DIVERSIFY ALLIANCES

“The downside is, of course, this is going to make many more countries and economies, at least in the medium term, susceptible to political and economic pressure from China because China is the country that has a real dominance over clean energy supply chains. So again, the energy weapon is back, but it's not just the old weapon. It's not just oil and gas. It's also weaponization of clean energy supply chains.”

“I mean, certainly Russia and the former Soviet Union, I would say, has thought about stirring up geopolitical tensions as a way of increasing the price of oil. This has been documented for people who are historians and have looked through the Politburo notes from the end of the Soviet Empire, that it was actively debated whether the Soviet Union should stir up problems in the Middle East simply to increase the price of oil. So I wouldn't go so far as to say that Russia had any particular hand in instigating this phase of this conflict. But I agree with you that for the moment, Russia is really benefiting from this.”

“Well, I would say it never went away. It just kind of receded to the background. And part of it allows me to pick up where I left off with this, the 1970s and the reaction of the world to becoming more integrated, to building up the global market in a way that oil became the most easily traded commodity in the world. So this is a very flexible global market that you can buy and sell pretty much in any part of the market, and the market will help that barrel of oil find its way to the most efficient destination. So this evolved over time, and it made the prospect of using energy as a weapon less attractive because the market could defuse the shock of cutting off a single supplier.”

“Well, I can't resist saying, a rogue state declines gradually, then suddenly. Yeah, that's from Hemingway's famous definition of, how did I go bankrupt gradually, then suddenly? The United States built up an enormous network of influence over the last 75 years, really extraordinary influence in both military and economic spheres, financial spheres. But the more we exploit them, of course, the more others began to see the downside, and they begin to hedge, they begin to diversify.”

“The thing about balking, about just saying no is nobody really wants to pick a fight with the United States if they can avoid it. So one of the things you can do is eventually agree to whatever Trump is asking you to do and then don't actually deliver it. Think of the way that children often resist what their parents are trying to get them to do. They pretend to do it, but they don't really. So you can promise to invest in the American economy. Say you'll do it over five or 10 years and then a couple of years in, you say, well, gee, we're having some problems over here.”

“And the Carney speech was a remarkable performance, and it was remarkable to me in two senses. One is he was calling for medium powers to work together, not so much to contain the United States, so it wasn't really balancing, but to simply reduce their own vulnerability and to defend key norms, rules, and institutions that facilitate cooperation. Second thing that was interesting about the speech, of course, was it was delivered in a very calm matter of fact. We're not angry at America tone.”

“Right. This was a term of art really in the 1990s, where we labeled countries like Libya, North Korea, Iran, Iraq, and some others rogue states. The qualities that we associated with that back then was countries that are largely indifferent to international norms and international law, countries that were threats to peace and security in their region. This is an administration that almost seems to take pleasure in showing just how powerful it is, and just how little it cares about the opinions of others.”

“This is why what we've done in Iran, I think is so egregious and likely to have such dramatic effects. First of all, we went ahead and did this even while negotiations were underway, and we did it without consulting any of our allies, without preparing the American people. It was a willful decision by the president as well. That indicates the opposite of a decent respect for the opinions of mankind. Also, we did it without thinking through what the implications of this were going to be, not just for the United States, but the implications for our allies in Europe, who are more dependent upon external oil and gas.”

“When Iran shut the Strait of Hormuz, Trump said, who knew they'd do that? Well, his own Director of National Intelligence, Tulsi Gabbard, told a Senate hearing that that was exactly the assessment of the entire intelligence community. Trump said nobody expected Iran to attack the Gulf states if it were provoked. Wrong again. Multiple former policymakers have told me this is exactly what was expected in war games. Experts sometimes get it wrong. You still need them in the room.”

“And there are indeed lessons to learn from his ouster. Economics matters. You can't govern badly forever and expect people to not notice. Infrastructure matters. You can't ignore basic metrics of how you compare with your neighbors on health care or quality of life and not expect your people to care. And corruption is very unpopular. People hate kleptocracies and ultimately they do rise up.”

“I think the biggest difference, the thing that's really striking and that I didn't expect when Trump came back in, was that the United States has sort of abandoned all efforts to wrap the mailed fist in the velvet glove. The United States has been a very powerful country for a long time and we've sometimes played hardball, certainly with our adversaries and sometimes with our allies. But especially with our allies, we tended to do that reluctantly. We listened, we tried to accommodate their concerns whenever possible.”

“And the reasons for this goes back to the time that I spent in Iraq. I spent about two years in Iraq immediately after Saddam fled, and then throughout the years that followed off and on. And America's 2003 war in Iraq was about primarily weapons of mass destruction. It was not about getting control over Iraqi oil. But to this day, most Iraqis, when they try to make sense of the American intervention, they come back to oil, that it must have been about Iraqi oil. So, in a world where President Trump said over the weekend, he wishes he could just take the oil. That's what he'd like to do if the American people would allow him to. I think this is going to be rhetoric that we're going to hear throughout Iranian politics for a long time to come and not to America's benefit.”

“But in Venezuela, President Trump very explicitly said, this is about taking control of the oil. And to me, it was harkening back again to a very old frame of thinking, but it also didn't really make sense to me. In a world where the price of oil was bumping along at $65 and American producers were struggling to make ends meet with such a low oil price, to claim that we should use American military prowess to try to bring more Venezuelan oil onto the global market. I didn't see how that made sense for America commercially, except in the one narrow sense, which is not insignificant, but keeping China and Russia from really having the ability to develop Venezuela's oil.”

“I mean, I think Orban's fate shows you the risks of a autocratic regime where increasingly the leader is surrounded by sycophants, doesn't necessarily have an accurate sense of what's going on in the country, has lost whatever touch they once had that got them into power and kept them in power. So they no longer understand exactly how unpopular they've become. I think Orban was surprised by the outcome here, and part of that was because he was now trapped in a sycophantic bubble. I worry that that's actually what's happened to President Trump.”

“Well, the predatory part is that the United States has, under Trump, in his second term, essentially adopted a zero-sum approach to all of its relations, not just relations towards adversaries, where all great powers tend to act in a fairly assertive and predatory fashion. But Trump is also acting that way towards some of our closest allies. You see this in the tariff policy, trying to extract concessions on economic terms by threatening other countries with tariffs, including some of our closest allies. Their guiding credo is, what's mine is mine and what yours is negotiable.”

“China has gone to enormous lengths over the last decade or more to represent itself as a stable, tranquil, reliable partner, that it's the defender of world order. What can the United States offer you? The United States can offer you some weaponry, perhaps maybe some protection and a lot of economic pain. What can China offer you? China can offer you solar cells. China can offer you wind power. China can offer you batteries. China can build roads and bridges and train lines for you.”

“The obvious energy shock that we compare it to are the shocks of the 1970s. 1973, the oil embargo where Arab members of OPEC declined to export their oil to the United States and other supporters of Israel in the 1973 war. But they also started to take oil off the market, the absolute amount of oil that was on the market. So, percentage wise and the physical number of barrels that were taken off the market in 1973 is considerably less than is happening today. As you and your listeners will have heard over and over again, this is the biggest supply disruption that we've ever seen.”

“We call it the Iran shock and the dangerous illusion of energy autarky, which is the idea that many countries are probably feeling, wow, exposure to this global market is dangerous, and we want to pull away from this global market. Now that could manifest itself in a number of ways. If you're China, it might mean you're going to stockpile energy. We actually saw Fatih Barul, the Executive Director of the International Energy Agency, just in the last day or so, warring countries, none by name, but warring countries generally don't stockpile. This is going to worsen the crisis.”