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Why There Are No Good Options Left in the US War Against Iran | Gregg Carlstrom
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- [00:01]
A
What's up everybody? My name is Demetri Kofinas and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guest on this episode of Hidden Forces is Greg Karlstrom, a Middle east correspondent for the Economist based out of Dubai and Riyadh, who's been stationed in Cairo, Beirut and Tel Aviv and has been covering this region for roughly 15 years with publications in Foreign affairs, the Atlantic, and Politico. This episode is part of an ongoing series I've been producing since the latest U.S. and Israeli military campaign against Iran began on February 28th. These episodes are shorter than our standard format and are designed to help me and my audience stay current with the latest developments and their strategic, economic and geopolitical consequences for Iran, the United States, Israel, the wider region, and the global economy. In this conversation, Greg and I discussed the mood inside Saudi Arabia and across other Gulf states since this latest round of violence began, including the shift in opinion from opposition to the war to a hawkish demand by some in the region that the United States, having now opened Pandora's box, finish what it started. We assess the human and material toll the conflict has taken thus far, the extent and logic of Iranian restraint and its targeting of Gulf infrastructure, and the implications of Iran's decentralized mosaic defense doctrine for command and control and efforts at de escalation. We examine the growing gap between the operational success of US And Israeli airstrikes and the larger strategic picture, including the closure of the Strait of Hormuz and its consequences for global oil and LNG markets. We also discussed the divergent strategic objectives of the United States and Israel, the nuclear question as it applies to both Tel Aviv and Washington Washington, the opaque internal dynamics and power struggles within the remaining elements of the Iranian regime, and what a near term resolution or further escalation might look like. If you want access to transcripts and intelligence reports for this and other episodes, which include summary sections with key takeaways, you can access those by subscribing to our super nerd tier at HiddenForces IO subscribe, where you can also join in on the conversation with by becoming a member of the Hidden Forces Genius community, which includes Q and A calls with guests, discounted access to third party research and analysis, and in person events like our intimate dinners and weekend retreats. And if you still have questions, feel free to send an email to infoodenforces IO and I or someone from our team will get right back to you. And with that, please enjoy this timely and informative conversation with my guest, Greg Karlstrom. Greg Karlstrom, welcome to Hidden Forces.
- [02:56]
B
Thanks for having me.
- [02:57]
A
It's great having you on, Greg. We were trying to make this happen, I think, last week, and the episode got delayed. So I'm happy we were able to make it happen, though I can't say I'm happy with the circumstances. I should also mention before we start that we're recording this on March 24, and that this is part of a series of episodes that I've been producing since the outbreak of this latest phase of the ongoing war with Iran. And by latest, I mean since the US and Israel began bombing Iran on February 28th. So there won't be the customary second hour. And these discussions are largely meant to keep me and the audience up to date with some of the latest news in the region and its larger strategic and economic consequences for all the major parties involved, notably Iran, the U.S. israel and the surrounding Gulf states. But of course, the implications of this conflict, the longer it goes on, have lasting effects for everyone, given the strategic importance of Iran and its position and its ability to control traffic through the Strait of Hormuz. Before we start, just give our listeners a quick idea of who you are, your role at the Economist, and where you're based out of, if you don't mind.
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B
So I'm a Middle east correspondent for the Economist. I've been covering the region for about 15 years, about 8 of that with the Economist. I've been based all over the place. I was in Tel Aviv for a few years, Cairo, Beirut, Dubai. And I'm sort of between Dubai and Riyadh at the moment.
- [04:23]
A
So you said you're in Riyadh. What is the mood in the kingdom? And how do people in Saudi Arabia, as well as some of the surrounding Gulf states feel about what's taking place at the moment?
- [04:34]
B
So Saudi has been quieter than most of the other Gulf countries, you know, whereas in the UAE you've had some thousands of Iranian missile and drone attacks over the past few weeks, it's been a smaller number in Saudi, and many of them have been aimed at the oil fields in the eastern part of the country. So you haven't felt it as much in Riyadh. But that being said, I mean, the US Embassy, which is down the street from here, was hit by a drone early on in the war. There was a ballistic missile attack last week. So you can tell that there is a conflict going on in the region and there's Just a lot of nervousness about how far this is going to go. I think people are worried, read across the Gulf about how long is this going to go on? Will the Iranians make good on their threats at some point to start striking at power plants or desalination facilities, things like that? It's really not clear to anyone when or how this might end.
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So I'd love for you to give us a sense of how citizens or subjects in some of these Gulf states, as well as their governments, feel about this war. Do some of them feel like they got dragged kicking and screaming into it? Because there are reports. For example, I saw something recently in the Wall Street Journal that Mohammed bin Salman has been communicating to the White House. Again, all of this has to be taken with a grain of salt, but that he wants the US to continue to push forward and not try and finish the job that they started. How much of this reflects the fact that they're now in so deep that they want the US to help see this through? How much of it actually reflects a deeper strategic desire that preceded the war? And, of course, it's important to point out that while I'm referring to the Gulf states as though they're some giant collective, they are each individual countries with, in some cases, very different national objectives and in some cases, mutual enmities.
- [06:19]
B
Right? They're not a monolith. Although the longer this goes on, the more they are all being pushed into, I think, alignment in their positions. Before the war, no one in the Gulf wanted it to happen. If you go back to January, when Trump first started making threats, saying that he was going to send the US Military to rescue Iranian protesters and so on. The message from the Gulf was, don't do it. Don't start a war. They were nervous about two things. They were nervous that they would be on the front lines of Iranian retaliation, which is what we've seen. And they were nervous that if Iran was pushed to a point where the regime collapsed, there would be chaos in Iran, and that chaos would have consequences for the region. So that was the position, I would say, in January, beginning of February. There was a point in February at which it started to look like war was inevitable. Trump had sent one aircraft carrier group. A second one was on the way, you know, other warplanes and military units. It was clear that he was going to do something. And at that point, the Gulf states, they were still opposed to the war. They didn't want it to happen. But they tempered their criticism a little bit because they wanted to have some input into okay, if this is happening, we want to be able to advise you on what we want. And, you know, if you're going to do it, do it right. Now that the war has started, I think, and now that the Gulf has taken the brunt of Iran's retaliation, the message from Saudi, from the uae, from Bahrain, even from Qatar to some extent is you need to finish the job. You can't leave us with a situation where Iran has a stranglehold on the Strait of Hormuz, where Iran learns that attacking the Gulf states is an effective way to change American foreign policy and an effective way to essentially hold our societies and our economies hostage. And so the message has become much more hawkish. They don't want Trump to just declare victory and go home. They want him to continue the fighting for a while.
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A
What do we know so far about how many people have been killed or seriously injured since February 28th and how much damage has been sustained to not just critical infrastructure, but also US Bases and other US And Israeli military installations in the region?
- [08:31]
B
So the death toll highest, obviously in Iran, it's hard to get accurate figures, but Washington based human rights group that did very good reporting on the death toll during the protests a couple months ago. A credible source has counted at least 2,000 civilians killed, probably a comparable number of military deaths as well. But again, we don't have accurate figures from Iran. In the Gulf, it's in the dozens. Most of the people who have been killed or badly wounded have been migrant workers, often low paid migrant workers who do you know, the essential jobs that keep this part of the world running? They have suffered the most from these attacks. They tend to live in places that maybe are not well defended or places where there's nowhere safe to go and take shelter. In terms of damage in the Gulf, again, it's a bit difficult to say because governments in this region have to varying extents put restrictions on not just reporting on, but even taking photos of the aftermath of attacks. We do know that some of these attacks on American military bases in the region, they have damaged aircraft there. Refueling planes, for example, in Saudi Arabia were damaged in an Iranian strike on an air force base southeast of Riyadh. Radars and other components of air defense systems have been damaged in the UAE and Bahrain and elsewhere. Nothing that has compelled America or forced America to stop conducting operations from these bases. But there has been some meaningful damage to US Military facilities.
- [10:07]
A
Is it fair to say that the Iranians have been restrained in the targets that they've been hitting? And what explains that do you think?
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B
I mean, depends on how you look at it. You think about the targets set over the past three weeks. I mean, yes, they have been firing at military bases, but they've also been firing at commercial airports, at oil and gas infrastructure, at hotels, at ordinary apartment buildings. There hasn't been any effort to confine these strikes to military targets or even bits of critical infrastructure. I mean, there are horrible videos of drones flying into high rise apartment blocks in Bahrain. So they haven't been restrained in that sense. On the other hand, they haven't so far targeted the power plants, the desalination facilities, the things that are really the doomsday scenario for officials in the Gulf, because obviously this is a very inhospitable region. If you knock out the desalination plant that supplies water to a major city in the Gulf, that city is going to become uninhabitable quite fast. So they haven't done those things yet. They're threatening now to do those things in retaliation for if Donald Trump follows through on his threat to strike power plants. But I think the Iranian logic here is to try and maintain some further options for escalation and not to escalate to a point where they do something that will have such catastrophic consequences that Gulf states, perhaps their European allies, other countries, feel compelled to jump into the war.
- [11:34]
A
So one of the things that I've been reading or that I began reading early on in this war, is that the command and control in Iran is become more decentralized since October 7th, especially since the September 2024 beeper attacks and the subsequent 12 day war. How confident are we that any attacks coming from Iran reflect the intentions of its leadership? And is there any concern that there could be rogue organizational elements within the country that may choose to attack targets in the region by either going against the express wishes of the IRGC leadership or as a result of some miscommunication?
- [12:10]
B
So I wouldn't go so far as to call them rogue organizations. I don't think anyone is entirely freelancing here. But yes, Iran does have what it calls its mosaic defense doctrine, which is an idea that in wartime command and control might be disrupted. And so to preempt that, the Revolutionary Guard, the armed forces, devolved power to individual commanders in different provinces, in some cases even at a lower level to individual units. And so people who are familiar with Iran's military doctrine say before this war started, those individual units had a pre selected set of targets or guidelines on what to target in the event of a war. And so I think some of what we've seen over the past few weeks, it's not coming down from a central authority in Tehran or wherever it is the Iranian leadership is hiding at the moment. These are decisions that are being made by lower level commanders in the field, but they're doing so based on, again, these pre written orders or guidelines that they have from the leadership from before the war.
- [13:17]
A
So how would you say the war is going for the US And Israel, for their military planners? And is there a meaningful gap between success on the battlefield and tactical wins and the larger strategic objectives and political objectives of the leadership?
- [13:32]
B
I think there's a huge gap there. I think you can say on an operational level, things are probably going more or less according to plan. I mean, they've both carried out thousands of strikes across Iran, and they both say they went into the war with what they call a target bank, the list of targets they wanted to hit in Iran. They are working their way through that. They're not at the end yet, but they're about where they expected to be at this point in the campaign. And there has been appreciable damage to Iran's missile program, to its navy, to other parts of its military infrastructure, and at relatively little cost for the United States or Israel. I mean, the only planes that we've seen shot down over the course of the war have been planes that were shot down by friendly fire, by air defenses in Kuwait. And so the Iranians have had very little ability to stop America or Israel from carrying out airstrikes at a strategic level. I'm not sure any of this is going according to plan, starting with the closure of the Strait of Hormuz. And it's really inexplicable why the US Wasn't more prepared for that at a political level, because at a planning level, this is something the Pentagon has been thinking about for decades. The idea of keeping Hormuz open, keeping oil and gas flowing out of the Gulf. That's been a central pillar of America's Middle east policy going back to Jimmy Carter, the Carter doctrine. And so it's something that there are plans on the shelf for. But you look at what's happening now, America scrambling amphibious ready groups and other naval assets all the way from California. America's minesweepers that are normally posted in the Gulf are in Malaysia right now. You really get the sense that they didn't anticipate, again, at a political level, that Hormuz was going to be closed. And so that has become the central focus of this war. It's become an energy War, it's become a battle over the strait and the Americans are really on the back foot in terms of trying to reopen it.
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A
What do we know about the extent of damage to global oil and LNG markets and how long would it take to get back to pre war levels of production and refining at some of these facilities?
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B
Months. Even if the war ends now, we're looking at months.
- [15:42]
A
Well, I saw some figures related to the recent attacks on Qatar's Ras Lafan facility stating that I think it was some of its LNG trains are now going to be out of commission for the next three to five years. Does that track with your reporting that some of these facilities could take years to get back to pre war production?
- [16:00]
B
Yeah, I mean that is the official line from Qatar Energy, the state owned energy giant there. So they produce about 20% of the world's liquefied natural gas at this Ras Lafan facility. Last week when Iran carried out a ballistic missile strike on that facility, it damaged part of it. And so The Qataris say 17% of their total output. So about 3% of the world's supply of LNG is going to be offline for three to five years because there was extensive damage from that strike and it's going to take years to replace that. So that is a prolonged impact. But even the bits of it that haven't been destroyed. Think of, you know, an LNG facility. When you turn that back on, it's offline right now. Russ Lafan has been offline for almost a month. When you turn that back on, you have to cool it back down to about 160 degrees below zero. That is a process that takes weeks. You can't cool the whole thing at once. You have to do it piece by piece. You have to check it as you go along. That could take up to seven weeks just to switch that facility back on. And then once it's back on you need to bring tankers into the Gulf to pick up that liquefied gas. They have to bring it to importing countries. Those countries will have to turn their regasification facilities back on, which is going to take maybe a period of several weeks more. And that's just gas. Oil is a slightly shorter timeline but similar story. So I mean the assessment that we have at the Economist is if the war ended today, you're looking at four months before you get back to something approaching normalcy in energy markets.
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A
So I've seen reporting that we've lost something like 10% of global oil supply. Do we know how this compares to the energy shocks of the 1970s, the 1973 oil embargo, Arab oil embargo, and the supply shocks stemming from the overthrow of the Shah and the Iran hostage crisis in 1979. Like, is there some benchmark that we can index to when trying to determine how bad it's gotten and how bad it's going to get?
- [17:58]
B
I mean, you hear different comparisons. The iea, the International Energy association, has been describing it as, you know, if this goes on for a bit long, may be worse than both of those crises combined. It's hard to quantify how I think one is worse than the other. But I think what's different here is, you know, it's not just a political issue of OPEC deciding to impose an embargo or something. It's not something so easily resolved. There's a physical issue here in the markets, not just with supply, not just with the transit of oil, but increasingly with production. You know, you look at a country like Kuwait, which is now shutting in some of its oil wells, turning them off, essentially. Once you shut in a well, there's no guarantee that you can turn it back on afterwards. There have been cases in the past where wells that are shut in permanently go offline. So even when this crisis passes, even when Hormuz is reopened, then it's possible to ship oil once again and gas once again. It's not clear that we're ever going to go back to the amount of supply that we had coming out of the Gulf.
- [19:01]
A
Does this advantage US Producers of natural gas and all these new LNG facilities that are getting spun up in the US like, is there any talk in the Gulf? Are there any kind of conspiracies in the Gulf around, like, Trump's willingness to do this because it advantages local producers in any way?
- [19:17]
B
I mean, there are no conspiracies around it that I've heard, but you'd imagine there should be, right? I mean, there is a major new gas liquefaction plant, I think, in Louisiana that's meant to come online fairly soon. It's been delayed, but it's meant to come online fairly soon. There aren't many countries that can pick up the slack for Qatar being out of the natural gas market, but the US Is a powerhouse in that space. It's one of the real ironies of this war is that the country that started it, because of its oil and gas resources, because of its distance from the conflict, it's one of the countries so far least affected by it.
- [19:53]
A
It also seems like one of the ironies is even though the US has done a lot to undermine its relationships with allies, and this certainly doesn't make the Gulf states like Washington anymore, it may actually make them more dependent on Washington. And their economies have also they've been trying to diversify their economies. This impacts their effort to increase their share of tourism. Finance was moving to the Gulf. This also raises questions about that. Certainly data centers, efforts to build out data centers could benefit from cheap energy. So what is the conversation happening in the region around what this means for their relationship to the United States and efforts to diversify their economic relationships with China and Russia?
- [20:35]
B
It's a very early conversation right now, and I think how that conversation ends will depend a lot on how the war ends. I think if there's a scenario after the war where the Iranian regime is still in power, where it can maybe make good on these threats now to start charging fees for ships going in and out of Hormuz, I mean, if that is the situation post war, there's going to be a lot of anger in the Gulf, but there's going to be at the same time, as you say, a lot of dependence on America. They're going to need a powerful security partner somewhere. Russia really can't step in and fill that role militarily. They're too preoccupied in Ukraine, and I'm not sure they have any interest in doing it. And China just, again, I think, doesn't have the capacity or the interest to be the security guarantor of the Gulf. So that leaves you with America, like it or not, angry as you might be at the end of the war. And so it's going to make them more dependent on America. At the same time, you have people in the Gulf who are starting to talk about, you know, after this war, we need to have our own indigenous military capabilities. We shouldn't be so reliant on an outside partner. These are countries that spend tens of billions of dollars a year importing weapons from the US and from other NATO countries. They have very well equipped militaries, but they're very reluctant to use them. And when they have used them in the past, you know, when the Saudis were fighting a war in Yemen a decade ago, they didn't exactly do a good job on the battlefield. So there is some talk now about, you know, the need to have better training, better preparedness and coordination between the Gulf countries. But the problem is anything that requires the six countries of the gcc, the Gulf Cooperation Council, to get on the same page and work together, they've Been talking about that for decades, and it never happens. Whether it comes to military cooperation, common currency, even talk of having a railway going across the Arabian Peninsula has been on the table for decades and hasn't actually come to fruition. So they're just not countries that coordinate well, owing to all sorts of petty political rivalries.
- [22:46]
A
Well, that was going to be my next question, which is, does this make regional cooperation in building regional security architectures and frameworks even more difficult? And do we see more bilateral security arrangements between each of these states and the US Coming out of this? Is that one of the consequences?
- [23:03]
B
You would think it would give them an impetus to work together. And for the moment, they certainly have put aside the petty disputes. I mean, if you go back to late December, early January, the crown Prince of Saudi Arabia and the president of the UAE weren't even on speaking terms because they were arguing with each other. They were fighting in Yemen, they were fighting over their divergent policies in Sudan. And all of this came to a head. There was a crisis in southern Yemen that led to almost a rupturing of relations at a high level between Saudi and the uae. Nobody's talking about these things anymore. The crown prince and the president have spoken to one another. They've buried the hatchet for now. But will that remain the case after the war, or will these old rivalries come back to the surface? I mean, if you spend enough time in the Gulf, I think you tend to believe it's the latter. So more likely, I think, when you talk about will there be bilateral arrangements between these countries and the US or other security guarantors, I think that's more likely to be the case. They would like to diversify their relationships a bit. They don't have many options to do that beyond the United States. There's a lot of frustration with Europe, particularly in the UAE and Saudi. They feel like Europe is not doing enough to defend its allies in the Gulf to try and reopen the Strait of Hormuz. So this has led to, I think, even more dismissal of Europe as a security partner. If you take Europe out, if China and Russia aren't going to fill the role, then there's not many other options.
- [24:31]
A
So one of the features of this phase of the war has been, when I say this phase, I mean since February 28th has been the confusion within the US about why it's happening. You know, we've been given a lot of different reasons. I'm curious what the view is in the Middle east as to why this war happened. What's Driving it. What would constitute a victory here for the US at this stage? What is the thinking there about why this has happened?
- [25:00]
B
I mean, everybody here is as confused as people in America. Honestly, I think when you ask people this question in the region, what are the answers that you hear? One answer is, some people think Israel dragged America into this war. I think that was the only reason for it. America is involved in this war at Israel's behest. Other people think America had agency in that decision, and I agree with that. But what is it trying to achieve? I would say the consensus view here is that everyone thinks Donald Trump believed this would be a short war. He would go in, he would find his Delsey Rodriguez figure, as he did in Venezuela. The regime would cut a deal, and this would have been over in a matter of days. And obviously, it hasn't gone according to plan. So now what is the aim? Is it to overthrow the regime? Is it to make a deal with the regime? As we're hearing talk of diplomatic outreach over the past few days, is it just to smash things up in Iran and then leave to do damage to Iran's military capabilities and then call it a day? No one in the Gulf is sure they're not getting any clarity on that when they speak to the Americans. And it's one of the reasons why we haven't seen them get involved themselves militarily, because they don't want to be in a situation where they start carrying out airstrikes in Iran, and then a week later, America decides to declare victory and go home, and they're left holding the bag.
- [26:23]
A
So another feature of this war has been a confusion on the part of. Of everybody, everybody who's not maybe in the inner circle about how much of what Trump says is posturing for a deal and what he does is posturing for a deal, whether that's escalating to de escalate, as Bessett was suggesting, and how much of it actually reflects an intention to escalate. So what is your feeling covering this conflict and covering the president and the comments of members of his staff, his cabinet, about what he's willing to do here, how far he's willing to escalate, what his pain points are? Do you believe, for example, do you buy some of the recent comments coming out of the White House about negotiations, looking to get a deal? I mean, what's true, what's not true? The Iranians are throwing cold water on everything. How do we make sense of what's going on right now?
- [27:16]
B
For me, I'm Trying to tune out as much of what Trump says as possible, because he has said everything over the course of the war. It's going to be over in a few days. It might last four or five weeks. We're close to a deal. We want to overthrow the regime. We want to free the Iranian people. I mean, he's been all over the place, as he usually is. So set that aside and look at what he's doing. This talk in the past day or two about possibly striking a deal with the regime, my understanding is, yes, there have been messages passed between America and Iran. They're not speaking directly, but they are passing messages through intermediaries. America has proposed direct talks. The Iranians, my understanding is, have not yet responded to that offer. They haven't rejected it, but they haven't agreed either. But it hasn't gone any further than that. So when Trump says that we've reached agreement on a detailed plan and we're going to resolve all of the outstanding issues between the United States and Iran, I don't see any evidence that that's the case. Nobody that I've spoken to believes that to be the case. And so I think when Trump sort of misrepresents or embellishes this very nascent diplomatic outreach as being we're close to a deal, I think he's doing that mostly with an eye towards calming the markets. I mean, as we all noticed at this right before they opened on a Monday morning. Meanwhile, while he's talking about diplomatic outreach, you have a Marine Expeditionary Unit that is still on the way from Japan that should arrive in the region on Friday. You have these other naval and marine units that are on their way from California. They need another, I think, about two weeks to arrive in the region. The military buildup is continuing even as Trump is saying, we're close to a deal. And for me, the military part of it is more revealing than what Trump may or may not say.
- [29:06]
A
And what is it revealing of that?
- [29:09]
B
I think this will escalate further. That I think this for the White House cannot end with a situation where the Strait of Hormuz is still closed unless there is a deal, unless there is a really comprehensive deal by which it is reopened and other issues are dealt with. But I think absent that, absent a deal, to just declare victory Now, I don't think it would go over well domestically. I think Trump would worry about the politics of that. It would not go over well at all with American allies in the Gulf. They would be furious. And so I think whether it's this talk of trying to seize Kharg island, which is the site of Iran's main oil export terminal, or maybe other islands in the Strait of Hormuz, whether it's a commando raid to try and secure Iran's highly enriched uranium, although that's a very complicated endeavor, or just trying to do some sort of military effort to reopen the Strait of Hormuz, there is something that they are building towards, something escalatory. I don't think this is over anytime soon.
- [30:12]
A
You alluded to the whipsawing of markets recently. I do want to ask you about that because there have been allegations of insider trading as some large trades were put on right before the President announced a temporary halt to the attacks. Let's talk a little bit about the Strait of Hormuz, because the more accurate term is not that it's closed. I know what you mean by that. But actually it's being controlled by the Iranians. The Iranians are able to let some vessels through and attack others. And one of the concerns about the U.S. leaving the region having sort of broken it, it's funny because when I was younger and we went into Iraq, there was that famous dictum by Colin Powell that if you break it, you own it. And so there was a lot of concern about actually going in, because once it's broken, now it's yours. But the concern among the Gulf states, obviously one of the concerns is that this president doesn't give a shit whether he breaks it or not. And he doesn't feel that he necessarily does own it, though he has many personal relationships with people, whether it's some of these Gulf monarchs, whether it's Dana White of the UFC who's poured a bunch of money into Dubai. I mean, it's hard to know really where his loyalties are on this. But one of the concerns is that then the Iranians would effectively control the Strait of Hormuz. Exact attacks, use that to fund their proxies, double down on their nuclear program. So, like, this is such a mess that we are now at a place and I feel like. Let me get through this long winded observation so you can comment on it. Greg. It seems to me that pre February 28th, the US was in a great position in the Gulf. They had degraded Iran's ability to project power in the region over the course of two years in combination with Israel, to now, where all the options available are awful, there actually is no option. So there's like a state of denial, I think, where markets and policymakers also want to go back to the world before February 28th, but they cannot. And all the options available to them now are worse than the ones before. And the question that really seems to sit before us is do we want to cut our losses here or do we want to escalate and get bogged into a potential quagmire because walking away is no longer possible. And so is that, I'm curious, like, does that resonate with you? Is that, do you think the, the view out of Washington and is that the concern, the primary concern among people in the region?
- [32:30]
B
It's very much the concern in the region that this is going to be, you know, the reverse of that Colin Powell dictum. It will be, we broke it, you buy it, it's not our problem anymore, and America is going to go home. I mean, I think you're right. You go back to pre war. It's not just that Iran's ability to project power in the region had been weakened. Iran had also just been through a period of major domestic unrest that it was only able to quell by murdering thousands of protesters. Its currency is all but worthless at this point. It rolled out a new 5 million real banknote in February, and it just unveiled the 10 million real banknote. That's how quickly the currency has lost value over the past couple of years. Inflation is high. People are angry. It did look as if the regime was at its weakest since the Iran Iraq war in the 80s. I'm not saying it's strengthened now. I think it's going to come out of this war internally in a much worse place. The economic problems are still there. Its military capabilities have been degraded. But it has shown this newfound ability to impose enormous costs on the region and the world and to essentially hold its neighbors in the Gulf hostage. And so when they're talking to the White House right now, I mean, again, that is the message that they're sending, that you can't end the war with that state of affairs still there. But what are your options if you escalate? If you start bombing Iran's power plants, as Trump threatened to do, Iran is going to respond in kind against Gulf countries. And the consequences of that will be catastrophic for the millions of people that live in this region. You can continue. You can just try and stay the course, and we'll do a few more weeks of bombing and maybe we'll get to a tipping point where either Iran can no longer fire missiles and drones at its neighbors, or maybe everything implodes and the regime collapses. And, I mean, I guess that's Possible, but there's also a very good chance it won't happen. It's a proposition that you can't test. And you know, you mentioned Iraq. I mean we all remember in Iraq constantly hearing the next six months will be critical for turning the corner in Iraq. And then six months later, the next six months will be critical. And so you can get sucked into that pattern. But at the same time, if you leave now, then you leave a situation that's really intolerable for the region. So there is no good option at this point.
- [34:49]
A
So let's go back to the comment you made earlier about Israel and the war aims of the Israelis versus the Americans, because I think this is an important framework to try and have as the Israeli hawks that I've spoken to. While they may not be happy with the current state of affairs, the turning Iran into Syria or just kind of going back and mowing the lawn, which is a comment I've actually heard in the context of what's going on right now as an end game is better than the status quo pre February 28th for a lot of folks. Again, people on the hawkish side of the, on the Israeli side, hawks on the Israeli side, whereas that's not in the strategic interest of the United States. So if I had to guess, I feel like the president became increasingly impressed by and reliant upon Israeli policymakers, the intel community out of Israel and maybe drank the Kool Aid on this. Didn't really think, as you said, that this. And again, you can't overindex to what he says. Cuz he's also said, you know, nobody saw this coming. You know, maybe that is a way of him saying I never saw this coming. But essentially he thought that he was going to get a quick resolution. I remember actually during the 12 day war, didn't he initially come out and reprimand the Israelis and then quickly backtrack and essentially even say like I want some credit for this, I want to jump on the victory parade here. And so maybe he thought this was going to be a repeat of that. And for the Israelis, the risk reward was very different because while, you know, again, like they would have preferred an outcome that would align more with what Trump maybe was hoping for, they're not unhappy with the current state. So how important is it to understand really these divergent strategic aims? How much are we over relying on the Israelis within the Gulf to manage this, to manage what's going on both from intelligence and on the operational side? And how does that increasingly sort of drive this train as we sort of project outwards.
- [36:42]
B
If you're Israel, this is your once in a lifetime opportunity to fight your main state adversary and to do it in partnership with the world superpower. Right? So you want to keep going as long as you can. You want to do as much damage to Iran as you can. Maybe you can't topple the regime from the air. You know, many policymakers in Israel are aware of that. But you could destabilize it, you can undermine it, and that is your only strategic interest here. Whereas the United States first, I think, doesn't have an interest in completely collapsing the Iranian state because of what that will mean for the region. It might mean refugee flows, it might mean 400kg of highly enriched uranium that goes missing that winds up in the hands of a militia or some other group. Iran, obviously, it's a country with a lot of missiles and other weapons. Those things too might find their way to non state actors if the country collapses. So you don't want that to happen and you have other interests to juggle. You're a superpower, so you have to worry about what this means for energy prices and the knock on effects of that on your allies elsewhere. You have to worry about every precision guided munition that you use in the Middle east is one that will not be available for some hypothetical future war in Asia or elsewhere. You have to balance all of these things. And it's not clear how much the Trump administration is balancing these things. I think he was shaped, I agree he was shaped by the experience last summer. And it seemed like it went well from Israel's perspective. And so Trump came out and demanded credit for it. I think if it had gone badly last summer, Trump would have said, well, I knew this was a bad idea and I told them not to do it. But once it went well, he wants credit for it. I think he was also shaped by the Venezuela experience. He feels like air power and US Special forces can achieve strategic outcomes easily and cheaply and without casualties or cost to the world. This was never going to be that kind of conflict. But I think the mix of his own experience over the past year and then watching what Israel has done led him to believe this was going to be a lot easier and cheaper than it is.
- [38:59]
A
So you've mentioned Iran's nuclear program a few times and enriched uranium, one of the other concerns that not only have I heard this raised, but honestly, watching videos of ballistic missiles and drones hit infrastructure in Tel Aviv and Israel has made me wonder whether the Israelis, not whether actually I think the Israelis would be willing to threaten to use nuclear weapons. But the question is what would be the threshold to do so? And I think that the threshold is lower. And it's especially lower since Russia also threatened to use nuclear weapons during the Ukraine war in the early period. I think there's a general consensus that the use of, quote, tactical nuclear weapons is now no longer taboo in the international discussion. And in fact, that's kind of worrying. It's being introduced more and more into the public discussion. Is there any discussion in the region about whether or not the Israelis would be willing to escalate on a nuclear level? Should the United States think threaten to exit this conflict or exit it entirely, leaving it unresolved and festering like an open wound?
- [40:00]
B
People in the region have asked me the nuclear question, but actually about the United States rather than Israel. Will Donald Trump do it? You know, if this goes on for weeks and weeks and weeks, will America decide to use a nuclear option and any other president? I would tell you 100% absolutely not. That's not going to happen. Donald Trump 99%. I don't think it will happen. But you know, you can't tell anyone definitively what he's going to do.
- [40:26]
A
You only give him a 1% chance of threatening to use nuclear weapons or a 1% chance of using them.
- [40:32]
B
Using threatening, I would give it a much higher chance. I mean he's already threatened to bomb Iran into the Stone Age essentially. So I wouldn't be surprised if he made those threats.
- [40:42]
A
Yeah, I mean he could do that so easily. So one more question about that. I want to go back to that question about insider trading before we we end this interview, Greg. So I saw this is again like in the world we live in today, there's way more information flooding out over the Internet than you can possibly process. And again we're recording this on Tuesday, March 24th. But when Trump recently announced that he a five day interregnum to this conflict, we saw that right before he came out with that announcement. There was something like the FT report, I think $570 billion worth of trades. I don't know what those trades referred to, you know, what exactly was being traded. But suffice it to say that there have been enough people reporting on this that it seems to have a high level of accuracy. What do you know about this and what's been reported on with respect to like insider trading? This White House, and this is of course the first time even with respect to this conflict, I think right in the early days of the conflict. There were some bets placed on Polymarket before, some similar types of announcements. So what do we know about this?
- [41:43]
B
Yeah, so honestly I haven't had a chance to do any reporting around that myself yet. So I don't know anything more than what's been in the papers. But you're right, it's not the first time we've seen with Venezuela, we saw last summer with the war with Iran, all sorts of suspicious trades on Polymarket on other prediction markets. It's happening in Israel too. They just arrested someone recently, I think someone from the Israeli military who was making trades connected to Israeli military activity. So I wouldn't be surprised if someone connected to Trump was making a profit off of this. But I don't have any information about it.
- [42:17]
A
So actually another question just came to me because it's very easy to get caught up in the mimesis of pessimism around this conflict because it's everywhere and correctly so. But also we don't know much about, we know even less about what's going on internally within Iran. We don't know what kind of jockeying for power is happening within the regime. There are obviously under way more pressure than the US as bad as it is here, the pressure that the Iranians are under is much worse. Is there a possibility that we're discounting their willingness to, quote, make a deal and come to the table and again, the power structure there? Again, we don't know. We don't really know what's going on, who's in charge, exactly what the chain of command is and whether or not someone can emerge or a faction can emerge within Iran that will be ultimately motivated to bring peace to the region on some level or another, while having obviously established deterrence. So anyway, my question essentially is like, are we discounting how close we may actually be to a deal because we don't have insight into Iran's internal state?
- [43:18]
B
I think we're discounting the possibility that in a year or two, Iran is not going to look like it does today. The regime is not going to look like it does today. I'm more skeptical about a deal in the short term. I think if the administration is talking to, if they do get to hold face to face talks with Mohammed Khalibaaf, who's the speaker of the Iranian Parliament, he is the right guy to talk to. He is probably the most powerful man in the country right now. He's not just speaker of parliament, but he was a previous high ranking officer in the Revolutionary Guard. So he has ties in the military, has ties with the business community. He's an extremely corrupt businessman who enriched himself with construction, real estate deals. So you can imagine if he and Trump ever end up having direct talks, they'll get along pretty well, I think. So he is the right guy to negotiate with. But I think there is such a gulf between what the Americans and the Iranians want out of a deal. And I think there is probably so much infighting inside of Iran right now, it's not clear that anyone can drive the system towards a deal that renounces the nuclear program, suspends the missile program, ends support for regional proxies. I mean, if Iran does these things, it sort of stops being the Islamic Republic, or at least as we've known it for decades. And I'm not sure that there's any man right now, any one man who can push the system that far. But I think what we're discounting or not focusing on enough is all of the problems Iran had before the war, they're still going to be there after the war. This is a deeply unpopular government. You know, maybe, maybe 20% of Iranians are still staunch supporters of the Islamic Republic. But as we've seen with wave after wave after wave of protest in recent years, there is a huge well of popular discontent. The economic problems are only going to get worse because Iran is going to come out of this war isolated. It talks about wanting reparations and wanting, you know, trade and investment from Gulf countries. I don't think any of that is going to happen. The Gulf is going to come out of this very hostile to Iran. You have officials in the UAE talking about clamping down on Iranian business, Iranian money laundering. There's all sorts of dodgy finance that goes through Dubai, which has now been bombed by the Iranians. And so they're talking about clamping down on that. So isolated, unpopular, bankrupt regime. At the end of the war, I think there's a good chance that when the fighting stops, we see domestic unrest resume. And maybe at some point that is what pushes the regime to a breaking point. It's not going to be external military intervention that does it. It's going to be this constellation of internal problems.
- [46:04]
A
So, in closing, Greg, can you give me some scenarios, lay out some scenarios for us and for the audience for how you think this work could play out. Like, from best case to worst case,
- [46:14]
B
I would say my most likely scenario. I'm not sure there's any best case at this point. Point. They're, as you said before, they're all bad options. I think my most likely scenario is we're going to have several more weeks of this not significant escalation, not bombing power plants, that sort of thing on the American side, but several more weeks of airstrikes moving more naval assets to the region, trying to not reopen Hormuz. That's a very difficult thing to do militarily, but at least make a show of getting a few vessels through there so that Trump can say, okay, it's open, and at that point he decides to declare victory and leave. I could see that happening sort of mid April, late April. I feel like that's the most likely scenario. Second most likely would be the escalatory scenario. Trump decides to seize islands or carry out a commando raid or do something like that. But I think any of those options, they're operationally risky for the American troops that are involved, and there's a very good chance that Iran will escalate in kind, and that pushes us down a very dark path of greater attacks on energy infrastructure in the Gulf. The deal scenario, I would say, is probably the least likely one at this point. I'm just very skeptical that these talks, if they do even happen, are going to go anywhere. So my base case right now is maybe two or three weeks more of conflict at roughly the level we've seen it so far. No major escalation, at least on the American side.
- [47:41]
A
Greg, thank you so much for coming on the show. This was very helpful and I know our audience will appreciate it as well. If people want to follow you, you tweet pretty regularly. You're a great follow. What's your Twitter handle for people to follow?
- [47:53]
B
G.L. karlstrom.
- [47:54]
A
And you write at the Economist?
- [47:56]
B
I do, yep.
- [47:57]
A
Thank you so much for coming on the show, Greg.
- [47:59]
B
It was a pleasure. Thanks.
- [48:02]
A
If you want to listen in on the rest of today's conversation, head over to HiddenForces IO. Subscribe and join our premium feed. If you want to join in on the conversation and become a member of the Hidden Forces genius community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces IO, you can follow me on Twitter cofinas, and you can email me at infoiddenforces. As always, thanks for listening. We'll see you next time.