1 00:00:02,520 --> 00:00:10,719 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:11,400 --> 00:00:15,000 Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. Markets 3 00:00:15,000 --> 00:00:18,599 Speaker 2: are dealing with rising risk of a military confrontation between 4 00:00:18,640 --> 00:00:22,079 Speaker 2: the US and Iran. Earlier, President Trump said the next 5 00:00:22,120 --> 00:00:24,800 Speaker 2: ten days will tell whether there will be an accord 6 00:00:24,920 --> 00:00:29,560 Speaker 2: covering Iran's nuclear ambitions. In the meantime, the American military 7 00:00:29,720 --> 00:00:32,760 Speaker 2: is stationing a vast array of forces in the Middle East, 8 00:00:33,000 --> 00:00:36,240 Speaker 2: and The Wall Street Journal reported the President is weighing 9 00:00:36,280 --> 00:00:40,160 Speaker 2: an initial limited military strike to force Iran to meet 10 00:00:40,159 --> 00:00:43,640 Speaker 2: Trump's demands for a nuclear deal. Needless to say, a 11 00:00:43,680 --> 00:00:46,519 Speaker 2: potential war would put the flow of crude oil very 12 00:00:46,560 --> 00:00:49,839 Speaker 2: much at risk. The Mideast pumps about a third of 13 00:00:49,920 --> 00:00:53,160 Speaker 2: the world's crude oil supply. In New York trading, WTI 14 00:00:53,320 --> 00:00:56,760 Speaker 2: was up one point nine percent to sixty six forty three. 15 00:00:56,800 --> 00:00:59,520 Speaker 2: For a closer look, I'm joined by Bloomberg's Paul Dobson. 16 00:00:59,680 --> 00:01:02,800 Speaker 2: He is executive editor for Asia Markets. Paul joins from 17 00:01:02,800 --> 00:01:06,240 Speaker 2: our studios in Singapore. Thank you for being here. It 18 00:01:06,280 --> 00:01:09,720 Speaker 2: doesn't seem as though markets are terribly stressed about this situation. 19 00:01:09,880 --> 00:01:13,480 Speaker 2: Oil higher, Yeah, maybe concerns are a little contained. How 20 00:01:13,480 --> 00:01:15,600 Speaker 2: would you evaluate this situation. 21 00:01:16,360 --> 00:01:19,800 Speaker 3: I think that it's reasonable to say that based on 22 00:01:20,040 --> 00:01:23,880 Speaker 3: the broad macro picture right now, Doug. If you look 23 00:01:23,880 --> 00:01:27,360 Speaker 3: at brain crewde oil, it did close at the highest 24 00:01:27,440 --> 00:01:31,880 Speaker 3: level since last summer in trading yesterday. So there is 25 00:01:32,240 --> 00:01:35,880 Speaker 3: some risks starting to get priced into the energy markets 26 00:01:36,400 --> 00:01:39,880 Speaker 3: at least, But I think for broader macro it's hard 27 00:01:39,920 --> 00:01:44,440 Speaker 3: to discern or unpick the concerns over an Iran conflict 28 00:01:44,480 --> 00:01:48,080 Speaker 3: from the broader themes that are out there. What I 29 00:01:48,120 --> 00:01:50,880 Speaker 3: will say though, is that you know, just a little 30 00:01:50,880 --> 00:01:53,280 Speaker 3: bit kind of in the background there, We've had dollar 31 00:01:53,360 --> 00:01:55,760 Speaker 3: strength this week, which we haven't seen for a while. 32 00:01:55,840 --> 00:02:00,360 Speaker 3: It's best week in three months, and that talks to 33 00:02:00,400 --> 00:02:03,040 Speaker 3: the idea that the FED sounded much more hawkish in 34 00:02:03,040 --> 00:02:06,120 Speaker 3: the minutes than people had expected, but also to this 35 00:02:06,280 --> 00:02:08,520 Speaker 3: idea that you know, maybe the dollar fares a little 36 00:02:08,560 --> 00:02:10,239 Speaker 3: bit better when there's a little bit of risk and 37 00:02:10,280 --> 00:02:11,880 Speaker 3: stress out there in global markets. 38 00:02:12,200 --> 00:02:15,600 Speaker 2: So China remains on holiday today for Lunar New Year, 39 00:02:15,840 --> 00:02:20,080 Speaker 2: other jurisdictions are back online. Are you seeing any high 40 00:02:20,120 --> 00:02:24,240 Speaker 2: frequency data on levels of consumer spending, whether we're talking 41 00:02:24,240 --> 00:02:27,640 Speaker 2: about travel, restaurants, or merchandise, anything that would kind of 42 00:02:27,760 --> 00:02:31,960 Speaker 2: give us some insight into the level of consumer engagement 43 00:02:32,040 --> 00:02:32,800 Speaker 2: during the holiday. 44 00:02:33,360 --> 00:02:36,240 Speaker 3: That is definitely the thing to watch. I haven't seen 45 00:02:36,320 --> 00:02:41,440 Speaker 3: any of the data passing through as yet. And the concern, 46 00:02:41,480 --> 00:02:45,400 Speaker 3: of course is that the China is still stuck in 47 00:02:45,440 --> 00:02:48,839 Speaker 3: this kind of rout when it comes to consumer activity, 48 00:02:49,320 --> 00:02:53,000 Speaker 3: and not just in terms of consumer spending and enthusiasm, 49 00:02:53,040 --> 00:02:55,560 Speaker 3: but also the investment climate. So those are the two 50 00:02:55,639 --> 00:02:59,400 Speaker 3: things that are really kind of under that great amount 51 00:02:59,440 --> 00:03:02,720 Speaker 3: of pressure at the moment. People are paying down debt 52 00:03:03,520 --> 00:03:08,080 Speaker 3: rather than putting money into productive uses or indeed being 53 00:03:08,080 --> 00:03:14,000 Speaker 3: willing to spend it on new products. And while there 54 00:03:14,040 --> 00:03:16,680 Speaker 3: were little glimmers I think in the first couple of 55 00:03:16,680 --> 00:03:19,799 Speaker 3: months of the year, some good numbers from Apple in 56 00:03:19,880 --> 00:03:22,960 Speaker 3: terms of iPhone sales, some good numbers from Maltai in 57 00:03:23,040 --> 00:03:27,000 Speaker 3: terms of By Joe sales as well, so some alcoholic 58 00:03:27,400 --> 00:03:31,239 Speaker 3: drink enthusiasm at least, it does still feel like the 59 00:03:31,639 --> 00:03:35,880 Speaker 3: economy is waiting for that spark to ignite more spending 60 00:03:35,920 --> 00:03:38,320 Speaker 3: on while the authorities have promised us that that's what 61 00:03:38,360 --> 00:03:41,480 Speaker 3: they're working on. You know, everything that we've seen so 62 00:03:41,600 --> 00:03:44,040 Speaker 3: far has I wouldn't say failed, but has only had 63 00:03:44,040 --> 00:03:47,600 Speaker 3: a limited amount of enthusiasm, but behind it and hasn't 64 00:03:47,640 --> 00:03:50,760 Speaker 3: really sparked a kind of self fulfilling kind of build there. 65 00:03:51,120 --> 00:03:53,040 Speaker 2: I was reading that some of the big tech giants 66 00:03:53,080 --> 00:03:56,119 Speaker 2: in China, names like Ali Baba by Dance ten Cent, 67 00:03:56,280 --> 00:04:01,560 Speaker 2: reported huge gains during the holiday from there new AI offerings. 68 00:04:01,760 --> 00:04:03,720 Speaker 2: What do we know about what these companies are up 69 00:04:03,760 --> 00:04:05,360 Speaker 2: to regarding AI? 70 00:04:05,760 --> 00:04:10,520 Speaker 3: Yeah, I think it's becoming an increasingly competitive space in China, 71 00:04:10,600 --> 00:04:13,160 Speaker 3: with a bunch of new models getting launched. We also 72 00:04:13,240 --> 00:04:16,120 Speaker 3: had Japu, a newer company which has been on a 73 00:04:16,120 --> 00:04:20,400 Speaker 3: real tear as its model gains traction. And you know, 74 00:04:20,760 --> 00:04:23,280 Speaker 3: I kind of feel China's a little bit in some 75 00:04:23,360 --> 00:04:27,200 Speaker 3: ways where the US was maybe a year eighteen months ago, 76 00:04:27,279 --> 00:04:29,279 Speaker 3: not in terms of what the technology is doing, but 77 00:04:29,320 --> 00:04:31,919 Speaker 3: in terms of what the market is pricing for the technology. 78 00:04:31,960 --> 00:04:34,720 Speaker 3: And therefore there are people are seeing in the investment 79 00:04:34,880 --> 00:04:39,039 Speaker 3: side of things opportunities in the China tech companies that 80 00:04:39,120 --> 00:04:43,159 Speaker 3: are already fully priced in US markets, and so that 81 00:04:43,480 --> 00:04:46,960 Speaker 3: you know, makes China's stocks kind of interesting, and particularly 82 00:04:47,040 --> 00:04:51,400 Speaker 3: if they're getting an upswinging usage. The downside is that, 83 00:04:51,640 --> 00:04:54,880 Speaker 3: as I said, is highly competitive, and so all of 84 00:04:54,880 --> 00:04:58,120 Speaker 3: those companies have limited pricing power because they're all competing 85 00:04:58,160 --> 00:05:01,320 Speaker 3: against each other for the same type of customer in 86 00:05:01,360 --> 00:05:04,279 Speaker 3: the same amount of money or share of the pie. 87 00:05:04,400 --> 00:05:07,600 Speaker 3: So much as we've seen with electric vehicles, for example, 88 00:05:07,600 --> 00:05:11,320 Speaker 3: and particularly with online retail, you have that very face 89 00:05:11,400 --> 00:05:14,240 Speaker 3: competition which erodes profitability. 90 00:05:14,600 --> 00:05:18,040 Speaker 2: Maybe we can talk about the trade picture next, because 91 00:05:18,400 --> 00:05:21,359 Speaker 2: in the US the government reported that the deficit, the 92 00:05:21,360 --> 00:05:24,839 Speaker 2: trade deficit widened last year. This is the annual figure, 93 00:05:24,880 --> 00:05:28,359 Speaker 2: to more than nine hundred billion dollars. Obviously, the tariffs 94 00:05:28,400 --> 00:05:32,000 Speaker 2: are a major factor here, and I'm imagining they created 95 00:05:33,040 --> 00:05:35,320 Speaker 2: a lot of volatility when you look at the entire 96 00:05:35,360 --> 00:05:38,960 Speaker 2: twelve month period, because month to month the narrative seemed 97 00:05:38,960 --> 00:05:42,240 Speaker 2: to shift slightly. It was interesting that the deficit with 98 00:05:42,360 --> 00:05:45,120 Speaker 2: China shrank last year to the smallest in more than 99 00:05:45,160 --> 00:05:47,680 Speaker 2: two decades. But when you look at trade deficits with 100 00:05:47,720 --> 00:05:52,200 Speaker 2: countries like Mexico and Vietnam, they widened to record levels. 101 00:05:52,200 --> 00:05:56,760 Speaker 2: So there seems to be a real reorganization of global 102 00:05:56,800 --> 00:05:59,359 Speaker 2: trade flows as a result of these tariffs. 103 00:06:00,120 --> 00:06:03,680 Speaker 3: Yeah, that's absolutely been true, and obviously some of it 104 00:06:03,680 --> 00:06:07,560 Speaker 3: has been diversion, so using transit countries in terms of 105 00:06:07,600 --> 00:06:10,279 Speaker 3: the exports to the US from China, but some of 106 00:06:10,320 --> 00:06:12,520 Speaker 3: it has been you know, a bit of a shakeup 107 00:06:12,520 --> 00:06:14,360 Speaker 3: in the way that people are doing business, in the 108 00:06:14,400 --> 00:06:16,880 Speaker 3: way that money and goods are flowing around the world. 109 00:06:17,120 --> 00:06:19,000 Speaker 3: One thing that I thought was interesting as well is 110 00:06:19,040 --> 00:06:22,760 Speaker 3: that Taiwan actually overtook China in terms of dollars of 111 00:06:22,960 --> 00:06:27,120 Speaker 3: exports to the US last year based on those data. 112 00:06:27,360 --> 00:06:31,840 Speaker 3: So that tells you one the humongous demand for the 113 00:06:31,880 --> 00:06:34,920 Speaker 3: technology that's coming out of Taiwan, particularly the chips, but 114 00:06:34,960 --> 00:06:38,159 Speaker 3: also the fact that China is looking to other markets, 115 00:06:38,160 --> 00:06:40,120 Speaker 3: and I think that, you know, that's been a very 116 00:06:40,160 --> 00:06:43,520 Speaker 3: clear secondary trend, the idea that China is still you know, 117 00:06:43,560 --> 00:06:46,279 Speaker 3: retaining a massive trade surplus, but it's not all going 118 00:06:46,320 --> 00:06:48,080 Speaker 3: to the US anymore. A lot more of it is 119 00:06:48,120 --> 00:06:52,080 Speaker 3: going into Europe and newer markets as well. So, just 120 00:06:52,120 --> 00:06:56,320 Speaker 3: as you said, the terriffs have changed the flows of goods, 121 00:06:56,680 --> 00:06:59,320 Speaker 3: but they haven't changed that overall picture of China as 122 00:06:59,320 --> 00:07:00,960 Speaker 3: a very big expert order in the US is a 123 00:07:01,000 --> 00:07:01,760 Speaker 3: very big importer. 124 00:07:02,600 --> 00:07:05,400 Speaker 2: Maybe we can talk a little bit about inflation in Japan, 125 00:07:05,480 --> 00:07:10,080 Speaker 2: because we had the CPI number this morning. Consumer prices 126 00:07:10,120 --> 00:07:13,920 Speaker 2: excluding fresh food up two percent from last January. That's 127 00:07:13,960 --> 00:07:18,080 Speaker 2: the smallest gain since January twenty twenty four. If you 128 00:07:18,120 --> 00:07:20,200 Speaker 2: strip out energy, we saw a gain of two point 129 00:07:20,240 --> 00:07:23,040 Speaker 2: six on an annual rate, and you and I both 130 00:07:23,120 --> 00:07:26,440 Speaker 2: know that that's still above the boj's target. What is 131 00:07:26,440 --> 00:07:30,200 Speaker 2: the path forward here for Japan Prime Minister Takeiichi? Trying 132 00:07:30,280 --> 00:07:33,240 Speaker 2: to stimulate the economy, but it's clear that inflation is 133 00:07:33,240 --> 00:07:34,640 Speaker 2: still a major issue. 134 00:07:36,240 --> 00:07:39,480 Speaker 3: Yeah, it is a major issue, and so Takaichi's plan 135 00:07:39,600 --> 00:07:43,080 Speaker 3: is partly to help the economy deal with the inflation 136 00:07:43,840 --> 00:07:48,800 Speaker 3: by reducing taxes that's the main goal, cutting VAT, which 137 00:07:48,840 --> 00:07:52,680 Speaker 3: is massively unpopular in Japan, and providing subsidies as well 138 00:07:52,720 --> 00:07:56,400 Speaker 3: to help people around it. So the inflation can stay 139 00:07:57,040 --> 00:07:59,520 Speaker 3: and wind its own way through the system, but people 140 00:07:59,560 --> 00:08:01,880 Speaker 3: will be ab or to manage it or deal with it. 141 00:08:02,320 --> 00:08:06,320 Speaker 3: The bigger question is part of that stimulus plan, how 142 00:08:06,440 --> 00:08:09,640 Speaker 3: much does Takaichi lean on the BOJ to try to 143 00:08:09,680 --> 00:08:12,520 Speaker 3: get them to be slow at raising interest rates. You know, 144 00:08:12,560 --> 00:08:15,679 Speaker 3: the BOJ has signaled that its intention is to carry 145 00:08:15,720 --> 00:08:19,600 Speaker 3: on hiking add a regular and pretty slow cadence. But 146 00:08:19,920 --> 00:08:22,240 Speaker 3: you know what it would really like to do is 147 00:08:22,280 --> 00:08:25,400 Speaker 3: to have interest rates firmly away from that floor that 148 00:08:25,440 --> 00:08:28,680 Speaker 3: they were stuck on for so very long. And also 149 00:08:29,240 --> 00:08:32,080 Speaker 3: it quite wants there to be some inflation in the economy, 150 00:08:32,120 --> 00:08:35,040 Speaker 3: so it doesn't want to snuff it out altogether, having 151 00:08:35,080 --> 00:08:40,040 Speaker 3: spent you know, decades of disinflation and deflation along the way. 152 00:08:40,200 --> 00:08:44,440 Speaker 3: So is that delicate balancing act. The market is still 153 00:08:44,760 --> 00:08:48,120 Speaker 3: expecting that the boj will continue to raise interest rates 154 00:08:48,559 --> 00:08:52,360 Speaker 3: over time, and you know that has pushed up yields 155 00:08:52,360 --> 00:08:54,439 Speaker 3: to a certain extent. But the market has also been 156 00:08:54,440 --> 00:08:58,080 Speaker 3: wary of inflation and that's been a major cause of 157 00:08:58,200 --> 00:09:00,800 Speaker 3: volatility at the back end of the yield. Right now, 158 00:09:01,000 --> 00:09:03,720 Speaker 3: we've had a pretty good rally in longer term Japanese 159 00:09:03,760 --> 00:09:06,400 Speaker 3: government bonds. I think partly on the idea that inflation 160 00:09:06,480 --> 00:09:09,040 Speaker 3: can be under control, and partly on the idea that 161 00:09:09,080 --> 00:09:12,960 Speaker 3: Takaichi will, with such a firm mandate, be able to 162 00:09:13,280 --> 00:09:17,520 Speaker 3: act with more authority, more decisively, in a more focus 163 00:09:17,559 --> 00:09:20,160 Speaker 3: in terms of the cash giveaways that she's doing and 164 00:09:20,200 --> 00:09:21,320 Speaker 3: the way that she funds them. 165 00:09:21,640 --> 00:09:23,880 Speaker 2: So, as you and I are speaking, I'm seeing weakness 166 00:09:23,880 --> 00:09:26,080 Speaker 2: in the Japanese equity market. Do you have a sense 167 00:09:26,120 --> 00:09:28,360 Speaker 2: of what accounts for the weakness today? If you look 168 00:09:28,400 --> 00:09:29,280 Speaker 2: at the internals. 169 00:09:30,960 --> 00:09:33,720 Speaker 3: I think that they've been having a pretty decent time 170 00:09:33,760 --> 00:09:38,080 Speaker 3: of it of late. I think the going into the 171 00:09:38,120 --> 00:09:44,320 Speaker 3: weekend with this Iran risk we were talking about, there 172 00:09:44,440 --> 00:09:48,680 Speaker 3: is maybe a little bit more caution more generally out 173 00:09:48,720 --> 00:09:53,320 Speaker 3: there right now. But I don't think that, you know, 174 00:09:53,400 --> 00:09:56,560 Speaker 3: that changes the slightly longer term picture, which is that 175 00:09:57,320 --> 00:10:01,719 Speaker 3: although although they sort of lost a little bit of momentum, 176 00:10:01,920 --> 00:10:05,680 Speaker 3: there's a lot of global interest sill in Japanese equities 177 00:10:05,720 --> 00:10:08,000 Speaker 3: and still quite a lot of money flowing in which 178 00:10:08,600 --> 00:10:10,920 Speaker 3: ought to be relatively supportive. 179 00:10:11,520 --> 00:10:14,160 Speaker 2: Is there anything else that you're looking at today as 180 00:10:14,200 --> 00:10:17,560 Speaker 2: we wrap up the trading week in Asia that has 181 00:10:17,760 --> 00:10:21,240 Speaker 2: the ability to impact markets in a significant way. 182 00:10:22,400 --> 00:10:24,839 Speaker 3: I think, you know, it's not a big impact for 183 00:10:24,920 --> 00:10:28,040 Speaker 3: Asian markets, but I do note the amount of interest 184 00:10:28,080 --> 00:10:31,560 Speaker 3: that there was in blue Oul and it's private credit 185 00:10:31,640 --> 00:10:35,160 Speaker 3: lending over the last twenty four hours. What it did 186 00:10:35,280 --> 00:10:37,840 Speaker 3: is sort of changed the way that it's allowing some 187 00:10:37,840 --> 00:10:42,920 Speaker 3: redemptions for some retailed investment products, and that has raddled 188 00:10:42,920 --> 00:10:45,840 Speaker 3: people quite a lot, because you know, they're thinking, is 189 00:10:45,880 --> 00:10:49,480 Speaker 3: this another sign that private credit isn't functioning the way 190 00:10:49,520 --> 00:10:51,720 Speaker 3: that we would like it too? That there's more risks 191 00:10:51,920 --> 00:10:55,280 Speaker 3: in that market space than the people are letting on. Essentially, 192 00:10:55,360 --> 00:10:56,960 Speaker 3: you know, is there something going on here that we 193 00:10:57,000 --> 00:10:59,760 Speaker 3: need to be worried about. And the market's already been 194 00:11:00,520 --> 00:11:03,760 Speaker 3: a bit nervous about private credit more generally because of 195 00:11:03,800 --> 00:11:06,719 Speaker 3: the amount of lending that there has been into the 196 00:11:07,360 --> 00:11:13,199 Speaker 3: sectors that have been damaged recently by the AI capability. 197 00:11:13,320 --> 00:11:16,480 Speaker 3: So thinking about financial services and thinking about insurance companies 198 00:11:16,679 --> 00:11:20,240 Speaker 3: and those kinds of things, right, and software and software 199 00:11:20,280 --> 00:11:23,280 Speaker 3: and software is a big one, that's right, And so 200 00:11:23,360 --> 00:11:25,880 Speaker 3: the amount of private lending that's been pushed in that 201 00:11:26,040 --> 00:11:31,440 Speaker 3: direction and whether those loans are still good. Essentially, now, 202 00:11:31,440 --> 00:11:34,120 Speaker 3: the private credit companies will all say, don't worry, they 203 00:11:34,160 --> 00:11:38,920 Speaker 3: have very low default records. They manage them my finances 204 00:11:39,000 --> 00:11:42,400 Speaker 3: very carefully. But you know, because it's so opaque, partly 205 00:11:43,080 --> 00:11:45,560 Speaker 3: the market is suspicious and nervous about this. And so 206 00:11:45,600 --> 00:11:48,800 Speaker 3: I think that that's why the stock performance of those 207 00:11:48,800 --> 00:11:51,520 Speaker 3: asset management companies, including Blue Oil, which fell I think 208 00:11:51,559 --> 00:11:53,679 Speaker 3: as much as ten percent before recovering a little bit 209 00:11:53,679 --> 00:11:56,200 Speaker 3: of the losses in trading in the US yesterday is 210 00:11:56,200 --> 00:12:00,280 Speaker 3: another thing that is worrying people, partly because of the 211 00:12:00,320 --> 00:12:01,840 Speaker 3: policity of information there. 212 00:12:02,000 --> 00:12:04,559 Speaker 2: Yeah, it's a one point eight trillion dollar market, so 213 00:12:04,600 --> 00:12:06,880 Speaker 2: there may be a little bit of systemic risk too. 214 00:12:07,040 --> 00:12:11,080 Speaker 2: If they're in the future, becomes a greater difficulty. But 215 00:12:11,240 --> 00:12:12,959 Speaker 2: there's got to be a lot of concern if you're 216 00:12:12,960 --> 00:12:17,440 Speaker 2: an investor anytime you hear of a company restricting withdrawals 217 00:12:17,760 --> 00:12:20,439 Speaker 2: from a certain fund. And to your point, I think 218 00:12:20,440 --> 00:12:24,120 Speaker 2: that's what rattled the market today in regards to Blue 219 00:12:24,120 --> 00:12:27,319 Speaker 2: Owl Capital. Paul, thank you so much. Enjoy the weekend. 220 00:12:27,360 --> 00:12:31,120 Speaker 2: Paul Dobson is executive editor for Asia Markets, joining from 221 00:12:31,480 --> 00:12:42,880 Speaker 2: Singapore today here on the Daybreak Asia podcast. Welcome back 222 00:12:42,880 --> 00:12:45,880 Speaker 2: to the Daybreak Asia Podcast. I'm Doug Krisner, and as 223 00:12:45,880 --> 00:12:49,240 Speaker 2: I mentioned earlier, markets are very anxious over President Trump's 224 00:12:49,320 --> 00:12:53,560 Speaker 2: next move on Iran. The risk of a military confrontation 225 00:12:53,800 --> 00:12:56,680 Speaker 2: is high. There is already a vast array of American 226 00:12:56,720 --> 00:12:59,920 Speaker 2: forces stationed in the Middle East. This would include two 227 00:13:00,120 --> 00:13:05,000 Speaker 2: aircraft carriers, jet fighters and refueling tankers. And needless to say, 228 00:13:05,040 --> 00:13:08,520 Speaker 2: a potential conflict would put flows of Mid East oil 229 00:13:08,679 --> 00:13:11,800 Speaker 2: at risk. And that's where we begin our conversation with 230 00:13:11,960 --> 00:13:15,920 Speaker 2: Barbara Slaven. She is a distinguished fellow at the Stimson Center. 231 00:13:16,120 --> 00:13:19,480 Speaker 2: Barbara spoke with Bloomberg TV host Cherry On and April Holm. 232 00:13:19,679 --> 00:13:22,559 Speaker 1: Give us a little bit of perspective of how significant 233 00:13:22,640 --> 00:13:25,719 Speaker 1: these moves are by the United States. So cent forces 234 00:13:26,040 --> 00:13:28,280 Speaker 1: around the Iran we're hearing is a first time that 235 00:13:28,320 --> 00:13:31,080 Speaker 1: we have such a massive force since the Iraq War. 236 00:13:32,160 --> 00:13:37,040 Speaker 4: Yeah, it's frankly very worrisome. I don't understand what the 237 00:13:37,240 --> 00:13:41,599 Speaker 4: emergency is that requires the United States to contemplate military 238 00:13:41,640 --> 00:13:45,760 Speaker 4: action against Iran. The country is at its weakest in 239 00:13:45,840 --> 00:13:49,800 Speaker 4: many ways. It's nuclear and other facilities were hit last June, 240 00:13:49,880 --> 00:13:52,720 Speaker 4: as you know by Israel and the United States. Its 241 00:13:52,760 --> 00:13:58,120 Speaker 4: currency is extremely weak. It's just coming off very significant 242 00:13:58,160 --> 00:14:03,400 Speaker 4: protests which were repressed brutally. It does seem as though 243 00:14:03,440 --> 00:14:05,720 Speaker 4: this is some sort of play to try to overthrow 244 00:14:05,760 --> 00:14:08,760 Speaker 4: the regime, which President Trump has mentioned as one of 245 00:14:08,800 --> 00:14:14,359 Speaker 4: his goals. But you cannot conduct regime change with airstrikes. 246 00:14:15,280 --> 00:14:17,920 Speaker 4: If there is something more to this plan, I'm certainly 247 00:14:17,960 --> 00:14:21,160 Speaker 4: not aware of it. It's causing a lot of consternation 248 00:14:21,240 --> 00:14:25,280 Speaker 4: in the United States, frankly, a lot of political opposition, 249 00:14:25,560 --> 00:14:29,080 Speaker 4: certainly among Democrats and also among Republicans. To some extent, 250 00:14:30,120 --> 00:14:33,280 Speaker 4: Trump has not asked for any congressional authorization. He's given 251 00:14:33,320 --> 00:14:37,120 Speaker 4: no explanation for why Iran is suddenly such a threat 252 00:14:37,200 --> 00:14:38,360 Speaker 4: to US interests. 253 00:14:40,240 --> 00:14:42,960 Speaker 1: Barbara, you mentioned the target of attacks on around back 254 00:14:43,000 --> 00:14:45,560 Speaker 1: in June, but of course we've also had the drog 255 00:14:45,680 --> 00:14:48,480 Speaker 1: trafficking boats also being attacked, not to mention, of course, 256 00:14:48,480 --> 00:14:51,920 Speaker 1: the extraction of Nicolas, Madora and Venezuela. How much boulder 257 00:14:52,160 --> 00:14:57,680 Speaker 1: is the US foreign policy towards these regimes getting recently, 258 00:14:57,720 --> 00:14:59,960 Speaker 1: and what are the risks of this new approach. 259 00:15:01,160 --> 00:15:05,200 Speaker 4: Yeah, this is not what President Trump campaigned on. He 260 00:15:05,240 --> 00:15:10,640 Speaker 4: didn't campaign on foreign adventures and regime change. It's really strange. 261 00:15:10,680 --> 00:15:16,240 Speaker 4: It's as though he's channeled George W. Bush in some way. Again, 262 00:15:16,920 --> 00:15:20,520 Speaker 4: I'm not privy to his personal thinking. He obviously believes 263 00:15:20,520 --> 00:15:23,480 Speaker 4: that this is a strategy that can bring results. But 264 00:15:23,600 --> 00:15:27,160 Speaker 4: we just had a very perfunctory session of talks in 265 00:15:27,240 --> 00:15:32,880 Speaker 4: Geneva between President Trump's envoys and the Iranians. There was 266 00:15:32,880 --> 00:15:38,120 Speaker 4: some talk about future negotiations and the Iranians promising to 267 00:15:38,160 --> 00:15:41,960 Speaker 4: come forward with some concrete proposals, but the positions of 268 00:15:42,040 --> 00:15:46,680 Speaker 4: the two sides seems very far apart. In the past. 269 00:15:46,720 --> 00:15:50,920 Speaker 4: Of course, we've had US strikes while negotiations were supposedly 270 00:15:50,960 --> 00:15:54,160 Speaker 4: still ongoing. So there's a lot of nervousness frankly, that 271 00:15:54,240 --> 00:15:56,680 Speaker 4: we might see strikes as soon as this weekend, when 272 00:15:56,800 --> 00:16:01,040 Speaker 4: all of these forces will be in place. The other factor, 273 00:16:01,040 --> 00:16:03,440 Speaker 4: of course, is the Israeli factor. What are they hoping 274 00:16:03,480 --> 00:16:06,080 Speaker 4: to get from this? Will they join in? Do they 275 00:16:06,120 --> 00:16:09,880 Speaker 4: want to hit Iranian missile positions perhaps, which is a 276 00:16:10,000 --> 00:16:14,760 Speaker 4: key concern for them. Again, very very little explanation, very 277 00:16:14,760 --> 00:16:18,920 Speaker 4: little daylight. And this is really infuriating to people who 278 00:16:19,000 --> 00:16:23,320 Speaker 4: thought President Trump would concentrate on domestic issues and particularly 279 00:16:23,400 --> 00:16:24,960 Speaker 4: the US economy. 280 00:16:26,720 --> 00:16:30,000 Speaker 5: And to your point about not having congressional approval. Of course, 281 00:16:30,040 --> 00:16:33,120 Speaker 5: this was also the case with Venezuela. But I wonder, 282 00:16:33,520 --> 00:16:37,400 Speaker 5: given this backdrop, what is your sense of the extent 283 00:16:37,440 --> 00:16:40,200 Speaker 5: in which there could still be a sort of deal 284 00:16:40,320 --> 00:16:43,560 Speaker 5: on the nuclear program between the US and Iran. 285 00:16:44,840 --> 00:16:48,000 Speaker 4: Well, that means that President Trump will have to accept 286 00:16:48,000 --> 00:16:51,160 Speaker 4: something less than what he has suggested. The Iranians are 287 00:16:51,160 --> 00:16:56,960 Speaker 4: perfectly willing to postpone to stave off suspend uranium enrichment 288 00:16:57,040 --> 00:17:00,880 Speaker 4: for a number of years. They're willing to send out 289 00:17:01,040 --> 00:17:04,840 Speaker 4: or dilute highly enriched uranium stockpiles, which they still possess, 290 00:17:05,320 --> 00:17:07,600 Speaker 4: but they are not willing to say that they will 291 00:17:07,640 --> 00:17:11,520 Speaker 4: never enrich uranium on Iranian soil. They believe this is 292 00:17:11,560 --> 00:17:15,040 Speaker 4: their right. They also have ruled out any talks on 293 00:17:15,160 --> 00:17:19,840 Speaker 4: their missiles or on their relationship with regional partners, which 294 00:17:19,880 --> 00:17:22,240 Speaker 4: have also been mentioned as demands on the part of 295 00:17:22,280 --> 00:17:25,520 Speaker 4: President Trump. He's also talked about regime change in a 296 00:17:25,640 --> 00:17:29,880 Speaker 4: very cavalier fashion and suggested that would be a wonderful outcome. 297 00:17:30,359 --> 00:17:33,360 Speaker 4: But again, I fail to see how attacking Iran now 298 00:17:33,440 --> 00:17:36,200 Speaker 4: will bring about that regime change. It could bring about 299 00:17:36,600 --> 00:17:40,119 Speaker 4: more chaos, It could bring about some civil strife, maybe 300 00:17:40,200 --> 00:17:45,000 Speaker 4: more protests. But the Iranian government has been preparing for 301 00:17:45,119 --> 00:17:50,240 Speaker 4: a long time now and expecting frankly new Israelian American strikes, 302 00:17:50,240 --> 00:17:53,400 Speaker 4: and I'm sure they have plans for pretty much whatever 303 00:17:53,480 --> 00:17:55,200 Speaker 4: Trump is contemplating. 304 00:17:57,440 --> 00:18:00,639 Speaker 5: Barbar on those issues on regional force. Can you also 305 00:18:00,720 --> 00:18:04,400 Speaker 5: talk to us about how things have changed between Iran 306 00:18:04,560 --> 00:18:08,280 Speaker 5: and some of its proxies in the past year, how 307 00:18:08,359 --> 00:18:10,040 Speaker 5: much has its influence shifted. 308 00:18:11,320 --> 00:18:13,560 Speaker 4: Iran is certainly much weaker than it was a couple 309 00:18:13,600 --> 00:18:17,360 Speaker 4: of years ago, primarily because of the blows struck against 310 00:18:17,400 --> 00:18:20,920 Speaker 4: Hezbollah in Lebanon and also the fall of the Asad 311 00:18:20,960 --> 00:18:24,119 Speaker 4: regime in Syria a couple of years ago. But Iran 312 00:18:24,200 --> 00:18:27,520 Speaker 4: still has relationships with the Hooties in Yemen, which can 313 00:18:27,520 --> 00:18:31,760 Speaker 4: disrupt shipping in the Red Sea. It has relationships with 314 00:18:32,080 --> 00:18:36,920 Speaker 4: militias in Iraq which may be called upon to attack 315 00:18:37,080 --> 00:18:43,560 Speaker 4: US basis US personnel still in Iraq. It is not 316 00:18:43,680 --> 00:18:47,560 Speaker 4: without resources, and I think this is an extremely dangerous 317 00:18:47,560 --> 00:18:53,840 Speaker 4: situation where escalation can certainly happen rather suddenly. The US 318 00:18:53,880 --> 00:18:57,560 Speaker 4: has thirty to forty thousand personnel stationed at bases in 319 00:18:57,600 --> 00:19:01,080 Speaker 4: some eight countries in the region. Them can be reached 320 00:19:01,119 --> 00:19:06,200 Speaker 4: by Iranian missiles and rockets. The US has, of course 321 00:19:06,440 --> 00:19:09,600 Speaker 4: means of defending these places. But I think what we've 322 00:19:09,600 --> 00:19:12,400 Speaker 4: seen in the past is that Iranian retaliation has been 323 00:19:12,520 --> 00:19:16,320 Speaker 4: telegraphed and pro forma. No Americans have been killed, and 324 00:19:16,640 --> 00:19:20,439 Speaker 4: I don't feel as confident that that can be the 325 00:19:20,440 --> 00:19:23,400 Speaker 4: case this time. I think the Iranian regime may feel 326 00:19:23,440 --> 00:19:25,199 Speaker 4: that its back is to the wall and it may 327 00:19:25,240 --> 00:19:29,440 Speaker 4: simply let fly with whatever it has. Trump has been 328 00:19:30,119 --> 00:19:34,240 Speaker 4: lucky in these military adventures of his He's not lost 329 00:19:34,280 --> 00:19:38,640 Speaker 4: American lives If that changes, that's really going to affect 330 00:19:38,680 --> 00:19:43,600 Speaker 4: his status in the United States. We have midterm elections coming. 331 00:19:43,960 --> 00:19:47,919 Speaker 4: I just I'm trying to imagine what he is thinking now. 332 00:19:48,000 --> 00:19:50,479 Speaker 4: Maybe there is some deal that still can be reached. 333 00:19:50,840 --> 00:19:55,360 Speaker 4: Of course, he's perfectly capable of declaring victory even if 334 00:19:55,400 --> 00:19:58,240 Speaker 4: the deal is not much of an improvement on previous 335 00:19:58,320 --> 00:20:02,600 Speaker 4: agreements with the Iranians. But if so, why all of 336 00:20:02,640 --> 00:20:06,800 Speaker 4: this amassing of American military power, Why these threats, What's 337 00:20:06,800 --> 00:20:11,120 Speaker 4: the strategy, what's the goal? We are, frankly all rather 338 00:20:11,200 --> 00:20:12,000 Speaker 4: confused here. 339 00:20:12,640 --> 00:20:15,800 Speaker 2: That was Barbara Slaven, Distinguished Fellow at the Stimpson Center, 340 00:20:15,920 --> 00:20:19,040 Speaker 2: speaking with Bloomberg TV host Sherry On in April Hong, 341 00:20:19,400 --> 00:20:22,520 Speaker 2: bringing you their conversation here on the Daybreak Asia podcast. 342 00:20:24,440 --> 00:20:27,800 Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak 343 00:20:27,960 --> 00:20:31,359 Speaker 2: Asia Edition podcast. Each weekday, we look at the story 344 00:20:31,400 --> 00:20:35,760 Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You 345 00:20:35,800 --> 00:20:39,919 Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, 346 00:20:40,000 --> 00:20:43,040 Speaker 2: or anywhere else you listen. Join us again tomorrow for 347 00:20:43,160 --> 00:20:46,600 Speaker 2: insight on the market moves from Hong Kong to Singapore 348 00:20:47,040 --> 00:20:50,840 Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg.