Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. This
Speaker 1: is a real treat. We welcome all of you worldwide
Speaker 1: and across the nation to a conversation with Ian Bremer.
Speaker 1: Let me explain here right now out of telaying. Dr
Speaker 1: Bremer has built a franchise over a well decade with
Speaker 1: Eurasia Group. And what he's done like any lead singer
Speaker 1: running a good band, and to be sure, everybody in
Speaker 1: the band is better than him. And he has put
Speaker 1: together an outstanding team at Eurasia Group over the years
Speaker 1: of true experts. So let's dive in with Ian Bremer
Speaker 1: with the top risk of You had to rip up
Speaker 1: the script of risk here and rewrite it on Friday
Speaker 1: and Saturday. Where does iraq a ran all of these
Speaker 1: tensions fit in to the global risks of this year. Oh,
Speaker 1: we had to include it, certainly. But let's be clear,
Speaker 1: when you look at the big trends out there is
Speaker 1: a tipping point and that's true because an economy that's
Speaker 1: been growing robustly after financial crisis is now starting to
Speaker 1: get softer, a geopolitical recession is in serious uh capacity
Speaker 1: right now, and that the alignment between the United States
Speaker 1: and its allies is vastly weaker than it used to be. Globalization,
Speaker 1: which is the one thing that had driven so much
Speaker 1: of the good news um, is now taking a significant
Speaker 1: step backwards as the United States and China decouples from
Speaker 1: each other on the technology front. Those three things coming
Speaker 1: together is frankly an unprecedented stead of trends over the
Speaker 1: course of the last few generations. And it does mean
Speaker 1: that even though we don't believe that Iran war is
Speaker 1: going to suddenly lead to regional confrontation or World War three,
Speaker 1: we do believe that the Resilian's globally is so much less.
Speaker 1: You sat down today, inn and you said to me,
Speaker 1: I just want to get away from the hysteria. I've
Speaker 1: been doing that all weekend. You know. It's like excepter
Speaker 1: Neil Ferguson's wonderful essay in the Times of London, Time
Speaker 1: Freedman writing and others about some of the historical perspective.
Speaker 1: If we're to get away from the hysteria and get
Speaker 1: towards clear thinking on these immediate matters. What is the
Speaker 1: clear thinking as we look at Tehran, Baghdad in Washington,
Speaker 1: clear thinking is that the United States is likely to
Speaker 1: be forced out of Iraq. It's troop presence, which Trump
Speaker 1: didn't want to have to begin with, but nonetheless not
Speaker 1: because of the United States, because of Iran, and because
Speaker 1: the Shia, who are the majority in Iraq, um are
Speaker 1: going to turn very significantly against the United States following
Speaker 1: the series of bombings that you've seen um without any
Speaker 1: premi from the Iraqi government invasion of their sovereignty. Having
Speaker 1: said that, the power asymmetry between the United States and
Speaker 1: Iran is massive. If the Iranians were to actually engage
Speaker 1: in serious strikes against Americans in the region, they do
Speaker 1: risk their regime. And that's very different from the risk
Speaker 1: they thought they were taking when they went after a
Speaker 1: US base in the last week, or when they went
Speaker 1: after the U. S embassy in terms of the recent demonstrations, violence,
Speaker 1: and occupation. So there now is a level of deterrence.
Speaker 1: Trump is certainly enormously unpredictable, not very experienced leader from
Speaker 1: a foreign policy perspective. That's different from saying that our
Speaker 1: expectation is US Iran war. We don't think that's gonna happen.
Speaker 1: There's so many ways to go, your folks, and I
Speaker 1: think what I'll do is start with the immediate newsflow
Speaker 1: as you wake up across the nation, and one of
Speaker 1: them is to see the House Foreign Affairs Committee say
Speaker 1: on the back end of I believe it was a tweet.
Speaker 1: Mr Trump, you are not a dictator. Interpret force what
Speaker 1: your raisor group says about this Warpowers Act, how we've
Speaker 1: come out of the fractions seventies, the legacy of Vietnam,
Speaker 1: and now Congress in the executive branch should work with
Speaker 1: each other given these tensions. Most should and will are
Speaker 1: two different things. Let's be very clear, um. I think
Speaker 1: that if Maddis, McMaster, h Kelly, if they were still
Speaker 1: in the administration, I don't think Sulimani would have been killed.
Speaker 1: I think the constraints on Trump the adults in the
Speaker 1: room are not what they were. Pompeo is very smart,
Speaker 1: but facilitates Trump, and he's about to leave office and
Speaker 1: run for Senate in Kansas in any case, so I
Speaker 1: do think that that is a concern, and it's a
Speaker 1: concern that is rightly brought up by Congress. But the
Speaker 1: more important issue is that impeachment we are about to
Speaker 1: see is no longer functional as a political constraint on
Speaker 1: the president. And that's new. In other words, we're gonna
Speaker 1: have a guy running for office that will be acquitted
Speaker 1: by the Senate and he's going to have no no
Speaker 1: ability of others to say, if you take the following actions,
Speaker 1: you'll be removed from office. Only the people will be
Speaker 1: able to do that with the vote, and his efforts
Speaker 1: to manipulate and delegitimize that vote is going to be
Speaker 1: unprecedented in recent times. And I guess my question, Dr
Speaker 1: Bremer is synthesizing the Democrat candidate responses to what we're
Speaker 1: seeing in the last three days. But more than that,
Speaker 1: synthesize in the United States election into your top risks
Speaker 1: of For the first time in twenty three years, we
Speaker 1: view US domestic politics is actually the singular top risk,
Speaker 1: and we don't usually think about that because the US
Speaker 1: is so resilient, the political institutions are so strong. But
Speaker 1: here the concern is that we end up in an
Speaker 1: American Brexit, not because the US is leaving anything. But
Speaker 1: because the outcome of the election is seen as uncertain,
Speaker 1: is seen as contested and delegitimized. So it's not that
Speaker 1: you vote for Trump or that you vote for some
Speaker 1: Democratic candidate, but rather that whoever you vote for, half
Speaker 1: of the population believes that person should not have actually
Speaker 1: gotten the presidency. It's like core Bush, but without the
Speaker 1: Supreme Court concluding the outcome. And and and we haven't
Speaker 1: seen that since in teen seventy six in the United States,
Speaker 1: with the election of Rutherford Hayes. There's quite something to
Speaker 1: think about the world's largest economy going to have that
Speaker 1: kind of atturning point moment with our upcoming election. Let's
Speaker 1: let's move to some of the other risks that we
Speaker 1: see this year. I want to touch on a few
Speaker 1: here very quickly. On China, and of course you've been
Speaker 1: wonderful in China with your Meritith sumter um Ian Bremer's
Speaker 1: take on the next step of China not Phase two
Speaker 1: in the trade talks, but almost Phase G Trump. What's
Speaker 1: the next thing we should try to observe of these
Speaker 1: two world leaders. We should observe that China has changed
Speaker 1: a lot more than the United States, j and Pink's
Speaker 1: consolidation of power, his decision to make China into an
Speaker 1: ai superpower and to decouple itself from the United States,
Speaker 1: his belt and Road, his end of term limits, his
Speaker 1: anti corruption campaign. Those are the sea changes that we're seeing.
Speaker 1: The United States has it's only bipartisan consensus on foreign policy,
Speaker 1: is largely on a harder line response to the just
Speaker 1: because the timing. You know, I've got to get to this.
Speaker 1: You use the phrase a long march, which of course
Speaker 1: has all that color of another time in place in China.
Speaker 1: What does the new long march of China look like? Well,
Speaker 1: Jiji and Ping uses that phrase and that that phrase
Speaker 1: is about the Chinese not being able to be hit
Speaker 1: by the United States on critical issues of national security,
Speaker 1: most importantly their technology system. So it's building their own
Speaker 1: supply chain, having control of the countries that really matter.
Speaker 1: It's not needing the United States. That is decisively in
Speaker 1: opposition to everything that mattered to multinational corporations in the
Speaker 1: West for the last generations. We see the image of Tehran.
Speaker 1: We get out our map of a run like we
Speaker 1: got out our map of Iraq and two thousand three,
Speaker 1: Tehran's in a bowl. They have a lot of air pollution.
Speaker 1: We see the images of men the Indian cities with
Speaker 1: horrific air pollution as well, and that gets us the
Speaker 1: climate change. It's the vogue, but it's a different vogue
Speaker 1: this year. Climate change is different now than it was
Speaker 1: four years ago, isn't it. It's different because UM it's
Speaker 1: causing more domestic political response in backlash when the governments
Speaker 1: and the leaders aren't taking actions themselves to get to
Speaker 1: two degrees to point five degrees UM. The Chinese, the Indians,
Speaker 1: the Americans, nobody UM is on track UM to make
Speaker 1: their commitments. What that means is that you're going to
Speaker 1: start to see UM non organized responses like you have
Speaker 1: in the financial markets right now, and that's definitely changing
Speaker 1: how we think about UM. The multiples of shares in
Speaker 1: fossil fuels, for example, or the companies that are served
Speaker 1: by them, certainly going to change how we think about
Speaker 1: portfolio allocation. Let me circle back to what I've noticed
Speaker 1: since Friday. I've had to speak to adults in the room.
Speaker 1: James Travitas, the Atimal, mark him at the general time,
Speaker 1: Beckett of the United Kingdom Military, you as well, and
Speaker 1: in others. We're all trying to get to clear conversation
Speaker 1: in non hysteria over this. What should we listen for
Speaker 1: in the coming few days, is this unfolds Iraq irun
Speaker 1: in the United States. Let's watch what the Iranians do
Speaker 1: and don't say. It's very interesting that the Foreign Minister
Speaker 1: has focused on in the last twenty four hours leaving
Speaker 1: the nuclear deal but also saying they'll come back if
Speaker 1: the Europeans are able to continue to uphold and get
Speaker 1: them the sanctions off. They're focusing on um the uh
Speaker 1: Iraq uh pull out of the legislature, saying that the U.
Speaker 1: S troops should leave. If they're focusing on things that
Speaker 1: look like winds but aren't about we have to, you know,
Speaker 1: sort of kill American military. For me, so far, I'd
Speaker 1: actually say the diplomacy from Iran, not the demonstrations, but
Speaker 1: the diplomacy feels more climb down, feels softer rather than harder.
Speaker 1: There they are not in a position of power. If
Speaker 1: you're the world's only superpower, your room for miscalculation is greater.
Speaker 1: It gives me no pleasure to say that, but it's true,
Speaker 1: and the Iranians are highly aware of it. We're gonna
Speaker 1: have to wrap this up. Ian Bremer with us with
Speaker 1: your Asia group. Of course, many more conversations through the
Speaker 1: morning is well, and of course we'll look for this
Speaker 1: out on social particularly on Twitter and on LinkedIn as well.
Speaker 1: An important document the top risk from your Aisier group.
Speaker 1: Pharaoh is sick and he is going home. He maybe
Speaker 1: Yeoman's duty to come in earlier today and we hope
Speaker 1: that Mr Farrell kills it, makes it through it. I've
Speaker 1: had the plague here in the last few days and
Speaker 1: now Farrell he got it for me. Is how he
Speaker 1: has blaming on the with Paul Sweeney. He is and
Speaker 1: Paul Sweeney uh is here and we're thrilled that we
Speaker 1: can move forward. And we do that with a very
Speaker 1: special broadcast. We welcome all of you worldwide, particularly on
Speaker 1: a Pacific rim in your evening in Asia, to our
Speaker 1: annual visit to euro to do Eurasia Groups offices in
Speaker 1: New York and of course the centers around the top
Speaker 1: risks of for Asian. Now we do this, Paul with
Speaker 1: a market chourninger all the news slow coming off of
Speaker 1: a rock and a run, and of course in Washington,
Speaker 1: and we'll let others we'll describe that over the hour
Speaker 1: as well, but certainly with futures of negative sixteen DA
Speaker 1: futures negative one fifty eight yields jumble. This morning we
Speaker 1: had seventy dollar oil sixty ninety two on Brent crude,
Speaker 1: and the global Litmus paper that I use dollar yen
Speaker 1: showing me a little bit of calm there one O
Speaker 1: eight sixteen on yen churning at this morning. So certainly, Paul,
Speaker 1: I don't see panic out there to you, I do not,
Speaker 1: and we kind of made that comment on on Friday
Speaker 1: as well. But clearly a new level of risk in
Speaker 1: the market and the market participants across the risky asset
Speaker 1: classes time you mentioned oil as well as the end
Speaker 1: trying to figure out kind of where this goes next
Speaker 1: steps here as relates to renewed min East attentions. A
Speaker 1: lot of news slow there this morning. Course, Kevin Serilllean
Speaker 1: Washington monitoring this as best he can. It is the
Speaker 1: top risky and of COURSI and Bremer and Cliff and
Speaker 1: others had to rip it up and write a new ideas.
Speaker 1: And I believe their third risk of the year, which
Speaker 1: is on the Middle East and particularly on Iran but
Speaker 1: so much of this is about China. Maybe they don't
Speaker 1: leave this year with China. They look at the US
Speaker 1: election is their lead risk. But Meredith Sumter, with this
Speaker 1: head of all their research and of course truly expert
Speaker 1: on China, is well, what's the nuance here in China
Speaker 1: of this January versus a year ago. A year ago, Tom,
Speaker 1: I think there was a great deal more expectation that
Speaker 1: the U. S And China would have some kind of
Speaker 1: trade confrontation but would find some way to resolve their differences.
Speaker 1: A year on where we stand now we have a
Speaker 1: Phase one trade deal. But even with the deal, Tom,
Speaker 1: there is no real truth between the world's two largest economies.
Speaker 1: Does China need a truce? Jan Ping doesn't believe so,
Speaker 1: and he is girding up his population for what he
Speaker 1: believes is going to be a long march to increase
Speaker 1: China's own self reliance and reduce its dependency and risk
Speaker 1: exposure to the United States. The dependency is around sanctions.
Speaker 1: I'm a bit confused here, as I'm sure all my
Speaker 1: listeners are about what sanctions are coming on, which ones
Speaker 1: are coming off. The hope and prayer of getting back
Speaker 1: to some form of not lazy, fair free trade, but
Speaker 1: at least less sanctions. Give us a sanctions update as
Speaker 1: you see it. What's the dynamic of sanctions into two
Speaker 1: thousand twenty. Well, in two tho markets are going to
Speaker 1: be looking for or a partial reduction of tariffs, but
Speaker 1: for the most part, the majority of the tariffs are
Speaker 1: are going to to stay in place. Uh, And we
Speaker 1: could be seeing more tough measures from the US towards
Speaker 1: China this year. It's it's an election year and product
Speaker 1: is nothing changes? Is that right? Not much is changing.
Speaker 1: But I'll tell you what is changing on the negative
Speaker 1: front is you're going to see a hardening of this
Speaker 1: confrontation and locking in that hardened confrontation for the longer term.
Speaker 1: So that's why we have US China as our third
Speaker 1: top risk. But tied to that is our second top risk, TOM,
Speaker 1: which is the Great decoupling. This is essentially China in
Speaker 1: the US, the two largest economies disentangling from one another
Speaker 1: in a way that's going to have spillover effects not
Speaker 1: just in global technology, but in business activity, in research,
Speaker 1: in media and entertainment, in culture. You're going to have
Speaker 1: more of a risk of a true bifurcation of the
Speaker 1: global order in a way that really haven't taken seriously
Speaker 1: since the Cold War. So, Meredith, we had yet to
Speaker 1: see anything really on paper as it relates to Phase one.
Speaker 1: So I hate to even go to phase two. But
Speaker 1: is there any sense of what Phase two could encompass, uh,
Speaker 1: and maybe any sense of timing or is this just
Speaker 1: a tweet out there in the wind terrific question. I
Speaker 1: would say the President and US here Bob Lizzheiser, are
Speaker 1: supremely focused on a phase two. If you talk to
Speaker 1: the actual trade negotiators on the US and China side, though,
Speaker 1: who are going over the substance of what those negotiations
Speaker 1: might entail. No one seriously believes that we're likely to
Speaker 1: see a Phase two negotiation reached completion, And believe me,
Speaker 1: there's a whole lot left on the table there. Phase
Speaker 1: one really is just about a partial teriff reduction, a
Speaker 1: resumption of of some Chinese purchases of of US products,
Speaker 1: namely agg But the core issues at at at the
Speaker 1: heart of the conference tation, industrial policies, subsidies, the misalignment
Speaker 1: of the Chinese economy with the U S economy, that
Speaker 1: all remains, and that's not likely to be fundamentally changed
Speaker 1: by onward negotiations this year. So, Meredith, one of the
Speaker 1: things that this administration has done is it as UH
Speaker 1: really taken trade negotiations with China to arguably the next level,
Speaker 1: a more direct level including tariffs and so on and
Speaker 1: so forth, a more bilateral approach, more aggressive approach. Do
Speaker 1: you think this is the new normal for US China
Speaker 1: UH negotiations or if there is another administration coming in,
Speaker 1: it might go back to something UH that we're more
Speaker 1: used to. This is a this is a new normal
Speaker 1: for US China with the Trump administration. But you know,
Speaker 1: even if you get a democratic administration in office in
Speaker 1: one UH, there is still going to be a hardened
Speaker 1: US approach towards China. Now, they might take a and
Speaker 1: and look all of the Democratic candidates who are still
Speaker 1: in the field. Not one of them has said that
Speaker 1: they would reduce tariffs on China. The difference in approach, however,
Speaker 1: might be more of a collaborative strategy with other allies
Speaker 1: to to play sort of collective pressure on China to
Speaker 1: adjust its approach. One of them is, that's so wonderful
Speaker 1: what your Asia group is. All the horses you're bringing here.
Speaker 1: You've got Robert D. Caplan in helping you out advising.
Speaker 1: Of course, this book Asia's Cauldron and was in my
Speaker 1: Book of the Year a couple of years ago, and
Speaker 1: it is about the South China Sea. How does China
Speaker 1: right now interpret the South China see? Is it just
Speaker 1: as simple as they say, it's ours? It has always
Speaker 1: been in China's mindset, there's and what you're seeing. It
Speaker 1: is it is, but it's it's what you're seeing. We're
Speaker 1: talking about the bifurcating world. Tom. For China, it's reality
Speaker 1: and the sound China see. They've built their outposts, they're
Speaker 1: exercising influence, maybe not absolute control, and maybe they don't
Speaker 1: they don't get a chance showing the flag enough on
Speaker 1: the U S sign We are in in the area.
Speaker 1: But I think that there's enough of a question about
Speaker 1: US staying power in the region and US commitment to
Speaker 1: partnerships and alliances in the region to where the other
Speaker 1: countries in the region are already hedging their bets. Meridith
Speaker 1: sumter with us with your Raiser group, folks, as we
Speaker 1: look at their top risk. A lovely conversation here and
Speaker 1: look for this on our podcast. We are thrilled to
Speaker 1: re emphasize our podcast in this January obviously out at
Speaker 1: Apple Spotify for their names. I'm not hip enough to remember,
Speaker 1: but the podcasts have been hugely, hugely successful. And we'll
Speaker 1: lead with Brummer and Sumter. Uh. This day you read?
Speaker 1: Do you read Chinese? Right? Can you speak it? Uh?
Speaker 1: Not as well? It's hard, it's hard to make that lead.
Speaker 1: What what do you read in China? Explain to our
Speaker 1: audience who are kids? My child's going to take Mandarin
Speaker 1: and that lasts for like two weeks. It's like, you know,
Speaker 1: Ellen lessons. When you read Chinese? How do you read it?
Speaker 1: What do you profession? Is there like a Beijing newspaper
Speaker 1: you read every morning or is it research reports or
Speaker 1: secret things that come in like you know, on pigeons, wings,
Speaker 1: on ravens, wings, like Game of Thrones. When you read
Speaker 1: China in Chinese, what do you read? You read a
Speaker 1: variety of different newspapers. Um, all of them sort of
Speaker 1: state bad. But there are different nuances with the with
Speaker 1: the different newspapers out there. But it's it's a wonderful language. Uh.
Speaker 1: And I think when you when you actually get in
Speaker 1: to the language, you get a sense of the whole
Speaker 1: holy different worldview that is coming from from Beijing. And
Speaker 1: again it sort of leads back into this bifurcated world
Speaker 1: that we're that we're moving into. Neither China nor the
Speaker 1: US is strong enough or is going to take enough
Speaker 1: of the pain to push the other off of the
Speaker 1: helm of global leadership. But they've got to find a
Speaker 1: way to co exist. And what you see in Chinese
Speaker 1: print media, uh, and in commentary frankly on on wayble
Speaker 1: and and and other media social media platforms is increasingly
Speaker 1: China is looking to project its own interpretation of what
Speaker 1: international technology, international trade, international financial architecture, international rules and regulations,
Speaker 1: how those should be shaped to account for Beijing's and
Speaker 1: China's own interests in addition to the interests of the
Speaker 1: traditional Western liberal order. Mare, could you just give us
Speaker 1: a quick update on kind of what is the latest
Speaker 1: from Hong Kong. We know there's been some leadership changes
Speaker 1: there right well, we've we've seen actually just in the
Speaker 1: last couple of days, Beijing appointing a perceived sort of
Speaker 1: hardliner to to go in and be their chief representative
Speaker 1: in Hong Kong. Uh, this is to be expected. Uh,
Speaker 1: Beijing's approach is to strengthen their reach in control over
Speaker 1: Hong Kong, even as the protests show no signs of abating. Uh.
Speaker 1: And you know speculation that Carrie Lamb will be stepping
Speaker 1: down perhaps later this year after the leon Quai, China's
Speaker 1: own sort of meetings in March of their National People's
Speaker 1: Congress and Consultative Conference. But she might step down, but
Speaker 1: that's not going to do anything to to take the
Speaker 1: floor underneath the protests that we see happening in Hong Kong.
Speaker 1: This has been wonderful, Maritus Sumter, thank you so much.
Speaker 1: I thank you to all your research capabilities. Here are
Speaker 1: the different voices we've heard this morning at eur Asia Group.
Speaker 1: Without question, this is our interview of the morning. He
Speaker 1: is Henry Rome and he is far, far too young
Speaker 1: to be this good. He's out of Princeton where he
Speaker 1: had a modest knowledge of the Persian language, and then
Speaker 1: it's going on to a sterling academic career studying the
Speaker 1: Levant and Persia, and he joins us today is truly
Speaker 1: one of the nation's Persian experts. With your Aisia Group,
Speaker 1: I should point out we're thrilled that we have the
Speaker 1: top Risks of two thousand twenty four Ian Bremer's e
Speaker 1: Raisia group this morning, Henry, thank you so much for
Speaker 1: taking time with us. What is the number one thing
Speaker 1: Americans miss of the present Islamic Republic and its linkage
Speaker 1: back to a Persia of long ago? Sure? Thanks, Tom,
Speaker 1: It's it's great to be here here with you. I
Speaker 1: think the number one thing that that Americans missed is
Speaker 1: the prevalence in in today's Iran of the same nationalism
Speaker 1: that we've seen over the past hundreds of years. That
Speaker 1: while Iranians today obviously majority Shia country, but the depth
Speaker 1: of religion and only gets you so far. Really, the nationalism,
Speaker 1: the pride and the empire is still very strong, and
Speaker 1: I think the government today uses that very effectively to
Speaker 1: try to rally around the flag. And then we're seeing
Speaker 1: it right this morning with with the funeral processions for
Speaker 1: costumsula money. We whether we read Dexter, Philkins or George
Speaker 1: Packer the others out in the media, Tom Friedman and
Speaker 1: others writing and the last number of days there seems
Speaker 1: to be a debate about the Islamic Republic. I get
Speaker 1: the idea of nationhood and everyone coalescing. What does the
Speaker 1: new Islamic Republic look like. It's not the same one
Speaker 1: of nineteen seventy nine or even eighty nine after the war,
Speaker 1: is it. No, it's not. It's it shifted in a
Speaker 1: number of important ways. One is that after the revolution
Speaker 1: you've had a much more institutionalized mechanism that have I
Speaker 1: think become or solidified I should say, the the rule
Speaker 1: will of of of the clerical elite, and also I
Speaker 1: think limited or or disabused people of the notions that
Speaker 1: that this would be a that this would take a
Speaker 1: more republican, a more democratic route. So there so there's
Speaker 1: been I think in in in aspect of disappointment, especially
Speaker 1: among the revolutionary generation. I think also the government's proclivity,
Speaker 1: of government's willingness to crack down viciously on the population
Speaker 1: when it feels threatened, I think is a more recent phenomena,
Speaker 1: going back uh to to two thousand and nine. Certainly
Speaker 1: they were protests before, but the events of two thousand nine,
Speaker 1: combined with the ones over the past few months, I
Speaker 1: think have been quite um quite quite quite impactful. And
Speaker 1: I think that the last point I'll make is is
Speaker 1: the kind of UH intensification of of official corruption of
Speaker 1: you have folks who are ostensibly men of God but
Speaker 1: are also involved very significantly in the Iranian business sector.
Speaker 1: And and and I think you have a um a
Speaker 1: disappointment of expectations among many Iranians. Now, does that mean
Speaker 1: they want to overthrow the government? No? And I think
Speaker 1: that's that's what we're seeing very clearly uh in Tehran
Speaker 1: right now. So anyway, I guess what a lot of
Speaker 1: observers are wondering at this point as we wait for
Speaker 1: some type of retaliation, is this going to be a
Speaker 1: series of tips for tat's kind of thing, back and forth,
Speaker 1: back and forth, you know, relatively low level engagement, or
Speaker 1: do we really run the risk of this escalating into
Speaker 1: some type of war, however limited. I think it will
Speaker 1: be more of the former, more of the tip for
Speaker 1: TAT exchanges. But but there's going to be bloodshed and
Speaker 1: and and it's going to be very turbulent. So I
Speaker 1: would say that that that that the Iranians will continue
Speaker 1: to have US forces in their sights. They said very
Speaker 1: publicly over the weekend that military retaliation is what they
Speaker 1: are going to do. And I think once that happens,
Speaker 1: President Trump will be compelled to respond, and there will
Speaker 1: be a cycle here. But but there is a ceiling
Speaker 1: to this, and I think the ceiling is is reinforced
Speaker 1: by the structural factors on either side that are pushing
Speaker 1: the two sides away from the kind of brink of
Speaker 1: brink of a larger escalation. On the U s side,
Speaker 1: I think Trump remains a verse to military conflict. I
Speaker 1: think recognizes that, uh conducting a major war essentially in
Speaker 1: the middle of an election campaign is would be extremely damaging.
Speaker 1: And I think from the Iranian side, they are very cautious,
Speaker 1: They're calculated. They do not want to fight a war
Speaker 1: that they're going to lose. So I think the that
Speaker 1: imposes some constraints on what we're going to be seeing
Speaker 1: over the next weeks and months. Henry, just quickly, what
Speaker 1: is your best estimate of when we could or when
Speaker 1: Iran could really make a move here in retaliation. I
Speaker 1: think within the next days or weeks, UH, so fairly soon.
Speaker 1: They're using the Sulamani funeral as a way to generate
Speaker 1: and and and consolidate nationalism in the country and also
Speaker 1: as a way to buy time to figure out exactly
Speaker 1: what to do. But but but I would say, you know,
Speaker 1: imminent essentially, Henry, thank you so much. We really look
Speaker 1: forward to your analysis, your synthesis here in the next
Speaker 1: number of days. Henry Rome is with Eurasia Group, and
Speaker 1: of course one of his focal points is the Middle
Speaker 1: East and it is a top risk for two thousand
Speaker 1: twenty four Ian Bremer and Eurasia Group. This is a
Speaker 1: joy with your Asia Group as we look at their
Speaker 1: top risk for two thousand twenty is midg Rahman, who
Speaker 1: over the last two three years has been dead on
Speaker 1: of a very very new, indistinctive Europe. Midge, what is
Speaker 1: the distinction in your European report as you look at
Speaker 1: the top risks of Thanks for having me, Tommy. It's really,
Speaker 1: I think a year where Europe is going to try
Speaker 1: to do more geopolitically, and and that I think is
Speaker 1: a direct reflection of the fact anglom week at home
Speaker 1: cobbled by a wobbly coalition while Emmanuel Macron is sitting
Speaker 1: on top of a super majority and a mandate that's
Speaker 1: probably going to see him win the next election. In
Speaker 1: Macron is decisively off this view that Europe should be
Speaker 1: doing more in the world, taking on China and its
Speaker 1: centralized political and economic model, dealing with the fact Trump
Speaker 1: is erratic, inconsistent and cannot be relied upon, and in
Speaker 1: that in that space, I think a believer in the
Speaker 1: idea that Europe needs to be the defender of multilateralism
Speaker 1: and needs to speak up in world affairs, well, some
Speaker 1: of that is and I've seen as so much in
Speaker 1: the last number of days, including all that's going on
Speaker 1: in Tihran and Baghdad, and that is the yearning look
Speaker 1: back to a Westphalian system. There's almost this in a
Speaker 1: nostalgia mide raman of going back to what was? What
Speaker 1: do we want to go back to post World War two?
Speaker 1: Or something even more distant like the Treaty of West Failure.
Speaker 1: I agree, I agree, there is something historical and almost
Speaker 1: mystical about what the French are trying to achieve, and actually,
Speaker 1: in practical and real terms, you know, what can the
Speaker 1: European Union do to prevent escalation between this U S
Speaker 1: and IRUN crisis? And the answer at the moment is
Speaker 1: absolutely nothing. But I think it's that precise answer that's
Speaker 1: driving the French in particular to say, look, we need
Speaker 1: to be able to speak up in world affairs more effectively,
Speaker 1: and we need to be able to do more. And
Speaker 1: I think in the first instance, what the Europeans are
Speaker 1: going to try and do is leverage their market to
Speaker 1: give them a bigger voice in world affairs. So they're
Speaker 1: going to try to use the internal market to promote
Speaker 1: cross border military trade, to promote more technological development within
Speaker 1: your Europe, to make them less dependent on other parts
Speaker 1: of the world for defense and for the protection of
Speaker 1: their own interests. That's where I think they start with
Speaker 1: the market in major I find your comments about the
Speaker 1: EU trying to assert itself in global affairs extraordinarily interesting,
Speaker 1: just at a time when one of its most important
Speaker 1: members is leaving the block. How do you think the
Speaker 1: EU is going to deal with the UK and Brexit
Speaker 1: really over the coming weeks and coming months. I'm just
Speaker 1: kind of trying to get a sense of how harder
Speaker 1: soft this whole thing. Maybe, Yeah, it's a great question.
Speaker 1: I think, you know, the the European Union doesn't have
Speaker 1: a great strategic answer for the fact the UK is leaving.
Speaker 1: They're desperate to keep the UK in its diplomatic orbit,
Speaker 1: and I think the statement last night from Chancellor Merc
Speaker 1: le French President Macron and Boris Johnson will go down
Speaker 1: well in Europe in the sense that Boris has firmly
Speaker 1: aligned himself for now at least with the EU camp
Speaker 1: in calling forward the escalation, and as you'll know, there
Speaker 1: was no reference to Trump in that statement. But in
Speaker 1: terms of pure Brexit negotiations, I think the landing zone
Speaker 1: looks quite hard because you have a government with Boris
Speaker 1: John's and that basically wants to do things differently. You know,
Speaker 1: their interpretation of Brexit and the mandate they have is
Speaker 1: the right to do things differently. They don't want to
Speaker 1: follow EU rules in the future. They want to be
Speaker 1: free and they want to do things their own way,
Speaker 1: and that's going to immediately impact how close the two
Speaker 1: sides can indeed be, because ultimately market access for the
Speaker 1: UK depends on following EU rules and if the UK
Speaker 1: no more no longer wants to do that because they
Speaker 1: want to be democratic and sovereign, well, that's going to
Speaker 1: have an impact on I think how close economically the
Speaker 1: two sides can be, which suggests there is a degree
Speaker 1: of risk for Sterling, a degree of economic disruption that
Speaker 1: we're going to see manifest towards the end of the
Speaker 1: year when that becomes apparent to the investment community. Image.
Speaker 1: Just give us a sense of in the City of
Speaker 1: London in Parliament, what's the confidence level that the UK
Speaker 1: can actually negotiate a meaningful and positive trade agreement with
Speaker 1: both the EU and also the U S. I mean,
Speaker 1: we have it. It's kind of going on live now
Speaker 1: between the US and China. These things aren't easy to do. Yeah,
Speaker 1: I mean you saw you saw the end of December
Speaker 1: when the when the government announced it was not going
Speaker 1: to extend the transition period. So basically we're in a
Speaker 1: standstill transition now until the end of the year. The
Speaker 1: government said they're not going to extend that into one
Speaker 1: and there was an immediate dip in sterling, something of
Speaker 1: a crash. I think markets are still working off the
Speaker 1: assumption that the government is going to soften its approach
Speaker 1: and that ultimately economic objectives will prove imperative and that
Speaker 1: will driver closer relationship between the two sides, and I
Speaker 1: think that's misreading where this government is. I think they
Speaker 1: do as I say, want to do differently. That suggests
Speaker 1: negotiations are going to be complex, both with Europe but
Speaker 1: also but also with the US, I mean the price
Speaker 1: of the trade agreement with America. Who is going to
Speaker 1: be difficult for this government because obviously the US are
Speaker 1: going to ask the things the government doesn't want to
Speaker 1: agree to. I'm not going to be challenging. I think
Speaker 1: if you're just joining US, Midje Ramen with US. Here
Speaker 1: is with Eurasia Group as we look at their top
Speaker 1: risks for twenty twenty Midge. In the last forty eight hours,
Speaker 1: we've all had to become more expert on the collapse
Speaker 1: of a nuclear accord between the United States and Iran.
Speaker 1: And it's something that Europe has tried to triage almost
Speaker 1: through the recent months and even quarters. What does Europe
Speaker 1: want out of a nuclear redo with Iran? Did they
Speaker 1: go it alone with Iran? How will that work? I mean,
Speaker 1: I think based on based on what's happened in the
Speaker 1: last twelve hours, I think, honestly there's the likelihood that
Speaker 1: they're on nuclear agreement now hoses, you know, falling close
Speaker 1: to below zero. I think that was I think the
Speaker 1: immediate objective and conferent for the European Union last night.
Speaker 1: I wrong is going to now back out of the
Speaker 1: nuclear agreement More broadly in the region, led by the French.
Speaker 1: There's a desire to stabilize Iraq and allow Iraq to
Speaker 1: be fully sovereign, and then of course a priority to
Speaker 1: attack Dash and Isis. I think that's absolutely top of mind,
Speaker 1: certainly in the Elise and also in the Chancellery. That's
Speaker 1: how I'd argue Europeans are thinking about their strategic objectives
Speaker 1: in the Middle East, but do they really have the
Speaker 1: means that diplomacy, the politics to allow them to achieve
Speaker 1: those goals. I think, and I'm quite skeptical. Frankly, we
Speaker 1: don't have an army. Foreign and defense policy is heavily
Speaker 1: uncoordinated in Europe. Capitals are basically doing their own thing,
Speaker 1: and that's why I think this is largely going to
Speaker 1: remain something in the American theater. I think US Iran
Speaker 1: is a US are an issue. Europe will try and
Speaker 1: be relevant, but I think, frankly speaking, it's not going
Speaker 1: to be particularly effective. It's it's just first thing to me.
Speaker 1: So it's to be clear on this medge is does
Speaker 1: Europe have of voice in Tehran? Not not allowed one,
Speaker 1: not a very prominent one. I mean, if you think
Speaker 1: about the number of UK nationals that are being held
Speaker 1: hostage in Iran, and the amount of political capital that
Speaker 1: was invested by Jeremy Hunt, the previous Foreign Secretary Boris
Speaker 1: Johnson when he was Foreign Secretary and now as Prime Minister,
Speaker 1: and the Iranians are simply not moving and there's not
Speaker 1: that much the UK or indeed the European Union can
Speaker 1: do to get the Iranians to budge. So I think
Speaker 1: I think that's why Tom the French are so eager
Speaker 1: to redefine more broadly the European Union's place in the world.
Speaker 1: That's why MacLean intent on your being a geopolitical player,
Speaker 1: because he recognizes the gap in his aspirations and where
Speaker 1: the EU is today. So right, do you think, what
Speaker 1: do they have this? I'm sorry my fault. Did they
Speaker 1: have a sense of isolationism like the president and like
Speaker 1: a good part of the love America. I mean, I
Speaker 1: think it's it's lesser celt I think to be to
Speaker 1: be honest, Tom, and and again it's that the problem
Speaker 1: with Europe is structurally, states are basically not coordinated in
Speaker 1: the area of foreign and security policy. It remains the
Speaker 1: prerogative of the member states, and the member states have
Speaker 1: competing objectives. I think Macron is of the view that
Speaker 1: real sovereignty for the EU is a function of the
Speaker 1: more stand up army. They want to invest more on
Speaker 1: the militarily sad on the military side. The Germans don't
Speaker 1: want to do that. The Germans want to dabble at
Speaker 1: the edges of defense policy, but not do much more,
Speaker 1: certainly not get close to the two present the Trump
Speaker 1: that the US administration and Trump is asking for. So
Speaker 1: there are a big competing strategic objectives within Europe about
Speaker 1: how it can achieve the sovereignty. The Macron team are
Speaker 1: asking for what is necessarily in order to fulfill that objective,
Speaker 1: and there is no agreement, and that that really, I
Speaker 1: think always hamstring the ability for Europe to be influential
Speaker 1: on the globals aage mid drama. Thank you so much
Speaker 1: for joining us images the analysts that you raised your group,
Speaker 1: covering all things your We have Brent crude sixty nine
Speaker 1: dollars a barrel that's up another one percent today on
Speaker 1: that Mid East tension. Do you get a sense of
Speaker 1: how this may play out in terms of global energy?
Speaker 1: Welcome Amy Myers Jaffee. She's the David M. Rubinstein, Senior
Speaker 1: Fellow for Energy and the Environment at the Council on
Speaker 1: Foreign Relationship, joins us on the phone. Amy, thanks so
Speaker 1: much for joining us. So again, quite a shock to
Speaker 1: financial markets, including commodity markets and oil. How does what
Speaker 1: is your sense of kind of how oil is going
Speaker 1: to play out here of the coming weeks and months. Well,
Speaker 1: you know, you have two things going on. One, we
Speaker 1: had this narrative that was held in the oil price down,
Speaker 1: which was that there wouldn't be a trade deal between
Speaker 1: the United States and China. Um. So to the extent
Speaker 1: that we continue to hear positive things about a possible
Speaker 1: deal coming in a week, and if it actually comes
Speaker 1: to fruition, um, that that's going to keep the short
Speaker 1: sellers at bay. And then the second step is what
Speaker 1: happens in the Middle East. One of the things that
Speaker 1: I think characterizes the market now is that every time
Speaker 1: we have these increasing geopolitical risks, the market becomes less
Speaker 1: resilient to the next event. So now I think the
Speaker 1: market has to worry about loss of Iraqi oil production
Speaker 1: to the market, and that could come away. Uh, that
Speaker 1: could come about in one of two ways. Uh, We've
Speaker 1: already seen that the very small nust for real oil
Speaker 1: field go down for a day or two because the demonstrators,
Speaker 1: So we could see more disruptions and production that's come
Speaker 1: about because of violence on the ground inside Iraq. UM
Speaker 1: or if it turns out that UM the Trump administration,
Speaker 1: things don't go smoothly, we don't have a diplomatic solution
Speaker 1: and and tensions escalate. You could see the Trump administration
Speaker 1: being taking a stronger position on whether there's oil smuggling
Speaker 1: between Iraq and Iran and which what if that oil
Speaker 1: production is being sold in the international market and that
Speaker 1: could take some barrels off the market UM, and then
Speaker 1: of course the market is worried about what if there's
Speaker 1: a tremendous escalation which hopefully we will avoid. UM and
Speaker 1: it was engaged with UM oil facilities because as we
Speaker 1: all know from the history of the Iraq Iran War,
Speaker 1: in that case, which was an extended war UH, the
Speaker 1: oil industries of both Iraq and Iran were completely destroyed
Speaker 1: over the courses of UH the ongoing conflict. So, Amy,
Speaker 1: do you believe that the primary risk to the global
Speaker 1: energy markets is direct attacks or retaliatory attacks on Mideast
Speaker 1: refining production and that type of thing is that probably
Speaker 1: what is the most risk driver for global energy prices. Well,
Speaker 1: I think there's also the possibility of sort of you know,
Speaker 1: just unrest in the country and it affects their oil industry.
Speaker 1: I think that's an additional risk. But the thing, you know,
Speaker 1: I think the market probably will part a distinction between these.
Speaker 1: You have the risk that the Iranian government will respond
Speaker 1: as it as with you know, direct attack UM on
Speaker 1: some kind of oil facility in a in a neighboring country.
Speaker 1: But you also have the risk now with the sort
Speaker 1: of calls for revenge the death of Commander um Sleimani,
Speaker 1: that you might have a splinter group that decides that
Speaker 1: they want to attack energy facilities UM in Iraq or
Speaker 1: elsewhere UM as part of their own you know driver,
Speaker 1: And so you have sort of a more of a
Speaker 1: terrorism risk that's probably higher today than it was a
Speaker 1: week ago. And then you have the overall risk, which
Speaker 1: I thought the market was undervaluing post to appcake attack UM,
Speaker 1: that something would happen that would cause Iran to sponsor
Speaker 1: a second attack on energy facilities in the Gulf Amy
Speaker 1: we winn in doubt get out the map in the
Speaker 1: bottom line is the Iranian oil reserves are concentrated at
Speaker 1: the northeast top of the Persian Gulf and up the river.
Speaker 1: And am I right that literally just over the river
Speaker 1: are the Iraq oil reserves. I mean, how easy is
Speaker 1: it is it for Iran to co opt the Iraqi
Speaker 1: oil reserves if they choose to, Uh, Well, I would
Speaker 1: say very easy. And I would say, in my opinion,
Speaker 1: um that behind the scenes, you're already seeing some of
Speaker 1: that helped service the Iranian economy um. And you know,
Speaker 1: maybe not at at scale, but but I think part
Speaker 1: of the things that you see when you listen to
Speaker 1: the demonstrators that were calling for Iran to exit Iraq
Speaker 1: and calling for new political leaders that weren't so tied
Speaker 1: I'm sorry Iraqi demonstrators calling for Iran uh to exit
Speaker 1: the country and to have its political leaders be less
Speaker 1: tied to Iran. I think that there's sort of cozy
Speaker 1: um relationship and oil swaps and things like that. We're
Speaker 1: part and parcel of that and and and if you
Speaker 1: think about Iran and Iraq um, and then you go
Speaker 1: back in history to when people had concerns that is
Speaker 1: Iraq somehow we're to stay in Kuwait. They could threaten
Speaker 1: um you military force to threaten oil post the whole Gulf.
Speaker 1: We're in that same situation today, and you can imagine
Speaker 1: a nuclear Iran announcing that no shippings going through the
Speaker 1: straight of her moves, and that would be a much
Speaker 1: more complicated declaration than the current round making that declaration. Well,
Speaker 1: we gotta leave it there, Amy Myers, Jeff, you thank
Speaker 1: you so much, Just really really love that. We greatly
Speaker 1: greatly appreciate today with the Console on Foreign Relations, the
Speaker 1: Rubinstein Senior Fellow, Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.