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Jason Palmer
The economist. Hello and welcome to the Intelligence from the Economist. I'm Jason Palmer. Today on the show, how China is finding ways to put its AI AI all over the world and remembering the woman who made it to 82 before fulfilling her astronaut dreams. First up, though, I hate to sound like a broken record, remember those? But the way Donald Trump's war of choice is going in, Iran forces my hand. The Strait of Hormuz is open, then it's closed. At the moment, Gulf states are trying to broker a temporary reopening. America launches strikes on Iran. Iran fires on regional American bases. Then they stop and start again. Mr. Trump says he's working up a deal. Iran says no, he's not or rejects the advance. It's time to look at that Memorandum of Understanding, or mou, from June, and how it's emblematic of a wider shortcoming of Trumpian dealmaking right across the region.
Greg Karlstrom
Under the terms of the MoU, America and Iran should be just about finished with negotiating a comprehensive deal that is going to end decades of conflict between their countries.
Jason Palmer
Greg Karlstrom is a Middle east correspondent for the Economist.
Greg Karlstrom
Instead, they've barely started talking about that deal and they're still haggling over the Strait of Hormuz. And even if they can manage to find a solution around the strait, which looks unlike at the moment, there are still large parts of this MoU which look all but defunct at this point.
Jason Palmer
You say barely started talking, but they are talking.
Greg Karlstrom
They are talking indirectly at the moment. Oman is passing messages between the two countries to try and find some arrangements related to the Strait. So about a week ago you had an Omani delegation that visited Tehran for talks and they're trying to propose a compromise in which there would be a formal truce between America and Iran, maybe lasting about 10 days and then a plan to reopen the strait. Now the Omani proposal is that all of the regional countries, Iran and Gulf states, would jointly manage Hormuz in a consortium. They wouldn't charge tolls on vessels using the strait, but they could charge voluntary fees for things like environmental services, similar to what happens in the Strait of Malacca in Southeast Asia. Which theory should be a face saving compromise for everyone. Iran could say it's imposed a new arrangement on the strait, but America could also say it's rejected this plan for charging tolls. The problem is Iran has refused this proposal in the past and sure enough they've refused it again. On Tuesday the Deputy Foreign Minister of Iran said that any deal around Hormuz would have to give the Iranians complete control over all inbound traffic going through the strait into the Parisian Gulf, which obviously is a non start for both the US and its Gulf allies. So diplomacy does not seem to be bearing any fruit. And we've had now renewed conflict after some days of an informal truce. Iran fired missiles at this American base in Jordan and the US carried out round of airstrikes in Iran.
Jason Palmer
And all of this was just sort of prelude to the meat of the mou, the biggest, grandest, longest term plans. What does that look like now?
Greg Karlstrom
Most of the deal is in bad shape at this point. I mean you start with the first paragraph which stated that America and Iran were permanently ending their war that lasted all of three weeks before they went back to fighting. They are still arguing over another clause which relates to the Iranian funds that are frozen in banks overseas due to American sanctions. The Iranians had expected at least some of that money would be released immediately upon the deal signing. The Americans said no, this money will not be released until we see that you're complying with the deal and then it will be unlocked in phases. So the Iranians are frustrated. They feel as if America isn't living up to its end of the bargain there. And then as you say, there's this longer term, bigger picture stuff that was meant to be negotiated. The deal spelled out a 60 day period for a comprehensive agreement to address Iran's nuclear program, its demand for further reaching sanctions relief, all of these long standing issues between the two countries. That 60 day period of talks is meant to end on August 16th. It's barely even begun. There haven't been any face to face talks at a high level this month. And there's certainly no way that America and Iran are going to get to a broader agreement in the next 16 days.
Jason Palmer
Greg, it feels like we've talked about this in pretty much the same terms for months now. And there is this cycle back and forth between fighting and kind of a bit of diplomacy and then back to fighting and then informal truces and what have you. How does that cycle break?
Greg Karlstrom
It's very hard to see how we get out at this point. The diplomacy clearly is not working. If they can't find a compromise agreement around the narrow issue of the strait, there's no way they're going to resolve their bigger issues. But beyond diplomacy, neither America nor Iran has a way to decisively end this conflict for the Americans. Donald Trump could decide to escalate. There are people pushing that in Washington. Admiral Brad Cooper, for example, the head of Central Command, pushing a plan for another few weeks of airstrikes, which he claims will degrade Iran's ballistic missile capability. But even if that's the case, Iran can still fire drones at ships. It can still attack Gulf states with short range missiles. You can't strike a decisive military blow that will force the Iranians to capitulate. The other option for the Americans is not to escalate the war, but to maintain their blockade of Iranian ports, to maintain economic pressure on the regime. And that is having a real impact on Iran. But I think it's going to be months before economic pressure really starts to change decision making in Tehran. They're quite willing to stomach long periods of economic pain, as we've seen in the past. And of course, the Iranians get a vote here as well. And so one of their options is if America wants to maintain a blockade, Iran can escalate the war. They can resume attacks on Gulf states in a bigger way than we've seen. They can escalate the war to other theaters as well. They can try to impose further costs on the global economy. And they can do that to some extent. But will that force the Americans to surrender, to accept the deal that Donald Trump has resisted for months that might leave Hormuz in Iran's control? I don't think that's the case either. So we've gone down a cul de sac here where neither side has a decisive military option. The only way out of it is to make compromises and reach an agreement. But neither side seems to be in the mood to do that in some sense.
Jason Palmer
It seemed from the start that diplomacy was the way out of this. But the deal to make a deal was in really sort of sketch form. Is that the sort of fundamental problem here, there wasn't enough bones to hang a deal on?
Greg Karlstrom
It's the fundamental problem here. This MOU was 14 points over a page and a half. There was no substance to it. And it's also the problem with so many of the diplomatic agreements that we're seeing across the region over the past few years. You have Saudi Arabia and the Houthis in Yemen, which four years ago struck a truce, have been trying to negotiate a more comprehensive deal, but have not been able to reach one. And now what we've seen over the past week is the Houthis announcing a blockade of Saudi shipping in the Red Sea, carrying out attacks on Saudi airports and energy infrastructure. And so that war, which was never decisively resolved, has now flared up and connected to America's war with Iran, because obviously shutting Saudi oil tankers off from the Red Sea will put even further pressure on energy markets. You have the deals that Donald Trump struck in Gaza to end Israel's war there, which almost a year later, there's very little substance on that agreement. We did hear this week that Hamas had finally agreed to disarm, but there's a lot that's unclear. And they say they're not going to hand over their weapons until Israel withdraws from Gaza. Israel will say the opposite. I'm sure they will say that they're not withdrawing until Hamas disarms, and it's not clear to whom they're going to hand over their weapons. They've rejected the idea of giving them to Israel. They've suggested in the past they would only hand them over to another Palestinian entity in Gaza, but there isn't a credible Palestinian governing entity there that could take possession of Hamas's arsenal. So, again, there's a lot of substance missing when it comes to Gaza and Lebanon as well. We've seen Israeli troops begin to withdraw from a couple of positions in south Lebanon. But how exactly is the Lebanese government going to disarm Hezbollah, exert its authority in the south? When is Israel going to withdraw? All of this has been left unclear in the most recent diplomatic agreement between those two countries. So this has been a hallmark of the way Donald Trump does diplomacy in the Middle East. You come out with a vague term sheet, and then you try to put some substance on that agreement later on. But what we're seeing is that if you don't actually spell out what the two sides are committing to do you leave a lot of room for uncertainty and you don't in fact, resolve the underlying conflict?
Jason Palmer
Greg, thanks very much for joining us. Thank you, Jason. You know that subscriber only video series I've been telling you about, the Economist Insider this week. It's a very special birthday edition. Congratulations to the Big Mac Index. You look great for your age. Forty years ago, our economics editor had the bright idea to demonstrate the tricky concept of purchasing power parity by simply comparing a widely available commodity across markets, McDonald's burgers. By now it's in economics textbooks the world over and it's still as useful as it is simple. On Insider this week, our editor in chief, Zanny Minton Beddoes, and our big economics brains peer through that greasy lens to see just how out of whack some of the world's currencies really are. If you're a digital subscriber, Insider is already included with your subscription. And if you're listening for free, you can watch extended clips by clicking the link. The show notes.
Don Weinland
Everything about climbing into a driverless cab feels strange. It's an awkward experience. And when the car starts moving, it really does feel almost frightening the first time you do it.
Greg Karlstrom
Is it running the red light?
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What? No.
Don Weinland
Basically ran a red light. Seriously.
Jason Palmer
Don Weinland is the Economist's China Business and Finance editor.
Don Weinland
When you eventually climb into a driverless cab in a country that's not China and not the US it probably is going to be driven by Chinese technology.
Jason Palmer
Why are you sure of that?
Don Weinland
That's because Chinese companies that do this type of service, driverless cabs, are moving overseas very, very quickly. There's a project that's going to be launching in Switzerland early next year. It's a tie up between a local company and a tech company called Baidu. This is China's main search engine and now AI giant. And they are providing the technology that will be driving these cabs around the cantons of Switzerland. And if you're not in Switzerland, you can also catch one of these cabs relatively soon in Singapore, Slovakia, Saudi Arabia. And yeah, you won't have a driver in the car, but essentially it is China driving the car, or at least Chinese technology behind the wheel.
Jason Palmer
Well, talk me through it. How far and how fast is this spreading?
Don Weinland
We're at a really early stage in this, but there's a lot of companies that want to get into this and fast. So if we're talking about AI exports, that's the export of AI technology as a service, the driverless cabs are the main place you see this, but there are a lot of other ways that this is coming. So robots that make coffee, robots that cook. These are some examples of AI services. And there are dozens of Chinese companies that are moving overseas and trying to find a market for their technology. And one fascinating thing about this trend is that Chinese companies are really leading the overseas push into foreign markets. You don't see many American rivals overseas. You may see some Waymo cars in London now, but Waymo is not really looking to expand globally. It's really focused on mastering the American market. So China's way ahead when it comes to expanding these AI services outside of China.
Jason Palmer
And why is that? Why is China so bent on exporting its AI?
Don Weinland
A lot of this has to do with what's happening within China and the Chinese economy. So one thing that's pretty clear within China is that there's too many cab drivers. So if you have too many cab drivers, why would you want cabs that don't have drivers? Cabs are a good form of employment. And really, for these Chinese companies within China, it's really hard for them to turn a profit. So just think about how much it costs for a 10 kilometer cab ride in a city such as Wuhan. It's about 23 yuan. That's $3.40. If you go to Switzerland, in the area where they are about to launch these driverless cabs, the Same ride is $54. So it's not hard to see that these companies can make a lot more money overseas where there's fewer cab drivers compared to China, where fares are very low and there is a ton of cab drivers.
Jason Palmer
So the essential calculation here is that Chinese AI is worth more abroad than it is at home?
Don Weinland
In many ways, yes. So if you take all of this technology that China is developing within China and deploy that overseas to markets that are not deflationary and where people pay a lot more for stuff such as cabs, it suddenly becomes a very, very good value proposition.
Jason Palmer
That's certainly the calculation for Chinese businesses. How does China's government feel about this big foreign push?
Don Weinland
The Chinese government's very happy to see more exports. China's services exports are pretty small, and AI services exports are tiny at this point. But if the Communist party is thinking 10, 20 years down the line, this is a very promising trend if it can continue to export things that are not just made in factories here. But there's another way of looking at this too. AI is a very disruptive technology. We don't fully understand the impact it's going to have on jobs over the next year, let alone the next five years. So to see more of this moving overseas could be a good thing in
Jason Palmer
the sense that any disruption that comes, essentially China is farming out abroad.
Don Weinland
That could be part of what's happening right now. We're in the very early stages of this, but imagine if China could reap many of the benefits of a rapidly developing AI sector, but not suffer all of the social and economic disruption that is caused by the technology being deployed across the economy. There's a very important first mover advantage in this type of technology. Most countries around the world don't have driverless taxis at this point, and that means they don't have the technical standards around driverless taxis. And when a new technology is deployed and the standards don't exist for it, usually the first movers technology is adopted as the standard. So if China's able to deploy a lot of these driverless cabs around the world and other AI services, their standards might be the first to be adopted. That means when American companies finally get around to moving overseas and trying to sell their own AI services, they might have to conform to Chinese standards. And this would be a big change for the way that things have worked for decades. America is used to defining the technologies that will be used and if that switches and China takes the lead in that area, it's a very concerning thing for how technology works around the world.
Jason Palmer
Don, thanks as ever for your time.
Don Weinland
Thanks, Jason.
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Greg Karlstrom
Your call has been forwarded to an automatic voice message system.
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Ann Ro
If you told Wally Funk what to do, she would very seldom abate. She wanted to do what she wanted to do.
Jason Palmer
Ann Ro is the Economist's obituaries editor.
Ann Ro
If she didn't want to wear a seat belt, she wouldn't. If she didn't want to stay at school because she wanted to do car mechanics rather than home economics and you told her to do home economics, she wouldn't do that either. What she wanted to do, she did. And what she wanted to do most was fly. At the age of five, she put on her superman cape and jumped off the roof of the barn. After that, she had her first flight at nine. She had a pilot's license by the age of 17. And at college, she was just as good as all the guys, doing rolls and turns and spins and going in races. So she was ready. And when astronauts appeared on the scene, she wanted to go into space. The men said no, it was their field. But there was someone called Dr. William Randolph Lovelace who set up his own program to test women to see if they were suitable for space flight. And Wally decided she would sign on to this at the age of 21. Technically, she was underage, but she was accepted. And all the women who signed on expected that they would have as good a chance of going into space as the men. The tests were pretty hard. Well, they were the same as the men's tests, exactly, which was fine. So she had needles put in all over her. Okay. She had ice cold water squirted into her ears. The strangest test of all was that she had to go into a soundproofed dark room and lie in a tank of water, which would mimic the time and space when you cannot feel any of your senses. So she couldn't feel, see, hear anything. But she floated there and was very happy to stay there, apart from the fact that they yanked her out after a while. And she had been in there for 10 hours, 35 minutes, which was hugely breaking the record. Most people did two hours and then they started hallucinating. So she did incredibly well. And overall on all the tests, she did better than the guys did. But he still didn't become an astronaut, and nor did any of the other women. The various men who were involved in the program and in the official space program just got cold feet about girls. The women all complained, but there was nothing to be done. She just had to get over. Wasn't difficult for her to get other jobs because she had such good credentials in aviation. So she worked first for the Federal Aviation Administration and instructions targeted pilots and inspected airplanes. Then she joined the National Transportation Safety Board, which investigated air crashes. And that was quite arduous work. She had to get to the crash site, which might mean riding on a mule or abseiling off cliffs. And then at the site, she had to search for evidence, which might be a bit gruesome at times. In both these jobs, she was the first woman to do them. She set up a flight school as well, at Taos in New Mexico, which was her hometown. So all these things kept her very busy. But she hadn't forgotten about going into space. She went to California to go into a centrifuge, and she did the same in space. Moscow. She went to the Yuri Gagarin Training center in the 2000s. And when she was 61, she was photographed floating around in zero gravity in a crowd of Russian men. Looking absolutely enrapture as she was. They weren't so happy and were throwing up. Still, as she got older and older, there wasn't much hope that she would ever fly there. And then an invitation came from Jeff Bezos, the founder of Amazon, who sent her an invitation to be his guest on the Blue Origin rocket. She was 82 by then.
Don Weinland
We land gently on the desert surface. We open the hatch and you step outside.
Ann Ro
What's the first thing you say? I will say, honey, that was the
Greg Karlstrom
best thing that ever happened to me.
Ann Ro
The trip only lasted 10 minutes, but they went 62 miles away from Earth, straight up into space. She looked on that blackness, and she was the oldest person to go into space by a long way. Although that didn't last very long. She's still the oldest woman to go into space. And she came back absolutely raving about the whole experience, thinking, wow, wow, I've done it at last. I've actually succeeded. I wish it could have lasted longer. But deep down, she'd never doubted that she would one day go into space. As she was growing up in Taos, she would look at the Taos mountain, and her mother told her there was a spirit in the mountain. And that spirit would tell you what you were supposed to achieve, what you would do in the day and what you do more generally in your life. She really believed this, and if she was not actually in Towers herself, she would look at a picture of the mountain on her wall and see what it told her to do. And if the mountain directed her to go and fly among the stars, that was exactly what she would
Jason Palmer
Ann Ro on Wally Funk, who's died aged 87. That's all for this episode of the Intelligence. The show's editors are Chris Impey and Jad Gill. Our deputy editor is Sarah Larnyuk and our sound designer is Will Rowe, with help this week from Mark Burrows. Our senior producers are Henry Andy McFarlane and Alize Jean Baptiste. Our senior creative producer is William Warren and our senior development producer is Rory Galloway. Our producer is Anne Hanna and assistant producer Kunal Patel, with extra production help this week from Emily Elias, Eleanor Sly, Sarah Trainor and Lily Meckle. We'll all see you back here tomorrow for the weekend. Intelligence this week we look at animal testing in America, long a lefty cause that has become a focus for one very effective activist on the right. Can animal testing really be stopped? Should it? These questions hit right at the heart of America's innovation economy and have put many of the country's scientists under fire from both sides of the political spectrum.
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Host: Jason Palmer (The Economist)
Key Guests: Greg Karlstrom (Middle East Correspondent), Don Weinland (China Business and Finance Editor), Ann Ro (Obituaries Editor)
This episode explores why the persistent cycle of conflict and diplomacy between America and Iran continues, centering on the breakdown of a recent Memorandum of Understanding (MoU) meant to defuse tensions. The discussion highlights failures in diplomatic dealmaking—especially under Donald Trump’s approach in the Middle East—and reflects on how vague agreements are failing to deliver lasting peace. Additional segments cover the global spread of Chinese AI driverless technology and a tribute to pioneering aviator and astronaut Wally Funk.
(Main Segment: 01:06–10:56)
(Segment: 12:10–18:52)
(Segment: 20:45–27:01)
| Timestamp | Segment | Speaker(s) | Key Topic | |--------------|---------------------------------------|-------------------------|---------------------------------------| | 01:06–10:56 | Iran-US conflict and MoU analysis | Jason Palmer, Greg Karlstrom | Why the deal failed, cycle of war/diplomacy | | 12:10–18:52 | China's global AI push | Jason Palmer, Don Weinland | Chinese driverless tech, global standards | | 20:45–27:01 | Obituary: Wally Funk’s journey | Ann Ro | Aviator’s life and ultimate space flight |
“Omission accomplished” deftly highlights the recurring cycles of conflict in the Middle East, particularly regarding America and Iran, underscoring the ineffectiveness of vague diplomatic deals. The episode draws a parallel between these failures and shifting global trends, including the rise of Chinese tech influence and the triumph of individual tenacity exemplified by Wally Funk. Through expert insights, the discussion makes clear how the lack of ambition and specificity in diplomacy perpetuates instability—a sobering lesson with resonance beyond the Gulf.