The Iran War Has No Exit — ft. Ian Bremmer | Prof G Conversations

I believe that Trump understands that the midterms are lost. I think he knows that he can't turn the economy around. That's why he's suddenly pivoting towards patience on Iran. That's why he said, 'I'm surprised oil prices are so low. I thought they could be $250, $300. They're under 100.' I think he knows that he's in too deep. And so the midterms are lost.

Hey, Scott, I am back in my office in New York City. Sunny, springlike New York City. Thank God we need something.

Well, the biggest thing that happened today is the Emiratis, ally of the United States, unilaterally withdrew from OPEC, an organization the Americans don't like, and is now going to be weaker, more fragmented, more led by Saudi Arabia. That is part of what is a growing divide between an Emirati bloc and a Saudi bloc on security, on economics and technology in the Gulf, and definitely the Iran war has accelerated that pretty dramatically. But take a quick step back. The other big news this week out of Iran is that the German chancellor publicly said the United States is being humiliated. The French president publicly said that the US president, the Russian president, the Chinese president are all directly against Europe acting together against Europe. Those are things that at best you usually hear with inside voices. You don't hear them saying publicly. So I mean this unwinding of US alliances, this anger and fragmentation geopolitically both in the region and more broadly is clearly becoming more front and center. And you know there are questions over how much this is in America's advantage over the short, the medium and the long term. But the anger, the feelings are raw and the view that these institutions, these alliances are not serving the purpose of the US or the allies, those things are growing and becoming much, much more direct. And the pain that comes from an Iran war that we're now in the third month of, no end in sight as you said, the economic consequences are massive as well as the geopolitical, is really leading to a lot of anger and hostility and mistrust on the global stage. So maybe that's the way I would frame it just to start.

So, Scott, there are lots of reasons. It's hard for me to tell you which ones are the most important, but they all move in this direction. One is that Dubai, which has been like so much of the model of future growth, like we're the Switzerland of the Middle East and we're attracting all these expats and everything is safe and stable, and you've been there, I've been there many times, right, that looks a lot more vulnerable when suddenly the Iranians are able to shut down the strait and use their missiles to strike directly your five-star hotels, your airport and the rest. And so, you know, suddenly you see Abu Dhabi, the capital of the UAE, willing to focus much more on what they see as in their national interests right now. And that is we're aligned with Israel. We're aligned with the United States. Those are the countries that are coming to our aid, not the Saudis. We are going to sell as much oil as humanly possible in the near term as soon as the strait is opened at higher rates. We're not going to align with voluntary restrictions on oil export because we can make money on that now. But long-term we've got to diversify away from oil. We've got to focus on tech investments. We've got to focus on post-carbon energy. That's the win for us. Then you have the fact that their view on Iran and this war is completely different from Saudi Arabia. The Emiratis really want the war to continue. They certainly don't want to see this Islamic Republic stay in place and they don't want this regime to have the military, the ballistic missile capabilities, the proxy support or potentially the nuclear capabilities. In that regard, if the war were over today, in 6 months, in 12 months, I could see the UAE joining with Israel in so-called mowing the grass, which you and I and Dan Senor talked about a few weeks ago when we last had a public conversation. The Saudis on the other hand, their principal alliance outside of the US is with Pakistan, a nuclear power. And they are increasingly aligned with Egypt, with Turkey, but also are thinking long term about how to make a deal with a postwar Iran to ensure their own security. They don't need to use the strait. They don't have to worry as much about Iran disrupting it or tolling it because they can get 7 million barrels a day through the Red Sea from their export terminal in Yanbu, the East-West pipeline that they have. They're focused much more on a 35 million strong population that they want to make sure has the ability and the money to develop, not an expat-heavy 90% population that the UAE has. And so this war, again, there have been fights between MBS and MBZ that predate this war. We saw that play out in Yemen. We saw that play out in Sudan. We've seen that play out in financial decision-making. But it has been accelerated and intensified by the war and the very divergent responses to the war geopolitically, militarily and economically by these two very successful countries with very different models. And I think that's what has led to the UAE to make this announcement. An announcement that's made when the strait is closed. So it doesn't have any proximate economic impact tomorrow, but it will. It would not surprise me if the Emiratis leave the Organization of Islamic Countries, the OIC. I have heard from both the Emiratis and the Saudis and others in the Gulf that they think the Gulf Cooperation Council, the GCC, which is the overarching regional framework, however loose, is not fit for purpose anymore. So that could also fall apart. It's becoming a G-Zero Middle East in that regard.

And it's a lot closer. It's a lot easier to hit if you're Iran, right? You need longer range missiles to hit Israel, which they don't have many of. And Israel much hardened targets.

I don't like cartels. I don't like monopolies, whether they're US platforms or they're global commodity unions. And in that regard the breakup of OPEC will lead to more competition and lower prices over time. I believe that is true and that certainly redounds to America's overall interests. Now the UAE and Saudi Arabia are both allies of the United States. Militarily they both rely on the US for intelligence to a very great degree. Now, Saudi Arabia, their missile program is provided by China, and that is important. It's also because the Americans weren't about to sell Tomahawks to the Saudis. Longer term, I see Saudi Arabia becoming more aligned with China in terms of who's going to buy their oil export. And Saudi sees themselves as the big producer of the last inexpensive barrels over decades that will still be needed in a global economy that's transitioning but still very much reliant in part on oil and gas. I also think that the Saudis will be more enticed to buy Chinese technology, including AI, because it will be less expensive for their own population, than the Emiratis, who will want to be more aligned with the US military-industrial-technological complex. So, for now, both of these countries are still aligned pretty strongly with the United States overall militarily. Over time, I expect that that will become more true for the Emiratis and it will become less true for the Saudis. There's also the kleptocracy piece, the fact that so many billions of dollars are trading hands from the Gulf to the Trump family and the Trump inner circle. There's also massive investments made into the United States. I think that the Saudis, even though they've promised a trillion dollars and Trump went there at the beginning of the term and he made that huge announcement of how much the Saudis were going to give them, I think the Saudis are much more likely to downgrade how much money they'll put in the US and they will reprioritize domestic investment for their own sovereign wealth funds. While the Emiratis I think are going to be doing much more globally and in that regard they will be seen as deeper pockets and more attractive partners for a lot of Western multinationals. So these things are again, I think geopolitically there are lots of consequences that will be playing out for a very long time on the back of this war but the most immediate and consequential is probably this dynamic which we are seeing play out with the headline of the Emiratis leaving OPEC.

The Americans say they have more leverage. The fact that the Germans spoke the way they did implies they think the Iranians have more leverage, which is not helpful. I will say the Iranians have an information advantage. They have an asymmetry here, right? Trump for a very long time has talked about the fact that you never know what Trump is going to do is an advantage, right? Like he could do crazy and so people have to be careful with him. Well, we actually know less about the Iranian leadership, who is willing and capable of ultimately implementing a decision, how decentralized the decision-making process is, and we don't have good information on who's saying what to whom, where in the United States, we've got polls, we've got impact in the markets, we've got all sorts of people inside the Trump administration that are talking to the media. So, it is easier for the Iranians to assess that Trump wants a ceasefire, that he's looking for an off-ramp, that he's promising the American people that this war will be over soon. I mean, all these things, it's very hard for the Americans to make that assessment of the Iranians today. Now, America, of course, is vastly more powerful than Iran. And so in principle that should give the Americans a lot more leverage. And yet the Iranians are showing that they are willing and capable of taking a lot more pain. 150 of their leaders have been assassinated. No American leaders have been assassinated. No Israeli leaders have been assassinated. So the Iranians are taking a lot more damage. They've got, you know, over a million people displaced. They've got well over a thousand dead. Americans 13. So I mean the Iranians are clearly showing that they are capable of tolerating a lot more pain than the Americans had expected. They're also showing that their military capacity at this point is much greater than the military planners in the US believed. And here, Scott, I'm not talking about what Trump thought having ignored what a lot of his military planners were telling him. I'm actually talking about the military planners. They are very surprised. CENTCOM is very surprised that in the third month of this war that the Iranians still have over 50% of their ballistic missile capacity intact. They're very surprised that after strikes on launch pads that in some cases the Iranians were able to dig them out and relaunch within 24 hours. They're very surprised by that. They're surprised by the hypersonics that were able to get through American defenses at the Sultan air base in Riyadh and destroy American advanced aircraft. They're surprised by the range that the Iranian missiles were able to show to launch a small attack on the base of Diego Garcia. So there has been more capability shown militarily on the part of the Iranians despite all this damage. The long and the short of it, Scott, is that it's hard to say who has more leverage here, but it is clear that President Trump is looking for an off-ramp. It is clear that President Trump is not in any way interested in a short-term return to war fighting and it's not as clear what the Iranian incentives are in this environment.

Yeah, I think you've framed it extremely appropriately, right on the money. Scott, this is the question I'm exercising myself with and my analysts at our firm every day. I think you're right that Trump feels like he cannot just cut and run here, even though that is clearly the right thing for America's national interests. The longer this war goes on, the more damage, the more costly. But Trump is unprepared to declare victory even though he has tried to. I mean, how many times has he said, ah, the strait is the European problem. It's the Asian problem. They have to deal with it. He has said this. He has set himself up to declare victory and leave. But he's not willing to do it because he knows it just looks horrible. He knows it feels like too much of a loss even for Trump who is one of the most incredibly shameless at saying things that just aren't so and willing them to be the truth for himself and his supporters, even he does not believe that this is plausible and credible. And yet we're in an environment where the baseline outcome, even if he were to declare victory and leave today, the baseline outcome is worse than the deal that was on offer to Jared and Witkoff by the Iranians before the war started. It is a worse outcome than if Trump had not left the Iranian nuclear deal, the JCPOA, at the beginning of his administration. And it becomes a worse outcome for every day that he chooses to continue with this blockade. The costs are so much greater than the benefits of continuing with this fight. And he's chasing the dragon, right? I mean, he needs a bigger hit and a bigger hit every moment. And he's becoming too pot committed, and you and I both know, we've seen people with gambling addiction problems, they end up getting themselves in bigger and bigger holes. So I think that he should declare victory and leave. What he seems to believe right now and what I've been hearing from the White House is, and this reflects him saying to the public you need to be more patient after he told the public that we're going to be done in two to three weeks max, the war will be over, that has proven not to be the case. He told the G7 allies a few days, just a couple more days at the beginning of the war and the Iranians are going to surrender unconditionally. That turned out obviously to be very, very far from the case. He's now saying if we just give it another month or two privately, then the Iranians will be under such economic pressure because of the blockade, which isn't biting yet and isn't biting in part because he suspended the sanctions on Iran at the beginning of the war so he could keep the oil prices low. Turned out not to be such a foresightful move. That then they will be forced to come to the table and negotiate more seriously with the Americans and give him the nuclear win that he is seeking. And that is a theory of the case that is plausible. It will cause a far, far greater economic damage to the US and globally to the American consumers, American voters. But that also relies on the idea that the Iranians are negotiating in part in good faith and on the basis of a clear-eyed view of their national interest and not out of revenge or vindictiveness or ideology and theocracy. And that they are a suitably unitary actor to implement what the negotiators agree with and all of those things are open to question. So, for all of those reasons, I think that Trump is only getting himself in deeper and deeper trouble here. So, you're right. He painted himself into a corner, but that doesn't mean digging yourself into a hole after you're painted in the corner, right? I mean, at some point logic tells you, okay, you're going to get some paint on your shoes. Walk out of there. Walk out of there.

Of course. Of course they can. The question is what are the implications of that? Now, I think that were the Americans to do that, the Iranians, if they were to charge prohibitive tolls and no one signs up to it, only very small numbers of countries, then oil prices are still high, the Americans could easily turn back to a blockade at any moment. So, that option remains there for the United States. Number one, turn the money off for the Iranians. Number two, you've got the option of what Trump intimated by saying it's the problem of the other countries that they end up doing deals with the Iranians. And you can call it a toll or you can call it reconstruction money. You can have sanctions suspended again off of Iran and then a whole bunch of the oil is actually getting out and then the Europeans may send some destroyers and other ships to help ensure the navigation and the insurance comes back online and the ships become crude. And then prices come down again. And the US economy has taken comparatively less of a hit than most of the other economies in the world. Now, is this embarrassing for Trump because you still have the same Iranian regime in place? Well, yes, but I don't see any strategy to remove the Iranian regime at this point. It's not like Trump is still talking about rescuing the Iranian people. The Iranians would still have their nuclear capabilities, but Trump has said now on a few occasions that if they try to get those nuclear capabilities, we've got satellites on them. We can blow them up at that point. You and I looking at this, Scott, it should be plainly obvious to everyone, irrespective of what Trump admits to, that there's no win here for the Americans. So the question is, how are you going to reduce your losses in ways that allow everyone to move forward? And I do think the best, the least worst scenario at this point is to conclude the war and open the strait as soon as humanly possible. And I would have argued that 6 weeks ago easily. It would have been much better than now. I mean, I don't see what's been gained in the last 6 weeks other than far, far more economic damage.

For the last 3 months, Ukraine has taken back a small amount of territory. And that is because the drone capabilities and the unmanned ground vehicle capabilities are increasingly changing the advantage on the front line, if not in favor of Ukraine, at least no longer in favor of the more highly manned Russia. Russia benefits from the war. They're selling a lot more oil, gas, fertilizer, commodities at higher prices. Some sanctions have been suspended by the US. Furthermore, the Ukrainians are having a harder time getting access to some of the weapons that the Europeans want to buy for them because they are in short supply and necessary now for the Iran war, American weapons. So there is a tactical advantage to the Russians that comes from the Iran war, but the war itself between Russia and Ukraine has at best for Russia shifted to a stalemate. Where the Russians are showing more advantage is that they now are manufacturing more ballistic missiles. Their drone capabilities are not what the Ukrainians are, but they're high. And they're now launching a lot more of those at record level rates and some days more than we've seen at any point in the four years of the war against Ukrainian cities. And the Ukrainians are running low on interceptors. Not on the lower tech drone responses, but interceptors for ballistic missiles, having a harder time defending their cities. So you could imagine a situation where the Ukrainians end up taking more land back, but the Ukrainians also take more casualties, civilian casualties in cities, and their own critical infrastructure becomes more damaged, their economy gets more hurt. Still, I guess your big takeaways here, and this shouldn't surprise you. Number one, zero incentive of Putin to negotiate a ceasefire in the near future. And number two, zero slowdown at this point of the Ukrainians to continue to defend themselves because they no longer need quite as many troops on the front line. And that's been the biggest vulnerability is that they've had a harder time raising reserves in a Ukrainian democracy than the Russians are. They can send North Koreans, they can send mercenaries, they can send convicts, all this kind of thing. The Ukrainians have a disadvantage there with a smaller population. That's becoming more balanced.

Doesn't look that way. You know that Trump, his top priority foreign policy when he became president was to end the war. His repeated quote of 24 hours it'll be over. He's failed at that and he's admitted that he's failed at that. He's frustrated about it. He blames the Ukrainians at least as much as the Russians, which is not analytically sound. But it does express his frustration that he doesn't have the leverage to muscle around Putin in the way that he does with Zelensky. So that irritates him. The Europeans are all in supporting Ukraine and they're spending a lot more money on their own defense. Certainly the Germans are, the Poles are, the frontline states are, they're also now spending all the money for Ukrainian defense. American taxpayers are no longer spending anything on Ukraine. So this is 100% the Europeans and that's what really I think has so antagonized when the Europeans are doing all of the burden for Ukraine in defending a democracy that the Americans wanted to invite to join NATO. It was Condoleezza Rice and Bush that pushed that. It wasn't the Europeans first and foremost. So the Americans are the ones doing the... Europeans are now the ones doing all of the lifting for Ukraine to help the Ukrainians and then the Americans decide to engage in a war in Iran that is going very badly. They didn't tell the Europeans about it in advance and then the Europeans take more economic damage from the war and then Trump calls them cowards when they don't stand up and join him. I mean the level of anger among European leaders right now towards the United States is unprecedented in my lifetime. I have never seen anything like it. And that's even before we talk about the trade hostilities. It's before we talk about Greenland. It's before we talk about Trump's recent flirtation with Argentina and the Falklands. I mean all of that stuff. I can give you so many more, you know, sort of count so many more data points on this, but the Russia and the Iran wars and the American response to that as the Europeans do feel like they're absolutely stepping up. They're spending money like they never have before on defense and they should have for decades, but they're also doing all of the lifting on Ukraine. And Trump's like, 'Okay, but what are you doing for me on Iran?' It's extraordinary.