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- [00:01]
Edward Harrison
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM,
- [00:33]
Podcast Host
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube,
- [00:55]
Kelly
running us through a market that is adjusting in real time to a cease fire agreement in the Middle East. Though it is one that even one of the architects of it, someone who was influential in getting us to this point, the Vice President of the United States, J.D. vance, is describing it as fragile. And those fragilities are on display. As Iran says the Strait of Hormuz is still not reopened, at least to oil tankers, because of Israel's ongoing fighting against Hezbollah in Lebanon. We still have questions too about the fate of Iran's nuclear program, whether or not they will agree to stop all enrichment and forfeit the remaining enriched uranium that they still in their territory. And there are other questions too, about the wider ramifications of where this exactly leaves the Middle east and our posture in it. And we're going to get into that in just a moment with General Frank McKenzie, who used to lead Central Command. But first we want to check in on the politics of all of this and the positioning of President Trump, who has four weeks been suggesting that he wanted to see a deal happen.
- [01:57]
Rick Davis
All I can tell you is they're begging to make a deal. If there is no deal, we are going to hit each and every one of their electric generating plants. We have to have a deal that's acceptable to me. And part of that deal is going to be we want free traffic of oil.
- [02:14]
Kelly
But again, free traffic of oil as of right now is not yet our reality. So let's turn to Bloomberg's Tyler Kendall, who is joining us live from the North Lawn of the White House. So, Tyler, it's one thing to agree to a cease fire. It's another thing to agree more widely to a longer term deal. How much progress realistically are we seeing in that direction?
- [02:36]
Tyler Kendall
Well, Kelly, at this point, within the last hour, we did get a post from President Trump on truth Social seeming to indicate that he feels that talks between the US And Iran are on track to happen. Even as we get this reporting that the cease fire is at this point very tenuous. Now President Trump in this post said that only the US And Iran will know what is happening behind closed doors and outlined that he feels that there is only one set of what he is calling, quote, meaningful points that would contribute to an agreement. Earlier today, as you well know, in another post on Truth Social, the president outlined that the US Is looking for an agreement where Iran would no longer have a nuclear weapon and would work with the US on extracting its already enriched nuclear material. He said in exchange, the US Is considering lifting some of those sanctions and tariffs on the country. But until we get to talk about a longer term deal, this cease fire needs to hold. And as you've already outlined, we're seeing some of those sticking points start to emerge, including Iranian state media reporting that traffic through the Strait of Hormuz continues to remain halted and that Iran is now preparing for what they are calling a serious attack in response to Israel's moves in Lebanon. Now keep in mind, Israel has opened a separate front in Lebanon to target the Iranian backed Hezbollah militant group and the US And Israel say that that is not part of any ceasefire deal. In fact, President Trump called it a qu separate skirmish in an interview with PBS News earlier today. But Kelly, according to Pakistan's foreign minister who is helping to mediate these discussions, they are saying that Iran wants to see that front of the war combined in to any potential cease fire or else they are going to continue these strikes on Gulf State energy infrastructure.
- [04:22]
Kelly
Well, and Tyler, when we consider not just the messaging we're getting from Pakistan and the true social posts we're getting from President Trump, we are expecting this hour a briefing from the White House press Secretary Caroline Levitt. It has not begun yet, but aside hearing from her will be hearing more directly at least on camera from President Trump, who's meeting with the Secretary General of Naito at the White House today but hasn't invited press into that at this point.
- [04:48]
Tyler Kendall
That meeting at 3:30pm Eastern does remain closed, but to be a fly in the wall, perhaps it will open up because of course Secretary General Mark Ruta and President Trump are considered to have a relatively warm relation. But transatlantic relations have been strained by the war in Iran. As you well know. President Trump last week issued perhaps his starkest warning that the US Is considering leaving the alliance. But I can actually say that our own reporting from Bloomberg News indicates it's actually been recent comments from Secretary of State Marco Rubio that the US should reassess its position in NATO. That has caused alarm bells throughout Europe. Now, of course, and as you discussed last hour, this is perhaps more easier said than done. It would require two thirds, a majority vote in the Senate. But, Kelly, we know that the president has some other things that he could do. Our reporting indicates that there is real concern that the US could stay in Naito but perhaps not adhere to Article 5, the mutual defense clause. President Trump could withdraw the U.S. ambassador to Naito or refuse outright to participate in joint military exercises. So no doubt there is going to be a lot to listen to when it comes to that meeting. But at this point, it remains close to the press.
- [05:59]
Kelly
All right, Bloomberg's Tyler Kendall live on the North Lawn of the White House. Thank you so much. So press not getting the invite as of yet into the White House where that meeting is taking place. But press were present at the Pentagon this morning when we heard once again in the joint briefing from the chair of the Joint Chiefs of Staff, Dan Kaine, the general and the defense Secretary, Pete Hegseth, who described victory in Iran.
- [06:21]
Pete Hegseth
Operation Epic Fury was a historic and overwhelming victory on the battlefield. Iran begged for this ceasefire. Iran's air force has been wiped out. Iran no longer has an air defense, any sort of a comprehensive air defense system. We own their skies. Their missile program is functionally destroyed.
- [06:46]
Kelly
He says it's victory with a capital V. But I wonder if our next guest agrees with that assessment. I'm pleased to say that General Frank McKenzie is joining us. The former commander of U.S. central Command, now executive director of the University of South Florida's Global and National Security Institute. General, thank you for your time. Welcome back to Bloomberg TV and Radio. If it were to end here, if this cease fire ultimately ends in a lasting truce or secession, a cessation of hostilities, would you describe this as victory with a capital V?
- [07:20]
General Frank McKenzie
I would. If we're able to get from Iran what's in our negotiating position. And I think what I've seen of public statements about the U.S. negotiating position and what we're going to demand of Iran is going to be free passage to the Strait of Hormuz, limitations on their nuclear nuclear program, limitations on their ballistic missile program, and limitations on the proxy exportation of terror across the region. If those conditions obtain, then clearly this will be a significant victory. And the hard part is ahead of us. Look, the Iranians are not great fighters. They've never been great fighters. They're brilliant. Negotiators and they know how to negotiate. They grew up in a culture that is based on negotiation. They will now seek to draw negotiations out, change the terms and create a new reality. And that's our task now, will be to take the substantive operational victory which we have obtained and turn it into something lasting and strategic.
- [08:13]
Kelly
So you say, General, that Iran, the Iranians, are not great fighters, and yet they had the world and global commerce and the companies that operate tankers that needed to go through the Strait of Hormuz believing that they posed a credible threat to the safety and security of those cargo and crews. And even President Trump himself is staying, saying that vessels need to be coordinating with Iranian armed forces if they want to pass. If Iran is openly talking about charging vessels to do so, is that not still a lever that Iran is going to be able to say it can pull at any time?
- [08:45]
General Frank McKenzie
Iran has powerful geographic advantages based on where they are in the Strait of Hormuz. The United States Navy has the ability to open that strait and keep it open if required to do so. We haven't, we haven't asked the Navy to do that just yet. That could still be in the future. Look, here we are less than really 24 hours into this cease fire. It appears not to be holding completely on the Iranian side anyway. I'm going to be real interested to see what happens in the next 48, 72 hours if the Iranians are actually going to adhere to it. And that would be good if they did, because I think, as I've told you, there's a path forward here for negotiations. But part of that path is going to have to be opening the Strait of Hormuz, should they choose not to do that. We do have the capability to open that strait
- [09:32]
Kelly
well and beyond our capabilities to open the strait. The President also was suggesting that the US Military had the capability to wipe out or in his words, kill, make, die a whole civilization. Obviously, we did not see him follow through on that threat with the agreement for this two week cease fire. But our service members had to be ready for that, General, And I wonder if you were inside Central Command still, how you would have had to be prepared for 8pm last night. And if you would have, you expect that they are still in that ready posture as we speak because of the fragility of this ceasefire.
- [10:06]
General Frank McKenzie
So the job of a combatant commander is to give the President and the Secretary of Defense options, to give them military activities that will support the policy goals of the United States. I would argue that Central Command has done that over the last 30 days brought us to this point in a really very effective military campaign against Iran. Now it's the task of our diplomats to take what we fashioned operationally and militarily, turn it into a lasting strategic outcome.
- [10:37]
Kelly
Well, and when we consider the strategic outcomes here, it's one thing to consider specifically what this means for the Middle east, for Iran and its future, whether it's nuclear capabilities or ballistic missile capabilities, what that therefore means for the US Interests in this region. But in terms of the signal sent by this conflict elsewhere, knowing, for example, that the US has expended heavily munitions and that it may take some time to replenish those, especially if for whatever reason we have to go back in and strike again if the cease fire can't hold, does it not signal that despite military strength that may have been shown with this operation, that there could be some weakness ahead because we simply won't have those same stockpiles to fall back on?
- [11:22]
General Frank McKenzie
Well, of course, stockpiles can be rebuilt. I think a lesson that a lot of people does.
- [11:26]
Kelly
That take years, though, General.
- [11:28]
General Frank McKenzie
It depends on what we do with our defense industrial base, which is another question entirely. I think long before the conflict with Iran, there was a sense within this administration that the defense industrial base was too small, too inefficient to actually support the size of the force that we have in the field today against the requirements that we might have. And I believe a number of initiatives are underway to repair that right now. But go back to your original question. I think potential foes across the world are looking very thoughtfully at the success of the US joint force in the campaign over the last 30 days. And yes, you're right, we have eaten into magazines. But I would note again, those magazines can be replenished and they can be replenished quickly, depending on the level of emphasis we choose to put on it.
- [12:13]
Kelly
It's interesting to consider that emphasis. As we know, the Pentagon is expected at least to make a $200 billion supplemental funding request on top of the 1.5 trillion DOL defense budget the president already requested of Congress last week. Our defense industrial base obviously is a consideration here, but we heard at the Pentagon today from both the Joint Chief Chair and Defense Secretary Hegseth about the degradation of Iran's defense industrial base, in particular noting how they were specifically targeting sites that. That make drones, that make missiles. So what about Iran's capability to rebuild that if it so chooses?
- [12:50]
General Frank McKenzie
So I think Iran's capabilities to build missiles, to build drones, very, very degraded. I don't read the classified information. So I don't know the details, but I would say this. That fact, coupled with our ability to maintain a persistent overhead presence over Iran will give us very good visibility into the status of their, what's left of their industrial base. And we'll know very quickly if they choose to rebuild it. And that could lead us to other decisions in the future to restrike or all those things are possible. All of those things the Iranians are acutely aware of.
- [13:24]
Kelly
Well, and we've already heard about the surveillance that we have on the remaining nuclear sites and materiel after Operation Midnight Hammer. The defense secretary was talking about that today. We've had repeatedly suggestions that they could always go in and strike again if they needed to, which is why a diplomatic agreement around that enriched uranium is going to be so critical here. I also wonder, General, as we're considering the Middle east more widely, the idea that Iran has, and still today sporadically was hitting other Gulf nations, that this was not just about US Assets or Israeli assets, that we have seen this spread elsewhere, if this has fundamentally reshaped the Middle east in, in some way and even potentially had the effect of drawing some of these other Gulf states closer to Israel if they may now see their interests as being more aligned.
- [14:16]
General Frank McKenzie
No, you're absolutely right. The Iranian decision to strike unprovoked its neighbors in the Gulf is the equivalent of Hitler's decision to declare war on the United States in December 1941. After the attack on Pearl harbor, we were mobilized to fight Japan. It would have been hard for President Roosevelt to mobilize people against Germany. Hitler took the problem out of his hands by declaring war on the United States. That's a little of what the Iranians have done by attacking their neighbors across the region. What began with IC neutrality among those countries is now moving to support for our goals. And you're right, the long, the clear long term future in the region in terms of defense and a variety of other things is going to feature the continued integration of Israel into those activities. That's inevitable. And the Iranians have no one to blame for that but themselves.
- [15:07]
Kelly
Well, it'll be interesting to see if indeed the President does get the expansion of the Abraham Accords that he has long said he is seeking just on Israel. Though it is worth pointing out, General, that of course Israel right now says Lebanon is not part of this cease fire, that it is going to continue its operations against Hezbollah. Clearly that is not sitting well with Iran. Who wants to see that front halted as well. If there's to be ships transiting the Strait of Hormuz. How should we consider Israel's position and the threat posed by Hezbollah right now in terms of how the region moves forward and how this particular ceasefire can move forward, if it can?
- [15:42]
General Frank McKenzie
Well, Lebanese Hezbollah poses a moral threat to the existence of the state of Israel. They have sworn that their activities over the decades have been very clear. And they've also been a parasite on the state of Lebanon. I think Israel's attacks are actually well justified going into Lebanon. We'll see what Iran does. I think Iran will actually think very long and hard before attacking Israel as a result of the ongoing operations that Israel is conducting in Lebanon. I think that would be a mistake for Iran to stand too strongly behind the idea of coupling what's going on in Lebanon to what's going on in the Strait of Hormuz. That would be a mistake for them.
- [16:24]
Kelly
All right, General, thank you so much for joining us here on Bloomberg. That's the former Central Command commander, General Frank McKenzie, now with the University of South Florida's Global and National Security Institute. We appreciate you joining us. And on the subject of Israel, we are hearing from the prime minister, Benjamin Netanyahu, who says Israel made, quote, huge gains in this war but is poised to resume the war whenever necessary. Once again, this is a fragile cease fire that we're speaking of here. And we'll have more on that next here on Balance of Power on Bloomberg TV and Radio.
- [16:53]
Pete Hegseth
Stay with us On Balance of Power.
- [16:54]
Rick Davis
We'll have much more coming up after this.
- [17:00]
Public Ad Narrator
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Kelly
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- [17:46]
General Frank McKenzie
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- [17:53]
Kelly
All investing involves risk of loss.
- [17:55]
General Frank McKenzie
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- [17:59]
Podcast Host
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our FL flagship New York station. Just say Alexa play Bloomberg 11:30 really
- [18:18]
Kelly
drastic market Reaction we saw to yesterday's news from President Trump that he had agreed to a two week cease fire with Iran, even as we're questioning whether that very fragile cease fire will be able to hold, if it even is holding at all. As we speak on this first day, the market doesn't seem to be waiting around to find out. Equity investors taking the opportunity to buy supply and oil incredibly reactive to this. We're back in double digits on Both Brent and WTI. $100 a barrel at least for the time being is no more. But of course, many questions remain geopolitically, strategically for the US when it comes to whether or not we are going to be able to get a lasting end to this conflict and an agreement with Tehran. Therefore, questions still remain for financial markets as well, and we want to pose some of them now to Ed Harrison, who is here with me in our Washington D.C. studio. He's Bloomberg Senior strategist and also author of the Everything R Risk newsletter. Edward, when we consider the market reaction we are seeing today, do you see it as being overdone at all given all of the uncertainties that still remain?
- [19:24]
Edward Harrison
Hey Kelly, no, I don't think it's overdone. I think that the market was coiled for this. If you think about this, as compared to what happened a year ago when we had the the April 2 tariff announcements, markets really fell a lot more than they fallen this time and then they rose even higher. So on this first particular day, we're only getting back some of those losses. Just to give you an example, the Mag 7 which had been leading the market higher, it was down almost 13 and a half percent from its record high as of yesterday. And so we're not even close to going back to the highs that the market had in 2025 or early 2026.
- [20:11]
Kelly
Okay, so there still could be room to run effectively for this recovery rally is what you're saying. So when we think about what else will factor into that beyond just the geopolitics, how much of it is going to matter how a conflict of this duration if it were to end here just over a month, what lasting impact that could either have have on inflation or growth? And which of those risks you think is larger?
- [20:33]
Edward Harrison
I mean, my personal view is, is that the growth risks are larger, especially because, you know, the Mag 7 that I was talking about before, those are the mega cap tech stocks. They actually peaked at the end of October of last year. And then we had this whole thing about private credit. You know, that was the Blue Owl thing that we were just talking about in the braids. So those preceded what happened with Iran. So then on top of that you have the inflation shock of Iran, which is also negative for consumption. So you have all of that coming together. And so therefore growth is a problem, which is one of the reasons that the market never fully bought into the concept that there wasn't going to be an end to the conflict. The market still thinks that this conflict will end because if it doesn't, growth will, will take a hit that could end up in a recession.
- [21:30]
Kelly
Economic consequences perhaps just too hard to swallow, especially if you're President Trump and Republicans staring down the midterm elections. So if it is really a growth concern that we have here, clearly the market is also building. The case now that the Fed is going to be more likely to cut this year. When we were having a conversation just days ago at the notion that they might have to tighten policy further, that the next move might have to be a hike, is that kind of off the table?
- [21:57]
Edward Harrison
I think it's always been off the table. I always never bought it. I never bought into that. Because if you think about it, even during 1973, during that conflict, the Fed was cutting because of the recession risk. The reality is, is, is that the only time that they're going to hike is if inflation expectations become unanchored, long term inflation expectations. And that hasn't happened. And so the risk, on balance, given everything I said before about how sentiment was starting to turn down slowdown, was for a recession and therefore for them to cut, which is exactly where the market was before Iran came onto the scene. And I think that it will eventually get back there to more cuts because of the recession risk or the slowdown risk.
- [22:42]
Kelly
So how much will depend on whether that recession risk materializes or what, what happens to overall consumption by how quickly prices at the pump go down? Yes, we are seeing massive declines in crude today. But as that trickles through refining margins and like when will the American consumer actually see gas sub 4 is that even a realistic possibility?
- [23:04]
Edward Harrison
It is a question because as you said, we're just below $100 a barrel. You know, we were in the 60s before the conflict erupted. So we have months of disruption from the existing Strait of Hormuz blockage. So we're looking at that two, three, four months during which consumers have to pay some pain. And as a result of that, we should expect growth to go down. And then the question becomes, is the conflict still happening? Can the Fed cut in that case? There are a lot of uncertainties in this first day after the ceasefire, and I think that most of it leans towards forward, slower growth. The Fed really looking past the inflation and then cutting interest rates.
- [23:59]
Kelly
All right, Edward Harrison, great stuff as always. Thank you so much for joining us. He's, of course, author of the Everything Risk newsletter and Bloomberg senior strategist. And as we were just discussing with Ed, this notion of what happens to prices at the pump here at home, a lot of that will be dependent on the trajectory of oil. And the trajectory of oil may very well be dependent on whether or not the Strait of Hormuz does indeed fully reopen open. President Trump said that was supposed to be part of this deal. Iran says right now, though, oil tankers cannot pass because Israel is still striking Hezbollah in Lebanon. So the strait remains a key question. And it's something we heard about from the defense secretary. Pete Hegg said this. He briefed the media at the Pentagon earlier today after he was describing what he said was an outright military victory in Iran.
- [24:40]
Pete Hegseth
Iran doesn't have the same ability to defend it the way they did before. And so, as the president has pointed out to the rest of the world, we barely get any of our energy out of the street, just a tiny fraction. It's time for the rest of the world to step up and ensure that that stays open after President Trump and the War Department brought Iran to the place where they are voluntarily opening it right now, as was announced last night.
- [25:03]
Kelly
But again, Iran is saying it is not right now open. So let's get into this and what it means for the oil Market with Mike McGlone, Bloomberg Intelligence senior commodity strategist, who is joining us from Miami. So, Mike, clearly the market, the oil market market specifically, is betting right now that the strait will reopen. When we look at declines of 16% on WTI, 13% on Brent, in and around $95 a barrel for the both of them, is that being overly optimistic at this point?
- [25:33]
Mike McGlone
I don't think so, Kelly. I initially thought that $120 a barrel in both Brent and WTI was the peak. I stick with that and it's more solidified. The thing to think about now is, yes, this is a bit of a relief rally in risk assets and crude oil going down, but this might have done some severe dam, global economic growth, consumer sentiment, capital budgeting, spending, and very similar to 2008. So again I look where the puck's going. I look towards that December crude oil future around $72 a barrel. I stick with my theme that I think it's going to be at 50 or lower by time we get to midterms. But we might be more of a recession globally and Even in the U.S. that's why the U.S. stock market's so important, it has to stay up. I think the risk is things are all going to start tilting lower as we move on.
- [26:16]
Kelly
Demand destruction is what you speak of Mike McGlone. Had we seen that materializing already with prices where they were, had that had yet to kick in?
- [26:27]
Mike McGlone
Well absolutely Kelly, demand destruction. But I'm more and more worried about wealth reversion because remember this happened with the US stock market near 100 year highs versus GDP and volatility still very low 180 day basis. So the demand instruction us, you can see that in things like gas oil dropping, heating oil taking off diesel near the all time high diesel right now the all time high in 2022 was 582. And today's high today got to 567. So that's the grease of a global economy, mostly us just getting hit and that's going to cause a major, major curtailing of capital budgeting, reallocation, price surcharges. So to me this is all kicking in. But it's demand destruction is normal and expected. But it's also the sentiment. You see major sentiment in the polls and everything. Your average consumer is very upset and before they were worried about maybe losing their job. Sue AI have to pay much higher prices at the pump and they're very upset with the leader of our country who kind of broke a promise. So to me this is major sentiment shift. That reminds me very much of what I remember in 2008 when crude oil spiked to 15147. The big difference is that was a 50% rise this year. We had 100% rise until yesterday.
- [27:38]
Kelly
Yeah, it's incredible to consider the superlatives, including the superlative today, that we haven't seen a drop like this since, since the COVID pandemic. Mike, I appreciate all of that on the demand side. On the supply side though, I wonder as we consider what the future of the Strait of Hormuz may look like in reality, if Iran's armed forces still need to be coordinated with for tankers to transit, if we could be talking about fees in the tune of millions of dollars in order for safe passage, does that not structurally change the way in which the global energy supply is ordered, how freely it is able to able to flow at what, what rate. I just wonder the longer term ramifications here. Even if there is something that trends back more toward normalization if we're ever going to get back to what normal previously was.
- [28:24]
Mike McGlone
Kaylee, I think you nailed it. This is a major workaround now remember that was about 20% of global supply coming through there. There's going to be major workarounds, pipelines and ways to get away from there. Look what happened after the Russians invasion of Ukraine. Not only that there'll be workarounds away from the Gulf, but also this is a made what happened when Russian INV Ukraine it really kicked that shift towards replacing fossil fuels with technology. That is a lot of EV sales now are just much higher than they were before there was incentivized. But also it's a major advantage for the US US member before this happened was the top producer net exporter of crude oil, liquid fuels and the planet. And that's really accelerating allowed producers to sell forward, bring on those profits. But it'll just extend that normal cycle towards a low price cure which I think will still head towards $50 a barrel this year in the US which the key thing to remember is we got well of cost of production. We got to the place where the US is in most of Western hemisphere have taken good profits and now they have incentive to bring on more supply and demand is going to be collapsing. So the key thing to remember in commodities and most nobody crude oils it pumps and it dumps. But when crude oil pumps it destroys global economies. And now we're seeing that potential tilt.
- [29:35]
Kelly
All right, Mike McGlone, Bloomberg senior commodities strategist joining us from Miami. Thank you so much not just for your insight and analysis today but through the duration of this conference.
- [29:44]
Rick Davis
Stay with us on balance of power. We'll have much more coming up after this.
- [29:51]
Public Ad Narrator
Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public.
- [30:09]
General Frank McKenzie
Public.
- [30:10]
Public Ad Narrator
You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by
- [30:35]
Kelly
Public Holdings Brokerage Services by Public Investing
- [30:38]
General Frank McKenzie
Member FINRA SIPC Advisory Services by Public Advisor SEC Registered Advisor Crypto Services by
- [30:44]
Public Ad Narrator
ZeroHash all investing involves risk of loss.
- [30:47]
General Frank McKenzie
See complete disclosures@public.com disclosures.
- [30:52]
Podcast Host
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [31:08]
Kelly
We appreciate you joining us here on Balance of Power as we run through where exactly things stand. Yes, there is supposed to be a stop in the hostilities between the US And Iran, but strikes are still ongoing throughout the Gulf, including a drone strike against the Saudi's east west pipeline earlier today, though no major damage we understand was done and Israel is still conducting its operations against Hezbollah in Lebanon. And as a result, Iran says the Strait of Hormuz is not in fact open for business for oil tankers in China until that situation changes. Of course, that was one key aspect of the cease fire that President Trump announced last night. He agreed to it on the basis that the Strait of Hormuz would be open. He says another key portion of this as well surrounds Iran's enriched uranium. In True on True Social this morning he said there will be no enrichment of uranium that the United States will, working with Iran, dig up and remove all of the deeply buried nuclear dust, referring back to Operation Midnight Hammer last June when the US Struck Iran's nuclear facilities. And it's around this idea of Iran's stopping the pursuit of a nuclear weapon that we also heard from the Defense Secretary, Pete Hegseth, in a briefing of the Pentagon earlier this morning.
- [32:15]
Pete Hegseth
It's always been non negotiable that they won't have nuclear capabilities. And so right now it's buried and we're watching it. We know exactly what they have and they know that. And they will either give it to us, which the president has laid out, they'll give it to us voluntarily, we'll get it, we'll take it, we'll take it out, or if we have to do something else ourselves like we did in Midnight Hammer, or something like that, like that. We reserve that opportunity. But what's clear, what the Iranian, the new Iranian regime knows is they'll never have a nuclear weapon or the capability to get a path to one.
- [32:47]
Kelly
But is it really that easy? Let's turn now to our political panel. Rick Davis is joining me Bloomberg Politics contributor, Republican strategist and Stone Court Capital partner, alongside Laura Fink, founder and CEO of Rebel Communications and Democratic strategist. Welcome to you both. So, Rick, the US Is contending here that Iran is going to give up its nuclear ambition ambitions and willingly. So I would imagine that this is going to feature heavily in talks over the next two weeks. Talks, of course, set to take place in Islamabad on Friday. How difficult in reality, though is this going to be? Is two weeks a realistic time frame to get something like this done?
- [33:23]
Rick Davis
Well, first of all, I would remind everybody, Kelly, that this is the line that Iran has been using for decades. Oh, we don't want to make a bomb. We're not going to make a bomb. We're just going to create some highly enriched uranium to have around just in case we need to make a bomb. It's, it's just a little bit more of the same, right? I mean, like they never claimed they were making a nuclear weapon. And so we shouldn't be surprised by this. This is kind of standard operating procedure opening gambit in a negotiation by Iran. Oh, yeah, no, we never expected to have a nuclear weapon, you know, and if you believe that, then you have to have been either asleep for the last 20 or 30 years to not witness what they have been doing. And we don't have to recount all. But the bottom line is it's a meaningful meaningless charge until at which point in time the highly enriched uranium is on a truck and out of Iran. We're not going to sleep well at night knowing that they've got as much as 60% high grade uranium that could be used today to make a bomb in their country and that we can't settle for.
- [34:32]
Kelly
Okay, so if what you're saying, Rick, is essentially, do you not take this, this notion seriously, how seriously should we be this prospect of a ceasefire at least leading to a lasting agreement? Laura, what is your sense of optimism or the lack thereof today?
- [34:48]
Laura Fink
Well, we don't have a lot of information. We have conflicting 10 point plans. What the Trump, what the Trump administration is talking about and what the Iranians are talking about talking about are two different things. And I think what this raises is not just the question of the immediate cease fire, but what is the outcome overall? Is that uranium going to be turned over? And if so, at a billion dollars a day, the cost of 15American lives, more than 1,000 Iranian kids and more than 500American service members injured, is that, did they achieve the same thing as we did with diplomacy? We know that the Iranians continue to enrich uranium even after we, you know, this is going to be an enduring problem, particularly because we essentially have the same regime. Just a change in management. We went from father to son and we've solidified the power of the Iranian Revolutionary Corps that enforces it. So. So I think that what we see here is a significant destabilization as well as output by the Americans and a question mark as to what is achieved.
- [35:49]
Kelly
Hmm. Well, this is a really important question that Laura is getting at here, Rick. The notion as to whether or not we spent blood and treasure when we could have just talked it out effectively, what the whole point of this really was. And I want to point to what we heard from the Prime Minister of Spain, Pedro Sanchez, earlier today. Clearly, there has been a big rupture between the US And Spain that has emerged as a result of this conflict. President Trump has made it very clear that he is not happy with the Spanish government and the restrictions they placed on the US not being able to use its bases and airspace. But he said the government of Spain will not applaud those who set the world on fire just because they show up with a bucket. When talking about this ceasefire, are we realistically, Rick, looking at a US President who's now playing firefighter after playing arsonist?
- [36:38]
Rick Davis
Yeah, pretty, pretty, pretty interesting way to characterize it. And I look at this thing in sort of two categories. One, what were the tactical wins? There's no question that, you know, Secretary Hexif was accurate in that we did degrade the missile capability and the drone capability of Iran. We, we, we did weaken the regime, you know, as far as, you know, getting rid of the first and second stream bench. But we, we have a lot of strategic questions that are still open and some that have really damaged the United States. And one of those is where we stand with our allies. We, no question, in this process have weakened the relationship we have with our traditional allies around the world. The conduct of how we prosecuted the war was just as important as is the outcomes of that prosecution. And so there are a number of strategic, long term and economic issues like who controls the strait, you know, who's getting paid for it. Now I hear that the President is talking about a joint venture with the Iranians to charge for people to come out of the strait. That that's a situation didn't exist before the war started. So, so we have a lot of wood to chop to see, like, how is this beneficial to the United States, our prosperity and our security? And I think there are still really strong Questions about that.
- [38:01]
Kelly
Well, and as you talk about the allies, it's worth noting, and I haven't mentioned it yet this hour, that the Secretary General of NATO, Margaret, will be at the White House this afternoon for a meeting that is set to take place behind closed doors. They're not letting the press in for this one, which usually is a clue that be, it could, could be pretty contentious and you would expect it, Laura, to be so given the rhetoric we have heard from President Trump about NATO specifically and how disappointed he has been with those in the alliance who he sees as not having come to the United States aid here. He even said over the weekend yesterday in that press conference, I said bye bye to NATO just how, how, how much could this conflict with Iran actually have ramifications well beyond just the Middle east and reshape the Western alliance as we as we knew it?
- [38:48]
Laura Fink
I think enormous consequences. I think this is on the heels of all of the tariffs back and forth, really using the leverage that America has to really punish these various countries. And when you do not pursue relationships of trust over the long term, long term investments can't be made either in economic relationships or in defense relationships around NATO. And I think the long term consequences consequences is there will be a realignment because they cannot trust that America will not have an executive that sustains those relationships. As we have seen through very different, philosophically different Republican and Democratic administrations, the central nurturing of our allies and working hard to maintain diplomatic relationships and cooperation and certainly there will be disagreements. But maintaining and realizing the value of those allies is something that has truly been lost in the Trump administration. And I think this Iranian conflict obviously exposes those rifts in a real way. We haven't had anyone come to help and it's because we've been on the attack for the last several years since Trump came back into office. So I think we really have to look at that and no matter which party you sit on, really understand the value of those allies and the importance. Clearly, Donald Trump now sees the value as he asks for help, but did not see the value when it came to maintaining, maintaining the relationships in other contexts.
- [40:11]
Kelly
Well, so when we consider the value of, of the alliance or the value of a commitment to such an alliance, Rick, we all know it would take an act of Congress for the US to formally pull itself out of NATO. This is not a decision that President Trump can make unilaterally. That has been consistently pointed out to us here on balance of power. But if even without a formal withdrawal like that, just talking this way the suggestion that the US May not be there for these allied countries because the US doesn't see them as having been there for us, is that not emboldening to adversaries like Russia?
- [40:47]
Rick Davis
Yeah, I think that if you were trying to design a scenario that, you know, from a US Perspective, that could sort of salvage Russia's world standing, that has been just decimated over the four years of the attack on, on Ukraine. You know, these are the kinds of things that start bringing them back into the world community that, you know, you start comparing our allies to, you know, working with Russia. Look, we did a solid for Russia by like, you know, allowing them to go back into the oil trade that enhanced their war effort against one of our allies, you know. So I think the whole question that hopefully we'll start talking about because it is relevant to the situation in the Middle east, is what do we think the role of Russia is going to be in the world moving forward? You know, they were using their satellite targeting systems to actually try and kill Americans. That has to be dealt with. There's an issue there, you know, and their alliance with malcontents like North Korea and Iran and in many cases China is, is, is a challenge to the US Free market system around the world. And so I think that, that, that this administration is going to find itself in a darker and darker place when it comes to our allies and in a harder and harder cell to find some common cause with a group like the Russians, who are really an enemy of all ours.
- [42:26]
Kelly
So that's a hard sell, Margaret. The NATO Secretary General probably has a hard sell ahead of him this afternoon at the White House. And someone else who is going to have to sell things at the White House this afternoon is the Press secretary, Caroline Levitt, who is slated to brief the media in just a few moments. At 1pm Eastern time, the top of the hour, Laura charged with now messaging not just around the ceasefire, but what the point of the mission was, to get back to what you were telling us originally and to the American people whether or not it was all worth it. How hard is that job going to be?
- [42:57]
Laura Fink
She has a challenging job in one sense, in that she has to continue to articulate an ever changing set of priorities and measurements of success and increasing skepticism from the public. But where her job is fairly easy is if she defends whatever President Trump has said at the current moment. She has a lot of job security. But I think, you know, the evolution of, of that role, it's always been a little bit of a defender of the administration. But it also has been a key communications post to be able to communicate internationally in a very different way than the president does and with more latitude. And we've really sort of truncated the role and narrowed it because of the need to simply defend whatever President Trump has chosen to do. I think, you know, we still, in this previous news cycle, the threat to all of the civilian infrastructure, which would have jeopardized Iranian lives and potentially brought war crimes into question. He talked about destroying a civilization. And so I think she's got her work cut out for her in defending things like that, in addition to all of the things that Rick and I are talking about and the global consequences of these choices.
- [44:10]
Kelly
All right. Well, we'll be hearing from her shortly and we'll bring you relevant remarks that she makes here on Balance of Power.
- [44:19]
Rick Davis
Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't
- [44:24]
Pete Hegseth
already, Apple, Spotify or wherever you get your podcasts.
- [44:27]
Rick Davis
And you can find us live every
- [44:29]
Pete Hegseth
weekday from Washington, D.C. at noontime eastern@bloomberg.com
- [44:33]
Podcast Host
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Kelly
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