WEBVTT - Trump’s Plan to Open the Strait of Hormuz? Close It 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.360 --> 0:00:11.160 The ceasefire between the US and Iran is set to 0:00:11.200 --> 0:00:14.960 expire next week, and following an inconclusive round of peace 0:00:15.000 --> 0:00:18.520 talks in Pakistan, the US is trying a different tactic 0:00:18.640 --> 0:00:22.600 to pressure Iran into a deal, a naval blockade. 0:00:22.680 --> 0:00:25.200 President Trump says the US blockade in the Strait of 0:00:25.280 --> 0:00:26.600 Hormuz has begun. 0:00:26.480 --> 0:00:30.000 Two tankers under US sanctions turning round as the restrictions 0:00:30.040 --> 0:00:33.879 went into effect. President Trump announcing that any Iranian who 0:00:33.960 --> 0:00:37.320 fires at US or at peaceful vessels will be blown 0:00:37.400 --> 0:00:37.880 to hew. 0:00:38.520 --> 0:00:42.159 The blockade was implemented Monday, further cutting off the Persian 0:00:42.200 --> 0:00:43.560 Gulf from the rest of the world. 0:00:43.880 --> 0:00:46.920 It seems as though President Trump has been saying, you know, 0:00:46.960 --> 0:00:48.920 the street must be opened, the straight must be opened, 0:00:48.920 --> 0:00:50.920 the street must be opened, but we're going to close 0:00:50.960 --> 0:00:52.720 it in order to get it to reopen. 0:00:53.400 --> 0:00:56.600 Becca Wasser is the defense lead for Bloomberg Economics. 0:00:56.920 --> 0:00:59.360 But the logic I for at least what I can 0:00:59.360 --> 0:01:03.080 piece together, is the idea of this economic pressure on 0:01:03.240 --> 0:01:07.600 Iran is going to either force them to concede at 0:01:07.959 --> 0:01:12.920 the negotiating table right now or over time. That pressure 0:01:13.040 --> 0:01:16.120 is going to lead them to make some of those concessions, 0:01:16.400 --> 0:01:20.600 to agree to terms that the US feels quite strongly about. 0:01:21.040 --> 0:01:23.880 People familiar with the matter told Bloomberg that the US 0:01:23.959 --> 0:01:26.800 and Iran are in talks about holding a second round 0:01:26.800 --> 0:01:30.399 of negotiations in the coming days, and Becca says the 0:01:30.440 --> 0:01:32.840 blockade only raises the stakes. 0:01:33.240 --> 0:01:36.200 The risks here are really the escalation risks in an 0:01:36.360 --> 0:01:41.400 already fragile ceasefire in a really fraught conflict, and that 0:01:41.440 --> 0:01:44.880 could ratchet up tensions further at a time where it 0:01:44.920 --> 0:01:47.480 does seem as though there are some signals from all 0:01:47.520 --> 0:01:49.680 sides to try and de escalate slightly. 0:01:54.200 --> 0:01:56.440 I'm Sarah Holder, and this is the big tack from 0:01:56.440 --> 0:01:59.840 Bloomberg News today on the show, how the US is 0:02:00.000 --> 0:02:03.000 an evil blockade of the Strait of Hormuz works, what 0:02:03.040 --> 0:02:06.360 could happen if it's tested, and how this latest pressure 0:02:06.400 --> 0:02:14.080 tactic could influence another route of Iran US peace talks. 0:02:15.040 --> 0:02:16.960 But my first question for you is just what is 0:02:17.000 --> 0:02:20.360 the status of the US blockade in Iran? What do 0:02:20.360 --> 0:02:22.320 we know about what's actually been set up so far? 0:02:22.600 --> 0:02:25.520 President Donald Trump said that it was a total blockade 0:02:25.639 --> 0:02:28.520 in the vein that he said for Venezuela, in which 0:02:28.520 --> 0:02:32.640 it would be almost all ships. But US Central Command 0:02:32.840 --> 0:02:37.960 issued a more restrictive definition of the blockade where they 0:02:38.000 --> 0:02:41.480 said that they were going to blockade all maritime traffic 0:02:41.680 --> 0:02:46.240 intending to enter Iranian ports both in and outside the 0:02:46.520 --> 0:02:48.679 Persian Gulf, but it said that it would enforce the 0:02:48.720 --> 0:02:53.040 blockade not in the strait itself, but right outside it, 0:02:53.240 --> 0:02:55.760 so that would be in the Gulf of Oman, that 0:02:55.800 --> 0:02:58.360 would be into the Arabian Sea, and that starts to 0:02:58.360 --> 0:03:01.920 get you closer towards the coastline of various Gulf countries. 0:03:02.480 --> 0:03:05.079 I've seen reporting that the US is deploying as many 0:03:05.080 --> 0:03:09.960 as fifteen ships to create this blockade. What is their 0:03:10.120 --> 0:03:10.680 role here? 0:03:11.080 --> 0:03:11.160 So? 0:03:11.320 --> 0:03:13.560 I think a lot of folks think of a blockade 0:03:13.680 --> 0:03:16.080 as accordon that you're going to have, you know, a 0:03:16.120 --> 0:03:19.000 group of ships stopped at the end of the strait 0:03:19.200 --> 0:03:22.960 no one can go past. But that's not likely exactly 0:03:23.000 --> 0:03:25.399 what's going to happen. I think what you are going 0:03:25.440 --> 0:03:28.720 to have is constant monitoring of the strait, which the 0:03:28.840 --> 0:03:33.400 US is likely doing with various intelligence, surveillance and reconnaissance assets, 0:03:33.919 --> 0:03:38.280 potentially even space based assets, as well as potentially even 0:03:38.320 --> 0:03:42.680 communication with those ships, and whenever there's any vessel that 0:03:42.760 --> 0:03:46.720 the US thinks might be headed for Iran or coming 0:03:46.760 --> 0:03:50.320 from an Iranian port, or is part of you know, 0:03:50.440 --> 0:03:54.800 the shadow fleet or sanctioned vessel, you know, they'll communicate 0:03:54.840 --> 0:03:57.240 with them and they will try and get more information, 0:03:57.800 --> 0:04:02.240 but also in many respects try to issue warnings and 0:04:02.320 --> 0:04:06.360 say that if you proceed, you will most likely be interdicted. 0:04:06.680 --> 0:04:09.040 And this means that either the vessel is going to 0:04:09.080 --> 0:04:13.040 be diverted, either sent back, or there's the chance that 0:04:13.080 --> 0:04:16.560 it could be boarded and eventually seized. 0:04:17.000 --> 0:04:20.720 What might Iranians do to counteract this blockade? 0:04:20.839 --> 0:04:23.840 A blockade is technically an act of war, and there's 0:04:23.880 --> 0:04:26.920 a high chance that Iran sees it that way, you know, 0:04:27.080 --> 0:04:31.440 so that could mean that Iran might retaliate attacking Gulf 0:04:31.520 --> 0:04:35.840 ports and infrastructure in response. Right now, it seems as 0:04:35.839 --> 0:04:40.320 though there's a chance that communication and diplomacy is still 0:04:40.360 --> 0:04:43.360 alive and that might give i Ron pause on any 0:04:43.520 --> 0:04:48.479 type of potential retaliation. However, I think it's notable where 0:04:48.520 --> 0:04:51.600 the US has said that the blockade area is going 0:04:51.680 --> 0:04:54.120 to be. What they've done is they've tried to take 0:04:54.160 --> 0:04:55.960 some of the ships and move them a little bit 0:04:56.040 --> 0:04:59.120 further away from some of the potential threats in the 0:04:59.120 --> 0:05:02.600 Strait of Horror Moon. That doesn't negate any all of 0:05:02.600 --> 0:05:05.800 the threats. You know, some of the US warships could 0:05:05.880 --> 0:05:09.799 still be at risk of drone attacks or anti ship 0:05:09.839 --> 0:05:12.560 cruise missile attacks, but it's taken it away out of 0:05:12.600 --> 0:05:16.960 the most threatening geography. And I think you do see 0:05:17.040 --> 0:05:20.320 a little bit of positioning on both sides right now 0:05:20.520 --> 0:05:23.479 to leave some space for communication and to leave some 0:05:23.600 --> 0:05:26.000 space for diplomacy to hopefully bear fruit. 0:05:26.920 --> 0:05:29.159 I want to talk a little bit more about how 0:05:29.200 --> 0:05:32.880 the US might enforce this blockade. What do we know 0:05:33.400 --> 0:05:35.480 about enforcement here? 0:05:35.680 --> 0:05:38.840 I think some of the bigger unknowns right now are 0:05:39.440 --> 0:05:42.880 really whether the US is going to take the narrow 0:05:43.000 --> 0:05:47.080 interpretation of a blockade that US Central Command put forward, 0:05:47.480 --> 0:05:51.400 or whether they're going to try and implement what President 0:05:51.440 --> 0:05:56.599 Trump initially tweeted, which is the idea of interdicting every 0:05:56.720 --> 0:05:59.880 vessel in international waters that paid a toll to I wrong. 0:06:00.360 --> 0:06:02.880 If that is the case, then you're likely to see 0:06:03.240 --> 0:06:07.560 a lot more US operations outside of the Middle East. 0:06:07.920 --> 0:06:11.159 That's when you could see the US trying to interdict 0:06:11.320 --> 0:06:14.600 vessels that are in the Indo Pacific, perhaps maybe some 0:06:14.680 --> 0:06:17.839 of those dark fleet vessels that are trying to ship 0:06:17.920 --> 0:06:21.200 oil to China, and that in itself opens up a 0:06:21.200 --> 0:06:26.160 potential host of other questions as well as some potential risks. 0:06:26.760 --> 0:06:30.360 In some ways, it seems counterintuitive maybe that in order 0:06:30.480 --> 0:06:34.159 to achieve one of the military aims here, which is 0:06:34.200 --> 0:06:37.120 reopening the Straight of hor Moos, the Trump administration is 0:06:37.520 --> 0:06:41.920 essentially closing traffic near the Straight of hor Moos. Can 0:06:41.960 --> 0:06:43.040 you explain the logic there? 0:06:43.360 --> 0:06:46.320 The logic for at least what I can piece together 0:06:46.920 --> 0:06:50.279 is the idea of this economic pressure on Iran is 0:06:50.320 --> 0:06:55.159 going to either force them to concede at the negotiating 0:06:55.240 --> 0:07:00.279 table right now or over time, that pressure is going 0:07:00.360 --> 0:07:03.320 to lead them to make some of those concessions, to 0:07:03.760 --> 0:07:07.440 agree to terms that the US feels quite strongly about. 0:07:08.560 --> 0:07:12.320 But in order to create that pressure, the US needs 0:07:12.400 --> 0:07:17.320 to essentially exert it, which, by their calculation, is the 0:07:17.360 --> 0:07:20.280 best way that they could do so is to enforce 0:07:20.560 --> 0:07:24.920 a counter blockade, if you will, of what Iran has 0:07:24.960 --> 0:07:28.239 been able to do in you know, threatening to close 0:07:28.360 --> 0:07:32.520 the straight and essentially you know, freezing all traffic. 0:07:34.560 --> 0:07:38.280 So how could the blockade affect negotiations between Iran and 0:07:38.360 --> 0:07:42.120 the US, and what is Israel's role that's after the break. 0:07:53.760 --> 0:07:56.800 The closure of the Straight of Hormuz has snarled global 0:07:56.800 --> 0:07:59.960 oil supplies and become a key flash point in negotiation 0:08:00.320 --> 0:08:04.360 between the US and Iran. To understand how the US's 0:08:04.440 --> 0:08:07.880 naval blockade could affect talks moving forward, I called up 0:08:07.880 --> 0:08:12.400 Bloomberg's Middle East Breaking News editor Patrick Sykes. So, Patrick, 0:08:12.480 --> 0:08:15.640 Iran has denied the world access to the Strait of 0:08:15.640 --> 0:08:18.760 Horn moves now the US is attempting to deny Iran 0:08:18.920 --> 0:08:21.160 access to the rest of the world by placing this 0:08:21.280 --> 0:08:25.760 naval blockade on Iranian ports. I'm wondering how you read 0:08:25.880 --> 0:08:28.560 this move. Does it look like a knee jerk reaction 0:08:28.920 --> 0:08:31.160 to the failure of the first round of peace talks 0:08:31.200 --> 0:08:33.160 between Iran and the US, or is it part of 0:08:33.520 --> 0:08:35.840 a bigger plan for this war in Iran. 0:08:35.880 --> 0:08:40.000 It's interesting it's been framed as a kind of third way. Right. 0:08:40.559 --> 0:08:46.040 The choices that the US had, crudely speaking, were to 0:08:46.120 --> 0:08:48.319 strike a deal or to go back to war, and 0:08:48.360 --> 0:08:51.160 this Nyan media are reading as an attempt to find 0:08:51.440 --> 0:08:55.280 an alternative way through that I think related to it. 0:08:55.280 --> 0:09:01.800 It's definitely seeking to deny to Iran this asymmetry around 0:09:01.800 --> 0:09:05.640 the whole straight ofform News situation, right, the fact that Iran, 0:09:05.720 --> 0:09:10.040 with relatively limited military capabilities in some cases just the 0:09:10.080 --> 0:09:13.760 threat of an attack or the general instability around the war, 0:09:14.320 --> 0:09:17.480 was able to, as you say, deny access to others 0:09:17.559 --> 0:09:22.559 while maintaining access for itself and reaping the rewards of 0:09:22.600 --> 0:09:26.360 those higher oil prices in the process. So the US, 0:09:26.480 --> 0:09:29.320 in doing this latest move, is trying to cut off 0:09:29.679 --> 0:09:33.040 at least a new flow of cash to Iran that 0:09:33.559 --> 0:09:34.640 it's been able to generate. 0:09:34.760 --> 0:09:36.520 And how do you see the blockade sort of fitting 0:09:36.520 --> 0:09:39.920 into the US's overall negotiation strategy. 0:09:40.120 --> 0:09:42.719 Then it's a pressure move, right, It's not the kind 0:09:42.760 --> 0:09:46.760 of thing that's gonna I think make Iran either run 0:09:47.000 --> 0:09:51.560 back to the negotiating table nor to abandon talks altogether. 0:09:52.160 --> 0:09:54.800 In their minds, you know, this is still a fight 0:09:55.000 --> 0:09:59.720 for survival, and they claim they have alternative routes. They 0:09:59.760 --> 0:10:03.600 might able to, you know, send some limited volumes over land, 0:10:03.760 --> 0:10:06.440 They might be able to draw on ports that are 0:10:06.520 --> 0:10:10.160 less exposed to the straight as such. So I think 0:10:10.160 --> 0:10:12.840 they will try to resist and they'll make the best 0:10:13.000 --> 0:10:13.280 of that. 0:10:13.360 --> 0:10:18.880 Newly limited situation, and I mean as a move intended 0:10:18.920 --> 0:10:21.880 to put pressure on Iran. I'm wondering how this naval 0:10:21.920 --> 0:10:26.000 blockade compares to something like a ground invasion that Trump 0:10:26.320 --> 0:10:31.480 has been threatening. Is this a preferable escalatory move that 0:10:31.559 --> 0:10:34.839 avoids troops on the ground, and for the. 0:10:34.880 --> 0:10:38.840 US for sure, right, we have to assume that, well, 0:10:38.960 --> 0:10:43.280 no doubt ground options were among those presented to the 0:10:43.280 --> 0:10:48.640 President in Washington. It obviously comes with huge risks, kinds 0:10:48.640 --> 0:10:51.240 of risk that what's largely been an air campaign so 0:10:51.360 --> 0:10:56.000 far don't have. Right from the US defense planner's perspective, 0:10:56.480 --> 0:10:59.640 this was quote unquote the beauty of the campaigns so 0:10:59.720 --> 0:11:04.280 far that from a relative distance and with relatively few 0:11:04.480 --> 0:11:08.400 from their perspective, casualties, they were able to cause wide 0:11:08.600 --> 0:11:13.920 spread destruction to the enemy. That whole equation changes if 0:11:13.960 --> 0:11:17.520 you're there on the ground, if you're actually on enemy territory. 0:11:18.160 --> 0:11:21.080 I think that the real test of it would be 0:11:21.559 --> 0:11:25.600 what happens if a ship tries to challenge the authority 0:11:25.840 --> 0:11:29.440 of this blockhead, right, because then you may end up 0:11:29.480 --> 0:11:33.400 in territory where you're looking at conflict on the water. 0:11:34.440 --> 0:11:38.160 We've had the Venezuela president a few months back where 0:11:38.160 --> 0:11:42.520 we had ships delivered trying to evade that blockade and 0:11:42.559 --> 0:11:45.000 the US having to chase after them. So there's both 0:11:45.080 --> 0:11:50.160 kind of reputational risks and obviously more more plainly military 0:11:50.240 --> 0:11:52.600 risks as and when they're challenged. 0:11:52.880 --> 0:11:57.280 I mean, from Iran's perspective, is that something they're willing 0:11:57.320 --> 0:11:59.880 to do to challenge this blockade? 0:12:00.240 --> 0:12:03.280 I mean, with the time skills that we're operating in 0:12:03.360 --> 0:12:06.880 right this ceasefire is supposed to end early next week, 0:12:08.800 --> 0:12:11.520 so we have to assume that the side will try 0:12:11.720 --> 0:12:15.440 and arrange another round of talks by then. So if 0:12:15.440 --> 0:12:18.560 we're looking at another round of diplomacy and best case 0:12:18.600 --> 0:12:21.520 scenario a deal by the end of the week, Iran 0:12:21.559 --> 0:12:24.160 has suffered this situation for a couple of days at 0:12:24.160 --> 0:12:27.240 that point, and that is definitely something that they're very 0:12:27.240 --> 0:12:32.320 happy to swallow longer term. Obviously, as the duration of 0:12:32.360 --> 0:12:35.920 any blockade increases, it becomes more and more painful, and 0:12:36.000 --> 0:12:39.760 that's in the context of an economy that's already even 0:12:39.840 --> 0:12:43.640 before the war been the currency has been in free fall, 0:12:43.800 --> 0:12:47.720 inflation over thirty percent, and the war is just obviously 0:12:47.760 --> 0:12:50.800 added to that in terms of damage to civilian infrastructure, 0:12:51.080 --> 0:12:56.080 disruption to businesses and ordinary people's lives. But I think 0:12:56.160 --> 0:12:58.920 both sides are making that calculation right. Iran is also 0:12:59.080 --> 0:13:02.480 making the time in calculation that the US doesn't want 0:13:02.480 --> 0:13:06.320 this to drag on, and US consumers, US buyers of 0:13:06.360 --> 0:13:08.239 gasoline don't want this to continue. 0:13:08.920 --> 0:13:11.320 A lot of what comes next to here depends on 0:13:11.760 --> 0:13:17.000 how quickly and how well peace talks go between Iran 0:13:17.160 --> 0:13:19.520 and the US. I want to talk about the state 0:13:19.559 --> 0:13:22.400 of negotiations a little bit more. What kind of progress 0:13:22.400 --> 0:13:26.079 can we say was made during that first round of talks. 0:13:26.400 --> 0:13:29.559 I think the progress might be structural, if anything. Right, 0:13:29.640 --> 0:13:33.240 these were, regardless of the contents at the format level, 0:13:33.280 --> 0:13:37.119 these were the highest level talks between America and Iranian 0:13:37.679 --> 0:13:40.640 officials in a very very long time. Right. These are 0:13:40.640 --> 0:13:44.600 obviously two countries that have been sworn enemies largely since 0:13:44.760 --> 0:13:48.320 the nineteen seventy nine revolution, So it is extremely rare 0:13:48.559 --> 0:13:51.360 for the speaker of the Parliament, the head of one 0:13:51.400 --> 0:13:54.160 of the three branches of government, who's also thought to 0:13:54.200 --> 0:13:58.000 be a key decision making in the defense establishment, to 0:13:58.080 --> 0:14:00.199 be there on the other side of the table the 0:14:00.200 --> 0:14:05.160 American Vice President. That in itself was remarkable, and I 0:14:05.200 --> 0:14:09.079 suppose We can only hope that with that contact, contact 0:14:09.200 --> 0:14:12.240 at such a high level, the two sides got something 0:14:12.280 --> 0:14:13.960 of a sense of each other. 0:14:17.400 --> 0:14:20.920 I want to talk about another factor here, which is Israel. Right, 0:14:21.080 --> 0:14:25.480 Iran has layered in a demand that Israel stop attacking Lebanon. 0:14:25.840 --> 0:14:28.320 Israel and the Lebanese government are engaging in their own 0:14:28.440 --> 0:14:33.520 hawks this week in DC. So, Patrick, what roles are 0:14:34.000 --> 0:14:39.080 Israel and Iran's proxies playing in this negotiation process right now? 0:14:39.240 --> 0:14:40.880 Yeah, it was really interesting. On the day of the 0:14:40.960 --> 0:14:44.560 Islamabad talks. You know, the Iranians came, they turned up 0:14:44.600 --> 0:14:46.840 and they kind of started the process with this initial 0:14:46.880 --> 0:14:50.320 meeting with the Pakistani officials. But it was only once 0:14:50.360 --> 0:14:54.760 they claimed that Israel had pulled back on that it 0:14:54.920 --> 0:14:58.480 limited some of its strikes on Lebanon that the Iranians 0:14:58.480 --> 0:15:01.040 said that they're happy to go ahea head, enter the 0:15:01.080 --> 0:15:04.200 actual room and start talking with the Americans. They were 0:15:04.320 --> 0:15:08.040 very keen to make that a condition of their participation. 0:15:08.400 --> 0:15:11.240 Now it's worth stressing. I think the US pushed back 0:15:11.400 --> 0:15:16.760 on that on that account of things, but it does 0:15:16.840 --> 0:15:22.160 underline that Iran wants this to be the end of 0:15:22.480 --> 0:15:25.640 not just the conflict in Iran right now, but the 0:15:25.760 --> 0:15:29.520 end of future aggression, both against Iran and against those 0:15:29.560 --> 0:15:34.040 regional allied militias that it has like Kesbolla in Lebanon, 0:15:34.960 --> 0:15:38.840 like the Huthis in Yemen, because from Iran's perspective, Iran's 0:15:38.840 --> 0:15:41.240 feels it's been burned a couple of times now by 0:15:41.280 --> 0:15:44.720 this back and forth of diplomacy and then war, and 0:15:44.760 --> 0:15:49.160 it's really keen to restore the terrence so that there's 0:15:49.160 --> 0:15:53.640 some sembilance of balance again in the region. At the 0:15:53.680 --> 0:15:57.320 same time, it's using whatever leverage it's been able to 0:15:57.360 --> 0:16:01.000 build up in this hot war the US in Israel 0:16:01.520 --> 0:16:05.560 to kind of display i think, a sense of solidarity 0:16:05.680 --> 0:16:09.560 with those regional militias like Kesbula in Lebanon and so on. 0:16:10.000 --> 0:16:13.680 So it's very keen to present a united front that 0:16:13.800 --> 0:16:16.880 if needed it can activate again, but in peace also 0:16:16.920 --> 0:16:18.840 has to enjoy the peace diffidend. 0:16:23.120 --> 0:16:26.080 This is The Big Take from Bloomberg News. I'm Sarah Holder. 0:16:26.480 --> 0:16:29.080 To get more from The Big Take and unlimited access 0:16:29.120 --> 0:16:32.960 to all of Bloomberg dot Com, subscribe today at Bloomberg 0:16:33.040 --> 0:16:36.520 dot com slash Podcast offer. If you like this episode, 0:16:36.600 --> 0:16:39.200 make sure to subscribe and review The Big Take wherever 0:16:39.280 --> 0:16:42.160 you listen to podcasts, it helps people find the show. 0:16:43.000 --> 0:16:44.960 Thanks for listening. We'll be back tomorrow.