Tyler Kendall (2:41)

Well, our reporting had indicated that a response would come via Pakistani mediators. We know the White House has been really complimentary about the role that they have been playing in helping to get the conversation going between the two sides. Though the rhetoric that we've heard today has so far come from posts on Truth Social, including that we heard from Iran's foreign minister earlier saying that Iran isn't going to ban bow to any pressure as both sides appear to be ramping up the stakes. Just earlier today, some headlines crossing the Bloomberg terminal, including that the US had intercepted two Iranian flagged vessels that were trying to, they say, avert that U.S. blockade. And Iran itself is saying that it is seizing additional oil tankers in the strait. And that's really what it comes down to, this standoff over the critical waterway. And we know that this one page memorandum of understanding that Iran is supposedly reviewing and going to get back to the US on that first phase is going to be a gradual reopening of the strait. But at this point, it doesn't appear that either of the sides want to let up their grip when it comes to it.

Kelly (3:48)

Well, so if neither side is really willing to budge in a material way, what does that mean here at home in terms of the political pressure that may build for President Trump to get him to a place that will budge knowing gas prices remain high? Clearly, the American electorate is not thrilled with this conflict in the first place. And with every day that passes, it's a day that brings us closer, closer to the midterm elections.

Tyler Kendall (4:10)

It's a really good point. We know that the political pressure is growing, including that it takes a longer time for retail gasoline prices to come down. We've asked administration officials about this before, if they're willing to take any perhaps additional actions after we've seen them take a series, including extending the Jones act waiver, trying to get higher ethanol content gasoline on the market. And as of now, we haven't heard any new ideas around the administration, though I will point out some Bloomberg News reporting from yesterday that this White House may be looking at drilling under US Military bases to help get more oil into the Strategic Petroleum Reserve, because that of course, has been drawn down during this conflict. But you're right, it's a political issue that the president's contending with. Now with the national gas average above $4.50 a gallon, it's at its highest point ever for a seasonal high, of course, lower than what we saw under the last administration during the war with Ukraine, as this administration likes to point out. But the last thing I'll point you to is some reporting this week from the Wall Street Journal that privately some of President Trump's aides are growing increasingly concerned that Republicans are going to pay a political price come November because of these higher fuel costs.

Kelly (5:23)

Well, so it begs the question, when Congress comes back from the recess they've been on this week, they returned to Washington on Monday, are we likely to see any behavioral changes in terms of the willingness to act as a check on, on the president's war authority here?

Tyler Kendall (5:36)

Well, at this point, Kelly, your guess is as good as mine. I think that there is growing pressure, of course, from Democrats. But so far we've seen 10 resolutions ultimately fail. This administration has put forward that they don't even think that there needs to be such a resolution because Operation Epic Fury they say, is done, which holds that 60 day clock. What I'm really watching for is when the administration asks for supplemental funding related to this conflict. We've already gotten their fiscal year budget for the Pentagon, but we are expecting them to put forward another request. And I think that is where you will start to see some Republicans voice concerns about the duration of the conflict as they debate whether or not Congress should provide additional, additional appropriations to the process.

Kelly (6:18)

All right, Bloomberg's Tyler Kendall, thank you so much as always for your reporting. And as we were discussing with Tyler on the political pressures that rise from higher gas prices, new analysis from JP Morgan today indicates that those gasoline prices could be heading even higher. The analysts over there say today that there is a legitimate chance that US gas prices rise to $5 a gallon. They argue because refiners are prioritizing jet fuel production at the expense of of other products like the ones that people put into their cars or their trucks. And of course, a five handle on gas would make it even more politically complicated for the incumbent Republican majority heading into November. So we wanted to get into the political stakes here of this, especially as November will also be colored by the redistricting fight. And turn to Jim Messina, the former campaign manager for President Obama's 2012 reelection campaign, previous White House deputy chief of staff as well. Jim, welcome back to Bloomberg TV and Radio. It's always good to have you. What would the political consequence be of a $5 gallon of gas on average across the country versus the north of 450 where we are now? What, what is that 50 cent difference? What could it potentially be, Kelly?

Jim Messina (7:28)

It could be a whole bunch of political earthquake, you know, I just saw some numbers showing that the president's approval rating and members of Congress approval rating are moving up and down with the price of gas. It makes sense. Research we did in the Obama years also showed that people's view of the economy gets baked in. Why June, Kaylee? It's because that's when people get their kids out of school and go on the road with their first vacations and start to look at how expensive things are. And so if you're sitting in June with $5 gas, you're going to have a whole bunch of angry swing voters out there. And I think that's a really big problem for the party in power. It's a problem for all people, all incumbents to talk about, but especially with the president's party and kind of his war of Choice in Iran. So $5 gas, I think you're seeing a very, very focused on trying to get this war over because they understand what the gas price issue is doing to the president's personal approval rating and his parties. And I think that's why you're seeing the president push so hard to get a deal with Iran.

Kelly (8:33)

Well, and I've asked this question repeatedly as we have seen him him more adamantly making the case that he wants to see this wrapped up. If you think that he could be willing for the sake of domestic politics to make a less strategically advantageous deal with Iran, then have otherwise agreed to. Have we not been approaching a midterm election?

Jim Messina (8:56)

Yeah, I mean, I think that's the position you're in when you're in the White House. You realize you have a whole bunch of really bad decisions in front of you. And right now, sitting 179 days before the election, you know what his political team is likely telling him is get this thing over quickly. And it doesn't really matter how you get it over. The problem is that sort of playing short term ball, Kelly, instead of playing long term and in the White House, you want to play long term. And if he agrees to something that is worse than the Obama deal with Iran, he's going to have huge problems in the way the international community views him and in a way his own party says, why did you pull us into a very unpopular war to get less than we had when we started. So again, there aren't any great solutions here. It is very hard to get out of these things once you've started them. But the political pressure becomes the reason for making deals you wouldn't ordinarily make.

Kelly (9:53)

Well, so clearly this is quite literally a war that he is still trying to win or claim some victory from. I'd like to talk to you about a war of a different kind, really a euphemism here, Jim, which is the redistricting wars which began in Texas, trickled on to California. Now they've gone all across the country and including coming to Virginia, where voters did decide to approve a new congressional map that would have been 10 to 1, 10 Dems, one Republican, a net of four seats, advent advantage. Democrats, Democrats. The Supreme Court today struck that down. Where does this leave the party now ahead of November?

Jim Messina (10:30)

Well, look, no one can say this is a good moment for the Democrats. The Democrats just passed the perfect map for them and spent tens of millions of dollars to get it done. And the fact that the court just did this is a bad moment for the Democrats. The Democrats will argue, well, we still have a shot at three of the four seats we were targeting, so maybe this isn't as bad. They will also point out that if the precedent that the court used today to invalidate this rul rule, a really arcane technicality saying there must be an election in between this decision and the next election if we're going to apply that to Florida, which is where the Republicans are now going, their courts would strike this down as well. In general, Kelly, I think these redistricting efforts are not great for the country. I think the country doesn't want more partisan districts. They want more people to work together. But both parties are trying to get control of the United States House of Representatives. And so now we're going to spend the next two to four years with you and I talking on Bloomberg radio and TV about all these states, both blue and red, trying to do this. I think when it's all said and done, it looks like to me that it's basically going to be a wash. And you've seen the kind of prediction markets and other analysts today say even with the Virginia rulings, the Democrats are still favored to win the House. But we are now in a redistricting war that you and I are going to be talking about for years.

Kelly (11:57)

Well, and so where is this ultimately going to leave the country in terms of political polarization, Jim? Because on the one hand, I've heard the argument that actually what you're seeing with a lot of these Republican redistricting efforts in particular is a watering down of what were much stronger R plus, you know, whatever double digits, districts that are now less stronghold or not quite as much of a stronghold in terms of the Republicans present in that district. But I've also heard that, no, this is just going to create more, more hard Rs and hard Ds in terms of districts. There's going to be fewer swing districts to compete, compete over. Therefore, it's going to lead to basically what already is a rare thing on Capitol Hill these days, moderates being even less frequently elected into office. Where do you come down on that?

Jim Messina (12:47)

I come down on both sides. I think in the short term, it is clearly made there be less swing districts. Of the 435 congressional districts right now, the Cook Political Report, which is sort of the bible for political geeks like me, say that only 17 seats are true. Toss up seats, Kelly. 435. Only 17. That number used to be in the 70s, 80s or 90s. I think that is bad for the country. However, long term, I am hopeful that your second scenario is right, that you're going to see more districts put into play, that the Voting Rights act case that the Supreme Court did was going to put a bunch of minority votes into many districts to allow more districts to be in play. That's the hope. That's the only good hope out of what I thought was a terrible Supreme Court ruling. In general, I think the country is better off with more. More seats being in play.

Rick Davis (13:43)

Why?

Jim Messina (13:44)

Because you tend to get members who want to work with both sides, want to put aside politics and get things done. I don't think it's good that 400 members only care about their primaries and don't care about their general elections.

Kelly (13:57)

Well, and as you talk about that Supreme Court decision on the Voting Rights act, that, of course, is what enabled Tennessee yesterday to draw out the only Democratic seat that that state had in the House of Representatives. There's a question now as to whether or not South Carolina would be willing to do the same. Knowing that lone Democratic seat is held by Congressman Jim Clyburn. What would the consequence be if we saw Clyburn drawn out?

Jim Messina (14:24)

You're talking about a guy who was a former whip of the House of Representatives, who is universally loved by both parties, who is known as one of the kind of, you know, people that work with both sides to get things done. This is exactly what you and I were just talking about. The last thing either party should want is the likes of Jim Clyburn out of the House of Representatives. Both parties should want him in there because he works with both sides to get things done. But when you're in a redistricting mode of scrambling to every state, both parties are doing this. And I think the long Term damage could be real. And the other thing is, like, we shouldn't have a state like South Carolina where there's not one Dem. We shouldn't have Dem states where there's not one Republican. There's a way I was seeing yesterday, Kaylee, to redistrict California. So there's only one member Republican member of the House out of 55. Great. You can do that. But should you, like, is that really the best thing for the fourth largest economy? I don't think so. And I don't think your listeners do either. And so I hope that, you know, the court sort of caused this and I hope that at some point the court steps back and says, you know, what hell have we wrought? And maybe we can step back and try to figure out some way to put the genie back in the bottle here.

Kelly (15:36)

Well, and finally on the courts, Jim, there's obviously a question as to whether or not Virginia Democrats in particular will choose to continue this legal fight, potentially escalate it to the United States Supreme Court after the state Supreme Court ruled this way. Do you think that would be a race, a waste of, of resources, frankly, given, as you mentioned, they already spent tens of millions of dollars on this in the first place and this is going to be a much more competitive midterm election. Is that money better spent elsewhere?

Jim Messina (16:02)

Oh, Kaylee, it's never a good idea to ask a political hack about legal issues, but I think they have to. I think you have a whole bunch of donors and you have 3 million people in Virginia that just voted for this who are saying, I'm sorry, what just happened. And so I think, you know, a whole bunch of smart lawyers will get in a room tonight, read this case and decide whether or not they have a case in front of the United States Supreme Court. And may this could be a moment where the court can sort of, you know, put the genie back in the bottle, as we discussed. But I think you're going to see the Dems do everything they can to protect 3 million voters who just voted.

Kelly (16:35)

All right, former Obama campaign manager Jim Messina, thank you so much as always for joining us. On BALANCE of power. Some news just breaking from the Wall Street Journal that President Trump is planning to fire the FDA commissioner, Marty Makary. We'll have more on that with our political panel next on Bloomberg TV and Radio.

Rick Davis (16:51)

Stay with us. On Balance of power. We'll have much more coming up after this.

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Kelly (18:30)

out the trade on this jobs Friday and what a jobs report it was for the second month in a row. A topping of expectations at least on the headline non farm payrolls figure, which for the month of April came in at 100% jobs that were added in the US economy. Compare that to the average estimate of just 65,000 and certainly that is a beat. But what's noteworthy as well is the revision to the March figure. March revised higher, meaning between March and April we saw the strongest two months of jobs gains for the US economy going back to 2024. It's a good story for the White House to sell, and certainly the National Economic Council Director Kevin Hassett tried to do so when he joined Bloomberg Bloomberg earlier today.

Rick Davis (19:11)

It's a rip roaring jobs market and

Kelly (19:14)

it's completely consistent with what we saw

Rick Davis (19:15)

with the claims data just a few days ago. Right? Like initial claims for unemployment insurance right now are the lowest since we've ever

Jim Messina (19:22)

been counting them all the way back to the 1960s.

Rick Davis (19:25)

And so the job market is really, really, really strong.

Kelly (19:30)

Of course, as he describes it as a rip roaring. If that's not the perception of the American electorate about the jobs market or this economy overall all how much does the firm data coming from the Bureau of Labor Statistics ultimately matter politically? Let's get into that question with our political panel. Rick Davis and Jeannie Shan Zaino are with me, both of them Bloomberg Politics contributors. Rick, of course, also a Republican strategist and Stone Court Capital partner. Jeannie, our Democratic analyst and a democracy visiting fellow at Harvard Kennedy School's Ash Center. Rick, this is a conversation we've had often for years now, including when we were talking about President Biden and his reelection effort, that the data looked okay, at least in some of the hard data, but it was very difficult to sell it to the American people who felt very much that things were not okay or at the very least not great. Can this White House sell this economy as rip roaring right now and polling suggests that most Americans think that it's not going well, at least for them personally?

Rick Davis (20:28)

Yeah, it is a bit of a trap. You look at the markets, you know, record levels even today potentially. And the president loves to talk about, you know, how much money people are making, the golden age that he's trying to usher in. So a healthier two month job, Mark, is obviously going to fuel some of that rhetoric and they deserve a little bit of a, I say a victory lap in that, you know, for a long time this market, job market has been really flat and the fact that they've seen some movement in it, you know, is, is going to inert to their benefit. It's good news right at a very news cycle for this administration. But that being said, you're 100% right in my view, Kelly, that you got to talk about things that people really care about, that's cost of living, affordability, gas price. If you're not talking about those things, you're talking past voters. And I think unfortunately for this administration, that's the only story they have to sell.

Kelly (21:29)

Well, and on the affordability question, we were told at the onset of this year, Jeannie, that that was going to be the focus of President Trump and he was going to be touring the country to, to spread that message. Instead, obviously, he's been dealing with an ongoing conflict in the Middle east that obviously has added to some of those very affordability pressures that he was supposed to be addressing. So when we consider that kind of notion of the affordability question, to what extent does a labor market that does appear like it's stabilizing grant him something of a political gift?

Jeannie Shan Zaino (22:03)

It is a good day for Donald Trump between the Virginia decision and these numbers and I think we, we heard Kevin Hassett out there trying to sell it. You know, Rick Roaring, I'm not sure the kids love that term anymore, but he's trying to sell it. But the problem is, is that people need to feel it. And that's where the consumer sentiment numbers are really disastrous. And I'm just, just struck by how different the story would be for the administration if we were not in this war of choice in Iran that has turned out to be an enormous political and economic problem for this party and for this president, not to mention the American people because they are talking about the consumer sentiment numbers as historically low due in large part to the price of gasoline. And as you just talked about, Kelly, we've now got this JP Morgan report saying, saying don't be surprised if this thing, if this, these numbers go up to five. And when the war started, we were all saying, gosh, you know, wonder if this gets to 350, then if it gets to 4 and now we're talking about 5. It is just a reminder every day to the American public, especially as they go out on their summer vacations, that the prices at the pump to drive to their vacation, they can't fly. The affordable airlines are shuttering considering that this is enormously negatively impactful on them and it's going to be reflected in their votes in the fall.

Kelly (23:34)

Well, Rick Davis, I'm sure you're salivating over these comments around the UMich consumer survey. As I know this is your favorite economic indicator. So when you see the headline cross the Bloomberg terminal that it falls to a second straight record low 48.2, what goes through your head?

Rick Davis (23:52)

Yeah, it kind of blows my mind. 74 year history of the Michigan Consumer Sentiment Index and today it's at the lowest it's ever been. And we've seen some tough times during that period of time. And certainly when I was running John McCain's campaign in 2008, we thought we'd never see anything lower than the global financial collapse data. This is lower than what people were feeling because of the global financial collapse. That's extraordinary. Especially at a time when we're just talking about, oh, the job markets look at all right, we got record stock markets. I mean we didn't have any of those things in 2008 and it's still lower. So at the end of the day, I don't think you can deny the fact that this administration bad cycle with consumers. If you see them start stop spending, that'll have a really dilatory effect on the economy. And that'll make it even tougher. I agree with Jim Messin. Voters start locking in in June because they're going on vacation. If they got $5 gas prices on going on vacation this summer, boy, are they going to be grumpy come November. And I think that's the cycle we're looking at.

Kelly (25:00)

Well, and just quickly on that point, Rick, because obviously I also spoke extensively with Jim Messina about redistricting. To what extent does the redistricting effort and carving out more Republican seats have an offsetting effect of the kind of dour economic sentiment that usually would work against incoming incumbents in a very material way in a midterm year like this? I just wonder what kind of losses you think Republicans could be looking at now and how much worse they could have been had they not pursued this redistricting effort. If these are the kind of sentiment figures we're looking at.

Rick Davis (25:33)

Yeah, if you look a combination of the president's approval rating, which is also at almost the historic low, George Bush again in 2008 was the least popular president of our time at 34% percent. Donald Trump is one point off of that. And then you look at the Michigan Consumer Sentiment Index and other polling with a lack of public support for some of the main efforts like the Iraq war, Iran war that the president's doing, I mean, you're really looking at a train wreck. And so, yes, 2018 could be a similar cycle. Sure, less competitive districts. But when you're talking about, you know, people who will diminish the, the Trump effect in the last election by as much as, you know, 15%, you're talking 30 members, the Republican Party are going to lose their jobs. And that's just math. I mean, that's got nothing to do with the campaign itself. That's just if those voters don't support Donald Trump's candidates, they're going down. And so, yeah, it takes a little edge off redistricting of that number, but it doesn't change the outcome, which is an overwhelming change in Congress for the Democrats.

Kelly (26:44)

Well, as Rick mentions people losing their jobs, I want to come back to the breaking news that we got from the Wall Street Journal earlier this hour. Jeannie. The Journal is reporting that President Trump is planning to fire the commissioner of the fda, Marty Makari, who we understand there's been some conflict within the fda, a lot of questions around his, his drug approval system in particular. But I wonder what this would send to you knowing that this would be yet more turnover in the Wider HHS under RFK Jr. When we've already seen the CDC director, for example, ousted last year. The deputy secretary went as well. Is this an RFK Jr. Health and Human Services Department problem or do you think that this is emblematic of, of the kind of wider turnover we are starting to see now in the second Trump administration?

Jeannie Shan Zaino (27:31)

I think it's both. I think it has a lot to do with rfk. I also think it wouldn't be happening without the president's approv, of course, and it speaks to turnover that happens at these times. But I think in particular with this commissioner, there has been a lot of consternation, a lot of tension between him and the White House on various things. It's the vaping, it's the abortion. I think that is a big, big issue. There is a lot of frustration that he kept that Biden era male access in place despite calls to the contrary. It's about vaccines. So I think that, I think it's also coming from the INS side a little bit is what we saw in the case of dhs, for instance, where there has been frustration and tension with the staff. So I think all of that, plus industry pushback is combining to make it a situation that, yeah, it speaks to turnover we naturally see. But I also think it's about this Maha doctor and how this has, he has, he has run the FDA over the last year and he has ruffled many feathers and I think it's coming home to root.

Kelly (28:38)

Well, and Rick, just quickly in our last minute here, is there something to be said for the rift that it appears is growing between the MAHA movement and the MAGA movement?

Rick Davis (28:49)

Yeah, this is a classic, you know, the president picks his secretaries like Secretary Kennedy and said, hey, run your own agency unless you pick somebody you don't like. And then I'm going to fire them. So, yeah, Maha is banging up against maga and it's in its and it's, and it's kind of interesting because traditional Democratic organizations, Carey, came right out of the Bernie Sanders operation, you know, are kind of in a tough place because they don't want to support anything the Trump administration is doing. But some of the food and health aspects of the Maha movement are appealing to some Democrats. And so you've got Democrats rooting for Kennedy and some of his appointments like McCary. And Trump isn't buying it.

Kelly (29:35)

All right, Rick Davis and Jeannie Shan Zaino, thank you so much as always for joining us and reacting again to that reporting from the Journal that President Trump is getting ready to fire the FDA commissioner. We still have more ahead here on Balance of Power. We'll turn back to Iran with Holly Doggrass next.

Rick Davis (29:49)

Stay with us on Balance of Power. We'll have much more coming up after this.

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Kelly (31:25)

Record highs for US equity benchmarks and oil down on a week in which we see repeated skirmishes in the Strait of Hormuz between the US And Iran. This is pretty incredible. And exchanging a fire happening again for a second day today as the US Says it was taking action against two vessels that were trying to violate the ongoing US Naval blockade of the Strait of Hormuz. And that of course comes after yesterday CENTCOM confirmed that they attacked Iranian targets that were used to target US Destroyers trying to transit the Strait. Kinetic activity, hostile activity. And yet the US says that the cease fire is still in place. But we want to get a better read of the situation in the Strait as it stands right now. In turn to Colonel Wayne Sanders, who of course is Bloomberg Intelligence Senior Defense Research Analyst in addition to being a retired colonel. So I wonder what your your weed read us here, Wayne. And I understand Wayne may take another moment to join us. But it is incredible to consider the notion that you can have an exchanging of fire, which Iran, mind you, said did violate the cease fire agreement and still have the United States saying that there is still a truce in place. President Trump, when asked by journalists about this yesterday, suggested that simply this was a love tap. He said the US Was just being trifled with and that we would all know, know if the ceasefire is over. He said Iran would be lit up red if that is the case. The question we have as well is what this kind of activity means for the ongoing diplomatic process, as the US did just this past Wednesday, submit a one page memorandum of understanding to Iran and we're still awaiting Iran's proposal. The secretary response to that proposal, the secretary of State Marco Rubio, said it could come as soon as today when he spoke to reporters in Italy earlier, earlier.

Jim Messina (33:09)

We're expecting a response from them today at some point. We have not received that yet as the last in the last hour, but perhaps that will come. Their system is still highly fractured and a bit dysfunctional as well. So that may be serving as an impediment. I hope it's a serious offer. I really do.

Kelly (33:27)

So let's dig into the diplomatic portion of this before we get to the military portion with Wayne, with Holly Douglas, who is joining us from the Washington Institute where she is a senior fellow. She's also the author of the substack the Iranist. Holly, welcome back to Bloomberg TV and Radio. I wonder what you're anticipating in terms of Iran's response, if you expect it to be a positive one, given the activity we've seen in the Strait of Hormuz in the last few days.

Holly Douglas (33:53)

Well, you know, separate from the activity, I think the substance of what has been at least reportedly noted by, I think it was the Wall Street Journal, is that this memorandum of understanding, it's said to be a one pager. The Wall Street Journal reported on 14 points and a lot of it had to do with the country's controversial nuclear program, one that President Donald Trump had said had been obliterated last summer. And the reason I'm bringing this up is because a lot of the points are saying that Iran could basically not have a nuclear program at all, zero enrichment, shutting down its nuclear facilities, handing any highly enriched uranium outside the country. And, and this is really a sticking point for the Iranians. They've invested billions of dollars into their nuclear program. They've had their nuclear scientists killed over the years and they've had two wars. And now these Growing calls from hardliners in Tehran saying, well, had we had a nuclear weapon, we wouldn't had these wars to begin with because they would have deterred one would have deterred a war. So I think that's really going to be the sticking points for the Iranians. And so I'm not very optimistic that the Trump administration is going to get the response that they're hoping for.

Kelly (35:08)

Hmm. Well, especially as the Washington Post reported yesterday that there's new CIA analysis that indicates Iran can withstand this US Naval blockade for another three to four months before it starts to feel real economic pain. Holly, is it just not yet the time in which Iran may be willing to make concessions like on the nuclear program, as you suggest? Do you think the president ultimately is going to have to wait this out a little longer?

Holly Douglas (35:34)

I think unfortunately, yes. And even your own outlets reporting they were saying that there were actually Chinese cargo planes going into the country every three to four days, reportedly. And so I think it's also important to emphasize that the Islamic Republic has one of the best sanctions evasion playbook globally. So much so that when the Ukraine war started in 2022 and Russia was being sanctioned in on a multilateral front, they have Russian businessmen flying into Tehran to learn their ways. So I really think that they're willing to feel that pain and in many ways amble along like a zombie regime it's been doing for years now. So I think that they're really counting on President Donald Trump to blink first because they technically, I know, granted now we're in a blockade, but they still have a strangle on much of the world's economy because of the Strait of Hormuz at this juncture.

Jeannie Shan Zaino (36:29)

Sure.

Kelly (36:31)

Well, and help me rationalize this, Holly, because if we're talking about an Iran that is willing to withstand a certain degree of economic pain, not just for the regime, but for the people of Iran, as we have seen, then why would Iran be incentivized by sanctions relief in any agreement? What, what would sanctions relief provide to the regime that they would be willing to make concessions for if they are so willing to tolerate and operate as a zombie economy?

Holly Douglas (36:59)

Well, you know, sanctions relief are a band aid. You have to remember the reason that assets were moved to the region in January was because of an anti regime uprising that resulted in the unprecedented massacre of tens of thousands of Iranian protesters. And some of that has to do with them being fed up with systemic issues of mismanagement, corruption and repression. And so if sanctions relief were to be given to the Islamic Republic, it could be a band Aid on some of those economic issues and actually keep some of the peace on the ground for the time being until they decide what they're going to do next. So I think for them it is something. And unfortunately, I think realistically speaking, what we've seen is that they won't be giving that money exactly to the Iranian people. They will be building much of their domestic nuclear program, its ballistic missiles capabilities and defense capabilities. And then any lift that's trickled down, it's going to be an economic bone to the very small group of supporters it has left.

Kelly (38:03)

Well, when we use terms like it referring to the regime or they, who really are we talking about, Holly, as the decision makers here that will be providing a formal response or making an ultimate decision on a proposal and deal with the United States? How do we know for sure that whoever it is that makes those decisions is one that everybody is going to be willing to go with and a decision that will be stood by by all parties, including the irgc?

Holly Douglas (38:31)

So I know there's a lot of commentary about the Islamic Republic being flat fractured due to some of the killings of senior leadership since the war began. And that being said, I think really what we're seeing here is a more hardline and repressive elements of the clerical establishment take over. And so our understanding of Supreme Leader Ayatollah Supreme Leader Moshe Abu Khomeini is actually in live. He's just in hiding and gravely injured. And much of the leadership is still in place. Granted, there are new faces leading the IRGC and the secretary of the Supreme National Security Council, but these people were part of the clerical establishment establishment before. And so what you're really seeing is this jockeying of power between some of the more traditional elements of the Islamic Republic and now this newer front facing irgc. And so basically, it's more these hardline voices that are pushing for much more of a stronger posture against the United States because they believe that if they don't do that, then they're going to have to face another war in the near future.

Kelly (39:41)

Just quickly, Holly, if this is a more hardline regime, does that mean Israel might actually have more to fear now in terms of the existential threat than it did prior to this operation starting potentially?

Holly Douglas (39:55)

I mean, you know, I think the Trump administration thought they were going to get a Venezuela out of this, that they were going to kill the supreme Leader inside, somebody would come up and make the deal that they were hoping to get. And what we've seen is that unfortunately, that we've come up with a North Korea instead, one that is more hardline, more repressive, more emboldened. And if it had its druthers, it would go all the way with its nuclear program because they would think that a nuclear weapon would deter for future conflict like this. And we're already seeing these trend lines just from some of the commentary of the senior senior leadership. The new supreme leader has come out and said that they would not be negotiating over their nuclear program or ballistic missiles. And of course, there's also a state imposed Internet shutdown since the war began. And so the people are also unable to express themselves in these moments.

Kelly (40:46)

All right, Holly Douglas of the Washington Institute, thank you so much for joining us with your insight and expertise. And we turn now to the expertise of Colonel Wayne Sanders of Bloomberg Intelligence, where he's our secretary. Senior Defense Research Analyst Wayne so as we talk about the kind of struggles and the path forward around the diplomatic process, I would imagine that is going to be very much informed by the activity we are seeing in the Strait of Hormuz, the exchange of fire for multiple days in a row here that the US Says isn't the end of the ceasefire. And I wonder for how long you think that can remain the case if we continue to see hostile activity like this.

Colonel Wayne Sanders (41:22)

Yeah, I think that they. Thanks for having me on, by the way. I think that really right now they're still trying to us CENTCOM is holding on in fifth fleet. They're looking at this as self defense rules of engagement. We were shot at by the Iranians and so we came over and struck at catch some island. So they're still doing it almost as a response action as opposed to an offensive. Right. So instead of moving back into Operation Epic Fury. So I think that that's one of the areas that's in there. Continue continued strikes or continued attacks against some of those naval vessels, I have a feeling is going to be a point where President Trump says look, I'm going to expand. I think he's going to do it, as we call it, escalation of force. I don't think he would go back to a full campaign. But cash in Island, I think was one of those areas where he goes, look, up until now all I've done is hit your fast boats. I've now moved back to land and I am willing to go beyond that.

Kelly (42:12)

Well, and is more of this frankly inevitable, Colonel, so long as we are insistent on maintaining this naval blockade?

Colonel Wayne Sanders (42:21)

I think, to a certain extent, I think, I think one of the biggest pieces Right now is Iran's response, as you brought up, even the CIA report, if the CIA report is true, I think that brings down some of the threshold and urgency of Iran needing to continue with some of these strikes. But when you think about where we are right now, over 5,400 missiles and drone attacks have happened since, since the 28th of February. Right. So you're talking about a significant amount and now you're only talking about it was 19 on Monday. You're talking about a handful that was after US Naval vessels, but well below that threshold that we were seeing where the average was somewhere between 65 and 150 attacks a day.

Kelly (43:02)

Well, and as you talk about that kind of diminished pace, at least in terms of the attacks Iran is able to, to execute, I just wonder how you think that colors their position or how they're likely to position themselves in the diplomatic response that the US Is expecting to receive from them today. Is this an Iran that looking at its own military capabilities is incentivized to be making a deal at this point?

Colonel Wayne Sanders (43:28)

Yeah, I think like you were bringing up about the IRGC and the front facing IRGC that we've seen as of late, they continue to be able to press from the asymmetric capabilities. So, so from a conventional military capability, you've heard Secretary Hegstadt say, you've heard President Trump say it, you've heard General Kaine, Chairman of Joint Chiefs of Staff, say it. From a conventional military perspective, Iran doesn't

Kelly (43:48)

have a whole lot left.

Colonel Wayne Sanders (43:49)

But if you have asymmetric capability that can hold the rest of the world hostage for 20% of its oil supply, you still have levers that you can hold onto. And the military, the IRGC side of the House can still continue to impose that. Even whether their strikes are unsuccessful, it's still being reported that they are still striking. So they're able to still hold on to some of that strike stranglehold until they bring that leverage forward.

Kelly (44:12)

All right, Colonel Wayne Sanders, senior Defense Research Analyst for Bloomberg Intelligence, thank you so much. Some breaking news to bring you now. Bloomberg News confirming earlier reporting by the Wall Street Journal that President Trump is signing off on firing the FDA commissioner.

Rick Davis (44:26)

Marty Makari, thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you you get your podcasts. And you can find us live every weekday from Washington D.C. at Noontime eastern@bloomberg.com

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