WEBVTT - Punishing Iran Could Alienate China and India — Again

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Iran is on Edge. Deadly protests erupted last month when

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<v Speaker 2>Iran's currency collapsed and prices soared, fueling public anger. The

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<v Speaker 2>governments responded with mass arrests, internet blackouts, and lethal force

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<v Speaker 2>to clamp down on public dissenters.

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<v Speaker 3>The death toll has now spiked to nearly two thousand

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<v Speaker 3>people killed in the crackdown. The scale is really hard

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<v Speaker 3>to judge from the outside, particularly in light of these

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<v Speaker 3>Internet blackouts.

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<v Speaker 2>As the protests continued to simmer and the death toll mounts,

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<v Speaker 2>US President Donald Trump has said more violence could trigger

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<v Speaker 2>the US to take military action. The military is looking

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<v Speaker 2>at it, and we're looking at some very strong options.

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<v Speaker 1>We'll make a determination.

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<v Speaker 2>President Trump says he has canceled talks with the Radiant

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<v Speaker 2>officials amid a protest crackdown, telling Iranian citizens quote, help

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<v Speaker 2>is on its way. One determination he's already made, threatening

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<v Speaker 2>to slap a twenty five percent tariff on any country

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<v Speaker 2>that's doing business with Iran. He made the surprise tariff

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<v Speaker 2>announcement on True Social on Monday. Though Trump didn't specify

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<v Speaker 2>who would be targeted, it was clear straight away that

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<v Speaker 2>two of Asia's largest economies would be firmly in the crosshairs.

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<v Speaker 3>China is by far and away the biggest purchaser of

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<v Speaker 3>Iranian oil. It buys about ninety percent of Iran's oil,

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<v Speaker 3>and India maybe buys about a tenth of what China

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<v Speaker 3>does in terms of total goods.

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<v Speaker 2>That's Daniel ten Kate, Bloomberg's executive editor of Government and

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<v Speaker 2>Economics in Asia.

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<v Speaker 3>Trump could go in and say it's twenty five percent.

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<v Speaker 3>There's all sorts of questions about what it means. But

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<v Speaker 3>if it is twenty five percent on top of current rates,

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<v Speaker 3>then you looking at blowing up the truth with China

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<v Speaker 3>and also really setting back even further US relations with India,

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<v Speaker 3>just as Trump says, their important strategically.

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<v Speaker 2>This is the Big Take Asia from Bloomberg News. I'm Wanha.

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<v Speaker 2>Every week we take you inside some of the world's

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<v Speaker 2>biggest and most powerful economies and the markets, tycoons and

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<v Speaker 2>businesses that drive this ever shifting region. Today on the show,

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<v Speaker 2>Trump's response to violence in Iran is another round of tariffs.

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<v Speaker 2>What that means for two of Iran's top trading partners

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<v Speaker 2>in Asia and how it could tip the balance of

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<v Speaker 2>power around the world dan. This latest news began, as

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<v Speaker 2>it often does, with President Trump posting on true social

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<v Speaker 2>on Monday. The President issued an ultimatum countries doing business

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<v Speaker 2>with Iran risks paying twenty five percent tariffs on all

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<v Speaker 2>goods sent to the US. Radley speaking, what does that entail?

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<v Speaker 2>Who would that affect? You know which countries it would be? Hit?

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<v Speaker 2>The hert ist there.

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<v Speaker 3>This is sort of a classic trup tariff threat if

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<v Speaker 3>that's something we can use now, But it's like, take

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<v Speaker 3>something very vague, kind of a bold round number, like

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<v Speaker 3>twenty five percent. You know, he's used one hundred percent before.

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<v Speaker 3>He's threatened the bricks countries. He's threatened them for very

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<v Speaker 3>vague things, and nobody really knows what that means.

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<v Speaker 1>Doing business could mean a lot of different things.

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<v Speaker 3>So it's almost any country that has any sort of

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<v Speaker 3>economic relationship would be at risk. When you look at

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<v Speaker 3>trading partners, China, the UAE, Turkey, Iraq, the EU, India, Pakistan, Russia, Afghanistan, Oman,

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<v Speaker 3>those are the top ten trading partners according to official data.

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<v Speaker 3>So the big question with all these threats is how

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<v Speaker 3>they're actually implemented, and we have not seen that yet.

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<v Speaker 3>We're still waiting for the actual paper to come where

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<v Speaker 3>they put this in writing and they tell importers and

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<v Speaker 3>exporters exactly what the tariff rate is going to be

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<v Speaker 3>on whichever country.

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<v Speaker 2>None of this is happening in a vacuum. It seems

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<v Speaker 2>that Trump is trying to do this to isolate Iran

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<v Speaker 2>and force regime change. Possibly, if that's the case, is

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<v Speaker 2>using tariffs as an economic weapon to do it the

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<v Speaker 2>most effective way?

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<v Speaker 3>Well, that remains to be seen. I mean, I think

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<v Speaker 3>tariffs are Trump's financial weapon of choice, I guess, is

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<v Speaker 3>one way to put it. He's fresh off a big

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<v Speaker 3>victory in Venezuela. There's a lot of calls, particularly in

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<v Speaker 3>the US right now, saying that Trump is on this

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<v Speaker 3>march for freedom around the world. He's changing the geopolitical map.

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<v Speaker 3>He's gotten rid of one dictator in Venezuela.

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<v Speaker 1>Cuba might be next.

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<v Speaker 3>You have protests in Iran, why not try and nudge

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<v Speaker 3>the regime out if you can, and add to Trump's

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<v Speaker 3>sort of history making legacy, defining march for freedom here

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<v Speaker 3>that they see going on globally. It's a lot more

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<v Speaker 3>complicated than that. Obviously, you can threaten tariffs all you want,

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<v Speaker 3>but right now, heading into the midterms, the big issue

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<v Speaker 3>in the United States is still affordability, and that's where

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<v Speaker 3>Trump is the most vulnerable politically. So if you start

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<v Speaker 3>raising tariffs again twenty five percent across the board on

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<v Speaker 3>countries that do business with Iran China in particular, you're

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<v Speaker 3>looking at probably higher costs that will be born out

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<v Speaker 3>by US consumers and potential voters in the midterms.

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<v Speaker 2>And of course, on top of that, we're seeing that

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<v Speaker 2>Trump's broad tariffs on China and the world, and whether

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<v Speaker 2>he had the authority as president to impose them, are

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<v Speaker 2>now the subject of a lawsuit that the Supreme Court

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<v Speaker 2>could rule on in a matter of days. What rationale

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<v Speaker 2>could Trump use that would make these tariffs legal and

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<v Speaker 2>more likely to stick.

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<v Speaker 1>That's always a good question.

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<v Speaker 3>I mean, the Supreme Court is really ruling on whether

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<v Speaker 3>the tariffs are some sort of emergency and so if

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<v Speaker 3>they are ruled illegal, then that really limits the scope

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<v Speaker 3>that Trump can use to impose tariffs for emergency reasons. Traditionally,

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<v Speaker 3>you would have an investigation like a three oh one

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<v Speaker 3>investigation or some trade investigation that then author allows for

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<v Speaker 3>tariffs to be imposed. So we're seeing Trump take action

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<v Speaker 3>on that front with different investigations and to steal and

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<v Speaker 3>all sorts of overcapacity issues and things like that. And

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<v Speaker 3>these could be quite broad in how they're actually defined

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<v Speaker 3>at the end of the day, but they're on much

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<v Speaker 3>firmer legal footing than just issuing a bunch of tire

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<v Speaker 3>threats through executive order. So that does beg the question

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<v Speaker 3>of whether the falls into that category of whether he

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<v Speaker 3>can do that.

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<v Speaker 1>I think Trump is going to push the limits no

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<v Speaker 1>matter what.

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<v Speaker 3>He's not going to try and be bound by that,

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<v Speaker 3>and he's going to try and do this and then

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<v Speaker 3>just let it play out in the courts, which takes

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<v Speaker 3>a long time anyway. So whether the Supreme Court decision

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<v Speaker 3>will have any impact on what happens with these latest

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<v Speaker 3>terror threats on the part of Iran, I don't think

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<v Speaker 3>that will stop Trump from going ahead with it.

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<v Speaker 2>We here, of course, focus on Asia Pacific, but broadly speaking,

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<v Speaker 2>why is what's happening in Iran so significant for the

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<v Speaker 2>region that you and I cover every day.

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<v Speaker 3>It's impossible to look at this situation without looking at China,

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<v Speaker 3>And of course a lot of Asian countries are oil importers,

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<v Speaker 3>so anything that happens in the Middle East regarding the

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<v Speaker 3>price of oil is going to affect countries throughout Asia,

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<v Speaker 3>and China buys about ninety percent of Iran's oil, so

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<v Speaker 3>that's the key country to look at right now. India

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<v Speaker 3>maybe buys about a tenth of what China does in

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<v Speaker 3>terms of total goods. There are other goods at trade hands,

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<v Speaker 3>including electronics and things like that, but ultimately the relationship

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<v Speaker 3>hinges on oil.

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<v Speaker 2>And how important are those oil purchases to funding Iran

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<v Speaker 2>right now?

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<v Speaker 3>The oil purchases is certainly a big source of money

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<v Speaker 3>for the Iranian regime. So the US has done a

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<v Speaker 3>good job, I guess if you could call it that

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<v Speaker 3>in terms of preventing other countries from buying Iranian oil.

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<v Speaker 1>India's one of them.

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<v Speaker 3>Which stopped a lot of major purchases of that. So

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<v Speaker 3>the impact of US efforts and sanctions over the years

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<v Speaker 3>has been pretty effective in limiting who or which countries

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<v Speaker 3>Iran can sell to. And so that's why it's limited

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<v Speaker 3>to China, and a lot of that goes through a

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<v Speaker 3>so called dark fleet where it's not even on the

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<v Speaker 3>official books. So China is able to get around that

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<v Speaker 3>by having a lot of so called teapot refineries, refineries

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<v Speaker 3>with no real connections to the outside world, buying this

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<v Speaker 3>oil at a discount and processing it. And that's about

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<v Speaker 3>ten to fifteen percent of the oil that China imports altogether.

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<v Speaker 2>Right now, what have we heard from China and India

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<v Speaker 2>on this.

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<v Speaker 3>We have not heard too much. Of course, China always

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<v Speaker 3>expresses calls for stability. They don't like to interfere in

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<v Speaker 3>internal affairs of given countries, but they also don't want

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<v Speaker 3>third parties stepping in, particularly the United States. Obviously everyone

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<v Speaker 3>is watching very closely. You have a regime that's been

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<v Speaker 3>in place for four or five decades that if it collapses,

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<v Speaker 3>then there's all sorts of questions about what that means

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<v Speaker 3>for stability in the Middle East, for the price of oil,

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<v Speaker 3>and then does that have any ramifications for the region

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<v Speaker 3>at large? Are there kind of ripple effects that maybe

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<v Speaker 3>you're not even thinking about right now now that I'm

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<v Speaker 3>sure leaders across the region, particularly China and India are

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<v Speaker 3>kind of doing a risk assessment now and seeing where

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<v Speaker 3>they might be vulnerable.

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<v Speaker 2>Trump's hardball over Iranian oil could squeeze China, but it

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<v Speaker 2>could also boost Beijing's soft power that's coming up after

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<v Speaker 2>the break. China is Iran's most important trading partner, with

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<v Speaker 2>more than thirty two billion dollars in goods exchanged in

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<v Speaker 2>twenty twenty four. That support of Tehran helps counter US

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<v Speaker 2>influence in the Middle East. Meanwhile, India ranks as Iran's

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<v Speaker 2>sixth biggest trading partner, behind several Middle Eastern countries and

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<v Speaker 2>the European Union. For Tehran, oil sales to these two

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<v Speaker 2>Asian giants are vital to keeping the regime afloat, but

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<v Speaker 2>for Beijing and New Delhi that discounted crude is far

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<v Speaker 2>less crucial to their economies. Still, as Bloomberg's Daniel ten

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<v Speaker 2>Kate points out, maintaining a steady flow of arranging oil

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<v Speaker 2>remains important for both countries.

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<v Speaker 3>I mean, China is basically going through deflation, so I mean,

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<v Speaker 3>I guess you could have an argument that they can

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<v Speaker 3>absorb higher prices a lot easier than a place like

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<v Speaker 3>India could. India also CPI is quite low at the moment,

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<v Speaker 3>so from their perspective, you know, it's probably not the

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<v Speaker 3>end of the world either to start paying a higher prices.

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<v Speaker 3>They're always very politically sensitive to price moves and oil

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<v Speaker 3>is one where everyone could feel it throughout the whole economy.

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<v Speaker 3>So even if the price goes up and you're used

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<v Speaker 3>to paying a small amount, people notice the price increases

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<v Speaker 3>right away, So they tend to have a higher outsized

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<v Speaker 3>political impact. And so either way, if you're She or Mody,

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<v Speaker 3>you don't like to see oil prices jumping or being

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<v Speaker 3>volatile in any way, then even if you can absorb

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<v Speaker 3>it to some.

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<v Speaker 2>Extent, is there any chance that China and India would

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<v Speaker 2>actually preemptively stop purchasing oil from Iran to head off

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<v Speaker 2>these tariffs, Well.

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<v Speaker 3>India's already cut off a lot of Iranian oil purchases,

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<v Speaker 3>and they've already started reducing Russian purchases as well. So

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<v Speaker 3>for India, yes, I mean they're suffering under these tariffs

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<v Speaker 3>more acutely than China is at the moment. In China's case,

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<v Speaker 3>it is unlikely. I think China doesn't like to bend

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<v Speaker 3>to the US and has shown over the past year

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<v Speaker 3>that it can withstand the sort of pressure from Trump

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<v Speaker 3>because it has this trump card, so to speak of

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<v Speaker 3>rare eer so and it can cut off the US

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<v Speaker 3>and it has played that very effectively last year. Something

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<v Speaker 3>that brought Trump to the table, led to the truce

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<v Speaker 3>that we saw, and the US still has no real

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<v Speaker 3>replacement for these rarest and critical minerals, and they've shown

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<v Speaker 3>that they could play hardball with the US and the

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<v Speaker 3>rest of the world.

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<v Speaker 1>Frankly, so, yeah, I don't see.

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<v Speaker 3>China backing down on this, and I think they would

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<v Speaker 3>rather take up the fight than be seen to back down.

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<v Speaker 2>Now. Last week on the show, we discussed how President

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<v Speaker 2>Trump is using an expanded version of the Monroe Doctrine

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<v Speaker 2>to undercut China's influence in Latin America. It's interesting that

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<v Speaker 2>you talk about the world turning to China as a

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<v Speaker 2>more reliable partner. How might this latest threat kind of

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<v Speaker 2>further what Trump is trying to do in terms of

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<v Speaker 2>undercutting China's influence in the world.

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<v Speaker 3>Over the past five years, during the Biden administration particular,

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<v Speaker 3>they really tried to hammer home the fact that China

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<v Speaker 3>was using economic coercion to get what it wants and

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<v Speaker 3>squeeze allies and other countries around the world. Now you

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<v Speaker 3>have a completely different scenario where Trump is just blatantly

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<v Speaker 3>saying We're going to use economic coersion.

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<v Speaker 1>To get what we want.

0:14:08.880 --> 0:14:13.600
<v Speaker 3>So from a Chinese perspective, You're in this sort.

0:14:13.360 --> 0:14:15.160
<v Speaker 1>Of mightis right world.

0:14:15.360 --> 0:14:18.120
<v Speaker 3>And I think that was a lot of the fears

0:14:18.160 --> 0:14:22.120
<v Speaker 3>that many countries had about China, that there were no

0:14:22.280 --> 0:14:27.400
<v Speaker 3>global rules to constrain countries like China. Frankly, and now,

0:14:27.800 --> 0:14:30.520
<v Speaker 3>if the situation were reversed and China was doing what

0:14:30.680 --> 0:14:34.120
<v Speaker 3>Trump was doing now, the outrage even two years ago

0:14:34.200 --> 0:14:35.800
<v Speaker 3>would have been off the charts.

0:14:35.960 --> 0:14:37.480
<v Speaker 2>And I guess, in some ways, does all of this

0:14:38.040 --> 0:14:41.600
<v Speaker 2>position China to basically make that argument that it is

0:14:41.640 --> 0:14:46.400
<v Speaker 2>a more reliable friend, a more reliable partner than the US's.

0:14:46.600 --> 0:14:49.320
<v Speaker 3>Yeah, I mean it comes down to reliability. And if

0:14:49.880 --> 0:14:51.680
<v Speaker 3>you're dealing with Trump, you don't know if he's going

0:14:51.760 --> 0:14:55.200
<v Speaker 3>to turn on you and demand something from you that's

0:14:55.240 --> 0:14:59.080
<v Speaker 3>a core national interest. So China at the moment has

0:15:00.120 --> 0:15:05.040
<v Speaker 3>or trade itself as an alternative of stability. It's talked

0:15:05.040 --> 0:15:08.640
<v Speaker 3>about global rules a lot. It's allowed China to claim

0:15:08.920 --> 0:15:11.880
<v Speaker 3>the moral high ground, whether you think it deserves it

0:15:12.000 --> 0:15:15.560
<v Speaker 3>or not. China has been there to say, look, we

0:15:15.680 --> 0:15:19.280
<v Speaker 3>follow the UN Charter, we follow global rules. So China's

0:15:19.320 --> 0:15:22.600
<v Speaker 3>response isn't to go and say, okay, Trump said a

0:15:22.760 --> 0:15:24.760
<v Speaker 3>precedent where we can do anything we want, so we're

0:15:24.760 --> 0:15:27.200
<v Speaker 3>going to go and take Taiwan. That's not the case,

0:15:27.400 --> 0:15:30.600
<v Speaker 3>but the precedent is setting is that we're in a

0:15:30.680 --> 0:15:34.320
<v Speaker 3>law of the jungle, might is right world, and in

0:15:34.360 --> 0:15:37.160
<v Speaker 3>that type of world, China is very strong. But China

0:15:37.280 --> 0:15:40.680
<v Speaker 3>for the moment is it's enhancing its credibility as a

0:15:40.880 --> 0:15:42.800
<v Speaker 3>responsible partner in a lot of ways.

0:15:44.640 --> 0:15:47.600
<v Speaker 2>We're just weeks into twenty twenty six and the US

0:15:47.600 --> 0:15:51.480
<v Speaker 2>has now attacked Venezuela, captured President Nicholas Maduro, and is

0:15:51.520 --> 0:15:55.080
<v Speaker 2>now threatening to also intervene in Iran. Obviously, She and

0:15:55.120 --> 0:15:58.240
<v Speaker 2>Mody are closely watching all of this. How might this

0:15:58.320 --> 0:15:59.480
<v Speaker 2>be sitting with them?

0:16:00.360 --> 0:16:07.520
<v Speaker 3>Like, nobody likes instability, especially if you're running a country

0:16:07.560 --> 0:16:10.520
<v Speaker 3>with more than a billion people, with both Modi and

0:16:10.640 --> 0:16:13.400
<v Speaker 3>She are. I mean, there's a lot of moving parts

0:16:13.440 --> 0:16:17.520
<v Speaker 3>in both economies and to have big time external shocks

0:16:18.240 --> 0:16:21.840
<v Speaker 3>that could impact the price of oil is certainly a worry.

0:16:21.880 --> 0:16:24.160
<v Speaker 3>And I think that's their main worry at the moment,

0:16:24.880 --> 0:16:28.600
<v Speaker 3>is what are going to be the effects on the

0:16:28.640 --> 0:16:33.359
<v Speaker 3>economy that could trickle into domestic politics and effects stability

0:16:33.440 --> 0:16:36.120
<v Speaker 3>one way or the other. I don't think they're necessarily

0:16:36.200 --> 0:16:40.480
<v Speaker 3>worried that you'll see a contagion effect from the protests

0:16:40.880 --> 0:16:46.840
<v Speaker 3>in Tehran to New Delhi or to Beijing. But certainly

0:16:46.880 --> 0:16:51.040
<v Speaker 3>you're worried about the secondary economic effects, and you're worried

0:16:51.040 --> 0:16:52.920
<v Speaker 3>about what the US will do.

0:16:53.600 --> 0:16:56.960
<v Speaker 1>For She and for Modi. Stability is the preference.

0:16:57.080 --> 0:16:59.160
<v Speaker 3>You want to make sure first of all that your

0:16:59.240 --> 0:17:04.359
<v Speaker 3>domestics such is secure, that there's no protest or domestic

0:17:04.480 --> 0:17:07.480
<v Speaker 3>unrest or fallout from any of these events that could

0:17:07.520 --> 0:17:11.760
<v Speaker 3>affect your domestic political standing. And then you know, secondly

0:17:11.840 --> 0:17:15.760
<v Speaker 3>to make sure that geopolitically you're not heard in any way.

0:17:16.000 --> 0:17:19.119
<v Speaker 1>And so I think that's kind of what they're watching for.

0:17:19.240 --> 0:17:22.159
<v Speaker 3>But are we going to see a change in strategy

0:17:22.160 --> 0:17:25.560
<v Speaker 3>more broadly, No, I mean I think you do see

0:17:26.240 --> 0:17:30.879
<v Speaker 3>China hosting a lot of leaders lately from Europe and

0:17:30.920 --> 0:17:34.000
<v Speaker 3>particularly of Canada's leader going over soon.

0:17:34.080 --> 0:17:36.080
<v Speaker 1>So they're improving.

0:17:35.680 --> 0:17:39.040
<v Speaker 3>Ties with a lot of Middle powers, and a lot

0:17:39.080 --> 0:17:40.480
<v Speaker 3>of middle powers are looking to.

0:17:40.480 --> 0:17:42.040
<v Speaker 1>China now is a hedge against the US.

0:17:42.080 --> 0:17:44.200
<v Speaker 3>So in a way, a lot of this is actually

0:17:45.000 --> 0:17:48.560
<v Speaker 3>not bad for China on a grand scheme of things.

0:17:48.640 --> 0:17:51.760
<v Speaker 3>It's sort of countries are looking to China as a

0:17:51.840 --> 0:17:55.679
<v Speaker 3>counterbalance to the US and Trump, and China has shown

0:17:55.760 --> 0:17:59.040
<v Speaker 3>that it can stand up to Trump. So if Trump

0:17:59.080 --> 0:18:01.800
<v Speaker 3>does go after them again, China's going to have a

0:18:01.840 --> 0:18:05.199
<v Speaker 3>lot of countries that are more sympathetic to China in

0:18:05.240 --> 0:18:08.399
<v Speaker 3>any case, in viewing Trump more as the rogue actor,

0:18:08.440 --> 0:18:11.239
<v Speaker 3>which is kind of a change of role in what

0:18:11.280 --> 0:18:20.520
<v Speaker 3>we've seen over the past decade or so.

0:18:20.600 --> 0:18:23.280
<v Speaker 2>This is The Big Take Asia from Bloomberg News. I'm

0:18:23.280 --> 0:18:26.679
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0:18:26.720 --> 0:18:29.639
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0:18:29.680 --> 0:18:33.400
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0:18:33.520 --> 0:18:36.000
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0:18:36.080 --> 0:18:38.880
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0:18:38.920 --> 0:18:42.040
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