Loading summary
Transcript53 lines
- [00:00]
A
Hi, it's Dan. I want to share with you this week's episode of Arc Media's what's yous Number? It's hosted by Yonatanadiri and Yael Wisner Levy. This week they did a truly important and timely deep dive into the full strategy behind Iran's economic warfare. As Iran's regime keeps targeting its Arab neighbors and disrupting global trade. Yonatan and Yael show that it's more than just a reactionary tactic, but part of a coherent strategy. They discuss the economic levers Iran is trying to pull, how the United States is trying to respond, and whether Israel can be as good an ally for economic warfare as it is for kinetic warfare. And if you enjoyed this episode, I recommend subscribing to what's yous Number? Which drops every Wednesday. Here's what's yous Number on Iran's economic Warfare.
- [00:53]
B
You are listening to an art media podcast.
- [00:58]
C
So, Yael, what's your number?
- [00:59]
B
My number is 47 and it's the score I'm getting right now as we're recording this podcast from 1 to 100 of how risky it is for me to take a shower. We're in deep in war, as everybody knows, but some of us here are taking it more casually and vibe coding their way into what it seems to be very, very useful apps. One of them is should I take a shower? And you have to put in all kinds of inputs like where you live, how long it takes you to shower, how long it takes you to get to a shelter. And so once I put all those power meters in, My number is 47, which means that is my shower score. So I'm, you know, not going to take a shower right now. Also, I'm recording this podcast, but it's not optimal time for taking a shower. We just had Siren, so I guess it was right. What's yours?
- [01:42]
C
So being the boring serious guy, mine is 3.11. It is the current shekel to dollar exchange rate. It is stable from the beginning of the war. A secondary number is 2.84 in the green. That's the TA125. That's the Israeli Stock Exchange top 125 companies, up almost 3% since the beginning of the war, even though we had a circuit break beginning this morning. The first day in the red from the beginning. So I go with 3 11, whose number wins.
- [02:09]
B
I'm happy for the stability, but I kind of like this creativity.
- [02:13]
C
I'll give you the shower number because you are sacrificing your shower Time to record this session. So you win. You win this time.
- [02:21]
B
Indeed.
- [02:29]
C
It is 5:22pm here in Israel. We started recording at 4:30. We had two sirens on our way to recording this episode. So it is 5:22 to be very accurate in Tel Aviv right now.
- [02:41]
B
And we'll. We'll hopefully be able to run through this entire podcast before getting stopped again. As I said, it's not a good time to take a shower. And so I'm happy I just had to stop the podcast and not have to stop my shower. So at least for that. And we're back after a break actually imposed by the war. We weren't planning on taking any kind of break, but last week was pretty difficult for us with kids, war reserve duty, et cetera, et cetera, to really record a proper episode.
- [03:09]
C
It was a tough one. And as the Hebrew song says, you sort of get used to this pace and you try to figure out how to run a routine. We both have four kids. It's interesting to see how in different age groups, they sort of socialize around the activities and the war School is still out. Very interesting times here in Israel. A very consequential feeling for everybody. We are going in and out of shelters. But it's very clear that this time the friction of this war is to try and tackle a very ominous cloud that's been hovering above our head for so long.
- [03:43]
B
The uncertainty, I would say, is also pretty high this time. If the first Iran war came out of nowhere for the Israeli public, they knew it was coming, but no one could imagine what it would feel like. Now we know what it feels like. We've been through it in the past, and as you say, we get used to everything. Yes, we're getting used to war, which is a pretty crappy feeling to get used to. I don't think there's any kind of sense of like, where this is going long term. Is it going to stop in a few days? It can stop in a few weeks. Does it take us, you talked about the kids. Does it take us all the way to the Passover holiday? We already miss Purim. So, you know, I think the uncertainty this time around is big.
- [04:19]
C
Well, look, in terms of this being, you know, kind of knowing what to expect, I think there's one thing that's working, and again, it's a bad dynamic to know how to do that is the recovery. We've had a rocket falling in the center of Tel Aviv just a few days ago, and the recovery was just so quick. The municipality, the home front Command the volunteers. We're getting better at this. And the digital infrastructure that gives us the early warnings and so on uncertainties here. But I think the sense of solidarity and the fact that things are working is also here with us. Let's hope it's as short as it can be. But you know, I think now with the US leading the war efforts, it's not so much in our hands as it was in the 12 day war.
- [05:00]
B
Okay, so as usual, we're going to take a quick look at the week's pressing news, our big shorts. But first we're going to go to the latest update on the Windex, the what's your number index that tracks the performance of publicly traded Israeli based or founded companies. All right, let's kick things off with this week's Windex. Yonatan, how's it looking?
- [05:21]
C
So before we get to the Windex, we actually do want to stop here and ask our listeners and viewers to check the survey again. Our show notes, this is a very helpful tool for us. It's still ongoing. Make sure you click on it and provide us with your feedback. It is critical for how we develop this season, this year's episodes. So a bit of a tricky timing. March 2nd throughout March 8th, those are the days we're looking at fantastic performance. 8.26% in the green. That's 7.97% above the NASDAQ and significant rise compared to the S and P. In essence though, what we're seeing is the bounce back from the Saspocalypse red abyss we were experiencing over the last few weeks. Wix is up 33% on that week as part of a combined share buyback and base for 44 news. That is the company that WIX bought a very strong vibe coding tool that is seeing massive adoption across the WIX platform. So the market loves that, loves the buyback. Even though there are a lot of nuances to the buyback scheme. It has even a discount on the warrant. So Wall street is a bit unhappy about that. But you know, 33% uptick in the share price is definitely something we can't overlook. Monday.com, which was suffering and struggling throughout the Saspocalypse peak is now up 8.4% on the week and is green as well. So that's sort of one theme we're seeing. The other theme is Israeli defense tech that is openly involved with the dynamics of the Iran war. Those are two companies to talk about. That's Kugnite, sort of the mini Palantir Coming out of Israel, publicly traded in Nasdaq and. And Elbit, which already doubled its market cap in the last 12 months and is now, you know, charging ahead in peak market cap territory up above 20% each in that week. They're both demonstrating the defense tech boom. Elbit is now in its highest market cap ever with the upcoming Israeli aviation industry and maybe even Arafa' el ipos this year. Any thoughts, Yad?
- [07:31]
B
You know, I'm looking at the green SaaS. He's called it a SaaS rebound. It seems that the ones that were punished the most are actually the ones gaining the most now, which is interesting. And then of course the defense names. The fact that Elbit and Kugnite are moving this sharply at the same time is probably not that random. We're in a crazy geopolitical time where demand is colliding with Israeli tech capability and I'm sure the market is starting to notice that as well. And it's interesting to see the diversification of the Israeli tech. You have like the very consumer kind of SaaS versus a very heavy institutionalized defense.
- [08:07]
C
Right. Not a lot of defense IPOs to kind of enjoy, you know, massive rise. I think it's a great point that we either have on the defense side a very well established three to five companies that are out there. So they kind of garner most of the interest and attract most of the capital in the red. Two very unlikely equities, both shedding about 6% each. That's Nova measurements and Mobileye. I think, you know, neither is dramatically affected by the war, but neither enjoy different negative effects from the SaaS apocalypse. You know, nova, critical for the semiconductor industry, for the silicon industry, Mobileye, obviously autonomous driving. So I think that's more or less as they move with their peers. Nothing to write home about there.
- [08:49]
B
Exactly. And these companies are really trading with the global sector trends of autonomous driving semiconductors. I don't think this says too much. It's not indicative of Israeli tech. Let's move on to big shorts.
- [09:01]
C
All right, so I think, you know, on a week like this, we don't really have big shorts. The war is gobbling up all the news and it is really the driving force behind the Israeli reality. Two points to kind of bring up here to our listeners that are going to be significant. Let's keep our eyes on those. One is sort of a signal in the noise to pay attention to. That's the Lebanese government's actions vis a vis Hezbollah. We'll talk about that in a minute. The other one where I'D like to get your comments on is it seems like we're going to have a budget. The ultra orthodox parties have made it clear to Netanyahu yesterday this was a report, I think, by Amit segal in Channel 2 and, you know, a regular call me back contributor, that they have decided to vote for the budget and disconnect it from the discussion and condition that they had imposed before of the recruitment, the IDF recruitment law. This may allow Netanyahu, if indeed it passes that way, and we have just a couple more weeks to either run the full course of this government through November, that would be, I think, one of the only two governments ever in Israeli history to see their full term or to decide on an exit timing that benefits the Likud and him, as we saw with Sana Takahichi in Japan or other leaders who sort of see the favorable window for a snap election. So let's keep an eye on what's happening in March.
- [10:22]
B
I don't know if it's a cynic approach or maybe just a very realpolitic approach, but we're not really talking about any fiscal policy, which is what you would want to hope that a budget discussion entails. There's no fiscal policy here. It's about political Runway. The budget does pass in March. The government is essentially buying itself stability to have elections. When it decides to have elections, it either can be at the end of its term or they can be timed. And we mentioned the ultra orthodox quite a bit around the budget. Their role here is key. So once they decide the budget is going to pass, the coalition stability does become less about ideology and more about transaction. Right. You give me, I give you, and we move on.
- [11:03]
C
Yeah, no, I think it's a great point. We are, I think what we're going to sacrifice for this budget to pass is indeed, you know, you know, meaningful fiscal reforms. And we know we've had previous episodes double clicks on that. We know the market does need them, I would say very much fundamentally. So this budget may pass. The government will see the end of its term. But I think 2027 would see massive macroeconomic reforms in Israel, pretty radical ones within the education system, the infrastructure, the transportation system and so on. These are in dire need in order to unlock Israeli growth. Any thoughts about that before we kind of drop a note into Beirut and move on to our long play today?
- [11:46]
B
Let's go right to Beirut.
- [11:49]
C
So, interesting area to watch on Sunday. Hezbollah, in a very surprising act, decided to join forces with Iran and attack Israel with a number of missile and Rocket launches at the beginning of the week. That was answered by a sort of full on recruitment. The northern front and the friction there is pretty high. Hezbollah is firing numerous times per day on the north of Israel from Haifa north. There are Israeli soldiers now active in Lebanon, about a million south Lebanese who've evacuated their homes and left north of the Leitani River. The response from Beirut however is very interesting and this will have economic repercussions and ramifications on sort of the day after. Michel Aoun, the leader of Lebanon today, has made three interesting steps since the beginning. One, he actually called on Hezbollah for the unprovoked fire into Israel, sort of joining Iran, its patron, delegitimizing Hezbollah for the first time openly like that. The second piece was actually an active policy now requiring Iranians for a visa in order to enter Lebanon and expelling all official Iranians from the state of Lebanon. And the third came in today, just a couple hours before we recorded, which is AUN's six point ceasefire plan, which does include for the first time a call for Israeli Lebanese direct negotiations. These are not peace negotiations or normalization, but rather long term ceasefire. No longer requiring a sort of room by room type negotiation, but actually willing to negotiate directly with Israel. Let's see how this unfolds. This may be big news and this sort of somewhat of a big short will turn out to be a long play over the next few weeks.
- [13:34]
B
I agree it is a small but very meaningful shift in tone when we have a public criticism of Hezbollah that is something that we haven't heard in years, maybe decades. And I am going to be cautious, of course, the possible Israeli Lebanese negotiations. You say it's not normalizations, it's far from it, but it is kind of an affirmation that the current equilibrium or the status quo on the border isn't sustainable and that the Lebanese state wants to reclaim some of their say in what is going on in decisions of war and peace.
- [14:05]
C
So it's meaningful some optimism before we deep dive into the long play of the Iranian economic assault.
- [14:12]
B
All right, get ready, let's roll. Today we're going to take a deeper look at the economic side of this war. So so far a lot of the attention globally and in newspapers and around social media has focused on the battlefield, missiles, airstrikes, military strategy. But another story is unfolding in parallel and it's happening quite under our noses. And it's literally burning strikes on energy infrastructure, disruptions to key oil routes are beginning to ripple through global markets and they're creating Consequences that stretch far beyond our region here. This isn't just a tactical response from Iran. It is a strategic one. And it's been nine days since that early Saturday morning surprise attack. And while Iran is clearly outmatched militarily by Israel and the US it appears to be pursuing quite a different path to inflict pain Its. On U.S. economic warfare. So what exactly does that strategy look like? And more importantly, could it actually work? Yonatan, we're going to spend the next few minutes talking about it. Let's go first back to the first 48 hours of the surprise attack on that Saturday. We know what happened militarily, but what happened economically.
- [15:22]
C
So, you know, starting a war on Saturday morning when the markets are out for 48 hours is an interesting way to kind of provide within this kind of shock and awe dynamic of the type of military campaign that both the U.S. and Israel started in Tehran early 8am Saturday with 48 hours to try and kind of set the tone without the pressures from the markets. And so we saw the first 48 hours with Iran with an autoimmune disorder. A lot of unexpected decisions over the first 48 hours, which seemed like Iran not seem Iran was shooting all over, trying to figure out and scrambling. But I would say somewhere around Sunday night after that scramble, we started seeing those sort of five different dimensions of the economic warfare that it started waging through its drones, through its missiles, both into Israel and to the neighboring countries. This is not scrambling anymore. There's a very clear, coherent path of what they're striking and how they seek to generate, you know, an economic warfare in order to drive or push over both the US And Israel into some kind of a detente that would hopefully, from their perspective, allow for them to claim the world's biggest armies were here and we won.
- [16:39]
B
Okay, so we're back from our third siren, third attempt to get this podcast rolling. And, Jonathan, you were talking about a new strategy that's appearing to come out of Iran.
- [16:50]
C
Yeah. So I think after those 48 hours of, you know, that immune system failure, it's clear that the path is economic. How do you leverage the remaining launchers that you have? It's kind of a combination of two things. Very sophisticated on one end. You realize the American and Israeli air presence and superiority is actually killing their launchers. Just a word for our listeners. You may have 10,000 rockets, but if you have a thousand launchers, that's what really matters. Because if every launcher cannot launch again, because once it launches, it gets destroyed by an American or an Israeli air asset, then you're diminishing your launching capability very, very quickly. And so on one end they realized that, and so they started leveraging their drones and whatever they have. And they have far better capabilities in that neighborhood because of lower air defenses and shorter ranges and less dependency on launcher economics. The second piece is there are five very clear targets that create a coherent economic pressure on the region and broadly on the world. One is obviously striking oil facilities and infrastructure across the Gulf. The second is natural gas. The third is all the areas that produce fertilizers, which are also critical coming out of the Gulf. The fourth is data centers. We have a massive AI infrastructure being built in the region after the Trump visit here in April last year, almost one year ago. And the fifth is the Straits of Hormuz, basically saying nothing comes out whatever commodity. So we can cover what Iran is doing in each of those five. Why is it doing that? Because it is emerging as the big story of the military strategy and the impact on global economy. Just I'm looking on, on the other screen. Oil started today at 115. It is now at 96, very volatile. And the market is trying to kind of grab the signals. All eyes on the Middle East. So let's deep dive.
- [18:52]
B
Yeah, because oil is obviously a good proxy to understand the volatility, as you say. And it's a good pressure point to look at when you want to see the effects it has on different sectors. Obviously the price of the barrel is one way to look at it, but it has also quite substantial effects on energy, farming, et cetera. How is oil influencing the economy beyond the price of the barrel? How significant is that second order kind of effect? And maybe there's a kind of also impact on food security.
- [19:23]
C
Right. So first, I think a great point on food security. The UAE, for instance, imports about 80% of its vegetables and fresh produce from Iran. So the dynamics around food security are far and beyond the oil pressure that Iran is piling up. Let's kind of take stock of what it did. When it comes to energy, I would combine the three dynamics together. Oil, natural gas and fertilizer. Three of the five main attack points or choke points that Iran has identified. They attacked Ras Tanura, which is the biggest and most significant Saudi production site. They attacked it twice, about 6 to 700,000 barrels of oil production per day. They attacked the liquefied natural gas terminals for Qatar. Another interesting fact here. Qatar is actually producing gas from one of the biggest gas fields in the world. It's called Fars F A R S. It is partly owned by Iran. And so Iran bombed that facility to the point that Qatar said, not only am I stopping or reducing production, I'm going to zero Yale. And that's 22% of the entire global consumption of natural gas is coming through there. And we saw a spike of about 100 plus percent in the price of natural gas. The most sensitive player here is obviously Europe. But then the secondary derivatives are related to China and they are related to petrochemicals and ammonia and sulfur, which are critical for fertilizing. So food security is impacted, farming is impacted, and the broader petrochemical space is impacted. So just if you take the three first kind of pillars of the strategy, you realize how sensitive the world is. These are all inflationary because once energy is expensive, other elements of our cost of living are expensive. And so when it comes to gas, fertilizer, petrochemicals and natural gas, I think that's the picture we're seeing.
- [21:14]
B
And another symbol I would say, which is hardly a symbol, but something that people often refer to in this conflict is the Strait of Hormuz. And the President Trump has referred to it quite frequently in his rhetoric, saying today to oil companies, go through the straits, you will not be harmed. We destroyed their navy. So, you know, this is a chronic vulnerability of the Gulf, right? Everyone depends on it, we all need it, but who is actually in control of it?
- [21:38]
C
So geography 101, before we dive into sort of the complexity here. This is the Straits of Hormuz are. They may look a bit wide. These are the exit point from the Gulf of Arabia or the Persian Gulf, depending on which side you are when you kind of refer to this part of land. But at its narrowest point, it's about four miles narrow. So it's very easy to create a choke point there. There's a sense of a poker game around the hormones straits. Right now Iran is trying to portray itself as, hey, I can lock the straits, whereas the US Is saying, hey, you have no navy left. And as you said, is encouraging ships and shipping companies to actually go out and continue kind of a business as usual scenario. So let's talk business as usual scenario. About a third of the world's oil that is shipped, that means non pipeline oil is shipped through those six miles. And about 22 to 25%, depending on the year of the global gas consumption passes through the straits. An important piece that I'm not sure a lot of our listeners are familiar with. Just to show how strong the deck of cards is in the White House right now, compared to a decade ago, America went from energy dependence to energy independence to energy dominance within a decade. The United States is today the biggest producer of oil in the world. 14 million barrels of oil produced by the U.S. you know, if you look 10 years back, it was insignificant. America is also producing about 130 billion heat units of natural gas, bigger than Qatar, biggest in the world. America's top on both of those commodities. So the deck of cards is very, very strong. Let's look at how it unfolded. This poker game started with Iran saying, hey, I'm not going to let anybody pass through the Straits of Hormuz. That was already, I'd say Saturday night, Sunday morning. That was considered a bluff, right? But then Lloyd's came in and to those of our listeners who listened to the episode with Ami Daniel just a couple of weeks ago, he mentioned how the insurance dynamic by Lloyds of London is critical. This is the company that does maritime insurance and sort of sets the tone. And here's what happened, Yael. They invoked very quickly the seven day term that cancels all open premiums. So we are now at a point that was done last Sunday. We are now at a point on Monday where all premiums are dead expired. You'd pay a quarter percent on the value of your haul. Now it's between 1% and 115. That's massive. So if you have $100 million of goods on your vessel, you're paying 1 point to $5 million just in premium to cross the Hormuz Straits. America responded already on Monday saying, okay, Lloyds of London, the dfc, which is the sort of long arm of the federal government for insurance risks, will dedicate $20 billion to underwrite premiums for the Straits of Hormuz, let alone sort of the broader region.
- [24:31]
B
Just a quick side note, because of my insurance background is quite crazy how insurance sustains almost any kind of geopolitical turmoil there is. It's the business in the world, truly. And it works quite the same as it did in the 17th century.
- [24:47]
C
So I think if we can just lock the sort of third element here. We just heard Emmanuel Macron for the first time in some of the G7 countries saying we'll produce and we'll release our reserves into the market. That's what kind of drove the price down from the morning which was peak over the last three to four years. We're now back at 95. Two decisions. One, the G7 decision which the market seems to favor. The second is the President's commitment for Allowing freedom of vessels and the European approach that says we're not going to be part of the war, but we may help enforce freedom of shipping around Hormuz. To which Ali Larijani of Iran just responded to Macron. I'll be very blunt in how I sort of freely translate. Shut up. You're not going to do this, because if you will, Europe will suffer the wrath of Iran.
- [25:37]
B
So you also mentioned before financial centers. What do you exactly mean by that?
- [25:42]
C
Well, look, Abu Dhabi, Dubai and to an extent, Qatar have both flourished as financial centers of global significance over the last decade. Qatar, mostly for East Asia, the UAE is now home for the most millionaires out of the UK in the last 24 months. Right. We are seeing creative people go to the UAE to create the there by virtue of the tax regime, by the stable banking system, reliable infrastructure when it comes to finance. All of those have been brought to a halt but are now questioned. Shahed drones from Iran hitting the arrival hall in the Dubai airport. Some of the banks have been targeted. Some of the buildings in the financial center of Abu Dhabi and Dubai have been hitting. Qatar has been hit. Iran is basically saying, look, we will not allow this part of the Gulf to serve as a safe haven. Financially, I would say it's not the weakest thing. And I think the bounce back there would be very fast once the fire is out in the next few weeks.
- [26:46]
B
The last weakness that you mentioned that Iran has identified are the data hubs and AI. They've been popping up around the region. Do you think this is a actual vulnerability for the West?
- [26:58]
C
So, look, I mean, it is not a vulnerability from the perspective of a collapse of the data regime globally or of the data infrastructure, but it is a pillar in what's called Pax silica. The American administration put this front and center and they said, look, there's no way that we, America are going to produce enough energy to feed the training models of AI, which we consider to be of national security importance. Right. So one of the areas of building this redundancy was data centers where energy is abundant, which is uae, Bahrain, Saudi Arabia and so on. When President Trump visited here in the region in April last year, this was the core. It's a trillion dollars worth of investments in data centers and redundancy that can enable, if you will, Western superiority when it comes to AI. Is this a dent in that strategy? It definitely is. Will America turn its back to this strategy? I don't think so. But the fact that Iran identifies that we're now looking at aws Amazon Web Services and Microsoft hubs that were struck with precision. So this is not some kind of a rocket that went afoul. So kind of wrapping all those up. Iran scrambled in the first 48 hours what seemed to be like an autoimmune disease firing all over, and then realized that there are two elements here. One is which elements in our arsenal can actually work economically and how do we leverage those into the second piece, creating an economic pain that the world feels playing the poker in that piece of the region.
- [28:28]
B
What is the ROI on the strategy and would you say it's backfiring or is it going to be cost effective?
- [28:34]
C
Look, I think overall we have a great mechanism to give us an answer for that. And that's the global markets, right? Wall street is responding. This is very measurable. The first three days, basically the market was not worried. Then we saw late last week, markets getting jittery. Is this going to be longer? Some comments from the White House and lack of response from the region to sort of Iran and sort of, you know, kind of sit and do nothing dynamics in the last 48 hours. We're starting to see it starting to backfire. So Saudi Arabia is very angry, Qatar is very angry. And both have dragged Pezeshkian, the current president of Iran, to apologize, even though after he apologized, he just created wrath with the Iranian Revolutionary Guard. And Iran continued to fire into Saudi Arabia, into Qatar, Bahrain and the uae. So I think the most important benchmark for comparison, at least that I'm looking at. And again, these are as all the other measurables, you know, the London Stock Exchange, the Korea Stock Exchange, Wall street are so clearly measuring this. We have a benchmark that's February 2022 and the beginning of the Russia, Ukraine war. We had sustained a barrel of oil above 100 for a good four or five months. After that, we had a 350% spike in the price of, of natural gas to Europe until America and Qatar figured out how to deliver those 120 plus billion heat units into Europe to replace the Russian dynamic. So that's, I think, is the best measurement of is it working or is it not the ROI from that perspective. So I would say Overall, the last 72 hours, we're seeing the American and the west response carrying its weight, showing that prices can be reduced and so the fear of inflation can be contained, at least for now. And Iran still continues to pay a heavy price as it deepens the hit on its own neighbors, creating very bad will for the day after. So negative ROI as we Speak right now.
- [30:33]
B
We spoke about the Gulf neighbors, but two kind of been left out of Iran's target list. Although we hear here and there missiles in airspace and so forth in Turkey and Azerbaijan. What do you make of this? Is this by design or.
- [30:47]
C
Oh, no, for sure by design. Because again, Larry, Johnny was made sure that he apologizes specifically to those two countries saying the projectiles have a life of their own that appeared in your airspace. Those were not sent by Iran. So kind of making a point of saying this is. No, we're not aggressive. There's. These are two distinctive areas, right? One, Turkey super worried. The first 72 hours saw the entire collapse of Turkey's regional strategy. Right? They showed that Turkey is not connected to the U.S. the way that it thought it is. They tried to portray themselves all the way until Friday as the ones who will create some kind of solution, take the enriched uranium and make the big win diplomatically. They lost on that. They're losing now as the Kurds are rising up after what seemed to be an enforced demilitarization of the Kurds in Turkey. It's all not working in Turkey's way. The Turks are angry. We heard Hakan Fidan, the foreign minister, say, we see all those airplanes because obviously they're a NATO country and they see everything in their radars. And he said something very, very clever and very honest. Credit to him. Something along the lines, and I'm not quoting directly, Turkey has developed an incredible military industry. But what we learned from seeing the Americans and Israelis operate, if you don't have superiority in cyberspace and outer space, don't even start a vocal argument with Israel or the US These days. Kind of admitting that Turkey, as it stepped up its military dominance, is nowhere near what needs to win a modern warfare. So Turkey is one issue. Iran is afraid. It is a NATO country as well. And I think the Turks are very jittery and they may act at some point, especially specifically across the western border of Iran, is a different story. This is becoming a global energy hub. I think this relates more to the first half of our conversation. Right? But look, about 25% of Iranians are Azeri, not just of Azeri descent. They genuinely sort of identify as Azeris. Firing it Azerbaijan would open a whole different can of worms in Iran. You know, again, you see the calculus. The fact that Turkey and Azerbaijan are out means that somebody is organizing and orchestrating this in Tehran.
- [33:06]
B
Right. And I'll just end with Israel, of course. Israel has been proving itself to be a very dependable ally to the US during this war, and vice versa, has to be said. But can Israel also be an ally for economic warfare? It's not exactly our forte here, and it doesn't have that many levers that we can pull. So what can we do?
- [33:26]
C
So I think that's a great question. Is Israel a good ally for the economic warfare piece to the US and to the region here? I think we have two parallel tracks. One is clandestine, and that's what we do as a country to support quietly our partners in the region. Even Saudi Arabia, according to some reports that have shunned Israel's normalization, still sort of collaborates behind the scenes. There's a lot of work being done there. To me, the paramount dynamic in this track is the uae, our best partner and inspiring leader in Mohammed bin Zayed. The way they've been fighting back, the way they stood their ground outspokenly, unlike Qatar, unlike Saudi Arabia, is really a remarkable show of leadership. We saw Mohammed bin Zayed yesterday invoking a metaphor that's very known and famous in the history of the Bedouins in the desert, saying, our skin is thick and our flesh is bitter, telling the Iranians, we have patience and we have endurance and we'll see this through. So I think that's the paramount dynamic for Israel on the economic side. On the other side, which is the more kinetic one, that's where we inflict pain, if you will. Israel is playing its part with Centcom, sort of under the central command of the U.S. but yesterday, I think we started seeing tension between the US and Israel when Israel bombed the Israeli Air Force, bombed the massive storage facility for oil for the Iranian Revolutionary Guards in Tehran. You saw the smoke and fire yesterday on cnn. So while some see this as a civilian infrastructure inside of Tehran, that is not the case. These depots are where the regime saves their oil, exactly, for times like this. So they can continue to pay, absent of cash, absent of connectivity to the global financial system. They can pay in oil and make sure the repression system, the cars, the motorcycles, the big vehicles, and in general, the capacity of people to kind of transact with oil, as they are part of the Basij militia, or they are part of the Revolutionary Guard and the repression complex of the Iranian regime. That oil depot and some others are critical for the Iranian regime in order to continue acting its repressive methods against the Iranian people. Maybe one last point to put up here for those who are thinking what's going to happen over the next few weeks and what to look for on the offensive side, there's an island called Hajj Kha rj. Google it. Google map it. It's a small island. It carries the infrastructure for export for about 90% of the Iranian oil. There is a discussion, it's been floated a couple of times, that it will not be attacked because that would actually require the Iranian infrastructure to rebuild over one or two years. And that would mean that even if the war ends after that being bombed, the repercussions on oil pricing are going to be long term. And that's what the administration said it doesn't want to see. So I would be very surprised if Hajj island gets attacked kinetically. On the other hand, there are rumors about a Green Beret Delta force type dynamic of taking that small island by force, kind of like the Venezuela action and taking it away from the stack of cards, the deck of cards that the Iranian regime has.
- [36:43]
B
I'm going to bring you now back home here in Tel Aviv. Despite it all, the Tel Aviv Stock exchange has stayed relatively steady. And you spoke about the shekel to dollar of course as well. What do you think that tells us about investor confidence in Israel's economic resilience?
- [36:59]
C
Look here, exchange rates and stock performance are a great. And that's the beauty of an open market. You can actually see the figures. So we may have a feeling obviously going in, as we did in this episode three times, right in and out of shelters, our kids are playing in the playground, they come back. So it's hard for us to climb to 30,000ft. But at the end of the day, if you're a macro investor deploying hundreds of millions of dollars in a single check, I mean Israel's geopolitical posture for the next decade, however, even if it ends today, right now, is dramatically improved given these dynamics in the last nine days. In the last nine days, yeah. But at the end of the day, if you're an international investor, Israel situation is just getting better and better. I think the signal we spoke of on the big shorts, the Lebanese one, is also very well received by international investors. It remains to be seen how it ends at the end of the day. To me, the next day to watch for is the end of March Xi Jinping, President Trump summit in Beijing, of course. And over the next week we're gonna see the Chinese publishing their five year plan. A lot to dig there. To me, that's sort of like the really big thing that's happening here is
- [38:07]
B
that dynamic, the missing piece of the puzzle that we need kind of to foresee the next few years. There's obviously lots to unpack. Every hour, every minute here, there's much more to be said and we'll definitely be diving deeper into all of this next week. Let's go to the words of the week.
- [38:30]
C
We began the show with the numbers. We always finish them with words of the week. These are from President Trump. They are short. They have been featured as various musical versions over the last week, and they are the following Khamenei is dead. The entire world is now changing its course due to these three words and will most likely take an entirely different shape in years to come depending on the outcomes of this war. But it started with the first act of the war, which is very uncommon. Usually wars protract and then they reach the sort of final goals. Here, both parties tried and waited for the right timing to make sure that this piece of the puzzle is hit first. And yeah, look, it remains to be seen. This war can take a number of negative turns, but as it looks right now, the Iranian economic assault is not working. It can protract, but it seems like the world is getting its act together. And you know, by the time we record our next episode, a lot can happen. So let's see. But those three words are historic and are significant and they demonstrate a whole new doctrine of global affairs. So I think they are our words of the week. That's it for today's show. We hope it made sense in all the craze that's happening. Thank you for tuning into Ark Media's what's your number? And we hope you found it interesting. If you did, be sure to like, subscribe, rate, review, you know the drill. Most importantly, share it with others who you think will find it interesting. If you want to make suggestions or share your feedback on email, please do that on what's your number@arc media.org.
- [40:05]
B
What's your number is an ARC Media podcast. Arc Media's executive producer is Adam James Levin. Already our production manager is Brittany Cohen. ARC's community manager is Ava Weiner. Sound and video editing is by Liquid Audio. Our theme music is by Midnight Generation. I am Yael Usner Levi.
- [40:22]
C
I'm Yonatan Adiri. See you back here next week.
- [40:25]
B
See you.
- [40:30]
C
This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.