The Hormuz Hotline: Eddie Fishman

represents sort of maybe a last-day chaffer for the Trump administration to see if there's a way for them to create a peaceful means of reopening the straight before they potentially get into another cycle of military escalation. I'm Hoth Michael Allen with Beacon Global Strategies. Today I'm joined by

Mr. Eddie Fishman, senior fellow and director of the Maurice Greenberg Center for geo-economic studies at the Council on Foreign Relations. Mr. Fishman joins us today to discuss the latest developments in Iran including the role of sanctions and negotiations and their implications for global markets. Stay with us as we speak with Eddie Fishman.

Eddie, welcome to the show. Yeah, Michael, thanks for having me back on. Eddie, let's start with sort of the news of the day or the news of the last 24 hours. Here you had the president seemingly impatient with how long a blockade of Iranian ports might take to bear fruit and so he announced yesterday.

What it first seemed like an escort mission, but was later clarified to be, I guess,

a guiding of other ships through the straight of foremows, which seemed limited to advising them on which route to take, which I gathered is the route closest to a man, but I wonder if you might just sort of assess the situation as you see it. Obviously, Iran has now, if we believe the news taken shots at a couple of ships that are going through the straight. So, with that wind up, Eddie sort of

“tell us where you think we are. Sure. So, I think the war started in late February.”

The US and Israel clearly sought regime change as their primary objective. If you just look at the target package on the first day, taking out supreme leader, and then Trump publicly saying, you know, Iranians take control of your destiny, now's the time to rise up. I think within a few weeks when it became clear that the Islamic Republic was quite a bit deeper than just the very upper echelon of political power.

And, of course, Iran successfully closed the straight of foremows and sent energy markets into this spasm that has not yet come out of. The Trump administration has been sort of shifting around looking for additional war aims. It's clear that we cannot call this a successful operation if it leaves Iran in control of the world's most important energy choke point. And so, it's very clear that one of the very top

objectives right now in the White House is to reopen the straight. The United States blockade that I guess now was put in place three weeks ago.

“I think the goal there was to tell the Iranians that if they continued closing”

the straight, they would also suffer substantial economic harm and that they would eventually have to concede, right? I think Trump called it crying uncle. I think the blockade was a really smart move. If you think about the status quo right before the blockade, the straight of foremows was close to everyone's oil besides Iran.

So Iran was still getting a million and a half to two million barrels of oil out

to export markets every single day. And they were able to sell that oil at inflated prices, prices that were inflated because of its own actions in the straight. So I think the blockade made sense because it at least prevented Iran from profiting off of its own disruption of the straight of foremows. But I think what Trump had intended was that this actually would make Iran

capitulate that they would be forced to come to the negotiating table maybe because their oil would be shut in and they would face irreparable harm, which is an argument that some folks at FDD, the think tank had been putting forward or just that because they weren't able to pay salaries of public sector workers that they would realize that they would have to make a deal.

“I think that now after three weeks we've learned a few things first,”

Iran's oil sector is a lot more resilient. I think than some of the analysts projected, I don't believe that we are going to see irreparable harm done to Iran's oil production capabilities or tax board capabilities. To me that's not all that much of a surprise Michael because if you go back to March of 2020, the beginning of COVID and sort of in the wake of the

maximum pressure strategy, Iran's oil exports went all the way down to 200,000 barrels a day. So they effectively went to de minimists and they were able to ramp back up to record levels within just a couple of years.

So the irreparable harm argument never really passed Mr.

and then sort of the crying uncle argument never struck me as particularly

strategy in the late 2010s, when they suffered, you know,

a 75% contraction in their GDP, right? A economic crisis that's definitely worse than what Iran is suffering now and that wasn't enough to dislodge

“Maduro from power. So I think in some ways what you're seeing now with”

this maritime coordination cell and we can talk about the specifics, if you'd like. I think it's an admission by Washington, by the Trump administration, that the US blockade is not going to make Iran capitulate. That the oil crisis and the energy crisis, the commodities crisis is not going to end until traffic through the straight resumes. And so they have to pivot to a

different approach. And so I see this maritime coordination cell or project freedom, I think is what they're calling it. A new effort to see if there is another way to give ships the comfort that they need to actually start transiting the straight again. Great. So before we get to the details of the coordination cell, it appeared that we were able to successfully guide through

two ships. What exactly happened there? And I'm sure there's much we have yet to learn. But I wondered if we had made a special arrangement with maybe some people with US connections that we would back them if they were to lose their ships or maybe they just had a higher risk tolerance.

And I wondered if this was the first step in a series of steps to try and

gain the confidence of the international community that we could see through commercial vessels getting through the straights. But is that the right

“read? I think it is. I mean, look, the details are still coming to light.”

But as far as I understand it, what the idea of a maritime coordination cell is effectively like a hotline that, you know, ship captains would be able to call in and be provided the same situational awareness that the US Navy has in the straight of our moves. So understanding where Iran has capabilities, where there may be mines, what are the safest passages to go through to get

through the straight? That's the idea. It's not that every single ship would receive a US Navy escort. I think that the report that there were a

couple US warships that translated the straight, I take that as kind of a

confidence building measure. It's to show commercial vessels that the US Navy does have some understanding of how to get through the straight safely. And sort of trying to get them to have confidence that the advice and the guidance that is provided by this maritime coordination cell is credible. I'm still somewhat skeptical that this is actually going to be the silver bullet

that the Trump administration wants it to be. For a few reasons, one is that I'd be surprised if maritime insurers consider this to be sufficient to have sort of say that they're going to cover ships going through the straight. Iran still has the capabilities it needs to target commercial vessels, right? They still have plenty of drones and missiles.

Those capabilities have not been completely destroyed, unfortunately.

“And I think just before this call, I mean, they so clearly possess some”

capability to strike at distance. There are some reports of strikes on the UAE. So that's one reason. And then, too, even setting aside the commercial reasons or why insurers might have cold feet. You know, one of the reasons that some of these insurance schemes haven't worked, like when the United States government tried to come in and provide some insurance cover is that

the mariners themselves have been very wary of crossing the straight because they fear losing their lives, right? So there are a number of reports of ship owners instructing their crews to go through the straight and then the captains and the crews saying, sorry, we're not going through. So I'm still skeptical that this is going to

work at scale. But I do think that it represents sort of maybe a last-to-edge effort for the Trump administration to see if there's a way for them to create a peaceful means of reopening the straight before they potentially get into another cycle of military escalation. But just to make sure I have the facts right, I think I heard you say

it was to U.S. Well, I thought you said maybe naval vessels. There were two commercial vessels that made it through, right? We should confirm this, Michael. But what I heard was that it was actually an actual U.S. naval vessel, so it operated. That's true. The straight yield. So yeah, exactly. And the way that assuming that that

is correct, and again, we can confirm, it's that the idea is to show that we have the capability to do this ourselves, right? We can show, if we can do it ourselves, then we're providing the same type of

guided our own naval vessels to the straight.

Yeah, I was thinking we had demonstrated that the couple Saturdays ago, it's the team negotiated in Islamabad, but you know, then a lot of time went by in between then and now. Yeah. Okay. So maritime coordination cell seems very different from an escort mission.

But maybe you could be construed as a baby step or a step along the way. What is the hang-up that the administration seems to have done on going for a full escort mission?

“Because it just strikes me that the only way we're going to be able to”

clear all these ships north of the straights of form moves. The ones that are all bottled up to say nothing of the ones to the south that want to get north, we've got to be able to escort them through give their insurers greater confidence that they'll make it and have this at least the support of the U.S. Navy.

But we don't seem to ever get there. What's your take? I think that there's real concern about losing some of our Navy vessels, right? Because even though they obviously have very sophisticated capabilities, air defense radar, et cetera, you know, with just the sort of plethora of these relatively inexpensive

drones and missiles that Iran has, I think there's no guarantee that we wouldn't lose a ship or two, which I don't think is something that the Navy's been willing to do. So that's my understanding of where the hang-up is. And look, I mean, even if most of our ships were okay, I mean, all it takes is, you know, one of these drones are missiles

to get through to kind of break down the entire operation.

“Okay. And by the way, that's what makes it so different from the”

80s, right? When we did this previously, you know, it's just the different sort of level of capabilities and age of drones and more precise chief munitions that exist today that, you know, weren't part of the battle field when we did maritime, you know, escorts in the 80s through the Strait of Hormes. Got it.

We received news that Iran had put out a map about their new governance of the Strait, and I think it was accompanied by a document, but clear once again, that when the Iranian say the Strait's are open, it's radically different from the idea that we have when we say they're open. And it seems to me, and, you know,

that in at least three ways, one, you have to check in with the Iranian navy. Two, you have to take the route closer to Iran. And three, you might have to pay a toll. Is that your sense of what the Iranians are after? Is there more? I definitely don't want to surrender their

leverage, but unpack this for us.

“That is what they're after. And I think one of the sort of”

biggest questions and something that I, I'm conflicted on, I think most people who track this closely don't have a, you know, 100% confidence, one way or the other, is to what extent is Iran going to be able to institutionalize its control of the Strait of Formus? Of course, over the last month or two, they've established

a fact-o control of the, of the Strait by showing that they can keep, uh, she puts ships at risk through use of drones and missiles. Um, institutionalization obviously would be another step. That would mean that even during peacetime, when ostensibly they're not randomly targeting neutral, uh,

commercial vessels, uh, you know, on an average day, that they would be able to extract, you know, toll. And I, you know, the reports

have been that they've been asking for tolls of around $2 million

per ship going through the Strait of Formus. So, look, the way I, the way I kind of examine this, I think if I had to, to make a base case scenario where I think this is going to come out, I think it's likely or the not that Iran is able to institutionalize some level of control over the Strait of Formus unless the United

States successfully affects regime change, right? And that's another topic we can discuss. But assuming the sort of this IRGC, uh, led regime, uh, stays in power, I think they'll be able to extract a toll. And for a few reasons, one is that I think for, uh, at a commercial level, if you think about a

very large crude carrier, you know, laid in with 2 million, you know, barrels of oil going through the Strait of Formus, you know,

2 million dollar toll isn't actually that commercially

significant. So, for the business, you know, for businesses, for oil companies, for shippers, um, if they could get the Strait reopen tomorrow and agreed to pay 2 million dollars a ship, that would be a deal. I think that most of the commercial

economically speaking, um, it's quite viable, uh, that

that happens. So, who wouldn't like, uh, the toll? The toll obviously wouldn't be great for the United States, because, you know, a big part of our role as the global, uh, you know, sort of the, the insurer of global order is to provide open sea lanes. This would be, uh, sort of a big hit, uh,

to that. Of course, the Gulf States, like Saudi Arabia and the UAE and, uh, and other oil exporters who rely on the economy of the United States. So, you know, it's, uh, we're going to go through this, uh, sort of a big hit. So,

we're going to go through this, uh, sort of, uh, sort of a big hit.

So, uh, we're going to go through this, uh, sort of a big hit. So, uh, we're going to go through this, uh, sort of a big hit. So, uh, we're going to go through this, uh, sort of a big hit. So, uh, we're going to go through this, uh, sort of a big hit. So, uh, we're going to go through this, uh, sort of a big hit.

So, uh, we're going to go through this, uh, sort of a big hit. So, uh, we're going to go through this, uh, sort of a big hit. And they're own oil sales. So, you've got to think that they have a huge economic incentive to keep that control. And then when you think about who could stop them, um, you know,

is it China, is it the Europeans? I just don't see it.

I don't see anybody coming in and, and, and forcing them, uh, not to extract these tools.

“So, I, I think that that's probably, uh, where we're headed,”

absent, uh, some level of regime change that's able to be affected in Tehran. Fascinating. Well, maybe they're in lies, a solution where we look the other way on tolls. That ships are just doing it up their own accord. Kind of reminds me of when hospitals have their data locked up by cyber hackers. The FBI, their official policy is don't pay them, um, but they do anyway.

And maybe these shippers, especially if they have no nexus to the United States, just say, look the other way, let's tell everyone to look the other way. And they'll pay them and maybe they're in, we'll have a deal eventually. Yeah, I actually think that's a really good analogy, Michael, right? Where, um, maybe this is not something that, you know,

US agrees to, right, formerly, or then anyone else agrees to. But it's, it's, uh, it's kind of seen as a viable path, uh, out of the crisis where everybody looks the other way. I mean, the thing I'd say is if you look at other maritime choke points, you know, Suez Canal, Panama Canal, the Bosphorus, um, you know, the Egyptians extract fees at Suez, uh, the Panamanians extract fees at the Panama Canal, uh, and, you know, the Turks extract fees at the Bosphorus.

I mean, none of them are quite as high as what the Iranians are proposing. And of course, uh, those waterways are a little different, you know, the Suez Canal and the Panama Canal are, uh, actual canal structures with the locks that have to be managed, and the Bosphorus is an internal waterway. You know, if you got Turkey on both sides of it, uh, but look, there are some precedents to this. So, um, it would not surprise me if that's, uh, that's where we come out of this.

“And the other thing to say too is, you know, there, there are different levels of institutionalization, right?”

There, there, there's a, there's a world where there's just sort of side deals that are struck. I mean, there, uh, we all know that, or maybe some don't, but a couple days ago, you know, a Japanese linked tanker carrying Saudi oil successfully got out of the state of Formus. And there's been a debate as to how this happened, you know, apparently there's some very high level diplomacy that the Japanese did with the Iranians. The Japanese say they didn't pay a toll, but what did they offer, right?

I'd be surprised if the, if all they did was ask very nicely, and the Iranians let them, uh, get this Saudi tanker out of the state. So, um, I think there are already some side deals happening, and you can just see how that would proliferate and potentially come into some level of an institutional structure after the war ends. However, we now have apparently Iran taking shots at the UAE. So, we're, again, on an escalatory path.

Well, what do you think there after? I mean, I think I expected them to hit UAE again. And if we got back into kinetic action with the regime, but it sure seems to me, I mean, they purely reacting to the two vessels that went through.

“But if you had to guess right now, why did they resume strikes today of all days?”

Yeah, it's a good question. I don't have a clear read myself. I think maybe it is some sort of a demonstration that they still have the capacity to strike back and to retaliate, and that they're not just going to sort of sit idly by as the US tries to make these missions to the straight of our moves. But look, I mean, I've long maintained now, really since that we had to cease fire and now it's however many weeks ago, that we haven't seen the worst of this war yet. I think we have at least another round of escalation.

And I think there are elements within the Iranian regime, which, as I think we all know, is not at all sort of a clear and monolithic structure.

And then, of course, the Trump administration, despite I think earnestly looking for some sort of a diplomatic off-ramp, has just continued to mass military assets in the region.

And so I do think we're both sides are kind of at a hair trigger right now, and it would not surprise me at all if there's at least one more round of escalation before we get some sort of real diplomacy. Yeah, okay. Gotcha. We're going to take a quick break and we'll be right back with more of our discussion with Eddie Fishman. Beacon Global Strategies is the premier National Security Advisory firm. Beacon works side by side with leading companies to help them understand national security policy, geopolitical risk, global technology policy and federal procurement trends.

Beacon's insight gives business leaders the decision advantage founded in 2013. Beacon develops and supports the execution of bespoke strategies to mitigate business risk drive growth and navigate a complex geopolitical environment. With the bipartisan team and decades of experience, Beacon provides a global perspective to help clients tackle their toughest challenges. All right. Now, let's back up a second. I also loved the idea of blockading the Iranian ports.

I thought finally we were showing a little initiative and trying to regain the strategic advantage. And I do believe it would hurt them, but can you talk about the degree of pain.

It has been causing them so far. I hear you, everyone seems to say, you know, maybe FDD and some of their experts had been a little bit too bullish on how it was hurting Iran. It was still hurting, was it not? And isn't that still a significant move that could bite into Iranian economy when it's already vulnerable? Sure. Yeah. I mean, look, if they're exporting a million and a half barrels of oil a day at a hundred dollars a barrel, you know, it's at least a hundred and fifty million, a hundred and fifty million dollars in revenue that they otherwise would be making.

You know, when you add, you know, some refined products and you know, petrochemicals, you know, it's quite a bit higher. You know, let's say two hundred, three hundred million dollars a day that they're not earning. I think there are a few mid-againsts. One is that Iran is quite a large country.

“And then the straight of our moves is not the only way that they can sell exports or import goods, right? They have land borders with handful of countries. They have ports on the Caspian Sea.”

So, and I think they've got capacity to export at least a hundred or two hundred thousand barrels of oil a day by rail. So it's not clear to me that this means that they're not getting any oil out of the country at all and getting any exports out. Right? That was a thing, another maybe analytical challenge that I'd saw some people saying, well, they're not importing anything anymore because of this blockade. I don't think that's accurate at all. Given the other borders that they have and the other ability to bring in goods.

But, but look, even at, you know, at whatever the reality is, you know, 200 million a day that they're not earning, it's a significant hit, you know, they're credible reports that they haven't been paying public sector employees for weeks. If not more than a month now, they're obviously in a huge economic recession right now.

But sort of to loop back to what I said at the sort of very beginning, you know, they're not the first country that's had sort of an economic calamity brought upon it in recent years.

“Then as well again, contracted by 75% during the maximum pressure strategy, right?”

I mean, I run it for all the damages it's going to suffer this year. I'd be surprised if there are economies contracts by 75% and that wasn't enough to dislodge Maduro. Or, you know, an issue, you know, very well, Michael Syria and the 2010s. I mean, the economy was completely obliterated. And that wasn't enough to get a side out of power, right? It wasn't until you had, you know, significant armed opposition that was willing to sort of take on the regime head on the Damascus that you actually got.

And we got rid of the Assad regime. So, I mean, I think the economic blockade, I still, I do support it because I think it gives Iran significantly more of an incentive to try to find an off ramp to the war certainly than they had before the blockade. But I don't view it as a magic bullet and I don't think that we, there's any reason to believe that the Iranian regime is going to collapse.

“I think if I were to make the counter argument, you know, like, what's the likely scenario that you actually do get some kind of regime change or something out of this situation?”

You would need to posit that there's like a splinter group within the IRGC. You know, more moderate, you know, sort of splinter group that says enough is enough.

But I don't think anyone really sees clear evidence of that just yet.

Well, I guess I was thinking less about it causing regime change, although maybe later later it would, and more just condition them to come to the table in a serious way. But this gets to the big question that we've heard that recently and it's still applicable today is that who can hold out the longest? There's a school of thought that the United States can because we still have physical access to oil and gas even if the prices up.

That the Iranians were the estimates I've seen anyway, hundreds of millions of dollars per day.

“They're losing. And we could, therefore, sustain this longer if we wanted. But if the president is impatient and we're ready to get through this, maybe that's why we're upgrading it.”

But more people say that the Iranians, because they're a revolutionary regime, uncompromising and ideological, and this is, they don't care about their people, that they would have just sort of, as you've just described with regard to Venezuela, they can take a punch. So tell us, you know, who's we've got two different clocks, who could take it, who could take the pain the longest? Yeah, so I appreciate that you invoke my foreign affairs essay from earlier, from the current issue. Because one of the conclusions I have is that, you know, whoever wins an economic war isn't just about which side has the ability to inflict more damage on the other's GDP.

It's about which side has the greater capacity to withstand it.

“And I think clearly, if you're just looking at this quantitatively, I mean, the US is not suffering nearly as much as Iran. I mean, Iran is suffering substantially more than the United States in every which way, including economically.”

I do think that our incredible bounty of fossil fuels, you know, being the world by far the world's biggest producer of oil and natural gas, does shield us to a certain extent from the dislocation, although not entirely, we're already seeing at least on the oil side, real ramifications in the United States, right? You saw spirit airlines effectively go out of business because of rising jet fuel costs. You have seen half of Americans already say that they're cutting back on driving because of gasoline prices.

Edging closer and closer to that that magical mark of five dollars a gallon, I think we're around four dollars and fifty cents right now. And I think a third of Americans have already canceled or changed their summer vacation plans because of rising fuel costs. So there are real pain that's being inflicted on the United States, although I think we're much more insulated than the Europeans or countries in Asia and certainly countries in the developing world that have seen real shortages, right? They're kind of already living in COVID-like conditions where you have to work from home and you're rationing fuel and whatnot.

“On the Iranian side, I think that the issue is that they're just, you know, the regime is fighting for survival.”

They know that the US and Israel are hoping for regime change. And as we saw in January, this is a regime that has very little regard for the lives of innocent Iranians, right?

I mean, they're willing to go to incredible lengths to hold on to power, gruesome lengths to hold on to power.

So I worry that in a basic test of wills that we won't come out ahead just because the Iranians are playing for much higher stakes than we are. But look, I mean, I will say we're now, well, you know, two months into this war, there have been pretty significant domestic economic ramifications already. And I think a lot of people are surprised that Trump hasn't already done something to seek an off ramp. So, you know, I think if I had to make an analytical judgment, I'd say that the Iranians can hold out longer if only because they're playing for much higher stakes.

And that they don't have to answer to voters. But, you know, as this goes on longer and longer, I think Trump is giving everyone reason to question that. I think it's through a little bit, we definitely, I think would cost the protests in late December early January was the, at least the proximate cause was the collapse of the currency. And, or at least it's getting out of getting out of a healthy relationship with other currencies and inflation going up. How much worse is there economy now, then it was, is there a way to talk about that?

But I think the challenge is, you know, people don't want to leave their homes, right? People are afraid right now.

They're afraid both of, you know, potential, potentially going to caught in the crossfire of a resumption of hostilities, they're afraid of their own regime.

“So I think that that's, that's really the challenge. It's not that the economy is, is better, but I think that people are fearful about sort of trying to fight back against the regime and these types of circumstances.”

I also think there has been some level of rally around the flag that is visible, where even Iranians who detest the regime also, I think, feel very upset by the fact that the United States and Israel have launched this war without a clear off ramp that they have attacked a number of Iranian infrastructural targets that seem to have gone beyond what was necessary in this war.

So I think it's, it's a complicated picture, but I don't, it would be very surprising to me if we were to see a resumption of protests like we saw in December and January any time soon.

Okay, great. Eddie, let's turn to the upcoming summit with China. How do you see this thing playing over there? Do you see Xi Jinping pressing the president for some sort of deal, or is he in different, because he has plenty of oil and gas, and deep reserves, a lot of resilience, and it's not really facing China that much after all.

“I think the Chinese are pretty comfortable with where they're at right now, and it would surprise me if they seek to play a decisive role in the endgame of the Iran conflict.”

And it's interesting, Michael, I don't know about you when you were in the Bush administration, certainly for me when I was at the State Department.

When we thought about any type of scenario of the closure of the state of foreign moves, we always thought that the Chinese would be a big loser, just given that they're so dependent on importing oil and natural gas from the Gulf. I think that they prepared very effectively, you know, a billion and a half barrels of oil in their strategic preserve, so somewhere between three and four times as much as we have in the salt caverns in the US Gulf Coast, so they're quite well insulated just on the sheer oil side.

I also think they're sort of the buyer of last resort in the oil market, right? I mean, they're not going to face shortages for oil, they've been, you know, everyone wants to sell to the Chinese if they can. But I think even more importantly, has been this multi year, multi-hundred billion dollar investment in clean energy technologies, you know, solar wind, nuclear electric vehicles, all of these industries where they're now by far the world leader. I think that that positions them quite well, and I think that they, they already see that around the world, governments and businesses are going to continually and accelerate their adoption of Chinese clean energy technologies coming out of this crisis, realizing that they don't want to rely on an unpredictable oil market.

“I think the Europeans are going to double down on their dependence on clean energy technologies from China. I think the Asian economies will, as well, and that's going to give China a lot of leverage, right?”

These are all choke points that China could use for economic pressure, even against America's allies going down the road. One way is Michael, the dam was already breaking. I mean, it was before that Ron Warren January that Mark Carney of Canada went to Beijing and agreed to bring in, you know, over 40,000 Chinese electric vehicles in the coming year. So I think the dam was already breaking. I think it's going to accelerate it. And I think China realizes that the longer this thing goes on, it damages the US sort of global reputation and its strengthens their own position as sort of the head gem on in the clean energy sector.

That's a lot. So how do you expect the Iran issue to come up then at the talks? Certainly they're going to discuss it somewhat. I mean, I don't know if the president asks Xi Jinping to be helpful or how does this look? And look, I mean, there's some room also for tension, right? I mean, just last week, the Treasury Department imposed some sanctions on Chinese entities involved in buying Iranian oil, including a very large petrochemical facility in China. So I think that there, this is potentially an area of tension between the US and China. China still is pretty much the only big buyer of Iranian oil. And in addition to the physical naval blockade, you know, the Treasury Department has this operation economic fury that is largely targeted at Chinese entities buying Iranian oil.

Basically, the Chinese government's trying to force, you know, Chinese financial institutions not to not to comply with American sanctions. So I think that this is a potentially a point of tension. But look, if the previous Trump Xi meetings from the first term are any guide, I mean, Trump tends to, you know, want these things to go well. They want both sides, I think, frankly, if they're going to meet are not going to want it to, you know, be an acrimonious meeting. They're going to want to come out.

At least holding hands on a few issues. So I would be surprised. I think that that also suggests to me that there's probably a limit in terms of how far the US is going to go in terms of targeting Chinese entities as part of this operation economic fury. But I don't anticipate that Iran is going to be the big sort of, you know, the big deliverable from the summit. Assuming the summit goes forward, I think it's going to be more on sort of US China bilateral trade, you know, purchase commitments. Those types of issues has opposed to, you know, some big G2 solution to the Iran war. Let's talk a little bit about if the strikes were reopened tomorrow and people were able to go through without fear of being targeted.

“So I think that's going to be an instantaneous economic recovery, or we wouldn't have instantaneously make up for all the losses of the last couple of months, right? How long would it take oil prices to come back down?”

Yeah, I mean, I think you would see oil prices drop relatively quickly. I think because, I mean, the market, now for ever since this war started has been gearing up for taco, you know, and that's part of the reason I think that oil prices haven't gone higher than they would have otherwise. I mean, most just by sort of pure quantitative metrics, you know, we've lost over 500 million barrels of oil. You know, in cumulative total since the beginning of this war, it's a huge amount of oil that hasn't gotten to the market, and oil prices are high, but they're not that high by historic standards, right? I mean, they're still not even quite as high as they were in March of 2022 after the start of the Russia Ukraine war, and back then there was no supply disruption at all.

And I think that's because a lot of commodities traders who were burned back in 2022 betting that oil prices would go higher and having seen what happened last year with taco on tariffs have just been waiting for some sort of solution here, and then haven't wanted to lose money betting on the sustained high oil prices.

“I think if there was actually a sustainable deal to reopen the straight, I think you'd see at least Brent and sort of the future price drop relatively quickly.”

But in terms of actually unwinding all of these supply disruptions, it's going to take some time. I mean, at the very basic level, you can't go back in time and produce, you know, the 500 million barrels of oil that weren't produced over the last few months, and that number is going to grow, assuming that this war lasts. So that's a supply that just isn't going to be produced. And then there's also going to be some bullish factors on the price, you know, so I might say bullish more demand than you think of otherwise in terms of, you know,

countries that have released oil from strategic stocks and private companies that like to have oil in reserve that have released those stocks are going to be buying oil. So I think you're going to see a spike in demand.

That might offset some of sort of the relaxation that we get from increasing supply.

And then of course, there's just, you know, getting the tankers in the right position, which I understand could take a month or two.

“So yeah, I mean, you're going to have sustained higher prices. I'd be very surprised if we get back to, you know, the 60s, which we were at the beginning of this year. I think the IEA expected oil prices to be in the 50s this year.”

So we're definitely not going to get there. Do I think we could get to, you know, the 80s? I do. I think that's very plausible.

If the straight, uh, we're open. And frankly, that's not all that high, right? That's definitely, you know, oil prices in the 80s is not high enough to have any real political salience in the United States. It would not be an issue, for instance, in the midterms, if oil prices bring the 80s. Okay, tell us a little bit about the tangible effects of if it's not so much the United States that's being harmed economically. I definitely hear that the European, the Asians have already felt a lot and the Europeans are next. So I've heard of, you know, all sorts of chaos in the Philippines, diesel shortages in Australia. What are you hearing?

And then how do we factor that into the head on head, Iran versus Trump that we're dealing with right now?

“So my plan, glad I already booked my, my family trip to Europe this summer, because I think you're right about the Europeans and the jet fuel shortages.”

You already have airlines that have cut flights, you see prices going up. So that is really hitting the Europeans, right? They don't have the same level of energy security that we have here in the United States. And the same is true by the way in industrialized Asia. But definitely the biggest impacts are being felt in the developing world. You're right about the Philippines. You know, in Thailand, you've already had government officials being ordered to work from home on India where they rely on on Gulf, cooking fuel, basically, you know, for to actually make hot food and drinks.

You're seeing those disappear from food menus and seeing, you know, people resorting to eating colder food and refrigerated items. Bangladesh, they closed all universities earlier this year as an emergency measure Sri Lanka has had fuel rationing with kind of a QR code system.

“So I mean, you see these types of, these types of impacts really across the developing world. I think to your, your latter point, which I think is really interesting about how does this affect the standoff.”

There's a real question. So these countries and the governments, these countries, who are they blaming for this?

Right? Are they blaming Iran? Because ultimately it is Iran, who's disrupted the state of foreign moves or are they blaming the US and Israel for, for starting the war?

And I thought there was an interesting piece of news last week where, you know, the type Prime Minister basically came out and said, you know, was publicly, I think, chastizing the Trump administration for, for sort of causing this disruption and not sort of painting a picture for how the world can get out of it. So I do, you know, there has been, I've heard people say, well, all of these countries eventually are going to come together and tell the Iranians you have to reopen the straight. But so far, it has been playing out that way. And if anything, you've seen a lot of anger directed toward the US and Israel. By the way, that's true in Europe, too.

“And I think that's why a lot of European governments have been unwilling, really, to come in help the United States and the circumstance, because politically it's very unpopular to do so.”

The US Treasury Department issued guidance and an alert warning of the sanctions risk of paying Iran toll payments. How much of a deterrent will that be against Iran's ability to control the straight of four moves will companies ignore that warning? And will the United States choose not to enforce? It's a really good question. It's something I've been grappling with since this advisory came out last week. Just to level set with everyone, in effect, put out this advisory, basically warning against the payment of tolls to Iran saying that it violated that it basically risked secondary sanctions by the United States.

And it's clearly an attempt to deter the payments of these tolls. A few thoughts. One is that I don't believe Iran is using formal financial channels to accept these tolls. You know, there have been reports of being paid in Bitcoin and other digital currencies that have been reports that Iran has collected some payments in R&B. So I think that in some ways they're not using financial channels that tend to be worried too much about US secondary sanctions. But let's say the US did really try to crack down what it deter.

I think it would deter some payments, but not all.

And ultimately, if it's a choice of taking a risk and seeing if you might get sanctioned by the US or getting the access to the oil you need,

I think it's not going to prove to be as effective as the Treasury Department wants it to be. I also think it will put assuming that the US actually was trying to implement it. It'll put the US Treasury in a very difficult spot. You know, I brought up a few minutes ago that a Japan-link tanker got out of the straight-of-hort moves a couple days ago. And Japan obviously is very energy insecure. They don't really produce any oil or natural gas. They depend a lot on imports from the Gulf.

And again, the Japanese said they didn't make any side payment. But what happens if they did, right? I mean, what if it came to light that there was some sort of a side payment? Is the US then going to go ahead and impose sanctions on Japanese companies, right? Or Indian companies that are making side payments to Iran? I think it becomes a very difficult policy to uphold over time for the US government.

We've got about 10 more minutes. We'll go to Russia here in a few minutes.

But let me see if I can nail you down on a couple of other issues. So as we look toward a possible agreement, not that anything is out there that we can see right now. Many people say the easiest thing to do would just be to relax both blockades. Let it be an open straight and exchange for the United States letting Iranians ships along with all others move forward. But the position of the United States seems to be, well, we've also need something on the nuclear program.

And presumably, if you believe the articles that the Iranians proposed a 15 year limit on uranium enrichment, that would be linked to sanctions relief.

It's not that we're going to give that away for nothing.

And I admit, this is a speculative question, but you're the world's sanctions expert. If we needed to give something up, what's the easiest thing for us to give that the Iranians would feel was significant that we would need a literally an act of Congress or it didn't meet some criteria of leverage that we wouldn't want to give up right now. Give us a little guide. Sure.

So it's clear that the Iranians want sanctions relief. And I think that in some ways it's becoming even more important to them, given the significant economic damage that's been inflicted on Iran in recent months. They need, they're going to need all the relief they can get. So I think in some ways, as a U.S. diplomat, that puts you in an advantageous position because the sanctions relief is quite valuable to the Iranians. I understand, I think the Trump administration is making the right move by saying that they're not going to give relief just an exchange for reopening the straight.

I could see a deal. I mean, certainly, I think if you could make a deal where the U.S. ends our blockade and Iranians, their blockade, that would be a great deal for the U.S. Right? Right? And I think we would take that in a heartbeat.

“I think the challenge is the Iranians know that their blockade, right?”

Their closure of the straight is their key leverage, right? So if they give that up, there's really not any incentive then for the U.S. to stop fighting the war. Right? So I'd be shocked if the Iranians are willing to go for that. I think they're going to want a lot more than just the U.S. ending our blockade.

I mean, on the nuclear file, you know, 15-year suspension of all enrichment, that would be a pretty good deal. Right? If the U.S. can get that, right? I mean, that would be, I think a very, a very good deal, especially if it also involves verifiably getting rid of the 440 kilograms of 60% in rich uranium that apparently is somewhere underneath S. Fahhan.

“So I think that would be, you know, if that's real, that's what the Iranians are actually offering.”

So they're the combined 15-year complete suspension plus getting rid of that H.E.U. It's a pretty good deal on the nuclear side. In terms of what the U.S. could give up on sanctions relief what they should give up, I'll give you both my sort of perspectives. The easiest thing to give up is repatriation of frozen assets. The same reason that the Obama administration saw that as a good lever when they got the JPUA in 2013 and the JCPOA in 2015.

The beauty of frozen assets is that, you know, they're very valuable to the Iranians, right? They have literally a monetary value. You can say we've repatriated 5 billion, 10 billion, 20 billion dollars of your own money. And the other thing that's great about it is it doesn't force you to really give up anything else, right? You could continue to have significant sanctions on Iran's oil sales on their financial industry, on investments in Iran's petroleum sector. Exactly.

Exactly.

It's not a continuous thing, right? I would always prefer repatriating assets than fully easing sanctions.

What I would say, though, Michael, I have a bit of a, I'd say, a heterodox perspective on this.

“I think if you were able to get a really good deal from the Iranians, right?”

Where they verifiably reopen the straight with some sort of international guarantee so that they can't just close it again, you know, at a whim without, you know, maybe bringing in other parties into the conflict, plus a very long, you know, 15-year, at least suspension of an Iranian enrichment, plus getting rid of the HU. If you could get like that big of a deal, I actually would counsel the Trump administration to go quite a bit bigger on sanctions relief.

I actually think that has it backwards, right? The more sanctions relief you give, the more leverage you have moving forward.

Because let's say you actually were to allow, you know, U.S. energy companies to help rebuild Iran's energy sector, sort of the way that we're now doing in Venezuela. I mean, think about the leverage the U.S. would have five, ten years down the road. If over a U.S. companies that were operating Iran's oil and gas sector, right? I mean, those are, those are companies that, you know, they, they answer to the U.S. government. You say it's illegal to do business in Iran. They'll stop doing business in Iran.

Right? It's actually quite a bit easier than if you have a scenario where it's only China that's operating in these fields.

“And then you, you know, you have to threaten secondary sanctions.”

So I think if you can get a good deal, I think the Trump administration should, should replay the, the playbook they did with Syria, where they went big on sanctions relief or if Venezuela, where they went pretty big on sanctions relief in the last few months. That's interesting. Turning of the tables. All right. Remind everyone about the sanctions or energy waivers that the administration released.

Certainly Iranian crude that might have been floating outside of India. I felt like maybe that was, maybe that was Russian crude, but give us an update of where we are on, on all of that and remind us why did, why did we do it? So the Trump administration has provided general licenses for Russia to continue to sell oil. This was a big reversal on a policy that they put in place last fall, where they put sanctions on Russia to look oil, the two biggest oil companies in Russia. And then threaten secondary sanctions on anyone do business with them, you know, particularly, you know, refineries and places like India and China and Turkey.

And that policy was working Michael, maybe go to February of this year right before the Iran war started. India's oil imports from Russia had fallen by about 50% since those sanctions went into effect.

You know, from two million barrels a day down to one million barrels a day.

And Russian crude was selling for about a $30 discount to Brent. So the Russians were really suffering.

“I think in February they actually earned the lowest monthly oil revenues that they had since the beginning of the Ukraine war.”

Well, Trump did these waivers really as sort of an effort to, you know, add some supply to the global oil market to take some of the lift out of prices, right? So just try to undo some of the damage that Iran had caused by virtue of closing the straight-of-horse moves. I don't think that it has had much of an impact on the global oil market, but it has had a huge impact on Russia. So Russia is now back to selling two million barrels a day to India. So all of those reductions that the Indians made from between October and February have been erased.

And the Indians actually have now locked in high levels of purchases from Russia moving forward as well. And the discount is evaporated, right? I mean, the Russian oil is now selling for at least as much as Brent. There are actually some reports that, you know, immediate delivery barrels of Russian oil sold at a premium to Brent from some Indian buyer.

So the Russians are now making 150 to $250 to $200 to $200 million more each day since those licenses went into effect.

And I think that the base case scenarios that those licenses are going to stay in place indefinitely, probably at least until then in terms of not longer. And I think the proof there, I mean, Scott Besant was on record saying that they wouldn't stay in place. And that the license actually did lapse, but then within a couple days, treasury extended it. And so I think this has pretty significant ramifications for the Ukraine war, which is still going on despite the fact that we're all watching Iran with both of our eyes.

There's still another war going on just to the west and northwest. And I think it's going to extend Russia's runway and just make it less likely that Putin is going to be willing to try to find an off ramp because they think they're going to be able to fight for longer. Yeah. As we wrap up here in the next two minutes, remind us, didn't the president have some sanctions directly aimed at India? And how does this whole thing with China play out that we're, you know, that this issue is something significant on the eve of a summit?

Yeah. Yeah.

“Now, I think that the India, the whole Russia India oil in Broglio of 2025 is firmly behind us, right?”

We're now encouraging the Indians to buy Russian oil. So I'm sure that the Indians feel quite a bit of whiplash. But I think in some ways that, you know, it's just strengthened their resolve to continue to try and regulate between the US and Russia on energy on defense on a number of areas, which is unfortunate.

It kind of peeled them away.

And then trying to look like I said, I mean, there are some threats right now toward the Chinese and some real actual secondary sanctions being put in place against their buyers. Chinese buyers of Iranian oil. We have not yet seen critically any secondary sanctions on Chinese banks, which would be sort of the big move.

If you wanted to go after the Chinese for buying Iranian oil.

“And I think if I had to bet, I don't think we're going to see that before the Trump Xi summit.”

I think that that very well could lead the Chinese to cancel the summit, or at least make sure that it's completely unsuccessful.

So I think we probably maxed out how far we're willing to go on Chinese sanctions, but, you know, I guess we'll see.

So, in definite, well, that's a lot.

“Can you also foresee then the United States pressuring Ukraine to curb its long-range strike at Russian refineries?”

Because we want their energy infrastructure to bounce back and get more oil out of the market. You know, I'd be surprised, because I also think that for all the success of the Ukrainian strikes on Russian oil export terminals,

“they haven't really done as much damage in terms of actually producing Russia's oil sales, I think, as the Ukrainians hoped.”

So I'd be surprised if that's a hill, the Trump administration wants to die on right now. Eddie, thank you so much for joining us today. That was terrific. My pleasure, Michael. That was Eddie Fishman. I'm Michael Allen. Please join us next week for another episode of "NATSEC Matters." "NATSEC Matters" is produced by Steve Dorsey with a Sissons from Ashley Barry. "NATSEC Matters" is a production of "Beacon Global Strategies."