WEBVTT - Why Oil Prices Are Decoupling From Geopolitical Threats 0:00:02.560 --> 0:00:08.760 Bloomberg Audio Studios, Podcasts, radio News. I want to just 0:00:09.400 --> 0:00:13.520 thank you our great host Canada, but you'll probably hear 0:00:13.560 --> 0:00:16.000 what I see and I have to be back here. 0:00:25.720 --> 0:00:28.800 I'm Stephanie Flanders, head of Government and Economics at Bloomberg. 0:00:29.080 --> 0:00:31.960 Welcome to Trumponomics, the podcast that looks at the economic 0:00:32.040 --> 0:00:36.000 world of Donald Trump, how he's already shaped the global economy, 0:00:36.320 --> 0:00:40.240 and what on earth is going to happen next. We're 0:00:40.280 --> 0:00:43.360 recording this on Tuesday, the seventeenth of June, hours before 0:00:43.400 --> 0:00:46.960 the official end of the fifty first g seventh Summit 0:00:47.200 --> 0:00:51.400 being hosted in Canada, but after the US President unexpectedly 0:00:51.479 --> 0:00:54.760 departed a day early. Maybe we shouldn't be so surprised. 0:00:55.160 --> 0:00:57.840 He's made no secret of his disdain for these official 0:00:57.960 --> 0:01:01.560 gatherings of world leaders, I mean, collective decision making. It's 0:01:01.600 --> 0:01:05.240 not really his thing, nor is sharing the spotlight. Why 0:01:05.319 --> 0:01:09.160 stick around arguing over a stupid communicate when you can 0:01:09.200 --> 0:01:11.600 steal all the headlines by jumping on a plane unexpectedly 0:01:11.600 --> 0:01:15.440 and posting on truth social But headlines aren't the same 0:01:15.440 --> 0:01:18.520 as results, and so far, the president's one man banned 0:01:18.520 --> 0:01:21.800 approach to ending foreign wars hasn't been going very well 0:01:21.840 --> 0:01:26.280 at all. As I mentioned, we're recording this on the Tuesday, 0:01:26.319 --> 0:01:30.080 the seventeenth of June. The conflict between Iran and Israel 0:01:30.200 --> 0:01:33.480 appears to be intensifying today, and obviously we don't know 0:01:33.560 --> 0:01:35.520 what will happen in the region before you listen to this, 0:01:36.120 --> 0:01:38.880 but we can ask what the crisis in the Middle 0:01:38.880 --> 0:01:43.000 East and potentially a soaring oil price would mean for 0:01:43.040 --> 0:01:46.040 the US economy and for Donald Trump. And we've got 0:01:46.040 --> 0:01:48.960 two brilliant voices to speak to that from our Bloomberg 0:01:49.080 --> 0:01:52.120 Economics team in London here with me, which I'm like 0:01:52.200 --> 0:01:55.320 to say is not always the case. Diaddou, chief emerging 0:01:55.360 --> 0:01:59.080 markets economist, who's also a senior fellow at Harvard Kennedy 0:01:59.120 --> 0:02:00.800 School and a great friend of the show. We heard 0:02:00.880 --> 0:02:03.280 him a few weeks ago in Qatar. It was great 0:02:03.320 --> 0:02:07.040 to be here and in Washington. Jenny Welch, our chief 0:02:07.160 --> 0:02:10.919 geoeconomics analyst. Jenny, who's also been on the show several times, 0:02:11.320 --> 0:02:14.440 previously served as the director for China and Taiwan on 0:02:14.520 --> 0:02:18.000 the US National Security Council under the Biden and old 0:02:18.120 --> 0:02:19.240 Trump administrations. 0:02:19.680 --> 0:02:25.400 Thanks so much, Stephanie, an honor to be here. 0:02:27.360 --> 0:02:30.000 Jenny you're someone who's I spent a fair bit of 0:02:30.000 --> 0:02:34.720 time preparing notes for G seven summits, and I was 0:02:34.760 --> 0:02:37.480 remembering that Donald Trump in his first term, he left 0:02:37.520 --> 0:02:40.320 the last G seven that was also held in Canada 0:02:40.600 --> 0:02:44.480 in a half about Canadian milk quotas. Is there any 0:02:44.520 --> 0:02:47.240 point having them these G seven meetings in the age 0:02:47.240 --> 0:02:48.000 of Donald Trump. 0:02:48.639 --> 0:02:50.600 Well, interestingly enough, I think we're going to get an 0:02:50.639 --> 0:02:53.520 answer to that question today on what the remaining G 0:02:53.639 --> 0:02:56.520 seven leader is another guest at the summit accomplished now 0:02:56.560 --> 0:02:59.840 that President Trump has departed it. They were able to 0:02:59.840 --> 0:03:03.880 put out yesterday a statement on the ongoing Israel Ron conflict, 0:03:04.200 --> 0:03:06.200 but even then they had to do a lot of 0:03:06.240 --> 0:03:09.880 backroom dealing to get President Trump to sign on to it. Otherwise, 0:03:09.960 --> 0:03:13.120 the expectations for the summer were pretty low heading into it. 0:03:13.200 --> 0:03:15.160 I think there was a lot of focus really more 0:03:15.200 --> 0:03:18.160 on Trump's bilateral meetings that he was due to hold 0:03:18.480 --> 0:03:20.679 on the sidelines on the summit, then on what the 0:03:20.760 --> 0:03:22.480 leaders themselves are going to accomplish. 0:03:22.760 --> 0:03:25.160 There is so much focus on who gets the bilateral 0:03:25.200 --> 0:03:27.120 with Donald Trump, and I guess the ones who were 0:03:27.320 --> 0:03:29.440 shortchanged have got an excuse. They say, oh, well, they 0:03:29.480 --> 0:03:31.600 had to leave. But did he get anything done before 0:03:31.639 --> 0:03:34.200 he left in any of these meetings. 0:03:33.880 --> 0:03:37.160 Well, we got additional progress. I say progress because there's 0:03:37.200 --> 0:03:41.040 still some unsolved elements of the US UK trade deal, 0:03:41.520 --> 0:03:44.720 but we didn't get progress on Japan, South Korea, India, 0:03:44.760 --> 0:03:47.320 which were kind of the other major trade deals that 0:03:48.040 --> 0:03:52.240 were building anticipation for some sort of announcement at this meeting. 0:03:52.440 --> 0:03:56.119 But Japan had their meeting and was surprisingly not able 0:03:56.160 --> 0:03:58.560 to come out of it with any major announcements. All 0:03:58.600 --> 0:04:01.520 of this, by the way, and just under a month 0:04:01.720 --> 0:04:04.800 until the deadline for reciprocal terrorists coming back in at 0:04:04.800 --> 0:04:08.040 those higher rates. Another leader who also wasn't able to 0:04:08.080 --> 0:04:11.040 have a meeting with President Trump was President Zelenski, who 0:04:11.280 --> 0:04:13.480 was a guest at this year's G seven as he 0:04:13.520 --> 0:04:16.640 has been in years past, and was probably very interested 0:04:16.640 --> 0:04:20.119 in having that conversation in light of negotiations with Russia 0:04:20.200 --> 0:04:23.760 continuing to sell out, concerns about us A continuing not 0:04:23.839 --> 0:04:27.440 to come through, and kind of the broader game plan 0:04:27.680 --> 0:04:30.280 for Russia Ukraine under President Trump. 0:04:31.160 --> 0:04:34.760 The reason that Donald Trump went back to White House 0:04:35.560 --> 0:04:42.560 was apparently to think harder potentially respond to the intensifying 0:04:42.560 --> 0:04:45.840 conflict between Iran and Israel over the last few days. 0:04:46.160 --> 0:04:48.520 I'm sure people listening will have been following most of 0:04:48.520 --> 0:04:50.280 the twists and turns. But just in terms of the 0:04:50.360 --> 0:04:53.800 market and the potential economic impact, just talk us through 0:04:53.880 --> 0:04:57.359 briefly how markets have responded to all intense purposes outbreak 0:04:57.400 --> 0:04:58.920 of war since the end of last week. 0:04:59.360 --> 0:05:02.000 Right the main market that we're talking about that's relevant 0:05:02.000 --> 0:05:05.440 for the global economy is obviously the oil market. All 0:05:05.520 --> 0:05:08.920 prices did go up or have gone up since Friday thirteenth. 0:05:09.440 --> 0:05:12.800 Before the conflict, oil was around sixty seven dollars per barrel. 0:05:13.160 --> 0:05:15.719 Now is around seventy five dollars per barrel. It did 0:05:15.720 --> 0:05:19.640 go up. There are some attacks on refineries in Israel 0:05:19.680 --> 0:05:23.760 and Iran, but nothing major, no major disruption. They're up 0:05:23.839 --> 0:05:27.680 because of worries about potential disruption and oil supply and 0:05:27.760 --> 0:05:30.680 our two risks here. There's one risk, which is basically 0:05:30.760 --> 0:05:35.320 Israel hitting Iranian energy facilities oil and gas and at 0:05:35.400 --> 0:05:38.200 risk here we're talking about Iran's oil productions about three 0:05:38.200 --> 0:05:41.120 percent of global supply. And there is the second risk, 0:05:41.160 --> 0:05:45.919 which is potential Iranian retaliation on all facilities in the 0:05:45.960 --> 0:05:48.440 Gulf and the arp Golf countries. In Saudi, in the Oe, 0:05:48.560 --> 0:05:51.000 in Kuwait and so on, and at risk. Here we're 0:05:51.040 --> 0:05:54.120 talking about one third of global supply or a closure 0:05:54.160 --> 0:05:57.400 of the Strait of Hormus, through which goes one fifth 0:05:57.520 --> 0:06:00.880 of global oil supply, so large quantities, and that will 0:06:00.880 --> 0:06:03.520 have implications for all prices. We looked at the scenarios. 0:06:03.560 --> 0:06:05.320 If you get the first scenario in which you get 0:06:05.839 --> 0:06:08.479 just a disruption an Iranian all supply and you lose 0:06:08.520 --> 0:06:11.360 three percent or most of the three percent of global 0:06:11.360 --> 0:06:14.480 all supply, we're talking about all prices in the mid seventies, 0:06:14.520 --> 0:06:17.839 which is roughly where they are now. If we get 0:06:17.839 --> 0:06:20.400 a major disruption and then shut down of the Strait 0:06:20.440 --> 0:06:22.720 of Humers and the world loses one fifth of its 0:06:22.720 --> 0:06:25.560 global all supply, which is something based by the way, 0:06:25.720 --> 0:06:29.159 is unprecedented, never happened. We're talking about a major oil 0:06:29.160 --> 0:06:31.160 shock that could take all prices to one hundred and 0:06:31.200 --> 0:06:32.919 thirty dollars per barrel. 0:06:33.080 --> 0:06:36.760 Okay, and if in the past we've had oil shops. 0:06:36.800 --> 0:06:39.120 I know you've also looked at what history shares on 0:06:39.160 --> 0:06:42.240 that front. What does that look like for the broader economy. 0:06:42.960 --> 0:06:44.840 Let's just talk about recent history and then we talk 0:06:44.880 --> 0:06:48.120 about the longer history, the recent history, past twelve to 0:06:48.160 --> 0:06:53.880 twenty months, we've had every imaginable geopolitical us has materialized. 0:06:55.400 --> 0:06:58.080 A war in Gaza and devastation and Gaza that has happened, 0:06:58.120 --> 0:06:59.839 an expansion of the war, and to eleven on, a 0:06:59.839 --> 0:07:03.080 c area that has happened. Regime change in the Middle East. 0:07:03.240 --> 0:07:05.839 Look at whos in the presidential palace in Damascus now 0:07:06.000 --> 0:07:08.839 a different person to a year ago. A direct war 0:07:08.920 --> 0:07:11.520 between Iran and Israel. It's not a one day it's 0:07:11.520 --> 0:07:14.160 a multi day war, and that is happening right now. 0:07:14.720 --> 0:07:19.000 So everything that we thought was remote and unlikely has materialized, 0:07:19.520 --> 0:07:22.600 and yet there's no pass through to all prices. In fact, 0:07:22.680 --> 0:07:25.200 even after the increase in all prices over the past week, 0:07:25.560 --> 0:07:28.880 oil today is lower than October six, when it was 0:07:28.920 --> 0:07:32.600 eighty five dollars per barrel. So this decoupling between oil 0:07:32.640 --> 0:07:35.640 and geopolitical risk is something that we have witness over 0:07:35.680 --> 0:07:38.680 the past twenty months. Let's now look at the longer 0:07:38.800 --> 0:07:42.080 time horizon. Over the past fifty years, there's been I 0:07:42.120 --> 0:07:46.040 think seven major turmoils in the Middle East, from the 0:07:46.120 --> 0:07:48.920 nineteen seventy three war all the way out to twenty 0:07:48.960 --> 0:07:55.000 twenty three. October seventh attacks. Of these seven turmoils, three 0:07:55.040 --> 0:07:58.440 of them have had little impact on all prices. Two 0:07:58.960 --> 0:08:01.239 did have an impact on oil, but that was short lived, 0:08:01.240 --> 0:08:04.400 only lasted for a few months, and only the remaining 0:08:04.480 --> 0:08:07.640 two have had the lasting impact on all prices. These 0:08:07.640 --> 0:08:10.560 were the nineteen seventy three war, Arab Israeli War and 0:08:10.640 --> 0:08:14.520 the Iranian Revolution of nineteen seventy nine. These also happened 0:08:14.520 --> 0:08:18.120 to be the oldest two events in our sample. So 0:08:18.280 --> 0:08:23.560 it seems that recently oil is getting decoupling from geopolitical 0:08:24.240 --> 0:08:27.960 events and escalation, but it's also something that has been 0:08:27.960 --> 0:08:29.960 happening over the past few decades as well. 0:08:30.520 --> 0:08:33.680 This is an administration that has talked more about oil 0:08:34.000 --> 0:08:37.000 than most, I mean, has been very keen on expanding 0:08:37.480 --> 0:08:40.520 US energy production. Donald Trump has also talked about and 0:08:40.600 --> 0:08:43.720 his Treasury sectary has talked about wanting to get oil 0:08:43.760 --> 0:08:45.959 prices down as one of the key parts of the 0:08:46.559 --> 0:08:50.240 economic strategy. This sort of decoupling of what's going on 0:08:50.240 --> 0:08:53.600 in the Middle East geopolitical conflict from the oil price. 0:08:53.640 --> 0:08:56.800 Do you think that is changing the way the administration 0:08:56.920 --> 0:08:59.480 will look at the risks of this situation. They will 0:08:59.480 --> 0:09:02.720 feel sort of a sense of reassurance that none of 0:09:02.720 --> 0:09:04.560 this is really going to come back to bite them 0:09:04.559 --> 0:09:06.400 in terms of the price of the pump. 0:09:06.880 --> 0:09:09.840 It does strike me that we don't see the same 0:09:09.920 --> 0:09:13.760 sort of sense of urgency to act and diffuse tensions 0:09:14.400 --> 0:09:17.440 this time around that we might have expected a few 0:09:17.480 --> 0:09:20.520 years ago when the US was more concerned about its 0:09:20.679 --> 0:09:23.480 energy dependence on the Middle East. You know, for example, 0:09:23.920 --> 0:09:26.679 President Trump's comments over the weekend that he was contemplating 0:09:26.760 --> 0:09:29.440 just letting Israel and Iran fight it out, I think 0:09:29.480 --> 0:09:33.160 would have been unthinkable a decade ago, certainly, you know, 0:09:33.200 --> 0:09:37.200 twenty years ago. That being said, you know, it's very 0:09:37.240 --> 0:09:41.760 difficult to see inside this administration's current calculus, for lack 0:09:41.800 --> 0:09:44.160 of a better word, on the conflict. There's been a 0:09:44.160 --> 0:09:47.480 lot of mixed signals, including you know, President Trump's early 0:09:47.480 --> 0:09:50.400 departure from the G seven last night was a rather 0:09:50.480 --> 0:09:52.720 unusual step that had a lot of folks worried, in 0:09:52.760 --> 0:09:56.680 combination with the movement of military assets out to the regions. 0:09:56.720 --> 0:10:00.160 I'm very concerning true social posts. And yet we woke 0:10:00.240 --> 0:10:03.559 up this morning in Washington to seeing US hasn't acted yet. 0:10:04.160 --> 0:10:07.160 What exactly is the next step, I think is something 0:10:07.200 --> 0:10:09.720 that We're continuing to watch Keenlee. Maybe by the time 0:10:09.760 --> 0:10:11.880 this podcast there as we'll have an answer to that question. 0:10:11.920 --> 0:10:15.200 But at the moment a lot of uncertainty about exactly 0:10:15.240 --> 0:10:16.800 what the US strategy is here. 0:10:17.360 --> 0:10:20.120 We've had the most sort of extreme examples of that 0:10:20.240 --> 0:10:22.760 tea coupling of geopolitics from the old price in the 0:10:22.840 --> 0:10:25.240 last two years. But the indication of what you were 0:10:25.280 --> 0:10:27.200 saying is that this has been something that's been coming 0:10:27.200 --> 0:10:28.920 for a long time. I mean, if we look at 0:10:28.960 --> 0:10:32.880 the amount of instability across the world, but particularly in 0:10:32.920 --> 0:10:35.679 the Middle Aged if there's a conflict that becomes much 0:10:35.720 --> 0:10:38.280 more regional in scale, do you think that would be 0:10:38.280 --> 0:10:41.600 the thing that would change the way markets were thinking 0:10:41.600 --> 0:10:44.040 about this moment because it kind of brings into question 0:10:44.880 --> 0:10:48.280 broader global stability, or you just think you can throw 0:10:48.360 --> 0:10:49.600 anything at these markets. 0:10:50.400 --> 0:10:54.000 I mean, right now market seems quite relaxed and calm, 0:10:54.440 --> 0:10:57.720 given the level of escalation that we're seeing now. It's 0:10:57.800 --> 0:11:01.080 not normal to see Daranga and bomb tel Aviv gain bomb. 0:11:01.120 --> 0:11:04.240 That's absolutely not normal. So I think it's important to 0:11:04.280 --> 0:11:08.120 think why there is a decoupling between geopolitics and oil, 0:11:08.200 --> 0:11:11.480 and also to think about the link between oil and 0:11:11.520 --> 0:11:15.280 the global economy. So I think the reasons why geopolitics 0:11:15.280 --> 0:11:17.520 seems to be decoupling from oil, I think there's multiple 0:11:17.600 --> 0:11:21.040 factors here. There's a factor in which there is probably 0:11:21.360 --> 0:11:24.040 more oil storage now than the early nineteen seventies, so 0:11:24.080 --> 0:11:27.200 the world is better prepared for it. There is a 0:11:27.240 --> 0:11:29.880 factor in which we do have more supply from the 0:11:29.960 --> 0:11:32.520 rest of the world. The Middle eas share is still important, 0:11:32.960 --> 0:11:34.640 but it's not just a supply of oil. It's general 0:11:34.640 --> 0:11:37.640 supply of energy. We're talking about dirty energy like coal, 0:11:37.760 --> 0:11:41.520 but also cleaner energy like renewables. And also typically when 0:11:41.520 --> 0:11:43.480 you have an oil price shock, what happens to the world. 0:11:43.520 --> 0:11:45.559 He gets slower growth, you get higher inflation, and you 0:11:45.600 --> 0:11:47.520 get higher interest rates. That's the sort of rule of 0:11:47.559 --> 0:11:50.400 thumb that we have in our global economic models. But 0:11:50.480 --> 0:11:52.959 I think the pass through is weaker now. My colleague 0:11:53.040 --> 0:11:56.800 Jamie Rush brought a piece this week and he looked 0:11:56.840 --> 0:11:59.560 at the reasons, and now there are a couple of reasons. First, 0:11:59.840 --> 0:12:02.080 there has been inflation in the world, so one hundred 0:12:02.120 --> 0:12:05.760 dollars oil today is not one hundred dollars oil a 0:12:05.840 --> 0:12:09.600 decade ago. There is more supply that is actually coming 0:12:09.679 --> 0:12:13.000 from rshield, which is more responsive to higher oil prices. 0:12:13.640 --> 0:12:15.920 And there is also we need less oil to produce 0:12:15.960 --> 0:12:19.560 one dollar of GDP. The energy intensity or the oil 0:12:19.600 --> 0:12:25.199 intensity of our economies have fallen in recent decades and 0:12:25.200 --> 0:12:29.080 thus reducing the responsiveness of the global economy to all prices. 0:12:29.240 --> 0:12:31.480 But also we have reasons why all prices are also 0:12:31.520 --> 0:12:33.560 less responsive to geopolitical risks. 0:12:34.480 --> 0:12:37.280 Jenny, it seems as though, at least to some degree, 0:12:37.440 --> 0:12:41.920 the fear of sort of economic blowback from conflict in 0:12:41.960 --> 0:12:45.200 the Middle East failing to stop conflict in the Middle 0:12:45.240 --> 0:12:47.880 East is less than it would have been in the past. 0:12:48.120 --> 0:12:51.000 But we know this is an administration that has a 0:12:51.040 --> 0:12:55.240 particular divide when it comes to the willingness of certain 0:12:55.320 --> 0:12:59.160 members to be quite interventionist and to be imposing America's 0:12:59.200 --> 0:13:01.400 will on the world, whether it's regard to China or 0:13:01.480 --> 0:13:06.000 other things, and those who are really deeply isolationist, and 0:13:06.320 --> 0:13:09.439 the America first rhetoric goes to the point of really 0:13:09.559 --> 0:13:13.840 just wanting to pull back from US involvements. Depending on 0:13:13.880 --> 0:13:16.760 how things go in the next few days, what kind 0:13:16.760 --> 0:13:20.040 of conclusions do you think we should be drawing the 0:13:20.080 --> 0:13:23.559 way that the administration approaches the situation in Iran. Do 0:13:23.600 --> 0:13:27.160 you think that will hold some lessons about the underlying 0:13:27.200 --> 0:13:28.520 dynamics of the administration. 0:13:29.080 --> 0:13:31.880 I think almost certainly it will, And I think at 0:13:31.880 --> 0:13:33.640 the end of the day, what it's going to reveal 0:13:33.840 --> 0:13:36.560 and what was true in the first Trump administration, but 0:13:36.640 --> 0:13:40.160 I think has come into even sharper relief in his 0:13:40.280 --> 0:13:43.920 second term is the idea that President Trump is ultimately 0:13:44.000 --> 0:13:46.360 the decider, the man in charge. And we saw this 0:13:46.440 --> 0:13:50.040 dynamic in his first term, where he liked, for lack 0:13:50.080 --> 0:13:52.360 of a better term, this team of rivals dynamic of 0:13:52.400 --> 0:13:56.880 having multiple voices within his administration that would cultivate different 0:13:56.880 --> 0:13:59.079 options for him and he could kind of weigh them 0:13:59.360 --> 0:14:02.360 and tease out the complexities of each of them and 0:14:02.640 --> 0:14:05.640 then make ultimately the decision right. And that's what we 0:14:05.800 --> 0:14:08.400 see in this time around. Except this time around it 0:14:08.520 --> 0:14:11.880 is complicated by this dynamic that he is also staffed 0:14:11.920 --> 0:14:14.959 his administration with people that, regardless of their different perspectives 0:14:14.960 --> 0:14:18.040 on issues, are ultimately very loyal to him, and I 0:14:18.080 --> 0:14:20.960 think that that has become especially an important influence on 0:14:21.000 --> 0:14:23.480 how he's approached Iran. In his first term, he was 0:14:23.520 --> 0:14:26.760 surrounded by people who were largely hawks on Iran and 0:14:26.760 --> 0:14:29.760 who urged his sort of maximum pressure campaign with the 0:14:29.800 --> 0:14:32.960 idea that there may ultimately be the second phase of 0:14:33.040 --> 0:14:35.480 eventually getting to negotiations, but you have to start with 0:14:35.520 --> 0:14:38.480 the pressure that was his first term play. Now in 0:14:38.520 --> 0:14:42.000 his second term, he's clearly still has people hawkish on 0:14:42.040 --> 0:14:45.080 Iran around him, but he is not necessarily following their 0:14:45.120 --> 0:14:48.040 advice on going back to that maximum pressure campaign. First 0:14:48.040 --> 0:14:50.440 he launched in with the negotiations, which I think was 0:14:50.440 --> 0:14:52.680 a surprise to a lot of people who had watched 0:14:52.680 --> 0:14:56.480 his first term policy. The question is now he seems 0:14:56.520 --> 0:14:59.640 to be seeing this latest conflict as sort of giving 0:14:59.720 --> 0:15:04.239 him leverage at the negotiating table, even though from Tehran's perspective, 0:15:04.320 --> 0:15:07.320 it is not going to engage at the negotiating table 0:15:07.360 --> 0:15:10.880 while it's involved in an active conflict. And so I 0:15:10.920 --> 0:15:13.680 think the question is how does Trump see this playing out. 0:15:13.720 --> 0:15:15.280 Does he really think that this is going to give 0:15:15.320 --> 0:15:17.920 him leverage? Is he still ultimately focused on a deal 0:15:18.320 --> 0:15:20.240 or is it some part he going to walk away 0:15:20.280 --> 0:15:23.000 from the table and say I can achieve my goals 0:15:23.040 --> 0:15:25.960 through other, albeit military means. 0:15:26.520 --> 0:15:29.720 This is slightly a process question, but I think it 0:15:29.840 --> 0:15:33.040 also matters because it affects how the decisions being made. 0:15:33.200 --> 0:15:33.640 You were in the. 0:15:33.640 --> 0:15:37.800 National Security Council. There is almost no National Security Council 0:15:37.840 --> 0:15:41.120 now in terms of your equivalent, the staff who are 0:15:41.280 --> 0:15:44.920 expert in their field and are writing memos and advising 0:15:45.000 --> 0:15:50.200 the principles. That is a skeleton operation now barely exists 0:15:50.240 --> 0:15:51.920 at all, And as far as we can see, all 0:15:51.960 --> 0:15:54.560 the policy planning, or at least the preparation for policy 0:15:54.600 --> 0:15:57.200 and the option papers is all coming out of the 0:15:57.200 --> 0:16:00.960 State Department. Is your sense that that expertise around the 0:16:00.960 --> 0:16:03.960 Middle East is still there within the State Department, That 0:16:04.080 --> 0:16:06.960 kind of knowledge of the region is feeding into some 0:16:07.000 --> 0:16:10.160 of the deliberations, even if Donald Trump and the people 0:16:10.160 --> 0:16:13.120 around him aren't themselves expert what's your sense of that. 0:16:13.840 --> 0:16:17.680 I think there's two simultaneous truths here. There is still 0:16:17.680 --> 0:16:20.400 a tremendous amount of expertise in the United States government 0:16:20.520 --> 0:16:23.440 on the Middle East that exists at various centers, the 0:16:23.480 --> 0:16:26.680 intelligence community, the State Department, Defense Department. But part of 0:16:26.680 --> 0:16:29.560 the function of the NSC was to coordinate and bring 0:16:29.640 --> 0:16:33.800 up into a higher level those expertise opinions and formulate 0:16:33.840 --> 0:16:36.800 policy options for the principle for the President and his 0:16:36.880 --> 0:16:41.160 senior advisors. The NSC not playing that function as well 0:16:41.160 --> 0:16:43.600 today because it's been so whittled down, and because even 0:16:43.680 --> 0:16:47.520 at senior levels it's been whittled down, I think creates 0:16:47.600 --> 0:16:50.200 questions about whether or not that expertise is still floating 0:16:50.240 --> 0:16:52.040 up to the top, and whether there's the same sort 0:16:52.080 --> 0:16:56.000 of very thought through options that are being presented at 0:16:56.000 --> 0:16:58.800 the same time. I think there has been a tendency 0:16:58.840 --> 0:17:01.880 in the Trump administration, even before the recent gutting of 0:17:01.880 --> 0:17:04.760 the NSC, for decisions to be made outside what we 0:17:04.800 --> 0:17:08.000 would call the normal policy process, for the President to 0:17:08.040 --> 0:17:11.119 be making these decisions based on his conversations with individuals, 0:17:11.160 --> 0:17:13.720 including people who are not in government, but he is, 0:17:13.800 --> 0:17:16.760 for example, very much influenced by people outside of government 0:17:16.800 --> 0:17:20.480 who are major voices in the MAGA community, and for 0:17:20.680 --> 0:17:24.159 those conversations to be happening simultaneous and not necessarily taking 0:17:24.240 --> 0:17:28.280 into stock some of the internal government expertise and policy 0:17:28.320 --> 0:17:32.720 options that are normally the foundation of those conversations. 0:17:33.119 --> 0:17:36.680 The desks officers' worst nightmare is when all these unofficial 0:17:36.720 --> 0:17:39.840 conversations happened that they can't control. Yeah, I'm just sort 0:17:39.880 --> 0:17:42.280 of interested. I'm looking at you, because we were sitting 0:17:42.680 --> 0:17:46.520 in Doha not long ago, just after Donald Trump had 0:17:46.560 --> 0:17:49.040 been to the region. Donald Trump went to the region, 0:17:49.240 --> 0:17:52.359 had all these conversations with the various leaders in different 0:17:52.359 --> 0:17:55.639 countries seem to go down pretty well, and they played 0:17:55.640 --> 0:17:58.560 their part with their commitments of investments in the US 0:17:58.600 --> 0:18:03.160 and other things. The US unexpectedly actually becomes in behind 0:18:03.280 --> 0:18:08.000 Israel on this effort quite aggressively. How will those same 0:18:08.080 --> 0:18:10.000 leaders who saw him a few weeks ago be thinking 0:18:10.000 --> 0:18:13.919 about that, and specifically how their own people will be 0:18:13.960 --> 0:18:14.639 reacting to that. 0:18:15.240 --> 0:18:17.080 I think in terms of the leader, they're already probably 0:18:17.080 --> 0:18:20.040 disappointed now when we sat down a few weeks ago 0:18:20.119 --> 0:18:23.159 and we said that Trump's visit was a success for them. 0:18:23.400 --> 0:18:25.960 It was a success because Trump was perceived to have 0:18:26.040 --> 0:18:28.879 gotten funds from the region in return for common the 0:18:28.920 --> 0:18:32.320 region now and not escalating with Iran. And he sat 0:18:32.400 --> 0:18:34.600 next to the Amir of Qatar saying, I'm talking to 0:18:34.640 --> 0:18:36.879 Iran because my friend, the Emir of Qatar is getting 0:18:36.880 --> 0:18:38.359 me to do this, and I like him, and this 0:18:38.400 --> 0:18:41.440 is why we're doing this. How do the leaders feel. 0:18:41.480 --> 0:18:44.360 I think they feel a bit. Obviously all is high 0:18:44.400 --> 0:18:46.320 and that's good for their economies, but the risk of 0:18:46.359 --> 0:18:50.080 instability is much bigger, and the risk of instability is 0:18:50.080 --> 0:18:52.919 that they're caught between the two fires, Iran and Israel. 0:18:53.119 --> 0:18:56.080 There is a risk of retaliation from Iran on their 0:18:56.200 --> 0:19:01.200 energy facilities, on their land or maritime borders. And there's 0:19:01.200 --> 0:19:03.919 also the risk of the people, the fact that people 0:19:04.000 --> 0:19:06.800 in the region are probably not happy with that, and 0:19:06.960 --> 0:19:09.719 they may take out their anger on the leaders. So 0:19:09.760 --> 0:19:12.320 I think everyone in the Middle East is watching, it's 0:19:12.359 --> 0:19:13.960 probably feeling nervous about this. 0:19:14.960 --> 0:19:17.880 Many people who voted for Donald Trump will not particularly 0:19:17.960 --> 0:19:21.359 care about the Middle East, but they had heard this 0:19:21.560 --> 0:19:25.520 mantra from the president that he was either not going 0:19:25.520 --> 0:19:27.119 to get involved in the rest of the world or 0:19:27.240 --> 0:19:29.320 was just going to very quickly achieve piece he wasn't 0:19:29.320 --> 0:19:32.199 going to get involved in what he would call Democrat wars. 0:19:32.520 --> 0:19:35.240 How much will they be concerned in the administration about 0:19:35.280 --> 0:19:39.119 the broader impact on the Mega Coalition of having this 0:19:39.359 --> 0:19:41.960 very obvious involvement, because you can see Donald Trump wanting 0:19:42.000 --> 0:19:44.440 to be the strong man in Middle East, wanting to 0:19:44.480 --> 0:19:47.040 take big gambles and do things that people hadn't dared 0:19:47.080 --> 0:19:50.000 to do before with Iran. But if the result is 0:19:50.080 --> 0:19:51.600 kind of what it's been in the past, which is 0:19:51.640 --> 0:19:54.400 American president's kind of stumble in and then can't get out. 0:19:54.920 --> 0:19:56.359 How much does that hurt him? How much will you 0:19:56.400 --> 0:19:56.959 worry about that? 0:19:57.480 --> 0:20:00.280 It's a fair question, especially because right now we're serving 0:20:00.320 --> 0:20:03.240 the MAGA movement does seem quite divided on this issue, 0:20:03.320 --> 0:20:06.440 and we even sol overnight President Trump taking aim at 0:20:06.560 --> 0:20:10.280 someone who has been an ally in the movement, so 0:20:10.400 --> 0:20:13.960 to speak for him, Tucker Carlson on this very point 0:20:14.080 --> 0:20:17.440 of who is ultimately the decider of what makes America 0:20:17.480 --> 0:20:19.879 great again? And President Trump saying he is, and he 0:20:20.040 --> 0:20:22.840 decides that making sure that around doesn't have a nuclear 0:20:22.880 --> 0:20:26.000 weapon is very much about making America grade again. But 0:20:26.080 --> 0:20:27.720 I think, ultimately, and this is a bit of a 0:20:27.760 --> 0:20:31.280 bold claim as a foreign policy expert, I think it 0:20:31.400 --> 0:20:35.080 tends to be, with rare exceptions, that foreign policy is 0:20:35.119 --> 0:20:39.520 not necessarily the major determinant of domestic political opinion towards 0:20:39.520 --> 0:20:42.640 a president, unless they really botch things and we get 0:20:42.760 --> 0:20:47.960 dragged into a major and very deadly war. It's probably 0:20:47.960 --> 0:20:50.440 going to be other things, and namely the economy and 0:20:50.560 --> 0:20:53.360 namely what happens, for example, with the Big Beautiful Bill 0:20:53.440 --> 0:20:56.679 and how it affects DUX policy, in the coming years 0:20:56.720 --> 0:20:59.280 and people's sense of how much money is in their wallet. 0:20:59.280 --> 0:21:01.360 I think is probably going to be what drives more 0:21:01.440 --> 0:21:04.960 of how people perceive the effectiveness of the President and 0:21:05.040 --> 0:21:07.920 his ability to come through our major promises that he's made. 0:21:08.040 --> 0:21:10.240 I think it's a whole host of other issues that 0:21:10.320 --> 0:21:10.920 are at play. 0:21:11.320 --> 0:21:14.400 We'll be down not to Iran but the irs. Yeah. Maybe, 0:21:14.760 --> 0:21:22.480 Jenny Sad, thank you very much, thanks for listening to 0:21:22.480 --> 0:21:25.720