Mistrust, Confusion Cloud US-Iran Talks

sanctions on Putin's oil. Journalist Ovo Rudenko gives us the view from Kyiv. Also ahead, the Trump administration begins refunding tariffs after the government. Court struck them down. Former U.S. Trade Representative Robert Lightheiser defends Trump's tariff regime and makes his case for a new trade order.

Trump says he's highly unlikely to extend the pause and hostilities beyond Wednesday evening if a deal is not reached. Here he is speaking this morning to CNBC.

Ahead, we'll have more on the chaos in and around the Strait of Ormuz, but first with so much mistrust amid confusion surrounding these talks. Let's bring in our correspondent Nick Robertson, who is following all of the developments on the ground in Islamabad. And Nick, there is a lot of confusion here, so much unknown as the clock is ticking down to this uh ceasefire deadline expiring.

Vice President Vance uh is still in Washington, D.C. There are reports that Jared Kushner and Steve Whitkopf also are still in the United States, and we don't know if Iran will show up for these negotiations either and who will be doing it. the that negotiating on their part. So is this a a situation where behind the scenes you're hearing that there is an effort being made to move this forward or are we really at a stalemate?

it break out into the public domain. More statements coming from the Foreign Ministry spokesman in Iran saying they have not yet made a definitive decision on whether or not to come to the talks in Islamabad. He is saying that the Americans continue to be inconsistent and have contradictory messages as well as taking military action um against Iran, meaning not just the tanker you mentioned, but another one earlier today that was in the Indian Ocean, Botswana.

flagged, uh boarded by US Marines that have been carrying sanctioned Iranian oil. Um what the spokesman at the Foreign Ministry in Tehran is saying is they will engage in talks when they are, as he said, results oriented. Pakistan has really been going on the diplomatic front foot in a way that negotiators don't normally do that.

Um the Foreign Minister here he he met with the US Charged Affair um spoke about the need to extend the ceasefire. The information minister here has written a tweet and he says a number of things, uh rede restating what Iran has ch has already said now that there's no definitive response from Iran, but calling on Iran to make a clear commitment before the ceasefire expires, Pakistan's understanding of that ceasefire is, it expires in the next seven hours.

The information minister also saying that Pakistan's doing everything that it diplomatically can in a sincere way to try to bring the sides together. Everyone here was expecting Iran to arrive. That's why JD Vance was going to get on his plane earlier in the day. Because it was a real belief the Iranians, even though they didn't say it publicly, were absolutely going to come. But but as you say, all of that's up in the air now.

Coming at a time when the country is also dealing with the impact of high gas and oil prices. How is that playing out locally?

by that but at the same time they're locked in. They're locked in because roads are cut, they can't use the main avenues here. The secure red zone is very secure. We we've been out around the city. You have to kinda go down back streets to get around. Uh buses can't come into the city from other cities in the country. Um you know, cafes, restaurants here that clientel clientele can't get to them, they're shuttering their kitchens.

Um so there is a ripple out effect. So there's the excitement, but there's also the reality. How long can you keep a city on lockdown? How long can you keep its major hotels empty? Um in the anticipation that you're going to try to do something hugely historic that everyone wants to see happen here. Um and that's the situation Islamabad finds itself in. That hope is still there and the desire to make this work is still there. But This is a city that's just sort of put on hold.

Well now from uncertainty at the negotiating table to chaos in the Strait of Ormuz, Tehran says that it has now returned to a quote wartime footing in the critical waterway, completely closing it off to all vessels without Iranian authorization. Meantime, the U.S. is blockading Iranian ports both inside and outside of the strait. Twenty percent of global oil supply comes through the key passage.

So all the disruption and the knock-on effects are are rising. Fuel cost is having a very real impact on ordinary people around the world. Energy expert Matt Smith joins me now to explain this complex crisis and its global Implications. Matt, welcome to the program. So let's just talk about the fact that the Strait of Ormuz, for all purposes, has been closed.

uh for business for a number of weeks now, well over a month. Are you surprised then given that and given all of the uncertainty and some of the heated rhetoric coming from both s sides here, um, that prices aren't even higher? Yeah.

Predominantly that is going into Asia, but then once it it gets there, it is refined into products, whether that is jet fuel, gasoline, diesel. And so we're not seeing those barrels arrive. And so those products are not being produced. And so the next kind of domino to fall is essentially uh the the drying up of these products being exported from these countries and also uh restrictions and rationalization of these fuels. You were just talking in uh in Islamabad there about

restrictions in Pakistan, but you have them elsewhere, everywhere in Asia in terms of Thailand, Taiwan, uh Vietnam, uh the list is it goes on and on and so this is hugely problematic and it's going to spread to the rest of the world here the longer that the Strait of Hormuz remains closed.

So do you think it was that initial shock value from the Russian invasion that in some sense kept prices thus far, at least, more measured?

At the same time too, there is an element of demand destruction from things as well. And so it's a very complex situation here, but ultimately it feels very much that the market is mispricing this.

India is a large exporter of uh clean products as well. And so by granting this waiver for the Russian crew to be able to still go into India, it means that they're able to to keep things working at least to a decent extent there. So By by while they're still not able to get the five million barrels a day that they need, there are able to substitute some of the loss of those Middle East barrels.

uh with that Russian crude. And so from that perspective it makes some sense there. We're not seeing too many of those other barrels flowing elsewhere from Russia simply because India is trying to get its hands on as much as it can do there. So Maybe it's helping prices a little bit in kind of keeping them in check, but ultimately here this is bailing out India who would be in massive trouble if it didn't have this olive branch

from completing completely running out of room to store its unsold oil. Um, from a production standpoint, How close are they to being forced to shut down their wells and do you think that's leverage enough from the United States to get Iran into a position of opening up the strait and returning back to the talks?

And so that has has brought that production down. But ultimately y your point here with the US blockade is meaning that well well we could be seeing a few of those tankers passing through, in theory that is blocking off. uh those Iranian barrels hitting the uh the open market. And so from that perspective, we should be seeing a slowing in these export loadings and things starting to grind to a halt.

With your point with the onshore storage there, we think there's probably about three weeks, something like that, until they kind of get uh hitting hitting the uh tank tops there. And so uh yes, it it it will put some pressure on Iran here.

But the challenge is is that's still got a number of weeks to go. If the US gets in a situation where it looks to drop bombs instead and w looks to escalate, you're gonna see the same thing from the Iranians and so Uh that's the big concern here that we just see this tit for tat for tit for tat and and things just get even worse.

for Ormuz to be reopened, um, is explaining it this way. He says, Beijing is definitely signaling subtly, yet importantly, to the hawks within Tehran, that further unbridled escalation will not be tolerated. H how much leverage does China have over Iran at this point to settle this?

uh because of this lack of crude that's arriving. We're seeing them putting uh uh export bans in place on their products as well, these protectionist measures and so By all means, they are feeling the pain of the the halting of these flows. And so from that perspective, you would expect them to be putting pressure uh on Iran to to try and get things moving here.

Uh it's it's going to have to take many more of these pipelines to be put in place to really circumvent the Strait of Hormuz. That takes time, it takes investment. There is also not the guarantee that these pipelines won't be attacked or future pipelines that are built uh won't be uh you know uh could be secure, you know. So that is the challenge going forward here when you have such a choke point or such a source.

uh for the world's oil leaving from this one place is very difficult to uh to secure it whether it's leaving via the the strait or whether it's on pipeline.

uh that this is having on particularly lower income countries that are so dependent uh on oil and fertilizer and other energy sources from this region. The IMF issued a stark warning say that they would bear the the brunt and the burden of this war as it continues and even uh rich nations, European countries as you noted, um everyone will be affected and they're not immune, even America which has a lot of supply. uh still has to withstand higher prices at the pump.

I'm just wondering, given the deluge of everyday tweets, posts, statements, and we're seeing huge spikes up and down on what they mean, how are you at Kepler assessing it all and giving advice to your clients?

They're dialing back on their refinery runs. They are not exporting the jet that is needed regionally. And so it's just a matter of time. We're we're we're following those dominoes falling and so It's it we can see like the the time frames it's gonna be weeks rather than months when you're going to see certain fuel restrictions being applied both from uh at the pumps. uh but also in terms of flights as that's happening in in Asia, that's gonna have a knock-on effect to the US West Coast.

You know, Europe here is is uh being starved of jet fuel, it's having to find it from us where and so we're starting to see uh not the system breaking, but really these n these anomalous flows that are popping up simply because

you know, Australia can't find gasoline or diesel in Asia and so it's coming to the US to buy it. And you're seeing all manner of those new routes opening up and that's just exemplifying the strain in the system here. And so Unfortunately we're s we're kind of seeing that play out in real time and know that these supply crunches are coming in weeks, not months.

Sparked by the Iran conflict, Zelensky says the money goes directly towards the Kremlin's war in Ukraine. And on the ground, Kyiv's fight for survival is urgent and real. Zelensky says that in the last week alone. Russia has launched more than 2300 attack drones. That includes a devastating wave of strikes that killed 18 people, the deadliest barrage the country has seen in months. To discuss all of this, let's bring in Olga Rudjenko, the editor-in-chief of the Kyiv Independent. Olga, welcome.

Back to the program. Um I want to pick up there on what you and others have noted. You recently in an interview with a New Yorker David Remnik uh said that America's focus on the war with Iran is a lifeline. for Vladimir Putin not only because attention is being diverted, but resources like weapons are as well. Can you talk about how it's impacting not only morale, but what's happening on the front lines in the battlefield?

um you know the uh peace negotiations stopped as you as you know when the uh when the war uh with Iran started and uh um what is especially unfortunate is that uh this arrived at a very good moment for Russia because Russian economy was starting to finally feel the the strain of the of the years of war. And now this uh the situation with the oil sanctions uh being uh temporarily lifted uh is uh helping Russia enormously and it is

out on the ground because the uh the numbers and not just the numbers when we come when you talk about how much Russia is benefiting from the oil uh prices for example. What even in conservative assessments, what Russia makes daily from this waiver, um can fund a mass um drone and missile attack on a city like Kyiv, uh on where I'm standing right now. So it is it is very real for us on the ground.

uh than putting more pressure on Russia to end this war. But what do you say to what you know our previous guest has noted and the administration is saying that they're doing this because they're getting pressure from other countries uh including India um because they are feeling the real impact of the spike in prices at home.

NATO allies uh fight Russia and only fighting Russia eventually if Russia is not stopped now. And the way to stop Russia is to both defeat it on the front lines but also to put economic pressure and to to be firm on sanctions because sanctions are working and are putting strain on Russia. Russia, even if Russia manages to find some new poles. So any any decision that helps rationale is short sighted, uh irregardless of um any uh arguments that are made.

uh not a good thing for Ukraine because it destructs uh the global audience and uh the eyes are not on Ukraine now. But at the same time it also put uh um uh in the spotlight uh Ukraine's defensive um capabilities and Ukraine's uh own um defence production because Um this uh conflict has been the world's awakening to this red that Iranian drones are and this is exactly what Ukraine has been dealing with and what Ukraine has learned to fight.

uh and to defend itself against in the past four years because in the first year of the Folska war Iran uh gave the technology to Russia and Russia has been mass producing Iranian drones and hitting Ukraine with it and Ukraine knows how to uh defend itself. So So what uh Ukraine has been trying to do obviously since the uh you know the past few weeks is present itself as a country that has solutions for this.

And uh this is what uh uh Vodin Rzelensky's tour in the Middle East was about, to present Ukraine as a country that is not asking for help, it has the solutions and it is offering them.

Former U.S. Trade Representative Robert Leitheiser defends the pr president's tariff regime, arguing that the free trade system has failed the global economy. And he joins Walter Isaacson to discuss.

Um the the notion of the trading system was that a country exports in order to import. And when you do that you you import what you what you make sort of second best and export what you make best. And when you do that you make your your citizens better off and you make the the the other citizens of the country that's exporting to you better off. But but uh over a period of time an awful lot of countries concluded that they were a lot better off running up

uh large trade surpluses and we developed these huge imbalances and they really had very little to do with economics. What they had to do with was was was uh a very aggressive industrial policy. Um and we saw a variety of countries do this. So so the system the system did do well after a period of time, certainly by the eighties, countries were realizing and and in the case of Japan probably even in the late sixties.

that they were far better off with a very aggressive industrial policy rather than this notion of exporting in order to import. So you ended up with huge imbalances and in the case of the United States, let me just go through the indictment very quickly. First of all, we're running up these huge, huge trade deficits. Uh oh, I I would say the realistic number is is sort of north of one point two trillion dollars a year for the United States.

And some would say, Well, who cares? Uh you know, my reaction is it doesn't matter if you don't care who owns America. So what's really going on at the macro level is we're transferring our wealth overseas in return for current consumption because other countries have kind of rigged industrial policy. So what's the accumulation of that? If you look at the net investment position of the United States, which is how much Americans own overseas versus how much everyone else owns in America.

That number, which when I was in the Reagan administration, was a a substantial positive number, several hundred billion dollars, is now a negative twenty seven trillion dollars.

You can't transfer your wealth overseas. And and to remind you, this is not because other countries are more efficient or do things better than us. This is because they have an industrial policy. Now let's just think what's the industrial policy? It's currency manipulation. It's a tax policy designed to take resources from their consumers and give them to their producers in order to create this huge imbalance.

It's a banking system, it's labor laws, it's health and safety uh regulations, which are designed not because of science to help health and safety but to reduce e uh uh imports into their country. It's massive, massive, massive subsidy. And and if you let them do this, these imbalances will accumulate, accumulate, accumulate. And the United States, as a result of it, is a poorer country by twenty seven trillion dollars than it otherwise would have been.

slow down in what you would think of as sort of traditional economic growth in the United States. So much slower economic growth. I give you a couple of data points on that. If you look at from the war, which you which you you know which you identified as a data point, to to 2000, the United States grew on average about three point one uh percent of GDP a year.

When you move to the last twenty-five years, that is to say, after this period of you would say, hyper-globalization, which includes the the worst single thing was of course granting most favored nation permanently to China. Um but also NAFTA and creating the World Trade Organization and we can delve into that if we have time.

So so if if if you look at from two thousand, two thousand and one forward, instead of three point one percent GDP growth, we end up with two point one or s or slightly over two percent of GDP growth. And if you think of of of periods of time. The United States in most 20-year periods before 2000 grew at over three percent.

about fourteen years out of twenty. We've seen basically a flat line for f from China entering the WTO for fifteen years. We saw a flat line in medium family income. And and then we've seen th the these hollowing out of these cities that we see across the Midwest and all the very bad consequences of that, including, I would say, very bad health consequences, where a lot of our working class people have really lost

uh uh m many years of their lives. Uh you know, there was a famous book called Deaths of Despair, which pointed out that people that don't have a college degree, which is like a proxy for these working class people, on average live about eight years shorter lives. And what do they die from? They die from from suicide, alcohol, uh drugs, basically, uh what what what Ann Case and uh and Angus Deaton call deaths of despair. So we've seen

very bad societal impacts, slower economic growth, and a transfer of wealth overseas. And I say none of it is because of basic economics. It's all because someone else In this case, primarily China, but a lot of other people have very aggressive economic policies. They're designed really to take advantage of the fact that the United States has a relatively open capital market and a relatively open economic. uh system.

Richer. Now it's seventy-two times richer. So we're moving in a very bad now. Some liberals might say the way to approach that is to Tax very heavily the rich people and give the money to the to the middle class. That I think is not a good outcome because I believe in the dignity of work. I believe that people feel better when they have productive good jobs. So what I'm suggesting is that we have a system that's designed to create these these these high paying jobs.

And if we get that trade deficit down from one uh uh point uh two and I would say it's probably if you act properly calculated, even higher than that. trillion dollars, you're gonna create an enormous number of these jobs. We need more workers in the in the the hundred thousand, ninety hundred thousand dollar range.

um time, it's gonna take diligence, but he it is in the process of working. We have lots, lots, millions of Americans out there who are either unemployed partially employed looking for full-time work or totally out of the workforce. We haven't, if you add all that up, who knows what the number is, but you could easily get to twenty million Americans who need these kinds of jobs.

And and nobody thinks this is gonna happen in five minutes or five days or even a year. This is a long term process. But we s as you suggest, we seem to be moving in the right direction. There's a lot of what I call green shoot. that suggested that manufacturing is taking off.

You know, the critics of the president will say, My goodness, we haven't reindustrialized. No one would criticize the ChIPS Act a year after it was implemented in twenty twenty two and say we haven't reindustrialized. But so what are the green shoots? Y you see this purchasing m man uh um managers index is now positive. Um um uh we see the the the uh um Fed's uh production numbers are now

showing substantial improvements. We have seen a r a substantial improvement in productivity, which is really, really important uh in the manufacturing sector. We've seen factory starts up, we've seen capital um uh um investment Uh up substantially. So there are a lot of things to indicate this is happening.

I would suggest if you go before that, core inflation, that is to say inflation that does not include energy, was actually in a in a pretty good range. It was about a little over two percent. Um the notion that tariffs somehow create inflation is is I would is is I think uh really quite wrong. You've seen a study by the San Francisco Fed that suggested that it's not true.

You've seen the fact that that that that we put uh tariffs in place and we did not have inflation in the first term. You can see that China has more um more uh barriers to trade than any country in the world and it actually has deflation, not inflation. So I don't really think it's fair to make that kind of link.

Right now, are we seeing inflation closer to three percent overall than we really want, which is closer to which is closer to two percent? Yes, but there's a lot of things going on. And if you look at where that inflation is. It is almost not at all in tariffed items, right? It is in services, primarily

um healthcare and financial services. So and these are things that don't have any tariffs associated with them at all. So I I don't see anything in the current data that suggests that the president's program is not working. I think I see a lot in the data that suggests that the predictions of all the geniuses Um, by the way, the same geniuses who prescribed uh an economic program that ended up getting us into this position where we have all these really bad

uh results for our working class people. I don't see anything that th th that supports their position. And where we are is we have to stick to it. I would say stick to the program. We have to work our way through the Tehran situation. get oil production back up, oil prices back down. And then I think you're going to see a lot of the results, the long-term results of of of manufacturing and the return of these kinds of jobs, which build up our communities and our families.

that to other Western in particular I'm sorry not Western countries but to Gulf countries. Your publication is also reporting that Ukraine's push to build homegrown ballistic defense systems. can happen within the next year or so that it is i actually growing at a rather rapid pace. Can you uh talk about that significance and what that will be able to provide for Ukraine as this war enters now its fifth year?

this kind of air defence systems is uh the biggest point of dependency for Ukraine because this is exactly what we depend on the most from our Western partners who give us um things like uh battle missiles that uh protect cities like Kiev where I'm in, um and uh it is Russian ballistic missiles that have been doing the most uh damage because of how difficult it is to to um to intercept them and uh we uh have just uh um had a terrible winter uh that where Russia uh imposed uh

imposed uh uh you know blackouts uh and uh people didn't have any heat and uh any electricity in their homes for days and weeks and uh it is uh example of uh a humanitarian catastrophe that Russia can impose with ballistic missiles and it is impossible to cover uh the whole of Ukraine with the with the uh defense systems that the West provides so if Ukraine can supplement that with domestic that would make a huge difference for us.

the United States as a reliable ally. What does that mean for Ukraine going forward?

a lot to Ukraine. The uh just the rhetoric as you said uh can be so confusing and can throw people off so much here and uh you know one day President Trump wakes up and says something that is essentially pro Russian and the other day something that is not so pro Russian so it is about

And it just it can be very ignorant when you follow in that from Ukraine as you can imagine. So um I mean I think uh with the with the uh um with the Lansky trying to uh figure out what what Ukraine ha can offer to other potential partners and existing partners he is trying like with his tour in the in the uh in the Middle East and uh uh offering the defence technology it is one of the ways uh uh for Ukraine to potentially you know differentiate and uh

uh decrease its dependency and uh I think it's terrible to say that uh Telensky Ukraine gave up on the on the relations of with the Trump administration but I think the uh um the past year um has uh demonstrated that uh Ukraine needs uh uh needs to be strategic about it and can't rely on rely on one partner too much even if it is uh such a such a big partner as the US.

who opposed Bulgaria's defense pact with Ukraine and said that uh before the election that that Crimea i is in fact Russian. So how is that all being interpreted in Kiev?

on but uh uh what is very certain is that Vladimir Putin has been searching and finding and he will not stop searching and finding uh useful allies in the EU and it is uh uh it is up to EU to figure out how to deal with things like this, how to not uh how not to let one member uh block something that is so essential for the defence of the EU.

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Alright, that is it for now. If you ever miss our show, you can find the latest episode shortly after it airs on our podcast. Remember you can always catch us online, on our website, and all over social media. Thanks so much for watching and goodbye.