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Speaker 1: the Bloomberg Crimenal and the Bloomberg Business opp This is
Speaker 1: an important conversation. Why the duration Ron Dermer is Israeli
Speaker 1: Minister of Strategic Affairs, but far more he was Ambassador
Speaker 1: of Israel to the United States for seven years. His
Speaker 1: extended period in Washington, his work at Wharton, among others,
Speaker 1: is noted and to have Ambassador Deurhmer with us, John,
Speaker 1: with his experience across all of a decade is important.
Speaker 2: Minister, thank you for being with us this morning, and
Speaker 2: I think first and foremost we have to extend on
Speaker 2: deepest sympathies to you and the people of Israel. Our
Speaker 2: first thoughts going to the hostages, the scores of hostages
Speaker 2: that were taken over the weekend. And as you know,
Speaker 2: there are some reports at the moment in the media
Speaker 2: that we'd love to get an on the record response
Speaker 2: from you on this from Reuter's a little bit earlier
Speaker 2: this morning that Katari mediators of how talks with Hamas
Speaker 2: officials to try to negotiate the release of Israeli women
Speaker 2: and children hold in Gaza. Minister, are their active talks
Speaker 2: exlct my guitar to release hostages?
Speaker 3: Well, what I guess you just read to me is
Speaker 3: that Kataris were talking to Hamas about it. Israel has
Speaker 3: not been negotiating with anybody.
Speaker 2: Has Katar spoken to you about the release of hostages
Speaker 2: and their role they might play as a mediator?
Speaker 3: As I said, what the qataris speaking to Hamas and
Speaker 3: talking about different things. Look, people are outraged by what happened.
Speaker 3: I'm sure your outrage. I appreciate the condolences. I know
Speaker 3: their heartfelt, and they're deeply appreciated. We haven't seen something
Speaker 3: like this, even in the Middle East, which is you know,
Speaker 3: is has a lot of brutality and savagery in it.
Speaker 3: We haven't seen savagery like this since Isis when you
Speaker 3: have killers, scores of hundreds, really of terrorists who who
Speaker 3: invaded Israel on Saturday morning on trucks with AK forty
Speaker 3: sevens and just mowed down people who were at a
Speaker 3: dance festival, went into people's homes, killed whole families, kidnapped children, women, elderly.
Speaker 3: This thing is sick and it's savage, and you really
Speaker 3: have a battle between the forces of civilization on the
Speaker 3: one side and the forces of barbarism, and civilization is
Speaker 3: going to have to win. And that's exactly what we're
Speaker 3: going to do in the days ahead. And as you
Speaker 3: heard from Secretary of Blincoln, it may take some time,
Speaker 3: but we're going to exact such a high price that
Speaker 3: not only will Hamas never consider doing this again, I
Speaker 3: think none of Israel's enemies are going to ever think
Speaker 3: about doing something like this again, you know, and the
Speaker 3: feeling of euphoria on the other side israelis those of
Speaker 3: a certain age remember nineteen seventy three when a surprise
Speaker 3: attack was launched against us on.
Speaker 4: Two different fronts.
Speaker 3: There was euphoria then for a few days, but then
Speaker 3: Israel turned the tide and the end of the war
Speaker 3: looked very different than the beginning of the war.
Speaker 4: And this is exactly what's going to happen.
Speaker 2: Now, Minister Basin One, you've just told us. Can we
Speaker 2: just assume then that a full ground invasion is inevitable.
Speaker 3: We're going to do whatever we have to do to
Speaker 3: send a lesson that they're going to understand for many,
Speaker 3: many decades, not just Hamas, not just the terror organizations
Speaker 3: in Gaza, but all the terror organizations and all the
Speaker 3: enemies of Israel, and Iran is the biggest enemy of all,
Speaker 3: and they're pulling the strings behind the scenes, giving money,
Speaker 3: giving weapons, having meetings to try to coordinate attacks in Israel,
Speaker 3: and as I speak to you, Iran is trying to
Speaker 3: push other people into the theater of war. We're going
Speaker 3: to have to send a message to everybody because Israel,
Speaker 3: you know, as you know, we're a tiny country or
Speaker 3: about the size of New Jersey, America is about forty
Speaker 3: times the population that we have, which goes to show
Speaker 3: you how heinous the attack was yesterday. Because when you
Speaker 3: have maybe one thousand people in Israel who were killed
Speaker 3: on a single day, and your population is forty times
Speaker 3: the size, it's around forty thousand Americans. That's more than
Speaker 3: ten nine to eleven. So you can imagine the sense
Speaker 3: of disgust that we have. We have to send a
Speaker 3: message to all of Israel's enemies because we're a strong country,
Speaker 3: but we're tiny, and we can go from strength to vulnerability.
Speaker 3: I think people are going to see the strength of Israel,
Speaker 3: the might of Israel, and I hope that the wal
Speaker 3: to Wall support that we appreciate that we had day
Speaker 3: from the President Biden, the support on both sides of
Speaker 3: the island Washington. I hope in the days ahead that
Speaker 3: that support continues when Israel has to do what it
Speaker 3: has to do in order to exact such a heavy
Speaker 3: price from this terror organization that not only do they
Speaker 3: not threadn us, that they don't threaten any civilized country
Speaker 3: around the world. Believe me, this will inspire terrorists the
Speaker 3: world over. Just like you had the Isis caliphate. It
Speaker 3: started to do inspiring people all around the globe. The
Speaker 3: world came together and understood they have to crush that caliphate.
Speaker 3: We have a force like that right in our backyard,
Speaker 3: not thousands of miles away, but right in our backyard,
Speaker 3: a few meters over the borders, and we're gonna have
Speaker 3: to crush both their capability and also their spirit.
Speaker 4: They will rule the day two days ago. We're going
Speaker 4: to remember that day.
Speaker 3: Israel will always remember that day, but all the terror
Speaker 3: organizations around us are going to remember this period for
Speaker 3: a very long time. And the critical miscalculation the Kamas
Speaker 3: may thinking that it was going to be business as
Speaker 3: usual in Israel. Believe me, it is not. The people
Speaker 3: are outrage and they have awoken not a sleeping giant,
Speaker 3: but a sleeping maccabee, and they're going to see it
Speaker 3: in the days and weeks ahead.
Speaker 2: Minister, you mentioned Iran. Have you seen personally or are
Speaker 2: you aware of any evidence that Iran was directly responsible
Speaker 2: and help coordinate these attacks over the weekend.
Speaker 3: Well, let me tell you what we do know for sure,
Speaker 3: But we know for sure that Iran provides ninety the
Speaker 3: last numbers. I saw ninety three percent of the military
Speaker 3: budget of Hamas is provided for by Iran. They are
Speaker 3: trying and have worked to put weapons not in justin
Speaker 3: to Gaza, but also in Judas, Samaria, the West Bank.
Speaker 3: They also support hasbalas you know, on our northern border.
Speaker 4: We know that as a fact.
Speaker 3: We know that Iran has coordinated meetings with all of
Speaker 3: its terrorist proxies in the region, Hamas and Gaza and
Speaker 3: another terror organization Palesiti in Islamic Jihad in Gaza and Hezbala,
Speaker 3: almost to kind of joint operations, I don't want to
Speaker 3: say joint operation center, but coordinated meetings. It was one
Speaker 3: question that I'm sure you're interested in. Did they know
Speaker 3: about this beforehand? Initially we didn't think that they did.
Speaker 3: Now there is some evidence that they might have known
Speaker 3: about it, or we are working to verify that evidence.
Speaker 3: That's why maybe there's some conflicting reports in the press
Speaker 3: that we don't exactly know. But now that we're looking
Speaker 3: back and we're looking at all of our intel and
Speaker 3: seeing exactly what the situation is, it's still not clear
Speaker 3: to us.
Speaker 4: But they might have done it. But I have to
Speaker 4: tell you they.
Speaker 3: Are working right now to bring more and more terror
Speaker 3: groups into this fight. So everyone has to know it,
Speaker 3: and it's important not just I think, to stand unequivocally
Speaker 3: with Israel against Kamas, to call for freeing the hostages,
Speaker 3: but also to stand unequivocally against Iran.
Speaker 4: You know there's going to be.
Speaker 3: The UN Security Council can tomorrow, Europe, France, Britain, Germany,
Speaker 3: they can work to snap bang the UN sanctions, the
Speaker 3: Security Council sanctions against Iran. You have to enforce oil
Speaker 3: sanctions against Iran. Sporting a lot of oil, They're getting
Speaker 3: a lot of money, tens of billions of dollars. It's
Speaker 3: time that the world unites against Iran because what you're
Speaker 3: seeing today is a tentacle of an Iranian octopus, and
Speaker 3: we have to not only cut off the tentacle, we
Speaker 3: have to deal with the regime that is sending them.
Speaker 3: And I hope that the world will stand with Israel,
Speaker 3: as I said in the days and weeks ahead, to
Speaker 3: reverse this and turn it into a victory against terrorism.
Speaker 2: And Barbers, Minister, we have some news to work through
Speaker 2: on our side, and I'd love to continue this conversation
Speaker 2: with you. At the same time, according to the CBS
Speaker 2: White House reporter or at least nine Americans were killed
Speaker 2: in Israel. As I'm sure you know, this goes beyond
Speaker 2: the people of Israel. The whole world is looking at
Speaker 2: this moment. Just on Iran, you mentioned that you may
Speaker 2: have some evidence that implicates Iran directly for the operations
Speaker 2: that took place over the weekend. Could you share with
Speaker 2: us the nature of that evidence?
Speaker 4: Unfortunately I can't.
Speaker 3: If I could, I would, but I can't, and we're
Speaker 3: going to have to look through it now. Our working
Speaker 3: assumption is that they may have. Our working assumption a
Speaker 3: couple of days ago was that they hadn't known about
Speaker 3: it directly. Now it is unclear, and we'll have to
Speaker 3: wait to verify it. And you know, when we make
Speaker 3: an official statement, we'll make an official statement, but we
Speaker 3: have to work some work through that right now, because
Speaker 3: I want to make sure that when I say it,
Speaker 3: we know with one hundred percent certainty.
Speaker 4: Now that is our working assumption.
Speaker 2: We did hear this from the Wall Street Journal that
Speaker 2: Iranian security officials helped plan Hamas's attacks and gave a
Speaker 2: green light for the assault at a meeting at Beirroute
Speaker 2: last Monday. According to Cedia members of Hamas and Hesbala.
Speaker 2: Are you aware of a meeting that took place in
Speaker 2: the last week between Iran and leadership of Hamas and Hespala.
Speaker 3: They have meetings all the time, it's not secret. You
Speaker 3: can see pictures of their meeting with Iran leadership, the
Speaker 3: leadership of their Iranian Revolutionary Guard leadership, their CUDS Force leadership,
Speaker 3: meeting with these other senior officials. So they've had many, many,
Speaker 3: many meetings over the last few months, and they worked
Speaker 3: very hard.
Speaker 4: What is Iran trying to do?
Speaker 3: Those of you, those are your viewers who know the
Speaker 3: map of the Middle East, know that Iran supports the
Speaker 3: Shield militias any rock. They are trying to establish a beachhead,
Speaker 3: a terrorists beachhead against Israel and Syria. They support Hezballah
Speaker 3: in Lebanon, which is the northern part of Israel. They
Speaker 3: support both Palistin and Islami Chihad and Hamas and Gaza.
Speaker 4: They support the Hutis in Yemen.
Speaker 3: And what they're trying to do is put a noose
Speaker 3: around Israel's neck with all of those terror groups there,
Speaker 3: and we have to make sure that we break out
Speaker 3: of that noose. And deliver such a mighty blow that
Speaker 3: they're not going to forget it for generations.
Speaker 1: Ambassador, I want to take your years of experience here,
Speaker 1: and it's outside your remit, but I'm sure it's something
Speaker 1: everyone wants to know. I can't get my head around
Speaker 1: how Israel invades the Gaza Strip. Do you anticipate substantial
Speaker 1: bombing and air attack or are we ready for some
Speaker 1: definitive original building to building urban warfare in Gaza.
Speaker 3: Because I'm a member of the Security Cabinet, I'm not
Speaker 3: going to discuss that. Let's just say we have a
Speaker 3: clear goal to cripple the capabilities of Kamas and also
Speaker 3: their will to wage war against us.
Speaker 4: So you're going to have to interpret that the way
Speaker 4: you want it. I have to leave it at that.
Speaker 3: But it's people who doubt Israel's capabilities are making a
Speaker 3: huge mistake. We will do what we have to do
Speaker 3: in order to achieve that goal, and we are going
Speaker 3: to have to achieve this goal obviously first and foremost
Speaker 3: for Israel, but it's for all of our Arab partners
Speaker 3: in the region.
Speaker 4: Believe me.
Speaker 3: Put aside all of those statements that are made by
Speaker 3: foreign ministries in the region, and some of you may
Speaker 3: have conversations with officials from the Middle East and they
Speaker 3: may tell you a very different story about Israel than
Speaker 3: they may be saying publicly. There have been times in
Speaker 3: the past where Israel has fought with these terror organizations,
Speaker 3: and the ones who are rooting for us usually first
Speaker 3: and foremost are these Arab states were threatened right by
Speaker 3: these jihadi forces, whether it's a Shia Jiadi force or
Speaker 3: a Shia group like Iran and its proxies, or Sunni
Speaker 3: group like Kamas. They don't want these forces of barbarism
Speaker 3: to win because they threaten them, Ambassador, and this is
Speaker 3: very just one thing, if I may, this is also
Speaker 3: very important for the pursuit of peace eventually, because no
Speaker 3: one is going to make peace with the week. We
Speaker 3: have to be very strong, and it's strength that is
Speaker 3: actually going to improve our chances to reach an historic
Speaker 3: piece agreement with Saudi Arabia, which I have no doubt
Speaker 3: is one of the reasons why this action was taken
Speaker 3: at this.
Speaker 1: Time for our audience, Ambassador Dermer, can you triangulate the
Speaker 1: focus obviously on Gaza, but also now on the West
Speaker 1: Bank in a fractious northern border with Lebanon. How will
Speaker 1: Israel affect a three front war.
Speaker 3: Well, we have to ensure that our force structure is
Speaker 3: done in a certain way that we can deal with
Speaker 3: any threats that would materialize. And you say, quite rightly,
Speaker 3: we have issues on the northern border. We had sirens
Speaker 3: there just about an hour ago, we had an attack
Speaker 3: there yesterday. There are different attempts for attacks, so we
Speaker 3: have to be clear on a northern border that we
Speaker 3: have all the capabilities we need to defend ourselves. As
Speaker 3: you know, the United States brought a carrier group into
Speaker 3: the eastern Mediterranean. I think that sends a very strong
Speaker 3: message to DeTar our enemies and it makes it clear
Speaker 3: that America backs Israel. And again we're deeply appreciative of
Speaker 3: a Bide administration for doing that. I think it makes
Speaker 3: the chances of war less likely, not more likely. And
Speaker 3: of course, as you said, in the West Bank, in
Speaker 3: Judaan and Samaria, we've had terror actions that have happened there,
Speaker 3: and we have an iro on that.
Speaker 4: We have to have our eye on.
Speaker 3: A sort of a three hundred and sixty radius in
Speaker 3: order to deal with all these different challenges. But I'll
Speaker 3: tell you the chances of having a multi front row
Speaker 3: grow when people see Israel as being vulnerable. So the
Speaker 3: stronger and faster we act, the more it will send
Speaker 3: a message of strength and purpose, and that message is
Speaker 3: critical to actually ultimately de escalate the situation and prevent
Speaker 3: these things from happening for many, many decades. This is
Speaker 3: an attack, I want to say it again, the lights
Speaker 3: of which has never happened in this state of Israel.
Speaker 3: We may have lost a thousand people in a single day,
Speaker 3: ambassament has never happened in the state of Israel.
Speaker 5: Ambassador, there's a big question around Saudi Arabia, and that
Speaker 5: talks about normalizing relations. I know you've been involved with those,
Speaker 5: and it seems like those are at least iced in
Speaker 5: the near term. Saudi Arabia put out a statement saying
Speaker 5: that it repeated its warnings of the dangers of the
Speaker 5: explosion of the situation as a result of the continued
Speaker 5: occupation and deprivation of the Palestinian people of their legitimate rights.
Speaker 5: How much do you see this as really precluding additional
Speaker 5: discussions with Saudi Arabia and making this kind of normalization
Speaker 5: talk not viable in the near term.
Speaker 3: Well, a lot of people were surprised by the Abraham Accords,
Speaker 3: you know a few years ago when no one thought
Speaker 3: that that could possibly happen, but Israel proved itself. It's strength, frankly,
Speaker 3: it's security strength, it's economic vitality. I think that's what
Speaker 3: made those accords ultimately possible. I think the critical question
Speaker 3: of whether we're going to be able to achieve this
Speaker 3: historic piece with Saudi Arabia that that pulls pushs the
Speaker 3: whole Arab is rarely conflicted to a completely different place
Speaker 3: and can lead to a broader reconciliation between Muslims and
Speaker 3: Jews as well. The critical factor will be how Israel
Speaker 3: emerges from this fight, or do we emerge as a victor.
Speaker 3: Because people make peace with winners, people make peace with
Speaker 3: a strong, they do not make peace with the weak.
Speaker 4: And that will be the critical factor.
Speaker 3: I'm telling you, take all the statements, all the diplomatic
Speaker 3: statements that have been made, put them aside. It's not relevant.
Speaker 3: I think there are many Arab partners in this region
Speaker 3: that want a different future, that are thinking about what's
Speaker 3: going to happen in twenty thirty forty years down the
Speaker 3: road when oil doesn't have the.
Speaker 4: Value to their countries that it has today.
Speaker 3: They need a partner in Israel that can help strengthen
Speaker 3: their own national security, that could help their own national prosperity.
Speaker 3: You saw a few weeks ago with the G twenty
Speaker 3: when several countries, the United States, European countries, India launched
Speaker 3: this vision of an economic.
Speaker 4: Corridor that would go.
Speaker 3: From India through the Arabian Peninsula into Israel and towards Europe.
Speaker 3: I mean, that's a game changer, an economic game changer
Speaker 3: for the region. And I think the Saudis have great
Speaker 3: plans for building their country. And believe me, there are
Speaker 3: a lot of people in a lot of places in
Speaker 3: the Middle East, no matter what they say publicly or
Speaker 3: rooting for Israel to win, and I think they're gonna
Speaker 3: get exactly what they want.
Speaker 2: Minister, Just to wrap things up, because I know you
Speaker 2: have to go one final question, winning, how do you
Speaker 2: define victory in a moment like this one?
Speaker 3: Like I said, you have to cripple their capability and
Speaker 3: you have to crush their will to do such an
Speaker 3: action for decades and decades to come, not just Hamas
Speaker 3: and palisining Islamichi Hat, but also other terror organizations in
Speaker 3: the region. We rely as a small country on our deterrence,
Speaker 3: but deterrence doesn't last forever. You have to exercise power
Speaker 3: and force to always make clear to your enemies that
Speaker 3: you're prepared to fight.
Speaker 4: Not only do you have the capability, but you have
Speaker 4: the will to fight.
Speaker 3: And our enemies Camas obviously miscalculated here because if they
Speaker 3: think that this action that they just took and murdering
Speaker 3: a thousand Israelis and just shooting our civilians and taking
Speaker 3: scores of people hostage and having over maybe three thousand
Speaker 3: people who are wounded, that this is going to be
Speaker 3: business as usual, they just have no idea who the
Speaker 3: people of Israel are, and I think they're going to
Speaker 3: find out in the days ahead.
Speaker 2: Minister, We appreciate your time this morning, got a very
Speaker 2: difficult time for your country, and hopefully we can catch
Speaker 2: up against soon. Run term of that, the Israeli Minister
Speaker 2: of Strategic Affairs.
Speaker 1: We forget in seventy three that Israeli forces got within
Speaker 1: X miles of Damascus to the north and they made
Speaker 1: it to the Suez Canal in over the Suez Canal
Speaker 1: in seventy That's a bit of history that I think
Speaker 1: people really are wide on this all comes up to
Speaker 1: the geopolitics of the region. Expert on this and a
Speaker 1: good friend of Bloomberg's surveillance is Ellen Wald, Senior Fellow
Speaker 1: at Atlantic Council. Her book Saudi Inc. Is Definitive on hydrocarbons. Ellen,
Speaker 1: thank you so much for joining this morning. Really really
Speaker 1: a timely to have.
Speaker 3: You with us.
Speaker 1: How does Israel get its oil? Are they in some
Speaker 1: way oil independent?
Speaker 6: They're not really oil independent. Israel actually does or used
Speaker 6: to get quite a bit of oil from the kurdis
Speaker 6: Dan region of Iraq. It was shipped out via the
Speaker 6: Jehan pipeline from the port of Jehan in Turkey to
Speaker 6: ports in Israel, to Haifa and to other ports. I
Speaker 6: don't think Israel's particularly concerned about getting oil or making
Speaker 6: sure that they have enough oil at this point.
Speaker 2: Though.
Speaker 6: One interesting point that has just come up is that
Speaker 6: Israel asked Chevron to shut down the operation of the
Speaker 6: Tamar gas field platform, which is out in the Mediterranean
Speaker 6: in the northern part of Israel. And to me, that
Speaker 6: says that either they think that there could potentially be
Speaker 6: some sort of terrorist attack on that platform, which potentially
Speaker 6: either from Iran or Hisbela, which I would say definitely
Speaker 6: signals to me a widening of this highly regional conflict
Speaker 6: and something that actually could be a potential threat to
Speaker 6: oil markets, to gas markets, especially if you consider that,
Speaker 6: like you said, the Suez Canal is not all that far.
Speaker 1: To take it to Saudi Arabia and your expertise there.
Speaker 1: Which part of Palestine do Saudi Arabia does the Royal
Speaker 1: family support, That's a great question.
Speaker 6: And they're definitely much more interested in the Palestinian authority
Speaker 6: run parts the West Bank than they are with Hamas,
Speaker 6: Hamas and Saudi Raba. They see Hamas as a very
Speaker 6: destabilizing element. Especially the Saudi monarchy does not like terrorists.
Speaker 6: Terrorists are just as much a threat to them and
Speaker 6: to their stability as they are to other areas. So
Speaker 6: you know, and what's interesting is that they keep pushing
Speaker 6: for this region two state solution, regional peace agreement. They
Speaker 6: have always said that their recognition of Israel depends upon
Speaker 6: a regional peace deal and two state solution, which is
Speaker 6: one of the reasons why I think it hasn't really
Speaker 6: gone very far and haven't seen very much, because that's
Speaker 6: not something that Israel or that the US is really
Speaker 6: prepared to push for at this point, the question is
Speaker 6: will they drop this in favor of getting a defense
Speaker 6: pack from Washington as they've indicated. They haven't quite indicated that,
Speaker 6: but they definitely have indicated that that's a top priority
Speaker 6: for them, especially on the nuclear front, and so that
Speaker 6: says to me that maybe they're willing to negotiate a
Speaker 6: bit on that requirement.
Speaker 2: Allan there was also talking into the weekend that is
Speaker 2: part of this pact. The likelihood is that we would
Speaker 2: get crew dounput increased into next year. And as you
Speaker 2: look across the region, now, what would Saudi Arabia stand
Speaker 2: on that particular point and what could this mean for
Speaker 2: Iran production and those barrels of oil that find their
Speaker 2: way on international markets exactly.
Speaker 6: And Iran has been selling more oil recently, not necessarily
Speaker 6: because they're evading sanctions anymore, because sanctions are not as
Speaker 6: tight as they were, but simply because Iran has been
Speaker 6: able to increase their production and so they're selling more.
Speaker 6: With prices up across across the markets, Iran is able
Speaker 6: to get more money for its oil even if it's
Speaker 6: still selling it at a discount. And even though it's
Speaker 6: got competition from from Russian oil. So if Saudi Arabia
Speaker 6: puts out another million barrels a day than they are
Speaker 6: right now, that would definitely threaten Iran's Iran's money making
Speaker 6: scheme from oil because it would send prices lower. Of course,
Speaker 6: there are lots of other things that could also send
Speaker 6: prices lower for i Ran, so that's not the only
Speaker 6: issue here. I think it's it's compelling that Saudi Arabia
Speaker 6: sees that million barrels a day as a bargaining chip
Speaker 6: with the United States. They're saying, Hey, you're going into
Speaker 6: an election year that could be tough. We could put
Speaker 6: a million barrels a day back on the market and
Speaker 6: lower oil prices for you if you help us out,
Speaker 6: if you get us this defense pack before you know,
Speaker 6: election season, before a new a new administration comes in
Speaker 6: and we have to start all over. So I think
Speaker 6: that's a very compelling chip that Saudi Arabia has thrown
Speaker 6: into the game here.
Speaker 5: You've talked about Uron selling more oil and it comes
Speaker 5: at a time or there's talk of the potential for
Speaker 5: sanctions or additional punitive measures if Euron is deemed to
Speaker 5: have a more active role in the planning and the
Speaker 5: execution of this attack. From your vantage point, how realistic
Speaker 5: is that. What kind of influence could that have not
Speaker 5: only the price of crude, but just in general to
Speaker 5: the region and the geopolitics there.
Speaker 6: That's a really good point. I think that any kind
Speaker 6: of tightening of sanctions is not really going.
Speaker 4: To have much of an impact.
Speaker 6: It's purely, you know, something that is purely just hyperbole
Speaker 6: and rhetoric, because enforcing sanctions is a multi year long process. Now,
Speaker 6: if we were hearing talk of, say a blockade against
Speaker 6: Iranian ships leaving the Persian Gulf, that would be a
Speaker 6: totally different story. So if the United States is willing
Speaker 6: to take its navy and ensure that Iranian ships can't
Speaker 6: get out of the Persian Gulf to sell their oil,
Speaker 6: or that ships that have transferred Iranian oil to them
Speaker 6: and not maybe Iranian ships can't get out, that would
Speaker 6: be a huge shift away from the current policy, which
Speaker 6: is just let's try to enforce sanctions. It takes you know, three, four,
Speaker 6: five years to do that, and that could definitely cause
Speaker 6: a major spreading of the geopolitical conflict. I would say
Speaker 6: if that happens, oil prices would go through the roof.
Speaker 5: But Ellen, can you just say on a broader level, then,
Speaker 5: do you think that any kind of interruption or disruption
Speaker 5: to oil production has been overstated and particularly in the
Speaker 5: price of oil this morning, or do you think that
Speaker 5: there is a broader implication as this goes on that
Speaker 5: you are watching.
Speaker 6: I think that the four dollar increase that we saw
Speaker 6: overnight was too much. You know, we've had regional conflict
Speaker 6: between Israel and Goza before and oil prices jump a
Speaker 6: little and then they come back down because people realize
Speaker 6: there is no larger impact to oil producers. But in
Speaker 6: this case we are really, I think, on the verge
Speaker 6: of a larger geopolitical regional conflict. There are so many
Speaker 6: other pieces here that it isn't that the jump and
Speaker 6: oil prices is basically anticipating that it's anticipating that there
Speaker 6: could be some kind of disruption, and that that's more
Speaker 6: like in this case than it has been in the past.
Speaker 2: And I diagnosed the sell off as well last week
Speaker 2: too out of it. If we can finish, do I
Speaker 2: think it's important Was that sell off in anticipation of
Speaker 2: potential boost the crude output from Saudi or was it
Speaker 2: because we saw evidence of our demand limits being tested
Speaker 2: by this price search.
Speaker 6: I think it's the second. It's definitely more of a
Speaker 6: larger demand issue that is coming to light or that
Speaker 6: is finally being realized in the market. I do think
Speaker 6: that the news that Saudi Arabia could increase production starting
Speaker 6: in twenty twenty four, if this, you know, if they
Speaker 6: get what they want from Washington is definitely could definitely
Speaker 6: be a catalyst. But that really didn't come out until Friday,
Speaker 6: and the sell off had started before that. So I
Speaker 6: do think it's much more based on the demand issue.
Speaker 2: That news was dated pretty quickly. Let's put it that way,
Speaker 2: and I thank you. In the world of the Atlantic Council,
Speaker 2: Steak Chevrone joins US now at a multi asset solutions
Speaker 2: that federated and they stay. A question I think people
Speaker 2: will be asking the market is whether this represents a
Speaker 2: durable headwind to invest the sentiment. Do you think it could?
Speaker 7: Yeah, I mean it certainly adds to uncertainty.
Speaker 8: I mean it's a difficult question to answer, John, I mean,
Speaker 8: just watching the footage over the weekend, I mean, I
Speaker 8: know we have a job to do, but I feel
Speaker 8: like equities are the least important thing considering some of
Speaker 8: the images we saw over the weekend, I mean, all
Speaker 8: things being considered, just trying to decipher it. Obviously, it's
Speaker 8: it's an upward pressure on the commodity complex and oil.
Speaker 8: It adds to uncertainty in the markets. Yeah, you saw
Speaker 8: bonds rally a little bit, but not anything major.
Speaker 7: I mean, we've seen.
Speaker 8: Treasurey yields go up ten basis points in a day.
Speaker 8: You know, a four basis point decline and international high
Speaker 8: quality bonds isn't much. I think the point you just made, though,
Speaker 8: is the appropriate one. You know, what happens next and
Speaker 8: does this spreads it become a wider regional conflict than
Speaker 8: that has all kinds of implications.
Speaker 7: But at this point, and when we all have to
Speaker 7: wait and see.
Speaker 1: You are wonderful at the cross asset analysis, this bond
Speaker 1: tobaccle that we're in right now. How does it affect
Speaker 1: Steve Off? I mean, is he getting his requisitt nine
Speaker 1: hours sleep a night? How does it affect the world
Speaker 1: of equities?
Speaker 7: So Steve and I are very close. I don't know
Speaker 7: what he does at night.
Speaker 8: What I will say is that you know, there's a
Speaker 8: lot of it's a hard one to tell. You've got
Speaker 8: a yield curve this uninverting, and historically when that happens,
Speaker 8: that's a real imminent sign of recession. But it's never
Speaker 8: uninverted this way, which is this kind of bearish steepener.
Speaker 8: It's not like the two year yield is falling an
Speaker 8: anticipation of cuts.
Speaker 7: You've got a ten year that's rising.
Speaker 8: And the question is is there a buyer's strike on
Speaker 8: the treasury or is the market trying to normalize to
Speaker 8: a new normal of a kind of five to six
Speaker 8: percent nomenal GDP.
Speaker 7: And one of those is much more bullish than the other.
Speaker 1: Tell me about value versus Carlton, I mean, I was
Speaker 1: shocked on the exon Pioneer transaction rumored last week that
Speaker 1: these are ten and twelve and thirteen multiple companies where
Speaker 1: we're talking about the chosen seven are twenty five and
Speaker 1: thirty multiple companies as well. How do you define a
Speaker 1: federated growth in value?
Speaker 8: Well, just using a simple kind of rustle one thousand
Speaker 8: growth versus value. Coming into this year, we thought inflation
Speaker 8: would be a little bit more adorable and the Fed
Speaker 8: would hike more than the market expected.
Speaker 7: That was right.
Speaker 8: We thought growth might struggle a little under that environment,
Speaker 8: and that wasn't. We still think that this market broadens out.
Speaker 8: We think it broadens out to cyclicals pricing out some
Speaker 8: recession risk at least in the short run. We think
Speaker 8: the dividend players and their safety are attractive. And so
Speaker 8: yet we've nibbled on large cap growth on the most
Speaker 8: recent sell off because we've been so underweight. But we
Speaker 8: still think that there's an opportunity for the market to
Speaker 8: broaden out.
Speaker 5: There's a question about how much can change in a minute,
Speaker 5: given some of the concern that we're seeing percolate out
Speaker 5: of yet another front for geopolitical conflagration. How much would
Speaker 5: your view change should oil sort of bear the brunt
Speaker 5: of this if we do see any kind of disruption,
Speaker 5: We do see oil prices climb above a hundred barrels
Speaker 5: one hundred dollars a barrel on a sustainable basis.
Speaker 8: Yeah, I mean, look with the market and the Fed
Speaker 8: are trying to pull off here as an inside straight
Speaker 8: to a softer landing, and so anything that makes that
Speaker 8: path more difficult is a challenge, whether or not that's
Speaker 8: higher oil prices, resurgent inflation, rising delinquencies, you know, a
Speaker 8: ten year yield that becomes unhinged to the upside. Those
Speaker 8: are all risk factors. And I think what the last
Speaker 8: year has told us is you want to be humble.
Speaker 8: You want portfolios that are close to neutral, pointed in
Speaker 8: the direction of your fundamental view. And so you know,
Speaker 8: we think markets are a little bit upside biased here
Speaker 8: or certainly before the weekend, but you want to stay
Speaker 8: close to neutral and humble because there's a lot of
Speaker 8: risk factors out here that are really unprecedented.
Speaker 2: City this morning, send the conflict in Israel to come
Speaker 2: and say, snakflation reshunk to the this is rady economy.
Speaker 2: Could you say the same thing about a global economy
Speaker 2: right now? Given what you're saying, galswe.
Speaker 7: It's certainly possible.
Speaker 8: But again, I think what has to happen there to
Speaker 8: be a real stagflation aya event is you need to
Speaker 8: draw in some of the northern countries or you need
Speaker 8: a tax only I'm not really Iranian refineries or things
Speaker 8: of that nature. That there's probably not enough of an
Speaker 8: oil price shock where things are located today, but a
Speaker 8: spreading of that certainly can.
Speaker 7: And again, look on this theme of humility, John, if you.
Speaker 8: Would have asked me, you know, what would have happened
Speaker 8: in the wake of the Ukraine invasion, who would have
Speaker 8: gotten the market reaction right? And so these we're not
Speaker 8: experts in these areas, and we stick to the fundamentals
Speaker 8: as best as we can.
Speaker 2: It's one of those mornings where you can learn some
Speaker 2: think about how the market is responding to this incoming
Speaker 2: information and events over the weekend. In some ways, it's
Speaker 2: a shame the cash treasury market is close today. We
Speaker 2: learning the bonds still provide those risk mitigation characteristics.
Speaker 7: I think there's no question about that.
Speaker 8: Every time that bonds as a downside protection mechanism have
Speaker 8: been doubted, you know that they show up. And so look,
Speaker 8: I mean unless we're looking at some you know, massively
Speaker 8: secular buyers striking, and I think it's premature to say that.
Speaker 8: I think when there's trouble in the world, the safest
Speaker 8: asset is the United States Treasury and I don't think
Speaker 8: anything's changed about that, and I think we'll probably see
Speaker 8: that tomorrow.
Speaker 5: What are you watching as this sort of progresses over
Speaker 5: the next hours and days, as we read all of
Speaker 5: the news and how it's potentially spreading or being contained.
Speaker 5: What are you looking for to potentially change your outlook one.
Speaker 7: Way or another.
Speaker 8: Well, again, I think you know, spreading north, whether it's
Speaker 8: Lebanon or whether there's any kind of direct involvement with
Speaker 8: the Uranians, would certainly be something to watch.
Speaker 7: I think. In addition, you know, if you.
Speaker 8: Start to see how to say this, but if you
Speaker 8: see kind of any terrorist activity in non Middle Eastern countries,
Speaker 8: you know, that's something that certainly could shake confidence in
Speaker 8: the world, and you watch closely and then honestly, at
Speaker 8: least in more than anything, it's just watching in horror
Speaker 8: at the atrocities that are going on and feeling heartbroken
Speaker 8: about it.
Speaker 2: Just trity Shelkin stay, thank you, sir, Thanks for the
Speaker 2: inside this morning. Steve Cheffer on that Federal hermes the
Speaker 2: Israel Hamas conflict entering the third day with over oney
Speaker 2: one hundred dead. Israeli forces responding with strikes in Gaza
Speaker 2: after the militant group entered Israel, taking hostages. Over the weekend,
Speaker 2: the Wall Street Journal reporting Irani and security officials held
Speaker 2: plan what would be the biggest Israeli security failure in decades.
Speaker 2: US Secretary of State Anthony Blincoln maintaining they have not
Speaker 2: seen evidence to confirm cooperation.
Speaker 9: There's a long relationship between Iran and Hamas. In fact,
Speaker 9: Hamas wouldn't be Hamas without the support that it's gotten
Speaker 9: over many years from Iran. We haven't yet seen direct
Speaker 9: evidence that Iran was behind this particular attack or involved,
Speaker 9: but the support over many years is clear.
Speaker 2: Joining us now is Norman Rule, Senior advisor for the
Speaker 2: Transnational Threats Project at the Center for Strategic and International Studies.
Speaker 2: Norman spent thirty four years in the Central Intelligence Agents
Speaker 2: see Norman. Wonderful to catch up with you under tragic circumstances. Obviously, Norman,
Speaker 2: we have to start with the main question that was
Speaker 2: on the lips of everybody. What happened and how did
Speaker 2: this happen? Over the weekend?
Speaker 10: Good morning. Israeli security forces, primarily the Shin that have
Speaker 10: had responsibility for Godza on the occupied territories, and they
Speaker 10: have over the years demonstrated a very capable architecture of
Speaker 10: surveilling Palestine activity, and this has allowed them to frustrate
Speaker 10: multiple Palestine attacks and identify, locate, and when necessary, neutralized
Speaker 10: Hamas and other Palestine officials. In this case, it appears
Speaker 10: that Hamas was able to develop a compartmented planning, execution,
Speaker 10: and training program within that security bubble that not only
Speaker 10: evaded Israeli surveillance but enabled this operation to be undertaken
Speaker 10: without Israel seeing indicators that this existed. To be clear,
Speaker 10: this is an intelligence failure by Israel. However, they have
Speaker 10: a very capable intelligence service and are catching up. And also,
Speaker 10: to be clear, this is a failure by the international
Speaker 10: community as well. American other countries do not see the
Speaker 10: protection of their nationals to Israeli security services, and we
Speaker 10: also did not see the indicators of these of the.
Speaker 1: Bend Norman, wonderful to have you with us and with
Speaker 1: your years and years with the CIA. This is not
Speaker 1: Matt Damon in a movie.
Speaker 7: This is reality.
Speaker 1: How do you take over a geography that is two
Speaker 1: times the size of Washington, d c. And as two
Speaker 1: million people crammed into it. How do you link your
Speaker 1: intelligence knowledge with a military effort to de Hamas Gaza.
Speaker 10: It's it's possible, and Israel has done this for some
Speaker 10: time with Gaza, the West Bank and for Lebanon. However,
Speaker 10: you raise an extremely important point for Israel to consider
Speaker 10: grind operations or hostage rescue operations. This is one of
Speaker 10: the most challenging environments on the planet. It's not just
Speaker 10: that this is a concentrated civilian areas. This is a
Speaker 10: concentrated civilian area with very tall buildings. Now, the United
Speaker 10: States and Iraq and Britain have some experience in working
Speaker 10: this in Iraq and Afghanistan, but these were much smaller
Speaker 10: areas which with much shorter buildings. For Israel, this is
Speaker 10: an extraordinarily difficult challenge and no one should underplay the
Speaker 10: casualty account that is likely to happen for Israelis and
Speaker 10: Palestinians and ground operations are undertaken.
Speaker 1: You look at the narrow like that, and you also
Speaker 1: look at the bigger. In your writings, you talk of
Speaker 1: a multipolar dynamic, and you take the tensions of the
Speaker 1: Middle East and the Levant back to eighteen seventy and
Speaker 1: nineteen thirty, way before nineteen sixty seven as well. What's
Speaker 1: a multipolar dynamic that Israel faces right now?
Speaker 10: Well, it's a good news bad news story. You have
Speaker 10: a situation where in the good news side there are strategic,
Speaker 10: long term and continuing drivers by for the Saudis and
Speaker 10: for the Amorades and others to promote regional integration. That
Speaker 10: must include Israel because of its geographic location, that hasn't
Speaker 10: gone away, and that will sustain the ongoing diplomatic process
Speaker 10: between the United States, Saudi Arabia, and Israel to restore relations.
Speaker 10: On the downside, you have an international community that is
Speaker 10: cracked apart, so pulling together Russia, China, and the European
Speaker 10: community in a way that actually promotes a peace plan
Speaker 10: of some consequence will be impossible.
Speaker 5: There's also a question about the role of Iran, especially
Speaker 5: as the Wall Street Journal is reporting that they had
Speaker 5: an active role in helping to plan this attack. We
Speaker 5: have not heard from the US government confirming that. They
Speaker 5: said they are investigating. What are the potential consequences, what
Speaker 5: is the escalation type of potential. If Iran is deemed
Speaker 5: to have had an active role in planning these attat.
Speaker 10: We should be careful about the report. Iran is unlikely
Speaker 10: to have played a robust, active role in planning the
Speaker 10: attack simply because they are not on the ground, They
Speaker 10: do not have personnel on the ground, they would not
Speaker 10: be able to provide an intelligence of input to those operations,
Speaker 10: and their involvement would compromise the compartmentation of the operation. However,
Speaker 10: Iran has provided drones, training money for over the years.
Speaker 10: As Secretary blink and Is correctly stated, Hamas would not
Speaker 10: be Hamas without Iran, but that it's Iran's modus operandi.
Speaker 10: In essence, what they do is they enable proxies to
Speaker 10: conduct operations that parallel Iran's strategic objectives. Those operations play out,
Speaker 10: Iran is able to say it supported them and enabled
Speaker 10: them iron achieves and strategic goals, but Iran's direct hand
Speaker 10: is not seen, and thus Iran escapes international punishment.
Speaker 5: The speculation is that one of the strategic aims was
Speaker 5: to disrupt the Saudi Arabia Israeli agreement that was being
Speaker 5: worked on and coming to some sort of fruition in
Speaker 5: the next couple.
Speaker 7: Of weeks and days.
Speaker 5: How much do you think that that has been iced?
Speaker 5: How much are people really discussing that aspect of the
Speaker 5: strategic potential motivation for the timing of this attack.
Speaker 10: There's no question that that was likely one of the motivations.
Speaker 10: But this is a pie that has multiple pieces in it.
Speaker 10: This operation was clearly developed over many, many months. It
Speaker 10: would have taken a very long time, if only because
Speaker 10: of the compartmentation requirements to pull this together, and therefore
Speaker 10: it had a number of reasons. The Ricey government and
Speaker 10: its proxies have maintained an assertive foreign policy posture for
Speaker 10: a very long time. There was no specific incident that
Speaker 10: provoked this, but certainly one of the benefits for hardliners
Speaker 10: in Iran and the proxies is that this will complicate,
Speaker 10: if not disrupt, the diplomatic process underway.
Speaker 2: Norman, we know based on reports they've taken scores of hostages.
Speaker 2: Does that complicate Israel's response to this hugely?
Speaker 10: And we should note that these are international hostages. Reports
Speaker 10: are unconfirmed, but there may be Chinese, French, tie as
Speaker 10: well as American hostages as well as among the dead
Speaker 10: in Israel. So the international this is in many ways
Speaker 10: a Hamas attack against the international community. These hostages will
Speaker 10: be dispersed within Gaza. Isolating them and identifying their locations
Speaker 10: and developing rescue plans will be very, very difficult. The
Speaker 10: United States has considerable experience here will no doubt be
Speaker 10: sending intelligence security personnel to assist the Israelis, who are
Speaker 10: also very good at this. This will also inject considerable
Speaker 10: amount of complications and diplomacy. So we've watched the United States,
Speaker 10: Saudi Arabia and others engage Katar, Turkey which have good
Speaker 10: relations with Hamas, and a variety of actors to see
Speaker 10: how this plays out. It is not inconceivable that you
Speaker 10: will have outreach to Iran itself to assist on this.
Speaker 10: That rarely works out. Well, you should recall what happened
Speaker 10: last when Iran at hostages in Lebanon.
Speaker 1: Norman, I'll Kissinger, Merzheimer, Robert D. Aapplin, and frankly you,
Speaker 1: is this a day where America shifts back to real politics?
Speaker 1: I mean, forget about shuttle diplomacy and all of that
Speaker 1: this morning. Is it all about a real politic that
Speaker 1: we think we have forgotten and moved on from.
Speaker 10: Well, the line of the Middle East is unlike Las Vegas.
Speaker 10: What happens in the Middle East never stays in the
Speaker 10: Middle East. And the Biden administration will need to develop
Speaker 10: not only a strategy to address this issue, a strategy
Speaker 10: to see how this impacts existing programs such as the
Speaker 10: Iran and Saudi and other initiatives. But likewise they're going
Speaker 10: to have to staff this out. They're going to have
Speaker 10: to apply a lot of personnel and policymaker bandwidth well,
Speaker 10: which will come at a cost of other issues. This
Speaker 10: is a seismic issue which is going to transform regional
Speaker 10: policymaking and international policy making. We're in the early days
Speaker 10: and the ripples of this attack in terms of policy
Speaker 10: and domestic politics are still playing out.
Speaker 2: I want to ask you this question to wrap things up, Norman,
Speaker 2: no speaker House, no ambassador to Israel, AJB to Lebanon.
Speaker 2: Is that a symbolic failure or that have real world consequences.
Speaker 10: Well, it's certainly a symbolic problem, but we shouldn't discount
Speaker 10: the capabilities and roles of our charges in these locations
Speaker 10: of intelligence personnel of military personnel. Those communication channels remain robust,
Speaker 10: and these capitals often deal directly with the United States
Speaker 10: in Washington through their very able ambassadors. So the system
Speaker 10: of handling this is underway and will be executed crisply.
Speaker 10: It just would be better and easier if these personnel
Speaker 10: were in place. And Israel has received a considerable boost
Speaker 10: in the number of iron dome interceptors and ammunition it
Speaker 10: will need, and that has occurred without the House being
Speaker 10: in order. But we need to fix this. Norman.
Speaker 2: Thank you for your insight this morning, and hopefully we
Speaker 2: can catch up again before the end of the week.
Speaker 2: Norman Rule there the Center for Strategic and International Studies.
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