ASSESS LEVERAGE

“What does this all mean for the global economy? We look at the immense leverage Iran gains by controlling a key shipping route and forcing the world's most vital energy supplies through a specific, narrow chokepoint.”

“Iran has attacked ships that try to pass without approval. They have effectively funneled traffic into their own territory by insinuating that the waters near Oman are unsafe, allowing them to monitor every vessel.”

“I think you're absolutely right that what they perhaps have discovered over the last five weeks, that Hormuz enrichment is a far more potent tool for them than the uranium enrichment because most citizens around the world are not really impacted by Iran's nuclear program. But when the Strait of Hormuz is blocked, and as you said, a fifth of the world's oil and natural gas and fertilizer are locked up, then citizens all over the world feel that impact.”

“I thought Iran as North Korea was the least likely outcome. Unfortunately right now, at least in the immediate term, that may be the most likely outcome of this war, that we have, and again, it depends somewhat on what is the health of Mostafa Khamenei. But as of right now, it looks like it's another hereditary, ideological dictatorship with nuclear ambitions. And they've proven themselves willing to kill potentially tens of thousands of people to stay in power.”

“Recently they’ve insinuated that one part of the Strait — the part near Oman — is not safe. Which means that captains had to go right by Iran’s shores to get through the Strait … effectively creating a chokepoint for the global economy.”

“So, what President Trump has done is to significantly reduce his demands of Iran over the last six weeks. If you go back to the speech that he gave at the outset of the war, he had very grand ambitions to destroy Iran's nuclear program, destroy its missiles and drones, destroy its regional proxies, and potentially even bring down the regime. And now, six weeks later, the missiles and drones, as far as we know, are not even part of the negotiations.”

“Asian economies account for 40 percent of the world's energy demand. Almost all of them are net importers. Pakistan, for example, gets 80 percent of its crude from the Gulf. Bangladesh imports 95 percent of its energy. Energy shocks are like a triple whammy for these countries. They are more dependent, so they have very few options. They have to buy energy in dollars that are more expensive, and they're already in economic trouble.”

“The United States has some key advantages that most other countries don't. It is geographically blessed with no real adversaries nearby. It has become a true energy superpower, the world's biggest producer of oil and natural gas. It enjoys what is known as the exorbitant privilege of dollar supremacy. Ninety percent of all international commodities are traded in dollars. A strong dollar benefits US importers.”

“In my view, if you're looking around the world at which countries are better off now than they were before the war two months ago, the only one I would say with confidence as of now is Russia, and that Russia is just a lot wealthier than it was a few months ago because of the spike in oil prices and the risk premium to energy. With America bogged down in Iran, it has less time to think about Ukraine.”

“And that is indeed what they've been trying to do, to normalize and formalize this new order in which the Strait of Hormuz is their Panama Canal. You know, something that they collect resources and revenue from and it's an enormous source of leverage for them. And that is something that is going to be difficult to totally reverse because they've seen, it's a more powerful tool than anything they've had before.”

“One shorthand way of thinking of them is that the principle is that they fear that if Iran reforms, it could end up like the Soviet Union. The pragmatists, I think the model in their head is China. When after Chairman Mao died and Deng Xiaoping came and, as I said, prioritize economic interests before the Cultural Revolution. And at the moment, given the profound mistrust between the United States and Iran, the cynicism of the principalists is difficult for anyone to disregard.”

“The United States has been at war with Iran since February 28th. And for a month and a half, Iran’s main leverage over the U.S. has been their control over the Strait of Hormuz — a key global shipping route.”

“On today’s show, a source inside Iran tells us how ships had been getting through the strait, and how the tollbooth Iran set up works. We ask what this means for the global economy and the ships caught in the middle.”