Olivia sterns follows efforts in california to protect children from deadly toxins. Phil mattingly reports on bps agreement with the eta to compete for leases in the gulf of mexico. Alix steel looks at enrollment in Strategic Petroleum reserves in russia. John kerry and his counterpart from russia held talks today on the crisis in ukraine. Or is mr. Kerry in his post meeting News Conference. Him that clear with the president has made it clear there will be consequences if russia does not find a way to change course. We dont say that as a threat. We say that as a direct consequence of the choices that russia may or may not choose to make here. Chilcoteergs ryan joins us now on the phone from london. This latest diplomatic effort, did it accomplish anything echo i dont know. I just came back from the postmeeting press conference of the Russian Foreign minister who was meeting with kerry. I didnt hear anything thats adjusted that russia is prepared to stand down in ukraine. Or anything that would suggest that this train wreck in the making can be averted. Is there any way that russia could face sanctions echo there is. This vote in crimea is basically the people of crimea deciding whether or not they want to remain in ukraine or join russia. Just because they want to join russia doesnt mean that russia has to have them. So russia will have to make that decision. If they choose not to annex crimea, that might be something that would go some ways in appeasing the United States and the European Union in coming up with a double medic solution. The foreign minister says that russia has no plans to invade eastern ukraine. Thats another big concern. At the fact that he said that is not part of the plan is somewhat comforting for the west. Kerry has said the results of sundays referendum in crimea are a conclusion. What can we expect the next day . We have a full schedule of punishment for russia. The eu gathers on monday. They will lay out the punishment. They will say up there is no change this week, then this will happen to you. That is likely to be be so restrictions, asset freezes. Restrictions, asset freezes. On thursday, thats when the leaders gather in brussels. I expect action by then if russia does not change course. Ryan chilcote joining us on the phone from london. Thank you. Joining me now from washington with analysis of the situation, any further incursions by russia you heard some of the comments that both gentlemen made after that press conference. What do they really mean . Kerrys pressjohn Conference Live from washington. I got to say, knowing kerry, in some ways he was in his home polite, diplomatics ecoway. Speak way. Ic they met for five hours. They have no common vision on what is happening in crimea. Rov has said that kerry issued threats, kerry is trying to make the point that the Obama Administration is. Eady to take serious action took voice by saying we know russia has legitimate interests in crimea and we recognize that and we hope the president does not misunderstand and do something we dont understand that. As far as reassurances that we rov that russia is not planning to invade eastern ukraine, letter member that he gave those same reassurances to carry about crimea. Kerry about crimea. It seems they are talking across purposes if you parse mr. Lavrovs comments. The u. S. Is telling russia that you have violated international law. Russia is telling the u. S. , mind your business. Is that where we are at . That would be the translation from diplomatic speak and to regularly which. Said,ing that lavrov crimea as more integral and more important to us than the balkans were to Great Britain were tolands unde Great Britain. We know the boat is happening in crimea. The russians will respect the outcome of that vote. The u. S. Is hoping respecting the outcome does not mean annexation. I think they are prepared that it may mean that. In which case, as ryan said, were talking about sanctions coming out on monday. Eu far is the u. S. And willing to go . Will there be Economic Warfare . Who stands to lose the most from the sanctions . Whoever they want to designate in terms of seizing their assets. Those could be ukrainian as well is russian. Those could be those oligarchs. It could go all the way up to the leadership of the russian government. I dont think the u. S. And the eu are repaired to do that right away. It was interesting that on the lot merkel has gotten the buyin of the German Business Community by saying that trade sanctions would not affect germany that much. Merkel. A the new war of the 21st century, on the economic front as opposed on the battlefield . Thats right. The u. S. Has made it very clear that it wont take military action in crimea. It would not make any sense. At the same time, it is hoping it can isolate russia diplomatically and the threat of Economic Warfare without having to act on it. I think its stunning because russia has recently joined the wto. They would have a lot to lose if the sanctions went forward. To the extent that they could. Thank you. More followed from the scandal surrounding the london interbank libel or. A lawsuit against a dozen banks it accuses of manipulating libor from 20072011. Peter cook has the details. Good afternoon. Good afternoon. There has been a lot of talk over the last couple of years ever since the first allegations of manipulation of this inchmark lending rate 2008. You have had to traders who have been fired or put on leave. You had investigations in the u. S. And abroad over the interbank scandal. Now you have the fdic filing a in new in federal court york that accuses more than a dozen banks of manipulating libor. They are alleging that that meant oblation manipulation they are seeking to recover losses suffered by those close banks. The fdic took those banks over and is trying to get this money back by suing these banks. A lot of these banks very big names here. More than a dozen banks that includes bank of america, thesehe bank some of banks have had to deal with investigations already. Here,s complaint, it says in the absence of inclusion, the panel bank defended the banks involved here. The banks that helped set libor could not have set the rates. Suggesting the manipulation of this rate led to the closure of these banks here in the u. S. Thatis significant here is there have been all these investigations and we have not heard that much from the fdic on this front. This lawsuit comes as a surprise to some. Now the banks will have to take on the federal government in court. Punitiveasking for libor rate affects everything. This is a global benchmark. If you think it doesnt affect you, you are mistaken. It sets everything from a Mortgage Rate to a car loan rate. That is why this is such a big deal when it was first uncovered back in 2008. Why this has been a spiraling investigation, not just here in the u. S. But abroad. In asia as well. More fallout from this investigation. Probably not the last. Thank you. Coming up, with rising military conflicts abroad, the pentagon is landing drastic cuts to the military. What in impact will that have . Welcome back to bottom line. The pentagon plans to scale back the size of the u. S. Army. The 450,000 activeduty soldiers the lowest level since this will since before world war ii. Hamlin is the senior fellow at Brookings Institution where he specializes in u. S. Defense strategy. He joins me from washington. Welcome to bottom line. Nice to be with you. The defense get to cuts, the news of the day is still what is going on in ukraine. Following those talks in london today between secretary of state rov, how do you think both sides should be going about reaching an agreement . We will have to sanction russia or its top ruling elite at some level if it annexes crimea. I think we need to stay a little calm here about the stakes. I dont think that reference to the imperialist russian leaders of the past or hitler or anyone else is appropriate here. Putin is acting in a way that is brutish and bullish but i dont think its particularly threatening the major western interests. I proposed that we actually work out a compromise where crimea would have the option of joining russia but not right away. This weekends referendum would be a nonbinding one. Then it would pave the way for a more calm, properly monitored binding referendum in a year or two when tempers and fears have cooled. That would not be radically different from how certain other crises have been handled. I think we can come up with creative solutions. A lot of people dont agree with your assessment because they think this referendum is under the threat of force. How do you counter that . I agree. Thats why this cannot be a binding referendum with the possibly of annexation. We need to stand firm. The punishment may not need to extend to the general Russian Energy sector but painful enough that they learn a lesson. That they dont do this again. And that they even rethink it down the road. What im suggesting is, we need to get putin give him some way out. This is the biggest dispute between russia and the west since the fall of the iron curtain. What are the economic stakes, particularly for russia, after two days of cooperation with the west . You may be right at one level. I would much prefer this kind of crisis over the one we had in the 1990s. We were worried about what would happen to their 25,000 nuclear weapons. As bad as this is, i would rather have a russia that is intact and can pay its army and pay its weapons scientists and guard its nuclear arsenal. Putin has staked that are economically powerful enough that he is not likely to go to the next level and march tanks into eastern ukraine. Its a serious crisis that im not going to call it the biggest in obamas presidency or the biggest since the cold war. Last month, you wrote an oped in usa today about this proposed cuts to the u. S. Military. You pose this question. How much army is enough . And politicians talk about the modern military, they say it has to be slimmed down and it has to be nimble. At what force level does the slimmed down start to impact variables . I dont think we need an army to deal with russia. I dont think this crisis will move in that direction. Im not trying to link that into the current discussion of ukraine or crimea. I would say that we can go down to the 450,000 activeduty army that mr. Obama has recommended. You pointed out correctly. Its the smallest since before will work too. Its only 10 less than what we had in most of the 1990s. Since the 1990s, iraq has changed. Saddam is not threatening invasion against his neighbors. The region is a mess in a different way. The change in threats has shifted the appropriate responses for the United States a bit away from large land forces. Im comfortable going two for 50,000. Cutting more would risk deterrents in places like korea and would take away from our ability to respond in modest ways and elsewhere. Any deeper cuts would be a mistake. We have less than a minute left. Lets expand outside of the military. How much impact will the proposed cuts have on overall u. S. Economic growth, particularly private sector jobs . What will the Ripple Effect through the supply chain look like . I dont think that will be a huge concern compared to other ways we might have cut defense spending. We are staying robust in our approaches to equipment. The Industrial Base and scientific base these are greater concerns to me than the exact number of soldiers we have in the activeduty army. The economic effects are coupled. The real problem is that our budget deficit is still too big. Discretionary accounts are being streamlined. Perhaps they can afford to be. But entitlements and taxes are not being reformed. Our longterm Economic Future and longterm National Security are still at some risk from the size of these deficits. Thats the real concern. Senior fellow at the Brookings Institution joining us from washington. Its been a pleasure. Thanks for your expertise. My pleasure. Up next, we will get you the latest on the markets update. Buyer beware. California regulators are looking to ban spray foam and solution insulation. That story is next. California regulators have identified three toxins they want to ban from consumer products. The States Department of texaco willxic substances control target a new law that could affect retailers and consumers across the u. S. Olivia sterns joins me with more. What are these problems products . These are substances that can be found in everyday products and ordinary mirkin in homes and are already accepted as hazardous in high doses. The first is something called tb cpp. It is still winning a lot of foam products. Has been linked to asthma and commonly used as a sealant for windows. The third is paint strippers with methylene chloride. Is a carcinogen that is commonly used in furniture stripping. Thatey take away here is what this law is doing is shifting some of the burden of proving that chemicals actually are safe. A chemical is potentially dangerous until it is been prov proven safe. Goods thatho sell contain the substances now have to replace them or risk a statewide sales ban in california. The California Retail association is warning this will be a huge program and very expensive. They were involved in the drafting of these rules. So these rules really arent taking anybody here by surprise. Many are actually disappointed that the rules arent even stricter. If you compare the number of substances that are restricted or banned in europe versus here in the u. S. , european regulators are much stricter. Weve seen Companies LikeJohnson Johnson moved well and thoroughly to take controversial chemicals out like formaldehyde. Is a 180 day analysis of replacement substances. Its going to be a year or two before anything makes it standard. Thank you. It is 26 past the hour. That means bloomberg is on the markets. Alix steel is standing by. Where stocks are trading. We did see the dow slipped into negative territory. Down 15 points. The s p also negative and the nasdaq flat. All this on the heels of thursdays record decline. The biggest decline that we have seen in five weeks. Traders are watching the s p. A long way until we get there with the issues in china and ukraine. We are keeping our eyes on Liberty Media and sirius xm radio that the virgin media dropping its bid for full control of the satellite Radio Company and reselling rights to a unit that will be called liberty broadband. We are back on the markets in 30 minutes. Bottom line continues, next erie. Welcome back to this second halfhour of bottom line on bloomberg television. Im mark crumpton. Lets check the top stories. Ofew twist in the mystery that missing plane. Malaysias government is investigating whether the crew was involved in the disappearance. The search has expanded to the ocean. Indian Officials Say satellite signals indicate the plane flew for several hours after the last radar contact. Differences remain between moscow and russian following negotiations in london. The strategic crimea region has voted this weekend on whether to on whether to secede. , the u. S. Anddes European Union plan to stop sanctions start sanctions as early as monday. Thats a look at the top stories in the news at this hour. We want to focus on the oil ties between the two nations. The u. S. Is selling 5 million oil from itsels of crew stash. The first time that the u. S. Will be testing its really system. Alex deal has been digging into those details. She joins us on set. 5 Million Barrels. A drop in the bucket. As less thanat it 1 of the entire stockpile that the u. S. Has. Billion have 690 barrels stashed away in the gulf of mexico. Demand, we use 19 Million Barrels of oil a day. Is 26 of justls one day of demand. Its an indirect effect here. Supposedly this has been planned for a wild. These things take a long time to set up. The direct purpose is to test the infrastructure. It had a lot of pipeline reversals over the last few years. They wanted to see if it was all working correctly. Its a good time to do it. Refiners are in maintenance right now. Demand is like. Were talking to michael cohen. Is department of energy undergoing a review right now of transmission and distribution of energy all across the country. This could play a part in a review that was commissioned by obama. We talked about russia. Are we flexing our muscle to show, we have our own oil. We can live without you. Ake whitner is calling it warning shot. This is not a game changer but this oil is diverted elsewhere, maybe it makes its way back to europe, that is going to directly compete with russian oil. That is where the issue lies. Folks who are going to the pump, talk less about prices. What effect will this have gekko dont worry about it. You did see a kneejerk reaction in the u. S. Oil prices. Hitting a fiveweek low on thursday when we got this announcement. Overall, it might have impact on global crude. Its a different quality. Aobal oil prices could see shortterm effect. 5 Million Barrels is not enough to move the needle. If the u. S. Wants to do some kind of permanent damage here, experts are telling me what they are really considering is exporting crude from the west, which we are not allowed to do currently because that would cause a massive oversupply in the market. Thank you so much. Staying with energy, bp is back in business with the u. S. Government after a ban on new federal contracts and leases. Free toany is now start bidding. How important is this the bps core business . Theres a reason the company sued the federal government to get this ban lifted. It matters. Thisyou look at before ban was put into place, bp with pentagons number one supplier. Its their chance to expand across the gulf. They look at the gulf right now as one of their four core areas of growth. Dad not been able to work with that under the new contract basis. This matters. The company had to agree to terms with the epa to clear the way for this. Where are they now . 2010is all stems