WEBVTT - The Long-Term Global Economic Damage From the War With Iran

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

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<v Speaker 2>I'm Stephanie Flanders, head of Government and Economics at Bloomberg,

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<v Speaker 2>and this is Trumperonomics, the podcast that looks at the

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<v Speaker 2>economic world of Donald Trump, how he's already shaking the

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<v Speaker 2>global economy and what on earth is going to happen next.

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<v Speaker 2>Events are moving fast in the US Israeli conflict with Iran,

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<v Speaker 2>but as of this recording Wednesday afternoon in London, the

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<v Speaker 2>ships in the hall moves straight are not. We have

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<v Speaker 2>a ceasefire declared overnight, the implications of which policymakers, investors,

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<v Speaker 2>and anyone with a ship stuck in the Straight of

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<v Speaker 2>horm Moose are all working in real time to understand. Meanwhile,

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<v Speaker 2>Brent crude prices have fallen back below one hundred dollars,

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<v Speaker 2>but still about the third higher than before the star

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<v Speaker 2>the conflict, and some bombs are still flying, while a

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<v Speaker 2>chunk of global oil and gas production is still offline.

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<v Speaker 2>I saw Exon reported this morning six percent of its

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<v Speaker 2>global production in the first three months of this year

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<v Speaker 2>been knocked out by events in the Persian Gulf. Well,

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<v Speaker 2>if we just get to the Straight of Hormuz, eight

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<v Speaker 2>hundred ships are stuck right now, as usually around one

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<v Speaker 2>hundred and thirty passing through every day, they will not

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<v Speaker 2>get cleared overnight. And it looks as though whatever happens,

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<v Speaker 2>what used to be a relatively simple act passing through

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<v Speaker 2>that narrow strait is not going back to normal anytime soon,

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<v Speaker 2>if ever, and whatever happens, the reputation of the US

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<v Speaker 2>as the guardian of global shipping is going to be

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<v Speaker 2>forever damaged. Indeed, of all the things Donald Trump has

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<v Speaker 2>done to disrupt global commerce, from levying punitive tariffs to

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<v Speaker 2>tearing up trade deals, this change in the US role

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<v Speaker 2>with regard to global shipping may actually have the most

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<v Speaker 2>lasting impact. That's what we're going to get into, not

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<v Speaker 2>exactly what's going to happen in this conflict, let alone

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<v Speaker 2>gaming out who may have won this particular round, but

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<v Speaker 2>unpicking the current state of play for shipping in the

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<v Speaker 2>Gulf and the knock on effects for every business everywhere

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<v Speaker 2>that relies on fuel being put in a tank to

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<v Speaker 2>get their products to consumers. But also what did ensure

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<v Speaker 2>free passage of goods through the straight of horn Moves

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<v Speaker 2>and other shipping choke points around the world before the

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<v Speaker 2>end of February, and what are the implications if that

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<v Speaker 2>underpinning for free transit is now absent. So here in

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<v Speaker 2>the London studio with me, I'm delighted to say we

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<v Speaker 2>have Brendan Murray, our Global trades are who coordinates all

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<v Speaker 2>of Bloomberg's global trade supply chain and geoeconomic statecraft coverage.

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<v Speaker 1>Good to have you back, Brendan, thanks for having me.

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<v Speaker 2>And joining us from Nairobi is Peter Martin in Africa

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<v Speaker 2>and Middle East correspondent who tends to dabble in many

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<v Speaker 2>other things, including defense and intelligence.

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<v Speaker 1>Peter, it's great to have you. Thanks for having me.

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<v Speaker 2>We know that there's a lot going on, and I

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<v Speaker 2>want to have two parts to this. In the sense

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<v Speaker 2>of thinking about what we're seeing already zeroing in on

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<v Speaker 2>the sort of transportation shipping aspect of the impact of

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<v Speaker 2>the Iran conflict and specifically that effective closure or much

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<v Speaker 2>constrained passage of ships through the Strait of horn Moose.

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<v Speaker 2>I was also sort of interested in thinking more broadly

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<v Speaker 2>of the US role in sort of underpinning the free

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<v Speaker 2>passage of shipping through places like the Strait of Horn Moose.

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<v Speaker 2>You wrote about that recently, so we will get into that,

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<v Speaker 2>But Brendan, let me check in with you first. If

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<v Speaker 2>I ask you, as our trades are, what the impact

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<v Speaker 2>of this conflict and the situation the Strait of a

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<v Speaker 2>Moose has been on global transportation, how would you summarize that?

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<v Speaker 3>Well, it's still mainly an energy crisis. The ceasefire that

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<v Speaker 3>was announced presumably would allow some ships to start going

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<v Speaker 3>through the Strait of horn Moose again, but that's going

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<v Speaker 3>to be a long process. Many of the experts that

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<v Speaker 3>we're hearing from say it could take many months. And

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<v Speaker 3>so the knock on effects are things like jet fuel

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<v Speaker 3>prices and diesel prices, and gasoline prices rising, not just

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<v Speaker 3>in the region and in Asia where they are the

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<v Speaker 3>most that the biggest buyers of Middle Eastern energy, but

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<v Speaker 3>also in Europe and the US. So most Americans would

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<v Speaker 3>be able to tell you what the price of a

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<v Speaker 3>gallon of gasoline would be within a nickel of their

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<v Speaker 3>local station the current price, but they couldn't tell you

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<v Speaker 3>what the price of diesel has been. And diesel has

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<v Speaker 3>actually gone up much more steeply than the price of

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<v Speaker 3>gasoline has. And so that's sort of the you know,

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<v Speaker 3>literally the thing that fuels the industrial economy in places

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<v Speaker 3>like Europe and the US, so the knock on effects

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<v Speaker 3>were being seen fairly quickly, just not at the doorstep

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<v Speaker 3>of the average American.

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<v Speaker 2>Now we're learning there's usually a reasonably stable margin between

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<v Speaker 2>the cost of the crude oil, and we always think

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<v Speaker 2>in terms of Brent crude, but of course no one

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<v Speaker 2>buys Brent crude except refiners. Everybody else is dealing with

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<v Speaker 2>refined petroleum products. That had always been quite a stable margin.

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<v Speaker 2>And then what we saw was it sort of exploded,

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<v Speaker 2>as we not only saw an increase in Brent crew

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<v Speaker 2>but we also saw question marks about actual supplies of

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<v Speaker 2>those refined goods and even some questions about ports potentially

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<v Speaker 2>running out of this the fuel that the container ships

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<v Speaker 2>run on Brendan. I mean, how much has that been

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<v Speaker 2>a feature?

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<v Speaker 3>Yeah, that has been a huge issue for as you mentioned,

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<v Speaker 3>the container shipping industry. One of the big carriers, a

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<v Speaker 3>German company, said recently that this was costing them fifty

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<v Speaker 3>million dollars a week. So you start adding up a

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<v Speaker 3>five week long conflict and you're talking about billions of dollars.

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<v Speaker 3>Delta Airlines recently said that the jet fuel surge is

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<v Speaker 3>going to hit them to the tune of about two

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<v Speaker 3>billion dollars. And so we've seen a conflict that's been

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<v Speaker 3>pretty contained in time frame have very significant and far

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<v Speaker 3>reaching impacts to companies that as much as we like

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<v Speaker 3>to think that we have gone green, they still rely

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<v Speaker 3>a lot on fossil fuels and this is really hitting

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<v Speaker 3>their margins hard.

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<v Speaker 2>I had someone talk about the air in the pipe

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<v Speaker 2>if we normally have it, whatever it is, one hundred

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<v Speaker 2>and thirty five ships going through the straight of all

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<v Speaker 2>moves a day these weeks where you haven't had that

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<v Speaker 2>one hundred and thirty five, many of those ships would

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<v Speaker 2>not have arrived yet anyway. So people are not only

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<v Speaker 2>going to see the lack of them maybe in a

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<v Speaker 2>six weeks or a months time, what does the delayed

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<v Speaker 2>response even if we start to see quite a lot

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<v Speaker 2>of shipping go through as a result of this cease FI.

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<v Speaker 3>I think what you've seen, especially in Asia at least initially,

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<v Speaker 3>was governments saying to people that they should conserve their

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<v Speaker 3>fuel use, turn their lights off when they're not using them,

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<v Speaker 3>and to try to control exports so their domestic supplies

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<v Speaker 3>wouldn't be run down so much. And so what we're

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<v Speaker 3>going to see if the straight reopens, is those vessels

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<v Speaker 3>that have crude oil or LNG reach their destinations and

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<v Speaker 3>basically replenished supplies back up to normal levels. And the

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<v Speaker 3>question then will be can that cycle continue to where

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<v Speaker 3>we're not just in this back and forth of domestic

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<v Speaker 3>inventories being run down and then just being refilled to

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<v Speaker 3>normal levels. That's where you see the reverberations really spreading

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<v Speaker 3>out more widely than Asia. You have. You know, it

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<v Speaker 3>takes thirty or forty days for a vessel to get

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<v Speaker 3>from the Middle East to northern Europe, and so that's

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<v Speaker 3>essentially the length of this conflict, and so there's a

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<v Speaker 3>sort of bull whip effect, if you will, that will

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<v Speaker 3>will kind of reverberate back and forth until supplies can

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<v Speaker 3>be stabilized.

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<v Speaker 2>Finally, just on this point, you mentioned Brendan that you know,

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<v Speaker 2>in the US you wouldn't necessarily see it, although we

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<v Speaker 2>have seen gas prices go up. But you did write

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<v Speaker 2>a piece about how the sort of the trucking industry

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<v Speaker 2>was being affected in the US. You compared it to

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<v Speaker 2>some of the stresses that we saw following COVID and

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<v Speaker 2>the war in Ukraine. Just so how is how is

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<v Speaker 2>US freight being affected?

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<v Speaker 3>Well, at the moment, there's an indicator we look at

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<v Speaker 3>that has three components to it. One of those is

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<v Speaker 3>transportation costs and capacity, the other one is where how

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<v Speaker 3>costs and capacity, and the final one is inventories. And

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<v Speaker 3>all three of those measures so it's called the logistics index.

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<v Speaker 3>All three of those measures are spiking higher at the moment.

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<v Speaker 3>The latest reading in March showed that there's a real

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<v Speaker 3>strain in the logistics capacity at the moment, and that

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<v Speaker 3>just means higher prices for everything that needs to move

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<v Speaker 3>from point A to point B, particularly particularly imports that

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<v Speaker 3>have a larger portion of their price being the transportation

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<v Speaker 3>of actors. So the reaction, especially to higher diesel prices

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<v Speaker 3>was pretty immediate. And the capacity this time around is

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<v Speaker 3>tighter than it was before because we were in COVID

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<v Speaker 3>and there was you know, there was there was some

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<v Speaker 3>excess capacity around, and so this time around there may

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<v Speaker 3>not be the slack that can absorb this particular shock.

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<v Speaker 3>If what we end up with is something that kind

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<v Speaker 3>of muddles along here for months.

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<v Speaker 2>I'm so glad we have you. I think of you

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<v Speaker 2>as the kind of real world correspondent. You know, we

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<v Speaker 2>often talk about these kind of you know, grand terms

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<v Speaker 2>about the global economy, but you spend most of your

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<v Speaker 2>time thinking about physically how long it takes for things

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<v Speaker 2>to get places and why what they need in order

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<v Speaker 2>to do that. And we've had to care about that

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<v Speaker 2>more in recent years, Pete. Stepping back from that, we're

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<v Speaker 2>now looking at a very uncertain state of play in

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<v Speaker 2>the Straight of Four Moves, with many claiming it's still

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<v Speaker 2>Iran has no right to be coordinating, constraining maybe charging

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<v Speaker 2>for passage through that very narrow straight Just remind us

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<v Speaker 2>what was the situation before this conflict.

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<v Speaker 4>Really, in the decades since the Second World War, the

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<v Speaker 4>US has seen itself as the guardian of safe passage

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<v Speaker 4>for ships all over the world, so through the Moves,

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<v Speaker 4>but also the Panama Canal, seers the Straits of Malacca.

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<v Speaker 4>Sometimes the US has felt that the burden has fallen

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<v Speaker 4>under on Washington in doing that, but in reality, the

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<v Speaker 4>presence of the US Navy around the world anti piracy

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<v Speaker 4>operations are the kind that we saw off the coast

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<v Speaker 4>of Somalia about a decade ago. Those kinds of military

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<v Speaker 4>operations have really kept trade flowing through the world and

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<v Speaker 4>have been a crucial means of underpinning American power and

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<v Speaker 4>also American prosperity.

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<v Speaker 2>What's the international law that the US was underpinning by

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<v Speaker 2>ensuring that passage.

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<v Speaker 4>The international law is the United Nations Convention on the

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<v Speaker 4>Law of the Sea, which the US helped to craft

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<v Speaker 4>but never actually ratified. But it's the basis of free

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<v Speaker 4>passage around the world, and the US has really been

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<v Speaker 4>the primary enforcer of that law, despite the legal technicalities.

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<v Speaker 2>And it's interesting because they haven't signed up to it,

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<v Speaker 2>and neither is Iran. And yet we'd somehow exact situation

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<v Speaker 2>where one was securing it and the other was abiding.

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<v Speaker 2>But what's the practicalities of moving through a different system now?

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<v Speaker 2>If Iran is suggesting it's going to have a permanent

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<v Speaker 2>role in controlling access to the almost Straight, I mean,

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<v Speaker 2>you know, what does that look like?

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<v Speaker 4>I think in truth no one knows, including Iran or

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<v Speaker 4>President Trump. And it would be incredibly problematic, clearly an

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<v Speaker 4>increased cost for shipping companies looking to move goods, energy, etc.

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<v Speaker 4>Through the Straight and I think, in the eyes of

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<v Speaker 4>many also potentially illegal because this is not something that

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<v Speaker 4>the countries are supposed to do.

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<v Speaker 2>When the US talk about we can't be the world's policeman,

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<v Speaker 2>this sense of the underpinning freedom of navigation, what's the

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<v Speaker 2>broader implications of the US backing away from that.

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<v Speaker 4>The implications are pretty profound. So I've spent a lot

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<v Speaker 4>of the last week speaking to Asian officials, European officials

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<v Speaker 4>about how they view this. And as you said, it's

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<v Speaker 4>something that's often taken for granted, but really, without the

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<v Speaker 4>free passage of goods around the world, the global economy

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<v Speaker 4>would come grinding to a halt. And I think that's

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<v Speaker 4>seen most acutely in Asia, where the US has spent

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<v Speaker 4>decades talking about the need to maintain freedom of navigation,

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<v Speaker 4>the fact that China could pose a threat to that,

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<v Speaker 4>the fact that the global economy would suffer.

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<v Speaker 1>If it did so.

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<v Speaker 4>But the reality is now that lots of America's partners

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<v Speaker 4>in Asia and in Europe too, are looking at the

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<v Speaker 4>US's actions and starting to wonder if really Washington does

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<v Speaker 4>provide the kind of stable guarantee for freedom of navigation

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<v Speaker 4>that they've always assumed it did.

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<v Speaker 2>The US clearly wants to make sure it stays open

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<v Speaker 2>or is reopened. But if you're aroun clear that the

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<v Speaker 2>US actually is minded to take the actions needed to

0:14:05.080 --> 0:14:07.199
<v Speaker 2>do that. I mean, there's been no operation that's been

0:14:07.280 --> 0:14:09.880
<v Speaker 2>undertaken in the straight of hom Moves to underpin that.

0:14:10.800 --> 0:14:13.760
<v Speaker 4>You know, it would be from a military perspective, incredibly

0:14:13.840 --> 0:14:17.400
<v Speaker 4>complex to do so. Straight up, hor Moves is extremely narrow,

0:14:18.000 --> 0:14:23.720
<v Speaker 4>Its long ships have very limited maneuverability. The water is shallow,

0:14:23.880 --> 0:14:26.920
<v Speaker 4>which means that it's easy to mine. It's also it's

0:14:26.960 --> 0:14:30.200
<v Speaker 4>surrounded by mountains, which makes it easy to hide missiles

0:14:30.240 --> 0:14:34.960
<v Speaker 4>and drones. So all of these things mean that militarily

0:14:35.000 --> 0:14:37.080
<v Speaker 4>it would be very difficult for the US to secure

0:14:37.080 --> 0:14:40.120
<v Speaker 4>the Strait. The option that lots of people talk about

0:14:40.200 --> 0:14:43.800
<v Speaker 4>is escorts of ships. But before this crisis there were

0:14:43.800 --> 0:14:46.400
<v Speaker 4>about one hundred and forty ships per day moving through

0:14:46.400 --> 0:14:50.040
<v Speaker 4>the Strait, and it's clear that the US without allied

0:14:50.080 --> 0:14:53.280
<v Speaker 4>backing doesn't have the ability to escort all of those vessels.

0:14:53.680 --> 0:14:56.960
<v Speaker 4>So really what's required, in the eyes of most experts,

0:14:57.000 --> 0:15:01.080
<v Speaker 4>is some kind of political solution, a sea fire or

0:15:01.120 --> 0:15:04.280
<v Speaker 4>a peace deal which allows safe passage to resume.

0:15:04.800 --> 0:15:07.160
<v Speaker 2>I think if you're around you have an interest in

0:15:07.840 --> 0:15:11.080
<v Speaker 2>ships still passing through. But if you can make money

0:15:11.120 --> 0:15:13.080
<v Speaker 2>out of that. That seems like quite a good and

0:15:14.080 --> 0:15:17.600
<v Speaker 2>potentially constrain who goes through, but also charge people to

0:15:17.640 --> 0:15:21.120
<v Speaker 2>go through. That seems something that they are contemplating even

0:15:21.200 --> 0:15:25.120
<v Speaker 2>doing in some cases. We had some reporting last week

0:15:25.160 --> 0:15:33.040
<v Speaker 2>about the details of negotiating potentially with crypto currency payments

0:15:34.000 --> 0:15:37.360
<v Speaker 2>to the Iranian military in order to pass through. Do

0:15:37.400 --> 0:15:39.960
<v Speaker 2>you get the sense that that is becoming more of

0:15:40.000 --> 0:15:41.560
<v Speaker 2>an official process.

0:15:42.040 --> 0:15:45.360
<v Speaker 4>It does seem like they attempting to formalize it, and

0:15:45.440 --> 0:15:48.720
<v Speaker 4>President Trump has even hinted that the US may in

0:15:48.760 --> 0:15:51.800
<v Speaker 4>some way be involved in some of those negotiations, although

0:15:51.800 --> 0:15:55.440
<v Speaker 4>the details are extremely murky at the moment. I mean,

0:15:55.680 --> 0:15:58.280
<v Speaker 4>I kind of think of it as a too pronged

0:15:58.320 --> 0:16:02.000
<v Speaker 4>advantage for around. There are economic benefits they can derive

0:16:02.040 --> 0:16:05.800
<v Speaker 4>from the situation, but there's also the constant threat hanging

0:16:05.840 --> 0:16:08.000
<v Speaker 4>over the US and the rest of the global economy

0:16:08.080 --> 0:16:11.680
<v Speaker 4>that they could close the straight again, which I think

0:16:11.960 --> 0:16:15.200
<v Speaker 4>has proved to be a very potent Deterran.

0:16:15.600 --> 0:16:17.800
<v Speaker 2>Brendan, you spend more time than any of us talking

0:16:17.800 --> 0:16:20.520
<v Speaker 2>to shipping companies, and I saw that one of the

0:16:20.560 --> 0:16:24.520
<v Speaker 2>world's biggest shipping companies advised ships today not to not

0:16:24.600 --> 0:16:27.880
<v Speaker 2>to do anything without talking to the US and the Iranians.

0:16:27.920 --> 0:16:30.440
<v Speaker 2>I mean, it doesn't there's no sense that it's a

0:16:30.680 --> 0:16:33.880
<v Speaker 2>safe thing to do yet to go through. Do you

0:16:34.000 --> 0:16:38.520
<v Speaker 2>have a sense of are they now reconciling themselves to

0:16:39.640 --> 0:16:42.080
<v Speaker 2>paying to go through the strait? How are they thinking

0:16:42.080 --> 0:16:42.920
<v Speaker 2>about it? Yeah?

0:16:42.920 --> 0:16:45.880
<v Speaker 3>I think they're They're going to react very slowly given

0:16:46.040 --> 0:16:49.680
<v Speaker 3>the you know, the sheer uh, you know, financial value

0:16:49.720 --> 0:16:52.040
<v Speaker 3>of what they're carrying, and then the people on board.

0:16:52.720 --> 0:16:54.880
<v Speaker 3>It's going to it's very murky at this stage. Do

0:16:55.400 --> 0:16:58.560
<v Speaker 3>you know that we don't know how the Iranians are

0:16:58.600 --> 0:17:02.200
<v Speaker 3>going to process the paperwork. They apparently they're looking at

0:17:02.200 --> 0:17:05.880
<v Speaker 3>manifests and cargo history and and sort of you know,

0:17:06.240 --> 0:17:09.760
<v Speaker 3>what your relationship is to the US and Israel in

0:17:09.800 --> 0:17:13.159
<v Speaker 3>the past, so you know, these if what we end

0:17:13.240 --> 0:17:16.000
<v Speaker 3>up with is some sort of toll system, just to

0:17:16.040 --> 0:17:19.480
<v Speaker 3>follow on what Peter said, the Iranians will wind up

0:17:19.560 --> 0:17:22.440
<v Speaker 3>picking winners and losers. To a certain extent, the Chinese

0:17:22.680 --> 0:17:25.840
<v Speaker 3>owned a lot of ships, and so do European companies

0:17:25.880 --> 0:17:29.920
<v Speaker 3>in European countries, So you know, we could see this

0:17:30.040 --> 0:17:34.159
<v Speaker 3>geopolitical struggle that the US is in with mainly China,

0:17:34.280 --> 0:17:37.400
<v Speaker 3>but you know, more broadly kind of playing out right

0:17:37.480 --> 0:17:41.440
<v Speaker 3>there in this waterway where Iran says, you know, the

0:17:42.119 --> 0:17:45.240
<v Speaker 3>Chinese get the first five slots this morning, and the

0:17:45.280 --> 0:17:48.600
<v Speaker 3>European companies, you know, can go this afternoon, and you

0:17:48.680 --> 0:17:53.119
<v Speaker 3>run into this situation where Iran dictating the terms of

0:17:53.680 --> 0:17:58.520
<v Speaker 3>transit is going to get obviously very costly and unpredictable,

0:17:58.600 --> 0:18:02.240
<v Speaker 3>and the shipping companies their number one priority is can

0:18:02.280 --> 0:18:05.359
<v Speaker 3>they get through safely? And you know that's going to

0:18:05.359 --> 0:18:10.200
<v Speaker 3>be a very uncertain process if this is what we

0:18:10.640 --> 0:18:12.159
<v Speaker 3>end up with going forward.

0:18:12.720 --> 0:18:15.080
<v Speaker 2>And I mean it's striking because it's one of the

0:18:15.119 --> 0:18:17.800
<v Speaker 2>industries that the US was keen to get back into

0:18:17.960 --> 0:18:20.760
<v Speaker 2>and try and build some kind of capacity because as

0:18:20.800 --> 0:18:23.639
<v Speaker 2>you say it, just in terms of global shipping, those

0:18:23.720 --> 0:18:27.479
<v Speaker 2>massive containerships, they're pretty much all Chinese or maybe South Korean.

0:18:27.760 --> 0:18:28.960
<v Speaker 2>But it's not going to be much good to be

0:18:29.000 --> 0:18:31.200
<v Speaker 2>a US containership if you're not going to be able

0:18:31.200 --> 0:18:33.800
<v Speaker 2>to get through the straight Still with you, Brendan, we

0:18:33.880 --> 0:18:36.119
<v Speaker 2>had talked the other day actually on this show about

0:18:36.160 --> 0:18:38.720
<v Speaker 2>you know, okay, Rana has shown that it can use

0:18:38.760 --> 0:18:41.800
<v Speaker 2>this as a very powerful bargaining chip, and you can't

0:18:41.840 --> 0:18:44.840
<v Speaker 2>help thinking they'll use it again, but by the same token,

0:18:44.960 --> 0:18:51.440
<v Speaker 2>you'd expect shippers, companies, businesses to all think about alternatives

0:18:51.440 --> 0:18:54.240
<v Speaker 2>so that they're not in this position again. How do

0:18:54.320 --> 0:18:58.480
<v Speaker 2>you think the industry will be thinking about avoid getting

0:18:58.560 --> 0:19:00.000
<v Speaker 2>round the straight of hormus in the field.

0:19:00.800 --> 0:19:01.000
<v Speaker 1>Yeah.

0:19:01.000 --> 0:19:02.720
<v Speaker 3>I think one of the lessons coming out of this

0:19:02.800 --> 0:19:06.960
<v Speaker 3>is going to be a lesson that people learned after

0:19:07.040 --> 0:19:10.880
<v Speaker 3>COVID and after the Russia full scale invasion of Ukraine,

0:19:11.440 --> 0:19:13.920
<v Speaker 3>and that's you can't have all your eggs in one basket.

0:19:14.119 --> 0:19:17.119
<v Speaker 3>And that's not just you know, having one supplier in

0:19:17.160 --> 0:19:19.760
<v Speaker 3>one country, it's we have to be able to get

0:19:19.800 --> 0:19:25.159
<v Speaker 3>goods in multiple different routes, through multiple different transportation modes,

0:19:25.680 --> 0:19:30.160
<v Speaker 3>and we need to build in that extra resilience that

0:19:30.200 --> 0:19:33.679
<v Speaker 3>we already probably did after COVID and after you know,

0:19:33.720 --> 0:19:38.639
<v Speaker 3>the Russia Ukraine war unfolded. So this is just going

0:19:38.720 --> 0:19:43.000
<v Speaker 3>to be another lesson in self reliance independence when it

0:19:43.040 --> 0:19:46.440
<v Speaker 3>comes to your supply chain, resilience in your supply chain,

0:19:46.960 --> 0:19:51.920
<v Speaker 3>and now that this geopolitical cloud of uncertainty hovers over

0:19:51.960 --> 0:19:55.479
<v Speaker 3>the global economy, how can we make sure our supply

0:19:55.640 --> 0:19:59.920
<v Speaker 3>chains are robust enough to withstand you know, a five

0:20:00.080 --> 0:20:02.879
<v Speaker 3>weak closure of the straight of hormose or there are

0:20:02.920 --> 0:20:04.879
<v Speaker 3>a lot of straits and a lot of waterways in

0:20:04.920 --> 0:20:07.640
<v Speaker 3>the world, and a lot of them are in unfriendly places,

0:20:07.720 --> 0:20:10.280
<v Speaker 3>not just in the Mid East, And so I think

0:20:10.320 --> 0:20:13.480
<v Speaker 3>you're going to have contingency planners going back to the

0:20:13.560 --> 0:20:17.280
<v Speaker 3>drawing board and saying, Okay, this is now a new

0:20:17.359 --> 0:20:19.760
<v Speaker 3>risk that we have to factor in, and it's going

0:20:19.800 --> 0:20:22.840
<v Speaker 3>to be a costly one if we don't prepare for it.

0:20:22.840 --> 0:20:25.760
<v Speaker 2>It does strike me that one sector that does very

0:20:25.800 --> 0:20:28.400
<v Speaker 2>well out of all these developments is the insurance industry.

0:20:28.560 --> 0:20:32.600
<v Speaker 2>Are you seeing the cost of premiums and even taking

0:20:32.600 --> 0:20:34.160
<v Speaker 2>out of insurance going up.

0:20:34.560 --> 0:20:37.359
<v Speaker 3>Yeah, definitely. Those are some of the key players in

0:20:37.400 --> 0:20:40.560
<v Speaker 3>all of this. They will ultimately decide, the insurers will

0:20:41.000 --> 0:20:44.560
<v Speaker 3>whether a ship is cleared to go through, and if

0:20:44.560 --> 0:20:48.000
<v Speaker 3>it's not, then you know, those ships will not move

0:20:48.040 --> 0:20:50.800
<v Speaker 3>through a zone that the insurers feel isn't safe, and

0:20:50.840 --> 0:20:54.639
<v Speaker 3>so that just gets added into the overall cost of

0:20:55.119 --> 0:21:00.679
<v Speaker 3>transportation and ultimately what importers and exporters pay. And so

0:21:01.840 --> 0:21:05.600
<v Speaker 3>they have a pretty immediate surcharge that they can slap

0:21:05.640 --> 0:21:09.320
<v Speaker 3>on the price of a cargo that factors that in.

0:21:09.400 --> 0:21:12.600
<v Speaker 3>And so we'll have to see whether the risk goes

0:21:12.640 --> 0:21:16.600
<v Speaker 3>down and whether Iran let's ships move through. But the

0:21:16.640 --> 0:21:19.880
<v Speaker 3>insurance factor is definitely going to be one that we'll

0:21:19.880 --> 0:21:24.080
<v Speaker 3>have to watch in the weeks ahead, because not many

0:21:24.119 --> 0:21:27.760
<v Speaker 3>people think that the risks are are gonna go away

0:21:27.920 --> 0:21:28.320
<v Speaker 3>very soon.

0:21:28.800 --> 0:21:31.080
<v Speaker 2>And you know, if you even look at the statement

0:21:31.160 --> 0:21:33.160
<v Speaker 2>from the Iranians today, the fact that you can now

0:21:33.200 --> 0:21:36.160
<v Speaker 2>pass through the straightforard moves in coordination with the Aralian

0:21:36.200 --> 0:21:40.520
<v Speaker 2>military authorities doesn't, I'm sure, instill a great deal of

0:21:40.560 --> 0:21:44.240
<v Speaker 2>confidence in the typical kind of container ship pilot. Brendan Murray,

0:21:44.240 --> 0:21:45.560
<v Speaker 2>thank you so much for talking to us. I know

0:21:45.600 --> 0:21:48.280
<v Speaker 2>when you're dashing off to a flight, we really appreciate it.

0:21:48.359 --> 0:21:50.400
<v Speaker 2>And Pete Martin in Nairobi, thank you so much.

0:21:51.160 --> 0:22:10.320
<v Speaker 1>Thanks for having me, Thanks for having me, Thanks.

0:22:10.119 --> 0:22:13.159
<v Speaker 2>For listening to Trumponomics from Bloomberg. It was hosted by me,

0:22:13.320 --> 0:22:16.639
<v Speaker 2>Stephanie Flanders, and I was joined by Bloomberg Global Trade

0:22:16.720 --> 0:22:21.600
<v Speaker 2>editor Brendan Murray and Middle East and Africa reporter Peter Martin.

0:22:22.320 --> 0:22:25.560
<v Speaker 2>Trumponomics was produced by Samma Sandi and Moses and Am

0:22:25.840 --> 0:22:28.960
<v Speaker 2>with help from Amy Keen, and sound design was by

0:22:29.000 --> 0:22:32.240
<v Speaker 2>Blake Maples and Kelly Garret, and to help others find

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<v Speaker 2>and enjoy this show, Please rate it, review it highly.

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<v Speaker 1>Wherever you listen