WEBVTT - Traders Focus on Oil, Trump on Iran Operation Goals

0:00:00.040 --> 0:00:07.000
<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

0:00:10.400 --> 0:00:13.720
<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Krisner. The

0:00:13.800 --> 0:00:16.840
<v Speaker 2>crude oil and natural gas markets have been forced to

0:00:16.920 --> 0:00:20.360
<v Speaker 2>consider the possibility of an energy crisis. All of this

0:00:20.400 --> 0:00:23.480
<v Speaker 2>is after the US and Israeli military action in Iran.

0:00:23.920 --> 0:00:26.880
<v Speaker 2>Now shipping through the Strait of horm Moves is at

0:00:26.920 --> 0:00:30.160
<v Speaker 2>a near standstill. You know, roughly twenty percent of global

0:00:30.160 --> 0:00:33.920
<v Speaker 2>oil exports passed through this narrow waterway. It was late

0:00:34.000 --> 0:00:38.000
<v Speaker 2>Monday when an advisor to the Islamic Revolutionary Guard said

0:00:38.120 --> 0:00:42.040
<v Speaker 2>Iranian forces will set fire to any ship attempting to

0:00:42.080 --> 0:00:44.640
<v Speaker 2>pass through the strait. I think the quote was, we

0:00:44.720 --> 0:00:48.159
<v Speaker 2>won't allow a single drop of oil to leave the region.

0:00:48.479 --> 0:00:51.440
<v Speaker 2>For a closer look, I'm joined by Bloomberg Stephen Stepchinsky.

0:00:51.520 --> 0:00:54.880
<v Speaker 2>Stephen is team leader for Asia Energy and he joins

0:00:54.880 --> 0:00:57.960
<v Speaker 2>from our studios in Singapore. Stephen, thank you for being here.

0:00:58.360 --> 0:01:01.240
<v Speaker 2>What is the biggest question in your mind right now

0:01:01.280 --> 0:01:04.840
<v Speaker 2>as we look at the various scenarios, If I can

0:01:04.840 --> 0:01:06.759
<v Speaker 2>put it that way, I.

0:01:06.720 --> 0:01:09.399
<v Speaker 3>Think there are two things that the market is watching

0:01:09.560 --> 0:01:12.920
<v Speaker 3>very very closely. Obviously, as you talked about the Strait

0:01:12.920 --> 0:01:15.920
<v Speaker 3>of Hormoves, is a key waterway. How long will it

0:01:15.959 --> 0:01:19.880
<v Speaker 3>stay shut and what ships will be willing to go through.

0:01:20.120 --> 0:01:24.560
<v Speaker 3>A lot of companies, like Japan's Mitsui Osk Lines has

0:01:24.600 --> 0:01:27.280
<v Speaker 3>said that they will not allow their ships to go through.

0:01:27.319 --> 0:01:31.000
<v Speaker 3>They've told them to salt. Meanwhile, other ship owners are

0:01:31.000 --> 0:01:34.360
<v Speaker 3>dealing with rising insurance prices. How much are they willing

0:01:34.400 --> 0:01:36.720
<v Speaker 3>to pay? Can they get the war insurance that they need,

0:01:36.760 --> 0:01:39.280
<v Speaker 3>because a lot of those war insurance terms are actually

0:01:39.319 --> 0:01:44.440
<v Speaker 3>getting canceled this week as the situation on folds. That's

0:01:44.480 --> 0:01:48.120
<v Speaker 3>horror moves. The other is infrastructure, right, so horror moves

0:01:48.160 --> 0:01:51.200
<v Speaker 3>that could quickly be resolved if there's some sort of

0:01:51.240 --> 0:01:54.960
<v Speaker 3>piece deal and flows could resume again. But if infrastructure,

0:01:55.200 --> 0:02:01.040
<v Speaker 3>oil exports, gas production facilities, pipelines are damaged as the

0:02:01.080 --> 0:02:05.320
<v Speaker 3>conflict unfolds, then we're seeing an oil or gas market

0:02:05.320 --> 0:02:08.400
<v Speaker 3>where where production is affected potentially for longer. You know,

0:02:08.440 --> 0:02:10.480
<v Speaker 3>I have to remind you that the Middle East is

0:02:10.520 --> 0:02:15.079
<v Speaker 3>a major producer of oil and gas for consumers all

0:02:15.120 --> 0:02:19.080
<v Speaker 3>around the world, from Europe to Asia, and already over

0:02:19.120 --> 0:02:23.079
<v Speaker 3>the last twenty four hours we saw Iranian drones hit

0:02:23.320 --> 0:02:28.519
<v Speaker 3>a Saudi Arabia's largest refinery, and we've also seen Qatar's

0:02:29.040 --> 0:02:32.560
<v Speaker 3>ras Lafa and Energy Complex get Hit that includes the

0:02:32.600 --> 0:02:36.399
<v Speaker 3>world's biggest look fed natural gas export facility. It provides

0:02:37.160 --> 0:02:39.200
<v Speaker 3>twenty percent of the world's LNG.

0:02:40.000 --> 0:02:43.000
<v Speaker 2>So China, i know, is a big buyer of Iranian crude,

0:02:43.040 --> 0:02:46.280
<v Speaker 2>even though that crude oil has been sanctioned by the US.

0:02:47.000 --> 0:02:48.959
<v Speaker 2>Do you have a sense of the impact on China

0:02:49.040 --> 0:02:52.480
<v Speaker 2>if there is a prolonged closure of the strait or

0:02:52.520 --> 0:02:57.200
<v Speaker 2>it becomes difficult for those vessels to reach Chinese mainland refineries.

0:02:58.120 --> 0:03:01.160
<v Speaker 3>So in a way, Beijing has been preparing for this

0:03:01.680 --> 0:03:04.880
<v Speaker 3>for years, you know. I think if you think about

0:03:04.880 --> 0:03:10.040
<v Speaker 3>the twenty twenty two energy crisis after Russia invaded Ukraine

0:03:10.080 --> 0:03:13.160
<v Speaker 3>and upended oil and gas markets, it actually led to

0:03:13.560 --> 0:03:17.400
<v Speaker 3>some energy shortages in China, and since then Beijing has

0:03:17.440 --> 0:03:21.040
<v Speaker 3>been working really hard to increase their own oil and

0:03:21.120 --> 0:03:26.760
<v Speaker 3>gas production, find alternative supplies, increase coal production for power generation,

0:03:27.280 --> 0:03:30.160
<v Speaker 3>as well as talk to other partners across the region.

0:03:30.880 --> 0:03:33.600
<v Speaker 3>China has turned more and more to Russia, for example,

0:03:33.720 --> 0:03:37.480
<v Speaker 3>for oil and gas supplies as well. So if this

0:03:37.680 --> 0:03:41.160
<v Speaker 3>let's look at oil. If this were to be prolonged, yes,

0:03:41.240 --> 0:03:43.760
<v Speaker 3>oil would would be This would become an issue for

0:03:44.000 --> 0:03:47.560
<v Speaker 3>some refiners in China, they'd have to scramble on fine alternatives.

0:03:47.560 --> 0:03:51.040
<v Speaker 3>But we are entering a period of a glut in

0:03:51.080 --> 0:03:54.280
<v Speaker 3>the oil market, and if you're just talking about sheer barrels,

0:03:54.360 --> 0:03:56.800
<v Speaker 3>there is supply available, they have to pay the price.

0:03:57.160 --> 0:03:59.680
<v Speaker 3>Maybe the supply wouldn't be available for a few weeks

0:03:59.760 --> 0:04:02.520
<v Speaker 3>or month, but it wouldn't lead to widespread shortages or

0:04:02.520 --> 0:04:06.000
<v Speaker 3>anything in China. Meanwhile, they also have very large inventories

0:04:06.000 --> 0:04:09.000
<v Speaker 3>that they've built up. Now turning to gas, which is

0:04:09.120 --> 0:04:11.880
<v Speaker 3>used in industries to a small degree power generation as

0:04:11.920 --> 0:04:14.920
<v Speaker 3>well as heating, that could be more of an issue.

0:04:15.520 --> 0:04:22.680
<v Speaker 3>Qatar depends. Qatar supplies thirty percent of China's LNG imports.

0:04:23.320 --> 0:04:26.240
<v Speaker 3>They're a major supplier to the country and that would

0:04:26.240 --> 0:04:29.920
<v Speaker 3>be harder to immediately replace. They would have to scramble

0:04:30.800 --> 0:04:36.360
<v Speaker 3>to other exporters like Australia, the US, or maybe Southeast

0:04:36.400 --> 0:04:40.600
<v Speaker 3>Asian suppliers, and that could result in higher prices as

0:04:40.640 --> 0:04:43.799
<v Speaker 3>well as maybe some curtailment of gas to certain industries.

0:04:44.000 --> 0:04:46.440
<v Speaker 2>So in the States, we are told the Trump administration

0:04:47.080 --> 0:04:51.520
<v Speaker 2>has no immediate plans to release oil from the Strategic

0:04:51.560 --> 0:04:54.279
<v Speaker 2>Petroleum Reserves. That would be tapped in case of an

0:04:54.320 --> 0:04:57.120
<v Speaker 2>emergency such as this. Can you give me a sense

0:04:57.360 --> 0:05:00.360
<v Speaker 2>on the magnitude or the size of the petrol olium

0:05:00.440 --> 0:05:02.080
<v Speaker 2>reserves that China has access to.

0:05:02.839 --> 0:05:06.520
<v Speaker 3>I mean, it's also massive. I mean I think to

0:05:06.560 --> 0:05:10.960
<v Speaker 3>give you some context, the oil market last year, it

0:05:11.000 --> 0:05:14.080
<v Speaker 3>would have been much weaker if it weren't for China's

0:05:14.320 --> 0:05:18.480
<v Speaker 3>enormous buying of oil. But for most of the year

0:05:18.480 --> 0:05:22.240
<v Speaker 3>they were filling up those reserves, among the largest reserves

0:05:22.240 --> 0:05:24.120
<v Speaker 3>on Earth. I mean, you have to remember that China

0:05:24.240 --> 0:05:28.039
<v Speaker 3>is the world's biggest crude importer and they take this

0:05:28.279 --> 0:05:32.240
<v Speaker 3>energy security very seriously. So yes, they do have mass

0:05:32.279 --> 0:05:35.680
<v Speaker 3>or reserves on the same scale as other large oil

0:05:35.720 --> 0:05:38.760
<v Speaker 3>producers or importers. I think one other thing to note though,

0:05:38.920 --> 0:05:43.440
<v Speaker 3>is unlike other countries, China has been to a degree

0:05:44.000 --> 0:05:47.039
<v Speaker 3>reducing its dependence on gasoline as well. They've been building

0:05:47.040 --> 0:05:50.719
<v Speaker 3>an enormous ev fleet. Like if you go to Beijing

0:05:50.839 --> 0:05:53.640
<v Speaker 3>or Shanghai and you hire a taxi, it will most

0:05:53.720 --> 0:05:56.520
<v Speaker 3>likely be an electric vehicle. So not only do they

0:05:56.520 --> 0:05:59.920
<v Speaker 3>have the reserves, but they're also changing their entire economy

0:06:00.400 --> 0:06:04.480
<v Speaker 3>to depend more on things that are fueled by electricity,

0:06:04.760 --> 0:06:07.080
<v Speaker 3>and that means that they depend more on coal, and

0:06:07.120 --> 0:06:09.440
<v Speaker 3>coal a lot of which they produce domestically.

0:06:09.680 --> 0:06:12.240
<v Speaker 2>There are two countries that I'm thinking of, in particular

0:06:12.360 --> 0:06:14.800
<v Speaker 2>in the Asia Pacific, both of which happen to be

0:06:15.200 --> 0:06:19.480
<v Speaker 2>US allies and both are heavy oil importers. I'm thinking

0:06:19.560 --> 0:06:23.000
<v Speaker 2>of Japan and South Korea. What is the situation as

0:06:23.040 --> 0:06:27.000
<v Speaker 2>it relates to those countries So so.

0:06:27.040 --> 0:06:29.440
<v Speaker 3>Far, we've heard from both of them that the situation

0:06:29.560 --> 0:06:33.040
<v Speaker 3>to a degree is under control. They're not looking to

0:06:33.160 --> 0:06:36.880
<v Speaker 3>release their own strategic reserves yet, but they are in

0:06:36.920 --> 0:06:39.640
<v Speaker 3>touch with their allies and they are following the situation

0:06:40.080 --> 0:06:42.080
<v Speaker 3>very closely. I do to remind you that we're just

0:06:42.160 --> 0:06:45.359
<v Speaker 3>three or four days into this, and so there is

0:06:45.520 --> 0:06:49.560
<v Speaker 3>enough fuel on the water. That being said, you know,

0:06:49.560 --> 0:06:52.159
<v Speaker 3>if we if we do see a situation where oil

0:06:52.200 --> 0:06:56.600
<v Speaker 3>supplies are cut off for weeks, then they are going

0:06:56.640 --> 0:06:58.200
<v Speaker 3>to have to scramble. They're going to have to release

0:06:58.240 --> 0:07:00.960
<v Speaker 3>their own reserves and have to work with International Energy

0:07:00.960 --> 0:07:04.240
<v Speaker 3>Agency to do a global potentially a global release, and

0:07:04.320 --> 0:07:08.680
<v Speaker 3>on top of that find alternative suppliers. Again, there is

0:07:08.800 --> 0:07:11.520
<v Speaker 3>enough oil in the market, so we're not necessarily in

0:07:11.600 --> 0:07:14.680
<v Speaker 3>a panic, and you're seeing that represented in Brent oil prices. Right,

0:07:15.080 --> 0:07:18.560
<v Speaker 3>prices rose from Brent to the seventy five seventy eight

0:07:18.560 --> 0:07:21.160
<v Speaker 3>dollars level. When the war in Ukraine was happening. In

0:07:21.160 --> 0:07:23.440
<v Speaker 3>twenty twenty two, oil prices for Brent were well above

0:07:23.440 --> 0:07:26.080
<v Speaker 3>one hundred dollars. There's more of a crisis feeling. So

0:07:26.560 --> 0:07:28.720
<v Speaker 3>the US could come to the aid as well to

0:07:29.640 --> 0:07:33.720
<v Speaker 3>Korea and in Japan and could be a larger supplier

0:07:33.760 --> 0:07:36.840
<v Speaker 3>of crude to those countries, but that also takes time.

0:07:37.040 --> 0:07:38.920
<v Speaker 3>The US is far away and a lot of that

0:07:39.000 --> 0:07:41.080
<v Speaker 3>oil would have to go around the Cape of Good

0:07:41.080 --> 0:07:43.520
<v Speaker 3>Hope through the Panama Canal, and that takes time to

0:07:43.560 --> 0:07:46.760
<v Speaker 3>get there. But there isn't quite a panic in Tokyo

0:07:46.840 --> 0:07:48.920
<v Speaker 3>and Soul yet as far as what we're reporting.

0:07:49.040 --> 0:07:51.720
<v Speaker 2>So we're being told that both the UAE and CUTTER

0:07:51.920 --> 0:07:57.000
<v Speaker 2>privately lobbied allies to persuade President Trump to keep operations

0:07:57.080 --> 0:08:00.400
<v Speaker 2>against Iran very very short. Do you think can you

0:08:00.480 --> 0:08:03.600
<v Speaker 2>imagine that the UAE or CUTTER would reach out to

0:08:03.880 --> 0:08:06.520
<v Speaker 2>countries in the Apac region to try to put some

0:08:06.600 --> 0:08:08.040
<v Speaker 2>pressure on President Trump.

0:08:08.840 --> 0:08:11.760
<v Speaker 3>I mean, when not just President Trump, but wouldn't they

0:08:11.760 --> 0:08:14.840
<v Speaker 3>also want to put pressure on Iran? As well. You

0:08:14.880 --> 0:08:18.320
<v Speaker 3>look at China, for example, China is an enormous buyer

0:08:18.400 --> 0:08:23.840
<v Speaker 3>of Iranian oil. They're also a big buyer of products

0:08:23.840 --> 0:08:27.440
<v Speaker 3>from Qatar and the UAE. So are they getting pressure

0:08:27.520 --> 0:08:30.920
<v Speaker 3>to put also force on top of on top of

0:08:30.920 --> 0:08:32.680
<v Speaker 3>Iran to try to come to a deal. Are they

0:08:32.720 --> 0:08:35.240
<v Speaker 3>putting pressure on the United States? I mean, I think

0:08:36.080 --> 0:08:39.480
<v Speaker 3>this is a pressure point. The fuel, the supply of

0:08:39.520 --> 0:08:43.120
<v Speaker 3>fuel that is so important to China, And while they

0:08:43.120 --> 0:08:46.680
<v Speaker 3>do have alternatives, the longer this goes on, the more

0:08:46.720 --> 0:08:52.320
<v Speaker 3>it risks China overall, it doesn't necessarily risk the United States.

0:08:52.360 --> 0:08:56.000
<v Speaker 3>The US is the world's biggest oil and one of

0:08:56.040 --> 0:08:59.559
<v Speaker 3>the big biggest oil exporters and the world's biggest LNG exporter.

0:08:59.840 --> 0:09:03.160
<v Speaker 3>In fact, this benefits their producers. The US is in

0:09:03.200 --> 0:09:05.319
<v Speaker 3>a very good spot at the moment, and if you

0:09:05.360 --> 0:09:08.520
<v Speaker 3>look at just natural gas prices in the US, it

0:09:08.600 --> 0:09:12.319
<v Speaker 3>is a fraction of the prices that are being paid

0:09:12.320 --> 0:09:15.760
<v Speaker 3>by customers in Europe and Asia, just because it's so

0:09:15.840 --> 0:09:16.559
<v Speaker 3>well insulated.

0:09:16.679 --> 0:09:20.960
<v Speaker 2>I'm remembering recently that the Trump administration put pressure on

0:09:21.080 --> 0:09:24.040
<v Speaker 2>the Indian government to stop buying Russian crude oil. So

0:09:24.440 --> 0:09:27.520
<v Speaker 2>when you consider the situation that India is in right now.

0:09:27.559 --> 0:09:31.200
<v Speaker 2>If it's being squeezed to resist the temptation to reach

0:09:31.240 --> 0:09:34.960
<v Speaker 2>out and tap into Russian crude oil, what type of

0:09:34.960 --> 0:09:36.680
<v Speaker 2>situation is India in right now?

0:09:37.200 --> 0:09:40.560
<v Speaker 3>Yeah, I mean India is also in a challenging spot.

0:09:40.679 --> 0:09:43.559
<v Speaker 3>You know, I think they have been over We had

0:09:43.720 --> 0:09:45.920
<v Speaker 3>a big take story on the Bloomberg terminal and the

0:09:45.920 --> 0:09:52.120
<v Speaker 3>website just this morning that kind of highlighted how Indian buyers,

0:09:52.200 --> 0:09:55.280
<v Speaker 3>especially of natural gas, have been sort of scrambling. They

0:09:55.320 --> 0:09:59.000
<v Speaker 3>depend on Koutar for about thirty percent of their LNG

0:09:59.200 --> 0:10:03.240
<v Speaker 3>needs and the situation more than thirty percent actually, and

0:10:03.360 --> 0:10:06.080
<v Speaker 3>in the situation in Delhi is getting quite dire. They're

0:10:06.080 --> 0:10:08.600
<v Speaker 3>looking at different scenarios, one of which is doing some

0:10:08.640 --> 0:10:12.360
<v Speaker 3>sort of government to government deal with with different suppliers. So, yeah,

0:10:12.400 --> 0:10:15.079
<v Speaker 3>they are getting squeezed by this and it's very unfortunate,

0:10:15.360 --> 0:10:18.040
<v Speaker 3>and you're going to see a situation where refineries might

0:10:18.120 --> 0:10:23.000
<v Speaker 3>need to go back to potentially look at the unsanctioned

0:10:23.040 --> 0:10:27.160
<v Speaker 3>supply from Russia, maybe try to make deals with other

0:10:27.200 --> 0:10:30.679
<v Speaker 3>potential partners or again. You know, this is a topic

0:10:30.720 --> 0:10:35.079
<v Speaker 3>that keeps coming up. Curtail supply, right, you know, curtail consumption,

0:10:36.000 --> 0:10:38.760
<v Speaker 3>try to find ways to reduce demand at home so

0:10:38.800 --> 0:10:42.480
<v Speaker 3>that the less supply that they get goes a longer way.

0:10:42.880 --> 0:10:44.560
<v Speaker 2>Before I let you go, Steve, and I have to

0:10:44.600 --> 0:10:47.280
<v Speaker 2>ask about the impact that higher oil may have in

0:10:47.360 --> 0:10:49.920
<v Speaker 2>terms of accelerating inflation. That was one of the things

0:10:49.920 --> 0:10:54.360
<v Speaker 2>that manifest in the New York session where treasury yields

0:10:54.400 --> 0:10:56.360
<v Speaker 2>started to rise quite a bit. I think both the

0:10:56.360 --> 0:10:59.319
<v Speaker 2>two and the tenure were up around ten basis points.

0:10:59.600 --> 0:11:03.280
<v Speaker 2>Is there a conversation in the Asia Pacific on the

0:11:03.320 --> 0:11:05.160
<v Speaker 2>inflationary impact of higher oil?

0:11:06.000 --> 0:11:10.040
<v Speaker 3>Absolutely. You know, Asia is a big importer of oil

0:11:10.080 --> 0:11:13.600
<v Speaker 3>and gas, and the higher prices does put more pressure

0:11:13.679 --> 0:11:16.240
<v Speaker 3>on these countries. And you know, you look at just

0:11:16.320 --> 0:11:18.840
<v Speaker 3>Japan for example. This was supposed to be the year

0:11:18.880 --> 0:11:22.840
<v Speaker 3>where oil prices were going to fall, but instead prices

0:11:22.840 --> 0:11:24.079
<v Speaker 3>are right because there was going to be a global

0:11:24.080 --> 0:11:26.520
<v Speaker 3>glood of supply, but instead, because of the geopolitical risk,

0:11:26.800 --> 0:11:30.760
<v Speaker 3>prices keep rising. And that's putting a lot of pressure

0:11:30.760 --> 0:11:34.160
<v Speaker 3>on Japanese households that for decades have been dealing with deflation.

0:11:34.559 --> 0:11:39.559
<v Speaker 3>Now suddenly there's larger than expected increases in prices. Gas

0:11:39.600 --> 0:11:43.480
<v Speaker 3>line prices are increasing. You know, companies have to deal

0:11:43.520 --> 0:11:47.880
<v Speaker 3>with higher energy costs. Japan's power prices spot electricity price

0:11:48.559 --> 0:11:51.600
<v Speaker 3>just on Monday popped up fifteen percent, is probably going

0:11:51.640 --> 0:11:54.960
<v Speaker 3>to rise even more. So you look at just Japan

0:11:55.040 --> 0:11:58.360
<v Speaker 3>for example, the household has to pay more because the

0:11:58.440 --> 0:12:01.600
<v Speaker 3>higher the prices are for oil, gas and coal, it

0:12:01.640 --> 0:12:05.240
<v Speaker 3>actually directly increases power bills on a monthly basis. And

0:12:05.320 --> 0:12:07.760
<v Speaker 3>it's not just su Japan issue. This is something that

0:12:07.880 --> 0:12:12.520
<v Speaker 3>South Korea, China, India. Sitting here in Singapore, Singapore is

0:12:12.520 --> 0:12:15.719
<v Speaker 3>a major buyer of Katari LNG. It affects all of us,

0:12:16.040 --> 0:12:18.559
<v Speaker 3>and it's something that's being closely watched and monitored. When

0:12:18.559 --> 0:12:20.000
<v Speaker 3>it was supposed to be a here where all these

0:12:20.000 --> 0:12:21.160
<v Speaker 3>prices were supposed to come down.

0:12:21.760 --> 0:12:23.840
<v Speaker 2>Steven, good stuff, Thank you so very much. We'll leave

0:12:23.840 --> 0:12:27.040
<v Speaker 2>it there, Bloomberg Steven Stepchinski. He is team leader for

0:12:27.120 --> 0:12:30.480
<v Speaker 2>Asia Energy. Joining from our studio in the Lion City

0:12:30.480 --> 0:12:40.880
<v Speaker 2>of Singapore here on the Daybreak Asia Podcast. Welcome back

0:12:40.920 --> 0:12:44.400
<v Speaker 2>to the Daybreak Asia Podcast. I'm Doug Krisner. President Trump

0:12:44.440 --> 0:12:47.199
<v Speaker 2>said earlier today the US will keep up its military

0:12:47.240 --> 0:12:50.560
<v Speaker 2>offensive against Iran for as long as it takes. We

0:12:50.600 --> 0:12:53.840
<v Speaker 2>also heard from Secretary of State Marco Rubio. He said,

0:12:53.840 --> 0:12:57.720
<v Speaker 2>the objective is to destroy Iran's ballistic missile program as

0:12:57.800 --> 0:13:01.640
<v Speaker 2>well as its naval fleet and attacked owns. Here is Rubio.

0:13:02.440 --> 0:13:05.000
<v Speaker 4>No matter what, Ultimately this operation needed to happen. That's

0:13:05.000 --> 0:13:07.640
<v Speaker 4>the question of why now. But this operation needed to

0:13:07.640 --> 0:13:10.199
<v Speaker 4>happen because Iran in about a year or a year

0:13:10.200 --> 0:13:12.160
<v Speaker 4>and a half would cross the line of immunity, meaning

0:13:12.200 --> 0:13:14.440
<v Speaker 4>they would have so many short range missiles, so many

0:13:14.520 --> 0:13:16.720
<v Speaker 4>drones that no one could do anything about it because

0:13:16.720 --> 0:13:18.800
<v Speaker 4>they could hold the whole world hostage. Look at the

0:13:18.880 --> 0:13:21.600
<v Speaker 4>damage they're doing now and this is a weekend Iran,

0:13:21.960 --> 0:13:23.000
<v Speaker 4>imagine a year from now.

0:13:23.200 --> 0:13:24.200
<v Speaker 1>So that had to happen.

0:13:24.840 --> 0:13:27.880
<v Speaker 2>That a Secretary of State Marco Rubio, And it helps

0:13:27.880 --> 0:13:31.360
<v Speaker 2>set up our conversation with Mona Yakubian. Mona is the

0:13:31.440 --> 0:13:35.920
<v Speaker 2>director and Senior Advisor of the Middle East Program at CSIS.

0:13:36.160 --> 0:13:39.480
<v Speaker 2>She spoke to Bloomberg TV host Devon Mann and David Nglaize,

0:13:39.920 --> 0:13:43.040
<v Speaker 2>and Devon started the conversation with a question on the

0:13:43.160 --> 0:13:47.160
<v Speaker 2>rationale behind the US and Israel striking Iran over the weekend.

0:13:47.559 --> 0:13:50.800
<v Speaker 5>I think there's still a very disturbing lack of clarity

0:13:50.920 --> 0:13:54.839
<v Speaker 5>as to the rationale. I mean, we've heard numerous reasons raised,

0:13:54.880 --> 0:13:59.880
<v Speaker 5>from Iran's nuclear and ballistic missile capabilities to addressing the

0:14:00.840 --> 0:14:04.520
<v Speaker 5>leadership in Iran, et cetera. None of it really seems

0:14:04.520 --> 0:14:09.400
<v Speaker 5>to make sense in terms of available intelligence reporting, none

0:14:09.480 --> 0:14:13.240
<v Speaker 5>of which points to an imminent threat. And therefore this

0:14:13.360 --> 0:14:16.240
<v Speaker 5>really looks more to have been a war of choice

0:14:16.720 --> 0:14:19.640
<v Speaker 5>rather than a war of necessity. And we are seeing

0:14:19.720 --> 0:14:23.800
<v Speaker 5>play out now, just entering the fourth day of this conflict,

0:14:24.240 --> 0:14:30.600
<v Speaker 5>the multiple downside risks from energy market hits, to US

0:14:30.720 --> 0:14:35.640
<v Speaker 5>soldiers being killed in combat, to security risks, and American

0:14:35.760 --> 0:14:41.560
<v Speaker 5>embassies being targeted to multiple countries now becoming embroiled in

0:14:41.600 --> 0:14:47.080
<v Speaker 5>this conflict. We are truly watching a region wide conflagration

0:14:47.520 --> 0:14:49.080
<v Speaker 5>unfold before our eyes.

0:14:51.120 --> 0:14:53.640
<v Speaker 6>So i'mon, among the many risks, what do you think

0:14:53.760 --> 0:14:56.160
<v Speaker 6>is most pertinent at the moment? If I know, that's

0:14:56.320 --> 0:14:59.920
<v Speaker 6>almost an impossible question to isolate that, But where do

0:15:00.040 --> 0:15:00.960
<v Speaker 6>I need to be looking?

0:15:01.640 --> 0:15:01.800
<v Speaker 1>Well?

0:15:01.840 --> 0:15:05.560
<v Speaker 5>I think the energy markets are in particular significant given

0:15:05.640 --> 0:15:09.680
<v Speaker 5>this part of the world's crucial role in both oil

0:15:09.720 --> 0:15:12.760
<v Speaker 5>and gas markets, and your analyst that was on before me,

0:15:12.920 --> 0:15:17.560
<v Speaker 5>was laying down these historic jumps in gas prices. I

0:15:17.600 --> 0:15:21.480
<v Speaker 5>think The problem is we don't know the duration of

0:15:21.560 --> 0:15:26.480
<v Speaker 5>this conflict obviously, and frankly, it's very hard to imagine

0:15:26.680 --> 0:15:29.640
<v Speaker 5>that this is going to be a replay of the twelve.

0:15:29.400 --> 0:15:31.840
<v Speaker 1>Day war that we saw this past June.

0:15:32.040 --> 0:15:36.520
<v Speaker 5>This is far more complex and involves far many more countries,

0:15:36.960 --> 0:15:40.320
<v Speaker 5>and of course, with the assassination of the Supreme Leader

0:15:40.400 --> 0:15:43.960
<v Speaker 5>and questions about who's even in charge in Iran and

0:15:44.040 --> 0:15:48.720
<v Speaker 5>what's Iran's risk tolerance? I would argue Iran's risk tolerance

0:15:48.800 --> 0:15:53.120
<v Speaker 5>is very high because they are facing existential threats. And

0:15:53.200 --> 0:15:56.560
<v Speaker 5>so if we are watching something that could last for

0:15:56.840 --> 0:16:00.440
<v Speaker 5>weeks and maybe even months, that is going to have

0:16:00.840 --> 0:16:05.640
<v Speaker 5>enormous reverberations across global energy and shipping markets. And of

0:16:05.680 --> 0:16:09.520
<v Speaker 5>course we also have to look at lives that are

0:16:09.560 --> 0:16:11.560
<v Speaker 5>at risk across the region.

0:16:13.440 --> 0:16:14.760
<v Speaker 6>I mean, might not want to pick up on that

0:16:14.920 --> 0:16:18.960
<v Speaker 6>this now involves many other parties. Might be a dumb question.

0:16:19.040 --> 0:16:19.480
<v Speaker 2>I don't know.

0:16:19.520 --> 0:16:23.480
<v Speaker 6>I don't have the answer. Why is Iran bombing its neighbors?

0:16:23.600 --> 0:16:26.080
<v Speaker 6>So I get why, I get why they would target

0:16:26.400 --> 0:16:30.640
<v Speaker 6>places with US basis, but Dubai for example, and how

0:16:30.680 --> 0:16:33.880
<v Speaker 6>does that then affect those regional powers in their response

0:16:33.920 --> 0:16:35.440
<v Speaker 6>to Iran I mean, I.

0:16:35.360 --> 0:16:36.800
<v Speaker 1>Think there are two ways to look at it. You're

0:16:36.800 --> 0:16:37.880
<v Speaker 1>absolutely right, David.

0:16:37.920 --> 0:16:39.800
<v Speaker 5>I mean, on the face of it, they've managed to

0:16:39.920 --> 0:16:43.400
<v Speaker 5>galvanize these Gulf countries frankly against Iran.

0:16:43.480 --> 0:16:45.720
<v Speaker 1>Iran is now completely alone.

0:16:46.000 --> 0:16:50.560
<v Speaker 5>These are countries that were advocating against conflict against it

0:16:50.600 --> 0:16:53.840
<v Speaker 5>with Iran, and so in a way it does look

0:16:54.000 --> 0:16:56.960
<v Speaker 5>sort of fool hardly, foolhardy and hard to understand.

0:16:57.600 --> 0:17:00.640
<v Speaker 1>On the other hand, if for Iran.

0:17:00.680 --> 0:17:05.120
<v Speaker 5>The stakes are existential, then at this point I think

0:17:05.240 --> 0:17:07.760
<v Speaker 5>they are making a gamble that they are going to

0:17:08.240 --> 0:17:13.719
<v Speaker 5>race up the escalation ladder and impose higher costs and

0:17:13.960 --> 0:17:16.520
<v Speaker 5>sort of in a way, invite.

0:17:16.480 --> 0:17:17.879
<v Speaker 1>A prolonged conflict.

0:17:18.119 --> 0:17:22.920
<v Speaker 5>And that's exactly what they're doing, perhaps with the calculation

0:17:23.560 --> 0:17:29.040
<v Speaker 5>that ultimately, especially these energy producing Gulf countries are going

0:17:29.080 --> 0:17:32.080
<v Speaker 5>to really push hard on the United States to find

0:17:32.119 --> 0:17:36.040
<v Speaker 5>an off ram to de escalate this conflict because of

0:17:36.119 --> 0:17:39.560
<v Speaker 5>the disruption that it is causing. So in a way,

0:17:39.640 --> 0:17:42.800
<v Speaker 5>Iran is taking a sort of an asymmetric approach to this.

0:17:46.359 --> 0:17:49.280
<v Speaker 7>We've been talking about a lot about the risk of

0:17:49.560 --> 0:17:52.400
<v Speaker 7>a more wider regional war. I'm just wondering in terms

0:17:52.440 --> 0:17:56.760
<v Speaker 7>of the Iran proxies right that the Hufis, the hes Blahs.

0:17:57.800 --> 0:18:01.199
<v Speaker 7>You know, does Iran have a can maintain control of

0:18:01.240 --> 0:18:03.720
<v Speaker 7>some of these groups here right now or is there

0:18:03.840 --> 0:18:06.080
<v Speaker 7>actually a chance that they could actually mobilize.

0:18:07.040 --> 0:18:09.680
<v Speaker 5>Well, it's really interesting on I mean, we just saw

0:18:09.800 --> 0:18:12.760
<v Speaker 5>in the last twenty four hours, among the different types

0:18:12.760 --> 0:18:17.240
<v Speaker 5>of escalation that we've witnessed is the more intensive use.

0:18:17.200 --> 0:18:18.360
<v Speaker 1>Of Iran's proxies.

0:18:18.400 --> 0:18:22.560
<v Speaker 5>We see this most notably in Lebanon, where Hezbollah, which

0:18:22.600 --> 0:18:26.960
<v Speaker 5>frankly is under greater Iranian influence than it's ever been

0:18:27.440 --> 0:18:34.879
<v Speaker 5>undertook rocket attacks against Israel quite frankly, relatively weak rocket attacks.

0:18:34.880 --> 0:18:36.320
<v Speaker 1>They didn't cause any damage.

0:18:36.400 --> 0:18:40.040
<v Speaker 5>But this has now brought an onslaught an offensive by

0:18:40.200 --> 0:18:45.240
<v Speaker 5>Israel against Lebanon, and so we'll have to see how

0:18:45.320 --> 0:18:49.560
<v Speaker 5>that evolves. I think the key proxy that has yet

0:18:49.600 --> 0:18:52.960
<v Speaker 5>to really raise its head again are the Houthis, and

0:18:53.000 --> 0:18:57.879
<v Speaker 5>that will be significant if the Houthis choose to get involved.

0:18:58.400 --> 0:19:02.960
<v Speaker 5>Should they seek to re start attacks on shipping in

0:19:03.000 --> 0:19:07.920
<v Speaker 5>the Red Sea to snarl the Babel Mendeb, another critical

0:19:08.000 --> 0:19:10.520
<v Speaker 5>choke point in the area, then I think we could

0:19:10.560 --> 0:19:16.200
<v Speaker 5>see the disruptions that were already watching unfold grow exponentially,

0:19:16.359 --> 0:19:19.119
<v Speaker 5>and this could have an enormous impact not only on

0:19:19.160 --> 0:19:20.399
<v Speaker 5>the region but globally.

0:19:22.760 --> 0:19:25.840
<v Speaker 6>Mona, just quickly, if you could, where does this leave

0:19:25.920 --> 0:19:30.560
<v Speaker 6>the nuclear assets or the ability to specify the ability

0:19:30.880 --> 0:19:35.359
<v Speaker 6>of Iran to enrich to a certain level, and do

0:19:35.440 --> 0:19:37.960
<v Speaker 6>we circle back to a negotiating table at some point

0:19:37.960 --> 0:19:38.920
<v Speaker 6>here on those.

0:19:39.480 --> 0:19:42.359
<v Speaker 5>Well, David, I mean there were already questions as to

0:19:42.480 --> 0:19:46.479
<v Speaker 5>whether or not Iran had started to move back toward

0:19:47.040 --> 0:19:53.120
<v Speaker 5>restarting its nuclear program. The program, the facilities certainly sustained

0:19:53.240 --> 0:19:58.280
<v Speaker 5>significant damage in the US and Israeli strikes this past summer,

0:19:58.800 --> 0:20:03.879
<v Speaker 5>and so there was no suggestion that Iran's ability to

0:20:03.960 --> 0:20:08.520
<v Speaker 5>begin enriching uranium again was imminent. Perhaps they were looking

0:20:08.520 --> 0:20:13.320
<v Speaker 5>to restart or start to repair those facilities, as some

0:20:13.440 --> 0:20:15.920
<v Speaker 5>of the imagery is showing. The US has gone back

0:20:16.320 --> 0:20:18.639
<v Speaker 5>and hit some of these sites again, the US and

0:20:18.800 --> 0:20:23.040
<v Speaker 5>israel I should say, and so I think Iran's nuclear

0:20:23.119 --> 0:20:27.440
<v Speaker 5>capability remain dramatically curtailed.

0:20:27.960 --> 0:20:31.280
<v Speaker 2>That was Mona Yakoubian, director and Senior Advisor of the

0:20:31.320 --> 0:20:35.359
<v Speaker 2>Middle East Program at CSIS, speaking with Bloomberg TV host

0:20:35.440 --> 0:20:39.000
<v Speaker 2>Von Mann and David Nglace, bringing you their conversation here

0:20:39.040 --> 0:20:44.600
<v Speaker 2>on the Daybreak Asia podcast. Thanks for listening to today's

0:20:44.600 --> 0:20:49.120
<v Speaker 2>episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

0:20:49.119 --> 0:20:53.080
<v Speaker 2>we look at the story shaping markets, finance, and geopolitics

0:20:53.080 --> 0:20:56.359
<v Speaker 2>in the Asia Pacific. You can find us on Apple, Spotify,

0:20:56.520 --> 0:20:59.920
<v Speaker 2>the Bloomberg Podcast YouTube channel, or anywhere else you listen.

0:21:00.400 --> 0:21:03.320
<v Speaker 2>Join us again tomorrow for insight on the market moves

0:21:03.359 --> 0:21:07.920
<v Speaker 2>from Hong Kong to Singapore and Australia. I'm Doug Prisoner

0:21:08.040 --> 0:21:09.480
<v Speaker 2>and this is Bloomberg