Loading summary
Transcript16 lines
- [00:00]
A
Foreign.
- [00:06]
B
Welcome back, everybody, to what really Matters. I'm Jeremy Stern with you in Los Angeles. I'm here, as always, with Walter Russell Mead of tablet, the Wall Street Journal, Hudson Institute, and the Hamilton School at the University of Florida. Let's start with this week's news. First story of the week. Iranian missiles have trapped about 15% of global oil supplies on the far side of the Strait of Hormuz, roughly twice the disruption the world suffered during the oil shock of the 1970. Although the International Energy Agency announced on Wednesday the release of up to 400 million barrels from emergency reserves, that is only a temporary fix, subject to bottlenecks of its own. And prices still rose after the announcement. About a fifth of the world's shipments of liquefied natural gas have been halted, too, and the shock is spreading to other commodities. The price of fertilizer, which is made using natural gas, is surging, stoking fears of food shortages. Sulfur, a byproduct of oil refining, is getting more expensive as well, which will in turn affect copper smelting. And a dearth of helium is imperiling production of computer chips. The IMF has urged governments to prepare for the, quote, unthinkable. Walter, is this news or faux news?
- [01:14]
A
It's news, and there's some exaggeration in it and so on. Just on the oil side, while this is a big disruption, and if it continues, it'd be very serious. The world's oil supply is a lot more diversified than it was in the 70s. You know, at that time, the US was a big importer of oil, so as well as Europe, Japan and so on. So we, it would, it would take a bigger percentage disruption in oil supplies to have the same kind of impact on the world economy that the crisis in the 70s did. However, and this is important, a lot of folks have been saying, you know, have been rather simplistically saying that the Gulf area is essentially only important because of oil exports and gas exports. So a. That led a lot of folks on the center left and farther left to say, well, now that we're in their glorious green transition, you know, we don't care about that. And even if we, even if something happens, it'll just accelerate the transition to green, so we should be moving out of the Middle east, and Middle east doesn't matter anymore. And then some folks on the right would also say, well, we're energy independence, and it's only other countries that need that oil, so why should we care? So there's been a kind of a tendency to reduce the importance of the Middle east both to the global economy and to the United States and American foreign policy. Based on this, I think that's all wrong. Part of it is, obviously, oil is still very needed, but also the Gulf countries have been serious about diversifying their economies, but it hasn't been to totally diversify away from oil in the sense of, okay, now we're going to do pure financial trading and stuff. No, it's been a diversification based on the idea of, okay, let's not just export bulk oil, which other people do things with. There are a lot of things that are energy intensive that we can do at a. We have a comparative advantage because the oil is right here and abundant. So, for example, we can make helium, we can make fertilizer, that then become important. And because our natural cost advantages make us, you know, a competitive performer, we can gain market share and we can gain importance in other ways. And so now what we see is that closing the Strait of Hormuz isn't just a problem in oil and gas markets, but in other markets that are dependent on things that you make using either oil and gas as raw materials or. Or as. As the energy source for something that. That you need somewhere else. And this should, I think, be a powerful lesson to a lot of people that the writing off of the Middle east as an important focus for international economic policy and American foreign policy has been greatly exaggerated. Probably matters to us a little bit less than it did, say, in 1975, but it matters a lot, and we're seeing it all right.
- [04:45]
B
Our second story. Vladimir Putin hasn't been shy about gloating over the upside of the Iran conflict for Russia as oil prices surge and the US has decided to temporarily lift sanctions on Russian crude. When Putin sat down with the heads of Russia's top oil and gas companies this week, he took the opportunity to taunt European countries that have spent the last four years weaning their economies off Russian energy supplies over Moscow's invasion of Ukraine with a heavy dose of schadenfreude. Putin said he wanted a clear signal from Europe if it wanted to return to Russian gas, which is cheaper than liquefied natural gas from the US or the Persian Gulf. The steady decline of prices and the needs of the military at the front in Ukraine had been eating away at Russia's finances and undermining its economic prospects, with annual growth expected at 1% or less in coming years. But the surge in prices has, at least temporarily, given Russia's economy a new lease on life. Russian Urals which sold at just above $50 a barrel for most of last year, skyrocketed to above $100 earlier this week. Currently, Russia can balance its budget with a price of $59 a barrel. Walter, news or FO news?
- [05:54]
A
It is slightly news, but there is so much exaggeration and wishful thinking, both sort of Russian propaganda wishful thinking and Trump hating Western journalists wishful thinking that we, we really have to do some sorting here. What is news is not big news. Kind of obvious. Gosh, the price of all oil goes up. Russian oil also goes up. Just shocking. The next piece of it is the US has temporarily lifted sanctions on Russian oil because otherwise the global shortage becomes even worse. And in any case, the chances of the sanctions holding up, when people are just desperate for oil under any circumstances, obviously the sanctions become less effective. So recognition of reality there. Now, again, many people are going to try to spend this as, oh, Trump's inner love for Putin is revealing itself. No, it's a necessity. But then this idea, okay, ah, Russian economy's been saved. This is going to be the model of the future. You know, that is, that is kind of pure Putin propaganda and pure anti Trump propaganda. I mean, if this war goes on for four years, a lot of things will change. But the, the idea somehow that this is going to save the Russian economy, you know, it predicates, first of all, it'll be a really long, that the Iran war is going to be months and months and months. Maybe it is, it's the future, who knows? But at the moment, the most likely thing is we're still looking at, in calendar terms, a pretty short war. And in that case, this is not going to save Russia's economy. It's like, you know, it's, it's like somebody who is perpetually in, you know, in debt and all wins $100 on a lottery ticket, like that helps with the next week's grocery bill. But it does not change your situation. Nothing has changed about Russia's economic situation yet as a result of this war. For that to change, the war would have to be going on for a long time, and then we would see a lot of other changes going on as well. This would be one of many things. And some of those other changes might well offset for Russia any advantages here. We just don't know.
- [08:24]
B
All right, final story of the week. President Miguel Diaz Canel of Cuba announced today that his government had been holding talks with the Trump administration while managing an increasingly severe lack of fuel. Cuba's government is facing an existential crisis. As the Trump administration ratchets up pressure on the 67 year old communist state, maintaining what amounts to an oil blockade, fuel is rapidly running out, plunging Cuba into prolonged periods of darkness. Though the discussions with the United States had previously been reported by US news outlets, it was the first time the Cuban government had acknowledged that talks were underway. Mr. Diaz Canal, in a 90 minute news conference broadcast on state media, said the talks were aimed at finding solutions to Cuba's differences with the United States. Walter News or FO news.
- [09:12]
A
Again, the news there is not that the talks were happening, that's been known. The news is that for domestic propaganda purposes, the leader of Cuba finds it useful to tell the Cuban people that there might be a light at the end of the tunnel here. You know, this looks like I'm not just sitting here with my hands folded while the country falls apart. I am actively doing something, you know, or at least talking to the Trump people. That's a kind of a minimal statement on his part in that it doesn't commit him to do anything. He's not holding out a bunch of, you know, light, you know, hey, it's, you know, help is, is on the way. So in that sense it's a bit of a stall for time perhaps. I do think it's significant that they've released something like 51 prisoners. Normally when the Cuban government is doing something like negotiating with the US that might be seen as giving concessions. They double down on in other ways, you know, to show we're as vigilant as ever. So they, they haven't done that this time and that would be a sign that they know they're in trouble. I'm not surprised they know that they're in trouble. It's pretty obvious the chances of some kind of a deal in Cuba are probably somewhat better than the chances of a quick deal of some kind in Iran, just because right now there are very few people, I think, left in the Cuban ruling world who believe in anything. So, you know, so many things they've tried have failed. The inspiration of Fidel's band of brothers coming down out of the mountains with their touching naive faith and the ability of communism to solve Cuba's social problems, you know, that's long gone. I heard from some of the Soviets who were engaged around the time of the Cuban Missile crisis, that the Soviets meeting with the Cubans were all sort of touched because by then most of the people running the Soviet Union had lost their faith in communism. They were survivors of, of, of Stalin. These were like just boring Old apparatchiks who, you know. Yeah. Final recite the lines in the party manual. They didn't believe in it. And oh, they saw these lovely Cubans who believed, still believed in socialism. How sweet. Right. You know, but I think now the Cubans have lost that youthful bloom of enthusiasm. So in that case. And the, and the Raul Castro kind of kept things moving in Cuba or kept the power system running by making sure that the army locked into all the tourism, all the sort of money opening advantages so that the hard currency that has gone to Cuba as a result of the easing of sanctions and so on, which the US hoped would weaken the Cuban establishment, the Cuban establishment used to strengthen it. So on the one hand it sends Cubans abroad either as part of a government program, like they're basically Dr. Serfs that they send out and who don't really get paid much themselves, but the money goes to the Cuban government. Kind of is serfdom, you know, and then remittances, people who just flee and then make a living but are sending money back because their, their families in Cuba are desperate and have to have it. So he's get, They've been getting hard currency this way and they've been getting, they got a trickle of tourism that, that's gone down. They got the subsidy from the Venezuelan oil, but it was all about the money and making sure that the money is channeled through state controlled assets. So in Cuba you can go to a dollar store where you can buy all kinds of things, you know, in, within hard currency or priced at hard currency levels. But guess what? The money from those stores doesn't go to create a class of private entrepreneurs and business people. Uh, it goes back to papa, back to the state and especially to the armed forces. So you have this very, you know, you have this, this economic interest group that is also the largest military force on the island that is, you know, has, has figured out a way to sustain itself from this otherwise very negative reality. Even Cuban American exiles sending money to their families back home are supporting the army. So the question is, can another deal be made that's maybe less bad for the Cuban people that provides? And I think this is where sort of Trump's realism comes in, is, you know, like, okay, fine, we're not going to drag you all off to the Hague. We're not going to hang you from the lampposts. Is there some sort of way that your interests and the interests of the Cuban people and humanity at large in the United States be handled in a better way than this incredibly Negative one. It's interesting too. I've seen some reports that the Vatican is getting involved in negotiations here and that again would suggest they're serious. The sort of ironic thing in a lot of ways about Fidel Castro was while he set out to create a revolution, in the end he actually just reproduced a classic Latin American caudilla style dictatorship where human rights are at a minimum, it's utterly corrupt, it's not capable of real economic development or anything. And while the United States and the Catholic Church both dislike the dictator and dislike the regime, they both put up with it because the fear is that whatever replaces it would be more chaotic. And that's actually been the position of the Cuban government for something like 40 years, really since the fall of the Soviet Union or so. A nasty, corrupt, repressive regime that nobody has been willing to try to destabilize or anything because of the sense that the alternatives would be worse. And this is the thing that the combination of the slow decline of Venezuela forcing the Venezuelans to end what was already in Venezuela, a very unpopular, you know, Venezuela is starving. You can imagine how popular it was, the idea among Venezuelans. Oh yes, but we have to starve a little more because we're trying to keep the Cubans also from starving because they also have a corrupt, pseudo socialist, complete failed government experiment. Oh yes, you can just imagine the international solidarity that that's been breeding in Venezuela. So it's just this whole kind of increasingly fragile and non functional collection of entities could well be this, this could really be the time where, where change could come. I would hope so. I really would hope so.
- [16:47]
B
Just one follow up. If, if the communist government did eventually fall or if it at least became less dictatorial and more cooperative with the United States at this point, that would presumably be very good for the Cuban people. But in terms of American foreign policy, would that be a kind of symbolic victory at this point, but produce very little kind of foreign policy or geopolitical benefit? Or would the benefits there be actually quite a bit larger for the us?
- [17:15]
A
Well, I think in terms of symbolism and prestige it would be significant, reducing a possible worry about Chinese spying or, you know, drugs or things. You know, there will be some. If Cuba, from being a sort of enemy country became an asset, for example, for American efforts to interdict drugs in the Caribbean, something really good could happen. But the global thing is going to be somewhat limited because Cuba doesn't really, really matter very much in terms of the whole global or even the hemispheric balance of power in an odd way, in 1959, when Castro took over, Cuba was a much more important country than it is now. It was actually in many ways the most developed of the Latin American countries. And it was, you know, it was in better shape than the rest. And so the victory of communism in Cuba had a big impact, not just in the Western hemisphere, but globally. But the kind of slow, inexorable decline of Cuba since it lost the Soviet Paymaster has taken a lot of that away.
- [18:39]
B
All right, that does it for the news this week. Let's have the big conversation. Walter, you wrote earlier this week about the three main ways the Iran war could end. And the end state scenario you think is most likely, at least as of now. So tell us what these are.
- [19:02]
A
All right. Well, I suppose think of them as the good, the bad and the ugly. A good scenario would be from an American point of view and I think also from an Iranian point of view. But obviously the Iranians have to be the judges of that would be that something range, you know, something between either a color revolution that put in a new, more democratic government, or simply a Venezuela style shift of power within the regime so that elements of the regime decide that they do better cooperating with the United States than opposing it. That would be the best result from an American point of view. I think it would. And in many ways globally at that point, what you would soon see is economic sanctions on Iran, lifting the security dangers connected with obviously interruptions of oil flows, subversion of neighbors. Those things would start scaling back. You'd see more oil from Iran going out into world markets. You might see a kind of a lowering of the global oil price as that production hit, the end of those sanctions hit. All of those things I think would work. And I think certainly from Trump's point of view, if you would put these things together, you get Cuba, Venezuela and Iran all moving in what people would see as a positive direction. That's a pretty successful foreign policy, first half of a first term. And so that I think would be, that's the good from Trump's point of view, from world peace's point of view, from energy and so on. The ugly, the one, I think that would be bad for Trump and bad for the United States. And bad generally is if the United States is unable to clear the oil flows and the flows of other commerce in and out of the straits, and until the Iranians give a ceasefire, other words, the Americans ultimately have to negotiate with Iran over reopening the strait. At that point, Iran has kind of replaced America as the country that has its foot on the throat of global commerce through the straits. Actually, we've already seen France and Italy, I understand, have announced that they're, they're now coming kind of hat in hand to Iran, asking, well, could you please spare our oil ships, oh great Supreme Ayatollah, my lord. And the Iranians would obviously like to see a lot more of that going. I can't imagine why people think France is an unreliable ally. I really just cannot imagine why they would think that. So that is, I mean, again, from the French point of view, it's not like we consulted them or anything. One can see their point nevertheless registers. So that one would look like a defeat for Trump domestically, it would look like a defeat for him internationally. It would be kind of the end of an 80 year era in which the United States was able to prevent a single country from acquiring that kind of power and using it as a diplomatic or economic tool. And I think it would open an era of more threats and more blackmail. Then the kind of middle scenario which think of as ugly because it doesn't really solve anything would be what I call in my newspaper column the mother of all lawnmower scenarios, where this would be like the Israelis often talk about you have to mow the lawn on the Iranian nuclear program. Every few years they get up to a certain level and then you just like knock it back. You mow the grass. You know, you're going to have to come back and mow the grass later. But this would be, you know, on such a scale, you know, far surpassing any of the other. So you might actually get a couple of years or five years before you had to mow the lawn. A complicating factor in all of this has been the replacement of the, or the addition of Iranian ballistic missiles to the strategic calculus. Before this year, I think when people talked about the immediate short term danger of Iran getting into a position where it could dominate oil in and out of the Gulf. The development of Iranian nuclear weapons was seen particularly by a lot of people in the United States as the one thing you had to watch out for. For if you could prevent Iran from developing a nuclear weapon, it would not be in a position to deter the United States or prevent the United States from doing what we needed to do to make sure that the Persian Gulf remained open. And by the way, Jimmy Carter was a president who dedicated himself to the idea that we had to keep the Persian Gulf open at all costs. So you'd have to be more dovish than Jimmy Carter to think this wasn't an important national interest. And so the ballistic missiles are easier to produce than nuclear weapons. And the point is, you get enough ballistic missiles and the ability of the Iranians to do exactly what they've been doing to attack the oil refineries and other targets in the Gulf states. You know, desalinization plants maybe being the kind of ultimate threat here, but Amazon data centers, other things like that. That the ability to do that with, with ballistic missiles, if it reaches a certain level, means that we would be deterred from intervening in the Gulf by the ballistic missiles, not just by nuclear weapons. And then obviously, if that were to happen, the Iranians hold us at bay with the nuclear, with the ballistics while they nuclearize, develop the nuclear weapons, and then put the nuclear weapons on the ballistic missiles. That's sort of where that goes. And so that means that this time the lawnmower can't just look at the nuclear program. The lawnmower really has to go after the ballistic missiles. And that is harder to do. There are many more targets involved with it. There's a lot more sort of dismantling and disassembling that has to happen. And that I think is part of why we're seeing such an intensive drive from the air. So those are the three scenarios, good, bad and ugly.
- [26:13]
B
Just one final question we've talked a lot on the podcast before about. It's part of Trump's strategy and negotiating strategy to never reveal his hand, commit himself too strongly to a particular position. But I guess what I'd like to ask is what do you think the costs are or could be soon to the fact that Trump and the administration more generally just haven't really made it totally clear to the American people what exactly the mission is at this point, now that we have on the grass, and what the point is, what the end state is on the one hand. And then on the other hand, Trump and other cabinet officials kind of routinely promising that it's only a matter of weeks until this is all gonna be over and we're gonna stop.
- [27:01]
A
You know, this stuff is hard. On the one hand, you have all these people who say, what's your end state? What's your withdrawal state? Honestly, war doesn't work that way. You don't have on the United States. In World War II, the Korean Peninsula would be divided, that Germany would be divided in four sectors. Nobody was thinking in 1941 wasn't on the agenda. And when he was asked about his post war plans, Churchill would always talk about that. His favorite recipe for jugged hair. Okay? The fur, it was in an old cookbook. And the first step is first catch your hair. And so, you know, the kind of planning for a final end state in a war is crazy because also in the effort to jug the hair, to catch the hair, all right, a lot of things happen. And so all kinds of plans that made sense for a beautiful post war architecture before your war begins. Now, you know, nine tenths of the way through the war, those are mostly irrelevant. You just have to kind of throw them out because of all the things that happened in the war. So this, some of this is sort of the consequence of the Wonka's Isaac Wonka fication of American intellectual life, American policy life. I want a chart, I want graphs, I want step by step, I want implementation. I want plan B, plan C, plan D. Donald Trump is right in that that is not actually the way you can conduct the affairs of a great nation in a time of profound international change and upheaval. You cannot do it. And people who bring that mindset to the table usually fail. That does not mean that any improvisational, you know, thing or that, you know, every war is a smart war or every offensive is a smart offensive. I was talking to somebody recently, and we were talking about the idea that, you know, Trump really very much is like the little boy who says the emperor has no clothes. You know, that's a good reason to get rid of the current emperor. But it's not at all clear that the little boy needs to be his replacement. And so to say that Trump is want to just be really careful with this, to say that Trump is right, that the kind of conventional, thinking, orderly approach to international life doesn't work well right now. That doesn't necessarily mean he, Trump, has got this magic plan for the Iran war or that his improv is going to get him to where he wants to be. But I think in some ways, he can't do exactly the kind of sales job, you know, that these people have in mind. And yet I think we haven't done enough. The country really hasn't done enough. The Trump administration hasn't done enough to help people understand why this matters. And you really do have a lot of folks who are Trump supporters who aren't sure that it matters. Now, right now, if you look at the polls, what you see is newspaper commentators and the talking heads who go from international conference to international conference. They are all in a burning, screaming panic about what's happening and have never had any faith in what Trump was doing. And they've lost what little faith they might have possibly had, but that Trump's voters, by and large, don't seem to have had that experience. And they. They are people who trust Trump, which means that, you know, there are a lot of issues that. That the average person doesn't really feel that they know the answers to. You know, should the United States have a war with Iran? Well, you can find 15,000 experts on one side, maybe 8,000 experts on the other side. Whatever, whatever. And so finding a leader who you believe in and hoping and praying and trusting that the leader is making a better choice than you would isn't an irrational thing for human beings to do. So right now, Trump has not lost that. I think it's under pressure, and I think if the war keeps going on, you have a problem. I don't mean by this in any way, shape or form comparing the Trump administration to Hitler. Enough people do that for me to, like, I can leave that one alone. But Goebbels, I think in Goebbels's diaries is talking about the course of German propaganda during the war. He says, you know, in 1940, our propaganda line was, we have won the war. In 1941, it was, we are winning the war. 1942, we can still win the war. 1943, we cannot be defeated. Right. That is, people can see that arc. And so if, you know, if the war proves to take a long time, more effort than expected, and so on, all of which are not at all rare in the case of conflict. If the Trump people go in their lines of explaining the wars to their backers from the start, boy, we've won the war with this unparalleled military thing. We're winning the war. You could follow that arc, and every step down that trajectory loses credibility. Politics of war Fighting is a. Is both important and complicated. Trump, I think, is trusting, you know, to his. His own uncanny, let's be honest, about his uncanny ability to connect with and convince a plurality, if not a majority of the American people, enough support to keep going. Plus, he believes also in his ability to improvise internationally, to find a positive step forward even in a very complicated and difficult situation. He believes his intuitive understanding of power is now experience of essentially six years in the Oval Office. He's trusting his ability to get himself out of trouble, to find a way through. All I can say is that we will now see in real time whether his confidence in himself is justified.
- [34:20]
B
All right, that does it for the big conversation. Let's end on the tip of the week. Walter Changing gears What's your favorite book you've read so far this year?
- [34:35]
A
Well, there's actually not that much competition because Vasily Grossman's Life and Fate is so long that I have not read as the only book, haven't read as many other books as I might have otherwise done. But it is, it is really, really good. It's, it's up there with, in my opinion, is up there with the classic Russian novels. It is a novel of World War II. It's basically set in and around Stalingrad at the moment when the initiative passes from the Germans to the Russians. It is panoramic. It's from people at the front, whether soldiers or non combatants, to people who were hundreds and thousands of miles away affected by the war. Both Hitler and Stalin make cameos in this way. You can see that he's kind of setting it up with War and Peace as a sort of a grand overview of an epical world changing conflict where he's able to make his own philosophical observations and reflections. And he pulls it off, which is just remarkable. It really does work. And I had, I had tried to read it some years ago. I was kind of put off because it's sort of, you know, you'll go, go a few pages with one character and then you're off to someone else. Off to someone else. I mean, I want me a plot here. I want, you know, I want to like identify with the good guy. You know, I want this to be like Lord of the Rings and I want, I want to know who Frodo is and I want Frodo to go all the way to Mount Doom and I want to go there every step of the way. Right. And that's not the kind of book this is it is this, this panoramic book. But once you. In that sense, weirdly, it's more like the Game of Thrones novels with, you know, lots of kind of episodes that over time reveal something. I am not, by the way, comparing the two as literary works. Once I found a comfortable way to read it, I just found it engrossing and I strongly recommend it.
- [37:06]
B
All right, there you have it. Thanks to our producers Josh Crow Cross and Quinn Waller. Thanks to Alex Katana, but Hudson and my co host, Walter Russell Mead. I'm Jeremy Stern. We'll see you next week. And until then, please go rate and review us. This helps other people find the show.