- 5 weeks ago
USA, Israel, Iran, Middle East, World Politics
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00:00Where do you think this war in Iran is going?
00:03How will it be resolved?
00:04And what are the consequences likely to be?
00:06Well, thanks so much for inviting me, Tucker.
00:08I'm a huge fan.
00:09I've been on your work for a number of years now.
00:12So I think that this war in Iran will be very similar to the war in Ukraine, meaning that
00:19this will be drawn out, be a war of attrition.
00:22Neither side will concede defeat, even though it is in the best interest to reach a cease
00:27fire, and this will have dramatic consequences on the global economy.
00:32And this war could drag on for years and years.
00:36Already, we're seeing major repercussions on the global economy in that flights are being
00:40canceled.
00:41Southeast Asia, they ran out of fuel, so they're asking people to stay at home.
00:45And in a few more months, experts are predicting a food shortage, meaning that nations will
00:50be forced into food rationing.
00:52And today, there's a major escalation in that the Israelis struck the largest gas field in
00:57Iran, and Iran retaliated by attacking energy infrastructure of the GCC.
01:02And Iran has stated that its purpose, its goal, its strategy is to move oil to $200 a barrel,
01:08which will have a really significant impact on the global economy, because the entire global
01:13economy is based on access to cheap energy.
01:16So unfortunately, I think that we can expect this war to drag on for years and years.
01:21Eventually, America will send in ground troops.
01:23Eventually, the state of Hormuz will be contested.
01:26Eventually, this will spread all across the world.
01:29Eventually, other nations will be drawn in.
01:31So Saudi Arabia is thinking about declaring war on Iran, and Saudi Arabia has a neutral defense
01:36pact with Pakistan.
01:37So Pakistan will be drawn into this war.
01:40So things are spiraling out of control.
01:43And just recently, Ali Larajini, who is a de facto head of the Iranian war effort, was
01:49assassinated, and he was a primatic elder statesman in Iran who had the authority to negotiate
01:55a ceasefire.
01:55Now that he's gone, there really is no more off-ramp.
01:58So sides are committed to a long war of attrition, and the consequences for the entire global economy
02:05are quite dire.
02:06So my question is, because there are so many global players, big global players, the U.S.
02:11in China, I think, who would be hurt by this, why is there not an incentive to get it settled
02:17quickly, and why can't that happen?
02:19Right.
02:20So once this war starts, it achieves a momentum and a logic of its own.
02:27So the United States doesn't really have an off-ramp, meaning that if it tries to negotiate
02:33a ceasefire with Iran, Iran would ask for reparations, about $1 trillion, basically.
02:39It would ask for the United States to leave the Middle East permanently to ensure its long-term
02:44survival.
02:45If the United States were to do that, then the GCC nations would collectively become client
02:51states of Iran, because only Iran can guarantee their safety, as well as use of the shared
02:56Hormuz.
02:56The GCC is the basis of the petrodollar.
02:59So what the GCC does is it sells oil in U.S. dollars and then recycles this money back
03:05into the American economy.
03:07So if the GCC were to abandon the petrodollar, then this would have severe repercussions on
03:13the American economy.
03:14Also, there'd be a chain reaction in that Japan and South Korea would look at what's happened
03:20in the Middle East and decide that the United States can no longer guarantee their safety.
03:25So they would have to re-militarize, and they would have spent all the resources on adapting
03:30to the possible China threat.
03:32And then you have Europe, and then Europe would look at what happened in the GCC, as well as
03:36in Southeast Asia, and they would be like, why are we fighting Russia?
03:40Wouldn't it be in our best interest to negotiate a peace treaty with Russia as soon as possible?
03:45What this would mean, the collapse of the U.S. dollar as a global reserve currency.
03:51Remember that America is sitting on $39 trillion in debt.
03:55And so the American economy is a pension scheme that relies on foreign nations to continually
04:00buy U.S. dollars.
04:02So the U.S. economy would not be able to withstand, essentially, and withdraw from the Middle East.
04:07So the Americans are stuck where they are right now, unfortunately.
04:11What is the Chinese perspective on this?
04:14I mean, it seems like China has an interest in peace in the Persian Gulf with those seven
04:19oil-producing countries.
04:21Why wouldn't China step in and try and settle this?
04:24So both the United States and China benefit from the status quo.
04:29And China has a vested interest in seeing a very quick solution to this war in the Middle East.
04:36China imports about 40% of its energy needs from the GCC.
04:41So not just Iranian oil, but also Qatari natural gas.
04:44So as you point out, China very much wants to see, as soon as possible, a ceasefire.
04:50Unfortunately, it is the nature of the Chinese government not to interfere in foreign affairs.
04:57China doesn't really have a geopolitical framework, a grand strategy.
05:01It really believes in global trade, and it doesn't really have a framework for how to resolve armed conflict.
05:08And so Chinese policymakers are really stuck.
05:11And in fact, Chinese policymakers have come out publicly saying that they would like the carnage,
05:17the violence in the Middle East to stop as soon as possible and for the Strait of Hormuz to open
05:21up.
05:22But unfortunately, previously, when a war starts, it achieves a momentum and a logic of its own.
05:28And it's very hard to stop a war once it starts.
05:31So if your prediction is correct, and I pray that it's not, and I'm sure you do too,
05:37hope that you're wrong.
05:38But if you're not wrong, and this continues to grind in the way that it is now,
05:44destroying energy infrastructure, just really destroying the civilizations of the region and Iran and the GCC,
05:50what does that look like in, say, two years globally?
05:53What's the effect on the global economy?
05:55Right. So this war, it will accelerate three major trends.
05:59And nations will have to adapt to a new reality in which energy is longer cheap and accessible.
06:05The first major trend is deindustrialization, meaning that right now you just have too many people living in cities.
06:12And you can do that as long as you can import cheap energy and cheap food.
06:16But when cheap energy and cheap food are gone, then you need people to work the fields, to grow food
06:22for your economy.
06:23So you have to deindustrialize and reduce your energy dependence.
06:26That's one major trend that we should see very soon.
06:29Second major trend we should see is remilitarization, in that before we had Pax Americana,
06:35where America basically guaranteed global peace.
06:38And America basically prevented nations from going to war against each other.
06:41So, for example, Trump brokered a ceasefire between India and Pakistan,
06:45because these two nations have much hostilities against each other.
06:50But now that America doesn't longer has the aura of invincibility and inability,
06:55now that the American military does not come across as almighty,
06:59then America doesn't have the power to stop kids from attacking each other on the playground anymore.
07:04So nations have to remilitarize, especially nations like Japan,
07:08which before relied too heavily on American military protection.
07:13So that's number two, the remilitarization of the world.
07:16And the third major trend we should see is mercantilism,
07:19meaning that now that global trade is disrupted,
07:23nations, especially advanced industrial nations such as Japan and Germany,
07:27they need to create their own independent, self-sufficient supply chains.
07:31Fortunately, America doesn't have this issue because the Western Hemisphere
07:35is extremely wealthy and abundant in natural resources.
07:39But if you are Japan and Germany,
07:42then you have to reach out and expand your borders if you are to maintain your industrial might.
07:47So these are the three major trends we should be seeing very quickly.
07:50So unfortunately, the biggest loser of this war,
07:55regardless of how it turns out,
07:56even if Americans were to win,
07:58the biggest loser is the GCC.
08:00Because for the past 30, 40 years,
08:03the GCC is basically built on a mirage
08:05because it's essentially a desert
08:06with very little access to fresh water
08:09and very little agriculture.
08:11And so it couldn't really sustain a large population.
08:14But with the petrodollar
08:16and with American military protection,
08:18then the GCC nations felt free to invest in technology
08:22that allowed them to grow the population, right?
08:24So these desalination plants,
08:26modern infrastructure.
08:26So you sort of saw this massive growth in Dubai,
08:29in Qatar, in Riyadh.
08:31And what this war has done is shattered this mirage
08:36and revealed the limitations of the GCC.
08:39So for example, look at Dubai.
08:41So Dubai, for many years,
08:43has prided itself as this safe,
08:45very cosmopolitan, very open Paxhaven.
08:48So a lot of wealthy people immigrated to Dubai.
08:51But because of this war,
08:53and we're only talking about like a few drones hitting hotels,
08:56it's really shattered the image of Dubai.
08:59And once you shadow this mirage,
09:01you can never ever rebuild it again.
09:03So the idea of Dubai as like the future New York or London,
09:08the financial capital of the GCC,
09:10it's this mirage has evaporated.
09:12Iran in five years?
09:14So Iran is being devastated right now.
09:16So the Israelis and Americans
09:19are attacking critical infrastructure.
09:22So the Israelis attack the largest gas field in Iran.
09:26The desalination plant was destroyed.
09:29But we also have to remember what is being hidden from us.
09:33And what's being hidden from us is the fact that
09:35the Israelis and Americans are trying to destroy
09:38the capacity of the state to govern the nation,
09:42basically destroy the state's monopoly on violence.
09:45And so what we're hearing are attacks on police officers,
09:49on military installations,
09:50and there's talk of special forces going into Iran
09:54and starting to fund dissonant groups, right?
09:57Like the Kurds and the Qalakis in Southeast Iran.
10:01So no matter what happens in this war,
10:03it's going to be very hard for the government
10:06to maintain national control,
10:08even if they were to survive this war.
10:11And also another huge issue for Iran
10:14is that for the past few years,
10:16it's suffered drought issues.
10:18So its agriculture was heavily impacted.
10:20They were actually talking about moving terrain,
10:22like moving these millions of people
10:24out of the city of Tehran
10:25because their capital can no longer sustain
10:27this large population.
10:28So this war will only exaggerate
10:32these environmental issues,
10:33especially with the attacks
10:35on critical civil infrastructure,
10:36for example, dams, reservoirs,
10:38desalination plants.
10:39And it's going to take years and years
10:42for Iran to recover from this war as a nation.
10:46You have basically the storing of ethnic sentiments,
10:50the destruction of the state's capacity
10:52to deliver basic services.
10:53But the good news for Iran
10:55is that it seems as though
10:57they will be able to maintain control
10:59over the Strait of Hormuz.
11:00And that is critical
11:01because now they're able to charge a toll
11:04on anyone who uses the Strait of Hormuz.
11:06And they talk about 10%,
11:07which is generally about $800 billion a year
11:09annually for Iran.
11:11So the nation will be destroyed in this war.
11:14But if it's able to harness
11:17the pride of the Persian people,
11:19if it's able to unify the Persian people,
11:21and it's able to leverage the resources
11:23of the Strait of Hormuz effectively,
11:25then we can expect Iran to rise again
11:27in like 10 to 20 years time.
11:29Where is Israel in a few years from now?
11:31So if you look at the main beneficiary of this war,
11:35it is Israel.
11:36Because Israel has an ambition
11:38called the Greater Israel Project,
11:40which is what they believe that their God,
11:42Yahweh, promised to their ancestor, Abraham.
11:45And so they believe that Yahweh promised Abraham
11:48all the land from the Nile in Egypt
11:51to Euphrates in Iraq.
11:53If you look at the entire map,
11:54it also extends to Anatolia,
11:56which is southern Turkey,
11:56and even into Saudi Arabia.
11:58So if you look at what's happening,
12:00well, it's convenient in that
12:02the GCC is being destroyed.
12:04Saudi Arabia will probably be drawn into this war.
12:05It is possible Turkey will be drawn
12:07into this war as well.
12:10And this war allows Israel
12:12to remake the Middle East in its own image.
12:16Also, if you think about it,
12:18according to game theory,
12:19the main constraint to Israel
12:21achieving the Greater Israel Project
12:22is actually not Iran,
12:24but America.
12:25Because America guarantees
12:27the military safety
12:28and protection of the GCC,
12:31Saudi Arabia, Qatar,
12:33Kuwait, Buran, UAE,
12:34these nations.
12:35And so if Israel has become dominant,
12:38it's become the hegemon
12:39of the Middle East,
12:40it needs to figure out
12:41how to remove America
12:42from the equation.
12:45And quite honestly,
12:46this war has shown the limitations
12:47of American power.
12:49It's really annoyed the American people.
12:51The American people do not want this war.
12:53And American people don't even understand
12:55why America is in the Middle East.
12:56And so it's very possible
12:57that regardless of what happens
12:59in this war,
13:00America is forced to withdraw
13:01from the Middle East,
13:02in which case Israel is able
13:03to achieve its Greater Israel Project.
13:05The reality is that
13:06war in the Middle East
13:07is having a severe impact already
13:09on the entire Southeast Asian economy.
13:12So India imports about 60% of its oil
13:14from the GCC.
13:16Pakistan also imports
13:17a majority of its oil.
13:18Japan imports about 75% of its oil
13:20from the GCC.
13:22China imports about 40%.
13:24Okay, so all these colonies
13:25are being impacted
13:26and already Thailand, Vietnam
13:27are running out of fuel.
13:29And you go to a gas station,
13:30there's just more fuel
13:31for your motorbike.
13:32And now people are being forced
13:34to work from home.
13:35There's fuel rationing.
13:37There's no jet fuel.
13:38So this is impacting
13:38all of Southeast Asia.
13:40So the question isn't like
13:42who will be impacted
13:42because everyone's impacted.
13:44The question is
13:44who will be most resilient
13:46and the most willing to innovate
13:48and adapt to this new reality?
13:49Because we're not talking
13:50about short-term war.
13:52We're talking about
13:52a long-term change
13:53to the global economy.
13:54And I think that China
13:57will actually be
13:58the least resilient
13:59and the least ready
14:00to adapt to this new reality
14:02because for the past 30, 40 years,
14:05China has gotten very wealthy
14:07because of the global economy
14:09where it imports cheap energy
14:11and exports manufactured goods.
14:13And the entire Chinese economy
14:14is currently based on this model.
14:16Now, for the past 20 years,
14:18China has been moving towards
14:19a consumer-based economy
14:21and more of an innovation-based economy,
14:23AI.
14:24But unfortunately,
14:24AI itself is dependent
14:25on cheap energy.
14:27And Chinese consumers
14:28are refusing to spend money
14:30for a variety of reasons,
14:31primarily because
14:32they are not that optimistic
14:34about China's growth
14:36in the future.
14:37So, Chinese household savings
14:39is about 4%.
14:40And unless the government
14:41is able to get Chinese
14:42to spend more money,
14:43then it'll be very hard
14:44for the Chinese economy
14:45to move towards
14:46a consumer-based economy.
14:48So, all of South East Asia
14:49will be impacted
14:50and I think China
14:51will be impacted
14:52the most in the long term.
14:53Maybe not in the short term
14:54because China still has access
14:55to Iranian oil.
14:56I mean, Scott doesn't announce today
14:58that they will lift sanctions
14:59on Iranian oil
15:00in order to make sure
15:01the global economy
15:02is not too impacted
15:03by this war.
15:04But in the long term,
15:05the Chinese economy,
15:06it is not much too focus
15:08on export and manufacturing
15:10in order to shift
15:11to a much more
15:12diversified economy.
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