00:00You have a new piece out titled Not So Straightforward, Hormuz, Iran and the Future of Gulf Oil and Gas
00:07Flows.
00:07And you talk about both the good and bad views, optimism and pessimism of how and when oil supplies could
00:14return to some sort of normal.
00:16Can you walk us through the main arguments there?
00:19Absolutely. And just to give you a sense of what that spectrum is, we've seen a range of analyses and
00:25predictions that say everything between
00:27we could expect if the recovery continues to move forward, if the straight does remain open to an extent,
00:35even if it's a complicated reopening, you know, maybe starting to see a renormalization,
00:40a major recovery of Gulf energy flows by the end of the year going into next year.
00:48And then at the other end of the spectrum, you get all the way to we should never expect to
00:53see a full recovery.
00:54Or even if we see a recovery in production levels, it's not necessarily going to look at like what we
01:00saw pre-February of this year.
01:03And there are a number of reasons for that range of projections.
01:06I think both extremes of this debate kind of broadly agree that there are four key tasks that need to
01:12be done for the reopening
01:13and for the restabilization, renormalization of flows in particular.
01:18That's the clearing of ships in the Gulf.
01:20It's the bringing back in of new empty tankers that can help to offload cargoes from producers.
01:26It's the restart of production itself out of a number of economies that halted their operations during this conflict.
01:33And then it's also a matter of dealing with the significant multi-billion dollar damage that we've seen across the
01:42region,
01:43not just to oil refineries and LNG facilities, but also ports that are going to continue to shape the output
01:49level.
01:50Claire, let me ask you just about the overarching ambiguity that still exists in this part of the world.
01:54So we quoted from the president just a few minutes ago his threat to bomb Iran again and more significantly.
02:01He never tried to take Karg Island.
02:03He could destroy more energy infrastructure in Saudi Arabia and – sorry, in Iran and elsewhere.
02:09Saudi Arabia and Qatar are still reeling from what's happened.
02:13As you look at things now, sort of how stable are things?
02:15As we talk about the prospect of kind of reopening that strait, are we at a point where that's really
02:19where the conversation lies?
02:20Or is there still kind of an overarching anxiety about sort of what more could happen to the infrastructure that's
02:24already been hit and hurt?
02:26It's absolutely a situation that remains incredibly fragile.
02:30And I think unstable is also the really apt word in this space.
02:35I think earlier this week when President Trump said, you know, the ceasefire is over,
02:40and we saw renewed strikes from both the United States and Iran,
02:44one of the questions that those of us who followed energy markets had was, you know,
02:49is this a situation where we're going back to where we've been for the last few months?
02:53Or, you know, is this just another risk that markets are going to, to an extent, be willing to price
02:59in?
03:00And I think it is still early days for multiple reasons.
03:05But one of the things that we have seen, even as of this week,
03:09is that while traffic shipments in and out of the strait have been significantly below pre-war levels,
03:16you do see a number that have at least attempted the crossing, not just exiting the strait,
03:22but to a more minor extent, some that are continuing to go back in as well.
03:28How they're getting to that confidence of doing this,
03:31how long they will be willing to continue to brave that risk.
03:35These are the things we don't really have good answers to at the moment.
03:38And there seem to be several ways in which they're doing this,
03:40and it's a little hard to track, literally, because sometimes they are doing it in a clandestine matter,
03:46turning off those trackers, doing it in the middle of the night so that they can get those ships out.
03:50You referenced this a little bit with David's question,
03:52but we had Qatar's big LNG plant that was hit.
03:55They were ramping up, planning to restart production this week,
03:58and then they put that back on hold after an LNG tanker was fired on by Iranian forces in the
04:03Gulf.
04:04We've talked a lot throughout this process about risk
04:06and how much risk these countries and companies are going to be willing to take
04:09and what that's going to cost.
04:11What's your analysis of that with those scenarios that you laid out?
04:17I mean, so what this cost is still a number that we're continuing to revise upwards, right?
04:25Because we're still continuing to see damage to new vessels, damage to infrastructure,
04:31as well as additional questions about what it looks like to recover well from the scenario.
04:36So Qatar and others are not just looking at repairing their facilities,
04:41but they're also looking at scenarios for hardening them as well.
04:45Scenarios for, in the case of others as well, looking at alternate routes to exit.
04:52To give you one number I've seen on this, just in terms of the repair costs,
04:57we are talking somewhere on the order of $60 billion.
05:03It's an incredible amount of money that says nothing about the impact that this has also had on human lives,
05:09daily society, other elements of the economy as well.
05:14But it is something that rather than just walking away from this very expensive element,
05:20it's something that doing this repairs is also seen as an important part about how you think about societal recovery,
05:27how you think about the restoring of contributions to me and other things.
05:32So it's an unenviable situation.
05:35Claire, I've got about a minute left, and I want to ask you about what David Sanger brought up in
05:37The Times this week,
05:38and that is this change from the U.S. administration using carrots to using sticks.
05:44And we saw that with the General License X1 that the administration put in place here,
05:48lifting the waiver that they'd had allowing Iran to sell oil on the open market.
05:51Again, in the minute we have left, can you explain the ramifications of that,
05:54sort of how that colors these negotiations as they continue to unfold?
06:01Oh, God.
06:02I mean, it's very much a live question.
06:05And in terms of how it colors the negotiations, it's genuinely hard to even say where those things are at.
06:13Yes, the United States has been using more sticks than carrots,
06:17but it's also a question of how effectively we can even use those sticks to make some of the demands
06:24that President Trump and others have had in terms of our ability to compel Iran to reopen the strait,
06:31compel Iran to address the questions about mining still through the main navigation areas,
06:36questions even about the routes that ships can be guaranteed to take,
06:41and also if those routes will be open with the additional fee or other things.
06:50Stand by to stand by.
06:51Everything's on the table right now.
06:53Clara, a pleasure to talk to you.
06:54Thank you very much.
06:54This is Clara Gillespie.
06:55She's a Senior Fellow at the Council on Foreign Relations.
06:57Appreciate the time.
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