WEBVTT - Trump Is Beginning To Cave On North Korea: Eli Lake (Podcast) 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penel podcast. I'm Paul Sweene. You, 0:00:05.360 --> 0:00:07.760 along with my co host Lisa Brahmawitz. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.560 Bloomberg dot com. Well. Last night, President Donald Trump, in 0:00:23.560 --> 0:00:25.560 a State of the Union address, said that he will 0:00:25.560 --> 0:00:29.680 meet with North Korean leader Kim John Un on February 0:00:29.920 --> 0:00:33.159 in Vietnam. Help us preview what might come out of 0:00:33.200 --> 0:00:36.960 that summit is Eli Lake. He is a Bloomberg opinion columnists. 0:00:37.159 --> 0:00:39.640 He joins us in Washington, d C. Eli, thank you 0:00:39.680 --> 0:00:43.080 for joining us. What do you expect will come out 0:00:43.159 --> 0:00:46.040 of this summit between the US and North Korean February. 0:00:46.440 --> 0:00:48.440 I think there's a very good chance you will see 0:00:49.159 --> 0:00:52.680 um a statement, a kind of declaration of peace, which 0:00:52.760 --> 0:00:55.560 is similar to statements that have been made before, but 0:00:56.000 --> 0:00:58.600 would pave the way to a formal peace treaty that 0:00:58.680 --> 0:01:02.320 ends the Korean conflict. Today there's only an armistice, and 0:01:02.360 --> 0:01:05.960 I think you may see a new policy where you 0:01:06.000 --> 0:01:08.960 would see the relaxation of sanctions on North Korea in 0:01:08.959 --> 0:01:13.919 exchange for some progress on what's called de nuclearization or disarmament, 0:01:14.440 --> 0:01:17.800 but not the old policy, which is that no sanctions 0:01:17.800 --> 0:01:21.640 would be lifted until they were there was verifiable disarmament 0:01:21.640 --> 0:01:24.600 from North Korea. So eli, are we any closer to 0:01:24.880 --> 0:01:29.080 de nuclearizing North Korea? Well, especially I I don't think 0:01:29.080 --> 0:01:31.560 we are. Especially a recent report from the U N 0:01:31.600 --> 0:01:34.679 Security Council is correct that says that, you know, there's 0:01:34.680 --> 0:01:36.600 a there's not that the North queens have not only 0:01:36.640 --> 0:01:40.440 continued their development of weapons programs, but are are continuing 0:01:40.480 --> 0:01:43.840 to sell it to other rogue actors um. And you know, 0:01:44.160 --> 0:01:46.679 the leaders of the U S Intelligence community also said 0:01:46.680 --> 0:01:49.640 that they do not expect that Kim Jong un would 0:01:49.720 --> 0:01:54.800 ever verifiably give up his nuclear arsenal um completely. And 0:01:55.040 --> 0:01:59.520 this follows a pattern we know that dictators all, you know, 0:01:59.640 --> 0:02:01.800 develop nuclear weapons in a way as a kind of 0:02:01.840 --> 0:02:05.440 insurance policy, because if you have a credible threat to 0:02:05.600 --> 0:02:09.040 and senerate a city like Seoul or other neighboring cities, 0:02:09.080 --> 0:02:12.320 then there you will not be invaded like someone like 0:02:12.320 --> 0:02:16.240 Saddam Hussein or well market Offie, So you like, who 0:02:16.280 --> 0:02:19.840 has the leverage here, the US versus North China, North 0:02:19.880 --> 0:02:22.800 North Korea just doesn't seem like anything has materially changed 0:02:22.880 --> 0:02:25.359 over the years. And I'm just trying wondering, other than 0:02:25.400 --> 0:02:28.040 the fact that we are the President is meeting with 0:02:28.200 --> 0:02:30.520 Kim Jong un, which is historic in and of itself, 0:02:30.720 --> 0:02:35.079 what's changed, well, the Trump administration, the President himself would 0:02:35.120 --> 0:02:38.760 say that the young leader of North Korea wants to 0:02:38.800 --> 0:02:42.920 bring economic prosperity to his country, and that this is 0:02:42.960 --> 0:02:45.040 a source of leverage because the United States is a 0:02:45.040 --> 0:02:47.680 wealthy country and it can help with that. But that 0:02:48.040 --> 0:02:51.600 defies in a lot of ways everything we know about 0:02:51.680 --> 0:02:55.000 Kim Jong Remember, you know, Kim Jong un murdered his 0:02:55.080 --> 0:02:58.200 uncle and had I think his half brother murdered and 0:02:58.440 --> 0:03:01.919 and has done terrible things in terms of his climb 0:03:01.960 --> 0:03:05.000 to power, and has acted in a in a ruthless 0:03:05.040 --> 0:03:09.360 manner that suggests that if he really is interested in 0:03:09.400 --> 0:03:12.079 the kinds of things he needs to do for prosperity, 0:03:12.320 --> 0:03:15.000 um that would mean opening up his society and opening 0:03:15.040 --> 0:03:17.160 up his economy in a way that would be ultimately 0:03:17.160 --> 0:03:20.520 a threat to him. So I don't think that I 0:03:20.560 --> 0:03:23.480 don't I don't believe the happy talk that he's interested 0:03:23.480 --> 0:03:25.400 in this sort of economic development. But the answer that 0:03:25.440 --> 0:03:27.120 I think that the White House would give you is that, 0:03:27.320 --> 0:03:30.120 you know, the US can provide North Korea with the 0:03:30.240 --> 0:03:34.720 means to get their country out of, you know, extreme poverty. 0:03:34.800 --> 0:03:37.360 I want to shift gears a little bit beyond North 0:03:37.440 --> 0:03:40.280 Korea because when we talk about national security, I have 0:03:40.400 --> 0:03:44.080 to wonder what's going on with Venezuela and how much 0:03:44.240 --> 0:03:48.760 is this becoming a sort of solidification of an alliance 0:03:48.800 --> 0:03:55.880 between China and Russia versus United States and other developed markets. Well, 0:03:56.120 --> 0:03:58.760 that's a very good question, and certainly Venezuela is a 0:03:58.800 --> 0:04:02.440 country where you've seen both Russia and China play the 0:04:02.560 --> 0:04:05.960 role of sort of the big power UH and development. 0:04:06.000 --> 0:04:10.160 But you know, China last year began to call back 0:04:10.160 --> 0:04:12.960 its loans from Venezuela at a moment when you know, 0:04:13.360 --> 0:04:17.559 its economy was cratering as it is now um and 0:04:17.839 --> 0:04:20.560 its oil sector has been so depleted because of its 0:04:20.560 --> 0:04:23.719 mismanagement and the corruption of the Chavez and Madura regime. 0:04:24.440 --> 0:04:27.839 UM And in many ways, the Chinese might be looking 0:04:27.839 --> 0:04:30.440 at their in initial investments in the earlier part of 0:04:30.440 --> 0:04:34.680 this decade into Venezuela as a pretty bad bet. Um. 0:04:34.720 --> 0:04:36.640 I think that the Russians have a different kind of 0:04:36.680 --> 0:04:39.919 interest because they see that Venezuela could potentially play the 0:04:40.040 --> 0:04:42.360 role at At Cuba played in the Cold War, which 0:04:42.400 --> 0:04:47.200 is a source for power projection in the hemisphere. Um So, 0:04:47.520 --> 0:04:49.920 you know, I think their interests a line here. I 0:04:50.000 --> 0:04:52.960 know that the U. S. Intelligence community leaders last week 0:04:53.000 --> 0:04:55.680 said that they feared a kind of research sign no 0:04:56.520 --> 0:04:59.400 alliance against you know, the rest of the sort of 0:04:59.400 --> 0:05:02.760 more western democracies. But I still think that there are 0:05:02.800 --> 0:05:05.719 a lot of sort of sources of tension there, and 0:05:05.880 --> 0:05:08.760 they could very well be a classic mistake that the U. S. 0:05:08.800 --> 0:05:11.200 Intelligence community, many in the US intelligence community made in 0:05:11.240 --> 0:05:12.920 the Cold War, where they believe that, you know, two 0:05:12.920 --> 0:05:17.720 countries that followed the same communist ideology would be natural allies, 0:05:17.760 --> 0:05:20.960 when in fact, you know, their their rivalries between them. 0:05:20.960 --> 0:05:25.280 That border uh Is has never really been quite so quiet. 0:05:25.440 --> 0:05:27.480 So in a lot of ways, I would say that, 0:05:27.560 --> 0:05:29.200 you know, we still have to sort of wait and see. 0:05:29.560 --> 0:05:32.800 But there is a different point which is also worth making, 0:05:33.160 --> 0:05:35.240 which is that we see it all the time that 0:05:35.360 --> 0:05:40.720 autocrats and autocratic regimes will band together when there is 0:05:40.760 --> 0:05:45.360 a democratic threat to to to those regimes. So it's 0:05:45.400 --> 0:05:49.280 in the interest that of China and Russia to see 0:05:49.360 --> 0:05:54.080 that the democratic tumult that we're seeing now in Venezuela fails, 0:05:54.640 --> 0:05:57.200 because that is that kind of same thing can be 0:05:57.279 --> 0:06:00.400 a threat to them at some point. Are you saying 0:06:00.480 --> 0:06:03.760 that right now China is very much an autocratic company 0:06:04.000 --> 0:06:06.080 country and that its alliances are going to be with 0:06:06.120 --> 0:06:09.680 other autocrats period the end, Well, China is an autocratic 0:06:09.680 --> 0:06:13.840 country and its alliances are you know, largely with other 0:06:13.880 --> 0:06:16.560 autocratic countries. And we see the China I mean we 0:06:16.560 --> 0:06:19.840 see with Russia for example, protecting Bashar al Assad and 0:06:19.880 --> 0:06:23.600 the UN Security Council um and I think you'll see 0:06:23.640 --> 0:06:26.080 more and more with China the same kind of behavior. 0:06:26.160 --> 0:06:27.800 I mean, I think that. So, like, what do you 0:06:27.920 --> 0:06:30.160 what do you think of the next steps in Venezuela. 0:06:30.160 --> 0:06:32.880 It's been kind of comps since Guido assumed his position 0:06:32.920 --> 0:06:35.560 as I guess president number two or President number one. 0:06:35.680 --> 0:06:37.880 What do you think our next steps? Well, we're seeing 0:06:37.920 --> 0:06:40.240 more and more pressure. I mean, most of Europe has 0:06:40.240 --> 0:06:42.640 now come out and recognized Guido as the interim president. 0:06:43.680 --> 0:06:45.719 I think that there will be more and more pressure 0:06:46.000 --> 0:06:49.760 now through humanitarian aid that you know will be delivered, 0:06:49.760 --> 0:06:53.560 and we'll see will the real question here is if 0:06:53.640 --> 0:06:56.320 Muduro gives an order not to accept or to block 0:06:56.400 --> 0:06:59.920 humanitarian aid to his starving population, will the mill of 0:07:00.080 --> 0:07:03.440 terry follow that order? If if Maduro gives an order, 0:07:03.440 --> 0:07:05.800 which by the way, apparently he didn't over the weekend 0:07:05.800 --> 0:07:08.800 in the face of mass demonstrations for his military to 0:07:08.880 --> 0:07:11.840 fire into the crowds, will the military follow that order. 0:07:11.960 --> 0:07:14.800 That's really where the rubber hits the road. And I 0:07:14.840 --> 0:07:17.360 think that there is an understanding that, you know, he 0:07:17.400 --> 0:07:19.800 can have his generals, as he did last week, show 0:07:19.880 --> 0:07:22.320 up in a press conference saying that they're still loyal 0:07:22.360 --> 0:07:26.679 to him. But if the order is given, how many 0:07:26.800 --> 0:07:29.800 of the middle and lower ranking members of the Venezuelan 0:07:29.840 --> 0:07:33.400 military will follow it. They are suffering the same kind 0:07:33.400 --> 0:07:37.000 of privations as the rest of ordinary Venezuelans. And so 0:07:37.080 --> 0:07:40.480 in that respect, I do think that Medora's days are numbered, 0:07:41.080 --> 0:07:44.160 just real quick. In one word, which is a bigger 0:07:44.200 --> 0:07:48.720 threat North Korea or Venezuela. Well, North Korea is a 0:07:48.720 --> 0:07:51.600 bigger threat because they have nuclear weapons. Sorry, North Korea, 0:07:52.280 --> 0:07:54.080 ELI like, thank you so much for being with us, 0:07:54.280 --> 0:07:57.120 Eli Lake. We always love reading your columns for Bloomberg 0:07:57.120 --> 0:08:01.720 Opinion coming to us from Washington. D see read his columns. 0:08:01.720 --> 0:08:20.480 They are fabulous. He covers national security. But we were 0:08:20.560 --> 0:08:23.800 right in the middle of media industry earning season right now. 0:08:23.800 --> 0:08:26.680 We had twenty one century Fox report pretty decent numbers 0:08:26.680 --> 0:08:29.200 this morning, and of course the Walt Disney Company last 0:08:29.280 --> 0:08:31.600 night out with their numbers which are also slightly better 0:08:31.640 --> 0:08:34.240 than expected. The stocks are both kind of unchanged here 0:08:34.320 --> 0:08:36.560 this morning, so it help us dive into kind of 0:08:36.600 --> 0:08:39.400 what we're seeing in the media landscape. Let's bring in 0:08:39.440 --> 0:08:41.959 Porter bib Porter Bibs and managing director of Media Tech 0:08:42.040 --> 0:08:45.280 Capital Partners. He joins us in our Bloomberg Interactive Broker 0:08:45.360 --> 0:08:48.000 studio here in New York. And Porter has been covering 0:08:48.040 --> 0:08:51.080 the media business close to forever. I'll put it that way. 0:08:51.400 --> 0:08:53.880 So Porter, as you kind of look at the landscape 0:08:53.920 --> 0:08:56.720 today and again we had those results just recently from 0:08:56.760 --> 0:08:58.920 Fox and um And and Disney. We have some more 0:08:58.960 --> 0:09:01.960 to go. You know. It looks like investors are stepping 0:09:02.000 --> 0:09:03.839 back and saying, gee, I have to make a bet 0:09:03.880 --> 0:09:06.320 here whether some of these big media companies can really 0:09:06.320 --> 0:09:09.760 survive in a world where there's Netflix and Facebook and Amazon, 0:09:10.240 --> 0:09:12.360 let's just take a look at Disney, you know, probably 0:09:12.640 --> 0:09:15.880 the biggest and best position arguably. What's your view on 0:09:15.920 --> 0:09:18.280 Disney and how they play out over the next several years. Well, 0:09:18.320 --> 0:09:23.720 Bob Iger in his conference call UH yesterday said direct 0:09:23.760 --> 0:09:27.920 to consumer is his highest priority. He's putting Disney Plus, 0:09:27.960 --> 0:09:33.559 his main streaming service, on on fast forward. They're gonna 0:09:33.600 --> 0:09:37.200 show in April a demo to the world to see 0:09:37.240 --> 0:09:40.200 how it flies, and hope to launch by the end 0:09:40.240 --> 0:09:44.960 of this calendar year. Um. But the real bombshell that 0:09:45.080 --> 0:09:49.680 Disney has is not just Disney Plus, and not their 0:09:49.720 --> 0:09:53.520 sixty ownership of Hulu, which they probably will um end 0:09:53.600 --> 0:09:56.760 up owning a pent of buying out Comcast and a 0:09:56.880 --> 0:09:59.720 T and T the minority shareholders so they can control 0:09:59.760 --> 0:10:05.000 the whole thing. The bombshell is ESPN Plus, which is 0:10:05.040 --> 0:10:09.400 going gangbusters, has two million paid subscribers. But where the 0:10:09.520 --> 0:10:13.240 real money tree is going to start shaking down on 0:10:13.360 --> 0:10:17.640 Disney is when online betting goes across the country, which 0:10:17.760 --> 0:10:19.920 is going to do There are three states now where 0:10:19.920 --> 0:10:22.439 it's legal, and all of a sudden, you're going to 0:10:22.520 --> 0:10:26.360 find in the next couple of years fifty states legalizing 0:10:26.480 --> 0:10:30.160 online betting, and who has the most live sports and 0:10:31.400 --> 0:10:36.800 just a gigantic archive of debtor sports information. It's it's 0:10:36.840 --> 0:10:39.880 interesting that you bring it up because it's one way 0:10:39.920 --> 0:10:43.760 that Disney diversifies away from what Netflix has in addition there, 0:10:44.040 --> 0:10:47.600 in addition to their other original content. My question is 0:10:47.600 --> 0:10:49.840 we talk a lot about Netflix being sort of the 0:10:49.920 --> 0:10:52.880 big elephant in the room. Is Netflix going to remain 0:10:52.920 --> 0:10:57.360 an independent company? Well? It um, I may be in 0:10:57.400 --> 0:11:00.480 the minority, but since the day that Netflix launched, I 0:11:00.480 --> 0:11:03.880 said it was an unsustainable business model. Um. They don't 0:11:03.880 --> 0:11:09.199 make profit, they absolutely and they have gigantic, almost eighteen 0:11:09.280 --> 0:11:13.440 billion dollars of off balance sheet obligations. And the reason 0:11:13.559 --> 0:11:15.880 that they don't have to show those is because they don't. 0:11:15.920 --> 0:11:19.199 They don't come do and payable until they air the 0:11:20.000 --> 0:11:24.120 content that they've paid over overpaid for. So they're gonna 0:11:24.120 --> 0:11:30.559 face serious competition already from Amazon, from Disney, from uh, 0:11:30.600 --> 0:11:33.280 everybody else who wants to get into the streaming business. 0:11:33.400 --> 0:11:37.439 And somebody is going to have to pick up Netflix 0:11:37.480 --> 0:11:40.680 and take them over. And who will that person be? Well, 0:11:41.000 --> 0:11:45.120 a lot a lot of analysts are positing Apple. I'm 0:11:45.160 --> 0:11:48.040 not sure Apple is the only buyer. I think that 0:11:48.720 --> 0:11:52.040 Verizon may have to do something because they're they're looking 0:11:52.120 --> 0:11:55.880 at uh, being dumb pipes for the for the future 0:11:55.920 --> 0:12:00.319 if they don't have some content to create multiple revenue streams, stories, 0:12:00.360 --> 0:12:04.840 subscription revenue, and advertising. Uh. It could be Microsoft, which 0:12:04.840 --> 0:12:09.800 has Xbox distribution network, tens of millions of Xboxes all 0:12:09.800 --> 0:12:12.400 over the country, all over the world actually, and no 0:12:12.559 --> 0:12:15.920 content except games. So Microsoft, well, let's take a lot. 0:12:15.920 --> 0:12:17.920 I mean, Netflix has a hundred and fifty billion dollar 0:12:17.960 --> 0:12:21.319 market cabin so obviously, Uh, only a handful of companies 0:12:21.360 --> 0:12:23.600 out there could possibly do that. Are you one of 0:12:23.640 --> 0:12:26.880 those folks that says that, g as we the landscape 0:12:26.920 --> 0:12:29.559 today in the in the media consumption world, it's Time Warner, 0:12:29.760 --> 0:12:32.720 you know, Comcast, Disney, Viacom, and so on and so forth. 0:12:32.880 --> 0:12:34.960 Are you one of those folks that says, boy, if 0:12:34.960 --> 0:12:37.080 I look five years into my crystal ball, five years 0:12:37.120 --> 0:12:39.800 down the road, it's not those companies. It is Amazon, 0:12:39.960 --> 0:12:43.360 it is Microsoft, it is Netflix. Are you one of 0:12:43.400 --> 0:12:46.160 those people? And if so, sorry for the two point question. 0:12:46.840 --> 0:12:48.840 What happens in the traditional media landscape? Do we have 0:12:48.880 --> 0:12:52.440 to have another massive wave of M and A it vaporizes. Uh, 0:12:52.920 --> 0:12:57.440 we're the whole media industry right now. Um, every ten 0:12:57.520 --> 0:13:01.520 years or so, Uh, everybody start screaming content is king. 0:13:01.679 --> 0:13:05.679 Well that's the scream today. Content is king. And the 0:13:06.360 --> 0:13:09.840 distribution means that you reach out to the consumer through 0:13:10.360 --> 0:13:13.440 uh is really irrelevant. It's all going digital. It's and 0:13:14.200 --> 0:13:18.800 five years and now it'll be virtually all mobile. So uh, 0:13:18.840 --> 0:13:23.000 the legacy media linear television, cable is not going to 0:13:23.080 --> 0:13:26.280 exist in any great shape or form alright, So in 0:13:26.480 --> 0:13:31.480 that vein what major media company that currently exists will 0:13:31.520 --> 0:13:34.800 be no longer in five years. Well, one of the 0:13:34.840 --> 0:13:39.200 most vulnerable right now is Comcast because there such a 0:13:39.200 --> 0:13:47.960 big cable, linear television, Universal Pictures and NBC, um, the 0:13:48.000 --> 0:13:52.040 major networks. They're trying to go digital right now and 0:13:52.080 --> 0:13:56.440 trying to walk away from their core businesses on on 0:13:57.080 --> 0:14:00.120 network television as we know it today. But it's not 0:14:00.160 --> 0:14:03.200 gonna work. You don't think their broadband business is what's 0:14:03.200 --> 0:14:05.200 going to be the future of Comcast. And I think 0:14:05.280 --> 0:14:08.040 the thing that we'll save Comcast as as a business 0:14:08.280 --> 0:14:13.120 is their ability to deliver five G content and it's 0:14:13.160 --> 0:14:17.040 probably going to be mostly somebody else's content porter bib 0:14:17.280 --> 0:14:19.600 it is wonderful having you here. Thank you so much 0:14:19.640 --> 0:14:22.240 for being with us. Porter bib is managing partner at 0:14:22.240 --> 0:14:26.200 Media Tech Capital Partners. Has been in the media space 0:14:26.360 --> 0:14:30.760 for decades. Was the first publisher of Rolling Stone magazine. 0:14:31.040 --> 0:14:33.920 Talking about that's my favorite part of them. I love it. 0:14:33.960 --> 0:14:37.600 There's so many favorite parts, talking about shifting industries and 0:14:37.800 --> 0:14:57.240 UH and just Amazon. This year has seen a significant 0:14:57.280 --> 0:14:59.320 rally and the price of crude, but there are still 0:14:59.360 --> 0:15:03.160 some archer existential questions hanging over at the oil market. 0:15:03.280 --> 0:15:06.040 Joining us now is Jim Crane, Energy Studies Fellow at 0:15:06.120 --> 0:15:10.320 Rice University's Baker Institute for Public Policy, joining us from Houston. 0:15:10.680 --> 0:15:13.880 He's also the author of a new book, Energy Kingdoms, 0:15:13.920 --> 0:15:18.000 Oil and Political Survival in the Persian Gulf. Jim, I 0:15:18.040 --> 0:15:21.880 think one really pressing question for oil markets recently has 0:15:21.920 --> 0:15:27.520 been is Opeque on its deathbed? No pick is is 0:15:27.520 --> 0:15:31.040 alive and kicking UH and getting bigger by the signs 0:15:31.080 --> 0:15:35.320 of UH. You know the talks that have been revealed 0:15:35.400 --> 0:15:39.760 recently with Russia and the you know, the OPEC plus 0:15:39.960 --> 0:15:44.760 countries that that are now caucusing UH frequently with with 0:15:44.800 --> 0:15:49.320 Saudi Arabia and the other OPEC. In the real OPEC members. UM. 0:15:49.360 --> 0:15:51.200 A lot of that is because of the U s shale. 0:15:51.320 --> 0:15:54.120 So you know, this rise in in US oil production 0:15:54.880 --> 0:15:59.240 has really undercut OPEX market power. So to get it back, uh, 0:15:59.320 --> 0:16:02.480 it brought in Russia and now we've got the you know, 0:16:02.680 --> 0:16:06.240 two of the three largest global oil producers, Saudi Arabian 0:16:06.280 --> 0:16:10.840 Russia working together. Uh. So I think, uh yeah, OPEC 0:16:11.000 --> 0:16:15.440 is still a going concern for sure. So, professoral Crane, 0:16:15.840 --> 0:16:17.760 when we think of OPEC in the Middle East, I 0:16:17.760 --> 0:16:20.440 mean it's obviously oil has transformed that region of the 0:16:20.480 --> 0:16:24.760 world so dramatically over the last seventy five years. Um. 0:16:24.800 --> 0:16:28.200 You know, obviously tremendous oil reserves there. Despite the fact 0:16:28.200 --> 0:16:30.200 that the US is now coming online with a shale. 0:16:30.760 --> 0:16:33.240 What are some of the downsides that you're concerned about 0:16:33.280 --> 0:16:38.120 in that region? Um, as they continued to progress. Well. 0:16:38.160 --> 0:16:40.560 So this basically that's you know, the whole crux in 0:16:40.600 --> 0:16:43.640 my book. So it's basically a history of energy consumption. 0:16:43.760 --> 0:16:48.040 You know, these countries were extremely poor. Uh when oil 0:16:48.080 --> 0:16:50.720 was discovered, they didn't use any oil at all, which 0:16:50.760 --> 0:16:53.760 was great for the companies that that we're producing that oil. 0:16:53.800 --> 0:16:56.560 They could export every bit of it. Uh, and over 0:16:56.600 --> 0:17:00.000 the past oh four or fifty years, they've gone from 0:17:00.160 --> 0:17:04.119 zero to leading the world in oil consumption, uh, you know, 0:17:04.160 --> 0:17:07.679 which also happens to be their main export commodity. So 0:17:07.800 --> 0:17:12.240 that that trend, that continued growth and energy demand was 0:17:12.440 --> 0:17:16.320 threatening their economies because you know, they were diverting evermore 0:17:16.680 --> 0:17:19.840 exportable crude oil into their economies, and it was also 0:17:20.200 --> 0:17:23.320 threatening their political systems. You know. They these are autocratic 0:17:23.520 --> 0:17:27.720 political systems that are based on patronage by basically giving 0:17:27.760 --> 0:17:31.760 away stuff. So they were giving away too much, uh 0:17:31.800 --> 0:17:36.120 in terms of energy domestically, and they needed to get 0:17:36.200 --> 0:17:39.119 rid of these subsidies that they that they put in 0:17:39.160 --> 0:17:42.520 place in the nineteen seventies. And they're they're starting it's 0:17:42.520 --> 0:17:46.639 starting to happen. They're starting to to to raise energy prices. 0:17:46.680 --> 0:17:50.200 Saudi Arabia is leading the way. But now, you know, 0:17:50.240 --> 0:17:52.520 sort of the latter stage of my book, I look 0:17:52.640 --> 0:17:57.640 at how climate change is likely to affect these countries. Uh, 0:17:57.640 --> 0:18:01.600 and that's a whole new existential issue, sort of a 0:18:01.680 --> 0:18:05.520 lose lose situation if you will, for them. Uh. You know, 0:18:05.520 --> 0:18:10.080 if climate action succeeds in reducing carbon emissions, that will 0:18:10.119 --> 0:18:14.040 probably affect oil demand in their economies. If climate change, 0:18:14.520 --> 0:18:19.879 if the world does not succeed in reducing oil demand, uh, 0:18:19.960 --> 0:18:23.760 you know, the raising rising temperatures, you know, Saudi Arabian 0:18:23.800 --> 0:18:25.280 the Gulf are going to be you know, on the 0:18:25.320 --> 0:18:29.520 front lines of climate victimhood, with some of those cities 0:18:29.560 --> 0:18:33.840 along the Gulf coast possibly getting to be too hot 0:18:33.880 --> 0:18:38.000 and humid for you know, the human for humans to withstand, uh, 0:18:38.119 --> 0:18:39.920 so by you know, sort of the end of this century. 0:18:40.800 --> 0:18:45.200 So you're talking about how sort of the the existence 0:18:45.200 --> 0:18:47.320 of oil and the production of oil in the Middle 0:18:47.359 --> 0:18:51.679 East really gave rise to the current political regimes and 0:18:51.760 --> 0:18:56.320 also to the capital there. At the same time, this 0:18:56.440 --> 0:18:58.280 is going to be a problem for them since this 0:18:58.320 --> 0:19:01.560 is how they've established, uh, the entire infrastructure of how 0:19:01.600 --> 0:19:04.800 they operate. I'm just wondering, you know. You we started 0:19:04.800 --> 0:19:08.439 with talking about OPEC and how it's broadening out and 0:19:08.480 --> 0:19:12.080 still alive and kicking, But is the center of focus 0:19:12.160 --> 0:19:15.159 moving away from the Middle East because of some of 0:19:15.160 --> 0:19:18.399 these challenges and because of uh, the fact that it 0:19:18.480 --> 0:19:20.439 needs to have a bigger critical mass to fight the 0:19:20.520 --> 0:19:24.480 U S shale presence. I think, you know, Saudi Arabia 0:19:24.560 --> 0:19:27.360 and Riad is still the you know where the critical 0:19:27.400 --> 0:19:30.280 mass of OPEC lies. I mean the Saudi Oil Ministry 0:19:30.280 --> 0:19:33.840 and the Saudi Minister himself. Um, you know, is still 0:19:33.880 --> 0:19:39.120 the key personage within OPEC who still calls the shots. Um. 0:19:39.200 --> 0:19:44.000 You know, the other countries in in the Gulf, you know, 0:19:44.040 --> 0:19:47.080 the the other monarchies tend to caucus with Saudi Arabia 0:19:47.160 --> 0:19:50.639 in within OPEX. So there you know, it's still um 0:19:50.680 --> 0:19:53.040 but yeah, I think you know, Saudi Arabia is still 0:19:53.040 --> 0:19:56.720 that the heavyweight within OPEC. We're talking to Jim Crane, 0:19:56.800 --> 0:20:01.280 energy Studies fellow at Rice University's Baker Institute for Public Policy. Jim, 0:20:01.400 --> 0:20:03.399 you know to the extent that these I mean, we 0:20:03.440 --> 0:20:05.920 know some of these Gulf area countries are trying to 0:20:06.000 --> 0:20:10.719 diversify their incomes, diversify their economies. How successful have they 0:20:10.760 --> 0:20:13.600 been at attracting foreign capital and actually achieving some of 0:20:13.640 --> 0:20:18.680 that diversification. Well, you've got the first successful post oil 0:20:18.720 --> 0:20:21.399 economy in the Middle East now in Dubai, right. So 0:20:21.480 --> 0:20:25.000 Dubai's GDP is you know, about three percent or less 0:20:25.400 --> 0:20:27.960 now from oil and gas. So so Dubai's done it. 0:20:28.000 --> 0:20:31.359 They've They've developed a you know economy based on financial services, 0:20:31.480 --> 0:20:35.840 on tourism and conventions and on shipping and logistics, uh, 0:20:35.880 --> 0:20:38.760 and on real estate, right those crazy real estate projects 0:20:38.800 --> 0:20:40.800 we've seen with their the you know the world's tallest 0:20:40.840 --> 0:20:43.280 building and the you know the islands in the uh 0:20:43.400 --> 0:20:45.960 you know shaped like palm trees in the Gulf. UM. 0:20:46.160 --> 0:20:48.240 You know, there's a lot of other real estate projects 0:20:48.240 --> 0:20:50.160 that are you know, maybe a bit a bit more 0:20:50.200 --> 0:20:53.200 sense that they've they've managed to convert into a non 0:20:53.320 --> 0:20:57.920 oil economy pretty successfully. Also airlines, um. But now you've 0:20:57.920 --> 0:21:01.840 got the you know, the other Gulf Cooperation Council countries, 0:21:01.880 --> 0:21:06.560 the other monarchies have not followed Dubai's example until recently 0:21:06.600 --> 0:21:10.000 they're starting to do the same thing. So a giving 0:21:10.160 --> 0:21:13.040 Dubai a bunch of competition in airlines and in real 0:21:13.119 --> 0:21:16.159 estate and tourism, um. But they need to go a 0:21:16.160 --> 0:21:20.760 lot further than this, I think for for oil derived economies, 0:21:20.880 --> 0:21:25.280 diversification is really something that they really have to be dragged, 0:21:25.520 --> 0:21:28.800 kicking and screaming into because you know, these these sectors 0:21:28.800 --> 0:21:31.959 are just not as profitable as oil. I mean, if 0:21:32.000 --> 0:21:35.040 you can produce oil for five or ten bucks and 0:21:35.200 --> 0:21:37.600 sell it for fifty or a hundred dollars, you know 0:21:37.800 --> 0:21:39.960 that's a you know that that level of profit is 0:21:40.000 --> 0:21:42.800 just not going to be available in pretty much anything else. 0:21:42.880 --> 0:21:47.120 So uh, it's a tough cell diversification, but unfortunately for them, 0:21:47.200 --> 0:21:50.280 it is vital. Uh, and that is what they've got 0:21:50.280 --> 0:21:52.320 to do. Jim Crane, thank you so much for being 0:21:52.320 --> 0:21:54.880 with us. Jim Crane is Energy Studies Fellow at Rice 0:21:55.040 --> 0:21:59.800 University's Baker Institute for Public Policy based in Houston. Is 0:21:59.840 --> 0:22:03.280 a book is Energy Kingdoms, Oil and Political Survival in 0:22:03.720 --> 0:22:07.960 the Persian Gulf. A very interesting kind of reflection at 0:22:07.960 --> 0:22:11.160 a time when there is this pressure about global warming 0:22:11.480 --> 0:22:14.119 and about the use of fossil fuels, and as a 0:22:14.119 --> 0:22:17.040 lot of these Middle Eastern kingdoms do try to diversify 0:22:17.080 --> 0:22:36.000 their investments and the resources away from oil. Well. Of course, 0:22:36.040 --> 0:22:38.800 President Trump delivered his State of the Union address last night, 0:22:39.280 --> 0:22:41.919 touching on a number of topics. To help us parts 0:22:42.080 --> 0:22:46.000 through what the President said and the democratic response, we 0:22:46.080 --> 0:22:49.560 bring in Lonnie Chen. Lonnie is the David and Diane 0:22:49.560 --> 0:22:53.399 Stuffy Research Fellow at the Hoover Institution, also a director 0:22:53.400 --> 0:22:56.760 of Domestic Policy Studies and Lecture in the Public Policy 0:22:56.760 --> 0:23:00.040 Program at Stanford University. Calling on the phone from of 0:23:00.160 --> 0:23:03.800 Lee Stanford. So, Lonnie, a lot of topics covered in 0:23:03.800 --> 0:23:06.080 a State of the Union address last night, maybe light 0:23:06.400 --> 0:23:09.640 on a detail, but certainly a message that was consistent 0:23:09.680 --> 0:23:12.960 with his past messaging. What did you take away from 0:23:13.080 --> 0:23:16.639 the State of the Union address last night? Well, I 0:23:16.920 --> 0:23:20.800 thought the President actually sounded a number of unifying themes 0:23:20.880 --> 0:23:23.560 during his speech. Obviously there were elements of it that 0:23:23.600 --> 0:23:28.840 were classic Trump claiming credit for avoiding nuclear armageddon with 0:23:28.920 --> 0:23:32.439 North Korea was chief among them, But fundamentally, as a 0:23:32.520 --> 0:23:36.200 as a speech, I think the President from a policy perspective, 0:23:36.840 --> 0:23:39.320 focused on a few items that ought to get support 0:23:39.400 --> 0:23:45.080 from Republicans and Democrats. Prescription drug pricing, infrastructure reform, UH, 0:23:45.280 --> 0:23:49.000 boosting economic growth. Those are all themes that Republicans and Democrats, 0:23:49.000 --> 0:23:51.320 at least in theories, should agree on. So as a 0:23:51.400 --> 0:23:54.240 general matter, I would say the President's speech sounded many 0:23:54.280 --> 0:23:59.640