00:00All right.
00:00To talk more about the flow of oil, or lack thereof,
00:03out and through the Strait of Hormuz,
00:05we're joined by Clara Gillespie.
00:06She's a senior fellow for Climate and Energy
00:08at the Council on Foreign Relations.
00:10Clara, thank you for joining us.
00:12You have a new piece out titled Not So Straightforward,
00:15Hormuz, Iran, and the Future of Gulf Oil and Gas Flows.
00:19And you talk about both the good and bad views,
00:22optimism and pessimism, of how and when oil supplies could
00:25return to some sort of normal.
00:28Can you walk us through the main arguments there?
00:31Absolutely.
00:32And just to give you a sense of what that spectrum is,
00:35we've seen a range of analyses and predictions
00:37that say everything between we could expect
00:41if the recovery continues to move forward,
00:44if the Strait does remain open to an extent,
00:47even if it's a complicated reopening,
00:50maybe starting to see a renormalization,
00:52a major recovery of Gulf energy flows
00:57by the end of the year going into next year.
00:59And then at the other end of the spectrum,
01:02you get all the way to we should never expect
01:04to see a full recovery.
01:06Or even if we see a recovery in production levels,
01:09it's not necessarily going to look at like what we saw
01:13pre-February of this year.
01:15And there are a number of reasons for that range of projections.
01:18I think both extremes of this debate kind of broadly agree
01:22that there are four key tasks that need to be done for the reopening
01:25and for the restabilization, renormalization of flows in particular.
01:30That's the clearing of ships in the Gulf.
01:32It's the bringing back in of new empty tankers that can help to offload cargoes from producers.
01:38It's the restart of production itself out of a number of economies that halted their operations during this conflict.
01:45And then it's also a matter of dealing with the significant multi-billion dollar damage
01:52that we've seen across the region, not just to oil refineries and LNG facilities,
01:57but also ports that are going to continue to shape the output level.
02:02Claire, let me ask you just about the overarching ambiguity
02:04that still exists in this part of the world.
02:06So we quoted from the president just a few minutes ago his threat to bomb Iran again and more significantly.
02:13He never tried to take Karg Island.
02:15He could destroy more energy infrastructure in Saudi Arabia and, sorry, in Iran and elsewhere.
02:21Saudi Arabia and Qatar are still reeling from what's happened.
02:25As you look at things now, sort of how stable are things?
02:27As we talk about the prospect of kind of reopening that strait,
02:30are we at a point where that's really where the conversation lies,
02:32or is there still kind of an overarching anxiety about sort of what more could happen
02:35to the infrastructure that's already been hit and hurt?
02:38It's absolutely a situation that remains incredibly fragile,
02:42and I think unstable is also the really apt word in this space.
02:47I think earlier this week when President Trump said, you know, the ceasefire is over,
02:52and we saw renewed strikes from both the United States and Iran,
02:56one of the questions that those of us who followed energy markets had was,
03:00you know, is this a situation where we're going back to where we've been for the last few months,
03:05or, you know, is this just another risk that markets are going to, to an extent, be willing to price
03:11in?
03:12And I think it is still early days for multiple reasons,
03:17but one of the things that we have seen even as of this week is that while traffic shipments in
03:24and out of the strait
03:25have been significantly below pre-war levels, you do see a number that have at least attempted the crossing,
03:32not just exiting the strait, but to a more minor extent, some that are continuing to go back in as
03:39well.
03:40How they're getting to that confidence of doing this, how long they will be willing to continue to brave that
03:46risk,
03:47these are the things we don't really have good answers to at the moment.
03:50And there seem to be several ways in which they're doing this,
03:52and it's a little hard to track, literally, because sometimes they are doing it in a clandestine matter,
03:58turning off those trackers, doing it in the middle of the night so that they can get those ships out.
04:02You reference this a little bit with David's question, but we had Qatar's big LNG plant that was hit.
04:07They were ramping up, planning to restart production this week,
04:10and then they put that back on hold after an LNG tanker was fired on by Iranian forces in the
04:15Gulf.
04:15We've talked a lot throughout this process about risk,
04:18and how much risk these countries and companies are going to be willing to take,
04:22and what that's going to cost.
04:23What's your analysis of that with those scenarios that you laid out?
04:28I mean, so what this cost is still a number that we're continuing to revise upwards, right?
04:37Because we're still continuing to see damage to new vessels, damage to infrastructure,
04:43as well as additional questions about what it looks like to recover well from the scenario.
04:48So Qatar and others are not just looking at repairing their facilities,
04:53but they're also looking at scenarios for hardening them as well.
04:56Scenarios for, in the case of others as well, looking at alternate routes to exit.
05:04To give you one number I've seen on this, just in terms of the repair costs,
05:09we are talking somewhere on the order of $60 billion, an incredible amount of money
05:17that says nothing about the impact that this has also had on human lives, daily society,
05:23other elements of the economy as well.
05:25But it is something that rather than just walking away from this very expensive element,
05:32it's something that doing this repairs is also seen as an important part about how you think about societal recovery,
05:39how you think about the restoring of contributions to and other things.
05:44So it's an unenviable situation.
05:47Claire, we've got about a minute left.
05:48And I want to ask you about what David Sanger brought up in The Times this week.
05:50And that is this change from the U.S. administration using carrots to using sticks.
05:56And we saw that with the General License X-1 that the administration put in place here,
06:00lifting the waiver that they had allowing Iran to sell oil on the open market.
06:03Again, in the minute we have left, can you explain the ramifications of that,
06:06sort of how that colors these negotiations as they continue to unfold?
06:13Oh, God.
06:14I mean, it's very much a live question.
06:17And in terms of how it colors the negotiations,
06:21it's genuinely hard to even say where those things are at.
06:25Yes, the United States has been using more sticks than carrots,
06:29but it's also a question of how effectively we can even use those sticks
06:35to make some of the demands that President Trump and others have had
06:38in terms of our ability to compel Iran to reopen the strait,
06:43compel Iran to address the questions about mining still through the main navigation areas,
06:48questions even about the routes that ships can be guaranteed to take,
06:53and also if those routes will be open with the additional fee or other things.
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