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00:00Joining us now are Bloomberg Economics Defense Lead, Becca Wasser, and Bloomberg Economics
00:03Middle East Geoeconomics Lead, Dina Esfandiari. She's the author of the book, Triple Axis,
00:07Iran's Relations with Russia and China. So great to have both of you with us on this Saturday.
00:12I'm going to read here from the President of the United States, one of his recent posts.
00:15The Islamic Republic of Iran has asked us to continue talks, in quotation fingers,
00:20quotation fingers, I'll do them there. We've agreed to do so, but the United States has
00:24stated to them in no uncertain terms that the ceasefire is over. Thank you for your
00:28attention to this matter. Both of you write in a recent note here that this is a familiar pattern
00:32what we've seen play out over these last few days. Strikes interspersed with talks, and this lower
00:38intensity conflict is going to be a feature, not a bug as we move forward here. Dina, let me start
00:42with you, if I could. What do you make of the moment that we're in? We mentioned that there are
00:46technical talks supposedly underway. Where are we as the conclusion of this 60-day period isn't too far
00:52off? Well, I think we are where we're going to be basically for the foreseeable future.
01:00I don't think these talks are going to make that much progress. Both sides' red lines are still too
01:06far apart, and neither side has really shown any willingness to move towards the other. And in the
01:11meantime, what they're doing is they're really trying to shape the negotiations, shape the ceasefire.
01:17Iran, for example, with its attacks in the Strait of Hormuz, is really trying to claim
01:21ownership over the Strait of Hormuz and demonstrate that ultimately, you know, it's king there,
01:27and the rest of the world has to recognize it. And the U.S. is trying to get Iran to
01:32climb down
01:32from that position. So I don't think things are going to change. I think this is literally what
01:37it's going to look like for the foreseeable future. So, Becca, what does that mean? Because
01:42you guys write in your latest piece, Is It a Ceasefire Over What The Strikes Me Now,
01:46Iranian officials believe that pressure, and especially bullying, works with the Trump
01:49administration, and they're doubling down on that tactic. You go on to talk about how nobody
01:54has claimed responsibility for the attacks in the Red Sea, but it could be an effort to show that
01:58Tehran still has other pressure options it hasn't yet pursued.
02:03Yeah, and I think that's kind of where we find ourselves in a really tricky position,
02:07because Iran has a great deal of levers that it hasn't yet pulled, the Red Sea being a great example
02:13of that. But we see that kind of bullying tactics also taking place from the Trump administration,
02:18with the president routinely tweeting that, you know, American missiles are locked and loaded on
02:24Iranian targets. And so both sides are trying to retain the threat of force to achieve their more
02:32geopolitical and geoeconomic aims. And so I think, you know, to Dina's point, this is going to play out
02:39over the long term. We are looking at the potential for a protracted conflict, a long conflict,
02:44where you do have these cycles of fighting and, you know, rest and reconstitution in order to build
02:51up to get ready for the next round of potential attacks. Dina, on the plasticity of the policies
02:57surrounding these meetings, we had the White House putting this waiver in place that allowed Iran to
03:02sell oil on the open market. On Tuesday of this week, they reversed course on that. And I'm just
03:08genuinely curious, sort of, were I in Tehran, what signal that would send to me about the U.S.'s
03:13openness to come to a deal here? So, you know, perhaps the whole game here is just to attenuate
03:18this as much as possible, to push this to the midterms, et cetera, et cetera. But if there is to
03:23be an effort here at some sort of negotiation, what would I make of the U.S. reversing course on
03:27that so
03:27quickly? I mean, as you said, nothing good. From Tehran's perspective, keep in mind that they have
03:34been negotiating with the United States now for over a year. Every time they have found themselves
03:40in negotiations with the United States, they've either been bombed, so over the course of the last
03:45two wars that the U.S. started, or in this case, made promises that the U.S. did not keep
03:53in the
03:53end. Now, to be fair, of course, it was the Iranians that shot at the ships in the Strait of
03:59Hormuz,
03:59which is why the U.S. reversed course on sanctions. But at the end of the day, I think the
04:03problem
04:04that we're facing in the talks is that the two sides have signed this MOU, but are not interpreting
04:09it in the same manner. They don't see it unfolding in the same way, which is why we keep going
04:15back to
04:15these cycles of violence. Yeah, a lot of that language was left, I think, specifically vague
04:20so that they could get both sides to sign on to it. But things like Iran agrees not to charge
04:24a toll
04:24for 60 days. Immediately, to me, said, well, then after 60 days, they will. But of course,
04:30you heard from Washington, they were interpreting that a different way. And I think it's one of
04:33the reasons we got to where we are. Becca, I also want to ask you, I want to follow up
04:37on the oil
04:37question, because the other debate was whether or not that sanctions waiver really made a difference,
04:43right? Whether it was more than symbolic. And the symbolism of diplomacy does matter. But when you
04:47look at who is buying Iranian oil, who their big clients are, who is buying this, are they able to
04:53sell it? And is it, when I think about Russia and their oil shortage at the moment due to that
04:58conflict, is that related here? Are they a better or worse client for Iranian oil at this time?
05:04Well, I mean, I think Iran hasn't relied solely on Russia for a little bit. I think there's also
05:10been conversations that were taking place from India about buying Iranian crude. So there's a lot
05:17of options that Iran has had. But again, this has now been revoked. And for Iran, it was an incentive,
05:24a carrot, to try and get them to the negotiating table and to shape that next round of talks for
05:30the MOU that now is no longer there. And so there's probably going to be another round of carrots and
05:37sticks. And where that ends up, you know, we'll see how it goes. But at the end of the day,
05:43it's not just about oil for now. It's about who controls the strait and is the strait open.
05:49And you see from the U.S. side a continued push to make sure that it is open in their
05:55terms. But
05:55right now they're trying to rely on Iran to at least issue a statement. But talk is cheap and
06:01actions are the things that actually matter here. Dina, you watched, as we all did, the period of
06:06mourning that preceded the funeral for the late supreme leader in Iran. And obviously there were masses
06:12in the streets. And I'm wondering sort of what you took away from the way that that unfolded,
06:17the degree to which that conveyed, unity or not among leadership in Iran, sort of what we can take
06:22away from that huge ceremonial event that just concluded. Well, I think what the leadership tried
06:29to do with this week-long funeral procession was to demonstrate unity, was to demonstrate that it
06:36still had support inside the country, despite everything that we've seen, the war, the protests in
06:42January. This was their moment really to show that the Islamic Republic still has support inside Iran.
06:48And to a certain extent, they were able to show that. There were a lot of people that showed up.
06:53The funeral procession even went all the way to Iraq. There were many foreign dignitaries that
06:58showed up last weekend at the beginning of the procession. So in some ways they were successful.
07:04But the issue for the Iranian leadership right now is that this war is buying them a little bit of
07:09time.
07:10People's attentions are distracted. They're focused on the war. They're focused on that ending.
07:15Once it's over, the Islamic Republic is really going to have to take whatever gain it manages to make
07:20as a result of these negotiations and start to use them to rebuild domestically, to sort out its
07:27economic issues. And there are many to sort out and really try to overcome some of the crises that
07:36it's been facing over the course of the last few months. And Becca, President Trump has had to deal
07:41with a little bit of pottery barn rules here, which is if you break it, you bought it, especially when
07:45it comes to the strait. He's been very frustrated that American allies, especially NATO allies,
07:50have not been willing to come in and help secure passage and solve some of these issues.
07:53And we expected those frustrations to play out at this recent NATO summit in Ankara. And I know
07:58you've written about kind of the dynamics there. NATO leaders trying to prove to the president,
08:03show to the president they are increasing defense spending. They are good allies. It's worth it for
08:08America to stay in that alliance. And one of the prominent kind of leaders trying to sell himself
08:13there was the host, Erdogan, Turkey's president, who's trying to put Turkey in a position to be a
08:19really strong defense partner for the U.S. When I think of Turkey, I immediately think of that spat a
08:25little while ago with the Russian S-400 missiles. They wanted it by Patriots, wouldn't let them,
08:29that they ended up reversing course, the F-35 program. Where does Turkey stand as far as defense
08:36manufacturing for the U.S.? And where does Europe stand as far as defense contributions coming out
08:41of that NATO meeting?
08:42Well, Turkey emerged as a big winner. Erdogan had a huge win, which is, you know, Trump saying that
08:48he would reverse CAATSA sanctions on Turkey and allow Turkey to purchase the F-35. We'll see how that
08:54actually plays out because it all comes down to implementation. But right now, Turkey is very
08:59much positioning as though it's going to happen. So Erdogan came out a big winner, even if it meant
09:05that some of the guns that he gifted to NATO leaders as a thank you actually remained in Turkey
09:11for a variety of different reasons. But for Europe, I think also the NATO summit was pretty much a net
09:17win
09:18for them. You know, they heard a lot of the similar, you know, upset from President Trump not helping
09:24enough when it came down to the Iran war, not increasing defense spending fast enough, you know,
09:29not buying enough American equipment and, you know, Trump doubling down on his designs on Greenland.
09:35But overall, it seemed as though it was fairly steady with a reinforcing of the U.S.-European
09:42relationship, as well as America's commitment to continue to sell very critical arms to Europe,
09:50including potentially moving into having Patriot production in Ukraine and also selling Germany
09:57Tomahawk missiles that was previously going to be reversed. So the NATO summit, I would put in the
10:03relative positive column. That said, you know, I do think that that doesn't mean that tensions don't
10:10remain and they won't boil to the surface yet again. You know, David Gurra, when we go to summits
10:13together, you never give me handguns like the Turkish president did. Gold revolvers. I don't
10:17know if President Trump kept the gold revolver. You've never handed me a. I'm very upset by the
10:21lack of revolvers in our summit relationship. I should know we're going to talk to Congressman
10:24Michael McCaul here in a bit about his recent trip to Ukraine. He's somebody who's been really
10:28pushing for them to have more missiles, more access to missiles on the battlefield. Air defense,
10:33especially on the battlefield. Dina, let me just end with you. We mentioned these technical talks. I'm
10:38curious what we know of what at a granular level is being discussed at this point in time. And I
10:44wonder
10:44what you make of just the focus there on the technical side of things, given what we know
10:47of how much effort and time when it is securing the JCPOA the first time around. When you hear that
10:52the talks are technically focused, is that a positive sign that they're getting down to brass tacks here?
10:58Or is it perhaps alternatively a sign that because they can't agree on broader issues, there's ample
11:03room here to haggle over smaller things? How do you read just sort of where we are in terms of
11:06the
11:07talks right now? And who is there? Yes, who's participating?
11:10So, no, I do think it's a positive that there are technical talks going on and that there are
11:15kind of lower level talks. They're really focusing on the details. I think that's what was lacking in
11:20the MOU. The MOU was like a one-page broad strokes document where even the language was very vague.
11:26And look where we are now as a result of it. So the fact that they're having technical talks,
11:30detailed talks on very specific issues, that's a good thing. I suspect the bulk of that will be
11:38focused on, obviously, Iran's nuclear program, the status of Iran's enrichment. Once the final
11:45deal is agreed to, will there be enrichment on Iranian soil? Won't there? Will there be a moratorium?
11:50How long will that last? What will happen to Iran's stockpile of highly enriched uranium,
11:55which disappeared after the last war? All of these things are things that they're going to be
11:59focusing on. They're also the issues on which neither side can really agree on. They were some
12:08of the sticking points that were there in the last few rounds of negotiations. So I think there is
12:12a little bit more willingness to compromise on these issues right now. The sticking point today,
12:18though, remains the straight, the sanctions, and also the sequencing of the implementation of
12:24the MOU and also the final deal. So there's a lot of material to cover. There's a lot of sticking
12:32points to unstick, basically. And I think that my fear is that neither side really right now has the
12:40patience to do it. The critical issue is neither side wants to return to war. They're prepared to,
12:45but they don't want to. And that in itself is also good news.
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