Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The ceasefire between the US and Iran is set to
Speaker 2: expire next week, and following an inconclusive round of peace
Speaker 2: talks in Pakistan, the US is trying a different tactic
Speaker 2: to pressure Iran into a deal, a naval blockade.
Speaker 3: President Trump says the US blockade in the Strait of
Speaker 3: Hormuz has begun.
Speaker 1: Two tankers under US sanctions turning round as the restrictions
Speaker 1: went into effect. President Trump announcing that any Iranian who
Speaker 1: fires at US or at peaceful vessels will be blown
Speaker 1: to hew.
Speaker 2: The blockade was implemented Monday, further cutting off the Persian
Speaker 2: Gulf from the rest of the world.
Speaker 3: It seems as though President Trump has been saying, you know,
Speaker 3: the street must be opened, the straight must be opened,
Speaker 3: the street must be opened, but we're going to close
Speaker 3: it in order to get it to reopen.
Speaker 2: Becca Wasser is the defense lead for Bloomberg Economics.
Speaker 3: But the logic I for at least what I can
Speaker 3: piece together, is the idea of this economic pressure on
Speaker 3: Iran is going to either force them to concede at
Speaker 3: the negotiating table right now or over time. That pressure
Speaker 3: is going to lead them to make some of those concessions,
Speaker 3: to agree to terms that the US feels quite strongly about.
Speaker 2: People familiar with the matter told Bloomberg that the US
Speaker 2: and Iran are in talks about holding a second round
Speaker 2: of negotiations in the coming days, and Becca says the
Speaker 2: blockade only raises the stakes.
Speaker 3: The risks here are really the escalation risks in an
Speaker 3: already fragile ceasefire in a really fraught conflict, and that
Speaker 3: could ratchet up tensions further at a time where it
Speaker 3: does seem as though there are some signals from all
Speaker 3: sides to try and de escalate slightly.
Speaker 2: I'm Sarah Holder, and this is the big tack from
Speaker 2: Bloomberg News today on the show, how the US is
Speaker 2: an evil blockade of the Strait of Hormuz works, what
Speaker 2: could happen if it's tested, and how this latest pressure
Speaker 2: tactic could influence another route of Iran US peace talks.
Speaker 2: But my first question for you is just what is
Speaker 2: the status of the US blockade in Iran? What do
Speaker 2: we know about what's actually been set up so far?
Speaker 3: President Donald Trump said that it was a total blockade
Speaker 3: in the vein that he said for Venezuela, in which
Speaker 3: it would be almost all ships. But US Central Command
Speaker 3: issued a more restrictive definition of the blockade where they
Speaker 3: said that they were going to blockade all maritime traffic
Speaker 3: intending to enter Iranian ports both in and outside the
Speaker 3: Persian Gulf, but it said that it would enforce the
Speaker 3: blockade not in the strait itself, but right outside it,
Speaker 3: so that would be in the Gulf of Oman, that
Speaker 3: would be into the Arabian Sea, and that starts to
Speaker 3: get you closer towards the coastline of various Gulf countries.
Speaker 2: I've seen reporting that the US is deploying as many
Speaker 2: as fifteen ships to create this blockade. What is their
Speaker 2: role here?
Speaker 1: So?
Speaker 3: I think a lot of folks think of a blockade
Speaker 3: as accordon that you're going to have, you know, a
Speaker 3: group of ships stopped at the end of the strait
Speaker 3: no one can go past. But that's not likely exactly
Speaker 3: what's going to happen. I think what you are going
Speaker 3: to have is constant monitoring of the strait, which the
Speaker 3: US is likely doing with various intelligence, surveillance and reconnaissance assets,
Speaker 3: potentially even space based assets, as well as potentially even
Speaker 3: communication with those ships, and whenever there's any vessel that
Speaker 3: the US thinks might be headed for Iran or coming
Speaker 3: from an Iranian port, or is part of you know,
Speaker 3: the shadow fleet or sanctioned vessel, you know, they'll communicate
Speaker 3: with them and they will try and get more information,
Speaker 3: but also in many respects try to issue warnings and
Speaker 3: say that if you proceed, you will most likely be interdicted.
Speaker 3: And this means that either the vessel is going to
Speaker 3: be diverted, either sent back, or there's the chance that
Speaker 3: it could be boarded and eventually seized.
Speaker 2: What might Iranians do to counteract this blockade?
Speaker 3: A blockade is technically an act of war, and there's
Speaker 3: a high chance that Iran sees it that way, you know,
Speaker 3: so that could mean that Iran might retaliate attacking Gulf
Speaker 3: ports and infrastructure in response. Right now, it seems as
Speaker 3: though there's a chance that communication and diplomacy is still
Speaker 3: alive and that might give i Ron pause on any
Speaker 3: type of potential retaliation. However, I think it's notable where
Speaker 3: the US has said that the blockade area is going
Speaker 3: to be. What they've done is they've tried to take
Speaker 3: some of the ships and move them a little bit
Speaker 3: further away from some of the potential threats in the
Speaker 3: Strait of Horror Moon. That doesn't negate any all of
Speaker 3: the threats. You know, some of the US warships could
Speaker 3: still be at risk of drone attacks or anti ship
Speaker 3: cruise missile attacks, but it's taken it away out of
Speaker 3: the most threatening geography. And I think you do see
Speaker 3: a little bit of positioning on both sides right now
Speaker 3: to leave some space for communication and to leave some
Speaker 3: space for diplomacy to hopefully bear fruit.
Speaker 2: I want to talk a little bit more about how
Speaker 2: the US might enforce this blockade. What do we know
Speaker 2: about enforcement here?
Speaker 3: I think some of the bigger unknowns right now are
Speaker 3: really whether the US is going to take the narrow
Speaker 3: interpretation of a blockade that US Central Command put forward,
Speaker 3: or whether they're going to try and implement what President
Speaker 3: Trump initially tweeted, which is the idea of interdicting every
Speaker 3: vessel in international waters that paid a toll to I wrong.
Speaker 3: If that is the case, then you're likely to see
Speaker 3: a lot more US operations outside of the Middle East.
Speaker 3: That's when you could see the US trying to interdict
Speaker 3: vessels that are in the Indo Pacific, perhaps maybe some
Speaker 3: of those dark fleet vessels that are trying to ship
Speaker 3: oil to China, and that in itself opens up a
Speaker 3: potential host of other questions as well as some potential risks.
Speaker 2: In some ways, it seems counterintuitive maybe that in order
Speaker 2: to achieve one of the military aims here, which is
Speaker 2: reopening the Straight of hor Moos, the Trump administration is
Speaker 2: essentially closing traffic near the Straight of hor Moos. Can
Speaker 2: you explain the logic there?
Speaker 3: The logic for at least what I can piece together
Speaker 3: is the idea of this economic pressure on Iran is
Speaker 3: going to either force them to concede at the negotiating
Speaker 3: table right now or over time, that pressure is going
Speaker 3: to lead them to make some of those concessions, to
Speaker 3: agree to terms that the US feels quite strongly about.
Speaker 3: But in order to create that pressure, the US needs
Speaker 3: to essentially exert it, which, by their calculation, is the
Speaker 3: best way that they could do so is to enforce
Speaker 3: a counter blockade, if you will, of what Iran has
Speaker 3: been able to do in you know, threatening to close
Speaker 3: the straight and essentially you know, freezing all traffic.
Speaker 2: So how could the blockade affect negotiations between Iran and
Speaker 2: the US, and what is Israel's role that's after the break.
Speaker 2: The closure of the Straight of Hormuz has snarled global
Speaker 2: oil supplies and become a key flash point in negotiation
Speaker 2: between the US and Iran. To understand how the US's
Speaker 2: naval blockade could affect talks moving forward, I called up
Speaker 2: Bloomberg's Middle East Breaking News editor Patrick Sykes. So, Patrick,
Speaker 2: Iran has denied the world access to the Strait of
Speaker 2: Horn moves now the US is attempting to deny Iran
Speaker 2: access to the rest of the world by placing this
Speaker 2: naval blockade on Iranian ports. I'm wondering how you read
Speaker 2: this move. Does it look like a knee jerk reaction
Speaker 2: to the failure of the first round of peace talks
Speaker 2: between Iran and the US, or is it part of
Speaker 2: a bigger plan for this war in Iran.
Speaker 1: It's interesting it's been framed as a kind of third way. Right.
Speaker 1: The choices that the US had, crudely speaking, were to
Speaker 1: strike a deal or to go back to war, and
Speaker 1: this Nyan media are reading as an attempt to find
Speaker 1: an alternative way through that I think related to it.
Speaker 1: It's definitely seeking to deny to Iran this asymmetry around
Speaker 1: the whole straight ofform News situation, right, the fact that Iran,
Speaker 1: with relatively limited military capabilities in some cases just the
Speaker 1: threat of an attack or the general instability around the war,
Speaker 1: was able to, as you say, deny access to others
Speaker 1: while maintaining access for itself and reaping the rewards of
Speaker 1: those higher oil prices in the process. So the US,
Speaker 1: in doing this latest move, is trying to cut off
Speaker 1: at least a new flow of cash to Iran that
Speaker 1: it's been able to generate.
Speaker 2: And how do you see the blockade sort of fitting
Speaker 2: into the US's overall negotiation strategy.
Speaker 1: Then it's a pressure move, right, It's not the kind
Speaker 1: of thing that's gonna I think make Iran either run
Speaker 1: back to the negotiating table nor to abandon talks altogether.
Speaker 1: In their minds, you know, this is still a fight
Speaker 1: for survival, and they claim they have alternative routes. They
Speaker 1: might able to, you know, send some limited volumes over land,
Speaker 1: They might be able to draw on ports that are
Speaker 1: less exposed to the straight as such. So I think
Speaker 1: they will try to resist and they'll make the best
Speaker 1: of that.
Speaker 2: Newly limited situation, and I mean as a move intended
Speaker 2: to put pressure on Iran. I'm wondering how this naval
Speaker 2: blockade compares to something like a ground invasion that Trump
Speaker 2: has been threatening. Is this a preferable escalatory move that
Speaker 2: avoids troops on the ground, and for the.
Speaker 1: US for sure, right, we have to assume that, well,
Speaker 1: no doubt ground options were among those presented to the
Speaker 1: President in Washington. It obviously comes with huge risks, kinds
Speaker 1: of risk that what's largely been an air campaign so
Speaker 1: far don't have. Right from the US defense planner's perspective,
Speaker 1: this was quote unquote the beauty of the campaigns so
Speaker 1: far that from a relative distance and with relatively few
Speaker 1: from their perspective, casualties, they were able to cause wide
Speaker 1: spread destruction to the enemy. That whole equation changes if
Speaker 1: you're there on the ground, if you're actually on enemy territory.
Speaker 1: I think that the real test of it would be
Speaker 1: what happens if a ship tries to challenge the authority
Speaker 1: of this blockhead, right, because then you may end up
Speaker 1: in territory where you're looking at conflict on the water.
Speaker 1: We've had the Venezuela president a few months back where
Speaker 1: we had ships delivered trying to evade that blockade and
Speaker 1: the US having to chase after them. So there's both
Speaker 1: kind of reputational risks and obviously more more plainly military
Speaker 1: risks as and when they're challenged.
Speaker 2: I mean, from Iran's perspective, is that something they're willing
Speaker 2: to do to challenge this blockade?
Speaker 1: I mean, with the time skills that we're operating in
Speaker 1: right this ceasefire is supposed to end early next week,
Speaker 1: so we have to assume that the side will try
Speaker 1: and arrange another round of talks by then. So if
Speaker 1: we're looking at another round of diplomacy and best case
Speaker 1: scenario a deal by the end of the week, Iran
Speaker 1: has suffered this situation for a couple of days at
Speaker 1: that point, and that is definitely something that they're very
Speaker 1: happy to swallow longer term. Obviously, as the duration of
Speaker 1: any blockade increases, it becomes more and more painful, and
Speaker 1: that's in the context of an economy that's already even
Speaker 1: before the war been the currency has been in free fall,
Speaker 1: inflation over thirty percent, and the war is just obviously
Speaker 1: added to that in terms of damage to civilian infrastructure,
Speaker 1: disruption to businesses and ordinary people's lives. But I think
Speaker 1: both sides are making that calculation right. Iran is also
Speaker 1: making the time in calculation that the US doesn't want
Speaker 1: this to drag on, and US consumers, US buyers of
Speaker 1: gasoline don't want this to continue.
Speaker 2: A lot of what comes next to here depends on
Speaker 2: how quickly and how well peace talks go between Iran
Speaker 2: and the US. I want to talk about the state
Speaker 2: of negotiations a little bit more. What kind of progress
Speaker 2: can we say was made during that first round of talks.
Speaker 1: I think the progress might be structural, if anything. Right,
Speaker 1: these were, regardless of the contents at the format level,
Speaker 1: these were the highest level talks between America and Iranian
Speaker 1: officials in a very very long time. Right. These are
Speaker 1: obviously two countries that have been sworn enemies largely since
Speaker 1: the nineteen seventy nine revolution, So it is extremely rare
Speaker 1: for the speaker of the Parliament, the head of one
Speaker 1: of the three branches of government, who's also thought to
Speaker 1: be a key decision making in the defense establishment, to
Speaker 1: be there on the other side of the table the
Speaker 1: American Vice President. That in itself was remarkable, and I
Speaker 1: suppose We can only hope that with that contact, contact
Speaker 1: at such a high level, the two sides got something
Speaker 1: of a sense of each other.
Speaker 2: I want to talk about another factor here, which is Israel. Right,
Speaker 2: Iran has layered in a demand that Israel stop attacking Lebanon.
Speaker 2: Israel and the Lebanese government are engaging in their own
Speaker 2: hawks this week in DC. So, Patrick, what roles are
Speaker 2: Israel and Iran's proxies playing in this negotiation process right now?
Speaker 1: Yeah, it was really interesting. On the day of the
Speaker 1: Islamabad talks. You know, the Iranians came, they turned up
Speaker 1: and they kind of started the process with this initial
Speaker 1: meeting with the Pakistani officials. But it was only once
Speaker 1: they claimed that Israel had pulled back on that it
Speaker 1: limited some of its strikes on Lebanon that the Iranians
Speaker 1: said that they're happy to go ahea head, enter the
Speaker 1: actual room and start talking with the Americans. They were
Speaker 1: very keen to make that a condition of their participation.
Speaker 1: Now it's worth stressing. I think the US pushed back
Speaker 1: on that on that account of things, but it does
Speaker 1: underline that Iran wants this to be the end of
Speaker 1: not just the conflict in Iran right now, but the
Speaker 1: end of future aggression, both against Iran and against those
Speaker 1: regional allied militias that it has like Kesbolla in Lebanon,
Speaker 1: like the Huthis in Yemen, because from Iran's perspective, Iran's
Speaker 1: feels it's been burned a couple of times now by
Speaker 1: this back and forth of diplomacy and then war, and
Speaker 1: it's really keen to restore the terrence so that there's
Speaker 1: some sembilance of balance again in the region. At the
Speaker 1: same time, it's using whatever leverage it's been able to
Speaker 1: build up in this hot war the US in Israel
Speaker 1: to kind of display i think, a sense of solidarity
Speaker 1: with those regional militias like Kesbula in Lebanon and so on.
Speaker 1: So it's very keen to present a united front that
Speaker 1: if needed it can activate again, but in peace also
Speaker 1: has to enjoy the peace diffidend.
Speaker 2: This is The Big Take from Bloomberg News. I'm Sarah Holder.
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