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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Balance of Power podcast. Catch us live weekdays at

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Thank you for being with us here on Balance of

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Speaker 2: Power Live from Washington.

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Speaker 3: I'm Joe Matthew.

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Speaker 2: Indeed, it's good to see you on Bloomberg TV and

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Speaker 2: radio as we follow President Trump north of the border

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Speaker 2: to the G seven in Canada, commenting earlier that Iran

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Speaker 2: wants to talk, this, of course following reports that Iran

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Speaker 2: was looking for off ramps following a brutal weekend of

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Speaker 2: missile attacks by Israel. Of course, that went back and

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Speaker 2: forth with a series of rounds. The President speaking earlier

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Speaker 2: as he appeared with Canadian Prime Minister Mark Carney, as

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Speaker 2: you heard here on Bloomberg.

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Speaker 4: Listen, I'd like to talk, but they should have done

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Speaker 4: that before. I had sixty days and they had sixty days,

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Speaker 4: and on the sixty for his day, we don't have

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Speaker 4: a deal. They have to make a deal, and it's

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Speaker 4: painful for both parties. But I'd say Iran is not

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Speaker 4: winning this war.

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Speaker 3: Not winning this war.

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Speaker 2: Asked about reports Iran wants to work toward a resolution,

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Speaker 2: President Trump responding, they'd like to talk, but they should

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Speaker 2: have done that before this, following a report from the

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Speaker 2: Wall Street Journal saying as much that Iran was signaling

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Speaker 2: through intermediaries that it hoped to return to the negotiating table.

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Speaker 2: This is where we start our conversation. I'm glad to

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Speaker 2: say with Ron Dermer, Israel's Minister of Strategic Affairs, former

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Speaker 2: Israeli ambassador to the US, is with us live right

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Speaker 2: now on Bloomberg TV and radio. It's great to have

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Speaker 2: you with us, sir, and appreciate your time today. Can

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Speaker 2: you confirm that these reports are true? Have you heard

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Speaker 2: outreach from Iran?

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Speaker 5: Well, there are some reports, and then the Iranians deny,

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Speaker 5: and then they may be passing messages through interlocutors to

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Speaker 5: the United States. I mean, you never know with the

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Speaker 5: Iranians what they're actually doing. But what I can tell

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Speaker 5: you is what's happening in the battle is they're losing.

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Speaker 5: As the President said, I think he was very diplomatic,

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Speaker 5: and he said Iran is not winning this war. They're

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Speaker 5: losing this war because Israel is determined to remove two

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Speaker 5: existential threats to our country. I mean, remember, Iran is

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Speaker 5: a country that openly calls it actively works to destroy Israel,

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Speaker 5: and they're on a pass lay weapons and we want

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Speaker 5: to remove destruction. We want to remove the ballistic threat.

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Speaker 3: I'm sorry, no understood. So then is it too late?

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Speaker 3: Is my question?

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Speaker 2: Do you need to see the destruction of Iran's nuclear program,

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Speaker 2: it's nuclear facilities before you ever consider going back to

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Speaker 2: the table.

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Speaker 5: Well, let's remember what happened a couple months ago. The

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Speaker 5: President talked about a sixty day timeline. I was with

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Speaker 5: the Prime Minister when he went to Washington, and the

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Speaker 5: President told the Prime Minister, look, he wants to give

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Speaker 5: Iran a last chance to see if we can can

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Speaker 5: reach a deal. But what were the outlines of that

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Speaker 5: deal is that Iran was going to have to dismantle

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Speaker 5: its military nuclear capability. That's what was put on the table.

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Speaker 5: And the President has been very clear about this from

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Speaker 5: the beginning, not just the beginning of his presidency. He's

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Speaker 5: been saying this for years. Iran must never have a

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Speaker 5: nuclear weapon, and he's been very clear that Iran cannot

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Speaker 5: have a nuclear enrichment capability, which is how you get

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Speaker 5: the fuel for nuclear weapons, So then you don't have

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Speaker 5: to really trust whether Iran has it or not. If

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Speaker 5: they have no fuel for the car, then it's not

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Speaker 5: a problem, and he gave it time. Several weeks. His

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Speaker 5: Special Envoy Steve Wetcoff, had several rounds of discussions, about

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Speaker 5: five rounds of discussions. We were in close contact with

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Speaker 5: them throughout, and they were very clear of what was

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Speaker 5: going to be their red lines and a deal. And

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Speaker 5: unfortunately Iran thought that they could string these talks on

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Speaker 5: forever and that there wasn't going to be any deadline,

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Speaker 5: and it was clear to us in the last few

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Speaker 5: days that there was no chance that iron was going

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Speaker 5: to agree to it. Will Iran agree to something else now,

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Speaker 5: I don't know, but remember one of their sites has

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Speaker 5: already been dismantled by us. That's the naton's Enrichmond facility,

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Speaker 5: and we're also basically taking out their missile production factories

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Speaker 5: as well. So we're going to go about our operation

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Speaker 5: to remove these two threats. Whether Iran will decide to

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Speaker 5: meet with the United States and agree to terms that

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Speaker 5: they should have taken a month ago or two weeks

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Speaker 5: ago or two months ago. You know, that's up to

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Speaker 5: Iran to decide.

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Speaker 2: Okay, all right, that's very important, Minister Dermer. I want

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Speaker 2: to go a little bit further down that road with you,

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Speaker 2: because we heard from National Security Advisor Hednagby who said

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Speaker 2: that Israel can tackle four Doe the site, the enrichment

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Speaker 2: site at four Dough deep underground alone. The conventional wisdom

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Speaker 2: here is that you need of the US to help

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Speaker 2: with that by way of bunker busting bombs. The MOAB

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Speaker 2: included is the destruction, Minister of for Dough the endgame,

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Speaker 2: and do you need us.

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Speaker 3: Help to do it.

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Speaker 5: I'm not going to get into operations this or that operation.

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Speaker 5: I hope by now people will not underestimate Israel's will

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Speaker 5: and ca capability of doing something thing. It's doing some

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Speaker 5: things in when we start a military operation. You saw

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Speaker 5: that with Hisbella, with the beepers. You've seen what's happened

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Speaker 5: in Gaza, You've seen what we've done as we're fighting

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Speaker 5: this seven front or so, I think it's safe to

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Speaker 5: say that you should underestimate Israel's capability to deal with threats.

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Speaker 5: What's important to understand, Joe, is that Israel started this

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Speaker 5: operation to remove two threats to the very survival of Israel.

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Speaker 5: We talked a little bit about the nuclear but there's

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Speaker 5: also the ballistic missile threats. Some of your viewers have

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Speaker 5: probably seen those scenes from Israeli neighborhoods where you had

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Speaker 5: a direct hit of a one ton missile. That's like

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Speaker 5: a bus filled with explosives flying through the air and

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Speaker 5: hitting a neighborhood. Now, imagine a country the size of Israel,

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Speaker 5: which is all the size of New Jersey, that Iran

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Speaker 5: would fire ten thousand or twenty thousand of these rockets,

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Speaker 5: and they have plans to build three hundred of these

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Speaker 5: a month, three thousand a year. You're gonna have ten

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Speaker 5: thousand every three years. This is not a threat that

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Speaker 5: we can tolerate. So we've launched an operation to deal

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Speaker 5: with both of those threats. And on day four, I

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Speaker 5: can tell you we're ahead of schedule of where we

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Speaker 5: want it to be, and we're going to win this

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Speaker 5: war with Iran, and so where's that schedule? Words hopefully

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Speaker 5: will turn the whole region to peace. Remember, we were

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Speaker 5: dealing with the a Ram Accords in the first term

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Speaker 5: and i'd liken the second term of President Trump to

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Speaker 5: expand that circle of peace.

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Speaker 2: Well, before we go that far, minister, how far are

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Speaker 2: you ahead of schedule? How far has the Iranian nuclear

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Speaker 2: program been set back?

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Speaker 5: Well, it's day four. We've taken out their main scientists.

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Speaker 5: Iran has the equivalent of the Manhattan Project, you know,

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Speaker 5: that effort to build a bomb by the United States

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Speaker 5: before World War Two that ultimately led to victory in Japan.

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Speaker 5: So Iran has this Manhattan Project and the main scientists

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Speaker 5: we're all taken out in the first few minutes of

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Speaker 5: this operation, and we've taken out information that they need

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Speaker 5: for nuclear weapons, and then facilities than a time in

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Speaker 5: Richmond Facility, which is their main enrichment facility, there's a

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Speaker 5: conversion facility that converts the uranium to the stuff that

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Speaker 5: you need in order to produce a momb that was

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Speaker 5: taken out. I mean we're setting them back. We're hitting

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Speaker 5: centrifuge manufacturing facilities, and we have a clear plan over

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Speaker 5: the next several days to degrade and destroy their capabilities

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Speaker 5: to produce and set them back several years. And in

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Speaker 5: that sense, we're ahead of where we thought we would

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Speaker 5: be on day four of this war. But we're going

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Speaker 5: to achieve what we set out to achieve.

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Speaker 2: Minister Durmer, there's a report that President Trump vetoed an

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Speaker 2: Israeli plan to kill Iran Supreme Leader Ayatola Ali Kameeni.

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Speaker 3: Is that true.

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Speaker 5: I'm not going to get into any private conversations with

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Speaker 5: US officials. What I can tell you is the US

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Speaker 5: has been tremendous in the support that it's given Israel

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Speaker 5: from the beginning of this war. On defense, they have

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Speaker 5: helped us with the AEGA ships to knock down these

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Speaker 5: flying buses full of TNT that were landing on our cities,

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Speaker 5: or the trial to land were launched at our cities.

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Speaker 5: I should say they were helpful in the THAD anti

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Speaker 5: missile system that you have. You also have American pilots

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Speaker 5: in the air knocking down drones that are being launched

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Speaker 5: at US from Iran. So we are deeply, deeply appreciative

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Speaker 5: of everything that President Trump and his administration has done

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Speaker 5: in order to defend and protect Israel. I mean, we're

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Speaker 5: doing the job on offense and defense as well, but

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Speaker 5: we appreciate everything that they have done to come to

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Speaker 5: the defense of Israel. It's deeply, deeply appreciated, not just

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Speaker 5: by the Prime Minister of Israel and the Government of Israel,

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Speaker 5: by all the people of Israel. We've never had a

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Speaker 5: better friend in the White House than President Trump. And

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Speaker 5: our greatest ally in the world is the United States

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Speaker 5: of America. And I think there's an understanding, frankly, Joe

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Speaker 5: in America and not just Israel. Then when we are

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Speaker 5: fighting Iran, we're not just fighting for ourselves. We're fighting

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Speaker 5: an enemy of the United States. I mean, these people

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Speaker 5: lead millions, these leaders in Iran, the tyrants of Tehran,

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Speaker 5: they lead millions of people in chance of death to America.

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Speaker 5: So when we're taking them on, we are fighting your fight,

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Speaker 5: and it actually our victory will also be an American victory,

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Speaker 5: and I think it will help turn the region into

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Speaker 5: a different direction. I think you're going to see that

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Speaker 5: a lot of the ghosts sales, and maybe they appear

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Speaker 5: on your show, and maybe they'll be critical of that,

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Speaker 5: and maybe they'll issue a pro form a condemnation. But

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Speaker 5: believe me, in capitals throughout the Gulf and throughout the region,

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Speaker 5: people who have lived under the shadow of Iran's campaign

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Speaker 5: of carnage and chaos and terrorism throughout the region. They

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Speaker 5: are rejoicing now, and my hope is that we're going

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Speaker 5: to act.

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Speaker 3: Offensively.

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Speaker 5: No, I think the United States is going to have

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Speaker 5: to do whatever is it sees, and the President is

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Speaker 5: ultimately the one that makes that decision. Whatever it sees

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Speaker 5: it's in America's interests, and I have full faith and

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Speaker 5: confidence that the President will make that decision whatever he

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Speaker 5: believes is in the American national interest. But I think

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Speaker 5: one thing you should keep your eye on, Joe, is

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Speaker 5: what happened, what is happening with any Our fight is

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Speaker 5: not with the Iranian people. We have no problem in

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Speaker 5: Israel with the Iranian people, and America should not have

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Speaker 5: a problem with the Iranian people. They're actually a very

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Speaker 5: pro American population, probably second to Israel in the entire

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Speaker 5: Middle East. It's the regime, and that regime subjugates them

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Speaker 5: and also terrorizes all of its neighbors, including our Arab neighbors,

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Speaker 5: while calling for Israel's destruction and ultimately for America's destruction.

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Speaker 5: Remember we're the little Satan, and they call you the

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Speaker 5: great Satan. So pay attention to what is happening inside Iran.

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Speaker 5: When you see the fires starting to spark against the regime.

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Speaker 5: And believe me, Joe, the thing that is most concerning

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Speaker 5: for the leader of Iran is that his people will

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Speaker 5: turn on him and his regime, because after nearly a

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Speaker 5: half century of tyranny, they've had it. You saw them

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Speaker 5: come to the streets in two thousand and nine, you

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Speaker 5: saw them go to the streets in twenty twenty two,

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Speaker 5: and they may actually go now. And he's very, very

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Speaker 5: worried about that. So we're going to wage our war

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Speaker 5: to achieve our goals. But keep your eye what the

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Speaker 5: people of Iran are doing.

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Speaker 3: We will, of course we will.

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Speaker 2: You've made a number of references to what happens after this,

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Speaker 2: Minister Dermer, and I'm curious to just extend that a

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Speaker 2: little bit, whether this conflict ends at the negotiating table

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Speaker 2: or on the battlefield. However this happens, will it also

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Speaker 2: bring an end to your war with Iranian proxies? Will

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Speaker 2: it mean an end to fighting in Gaza?

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Speaker 5: Well, I mean that's a very good question. A war

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Speaker 5: was launched against us on October seventh by one of

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Speaker 5: Iran's proxies, Camas, and you see what we've done since then.

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Speaker 5: When Iran basically opened many fronts against Israel, Hesbala in

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Speaker 5: the north, the Houti's in the south, and Yemen Shia

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Speaker 5: militias in Iraq, various different Iranian proxies in Syria, and

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Speaker 5: also directly from Iran itself. So we've been fighting this war.

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Speaker 5: But look what we've done. We have crushed Hamas in

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Speaker 5: Gaza and we essentially have decapitated Hesbala in Lebina. Iran

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Speaker 5: was this very powerful and dangerous octopus with all of

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Speaker 5: these arms. And what happen is those arms, those octopus arms,

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Speaker 5: have turned into t rex arms now and we have

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Speaker 5: cut them down to size. Now, in the wake of

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Speaker 5: this war, you say, well, how is it going to

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Speaker 5: be end diplomatically? Well, you know Japan ended diplomatically too.

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Speaker 5: You just had a surrender ceremony. What was it the

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Speaker 5: USS Missouri where you signed some documents. Now, we're not

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Speaker 5: looking to occupy Iran. We don't have a territorial conflict

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Speaker 5: with them. I don't think the United States is interested

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Speaker 5: in putting boots on the ground anywhere they don't have

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Speaker 5: to in the Middle East. That's not the question. The

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Speaker 5: question is, in the wake of this war, can we

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Speaker 5: then make it clear to Iran, that they have to

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Speaker 5: end their support for terror proxies, they have to give

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Speaker 5: up these ballistic missiles they're in violation of international law,

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Speaker 5: and that they have to end permanently any attempt for

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Speaker 5: a military nuclear capability. They want a peaceful nuclear program.

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Speaker 5: There are dozens of countries around the world that have

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Speaker 5: nuclear reactors. They don't domestically enrich uranium, and they can

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Speaker 5: do that. Those are the terms of what they I

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Speaker 5: think to get to an end of the war and

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Speaker 5: then to move on to the business of making peace

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Speaker 5: and continuing where President Trump left off at the end

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Speaker 5: of his first term when we made peace with four

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Speaker 5: Arab states, the United Arab Emeror Deerma, Crane, Sudan, and Morocco.

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Speaker 5: We should move that to other Gulf countries. And I

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Speaker 5: think there'll be a lot of surprises that will come

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Speaker 5: in the wake of this war, when you're going to

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Speaker 5: see actually peace deals start happening much faster than people think.

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Speaker 2: Okay, I want to ask you in our remaining moment, Minister,

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Speaker 2: because it's important. We're seeing a lot of numbers here.

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Speaker 2: I want to ask you about casualties and what's really

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Speaker 2: happening on the ground.

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Speaker 3: The National Emergency Services.

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Speaker 2: At least twenty one people identified as civilians have been

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Speaker 2: killed in Iran's retaliatory strikes since Friday.

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Speaker 3: Is that number still accurate?

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Speaker 5: I think that number now is up to twenty five. Unfortunately,

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Speaker 5: I'm not certain. You know, when you fired these ballistic

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Speaker 5: missiles into civilian areas and they're doing it, Remember, we're

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Speaker 5: targeting terrorists in Tehran have power to simply, you know,

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Speaker 5: carpet bomb whole cities. We don't do that. We're only

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Speaker 5: targeting terraces and trying to get the innocence in Tehran

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Speaker 5: and elsewhere of Iran out of harm's way. We're telling

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Speaker 5: people just today we took out the National Broadcasting Service,

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Speaker 5: which just I'm telling the people of Iran. I think

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Speaker 5: we're rejoicing over that. But we got people to evacuate

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Speaker 5: all the areas around it. They don't. They're not telling

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Speaker 5: us where they're going to fire. They want to kill

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Speaker 5: as many people as possible, and they're slinging these huge,

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Speaker 5: flaming buses into downtown Tel Aviv. You see it on

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Speaker 5: your television screens. So I think we're fortunate that the

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Speaker 5: casualties have not been even more than twenty five, even

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Speaker 5: though that it's a terrible tragedy for each and every

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Speaker 5: one of those families. But given what has been thrown

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Speaker 5: at us and fired at us, I think it speaks

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Speaker 5: to how the Israelis have acted under fire and what

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Speaker 5: kind of resolve that they have, And they're running into

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Speaker 5: their safe rooms, staying in the safe rooms, and acting

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Speaker 5: with a great deal of discipline that our home front

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Speaker 5: command is constantly encouraging them get into those safe rooms

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Speaker 5: because those are the places where it's really really unlikely

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Speaker 5: that they're going to be heard. And we've seen terrible

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Speaker 5: scenes of destruction, but unfortunately fewer casualties than otherwise people

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Speaker 5: would have expected.

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Speaker 2: We're glad that you could spend some time with us today, Minister,

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Speaker 2: and we'd like to stay close with you as this

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Speaker 2: all develops. Rondermer is Israel's Minister of Strategic Affairs former

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Speaker 2: Israeli ambassador to the US.

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Speaker 3: We thank you for your time.

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Speaker 2: I'm Joe Matthew and Washington as we follow the bad

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Speaker 2: to Canada. This is the backdrop for the G seven

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Speaker 2: summit that's getting underway right now. The open just took

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Speaker 2: place in Bloomberg's and Marie hor Dern following President Trump

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Speaker 2: to Banff, where she is right now, meetings getting underway.

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Speaker 2: In fact, we already brought you some images of the

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Speaker 2: President with Prime Minister Carney. He also sat down with

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Speaker 2: Germany's Chancellor Murrs and Marie, it's great to have you

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Speaker 2: with us here. You've had many conversations with Ron Dermer

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Speaker 2: and you can hear the passion in his voice today.

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Speaker 2: How is this adding to the conversation in Canada.

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Speaker 6: Well, I think one thing is very clear when you

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Speaker 6: hear from Ron Dermer is that the United States has

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Speaker 6: been absolutely supporting Israel in its defense. Of course, a

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Speaker 6: key question when we saw this attack originally take place

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Speaker 6: is how much the United States know and how much

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Speaker 6: support has the United States given Israel in the offense

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Speaker 6: at the moment. And the President said this over the

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Speaker 6: weekend to ABC News that they are not involved in

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Speaker 6: it right now, but it would become quote possible to

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Speaker 6: get involved. They have been very involved in terms of

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Speaker 6: helping Israel strike down missiles and drones, but they have

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Speaker 6: not yet joined in terms of the offense. And Joe,

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Speaker 6: you asked an excellent point when it comes to Fourdoh,

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Speaker 6: the nuclear facility that experts for years have said it

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Speaker 6: would be very possible for Israel to strike alone and

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Speaker 6: actually hit that nuclear facility, given the fact how it's

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Speaker 6: buried into deep into the mountain. And we have already

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Speaker 6: heard from the IAEA today that Fardeau stands fine and

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Speaker 6: has not been hit. But Ron Dermer didn't want to

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Speaker 6: get into any of those specifics, but just coming back

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Speaker 6: to the point that the US has been a great support.

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Speaker 3: Now.

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Speaker 6: At the same time, the President was asked about these

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Speaker 6: reports in the Wall Street Journal that Iran is using

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Speaker 6: back channels trying to get some Arab countries to convince

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Speaker 6: President Trump to put some weight on Benjamin nettin Yahoo

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Speaker 6: for a cease fire, and the President said, yeah, the

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Speaker 6: Iranians want to talk. The President also said something has

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Speaker 6: been repeating for days, which is that he gave Iran

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Speaker 6: months for a diplomatic off ramp. He's talking about some

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Speaker 6: sixty days. But actually Joe I reported in mid March

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Speaker 6: that that first letter went over to the Ayahtola giving

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Speaker 6: them a timeline to have talks, to have nuclear talks.

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Speaker 6: We were supposed to see the sixth round of those

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Speaker 6: nuclear talks with Steve Wikoff, his envoy in Oman yesterday

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Speaker 6: and obviously those talks did not go through.

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Speaker 3: So what's going to come from this meeting?

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Speaker 2: Then, Anne Marie, we understand there won't even be as

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Speaker 2: much as a communicate. Bloomberg is writing about the extent

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Speaker 2: to which Donald Trump loathes the G seven. What's the

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Speaker 2: point of getting everyone together?

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Speaker 6: Well, there won't be a communicate. And I think that

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Speaker 6: was a tactical strategic plan from Mark Karney and his

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Speaker 6: team because they remember what happened to them Prime Minister

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Speaker 6: Justin Trudeau in twenty eighteen when Trump left the summit

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Speaker 6: didn't sign off on the communicate. So what they're doing

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Speaker 6: this time around is they're trying to find points that

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Speaker 6: all of these leaders can actually agree upon and put

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Speaker 6: statements about those issues. So think of Critical Minerals or AI.

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Speaker 6: A key question is whether or not we could get

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Speaker 6: a statement now that this has overshadowed this, if we

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Speaker 6: could get some sort of statement from these leaders when

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Speaker 6: it comes to roan An Israel. So we will see

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Speaker 6: specific statements, but it won't be an overreaching communicate that

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Speaker 6: you would normally see in a G seven. We should

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Speaker 6: also note that the president here, besides, of course what

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Speaker 6: is going on in the Middle East and this concern

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Speaker 6: for the world about a wider regional war. They are

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Speaker 6: going to obviously be discussing trade. He is in the

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Speaker 6: midst of a trade war. We're not just Canada, and

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Speaker 6: he talked about that. At the top of his more

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Speaker 6: than hour meeting with Mark Carney, he said, I have

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Speaker 6: a tariff concept. Mark has something different, but trade is

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Speaker 6: going to be really key. He bought USTR Jamison Greer,

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Speaker 6: as well as the Treasury Secretary Scott Bessett, two individuals

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Speaker 6: have been leading on these trade talks. So the European

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Speaker 6: Union wants to make sure that they have these conversations

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Speaker 6: on trade, as well as Mexico's president who is preparing

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Speaker 6: for her first one on one meeting with Donald Trum

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Speaker 6: great reporting.

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Speaker 3: Anne Marie Hordern with us from Banff, a.

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Speaker 2: Beautiful location to hopefully get people in a room to

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Speaker 2: have some serious conversations. They'll be meeting in Cananaskis in

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Speaker 2: Canada and we'll let you know what comes from the

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Speaker 2: G seven with the help of Anne Marie and Bloomberg

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Speaker 2: Stavid Goerra, who was with us a bit earlier. I'm

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Speaker 2: Joe Matthew and Washington glad you came along. I can't

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Speaker 2: wait to hear what the panel thinks about all of this.

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Speaker 2: Genie Shanzano and Rick Davis are coming up.

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Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

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Speaker 1: us live weekdays at noon and five pm Eastern on

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Speaker 1: flagship New York station, Just Say Alexa, Play Bloomberg eleven thirty.

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Speaker 2: On Bloomberg TV and Radio, YouTube and Bloomberg Originals. It's

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Speaker 2: great to have you along as we assemble our political

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Speaker 2: panel following four days of attacks between Israel and Iran

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Speaker 2: and a fascinating conversation a Newsy conversation with Ron Dermer

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Speaker 2: that started our hour. Of course, the former Ambassador to

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Speaker 2: the US, Israel's former ambassador. He's now Minister of Strategic Affairs,

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Speaker 2: generating a lot of news here and pretty remarkable to

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Speaker 2: hear him talk about American pilots. American pilots in the

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Speaker 2: air over the weekend helping to knock down missiles ballistic

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Speaker 2: missiles shot by Iran at Israel.

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Speaker 3: He described them as.

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Speaker 2: Massive burning buses falling into the middle of civilian neighborhoods

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Speaker 2: and cities across Israel, it was difficult to get some

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Speaker 2: hard answers on US involvement. Offensively, he essentially kept that

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Speaker 2: on the US and said that Israel has a clear

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Speaker 2: plan to set Iran back several years with its nuclear program.

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Speaker 2: Wouldn't get specific about four Doah or some of the

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Speaker 2: other nuclear sites, the enrichment sites that Israel has been targeting,

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Speaker 2: but also does not appear ready to get back to

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Speaker 2: the table with reports today that Iran is signaling through

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Speaker 2: intermediaries that it wants to return to nuclear talks. President Trump,

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Speaker 2: in fact, was asked about that earlier today at the

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Speaker 2: G seven, and he did acknowledge that that was the case.

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Speaker 2: Let's assemble our political panel now for their take. Bloomberg

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Speaker 2: Politics contributors Genie Shanzino and Rick Davis are with us.

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Speaker 2: Rick is our Republican strategist partner at Stone Court Capital.

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Speaker 2: Genie senior democracy fellow with the Center for the Study

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Speaker 2: of the Presidency and Congress. After everything you just heard, Rick,

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Speaker 2: does that sound like a situation in which the United

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Speaker 2: States will begin providing offensive support in Israel's attack against Iran?

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Speaker 5: Yeah, Joe.

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Speaker 7: I think it just depends upon how you define offensive support. Look,

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Speaker 7: we've consistently put up defense of israel assets ships in

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Speaker 7: the Mediterranean to shoot down missiles from the Hoodies and

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Speaker 7: from Iran. We share intelligence actively with Israel in order

437
00:23:05,880 --> 00:23:08,240
Speaker 7: to not just defend their country but also keep an

438
00:23:08,280 --> 00:23:12,639
Speaker 7: eye on Iran. And so you could argue that some

439
00:23:12,680 --> 00:23:15,840
Speaker 7: of those things could be deemed offensive, but it is

440
00:23:15,880 --> 00:23:19,600
Speaker 7: not the intention based on what this administration has articulated,

441
00:23:20,080 --> 00:23:22,760
Speaker 7: that we will get into a fight with Iran, right

442
00:23:22,880 --> 00:23:26,879
Speaker 7: and Donald Trump's been very careful. Even just Saturday, he

443
00:23:27,000 --> 00:23:29,359
Speaker 7: was saying, Gee, we hope that Iran shows up on

444
00:23:29,440 --> 00:23:32,520
Speaker 7: Sunday for the negotiations because the only way that this

445
00:23:32,560 --> 00:23:35,200
Speaker 7: is going to end is with a treaty of some kind.

446
00:23:35,880 --> 00:23:40,000
Speaker 7: And so I think he wants to play in so

447
00:23:40,160 --> 00:23:43,160
Speaker 7: much as you can if you're Donald Trump, the good cop.

448
00:23:43,960 --> 00:23:47,960
Speaker 7: And by the way, what would that treaty look like tomorrow?

449
00:23:48,040 --> 00:23:51,760
Speaker 7: Based on what they were talking about yesterday. Yesterday there

450
00:23:51,760 --> 00:23:54,720
Speaker 7: were all kinds of questions about, you know, getting them

451
00:23:54,720 --> 00:23:58,960
Speaker 7: to stop enriching uranium. I think that it's pretty clear

452
00:23:59,040 --> 00:24:03,080
Speaker 7: that israel strategy and what they're executing on right now

453
00:24:03,200 --> 00:24:05,080
Speaker 7: is going to keep that from being able to happen,

454
00:24:05,119 --> 00:24:08,520
Speaker 7: So what's to negotiate there. I love the fact that

455
00:24:08,920 --> 00:24:12,520
Speaker 7: Ron Dermer, former Ambassador to the US, has said that

456
00:24:12,680 --> 00:24:14,760
Speaker 7: we also want to include ballistic missiles in that no

457
00:24:14,840 --> 00:24:18,760
Speaker 7: more ballistic missiles being manufactured by Iran, and I wouldn't

458
00:24:18,800 --> 00:24:21,560
Speaker 7: be surprised that even before the end of this current

459
00:24:22,480 --> 00:24:25,400
Speaker 7: attack is over, that they'll start talking about no more

460
00:24:25,520 --> 00:24:28,320
Speaker 7: drone manufacturing. And of course that would help our friends

461
00:24:28,320 --> 00:24:33,080
Speaker 7: in Ukraine mentally, because they are exporting terror by basically

462
00:24:33,119 --> 00:24:35,560
Speaker 7: selling their drones around the world to groups that want

463
00:24:35,600 --> 00:24:38,920
Speaker 7: to put Americans and other democratic nations in harm's way.

464
00:24:40,080 --> 00:24:42,200
Speaker 2: All right, Genie, what do you think is it possible

465
00:24:42,720 --> 00:24:46,120
Speaker 2: for the US to walk this line providing logistical support

466
00:24:46,280 --> 00:24:50,480
Speaker 2: essentially and defensive support to the extent that we've seen

467
00:24:50,520 --> 00:24:53,800
Speaker 2: American airmen in the air men and women presumably in

468
00:24:53,840 --> 00:24:57,080
Speaker 2: the air knocking down ballistic missiles fired by Iran. There's

469
00:24:57,160 --> 00:24:59,720
Speaker 2: reporting that the US NIMITS is on its way now

470
00:25:00,119 --> 00:25:04,919
Speaker 2: another carrier group to the region. We've surged so much material.

471
00:25:05,840 --> 00:25:08,719
Speaker 2: Is it possible that we could sleep walk into something larger?

472
00:25:10,240 --> 00:25:13,920
Speaker 8: That's absolutely The fear is that this escalates and as

473
00:25:13,960 --> 00:25:16,879
Speaker 8: things go in a conflict like this, as violent and

474
00:25:16,920 --> 00:25:19,560
Speaker 8: as long as this goes, that the US is somehow

475
00:25:19,680 --> 00:25:22,800
Speaker 8: dragged in. And of course yesterday the President said that

476
00:25:22,880 --> 00:25:26,760
Speaker 8: it is possible we could be active in this conflict.

477
00:25:26,840 --> 00:25:30,159
Speaker 8: So I think that is still a possibility. It was

478
00:25:30,240 --> 00:25:33,879
Speaker 8: such a fascinating conversation, Joe, because you could just feel

479
00:25:33,960 --> 00:25:37,439
Speaker 8: the passion in the minister's voice as he talked about

480
00:25:37,480 --> 00:25:40,919
Speaker 8: this incredibly difficult issue. And one of the things he

481
00:25:41,080 --> 00:25:44,360
Speaker 8: raised was you know, hopefully he said, and I don't

482
00:25:44,359 --> 00:25:47,080
Speaker 8: want to put words in his mouth. After we are done,

483
00:25:47,160 --> 00:25:50,280
Speaker 8: we live in a more peaceful Middle East, and you

484
00:25:50,280 --> 00:25:54,159
Speaker 8: know here here to that the question always is what

485
00:25:54,440 --> 00:25:57,399
Speaker 8: does the final day or the day after the final

486
00:25:57,520 --> 00:26:00,400
Speaker 8: day look like? On both sides? What is the end?

487
00:26:00,760 --> 00:26:04,840
Speaker 8: And that is still not clear. We can see from

488
00:26:04,920 --> 00:26:09,920
Speaker 8: all the reports that Iran is overgunned, out maneuvered, outmatched.

489
00:26:10,320 --> 00:26:14,000
Speaker 8: Israel has the upper hand. They have been decimated in Iran,

490
00:26:14,880 --> 00:26:19,240
Speaker 8: the proxies have been decimated, but there is no certainty

491
00:26:19,760 --> 00:26:23,240
Speaker 8: that they don't go underground after this is all over,

492
00:26:23,359 --> 00:26:26,600
Speaker 8: and what happens after we regime change, which is what

493
00:26:26,680 --> 00:26:29,560
Speaker 8: Iran has been Israel rather has been talking about if

494
00:26:29,600 --> 00:26:33,160
Speaker 8: we see a regime change, hopefully that regime is more

495
00:26:33,200 --> 00:26:36,399
Speaker 8: peaceful and more friendly to the United States, to Israel

496
00:26:36,440 --> 00:26:38,719
Speaker 8: in the Middle East. But that has not been what

497
00:26:38,760 --> 00:26:42,199
Speaker 8: we've seen in history. So that is the big question

498
00:26:42,280 --> 00:26:46,240
Speaker 8: I have. What does this look like when this finally

499
00:26:46,280 --> 00:26:48,720
Speaker 8: comes to an end. And I know the President is

500
00:26:48,720 --> 00:26:52,359
Speaker 8: saying Iran is talking about coming back to the table

501
00:26:52,480 --> 00:26:56,879
Speaker 8: for talks. How do you have talks about a nuclear

502
00:26:57,200 --> 00:27:02,239
Speaker 8: peace agreement when your nuclear capabilities have been decimated, if

503
00:27:02,280 --> 00:27:04,320
Speaker 8: that's indeed what happens at the end of this. So

504
00:27:04,680 --> 00:27:06,800
Speaker 8: I think there's a lot more questions here about the

505
00:27:06,920 --> 00:27:09,960
Speaker 8: end and a lot fewer answers and understanding as to

506
00:27:10,000 --> 00:27:13,280
Speaker 8: what that looks like and whether we are in fact

507
00:27:13,480 --> 00:27:15,840
Speaker 8: actually living in a world that is more peaceful here

508
00:27:15,880 --> 00:27:16,760
Speaker 8: and in the Middle East.

509
00:27:18,440 --> 00:27:22,560
Speaker 2: Rick Ron Dermer said, Israel has already dismantled then Atan's site.

510
00:27:22,640 --> 00:27:26,359
Speaker 2: This is Iran's main nuclear enrichment facility, and we know

511
00:27:26,440 --> 00:27:30,760
Speaker 2: that they had launched those attacks on Friday. There are questions,

512
00:27:30,760 --> 00:27:34,440
Speaker 2: and I asked Minister Dermer about what happens to Fourdeaux.

513
00:27:34,440 --> 00:27:36,840
Speaker 2: This is the enrichment site that is hundreds and hundreds

514
00:27:36,840 --> 00:27:40,040
Speaker 2: of feet beneath rock and it is believed that Israel

515
00:27:40,080 --> 00:27:42,840
Speaker 2: can't reach that far underground without the help of US

516
00:27:42,880 --> 00:27:46,879
Speaker 2: bunker busters. If they in fact can get there, should

517
00:27:46,920 --> 00:27:49,960
Speaker 2: we be trained on this site? Does Israel feel that

518
00:27:50,000 --> 00:27:52,080
Speaker 2: it needs to close the deal in four dou.

519
00:27:53,400 --> 00:27:53,640
Speaker 9: Well?

520
00:27:53,680 --> 00:27:57,840
Speaker 7: I think that if they had the means mo Abs

521
00:27:57,880 --> 00:28:02,560
Speaker 7: Mother of All bombs, bulk or busters, that I have

522
00:28:02,680 --> 00:28:06,520
Speaker 7: no doubt that they would probably have targeted that site

523
00:28:06,560 --> 00:28:08,800
Speaker 7: earlier on. But they know there are limitations. They have,

524
00:28:09,040 --> 00:28:14,639
Speaker 7: you know, fantastic precision guidance weapons missiles, but when you

525
00:28:14,720 --> 00:28:18,040
Speaker 7: bury something deep into a mountain side, it's trickier to

526
00:28:18,080 --> 00:28:21,200
Speaker 7: get to. And maybe that is the sum and substance

527
00:28:21,320 --> 00:28:24,919
Speaker 7: of ultimately a piece deal is that inspectors get to

528
00:28:24,920 --> 00:28:28,160
Speaker 7: go in and we make sure those centerfuges are dismantled

529
00:28:28,640 --> 00:28:33,600
Speaker 7: and they're monitoring. And so rather than destroy it with

530
00:28:34,760 --> 00:28:38,640
Speaker 7: with you know, offensive means, you get rid of it

531
00:28:38,760 --> 00:28:42,480
Speaker 7: through the negotiation process. And yet I think it's very

532
00:28:42,480 --> 00:28:46,760
Speaker 7: clear from your interview with Ron Dermer that Israel will

533
00:28:46,800 --> 00:28:50,600
Speaker 7: not stop as hostilities till they get the deal they want,

534
00:28:51,120 --> 00:28:53,600
Speaker 7: and he was not willing to describe what that deal

535
00:28:53,640 --> 00:28:57,800
Speaker 7: looks like. But I'm pretty confident that the two existential

536
00:28:57,880 --> 00:29:02,120
Speaker 7: threats that he described, a ballistic missiles and a nuclear program,

537
00:29:02,400 --> 00:29:04,840
Speaker 7: have to go away in order for this fight to stop.

538
00:29:06,800 --> 00:29:12,200
Speaker 2: Are you surprised at the way this has unfolded, Genie?

539
00:29:12,760 --> 00:29:14,960
Speaker 2: I've mentioned this a few times over the past couple

540
00:29:15,000 --> 00:29:15,440
Speaker 2: of days.

541
00:29:15,760 --> 00:29:16,960
Speaker 3: People our age grew up.

542
00:29:16,880 --> 00:29:19,720
Speaker 2: Thinking that this would be the beginning of World War three,

543
00:29:19,800 --> 00:29:21,600
Speaker 2: that this was the line you couldn't cross to have

544
00:29:21,760 --> 00:29:25,840
Speaker 2: Israel in fact go to war with Iran. But seeing

545
00:29:25,840 --> 00:29:29,680
Speaker 2: Iran as crippled as it was going into this, with

546
00:29:30,000 --> 00:29:36,560
Speaker 2: its missile defenses attacked repeatedly by Israel, it's changed the

547
00:29:36,600 --> 00:29:39,240
Speaker 2: way we're looking at this entire dynamic. You've got a

548
00:29:39,280 --> 00:29:42,640
Speaker 2: stock market today that's up hundreds of points even as

549
00:29:42,680 --> 00:29:44,960
Speaker 2: this takes place in the Middle East?

550
00:29:45,040 --> 00:29:46,160
Speaker 3: Are we missing something here?

551
00:29:47,920 --> 00:29:48,160
Speaker 5: You know?

552
00:29:48,520 --> 00:29:51,400
Speaker 8: I think that is how we grew up, and it

553
00:29:51,440 --> 00:29:55,320
Speaker 8: is a very scary proposition this has been. You know,

554
00:29:55,960 --> 00:29:58,040
Speaker 8: the Israel knew they had to go in now, if

555
00:29:58,080 --> 00:30:00,280
Speaker 8: they were going to go in at all, because of

556
00:30:00,280 --> 00:30:05,120
Speaker 8: course is Iran was weakened severely, as were the proxies.

557
00:30:05,560 --> 00:30:08,520
Speaker 8: I think the concern again is that there is no

558
00:30:08,680 --> 00:30:12,240
Speaker 8: guarantee that they stay weakened, and that is one of

559
00:30:12,240 --> 00:30:15,520
Speaker 8: the scary aspects of this. There is this assumption that

560
00:30:15,560 --> 00:30:18,640
Speaker 8: we take out this regime and what follows is much

561
00:30:18,920 --> 00:30:22,360
Speaker 8: friendlier to the Middle East and to the United States,

562
00:30:22,640 --> 00:30:25,320
Speaker 8: and that is not necessarily the case. Do they go

563
00:30:25,520 --> 00:30:29,800
Speaker 8: underground like North Korea and build a bomb. They have

564
00:30:29,960 --> 00:30:32,760
Speaker 8: the knowledge, they have the means, they have the capacity.

565
00:30:33,200 --> 00:30:36,040
Speaker 8: So those are all very scary propositions. And we should

566
00:30:36,040 --> 00:30:40,160
Speaker 8: also add from a domestic standpoint, Donald Trump is finding

567
00:30:40,240 --> 00:30:44,160
Speaker 8: himself in a domestic conundrum here on both this issue

568
00:30:44,200 --> 00:30:48,600
Speaker 8: and immigration. Similarly, where the MAGA right is standing up

569
00:30:48,720 --> 00:30:52,400
Speaker 8: all weakened on these two issues and saying you have

570
00:30:52,600 --> 00:30:55,640
Speaker 8: abandoned your promise so much so he came back and say,

571
00:30:55,680 --> 00:30:58,400
Speaker 8: Maggi policy is whatever I say it is. But that

572
00:30:58,600 --> 00:31:01,520
Speaker 8: is also a real threat to Donald Trump domestically.

573
00:31:02,840 --> 00:31:06,040
Speaker 2: Great conversation as always with Genie Shanzano and Rick Davis.

574
00:31:06,080 --> 00:31:09,880
Speaker 2: I appreciate your insights, Bloomberg Politics contributors. For a reason,

575
00:31:10,600 --> 00:31:12,840
Speaker 2: we're going to talk more about the market reaction or

576
00:31:12,960 --> 00:31:15,360
Speaker 2: lack thereof, to what we're seeing here in the Middle

577
00:31:15,360 --> 00:31:18,600
Speaker 2: East and drill down on energy. Bob McNally from Rapidan

578
00:31:18,760 --> 00:31:20,240
Speaker 2: is going to be with us to talk about what

579
00:31:20,280 --> 00:31:21,920
Speaker 2: this means for the energy complex.

580
00:31:22,000 --> 00:31:28,480
Speaker 1: Next on Bloomberg, you're listening to the Bloomberg Balance of

581
00:31:28,520 --> 00:31:31,920
Speaker 1: Power podcast. Catch us live weekdays at noon and five

582
00:31:31,960 --> 00:31:35,000
Speaker 1: pm Eastern on Apple, Coarcklay and Android Auto with the

583
00:31:35,000 --> 00:31:38,880
Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

584
00:31:39,160 --> 00:31:41,320
Speaker 1: or watch us live on YouTube.

585
00:31:42,400 --> 00:31:47,720
Speaker 3: It is pretty remarkable. Stocks up, fixed down, oil down.

586
00:31:49,840 --> 00:31:52,280
Speaker 2: Doesn't sound like a world in which we're on the

587
00:31:52,320 --> 00:31:55,280
Speaker 2: precipice of a global conflict breaking out of the Middle East,

588
00:31:56,400 --> 00:31:58,960
Speaker 2: unless Charlie Pellett is whistling past the graveyard. Here, we

589
00:31:59,000 --> 00:32:01,200
Speaker 2: have a pretty decent market on our hands after four

590
00:32:01,280 --> 00:32:05,240
Speaker 2: days of attacks between Israel and Iran. I want to

591
00:32:05,240 --> 00:32:08,000
Speaker 2: spend some time with Christina Kino, who covers the markets

592
00:32:08,000 --> 00:32:10,920
Speaker 2: for US, Bloomberg's managing editor for Markets Live with us

593
00:32:11,000 --> 00:32:14,760
Speaker 2: on Bloomberg. Christine, thanks so much for joining from New York.

594
00:32:14,840 --> 00:32:17,600
Speaker 2: Why do investors seem so confident? Is it just a

595
00:32:17,600 --> 00:32:20,360
Speaker 2: matter of one headline that Iran is looking.

596
00:32:20,120 --> 00:32:20,880
Speaker 3: For an off ramp?

597
00:32:21,400 --> 00:32:23,800
Speaker 10: Well, Joe, you know the history of markets is that

598
00:32:23,880 --> 00:32:28,360
Speaker 10: they are notoriously bad at pricing geopolitical risk. And you

599
00:32:28,360 --> 00:32:30,640
Speaker 10: know the same goes for what we're seeing now and

600
00:32:30,760 --> 00:32:33,640
Speaker 10: is latest out of the Middle East conflict. We did

601
00:32:33,680 --> 00:32:37,120
Speaker 10: see the initial knee jerk negative reaction on Friday when

602
00:32:37,240 --> 00:32:42,200
Speaker 10: news of Israel's initial strike against Iran emerged, and since

603
00:32:42,320 --> 00:32:46,040
Speaker 10: over the weekend, we have seen investors being willing to

604
00:32:46,800 --> 00:32:50,640
Speaker 10: recalibrate their appetite for risk, and clearly that's leaning more

605
00:32:50,640 --> 00:32:53,800
Speaker 10: toward the risk positive side of things. I mean, there's

606
00:32:53,840 --> 00:32:59,120
Speaker 10: definitely the headline that Iran is potentially willing to de escalate,

607
00:32:59,280 --> 00:33:01,800
Speaker 10: helping sent a little bit. But more broadly, you know,

608
00:33:01,880 --> 00:33:05,120
Speaker 10: there is still this very bullish sentiment in markets, particularly

609
00:33:05,160 --> 00:33:05,680
Speaker 10: in stocks.

610
00:33:06,920 --> 00:33:09,200
Speaker 2: Well, I guess this can take on a life of

611
00:33:09,240 --> 00:33:10,920
Speaker 2: its own, But what are you looking at? What sectors

612
00:33:10,960 --> 00:33:13,000
Speaker 2: are power in this higher Well, Joe.

613
00:33:12,840 --> 00:33:16,280
Speaker 10: You know, we're seeing the traditional sector. Semiconductors definitely one

614
00:33:16,320 --> 00:33:19,880
Speaker 10: of the sectors that are powering this rally. You're talking

615
00:33:19,920 --> 00:33:22,840
Speaker 10: about your magnificence of inn stocks, your big tech, and

616
00:33:23,120 --> 00:33:25,560
Speaker 10: that tends to be what we see, you know, during

617
00:33:25,560 --> 00:33:29,240
Speaker 10: the times of a rebound in markets, all these megacap

618
00:33:29,280 --> 00:33:32,560
Speaker 10: stocks that tend to get better when risk sentiment pulls back,

619
00:33:32,680 --> 00:33:34,880
Speaker 10: they're the ones that lead a rally. Right out of

620
00:33:34,920 --> 00:33:37,080
Speaker 10: the gate when we're starting the week on a more

621
00:33:37,120 --> 00:33:39,520
Speaker 10: positive note like this. The other thing the thing to

622
00:33:39,600 --> 00:33:42,200
Speaker 10: keep watch on is the dollar, because you know, it's

623
00:33:42,240 --> 00:33:44,880
Speaker 10: a relationship with risk a version really has been shifting

624
00:33:44,880 --> 00:33:46,520
Speaker 10: a lot. You know, gone are the days when the

625
00:33:46,560 --> 00:33:49,800
Speaker 10: dollar is an ultimate gain or an automatic game because

626
00:33:49,840 --> 00:33:52,080
Speaker 10: of risk a version. It seems like it's more responding

627
00:33:52,120 --> 00:33:56,040
Speaker 10: to developments domestically, particularly as we have the Federal Reserve

628
00:33:56,120 --> 00:33:57,240
Speaker 10: decision later this week.

629
00:33:58,360 --> 00:34:01,240
Speaker 2: Really interesting to see most to the big defense names

630
00:34:01,720 --> 00:34:04,360
Speaker 2: coming back down to earth after the big rally we

631
00:34:04,400 --> 00:34:09,160
Speaker 2: saw last week. Lockheed, Northrop, L three all down three

632
00:34:09,200 --> 00:34:12,120
Speaker 2: percent or more at this stage of the game, which

633
00:34:12,200 --> 00:34:14,480
Speaker 2: will be following for you here, Christina, is great to

634
00:34:14,480 --> 00:34:16,839
Speaker 2: have you appreciate your read on the markets. Come see

635
00:34:16,880 --> 00:34:19,080
Speaker 2: us again here on Balance of Power Live from New York,

636
00:34:19,760 --> 00:34:24,120
Speaker 2: Christina Keno from our market's team, I'm Joe Matthew in Washington.

637
00:34:24,120 --> 00:34:26,520
Speaker 2: As we zero went a little bit more closely on

638
00:34:26,719 --> 00:34:29,919
Speaker 2: energy and more specifically oil were as I mentioned, looking

639
00:34:29,960 --> 00:34:32,319
Speaker 2: at lower prices today that goes for WTI and that

640
00:34:32,360 --> 00:34:34,879
Speaker 2: goes for Brent down about a percent and a half

641
00:34:35,000 --> 00:34:37,759
Speaker 2: each following a little bit of an uptick last week,

642
00:34:37,840 --> 00:34:41,360
Speaker 2: a more severe uptick right at the outset of Israel's

643
00:34:41,360 --> 00:34:45,560
Speaker 2: attack on Iran. We can't have this conversation without Bob mcnaalan.

644
00:34:45,640 --> 00:34:47,359
Speaker 2: I've been looking forward to doing this for a couple

645
00:34:47,400 --> 00:34:49,279
Speaker 2: of days here to get his read, the founder and

646
00:34:49,320 --> 00:34:53,120
Speaker 2: president Rapidan Energy Group, former White House Energy advisor in

647
00:34:53,160 --> 00:34:56,080
Speaker 2: the George W. Bush administration. Bob, welcome back. It's great

648
00:34:56,080 --> 00:34:59,680
Speaker 2: to see you. Should this market be more concerned.

649
00:35:00,080 --> 00:35:02,160
Speaker 11: Great to be with you, Joe, You know, I think

650
00:35:02,200 --> 00:35:05,200
Speaker 11: it should, but you know what, you have to cut

651
00:35:05,239 --> 00:35:08,600
Speaker 11: it some slack. We have a pattern here where we've

652
00:35:08,640 --> 00:35:12,880
Speaker 11: had scary geopolitical disruption events going back to September of

653
00:35:12,920 --> 00:35:17,400
Speaker 11: twenty nineteen when the Iranians hit the Saudi Abcake stabilization plant,

654
00:35:17,640 --> 00:35:20,400
Speaker 11: most important oil facility in the world, had the biggest

655
00:35:20,440 --> 00:35:24,480
Speaker 11: open in Sunday and for crude oil markets ever, but

656
00:35:24,520 --> 00:35:28,600
Speaker 11: it didn't last. The Iranians chose to inflict light reversible damage.

657
00:35:28,760 --> 00:35:32,239
Speaker 11: Russian of Asia, Ukraine cruised, crude prices spiked, ended up

658
00:35:32,239 --> 00:35:35,560
Speaker 11: being a nothing burger. We've had the houties disrupts the

659
00:35:35,719 --> 00:35:38,880
Speaker 11: you know, Baba Ma Dab hasn't royal global oil markets

660
00:35:38,920 --> 00:35:41,560
Speaker 11: and Israel and Iran have come to blows twice last

661
00:35:41,640 --> 00:35:44,759
Speaker 11: year and now, and we still see oil flowing through

662
00:35:44,760 --> 00:35:48,360
Speaker 11: Horn Moves and being produced. So it's understandable why the

663
00:35:48,360 --> 00:35:49,719
Speaker 11: market would say, boya cried wolf.

664
00:35:49,760 --> 00:35:51,120
Speaker 9: I've seen this movie before.

665
00:35:50,920 --> 00:35:52,280
Speaker 3: Going back on and changes.

666
00:35:52,760 --> 00:35:55,000
Speaker 2: I'm going to watch un does close the straight for well,

667
00:35:55,080 --> 00:35:56,920
Speaker 2: keep hearing this is that the worst case scenario for

668
00:35:56,960 --> 00:35:57,600
Speaker 2: the oil market.

669
00:35:58,200 --> 00:35:59,719
Speaker 9: It's right up there in my view.

670
00:35:59,800 --> 00:36:04,200
Speaker 11: The worst case is a damaging attack on the Adcake

671
00:36:04,239 --> 00:36:07,839
Speaker 11: stabilization plan. There is no more important and valuable piece

672
00:36:07,840 --> 00:36:11,560
Speaker 11: of real estate on planet Earth. One facility stabilizes and

673
00:36:11,560 --> 00:36:13,760
Speaker 11: controls about seven million barrels a day of Saudi production.

674
00:36:13,800 --> 00:36:15,560
Speaker 11: The Iranians hit it once just as just as so

675
00:36:15,719 --> 00:36:18,120
Speaker 11: that they could. They didn't do damage. If they went

676
00:36:18,160 --> 00:36:21,360
Speaker 11: back and destroyed that facility, Joe, we'd be in a depression.

677
00:36:21,480 --> 00:36:23,759
Speaker 11: We oil go to one fifty in a week and

678
00:36:23,800 --> 00:36:26,040
Speaker 11: then down to twenty, and it would be really the

679
00:36:26,160 --> 00:36:27,799
Speaker 11: end of the world as we know it. At seven

680
00:36:27,840 --> 00:36:31,200
Speaker 11: percent of world oil supply gone now straight at Horn

681
00:36:31,239 --> 00:36:34,839
Speaker 11: Moos is eighteen million barrels a day, about five million

682
00:36:34,880 --> 00:36:37,000
Speaker 11: barrels a day of product, thirteen million barrels a day

683
00:36:37,000 --> 00:36:39,320
Speaker 11: accrued not a lot of redirects. You can put a

684
00:36:39,320 --> 00:36:41,880
Speaker 11: little bit out through Yamboo and the Red Sea, and

685
00:36:41,920 --> 00:36:45,240
Speaker 11: a little bit out through UAE through Hobsham, but basically

686
00:36:45,320 --> 00:36:48,760
Speaker 11: you're losing fifteen fourteen million barrels a day. Our strategic

687
00:36:48,760 --> 00:36:51,120
Speaker 11: stocks can't cover that. Even if they were full, they

688
00:36:51,160 --> 00:36:53,799
Speaker 11: couldn't cover that. So yeah, that's right up there as

689
00:36:53,840 --> 00:36:54,520
Speaker 11: a second worst.

690
00:36:54,520 --> 00:36:55,320
Speaker 9: I would think.

691
00:36:55,320 --> 00:36:58,400
Speaker 2: Neither of these appear to be expected by this market.

692
00:36:58,560 --> 00:37:01,680
Speaker 2: It gets back to the boy who cried wolf. To

693
00:37:01,760 --> 00:37:04,640
Speaker 2: your point here, we had Ron Dermer on the program

694
00:37:04,680 --> 00:37:07,520
Speaker 2: at the top of the hour, Minister for Strategic Affairs

695
00:37:07,560 --> 00:37:09,880
Speaker 2: in Israel, and he's.

696
00:37:09,719 --> 00:37:11,919
Speaker 3: Talking a tough game. They're not done.

697
00:37:12,000 --> 00:37:15,439
Speaker 2: They're not near being done, according to Ron Dermer, who

698
00:37:15,440 --> 00:37:17,960
Speaker 2: talked about not only eliminating the nuclear threat, but the

699
00:37:18,000 --> 00:37:21,200
Speaker 2: ballistic missile threat. That's going to require a lot more

700
00:37:21,239 --> 00:37:24,239
Speaker 2: sorties and could potentially change.

701
00:37:23,960 --> 00:37:26,920
Speaker 3: The nuances of this conflict.

702
00:37:28,160 --> 00:37:31,360
Speaker 2: Short of the worst case scenarios, you're mapping out, what

703
00:37:31,400 --> 00:37:32,600
Speaker 2: else should we have our eyes on.

704
00:37:33,200 --> 00:37:36,719
Speaker 11: Well, you know, Israel is a changed country after ten

705
00:37:36,800 --> 00:37:41,280
Speaker 11: seven twenty three, and the plan was always Gaza, Lebanon

706
00:37:41,920 --> 00:37:45,200
Speaker 11: and then Iran, and we're into the Iran phase. And

707
00:37:45,520 --> 00:37:49,920
Speaker 11: I think they're even hinting at regime destabilization, if not destruction.

708
00:37:50,000 --> 00:37:55,080
Speaker 11: They're emptying Tehran, et cetera. So Israel is not going

709
00:37:55,120 --> 00:37:58,600
Speaker 11: to stop until it achieves its objectives, very least neutralizing

710
00:37:58,680 --> 00:38:03,560
Speaker 11: nuclear facilities, missiles, and possibly destabilizing that regime. And I

711
00:38:03,560 --> 00:38:06,359
Speaker 11: don't believe President Trump is going to stop Israel from

712
00:38:06,400 --> 00:38:10,400
Speaker 11: doing that. So I would think that Iran has to

713
00:38:10,400 --> 00:38:13,320
Speaker 11: play the only card it has. It doesn't have military

714
00:38:13,840 --> 00:38:17,040
Speaker 11: escalation dominance with US or at Israel. The only card

715
00:38:17,120 --> 00:38:20,320
Speaker 11: Iran has is to threaten the thing that scares President

716
00:38:20,320 --> 00:38:23,560
Speaker 11: Trump perhaps the most, and that is five dollars gasoline here.

717
00:38:24,080 --> 00:38:26,239
Speaker 3: And so whether it could make that happen, it.

718
00:38:26,280 --> 00:38:29,200
Speaker 11: Can make that happen, And this debate is out there.

719
00:38:29,520 --> 00:38:31,839
Speaker 11: We shouldn't expect if the United States were to become

720
00:38:31,840 --> 00:38:34,319
Speaker 11: militarily engaged against Iran, or Iran were to try to

721
00:38:34,320 --> 00:38:36,680
Speaker 11: close the straits, it wouldn't be like the First Gulf

722
00:38:36,760 --> 00:38:39,720
Speaker 11: War or the Second Gulf War, where the US prevailed

723
00:38:39,760 --> 00:38:41,560
Speaker 11: militarily in hours to days.

724
00:38:41,680 --> 00:38:43,080
Speaker 9: No, it would not be a cakewalk.

725
00:38:43,320 --> 00:38:46,560
Speaker 11: Look at the Hutis, who are inferior to Iran, yet

726
00:38:46,600 --> 00:38:50,600
Speaker 11: they are keeping us at bay. Iran is able to

727
00:38:50,680 --> 00:38:52,879
Speaker 11: shut that straight for some period of time, a lot

728
00:38:52,920 --> 00:38:55,399
Speaker 11: longer than the market thinks. So I think they may

729
00:38:55,440 --> 00:38:58,560
Speaker 11: have to demonstrate that they're willing to do that to

730
00:38:58,640 --> 00:39:01,840
Speaker 11: get this crude price back, to try and convince President

731
00:39:01,880 --> 00:39:03,040
Speaker 11: Trump to reign in the Israelis.

732
00:39:03,080 --> 00:39:05,120
Speaker 9: In a way, it's the only card that fascinating.

733
00:39:05,160 --> 00:39:09,879
Speaker 2: You've been preparing for this moment, probably for a long

734
00:39:09,920 --> 00:39:12,680
Speaker 2: time as somebody in the oil space. What's different about

735
00:39:12,719 --> 00:39:16,160
Speaker 2: Iran and it's standing in the oil market It's importance

736
00:39:16,480 --> 00:39:17,960
Speaker 2: and scale in the oil market.

737
00:39:18,040 --> 00:39:20,480
Speaker 3: Now, then, say, back in the nineteen.

738
00:39:20,160 --> 00:39:23,680
Speaker 2: Seventies when an embargo had such an impact on our lives.

739
00:39:23,920 --> 00:39:26,400
Speaker 11: Yeah, you know, back in the nineteen seventies, especially the

740
00:39:26,440 --> 00:39:30,360
Speaker 11: early nineteen seventies, the United States was the Saudi Arabia,

741
00:39:30,920 --> 00:39:33,799
Speaker 11: the swing producer, the spare capacity holder of oil. Going

742
00:39:33,800 --> 00:39:36,879
Speaker 11: back a little earlier, late nineteen sixties Arab Israeli war,

743
00:39:36,960 --> 00:39:39,680
Speaker 11: Arab oil embargo didn't matter because the United States had

744
00:39:39,920 --> 00:39:40,719
Speaker 11: a safe.

745
00:39:40,680 --> 00:39:42,560
Speaker 9: Ample buffer in spare.

746
00:39:42,840 --> 00:39:45,319
Speaker 11: But as we went through the nineteen seventies, that went

747
00:39:45,400 --> 00:39:49,520
Speaker 11: over to opek and the United States lost control. And

748
00:39:49,600 --> 00:39:52,560
Speaker 11: here we are with a one hundred million barrel a

749
00:39:52,640 --> 00:39:56,719
Speaker 11: day market with maybe three four million barrels a day

750
00:39:56,719 --> 00:40:00,440
Speaker 11: of spare, and all of the spare is in the.

751
00:40:00,400 --> 00:40:04,279
Speaker 9: War zone in the Arabian Gulf. So we are We're in.

752
00:40:04,280 --> 00:40:06,680
Speaker 11: A pickle, and the world's in a pickle. And what

753
00:40:06,719 --> 00:40:09,200
Speaker 11: I think people may not realize. In the seventies, the

754
00:40:09,280 --> 00:40:12,400
Speaker 11: United States knew we were vulnerable because we were losing control.

755
00:40:13,120 --> 00:40:16,920
Speaker 11: The imports were rising. What people may think now is

756
00:40:17,000 --> 00:40:19,200
Speaker 11: because of shale oil, because of the US is a

757
00:40:19,239 --> 00:40:20,120
Speaker 11: net oil exporter.

758
00:40:20,200 --> 00:40:21,120
Speaker 9: I hear this all the time.

759
00:40:21,400 --> 00:40:24,279
Speaker 11: We don't need the Middle East, We don't need the oil. Yes,

760
00:40:24,400 --> 00:40:27,120
Speaker 11: we do, because the price of oil is what we

761
00:40:27,160 --> 00:40:30,080
Speaker 11: really care about. What our consumers and businesses and investors

762
00:40:30,239 --> 00:40:32,239
Speaker 11: care about the price you pay for it.

763
00:40:32,200 --> 00:40:34,920
Speaker 9: Not where it comes back, which is a segue, and whether.

764
00:40:34,680 --> 00:40:37,520
Speaker 11: We're an importer or an exporter, whether we're big or small.

765
00:40:38,280 --> 00:40:42,239
Speaker 11: If there's a disruption anywhere, prices go up everywhere.

766
00:40:42,360 --> 00:40:46,960
Speaker 2: In the meantime is reel Attacking Iranian energy sites means

767
00:40:47,360 --> 00:40:50,920
Speaker 2: an energy crisis in Iran or beyond the region.

768
00:40:51,280 --> 00:40:54,000
Speaker 11: So it depends on what targets they attack. So if

769
00:40:54,120 --> 00:40:58,560
Speaker 11: they're attacking local oil terminals like outside of Tehran like

770
00:40:58,600 --> 00:41:03,160
Speaker 11: they did, or the South Park fourteen face fourteen gas saw. Yes, right, Yeah,

771
00:41:03,200 --> 00:41:05,560
Speaker 11: that's a problem for Iran. That's not a problem for

772
00:41:05,560 --> 00:41:06,720
Speaker 11: a mister and Missus America.

773
00:41:06,760 --> 00:41:09,759
Speaker 9: That's not a problem for our Exxon station knows this,

774
00:41:09,960 --> 00:41:10,399
Speaker 9: that's right.

775
00:41:10,480 --> 00:41:13,839
Speaker 11: And so the Iranians hit the Haifa refinery. These are

776
00:41:13,920 --> 00:41:18,360
Speaker 11: hitting domestic facilities in Iran and Israel. It's concerning because

777
00:41:18,360 --> 00:41:23,000
Speaker 11: they're spreading beyond military targets. However, it hasn't yet hit

778
00:41:23,960 --> 00:41:26,759
Speaker 11: flows or production that matter for the world, and that's

779
00:41:26,760 --> 00:41:29,440
Speaker 11: why crude is off today and folks are not so

780
00:41:29,560 --> 00:41:30,080
Speaker 11: much worried.

781
00:41:30,160 --> 00:41:32,560
Speaker 3: Isn't that something This is all remarkable to hear about.

782
00:41:34,080 --> 00:41:37,360
Speaker 2: As I think about your answer on the Strategic Petroleum Reserve,

783
00:41:37,400 --> 00:41:39,120
Speaker 2: we talked to the Energy Secretary last week.

784
00:41:39,160 --> 00:41:43,360
Speaker 3: Chris Wright said it would take years. We've heard this

785
00:41:43,400 --> 00:41:44,560
Speaker 3: constantly from the administries.

786
00:41:44,640 --> 00:41:48,000
Speaker 2: If first we have to repair the caverns and then

787
00:41:48,040 --> 00:41:49,759
Speaker 2: we can start bidding, it's going to be a year's

788
00:41:49,800 --> 00:41:52,080
Speaker 2: long process. But Bob, it sounds like we don't have years.

789
00:41:52,640 --> 00:41:55,280
Speaker 2: Based on what you just said, we might need that oil.

790
00:41:55,640 --> 00:42:00,839
Speaker 11: Yeah, you know, sometimes our biggest mistakes are bipartisan and

791
00:42:01,400 --> 00:42:05,319
Speaker 11: Congress and its wisdom. Both parties, starting about five ten

792
00:42:05,400 --> 00:42:07,799
Speaker 11: years ago, started selling off the SPR just because we

793
00:42:07,800 --> 00:42:10,880
Speaker 11: thought we didn't need it, and then President Biden sold

794
00:42:11,560 --> 00:42:15,080
Speaker 11: about one hundred and eighty million barrels when there was

795
00:42:15,120 --> 00:42:18,200
Speaker 11: no emergency with Russia. We didn't lose any Russian oil.

796
00:42:18,239 --> 00:42:20,359
Speaker 11: Had we lost Russian oil would have been a reason

797
00:42:20,400 --> 00:42:20,799
Speaker 11: there wasn't.

798
00:42:20,840 --> 00:42:21,480
Speaker 9: So here we are.

799
00:42:22,880 --> 00:42:28,000
Speaker 11: Half of the reserve is full. Secretary's right, right, is right.

800
00:42:28,040 --> 00:42:30,960
Speaker 11: We'd have to be slow to refill it. I was

801
00:42:30,960 --> 00:42:33,200
Speaker 11: working for President Bush and we did it through a

802
00:42:33,239 --> 00:42:35,840
Speaker 11: royalty and kind program and took us.

803
00:42:36,080 --> 00:42:37,839
Speaker 9: Years to get back to the tippy top.

804
00:42:37,920 --> 00:42:38,960
Speaker 3: So you've already done this.

805
00:42:39,239 --> 00:42:40,719
Speaker 9: I've done it. I was there in the White House

806
00:42:40,719 --> 00:42:42,120
Speaker 9: after nine to eleven. I've tried.

807
00:42:42,520 --> 00:42:45,240
Speaker 11: I was there for the Second Gulf War. We thought

808
00:42:45,239 --> 00:42:48,879
Speaker 11: through the type of barrel flow and contingency planning, where

809
00:42:48,880 --> 00:42:52,800
Speaker 11: our inventories where spare capacity. And the math gets pretty

810
00:42:52,880 --> 00:42:56,120
Speaker 11: grim if we lose the Strait of Hormuz or Abcake

811
00:42:56,360 --> 00:42:57,640
Speaker 11: with or without an SPR.

812
00:42:57,840 --> 00:43:00,680
Speaker 3: If that happened, you'd have to release what was left

813
00:43:00,680 --> 00:43:01,000
Speaker 3: in there.

814
00:43:01,040 --> 00:43:04,240
Speaker 11: Now they would I think we'd organize a release between

815
00:43:04,320 --> 00:43:06,520
Speaker 11: us and then the Japanese and the Germans hold most

816
00:43:06,560 --> 00:43:09,399
Speaker 11: of the other stocks. But we're talking about maybe two

817
00:43:09,440 --> 00:43:13,120
Speaker 11: to three million barrels a day of flow. Hormuz is

818
00:43:13,360 --> 00:43:18,120
Speaker 11: eighteen total, maybe some redirects. We're losing fifteen, so fifteen

819
00:43:18,200 --> 00:43:19,479
Speaker 11: is a lot more than you know, three.

820
00:43:19,680 --> 00:43:23,520
Speaker 3: Fascinating. It comes down to barrels, as you always say.

821
00:43:23,400 --> 00:43:24,840
Speaker 11: It comes down to barrels. And you know, there's an

822
00:43:24,880 --> 00:43:29,160
Speaker 11: iron law of economics. You can't consume which you can't produce,

823
00:43:29,640 --> 00:43:33,680
Speaker 11: and the price is like the police officer that enforces

824
00:43:33,719 --> 00:43:37,040
Speaker 11: that rule. And if you lose fifteen and you only

825
00:43:37,040 --> 00:43:40,560
Speaker 11: can grab thirteen from spr and you can't produce more

826
00:43:40,560 --> 00:43:43,360
Speaker 11: in a hurry, we've got to consume that much less

827
00:43:43,440 --> 00:43:45,919
Speaker 11: and the price will do that by going up.

828
00:43:46,239 --> 00:43:49,160
Speaker 2: What does this mean for the big oil names ex On,

829
00:43:49,320 --> 00:43:50,239
Speaker 2: Chevron and so forth.

830
00:43:50,280 --> 00:43:51,759
Speaker 3: The stocks are hardly moving.

831
00:43:52,160 --> 00:43:54,399
Speaker 9: And I understand that this is not a good thing

832
00:43:54,480 --> 00:43:54,799
Speaker 9: for them.

833
00:43:54,960 --> 00:43:57,960
Speaker 11: You know, we've seen wars in the Arabian Gulf lead

834
00:43:57,960 --> 00:44:01,239
Speaker 11: to oil price spikes, but what comes after that at recessions,

835
00:44:01,600 --> 00:44:04,560
Speaker 11: demand downturns, and price drops. This is not a good

836
00:44:04,600 --> 00:44:06,640
Speaker 11: thing if you're an oil company or an oil producer.

837
00:44:07,040 --> 00:44:09,920
Speaker 11: Now what would be interesting is if there is regime

838
00:44:10,000 --> 00:44:13,200
Speaker 11: change in Iran and you could get private companies operating

839
00:44:13,640 --> 00:44:17,080
Speaker 11: in that country with the world's second second third largest

840
00:44:17,120 --> 00:44:20,640
Speaker 11: oil reserves excuse me gas reserves, third largest oil reserves,

841
00:44:20,680 --> 00:44:23,280
Speaker 11: so there's a lot of oil there and if around

842
00:44:23,280 --> 00:44:26,719
Speaker 11: were to have regime change, peace and stability would be strengthened.

843
00:44:28,160 --> 00:44:32,080
Speaker 11: But yeah, so it's but for the oil companies though,

844
00:44:32,200 --> 00:44:34,240
Speaker 11: these momentary spikes.

845
00:44:33,880 --> 00:44:35,200
Speaker 3: Are dangerous, really interesting.

846
00:44:35,200 --> 00:44:37,120
Speaker 11: I think it's the same thing for OPEC countries as well.

847
00:44:37,200 --> 00:44:39,640
Speaker 2: Having listened to Bob McNally for a couple of minutes here,

848
00:44:39,719 --> 00:44:44,000
Speaker 2: you're not terribly worried yet, but things could change very quickly.

849
00:44:44,040 --> 00:44:45,040
Speaker 3: Is that a fair assessment.

850
00:44:45,360 --> 00:44:47,800
Speaker 11: You're right, I'm not terribly worried, but I'm more worried

851
00:44:47,800 --> 00:44:49,800
Speaker 11: than we are today. Here we are on the markets,

852
00:44:50,520 --> 00:44:53,040
Speaker 11: i'd be I would not be buying this sell off here.

853
00:44:53,200 --> 00:44:55,080
Speaker 9: I think we're going to be going higher before we

854
00:44:55,120 --> 00:44:56,959
Speaker 9: go lower. I think this is not over yet.

855
00:44:57,120 --> 00:45:01,560
Speaker 2: Fascinating as always, Bob McNally, wrap, great conversation. I'm so

856
00:45:01,600 --> 00:45:03,920
Speaker 2: glad that you come in. It's always great to have

857
00:45:03,960 --> 00:45:06,800
Speaker 2: you here in the nation's capital. I'm Joe Matthew and Washington.

858
00:45:06,800 --> 00:45:07,959
Speaker 2: Glad you're with us as well.

859
00:45:10,160 --> 00:45:13,640
Speaker 1: You're listening to the Bloomberg Balance of Power podcast. Catch

860
00:45:13,719 --> 00:45:16,799
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861
00:45:16,880 --> 00:45:20,120
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862
00:45:20,200 --> 00:45:23,200
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863
00:45:23,239 --> 00:45:27,319
Speaker 1: flagship New York station, Just Say Alexa Play Bloomberg eleven

864
00:45:27,440 --> 00:45:29,080
Speaker 1: thirty with.

865
00:45:29,160 --> 00:45:31,560
Speaker 2: A bit of euphoria in the markets here Following the

866
00:45:31,560 --> 00:45:33,920
Speaker 2: big headline on the Wall Street Journal, pretty interesting Eron

867
00:45:34,080 --> 00:45:36,240
Speaker 2: is looking for an off REMP. Maybe that's not a shocker,

868
00:45:37,200 --> 00:45:39,680
Speaker 2: but following predictions of World War three, that sounds pretty

869
00:45:39,680 --> 00:45:41,560
Speaker 2: good to a Wall Street trader. Today, we're going to

870
00:45:41,640 --> 00:45:44,880
Speaker 2: get to the bottom of whether that is actually founded.

871
00:45:45,440 --> 00:45:49,440
Speaker 2: With President Trump appearing a short time ago G seven, Canada,

872
00:45:50,320 --> 00:45:52,480
Speaker 2: David Goa just brought us up to date, remembering that

873
00:45:52,560 --> 00:45:55,920
Speaker 2: this is the alliance he loathes. According to the headline

874
00:45:56,040 --> 00:45:59,719
Speaker 2: on Bloomberg, he appeared with Mark Carney a short time

875
00:45:59,719 --> 00:46:02,120
Speaker 2: ago and was asked about the situation. Might be a

876
00:46:02,120 --> 00:46:04,600
Speaker 2: good time to bring in Tyler Kendall into this conversation.

877
00:46:04,680 --> 00:46:08,160
Speaker 2: Bloomberg's Washington correspondent is with me here on Balance of

878
00:46:08,200 --> 00:46:12,279
Speaker 2: Power with the President abroad. The conversation has been just

879
00:46:12,280 --> 00:46:14,239
Speaker 2: as dicey, and we're picking up where we left off

880
00:46:14,320 --> 00:46:17,440
Speaker 2: last week, Tyler. With regard to any number of national

881
00:46:17,480 --> 00:46:19,400
Speaker 2: security concerns, the big one.

882
00:46:19,280 --> 00:46:20,399
Speaker 3: Of course, is Iran and Israel.

883
00:46:20,400 --> 00:46:22,359
Speaker 2: They're going to be talking about Ukraine and Russia at

884
00:46:22,360 --> 00:46:25,399
Speaker 2: the G seven with President Zelenski on the invite list too.

885
00:46:25,520 --> 00:46:28,440
Speaker 12: Yeah, definitely Joe and President Trump. Actually, what we were

886
00:46:28,480 --> 00:46:31,240
Speaker 12: going to hear is that he appeared to confirm reports

887
00:46:31,280 --> 00:46:34,000
Speaker 12: that Iran really does want to de escalate here. He

888
00:46:34,040 --> 00:46:35,919
Speaker 12: says that he heard that they want to talk, and

889
00:46:35,960 --> 00:46:38,480
Speaker 12: he reiterated to them that they should make a deal

890
00:46:38,640 --> 00:46:43,080
Speaker 12: before it's too late. Now you're mentioning the other geopolitical conflicts,

891
00:46:43,200 --> 00:46:44,480
Speaker 12: But of course we have to keep in mind the

892
00:46:44,480 --> 00:46:46,720
Speaker 12: White House went into this G seven s and thinking

893
00:46:46,760 --> 00:46:48,880
Speaker 12: that trade was actually going to be the priority and

894
00:46:48,920 --> 00:46:51,479
Speaker 12: that they could show some sort of forward progress here

895
00:46:51,800 --> 00:46:54,000
Speaker 12: as we are now within that one month deadline to

896
00:46:54,120 --> 00:46:54,719
Speaker 12: July ninth.

897
00:46:55,080 --> 00:46:57,120
Speaker 2: Yeah, it's amazing to think back up a couple of weeks,

898
00:46:57,160 --> 00:47:00,160
Speaker 2: you would think this would be all about tariffs. The

899
00:47:00,160 --> 00:47:02,680
Speaker 2: world has of course once again shifted under our feet,

900
00:47:02,680 --> 00:47:04,239
Speaker 2: which is why it's a great pleasure to bring in

901
00:47:04,320 --> 00:47:05,200
Speaker 2: Christopher Smart.

902
00:47:05,400 --> 00:47:06,759
Speaker 3: He's with us in studio right now.

903
00:47:06,760 --> 00:47:09,600
Speaker 2: Founder managing partner are Growth Group, former Special Assistant to

904
00:47:09,640 --> 00:47:13,480
Speaker 2: the President at the National Economic Council and the Obama administration. Christopher,

905
00:47:13,520 --> 00:47:15,120
Speaker 2: great to see in Washington to do with you, Lad,

906
00:47:15,120 --> 00:47:17,919
Speaker 2: you're back with us. It's pretty interesting when you back

907
00:47:17,920 --> 00:47:21,600
Speaker 2: away from this ever changing world. You've got Wall Street

908
00:47:21,600 --> 00:47:24,439
Speaker 2: on a tear today, but your note to clients would

909
00:47:24,440 --> 00:47:26,320
Speaker 2: suggest that recession odds are rising.

910
00:47:26,400 --> 00:47:27,280
Speaker 3: How do you have both?

911
00:47:28,000 --> 00:47:30,200
Speaker 13: Well, it's short term, long term, I guess you know,

912
00:47:30,239 --> 00:47:32,080
Speaker 13: if you had gone home Thursday night and not looked

913
00:47:32,080 --> 00:47:33,640
Speaker 13: at the news until this morning, or not looked at

914
00:47:33,640 --> 00:47:36,200
Speaker 13: the markets until this morning, you would assume everything was

915
00:47:36,239 --> 00:47:39,319
Speaker 13: fine and nothing had changed since then. Given what's happened

916
00:47:39,360 --> 00:47:42,000
Speaker 13: to the stock prices, into bond prices, and even the

917
00:47:42,000 --> 00:47:44,399
Speaker 13: oil prices kind of cooled off a little bit since then,

918
00:47:44,680 --> 00:47:47,680
Speaker 13: I think the immediate risks of what we see unfolding

919
00:47:47,680 --> 00:47:52,000
Speaker 13: in the Middle East appear to not have much impact

920
00:47:52,080 --> 00:47:55,200
Speaker 13: on global oil supply, particularly since the Saudiast and Opek

921
00:47:55,239 --> 00:47:57,080
Speaker 13: have been pumping a lot of oil since the beginning

922
00:47:57,080 --> 00:47:59,000
Speaker 13: of the year, and the global economy is slowing down.

923
00:47:59,520 --> 00:48:00,640
Speaker 3: But there's all what was that risk?

924
00:48:00,640 --> 00:48:02,680
Speaker 13: And that's why markets look a little jumpier right now

925
00:48:02,719 --> 00:48:05,920
Speaker 13: that we're going to get some outsized events closing down

926
00:48:05,960 --> 00:48:07,880
Speaker 13: the straits of horror moves or something that really does

927
00:48:08,600 --> 00:48:09,239
Speaker 13: upset that bound.

928
00:48:09,360 --> 00:48:11,240
Speaker 2: That's the event that keeps you up at night, because

929
00:48:11,239 --> 00:48:14,680
Speaker 2: we all grew up Christopher with the idea that if

930
00:48:14,760 --> 00:48:18,319
Speaker 2: Israel were to go to war with Iran, that's over.

931
00:48:18,400 --> 00:48:20,319
Speaker 2: This is World War three times. You've heard Donald Trump

932
00:48:20,400 --> 00:48:22,840
Speaker 2: say it himself. He grew up in that same environment.

933
00:48:22,880 --> 00:48:23,960
Speaker 2: Are we learning otherwise?

934
00:48:24,280 --> 00:48:27,759
Speaker 13: I think we're learning otherwise because the folks lining up

935
00:48:27,840 --> 00:48:30,640
Speaker 13: on the other side of the equation behind Iran aren't

936
00:48:30,640 --> 00:48:33,720
Speaker 13: lining up very closely behind the Iatola and the current government.

937
00:48:34,719 --> 00:48:39,000
Speaker 13: You have President Putin, who is one of Iran's allies,

938
00:48:39,840 --> 00:48:42,840
Speaker 13: offering to mediate the conversation rather than saying he's backing

939
00:48:42,840 --> 00:48:45,360
Speaker 13: Iran to the hilt. You've heard very little from China

940
00:48:45,440 --> 00:48:47,640
Speaker 13: other than let's try and de escalate this thing, and

941
00:48:47,680 --> 00:48:50,640
Speaker 13: everything should be solved through negotiations. So it appears, at

942
00:48:50,680 --> 00:48:52,839
Speaker 13: least right now, to be contained. But obviously, when you've

943
00:48:52,880 --> 00:48:55,040
Speaker 13: got that kind of exchange of missiles back and forth,

944
00:48:55,480 --> 00:48:58,640
Speaker 13: the risk of something going astray and some other US

945
00:48:58,680 --> 00:48:59,360
Speaker 13: asset being.

946
00:48:59,280 --> 00:49:00,959
Speaker 3: Hit is always there.

947
00:49:01,120 --> 00:49:03,239
Speaker 12: Well, I wanted to build on this because President Trump,

948
00:49:03,320 --> 00:49:05,520
Speaker 12: of course is at the G seven, but as you mentioned,

949
00:49:05,560 --> 00:49:07,520
Speaker 12: he took a call not from a G seven ally

950
00:49:07,560 --> 00:49:10,279
Speaker 12: over the weekend, but from the Russian president. And then

951
00:49:10,400 --> 00:49:13,520
Speaker 12: also we've heard from him actually just moments ago at

952
00:49:13,560 --> 00:49:15,839
Speaker 12: the G seven saying that he would potentially welcome if

953
00:49:15,920 --> 00:49:18,720
Speaker 12: China did come into these talks because he needs somebody

954
00:49:19,080 --> 00:49:22,160
Speaker 12: that Iran would speak to. So when it comes to

955
00:49:22,200 --> 00:49:25,480
Speaker 12: these strategic alliances that Iran does have, will they really

956
00:49:25,520 --> 00:49:26,879
Speaker 12: make an impact at the end of the day.

957
00:49:27,640 --> 00:49:30,400
Speaker 13: It's hard to see how they will, particularly because Israel

958
00:49:30,480 --> 00:49:34,160
Speaker 13: frankly is winning right now and looks like it is

959
00:49:34,239 --> 00:49:37,719
Speaker 13: going to be able to drive the military balance as

960
00:49:37,760 --> 00:49:40,279
Speaker 13: far as it wants to go. And so that's why

961
00:49:40,320 --> 00:49:42,280
Speaker 13: you see I think these overtures on behalf of Iran

962
00:49:42,320 --> 00:49:45,359
Speaker 13: to say let's talk, let's talk. But again, it's hard

963
00:49:45,400 --> 00:49:49,440
Speaker 13: to see how involving either Russia or China improves the

964
00:49:49,480 --> 00:49:53,920
Speaker 13: prospects for peace as long as Israel continues to have

965
00:49:53,960 --> 00:49:56,480
Speaker 13: its eye on the ball, which appears to be completely

966
00:49:56,520 --> 00:50:02,080
Speaker 13: disarming Iran's military and maybe doing enough weakening of the

967
00:50:02,080 --> 00:50:04,520
Speaker 13: regime to see if something new and better can replace it.

968
00:50:04,840 --> 00:50:09,320
Speaker 12: I was going to bring the picture actually to domestic

969
00:50:09,800 --> 00:50:12,120
Speaker 12: issues here as we have this interest rate decision of

970
00:50:12,120 --> 00:50:15,920
Speaker 12: course on Wednesday, and wondering how you're seeing these tensions

971
00:50:15,920 --> 00:50:19,239
Speaker 12: in the Middle East complicate an already complicated picture for

972
00:50:19,360 --> 00:50:20,000
Speaker 12: the FMC.

973
00:50:20,280 --> 00:50:22,440
Speaker 13: Well, I think it gives the FOMC yet another excuse

974
00:50:22,520 --> 00:50:27,080
Speaker 13: to do nothing, because the uncertainty of the oil price

975
00:50:27,520 --> 00:50:31,840
Speaker 13: compounds the uncertainty around tariffs. Usually an oil price spike

976
00:50:31,920 --> 00:50:34,920
Speaker 13: is something that more monetary policy monetary authorities try and

977
00:50:34,960 --> 00:50:38,879
Speaker 13: look through as a one off. But the volatility and

978
00:50:39,040 --> 00:50:41,439
Speaker 13: the impact on expectations, I think is where the FED

979
00:50:41,480 --> 00:50:43,719
Speaker 13: will be focused most of all, as it has been

980
00:50:44,280 --> 00:50:45,560
Speaker 13: looking at the tariff equation.

981
00:50:46,000 --> 00:50:48,080
Speaker 2: What do you think when you're looking at Donald Trump

982
00:50:48,120 --> 00:50:51,200
Speaker 2: at the G seven talking about as if it was

983
00:50:51,400 --> 00:50:55,040
Speaker 2: something done in error, Vladimir putin Russia somehow kick that

984
00:50:55,040 --> 00:50:59,040
Speaker 2: out of the alliance. Very skeptical of our allies in Europe,

985
00:51:00,080 --> 00:51:03,280
Speaker 2: kind of poking Mark Carney not with the fifty first state,

986
00:51:03,320 --> 00:51:05,680
Speaker 2: but a lot he's referring to the former Prime minister

987
00:51:05,760 --> 00:51:09,919
Speaker 2: and so forth. The Transatlantic rift does Wall Street care

988
00:51:10,120 --> 00:51:12,080
Speaker 2: about this. We talk about it a lot at home.

989
00:51:12,120 --> 00:51:12,960
Speaker 2: What about the market?

990
00:51:13,160 --> 00:51:15,279
Speaker 13: I think it's hard for markets to price it in

991
00:51:15,400 --> 00:51:17,640
Speaker 13: on a day to day basis. I think where you

992
00:51:17,719 --> 00:51:20,799
Speaker 13: really do start seeing it impacted is when you talk

993
00:51:20,920 --> 00:51:25,520
Speaker 13: to some of my clients who are corporates with global footprints,

994
00:51:25,520 --> 00:51:29,560
Speaker 13: certainly Transatlantic footprints, and feel frozen, not sure quite where

995
00:51:29,600 --> 00:51:32,200
Speaker 13: to build their next factory, quite where to sign the

996
00:51:32,239 --> 00:51:34,560
Speaker 13: next contract with their supplier. That's the kind of thing

997
00:51:34,560 --> 00:51:36,960
Speaker 13: that's likely to play through not day to day, but

998
00:51:37,480 --> 00:51:40,920
Speaker 13: month to month and even year to year. I think

999
00:51:41,080 --> 00:51:45,120
Speaker 13: the difficulty with how to interpret the president's statements. I

1000
00:51:45,120 --> 00:51:47,640
Speaker 13: think he really is focused on he wants to do deals,

1001
00:51:47,640 --> 00:51:50,000
Speaker 13: and he wants peace deals. I'm not sure he thinks

1002
00:51:50,000 --> 00:51:53,040
Speaker 13: about what happens beyond the peace deal or after you

1003
00:51:53,120 --> 00:51:56,359
Speaker 13: come to agreement with Putin on Ukraine? Does that embolden him,

1004
00:51:56,360 --> 00:51:58,880
Speaker 13: does that upset the balance of power? Does that change

1005
00:51:58,880 --> 00:52:01,120
Speaker 13: the global order? I'm not sure he thinks in those terms.

1006
00:52:01,480 --> 00:52:05,120
Speaker 13: He's really just looking to find a way forward for Iran,

1007
00:52:05,320 --> 00:52:12,880
Speaker 13: for Gaza, for Ukraine, and see if he can secure

1008
00:52:12,920 --> 00:52:16,560
Speaker 13: those kinds of understandings without necessarily thinking about what they.

1009
00:52:16,400 --> 00:52:20,040
Speaker 12: Mean for the next steps from peace deals to trade deals,

1010
00:52:20,080 --> 00:52:22,160
Speaker 12: which of course was supposed to really be the other

1011
00:52:22,239 --> 00:52:24,640
Speaker 12: big focus of the summit. We had the Treasury Secretary

1012
00:52:24,640 --> 00:52:26,920
Speaker 12: Scott Besson on Capitol Hill last week saying that it

1013
00:52:26,960 --> 00:52:29,919
Speaker 12: is highly likely that some of these trading partners are

1014
00:52:29,960 --> 00:52:32,680
Speaker 12: going to get an extension beyond July ninth, those ones

1015
00:52:32,719 --> 00:52:37,080
Speaker 12: that have been prioritized in these talks. In your note

1016
00:52:37,080 --> 00:52:39,879
Speaker 12: you talk about investment in the US. I'm wondering what

1017
00:52:39,920 --> 00:52:42,560
Speaker 12: that would mean for investment decisions in this country if

1018
00:52:42,560 --> 00:52:45,879
Speaker 12: we see certain countries perhaps see those rates go back

1019
00:52:45,960 --> 00:52:48,200
Speaker 12: up to where they were on April second, and others

1020
00:52:48,239 --> 00:52:49,400
Speaker 12: get an extended pause.

1021
00:52:49,680 --> 00:52:51,319
Speaker 13: Well, I think that's the problem with the way this

1022
00:52:51,360 --> 00:52:53,480
Speaker 13: has all been rolled out, is that the uncertainty is

1023
00:52:54,480 --> 00:52:57,120
Speaker 13: very high, and whether there is a deal that gets

1024
00:52:57,120 --> 00:52:59,680
Speaker 13: done with the country, will it be renegotiated because something

1025
00:52:59,680 --> 00:53:05,240
Speaker 13: else up. How can you start planning with your trade

1026
00:53:05,280 --> 00:53:06,960
Speaker 13: flows and your suppliers that may come out of the

1027
00:53:07,040 --> 00:53:08,880
Speaker 13: UK without knowing what's going to without knowing what's going

1028
00:53:08,960 --> 00:53:09,440
Speaker 13: to happen.

1029
00:53:09,280 --> 00:53:10,600
Speaker 3: With the EU.

1030
00:53:11,160 --> 00:53:15,000
Speaker 13: How do you understand your global auto supply chain without

1031
00:53:15,160 --> 00:53:17,239
Speaker 13: a deal in place with Japan? I mean there are

1032
00:53:17,239 --> 00:53:21,480
Speaker 13: lots of very complicated, interlocking pieces to this puzzle, and

1033
00:53:21,560 --> 00:53:24,680
Speaker 13: as long as most of them remain undecided and uncertain,

1034
00:53:24,760 --> 00:53:28,040
Speaker 13: I think that is where you build the uncertainty into

1035
00:53:28,360 --> 00:53:31,200
Speaker 13: business decisions. And I'll just say one more thing. Sooner

1036
00:53:31,280 --> 00:53:33,160
Speaker 13: or later, companies are going to have to make decisions.

1037
00:53:33,200 --> 00:53:35,680
Speaker 13: They can't be frozen forever, and so they're going to

1038
00:53:35,760 --> 00:53:37,719
Speaker 13: have to make more costly decisions. It's going to eat

1039
00:53:37,719 --> 00:53:40,320
Speaker 13: into their earnings. It's going to eat into the returns

1040
00:53:40,320 --> 00:53:41,520
Speaker 13: that investors should be expecting.

1041
00:53:41,560 --> 00:53:43,279
Speaker 3: Well, wait a minute, what happened in ninety deals in

1042
00:53:43,360 --> 00:53:44,360
Speaker 3: ninety days? Christopher?

1043
00:53:44,520 --> 00:53:47,480
Speaker 13: Well, deals are deals, but what we've been getting is

1044
00:53:47,520 --> 00:53:50,080
Speaker 13: sort of handshakes on a framework for the potential of

1045
00:53:50,080 --> 00:53:51,319
Speaker 13: a memorandum.

1046
00:53:50,840 --> 00:53:52,680
Speaker 3: Understanding rather than a trade deal.

1047
00:53:52,960 --> 00:53:54,640
Speaker 13: And I think that's the kind of thing that make

1048
00:53:54,719 --> 00:53:58,120
Speaker 13: investors crazy, because you know, they need to decide what

1049
00:53:58,280 --> 00:54:01,560
Speaker 13: particular terrif line their particular product falls into and what

1050
00:54:01,680 --> 00:54:03,600
Speaker 13: extra charge is going to be for that, rather than

1051
00:54:04,000 --> 00:54:06,719
Speaker 13: a framework for you know, working this out over a

1052
00:54:06,719 --> 00:54:07,680
Speaker 13: period of weeks and months.

1053
00:54:08,520 --> 00:54:11,919
Speaker 12: What about sector specific tariffs, how are you watching those?

1054
00:54:12,000 --> 00:54:15,080
Speaker 12: Because that seems to be the more longer lasting, perhaps

1055
00:54:15,160 --> 00:54:19,160
Speaker 12: more durable solution from this administration, when we do see

1056
00:54:19,440 --> 00:54:22,160
Speaker 12: the so called reciprocal tariffs get more of a pushback.

1057
00:54:22,200 --> 00:54:25,120
Speaker 12: And I'm particularly fascinated by the fact that these sector

1058
00:54:25,160 --> 00:54:29,040
Speaker 12: specific tariffs weren't supposed to be in those original negotiations

1059
00:54:29,040 --> 00:54:30,720
Speaker 12: on so called Liberation Day.

1060
00:54:31,000 --> 00:54:33,040
Speaker 13: No, indeed, And I think that is, you know, given

1061
00:54:33,080 --> 00:54:36,120
Speaker 13: the court pushbacks on some of these tariffs that are

1062
00:54:36,160 --> 00:54:39,960
Speaker 13: based on the president's international emergency authorities that courts are

1063
00:54:39,960 --> 00:54:45,160
Speaker 13: deciding to rule against. The much stronger leg that the

1064
00:54:45,160 --> 00:54:49,920
Speaker 13: president administration has to rest on are these sectoral tariffs,

1065
00:54:49,960 --> 00:54:52,799
Speaker 13: whether it's on steel, whether it's on pharmaceuticals or the

1066
00:54:52,840 --> 00:54:54,880
Speaker 13: automotive sector. And I think those are the kinds of

1067
00:54:54,880 --> 00:54:57,560
Speaker 13: things that are potentially much more disruptives of the global

1068
00:54:57,560 --> 00:55:00,239
Speaker 13: economy because it's not just a single bilateral relationship that

1069
00:55:00,280 --> 00:55:05,479
Speaker 13: they're impacting, but pharmaceuticals, autos steal and I think that's

1070
00:55:05,520 --> 00:55:06,640
Speaker 13: the kind of thing that we're going to have to

1071
00:55:06,719 --> 00:55:07,239
Speaker 13: keep our eye on.

1072
00:55:07,719 --> 00:55:10,960
Speaker 3: No communicate has expected to come from this G seven.

1073
00:55:11,040 --> 00:55:12,680
Speaker 3: That's how little we're getting along.

1074
00:55:12,760 --> 00:55:13,920
Speaker 13: I think they've learned their lesson.

1075
00:55:14,080 --> 00:55:17,600
Speaker 3: Yeah, that didn't go great in twenty eighteen. I guess it.

1076
00:55:17,520 --> 00:55:19,440
Speaker 13: Didn't go great in twenty eighteen in Ma Any case,

1077
00:55:19,480 --> 00:55:21,560
Speaker 13: I think are important when you do have agreement, because

1078
00:55:21,600 --> 00:55:24,839
Speaker 13: it does help frame things, but they also also tend

1079
00:55:24,880 --> 00:55:25,960
Speaker 13: to highlight the disagreement.

1080
00:55:26,040 --> 00:55:27,560
Speaker 3: So is this the tree that fell on the woods?

1081
00:55:27,680 --> 00:55:28,200
Speaker 3: G seven?

1082
00:55:29,040 --> 00:55:31,719
Speaker 13: Well, it's a complicated G seven, right, because we were

1083
00:55:31,760 --> 00:55:35,760
Speaker 13: expecting to have some clarity on trade if nothing else.

1084
00:55:35,960 --> 00:55:37,920
Speaker 13: You know, there's still talk that there might be a

1085
00:55:37,920 --> 00:55:40,920
Speaker 13: bilateral deal with India or Japan announced because the President

1086
00:55:40,920 --> 00:55:43,319
Speaker 13: will be meeting with both of those leaders. But I

1087
00:55:43,360 --> 00:55:48,120
Speaker 13: think generally it is being tremendously overshadowed by the news

1088
00:55:48,120 --> 00:55:51,239
Speaker 13: of the day, by what's going on on the ground

1089
00:55:51,280 --> 00:55:54,880
Speaker 13: in Iran, in Israel, the potential for talking about Russia,

1090
00:55:55,000 --> 00:55:58,200
Speaker 13: talking about China in this context. So I think it's

1091
00:55:58,239 --> 00:56:01,680
Speaker 13: going to be hard to write that single headline coming

1092
00:56:01,719 --> 00:56:04,640
Speaker 13: out of the G seven that we might all prefer

1093
00:56:04,760 --> 00:56:05,400
Speaker 13: to be able to do.

1094
00:56:05,520 --> 00:56:07,680
Speaker 2: This is the world that we're in, Tyler. We've got

1095
00:56:07,680 --> 00:56:10,400
Speaker 2: an image of President Trump with the Chancellor of Germany.

1096
00:56:10,520 --> 00:56:13,440
Speaker 2: The meeting did happen, Chancellor Murr's and the President's got

1097
00:56:13,480 --> 00:56:14,040
Speaker 2: a big smile.

1098
00:56:14,200 --> 00:56:15,759
Speaker 3: Looks like the meeting went pretty well.

1099
00:56:15,760 --> 00:56:18,000
Speaker 2: We'll see if anything comes of it, and if the

1100
00:56:18,040 --> 00:56:21,279
Speaker 2: market wants to care about that today. Great pleasure to

1101
00:56:21,280 --> 00:56:23,760
Speaker 2: have Christopher Smart with us in studio are Growth Group.

1102
00:56:24,280 --> 00:56:26,720
Speaker 2: Great to be with you, Toast to Boston and everyone

1103
00:56:26,760 --> 00:56:28,520
Speaker 2: in my former town when you get back home.

1104
00:56:28,560 --> 00:56:30,120
Speaker 3: Break to have you here in the nation's capital.

1105
00:56:33,880 --> 00:56:37,080
Speaker 2: Thanks for listening to the Balance of Power podcast. Make

1106
00:56:37,120 --> 00:56:40,040
Speaker 2: sure to subscribe if you haven't already, at Apple, Spotify,

1107
00:56:40,160 --> 00:56:42,759
Speaker 2: or wherever you get your podcasts, and you can find

1108
00:56:42,800 --> 00:56:46,040
Speaker 2: us live every weekday from Washington, DC at noontime Eastern

1109
00:56:46,360 --> 00:56:47,720
Speaker 2: at Bloomberg dot com.