WEBVTT - Daybreak Weekend: US Eco Preview, Iran Election, US-China Relations 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.840 --> 0:00:12.239 This is Bloomberg day Break Weekend, our global look at 0:00:12.240 --> 0:00:14.480 the top stories in the coming week from our Daybreak 0:00:14.480 --> 0:00:17.079 anchors all around the world, and straight ahead on the program, 0:00:17.120 --> 0:00:20.400 a look at GDP and PC data here in the 0:00:20.480 --> 0:00:24.639 US what that could mean to federal reserve policy going forward. 0:00:24.880 --> 0:00:27.960 I'm Tom Busby in New York. I'm Stephen Carol in London. 0:00:28.000 --> 0:00:30.400 Who We're looking ahead to the presidential election in Iran 0:00:30.520 --> 0:00:33.240 and asking what shifts, if any, it could mean in 0:00:33.280 --> 0:00:34.640 the country's foreign policy. 0:00:34.880 --> 0:00:38.640 I'm Derek Prisner, looking at US China relations as presidential 0:00:38.720 --> 0:00:41.360 candidates Biden and Trump prepared to debate. 0:00:42.479 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:46.479 --> 0:00:48.960 ey Loove, the three own, New York, Bloombergen ninety nine 0:00:49.000 --> 0:00:52.400 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:52.479 --> 0:00:57.280 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:57.400 --> 0:01:00.280 XM one nineteen and around the world on Blue Bomberg 0:01:00.400 --> 0:01:03.080 Radio dot Com and via the Bloomberg Business App. 0:01:07.120 --> 0:01:09.080 Good day to you. I'm Tom Busby, and we begin 0:01:09.120 --> 0:01:12.120 today's program with some key economic data here in the 0:01:12.200 --> 0:01:16.000 US this week are reading on first quarter GDP that's 0:01:16.000 --> 0:01:19.440 a third and final reading, and the Personal Consumption Price 0:01:19.480 --> 0:01:22.959 Index for May. That's the inflation measure closely monitored by 0:01:22.959 --> 0:01:25.520 the Fed. What could it mean for consumers and for 0:01:25.600 --> 0:01:28.640 Fed policy moving forward? Well, for more, we're joined by 0:01:28.720 --> 0:01:33.200 Stuart Paul, us economist with Bloomberg Economics. Well Stewart, we've 0:01:33.240 --> 0:01:36.600 seen some encouraging data on inflation CPI PPI over the 0:01:36.600 --> 0:01:39.640 past two months. What do you expect to see this week? 0:01:39.840 --> 0:01:43.120 We're expecting to see similarly encouraging signs when it comes 0:01:43.120 --> 0:01:46.720 to PCEE inflation. We estimate, based on the CPI and 0:01:46.760 --> 0:01:51.040 PPI data that we've already seen, that headline PCEE inflation 0:01:51.360 --> 0:01:53.920 is going to decline to two point six percent in 0:01:53.960 --> 0:01:57.200 May from about two point seven percent in April, and 0:01:57.240 --> 0:02:02.200 that's really facilitated by a swing in gasoline prices. Gasoline 0:02:02.240 --> 0:02:06.720 prices decline during the month of May. Typically gasoline prices 0:02:06.840 --> 0:02:10.720 rise during summer driving season, so you have both the 0:02:10.760 --> 0:02:14.040 actual price of the pump and the seasonal adjustment factor 0:02:14.160 --> 0:02:19.120 weighing on headline pce inflation for May. The core PCE 0:02:19.400 --> 0:02:21.520 measure which matters quite a bit more for the Federal 0:02:21.560 --> 0:02:24.760 Reserve that's also going to show some encouraging signs by 0:02:24.800 --> 0:02:27.840 slowing to two point six percent from about two point 0:02:27.880 --> 0:02:31.239 eight percent prior. It's still the case that shelter is 0:02:31.360 --> 0:02:35.840 undergirding core inflation measures, but we are seeing core goods 0:02:35.919 --> 0:02:41.880 prices decline when we map CPI to PCE space, and 0:02:42.360 --> 0:02:46.359 we also are seeing some softening services prices within the core. 0:02:46.840 --> 0:02:50.640 If we're looking outside of shelter, we see declining prices 0:02:50.680 --> 0:02:54.760 for airfares, for recreational services, for personal care services, some 0:02:54.800 --> 0:02:58.200 of those more discretionary spending categories, and we think that 0:02:58.200 --> 0:03:00.640 that's related to consumers starting to tell in their belt 0:03:00.639 --> 0:03:04.200 a little bit. We did see pretty discouraging signs in 0:03:04.240 --> 0:03:06.520 the retail sales report just last week. 0:03:06.400 --> 0:03:09.000 But we also saw import prices down. That's a reaction 0:03:09.120 --> 0:03:12.600 possibly to people not spending as much. And it looks 0:03:12.680 --> 0:03:15.880 like all that US energy production at a record high 0:03:15.960 --> 0:03:18.720 and a slight demand just really helping out, really changing things. 0:03:19.040 --> 0:03:21.800 That's right, It is helping to weigh on a headline inflation. 0:03:22.360 --> 0:03:22.520 Now. 0:03:22.560 --> 0:03:25.080 The big question, of course, what could this mean to 0:03:25.120 --> 0:03:28.760 the Federal Reserve. It's leftist benchmark lending rate unchanged seven 0:03:28.840 --> 0:03:31.400 meetings in a row dating back to last September. Another 0:03:31.400 --> 0:03:33.400 policy meeting at the end of next month, right the 0:03:33.400 --> 0:03:36.160 thirtieth and thirty first of July, just five weeks away. 0:03:36.720 --> 0:03:40.280 That's right, So any encouraging signs on the inflation front 0:03:40.320 --> 0:03:43.760 bodes well for the interest rate outlook. The Fed in 0:03:43.840 --> 0:03:48.480 its previous meeting changed its own outlook for interest rates. 0:03:48.480 --> 0:03:52.120 It had previously expected to cut interest rates by seventy 0:03:52.120 --> 0:03:54.840 five basis points this year, but in its most recent 0:03:54.920 --> 0:03:57.960 update it's now showing just one twenty five basis point 0:03:57.960 --> 0:04:01.240 cut this year. We think that the encouraging signs on 0:04:01.240 --> 0:04:05.240 the inflation side and consumers starting to tighten their belt 0:04:05.480 --> 0:04:08.520 could result in maybe two interest rate cuts this year, 0:04:08.560 --> 0:04:11.520 perhaps in September and then one in December. It gets 0:04:11.520 --> 0:04:15.360 a little bit tricky around election season, but with inflation 0:04:15.480 --> 0:04:17.719 coming in, with inflation slowing on a monthly basis and 0:04:17.839 --> 0:04:21.680 on an annual basis, with core inflation slowing, signs are 0:04:21.720 --> 0:04:24.400 starting to point to the Fed perhaps being able to 0:04:24.440 --> 0:04:28.599 cut two times this year, but probably only starting in September. 0:04:28.640 --> 0:04:30.680 If they were to decide to get two cuts off 0:04:30.680 --> 0:04:31.320 this year. 0:04:31.240 --> 0:04:33.520 And as always, the key to this is a pattern. 0:04:33.960 --> 0:04:35.480 That's right, Yeah, that's right. 0:04:36.040 --> 0:04:39.960 So we have seen two encouraging monthly inflation prints. The 0:04:40.040 --> 0:04:43.719 first quarter was a little bit rough, but we're starting 0:04:43.720 --> 0:04:46.359 to see a bit more evidence that a trend is 0:04:46.440 --> 0:04:48.880 building in that slowing inflation landscape. 0:04:49.080 --> 0:04:52.080 Oh boy, well, let's that would be encouraging. Let's talk 0:04:52.120 --> 0:04:55.119 about first quarter GDP. This is a third and final reading. 0:04:55.720 --> 0:04:58.480 A prior reading reported a growth of one point three percent, 0:04:58.600 --> 0:05:01.200 but we could see a little upside surprise to this. 0:05:01.360 --> 0:05:04.800 Now we could see some modest revisions coming in, so 0:05:05.120 --> 0:05:08.039 perhaps an upward revision of Q one GDP to an 0:05:08.040 --> 0:05:10.480 annualized pace of growth about one and a half percent 0:05:10.520 --> 0:05:12.640 from as you mentioned, one point three percent in the 0:05:12.680 --> 0:05:15.600 second estimate. It's starting to get a little bit stale 0:05:15.680 --> 0:05:19.719 for driving FED policy. So what's really going to matter 0:05:19.800 --> 0:05:23.760 is the Friday Personal Income and Outlays report. And although 0:05:23.760 --> 0:05:27.320 we are seeing more recent data showing personal income growth, 0:05:27.600 --> 0:05:31.839 there is something that's stopping consumers from taking that income 0:05:31.960 --> 0:05:36.119 and driving spending. There is something, perhaps more consumer caution, 0:05:36.680 --> 0:05:38.919 that's going to lead to further slowing. Even if we 0:05:38.920 --> 0:05:40.760 were to see an upward revision to Q one GDP, 0:05:41.160 --> 0:05:43.000 as we look at the Q two data, we could 0:05:43.040 --> 0:05:46.160 see some additional slowing as consumers become a little bit 0:05:46.160 --> 0:05:47.000 more cautious. 0:05:47.560 --> 0:05:50.840 Now that slight change in GDP. Is it the same 0:05:50.880 --> 0:05:55.039 exact factors you know? Or is there something else what changed? 0:05:55.160 --> 0:05:57.200 It's the same factors, It's just a little bit of 0:05:57.200 --> 0:06:01.120 additional precision as time goes on, when the Bureau of 0:06:01.160 --> 0:06:05.000 Labor Statistics in the Bureau of Economic Analysis has the 0:06:05.120 --> 0:06:09.960 time to more precisely measure the factors that go into 0:06:11.400 --> 0:06:13.599 gross domestic product and gross domestic income. 0:06:13.800 --> 0:06:17.440 Okay, so first quarter GDP that is out on Thursday, 0:06:17.960 --> 0:06:21.039 May Personal consumption Core Price Index out on Friday. A 0:06:21.040 --> 0:06:23.560 lot to look forward to, and our thanks to Stuart paul, 0:06:23.680 --> 0:06:28.560 Us economist with Bloomberg Economics. Moving to company earnings now, 0:06:28.640 --> 0:06:32.919 the world's largest express transportation company, FedEx, reports its latest 0:06:32.960 --> 0:06:35.600 earnings on Tuesday. What will the results tell us about 0:06:35.640 --> 0:06:39.440 the health of US supply chains and business and consumer demand? 0:06:39.960 --> 0:06:43.520 And for more? We're joined by Lee Clascal, Bloomberg Intelligence, 0:06:43.560 --> 0:06:48.000 Senior Transport Logistics and shipping analysts. Well, Lee, what do 0:06:48.040 --> 0:06:51.000 you expect to see from FedEx in its Q four 0:06:51.080 --> 0:06:52.279 earnings this week? 0:06:53.040 --> 0:06:53.240 Yeah? 0:06:53.400 --> 0:06:56.320 I think that the company is going to report a 0:06:56.400 --> 0:06:59.080 number that's probably more or less in line with consensus. 0:06:59.080 --> 0:07:02.159 I don't think there's really any divergence from there. But 0:07:02.279 --> 0:07:05.880 you know, what we do expect to see and we 0:07:06.040 --> 0:07:09.960 really hope to see, is continued improvement on their cost 0:07:09.960 --> 0:07:14.040 cutting measurements that they've been trying to reduce costs for 0:07:14.080 --> 0:07:17.840 some time. They have two programs in place called Drive 0:07:17.880 --> 0:07:19.920 and Network two point zero, and that's supposed to generate 0:07:19.960 --> 0:07:22.800 around six billion dollars in cost savings for the company. 0:07:23.160 --> 0:07:24.960 And you know, what the company is trying to do 0:07:25.120 --> 0:07:28.200 is right size its network to kind of match the 0:07:28.240 --> 0:07:31.560 realities of how its business has changed so much over 0:07:31.600 --> 0:07:35.360 the years with more of a focus of B two 0:07:35.400 --> 0:07:38.440 C business versus B to B business and B two 0:07:38.440 --> 0:07:40.840 C business, which is, you know, shipments that go to 0:07:40.880 --> 0:07:45.440 your house, whether you buy something online or otherwise. You know, 0:07:45.760 --> 0:07:48.400 it tends to carry lower margins, and so they're trying 0:07:48.400 --> 0:07:51.960 to improve that lower margin business by taking costs out. 0:07:53.000 --> 0:07:55.880 Well. I think it's been working because in margin this year, 0:07:56.000 --> 0:08:00.200 FedEx said it's worldwide headcount was down about twenty two 0:07:59.800 --> 0:08:03.120 thousand over the past year or the prior year. Just 0:08:03.120 --> 0:08:05.040 two weeks ago, it's had of plants to slash another 0:08:05.080 --> 0:08:08.880 two thousand jobs in Europe. So are these cuts still 0:08:09.000 --> 0:08:11.320 going on? Is FedEx still cutting jobs? 0:08:12.240 --> 0:08:14.640 Yeah? I mean, they absolutely are, and they need to 0:08:14.680 --> 0:08:17.600 write size. I mean, FedEx for a long time became 0:08:17.640 --> 0:08:21.080 a little bloated, you know, over the years, and the 0:08:21.160 --> 0:08:24.920 focus really wasn't so much on margin, shall I say? 0:08:24.960 --> 0:08:29.320 It was probably about the air fleet and in other things. 0:08:29.360 --> 0:08:33.760 And I think that you know, as management changes happened 0:08:33.800 --> 0:08:37.560 at the company, kind of priorities have shifted, and you know, 0:08:37.640 --> 0:08:40.800 the company has become a truly show me story. And 0:08:40.920 --> 0:08:44.600 management has been producing some pretty good results over the 0:08:44.640 --> 0:08:46.920 last couple of quarters, and we can we expect that 0:08:47.040 --> 0:08:50.960 to continue. You know, a couple of months ago, it 0:08:51.080 --> 0:08:54.920 announced that it was no longer doing the line Haull business, 0:08:54.960 --> 0:08:58.520 the airline hall business for the US Postal service. That 0:08:58.559 --> 0:09:02.040 business was, you know, about a two billion dollar revenue business, 0:09:02.040 --> 0:09:06.640 but extremely low margin. And you know what that capacity. 0:09:06.559 --> 0:09:09.960 They're able to free up that capacity, and not only 0:09:10.080 --> 0:09:12.920 are they able to fill it with more profitable business 0:09:13.040 --> 0:09:16.400 from small to mid sized car shippers, but they're also 0:09:16.679 --> 0:09:20.240 able to say, hey, maybe we don't need ten planes 0:09:20.360 --> 0:09:23.120 in a certain lane, maybe we can only you know, 0:09:23.160 --> 0:09:26.120 we only need to do six flights as opposed to ten. 0:09:26.440 --> 0:09:28.959 So they're able to kind of lower their own cost 0:09:28.960 --> 0:09:32.440 structure by reducing their air network, which is which is 0:09:32.480 --> 0:09:34.920 something that you know we expect to see and you 0:09:34.960 --> 0:09:38.040 know that will definitely benefit its margins. And the company 0:09:38.080 --> 0:09:41.760 is also going through a major transformation. For the longest time, 0:09:41.960 --> 0:09:45.480 it operated separate ground and air networks, and now it's 0:09:45.760 --> 0:09:48.120 it's becoming more of a hybrid where some of it's 0:09:48.400 --> 0:09:51.000 you know, air freight business or vians I go through 0:09:51.000 --> 0:09:55.240 its express network, are now going into trucking if it 0:09:55.280 --> 0:09:57.400 makes sense, if it's not like you know, needs to 0:09:57.440 --> 0:10:00.480 be there the next day, it might make sense pushed 0:10:00.559 --> 0:10:04.760 into their trucking network, which carries significantly less costs and 0:10:04.800 --> 0:10:07.520 so therefore, you know, better margins for the company. So 0:10:07.840 --> 0:10:10.680 you know it, we're in early innings towards this shift. 0:10:11.080 --> 0:10:14.800 They changed their reporting structure this month, so you know 0:10:14.960 --> 0:10:16.960 we're going to see that going forward. 0:10:17.520 --> 0:10:21.200 Now, those same cost cutting efforts, raining and spending, streamlining 0:10:21.240 --> 0:10:24.360 operations as allowed fed X to announce plans to buy 0:10:24.360 --> 0:10:27.120 back five billion dollars of its own share so at 0:10:27.200 --> 0:10:29.120 least shareholders must be thrilled about this. 0:10:29.600 --> 0:10:32.640 They are, They are outperforming their peers. You Know, what 0:10:32.679 --> 0:10:37.000 I would say is investors are probably still remain a 0:10:37.040 --> 0:10:42.840 little skeptical about FedEx and its ability to change its 0:10:42.840 --> 0:10:45.360 cost structure. Again, that's why I mentioned it was a 0:10:45.400 --> 0:10:50.480 show me story. They really need to prove and execute 0:10:50.480 --> 0:10:55.559 on their plans to build positive sentiment sentiment amongst monks investors. 0:10:55.760 --> 0:10:59.520 So that's something you know that we're we're really watching. 0:10:59.800 --> 0:11:03.040 And then you know, you're also kind of in a 0:11:03.640 --> 0:11:08.000 time where demand isn't great. Their express business volumes are 0:11:08.000 --> 0:11:10.240 expected to be down on one one percent in the quarter. 0:11:10.679 --> 0:11:13.840 Ground volumes, you know, might be up about one and 0:11:13.840 --> 0:11:16.960 a half two percent in the quarter, and they're less 0:11:16.960 --> 0:11:19.679 than truckload business fed X freight, you know volumes are 0:11:19.720 --> 0:11:22.800 expected to be up less than one percent. So you know, 0:11:22.920 --> 0:11:26.320 we have kind of a tepid demand outlook. Obviously, a 0:11:26.360 --> 0:11:31.280 stronger consumer would bode well for them, A positive ISM 0:11:31.440 --> 0:11:35.199 number would bode well for them. You know, positive industrial 0:11:35.240 --> 0:11:39.160 production numbers would bode well for them. So you really 0:11:39.200 --> 0:11:43.120 need to see the economy begin to accelerate from here 0:11:43.679 --> 0:11:46.840 for that volume picture to get better. The kind of 0:11:46.840 --> 0:11:49.640 good news for them is that comps do definitely become 0:11:49.720 --> 0:11:53.120 easier in the second half of the calendar year, and 0:11:53.160 --> 0:11:57.079 so you could see an acceleration of volume growth and 0:11:57.120 --> 0:12:01.000 even you know, volume inflecting positive and business later on 0:12:01.120 --> 0:12:05.240 the year, albeit you know, a low single digits. 0:12:05.160 --> 0:12:08.800 Well just about six months ago before the holidays. FedEx's 0:12:08.880 --> 0:12:11.960 latest earnings out this Tuesday, and our thanks to Lee Klascow, 0:12:12.080 --> 0:12:17.240 Bloomberg Intelligence Senior Transport, Logistics and shipping analyst. Coming up 0:12:17.280 --> 0:12:19.280 on Bloomberg day Break weekend to look ahead to the 0:12:19.280 --> 0:12:22.400 presidential election in Iran and whether it could mean a 0:12:22.400 --> 0:12:26.120 shift in the country's foreign policy. I'm Tom Busby and 0:12:26.200 --> 0:12:40.720 this is Bloomberg. This is Bloomberg day Break Weekend, our 0:12:40.760 --> 0:12:42.959 global look ahead at the top stories for investors in 0:12:43.000 --> 0:12:46.160 the coming week. I'm Tom Busby in New York. Up 0:12:46.240 --> 0:12:48.760 later in our program a look at US China relations. 0:12:48.800 --> 0:12:52.319 As presidential candidates Joe Biden and Donald Trump prepare to 0:12:52.400 --> 0:12:56.120 debate this week, but first Orian set to hold a 0:12:56.120 --> 0:12:59.320 snap presidential election in the coming days that follows the 0:12:59.360 --> 0:13:02.920 sudden death of former leader Ibraham Raisi in a helicopter 0:13:03.040 --> 0:13:05.200 crash last month. But the vote comes at a time 0:13:05.480 --> 0:13:08.480 of heightened tension between Iran and the West. For more, 0:13:08.559 --> 0:13:11.000 let's go to London and bring in Bloomberg Daybreak europe 0:13:11.000 --> 0:13:13.640 banker Stephen Carroll Tom Ibraham. 0:13:13.720 --> 0:13:16.920 Raisi's death came at a sensitive time for Iran and 0:13:16.960 --> 0:13:19.480 for the wider Middle East. Tehran came close to an 0:13:19.480 --> 0:13:22.120 all out war with Israel in April when it launched 0:13:22.120 --> 0:13:25.120 a direct military strike on Israel after its consulate in 0:13:25.200 --> 0:13:29.640 Damascus was bombed. Now, the president's influence is limited in Iran, 0:13:29.880 --> 0:13:33.240 but we could see some subtle shifts in policy when 0:13:33.400 --> 0:13:36.480 the new president is elected. I've been discussing the context 0:13:36.559 --> 0:13:40.040 for this election with Bloomberg's Golnarmotavali, who leads our coverage 0:13:40.080 --> 0:13:40.600 of Iran. 0:13:41.080 --> 0:13:45.360 TV debates are actually quite critical in Iranian elections because 0:13:46.120 --> 0:13:48.240 what they do is that they give you an immediate 0:13:48.400 --> 0:13:54.760 sense of how the candidates are and being received by 0:13:54.800 --> 0:14:00.920 the public. It's the major exposure to the broader general public. 0:14:01.000 --> 0:14:04.079 And I think last debate was kind of interesting because 0:14:04.080 --> 0:14:06.760 it very much focused on the economy. So obviously there 0:14:06.840 --> 0:14:10.880 was a lot of discussion about sanctions and inflation, which 0:14:10.920 --> 0:14:14.720 is a massive problem in Iran and in Iraq's relationship 0:14:14.760 --> 0:14:19.160 with the West and the broader global economy. This is 0:14:19.200 --> 0:14:24.760 a very highly circumscribed process. So it's a ballot that's 0:14:24.960 --> 0:14:28.320 very dominated by conservatives and hardliners, and we have only 0:14:28.400 --> 0:14:32.240 one reformist candidate of the six that are running. 0:14:32.640 --> 0:14:35.880 And who are the key names to be watching as 0:14:35.920 --> 0:14:38.040 we move towards the polling. 0:14:37.720 --> 0:14:40.840 Day, So the big names, I mean think it's important 0:14:40.880 --> 0:14:44.360 to point out that quite a few important, very high 0:14:44.400 --> 0:14:49.200 profile conservatives were disqualified, were not barred from running, which 0:14:49.240 --> 0:14:52.240 is interesting, including people like Ali Larry Jaranni, who's a 0:14:52.320 --> 0:14:56.600 very influential conservative politician. It's the second time he's been barred. 0:14:57.840 --> 0:15:00.200 But the names that we need to keep deep and 0:15:00.840 --> 0:15:06.640 said Jali Lee, who's a former nuclear negotiator under Ahmadi Needrard. 0:15:06.720 --> 0:15:11.600 He's a very very radical, hardline, deeply religious person, very 0:15:11.640 --> 0:15:16.320 anti Western, very anti US, opposed to the nuclear deal. 0:15:16.520 --> 0:15:18.720 He very much is kind of in the mold of 0:15:18.840 --> 0:15:22.120 let's keep our relationship with China and Russia as strong 0:15:22.160 --> 0:15:25.120 as possible. We don't need the West, we don't need Europe. 0:15:25.640 --> 0:15:29.520 We're very capable of being self sufficient economically. He's very 0:15:29.600 --> 0:15:32.640 much of that mold. The other names that we need 0:15:32.720 --> 0:15:36.080 to look out for are Masud Pezeshkian, who's the one 0:15:36.280 --> 0:15:40.680 token reformist. But he's quite an influential and important reformist 0:15:40.760 --> 0:15:44.160 because he was health minister under Moham Maghatami in the 0:15:44.240 --> 0:15:48.360 late nineties and early two thousands, and he can become 0:15:48.560 --> 0:15:51.080 quite a serious I mean, the cynical view is that 0:15:51.200 --> 0:15:54.920 he's there just to lend legitimacy to the vote, so 0:15:55.080 --> 0:15:58.600 that Harmonae and the establishment that run the islam Republic 0:15:58.680 --> 0:16:01.760 can say, look, we don't just have hardliners, We've got 0:16:01.800 --> 0:16:04.520 a reformist choice there as well. But the fact that 0:16:04.680 --> 0:16:09.200 he's actually quite a serious reformist name actually raises the 0:16:09.280 --> 0:16:12.960 possibility that he might boost turnout, and a boost in 0:16:13.080 --> 0:16:15.680 turnout is always going to work in favor of moderates 0:16:16.240 --> 0:16:17.080 and reformists. 0:16:17.240 --> 0:16:20.360 Yeah, I'm interested to get your view on how engaged 0:16:20.400 --> 0:16:22.520 the public has been in Iran in this campaign. Is 0:16:22.560 --> 0:16:25.000 it something that people feel as is sort of addressing 0:16:25.040 --> 0:16:26.320 the key issues in their lives. 0:16:26.520 --> 0:16:29.080 I don't think so. I think for many years there's 0:16:29.200 --> 0:16:34.640 been quite a strong sense of political disenfranchisement and disenchantment 0:16:34.800 --> 0:16:41.160 in Iran. We've had some really violent uprisings and protests recently, 0:16:41.320 --> 0:16:45.280 most notably in twenty nineteen and obviously more recently in 0:16:45.320 --> 0:16:48.720 twenty twenty two after the death in police custody of 0:16:48.840 --> 0:16:53.120 Maths Amini, who was arrested for allegedly violating these strict 0:16:53.240 --> 0:16:57.240 Islamic dress codes that apply to women mostly. That caused 0:16:57.240 --> 0:17:02.880 a huge convulsion across the country, and the establishment is rightly, 0:17:03.240 --> 0:17:08.640 very very concerned about internal political dissent. I would say 0:17:09.240 --> 0:17:14.080 that opposition to the whole system of the exact republic 0:17:14.520 --> 0:17:17.080 it has been, and you know, has been an all 0:17:17.160 --> 0:17:21.200 time high since the nineteen seventy nine revolution, for I 0:17:21.359 --> 0:17:25.000 reckon for at least since twenty twenty two, and that's 0:17:25.040 --> 0:17:30.960 something that individuals men like Harmony are worried about. Institutions 0:17:31.000 --> 0:17:33.600 like the ILGC, the example revolution regard called, they're worried 0:17:33.640 --> 0:17:38.240 about that, and they need to have as many people 0:17:38.680 --> 0:17:42.800 participating in this election as they can again to give 0:17:42.960 --> 0:17:46.880 that system and their own system a sense of legitimacy 0:17:47.320 --> 0:17:52.600 and credibility. And that's why Pezeshkian's presence is so key 0:17:53.000 --> 0:17:55.280 and important from a political point of view. 0:17:55.400 --> 0:17:57.760 Can you just briefly explain the process here, just so 0:17:57.840 --> 0:18:00.200 we can understand why we don't consider this to be 0:18:00.640 --> 0:18:01.399 a free election. 0:18:02.119 --> 0:18:04.440 Well, I don't know whether i'd say it's not entirely 0:18:04.560 --> 0:18:09.600 a free election. It's a highly circumscribed These elections tend 0:18:09.680 --> 0:18:15.560 to be very heavily stage stage managed from the outset. 0:18:15.760 --> 0:18:22.159 So you have a procedure whereby individuals who have to 0:18:22.240 --> 0:18:26.280 meet a certain criteria can go to the Interior Ministry 0:18:26.760 --> 0:18:31.199 and apply to become to register to become presidential candidates. 0:18:31.480 --> 0:18:35.280 The criteria some of it includes being between the age 0:18:35.280 --> 0:18:38.760 of forty and seventy five or forty five and seventy 0:18:38.800 --> 0:18:41.040 five I think I can't quite remember. You have to 0:18:41.119 --> 0:18:45.639 have some experience in political office, and you have to 0:18:45.720 --> 0:18:48.840 have no criminal records. And there are some things that 0:18:48.960 --> 0:18:53.160 are less clear, like being a woman is something that's 0:18:53.400 --> 0:18:56.920 it's up for debates whether the Uranian constitution prohibits women 0:18:57.080 --> 0:19:01.000 from being presidents or not being a Sunday. You definitely 0:19:01.080 --> 0:19:04.200 have to be a Muslim. There's never been a non 0:19:04.320 --> 0:19:07.800 Shia Muslim president in Iran since nineteen seventy nine, since 0:19:07.800 --> 0:19:10.920 we've had the presidency. So you have that process where 0:19:10.960 --> 0:19:15.200 people who meet that criteria register and then once they've registered, 0:19:15.480 --> 0:19:19.560 we have this very powerful non elected body called the 0:19:19.600 --> 0:19:24.880 Guardian Council. That's made up of twelve theologians who basically 0:19:25.040 --> 0:19:28.120 decide which of those two hundred or so people who've 0:19:28.160 --> 0:19:31.800 registered can actually run. They're the people that decide who 0:19:31.920 --> 0:19:35.920 gets disqualified. And that means that there's this perception that 0:19:36.000 --> 0:19:38.320 it's a very stage managed process. 0:19:38.680 --> 0:19:40.280 Talk us through how we should be thinking about this 0:19:40.400 --> 0:19:43.280 from an international point of view. Obviously Iran has a 0:19:43.400 --> 0:19:46.520 very tasty relationship with the West, first of all, and 0:19:46.720 --> 0:19:50.240 how should people sitting in London or in Washington be 0:19:50.320 --> 0:19:52.119 looking at this and thinking about this election. 0:19:52.640 --> 0:19:56.360 I mean, I think they need to be looking at 0:19:56.920 --> 0:20:01.520 not just who becomes president, but how how the entire 0:20:02.680 --> 0:20:09.040 government administration is then managed afterwards. So what's critical, for instance, 0:20:09.520 --> 0:20:16.359 is if hypothetically Pezeshkian, who's this token reformist, experienced candidate, 0:20:17.280 --> 0:20:20.560 does win the majority of votes, if he becomes president, 0:20:21.160 --> 0:20:25.440 what then happens to the foreign policy file? Because one 0:20:25.520 --> 0:20:29.159 of the issues I think when Raharni, who managed to 0:20:29.280 --> 0:20:33.240 kind of refashion himself as a moderate in twenty thirteen 0:20:33.280 --> 0:20:36.040 when he ran for the election, he won that election 0:20:36.200 --> 0:20:39.960 basically on a mandate of sanctions removal, better relations with 0:20:40.080 --> 0:20:43.119 the West, and some kind of dayton with the US. 0:20:43.520 --> 0:20:47.639 But the problem was that his foreign policy was constantly 0:20:47.840 --> 0:20:53.640 being attacked by hardliners, and because he gave almost kind 0:20:53.680 --> 0:20:58.760 of full reign to moderate politicians like Javad Zari, these 0:20:58.880 --> 0:21:05.400 multi lingual, you know, very errudite, sort of articulate diplomats 0:21:05.800 --> 0:21:08.560 to kind of schmooze in New York and go on 0:21:08.640 --> 0:21:11.800 these promenade walks in Switzerland with men like John Kerry. 0:21:12.640 --> 0:21:15.800 Stuff like that doesn't go down well amongst the hard 0:21:15.880 --> 0:21:19.960 line within the hardline establishment in Tehran. So, for instance, 0:21:20.000 --> 0:21:23.200 if someone like Peziskion does become president, you then have 0:21:23.320 --> 0:21:25.640 to ask, well, if the foreign policy file is given 0:21:25.680 --> 0:21:29.479 to hardliners and someone who de facto has the support 0:21:29.520 --> 0:21:35.080 of the IRGC, maybe that will make for a less contentious, 0:21:35.920 --> 0:21:42.360 paradoxically more stable administration and you can so I think 0:21:42.440 --> 0:21:43.920 that's what we need to look out for. It's not 0:21:44.040 --> 0:21:47.200 just who wins the top job, it's who looks after 0:21:48.080 --> 0:21:52.520 the strategic decisions that are going to decide the kind 0:21:52.560 --> 0:21:54.520 of direction of traveling. Yeah, exactly. 0:21:54.760 --> 0:21:57.800 Yeah, I wonder also because because we're obviously very focused 0:21:57.840 --> 0:22:01.359 on Iran's relationship with the region as well, and as 0:22:01.400 --> 0:22:04.560 particularly you know, after the incidence with Israel in recent months. 0:22:04.640 --> 0:22:04.800 Two. 0:22:04.960 --> 0:22:07.160 I mean, how much of an impact could this election 0:22:07.440 --> 0:22:10.520 have on how Israel interacts with its neighbors. 0:22:11.440 --> 0:22:15.080 At the bottom line is that, you know, the Islamic 0:22:15.200 --> 0:22:18.439 Republic is very much in terms of foreign policy, it's 0:22:18.520 --> 0:22:23.520 almost defined by its support for Palestine, for Palestinians, and 0:22:23.680 --> 0:22:27.399 it's also defined by the fact that it opposes the 0:22:27.520 --> 0:22:31.400 very presence of the States of Israel, at least rhetorically. 0:22:31.600 --> 0:22:34.679 That's the rhetoric that's not going to change. 0:22:34.960 --> 0:22:35.120 Now. 0:22:35.400 --> 0:22:41.240 There are kind of agreements and sort of arrangements or 0:22:41.359 --> 0:22:45.040 relationships that are managed so that they kind of can 0:22:45.359 --> 0:22:49.920 tolerate whatever consensus exists in the region. So, for instance, 0:22:50.000 --> 0:22:54.439 they need a strong economic relationship with the UAE. They 0:22:54.560 --> 0:22:58.760 have to Dubai has been referred to as Iran's economic lung, 0:22:58.920 --> 0:23:02.359 for instance, for decades. So if you have these accords, 0:23:02.440 --> 0:23:04.960 the so called Abraham Accords between the UAE and Israel, 0:23:05.000 --> 0:23:08.880 for instance, Iran can and does turn a blind eye 0:23:08.960 --> 0:23:11.240 to that and just keep it on a separate track 0:23:11.320 --> 0:23:14.880 to its economic trade relationship with the UAE. That's something 0:23:15.000 --> 0:23:19.879 that won't change regardless of who who becomes president. What 0:23:20.520 --> 0:23:24.000 can change is if someone like Jali Lee who's, like 0:23:24.119 --> 0:23:29.600 I said, very very conservative fundamentalist. If he's president, he 0:23:30.400 --> 0:23:38.840 is probably less likely to be bothered about pragmatic outcomes 0:23:38.920 --> 0:23:45.360 that protect Iran's trade relationship with the Europeans, for instance, 0:23:46.040 --> 0:23:51.320 or he might be less concerned about preventing an escalation 0:23:51.520 --> 0:23:57.400 over Iran's nuclear program with the US. He's much more 0:23:57.520 --> 0:24:02.320 in the vein of if you want a Western comparison, 0:24:02.440 --> 0:24:07.800 someone like John Bolton, he's more He's very focused on 0:24:08.920 --> 0:24:12.520 this idea. It's almost a bit like I mean, Putin's 0:24:12.560 --> 0:24:14.879 trip to North Korea made me think of Jali Lee 0:24:15.000 --> 0:24:18.640 because that's something that I would think he almost would 0:24:18.680 --> 0:24:23.119