00:00Earlier this week, you were writing about the prospects of there being an off-ramp for President Trump.
00:05We've seen a lot of vacillation over the last, say, 72 hours from the White House
00:09when it comes to the tact that the administration is taking vis-a-vis this war.
00:12Your sense of where that off-ramp is and what access the U.S. has to it right now?
00:17Well, it's hard to have an off-ramp when the people you were talking to are dead.
00:21We saw that at the beginning of the war, and we saw that with Larajani as well.
00:26There had been some back-channel conversations with him, and then he's gone.
00:30So that is challenging.
00:32Also, the level of incoherence that has come from the American president.
00:40If you're an Iranian leader watching, you've got to be thinking this feels like panic.
00:45It feels like urgency, and that the only lever that the Iranians have,
00:52which is the economic pain that is coming from keeping the Strait of Hormuz closed,
00:57is actually working.
00:59So, I mean, on the one hand, I see continued escalation from the United States and Israel.
01:04And on the other hand, I see the Iranians with little capacity to negotiate,
01:11a little faith in negotiations,
01:13and also at least some semblance of a belief that their own deterrence is starting to bear fruit.
01:23And I want to ask you, I asked many people this question yesterday,
01:26and I'm not sure we ever really got the answer.
01:28Can you explain, giving the administration the benefit of the doubt, possibly,
01:32can you explain the policy behind this OFAC waiver for Iranian oil,
01:36most of which is likely going to be purchased or already purchased by China?
01:40On its face, it seems like the U.S. has just put money in Iran's pocket
01:44and given a strategic competitor a discount on energy.
01:47But there has to be another thing that I'm not thinking of.
01:50I think that the United States is hitting Iran incredibly hard with its military capabilities.
01:57But the vulnerability is on the economic side.
02:01And on that side, the absolute short-term priority for Trump
02:06is get the price down, get more oil out under any circumstances possible.
02:12And clearly, he believes that there is some marginal benefit to price
02:15that comes from getting more of that oil out
02:20and not necessarily in the hands of the Chinese,
02:23but instead to countries that the Americans are more nominally aligned with.
02:27Now, keep in mind that Trump's long-term plan remains take the oil.
02:35It's Venezuela redux.
02:37So I guess what the Trump administration would say in response to your question is,
02:43yeah, in the near term, this in principle goes to the regime,
02:47but the regime is not going to be able to use that for very long.
02:50We're going to take Karg Island.
02:52We're going to have the oil.
02:53That's why you've got thousands of American troops that are heading their way to the region.
02:59I do understand that it is incoherent in the short term.
03:04And Secretary of Treasury Besant was doing his damnedest to try to frame it
03:10in that several hundred-word tweet that he put out.
03:14And he wasn't really convincing anyone with market experience.
03:19There's some analysis out this morning from Regional Energy Group
03:22that says that Gulf capitals are increasingly concerned
03:24that Washington could move to wind down the conflict
03:26before securing a durable resolution on maritime access,
03:30leaving Iran with de facto control over traffic through the strait.
03:33Do you think that's a legitimate concern
03:35and something that people need to start looking at?
03:37Well, it's a legitimate concern not just for the Gulf states.
03:41I mean, at this point, the Americans do believe
03:45that you're going to see fewer ballistic missile strikes
03:49from Iran over the coming weeks.
03:52Now, they've said that before, and they've been overconfident,
03:55but there's been a lot of damage done.
03:57They don't have—it's hard for them.
03:58They can't build more ballistic missiles in this wartime environment,
04:02given the damage to their military infrastructure
04:05that primarily the Israelis have done.
04:08But drones are a different story.
04:10And that means that for the foreseeable future,
04:13and here we're talking months and months at a minimum,
04:16this Iranian regime, if they wish,
04:19are going to be capable of continuing to pose threats
04:24to anything that goes through the strait
04:26and to ongoing production and capability of Gulf energy infrastructure.
04:33So, yeah, the Gulf is concerned about that,
04:37and they don't want the United States to stop now having started the war
04:42until that is resolved in some way.
04:46And we're hearing that from the Saudis,
04:48hearing that from the Emiratis,
04:49hearing that from the Qataris, the Kuwaitis.
04:51I mean, all of these countries have economic models
04:55that don't function with this level of violence and threat
04:58in their backyard.
05:00Ian, something I've valued about your writing for so many years
05:02is how you look at the shifts in multilateral alliances.
05:06And I'd love to kind of bring that experience to bear
05:08in the context of this conflict.
05:10You had the U.S. and Israel going this alone from the get-go,
05:14but now we've heard entreaties from both the president of the United States
05:16to other countries to help secure the Strait of Hormuz.
05:18Now we hear it from Prime Minister Benjamin Netanyahu this morning.
05:22There has been assembled, I guess,
05:23this coalition of a willing of sorts,
05:2622 countries who are going to help the U.S.
05:28in its efforts to keep that Strait clear and open,
05:31or clear that Strait and make it open.
05:34What is your sense of the state of these fragile alliances?
05:37Of course, you've heard the rhetoric from the Trump administration
05:38here over the last year plus
05:40toward its longstanding U.S. allies.
05:43How fractured are they, and sort of how more fractured are they
05:45as a result of this conflict?
05:47They're very fractured.
05:49In fact, I mean, this idea of a rupture
05:52that my friend Mark Carney put out there during Davos
05:55is clearly the way that the Europeans feel as well,
05:58that there is no level of trust of the United States president
06:03and of what the Americans think of their allies
06:07and how they treat their allies going forward.
06:10But the Europeans desperately need the Strait open.
06:12Trump is certainly right about that.
06:14And also, the Americans are the dominant military force,
06:20not just for the Europeans, but in the world.
06:22So as much as they may mistrust the United States,
06:26they recognize that the U.S. remains very important for them.
06:29And I have seen a change in the diplomatic posture
06:34towards the United States from Europeans,
06:36from this not-our-war-we-want-no-part-of-it
06:40to we're not going to engage in the fighting,
06:43but we understand that we collectively have a problem now,
06:46irrespective of who started it.
06:48And we need to try to engage with you.
06:51We hear you find a way to work together
06:54to eventually have the Straits safe and passable.
07:00But I do not see Europeans, as of today,
07:03I don't see Europeans that would be willing to send forces
07:07to bring the Strait open during this level of fighting.
07:12And I think, by the way, the United States is a minimum of four weeks,
07:16four weeks, a minimum, best possible scenario,
07:19where they would be able to actually bring escorts
07:24to start moving ships peacefully through the Strait.
07:30So I don't think that's yet priced in to the markets.
07:34And it's certainly an ongoing problem
07:37where the Americans and the Israelis are going it alone.
07:40And on that note, escorting ships through the Strait
07:43is not the same thing as securing the Strait
07:45and having it open to its normal capacity.
07:47It seems like this is something the U.S. cannot do alone.
07:51Trump has seemed to need to call in these allies.
07:54I was reading this morning,
07:55part of that is after the Cold War,
07:57the U.S. actually got rid of some of its mind-sweeping capabilities
08:00in the theory that if it were to need something like this,
08:04it would be part of a NATO operation.
08:06Can you talk to us just about the capability?
08:08Is this something the U.S. can do alone if it so chooses?
08:11Or does it need those allies,
08:13which sometimes the president doesn't like to rely on?
08:15I'm a political science expert, not a military analyst.
08:19So I'm not speaking in school if I answer that question directly.
08:25Fair enough, fair enough.
08:25But what I can say is that in the White House and in CENTCOM,
08:31they are a lot less concerned about dealing with mines
08:34than they are dealing with drone strikes going forward.
08:38That has been the principal thing that has addled them,
08:41as well as the concern that what do you do
08:44if the Houthis suddenly get fully involved in this conflict?
08:49There is some evidence that the Houthis are already involved,
08:52that some of the drone strikes through the empty quarter in Saudi Arabia
08:56came from the Houthis in Yemen.
08:59It's hard to imagine any other geography
09:02that would have brought those strikes in that area.
09:06But that's muscle flexing.
09:09That's very different from hitting the pipeline,
09:13bringing 7 million barrels of Saudi crude to market,
09:17shutting down the Red Sea, that kind of thing.
09:19Also, the White House is very concerned about that.
09:22Ian, very quickly here, we've got about a minute left.
09:23You raise an interesting point in your most recent note.
09:26You say the Iran war now feels a bit like the early days of the pandemic to you.
09:30I thought that was such a fascinating line.
09:32Explain that, if you would.
09:34What that indicates about sort of where this might be progressing
09:36going forward beyond four weeks' time.
09:38It means that we all see that there's a problem,
09:42and we're worried about it, and it's dominating headlines,
09:45but we're not thinking about the second- and third-order implications
09:48that are going to affect all of us and the global economy
09:53for a much longer period of time, say for a year or more,
09:57and how this is going to rupture America's relations in the Gulf,
10:04about the future of Israel in the world as a consequence,
10:08about the future of asymmetric warfare and drones as a consequence.
10:13We're certainly not thinking enough about the longer-term implications
10:18of this suspension of global supply chains in so much of the economy beyond oil,
10:25for example, fertilizer, the planting season, food as a consequence,
10:30plastics that come from hydrocarbons.
10:33I mean, every auto part imaginable.
10:35I mean, you know, sort of packaging for consumer durables.
10:39I mean, this is going to take months before it really hits prices in the market,
10:45but when it hits, it's going to be with us for a long time,
10:48and every day that we aren't addressing the straight
10:51is going to be a much longer period of time on the back end
10:55that we're all feeling that as consumers.
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