about. So it had to act immediately to say, OK, at least for the moment we are suspending him and let's move on.

QUEST: And what are the implications of that. Because he does have some shows coming up, doesn't he? Some quite important shows.

FALLON: He has a show both for-yes, very much. He has a show for the Christian Dior brand and a show for his own brand, John Galliano, both coming up in Paris, I believe next week or the following week. We are still trying to determine, I mean, what will happen. There will almost certainly be a show for Dior. Whether there is a show for the John Galliano brand itself remains to be seen. The collection would be pretty well done by now anyway. So, it really shouldn't throw a wrench into the works. What will be more interesting is if this suspension drags on and the case drags on, what then happens for the shows that take place in September and what that will mean for those collections to be show then.

QUEST: On a wider issue, the fashion industry has often been thought of as blithely sailing on, you know, in times of controversy, regardless of what might be swirling around. The speed with which they have jumped upon this, and not swept it under the carpet, really does tell us something doesn't it?

FALLON: Well, I think it tells us very much that-yes, you are absolutely right about the fashion industry tending to sort of be within its own bubble. But what it also tells us is that the fashion industry now, and this is proof positive, is a multi-billion dollar industry that is global. And these companies, just like any company, can no longer afford just to sail blithely on and ignore these kinds of potential accusations. Because of the damage that it might not only do to Christian Dior, but would then have, to a larger extent, might do to LVMH's other brands, from Moet Chandon to Givenchy, and on.

(END VIDEOTAPE)

QUEST: Will it be "The King's Speech", "The Social Network", or "Toy Story 3"? In a moment, we're going to go to Hollywood. We're talking with a celebrity publicist about the build up to the big night and what it takes to win an Oscar.

(COMMERCIAL BREAK)

QUEST: Excitement is building for Sunday's big Oscar party. Hollywood's biggest night, in fact, the entire movie industry's biggest night of the year. The red carpet has already been rolled out. Now, a recap for you on some of the most important categories.

Best Actor, Javier Bardem, Jeff Bridges, Jesse Eisenberg, Colin Firth, James Franco.

The Actress in a leading role, Annette Benning, Nicole Kidman, Jennifer Lawrence, Natalie Portman, Michelle Williams.

As for the best picture, there is a lot of them, of course, "Black Swan", "The Fighter", "Inception", "The Kids Are All Right", "The King's Speech", "127 Hours", "The Social Network", "Toy Story 3", "True Grit", "Winter's Bone".

Brooke Anderson is in Hollywood at the moment and joins me from the red carpet where the statues are already going up.

Brooke, there are good years, and there are bad years, for Oscars, that much we know. There are years that are thought of as important, and there are years that are throw away. What do you think this one is going to be?

BROOKE ANDERSON, CNN HOLLYWOOD CORRESPONDENT: I think this one is going to be entertaining, Richard. I'll say that because Oscar producers really want to revitalize the telecast. They have youthful hosts with Anne Hathaway, James Franco.

If you take a look behind me, it is prep day here, Richard. So you know you have a lot of rental equipment, a lot of people on hand getting things ready for Sunday's big show. But the look of even the red carpet area is different this year. It is a sleeker look. It is a more modern look. They want to revitalize things. They want to give everything a face lift this year. And you know last year they estimated that 41 million Americans watched the Academy Awards. Several 100 million people watched globally. And so, Richard, more than 200 countries can see the Oscars each and every year. So they take a lot of pride in what they do.

Security is very tight. So, I think it is going to be a important one.

QUEST: The industry-I mean, the talk-I heard you earlier talking to Hala Gorani, who put you neatly on the spot and asked you-who you thought was going to actually get the best Oscar. The battle is pretty intense, this year, for best picture.

ANDERSON: It is. There are 10 films nominated for best picture. But I have to tell you Richard, I think it is really going to go to "The King's Speech". It is about the British monarchy. It stars Colin Firth. It is a tremendous film. Now, "The Social Network" could sneak in, take that one. It is highly unlikely though. I'm thinking about the Oscar voters. There are nearly 6,000 voting members of the Academy. And they like films and subject matter like "The King's Speech". Rich in history, so I think that one is going to take it.

But you know what, Richard, these nominees. Those people nominated for Oscars. They are walking away with gift bags worth $70,000-not million, $70,000.

QUEST: I-I-$70,000, if you manage to snag one send it my way.

(LAUGHTER)

Finally, is the-you spend a large part of your working life looking at the movie industry. As it prepares for its big night, Brooke, as an industry, is it in good health?

ANDERSON: It seems to be. Things seem to be picking up as we see with the U.S. economy as a whole. You have studios taking out ads. They ran, you know, huge Oscar campaigns. They spent $100,000s, promoting their movies, promoting their stars, coming into what is really the pinnacle of the awards season each and every year. So, money is still being spent. Production is still happening regularly. So, things seem to be in a healthy state right now.

QUEST: Brooke, have a good night. I'm sure you have a gown worthy of the red carpet.

(LAUGHTER)

ANDERSON: Thanks, Richard.

QUEST: We'll see you, of course, next week. Brooke Anderson joining us from Hollywood.

The celebrity publicist Howard Bragman says the Oscar buildup starts long before the red carpet rolled out. He joins me now from Los Angeles studio at CNN.

Howard, if we look at the process from nomination through to Oscar night itself. It is a hyped up environment. Isn't it? Where, frankly, everyone because you are a nominee, is a winner?

HOWARD BRAGMAN, CHRM. & CEO, FIFTEEN MINUTES PUBLIC RELATIONS: Well, yes, and no. In most cases we always say a nomination is a win. There are some people who were expected to win and if they don't win it is a big surprise. If you remember Mickey Rourke a couple of years ago when he was a quote/unquote shoo-in and he didn't win. And I think he was disappointed. I thought he won with a nomination, I think he would argue otherwise. I think the movie "Brokeback Mountain" felt that they should have won, in a very competitive year when "Crash" won. So that is mostly the case. But every situation is different, Richard.

QUEST: Right. But in this sort-this sort of intervening period, as we head towards Oscar night itself, what is the mood? What are people doing? What are agents, publicists, people like you, studios, the stars themselves, in this time from nomination, to the night?

BRAGMAN: Well, you are sitting-you are up very early in the morning. You have time to hear the nominations. Because they play them for the East Coast. So if you are in L.A., you up about 5:00 in the morning. And then you are calling everybody you ever met, from your dentist to your dog walker to say I got a nomination. Or they are calling you and congratulating you. That is the first thing. And then campaigns are really made. It is really a strategic decision of when you are going to show the film. When you are going to have the actors appear. What kind of appearances you are going to make.

Then there is advertising campaigns, publicity campaigns; And frankly, now that all the votes are in, this is the-this weekend is a lot of fun. There are parties all over town. There are gifting suites where celebrities can go and get $10,000s in jewelry and gifts and spa treatments. So it is not so bad. It is not so bad. We're making do here.

(LAUGHTER)

QUEST: In times of austerity one can always rely on a bauble from Hollywood.

But listen, finally, how much do people like the stars, like the directors, walk this balance, this fine balance between self promotion and vulgar publicity which could backfire?

BRAGMAN: Well, I think that is a very good point. I think it is less about how much promotion you do and more about how you carry yourself. There are some stars that just don't have a good rep. And they-they have bad reputations on the set, they've acted out in public. And they are not the favorites. There are other stars that can, you know, George Clooney could wear a sandwich board that said vote for me, and people would think it was cute and charming, OK? So, some stars can get away with anything. And some don't get away with anything.

QUEST: I asked Brooke Anderson this question. It is an unfair question, it has to be asked, I'm afraid. Who do you-

BRAGMAN: I love unfair questions.

QUEST: Exactly, splendid, good. Which movie gets best picture for you, this time?

BRAGMAN: My favorite and the one that is going to walk away is "The King's Speech". It was an impeccable movie. It told a very intimate story of the king and his speech therapist, while at the same time against this huge backdrop of the war, and it was an amazing film. Gladly deserves best Oscar. And let me be the first to congratulate everyone associated with it.

QUEST: All right. Many thanks, lovely to have you Mr. Bragman. Many thanks, indeed. Have a good night on Oscar night it itself.

Oscar night, of course, is Sunday night.

Now, today, global stocks saw a brief respite from the slide we witnessed during the course of the week. When we return an assessment of how they moved and the losses-or gains, on the week.

(COMMERCIAL BREAK)

(NEWSBREAK)

QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

The embattled Libyan leader, Moammar Gadhafi, is rallying his supporters for a fight against the opposition. Libyan state television showed Gadhafi addressing a pro-government crowd in Tripoli today. He urged them to fight for Libya, saying he'd throw open the country's arsenals and arm them if necessary.

Gadhafi appears to be maintaining his hold on the capital despite new attempted protests. Witnesses say when people started gathering after Friday prayers to demand an end to his rule. They were quickly met with gunfire and tear gas.

Meanwhile, the opposition is claiming more ground in outlying areas.

A day of rage in Iraq -- demonstrators clashed with security forces in confrontations across the country. At least five people were killed. Several others were we needed. Media reports say security forces used water cannons and tear gas to disperse thousands of angry protesters in Baghdad.

Ireland's ruling party is bracing for heavy losses in the first general election since the $113 billion bailout late last year. In brisk voting, agency voters are expected to give Fianna Fail the boot after it negotiated the IMF and E.U. loan package, the terms of which were seen to have been very unpopular. Prime Minister Brian Cowen has announced he is retiring from politics.

The U.N. Security Council is due to meet to discuss measures against Libya in about an hour-and-a-half. And France is saying it's going to ask for a complete arms embargo. That's from France. Also, it wants financial sanctions against Libya and a request to ICC, the International Criminal Court, to examine possible crimes against humanity. That is what is going to be on the agenda.

CNN's senior U.N. correspondent, Richard Roth, is at the UN.

And he joins me now -- Richard, the first thing, bearing in mind the scenes that we have seen in -- in Tripoli, why -- why would there be any problem in getting some resolution through the Security Council?

RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: The problem -- and it's not a new one -- is that certain countries with veto power, namely, Russia and China in the lead, they don't like the U.N. intrusion in individual countries' affairs, even if things are bordering on civil war.

They don't think -- and they've made that clear inside and outside the Council -- they don't think that this is the role of the United Nations as a global organization.

They will eventually go along, sometimes, when events on the ground warrant it or if they have a particular interest, perhaps, regionally in keeping the peace.

That's why Western diplomats, who will be pushing a resolution forward today in the Council, they don't expect a vote today. It's hard to read how soon that could come. There may be weekend meetings. One Western diplomat said it would not be right for the Council to take the weekend off while there is such tragedy and carnage in the streets of Libya.

QUEST: So it -- so no vote today. No -- but potentially a vote over the weekend.

But, Richard, what form is any -- and this is the -- this is the impossible question, of course -- what form is any final resolution likely to take?

ROTH: The resolution will be backed by the threat of potential force. So it's at the highest level of resolutions. There was a lot of criticism a few days ago, when the U.N. Security Council unanimously passed a statement condemning the violence there. That's the way the Council operates. It was never going to put a big, tough resolution with sanctions together in less than 24 hours, as events unfolded.

This resolution will be like all the other resolutions and will -- here we go again. You know, sanctions on Libya were lifted December, 2003. So we're coming back again at the U.N. with travel bans, asset freezes. They didn't work exactly last time. Eventually, Gadhafi turned over suspects wanted in the Lockerbie bombing and there was some bite from the sanctions. But that took about 10 years of sanctions.

I don't know if there will be much of an impact from these sanctions. We don't know yet if this one contains any talk about no fly zone. I don't think that may be there. China and Russia would be highly reluctant to go along with that.

QUEST: Richard Roth at the United Nations.

We'll be watching that. And it probably has a -- a busy weekend ahead, as those discussions and consultations take place.

Now, if you join me in the library, I will show you the way the markets finished. This is Friday's finish. The FTSE closed up 1.37 percent, over 6000, just about. And the interesting thing about that was that the trading was even halted for -- excuse me -- for a technical glitch. The FTSE also wasn't held back by a 4.4 percent drop in Lloyd's TSB stock. The bank took a $46 billion hit from bad debt in Ireland.

We now go to the White House in Washington, where there's a briefing, of course, on what's happening in Libya.

And we need to listen in.

I beg your pardon. I -- I was under the impression that...

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: -- U.S. financial institutions to take reasonable risk-based steps with respect to the potential increased movement of assets that may be related to the situation in Libya.

During this period of uncertainty, Finsen (ph) is reminding U.S. financial institutions of their requirement to apply enhanced scrutiny for private banking accounts held by or on behalf of senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets, proceeds of bribery or other illegal payments or other public corruption proceeds.

Additionally, the United States has suspended the very limited military cooperation it had with Libya. The U.S. military began to cautiously re-engage with Libya, as you know, in 2009, following Libya's decision to halt its weapons of mass destruction programs and compensate victims of terrorism.

Prior to the react unrest and sales -- prior to the react unrest, sales of mili -- spare military parts were pending. They have been frozen. Bilet -- bilateral military events that were in the planning phases have also been frozen.

The United Nations Human Rights Council held an emergency session today in Geneva, where it adopted, by consensus, a resolu -- a resolution that condemned the gross and systematic human rights abuses now being committed by the government of Libya, established an international commission of inquiry to investigate these abuses and recommended account - - and recommended accountable -- accountability mesur -- measures for those responsible and also recommended that the U.N. General Assembly suspend Libya's membership on the Council.

The United States strongly supports these efforts and is already closely working with our international partners to carry out this suspension, which will be acted on by the General Assembly early next week.

In addition, as the president announced earlier this week, Secretary Clinton will travel to Geneva on Monday to speak at the Human Rights Council and to discuss with her international counterparts further measures on Libya, as well as events in the broader Middle East.

On Monday, the president will meet with U.N. Security -- U.N. Secretary General Ban Ki-moon in Washington and will discuss the diplomatic, legal and other actions needed to put a stop to violence against civilians in Libya. He will also discuss the range of activities that U.N. agencies and the international community can undertake to address the significant humanitarian needs created by this crisis.

The United States is involved in ongoing negotiations today at the UNSC, the U.N. Security Council, on a resolution that could include a weapons embargo, individual sanctions against key Libyan officials and an asset freeze.

Finally, the United States is utilizing the full extent of its intelligence capabilities to monitor the Gadhafi regime's actions and we are particularly vil -- vigilant for evidence of further violence or atrocities committed against the Libyan people.

With that, I'd like to take your questions.

Ben?

QUESTION: Thanks, Jay.

Obviously a lot there. Let me get back to the -- what you said at the top about unilateral and -- and multilateral sanctions.

Can you just describe them a bit more?

What are we talking about here when you -- when you (INAUDIBLE) sanctions?

CARNEY: Ben, we're -- we're finalizing the sanctions that we will pursue. I -- I -- rather than enumerate them, I can't tell you that they will be finalized soon and you will know specifically what we're going to do. I think the universe of effective sanctions is pretty well known, the kinds of things that we're considering. So, you know, a lot of that has been discussed. But I don't want to specify which ones now, because we're -- we're still just finalizing those and we'll get them to you soon.

QUESTION: Finalizing today or in the coming days or...

CARNEY: In the near future.

QUESTION: Can you explain what gives the United States confidence that sanctions work against someone like Gadhafi in (INAUDIBLE)?

CARNEY: We are initiating a series of steps, at the unilateral level and the multilateral level, to pressure the regime in Libya to stop killing its own people. This is a first step. And, obviously, we continue to review our options going forward. And the steps that we take in the near future are not the only steps we're prepared to take if -- if other steps are necessary.

QUESTION: Gadhafi today, over the last few hours, was calling on his followers to continue fighting the protesters. Militias that were loyal to him were still gunning down protesters. So I guess I'm wondering, as these things unfold, how is it that sanctions, as you see it, directly can affect that kind of inciting of -- of his people to -- to continue to kill?

CARNEY: Sanctions -- targeted sanctions that affect the senior political leadership of a regime like Libya have been shown to have an effect. We are also, as I mentioned, pursuing actions that will ensure that the perpetrators of violations of human rights are held accountable. And there is certainly a history of those kinds of perpetrators being held accountable in the international community.

And, again, we will take these substantial actions and leave other potential actions on the table and -- and evaluate as we go.

QUESTION: Thanks.

QUESTION: Jay?

CARNEY: Yes?

QUESTION: At the top, you mentioned the U.S. Embassy in -- in Tripoli has been withdrawn.

Is that right?

Have you evacuated it?

CARNEY: It has been shuttered.

QUESTION: OK. The power of sanctions to stop violence immediately is pretty weak.

What other steps, more forceful steps, could you take?

How quickly could they come?

Or will more steps have to wait until Secretary Clinton goes to Geneva on Monday (INAUDIBLE)?

CARNEY: Well, let me just say that there has never been a time when this much has been done this quickly. The United States has acted in concert with our international part -- partners and with great deliberation and haste. I know that in the past few days, it's sometimes been frustrating when you've been able to question American officials about what we're doing and maybe haven't gotten all the answers you want.

I discussed this with the president just a few hours ago or an hour ago. The purpose -- the focus that he has is on our obligation to the security of American citizens and also getting the policy right. And I can assure you that that has been the guide -- those have been the guiding principles as we've proceeded over the course of the last week.

QUESTION: Just to follow, there's been reports that Colonel Gadhafi has taken control of some parts of Tripoli.

What is your sense of the events there today?

And do you believe that Gadhafi is still in control of the capital?

CARNEY: Well, I -- I don't want to be in a position of giving a play by play commentary on, you know, very dramatic events happeling -- happening quite a long way away that we are all watching on television.

What I -- what I can say is it's clear that Colonel Gadhafi has lost the confidence of his people. He is overseeing the brutal treatment of his people, the -- the -- the fatal violence against his own people. And his legitimacy has been reduced to zero in the eyes of his people.

So that -- you know, that's what I'll say about him.

QUESTION: Just one more thing.

Does the president agree with French President Sarkozy that Gadhafi must leave?

CARNEY: We have always said that that is a matter for the people of Libya to decide. But I would repeat what I just said, what -- and because it is a matter for the people of Libya to decide, I think it is also clear that the people of Libya have expressed that his continued use of deadly violence is clear violations of human rights, are totally unacceptable just anywhere in the world. And the status quo is simply not -- neither tenable nor acceptable. The Libyan people deserve a government now that protects the safety of its citizens, is responsive to their aspirations and is broadly representative.

Yes, Jake?

QUESTION: Colonel Gadhafi does not seem all that tethered to reality right now, in particular. He's been accusing...

(CROSSTALK)

QUESTION: -- he's been -- and experts on Gadhafi say he actually believes that the protesters in the street are -- have been fed hallucinogens.

How does the United States deal with a government -- this isn't -- this isn't your typical dictator losing power. This is a man who, by many accounts, seems to be legitimately unstable and -- and perhaps willing to burn the house down with him?

How does that affect the policies that -- that you go forward with?

CARNEY: Well, Jake, we -- we make our policy decisions based on some key principles, as you know, that I've enunciated, the president has enunciated and others. And we evaluate the circumstances in, this case, Libya.

It's not about personalities. It's about the expression of -- the peaceful expression of the dissatisfaction of the people of Libya with their leadership. And we support them in -- in their -- and their aspirations.

But we -- the actions we are taking, I think, in many ways, answer your questions. We are acting unilateral and multilaterally in a way that we believe needs to be done to put pressure on the regime to cease this horrendous activity.

QUESTION: I understand that your decisions about the Libyan future and the Libyan government should be made by the Libyan people.

But what's the end game here?

QUEST: There we leave the -- there we leave the White House press briefing. The White House press secretary, Jay Carney, telling us that the -- telling us that the United States was shuttering or had shuttered its embassy in Tripoli and it was also planning to unilaterally to introduce sanctions against Libya.

Hala Gorani is at the CNN Center and continues our coverage from there -- good evening, Hala.

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