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Terminal and the Bloomberg Business app. To extend the conversation, the former senior US intelligence official, Normal Raw joins us now for more Normal Welcome back to the program sir. Just a quote from the Defense Secretary pet Agseth called it an incredible and overwhelming success. How should we define success? This Monday morning?
Good morning, Well, we have a changed Middle East. The United States and Israel of conducted devastating attacks against all ofver Ron's air defense, his leadership nuclear programs in Iran's response has been generally feeble. What response Iran has been able to conduct, to include missile attacks against Israel have
not impacted the strategic course of the conflict. The numbers are moving in a direction where Iran's missile program is being whittled away, and Iran's nuclear program is effectively destroyed. There will be elements that remain, there will be elements that are concerning, but its nuclear program is effectively destroyed.
Norman, no one really understands Iran quite like you. What do you think that Iotola is weighing up right now? The menu of options in terms of a response.
Well, there are many people who understand Iran are better than me. But within Iran, the decision making structure is going to be challenged. His leadership has been changed. He himself is in a difficult, hidden location. Some of his leadership is being hunted, perhaps by the Israelis. They're under attack, their economy is poor, their population is restive. Let me
give you an example of options and the challenges. If they close the straight of her moves, they close off most of the many of the food stuffs, the vegetable oils, the primary goods that come into the country to feed the population. Now, that is something that you really don't want to do at a time when your population may erupt into major unrest. So they have many challenges with
all of the decisions they make. But again, if they close the straight of her moves, it does not impact Israel, and it will bring in the United States and could likely lead to the end of the regime.
Do you think these strikes get around to the table? The President continues to say he wants to see a diplomatic path forward.
Not immediately. But what it does do is it tells the world that the United States is pushing for diplomacy, and that actually encourages the world to push back on Iran's efforts to escalate the contact conflict or isolate the United States. So in the past, in some cases the United States seemed as the aggressor or are alone. But the United States is an essence saying you can't have a program that is moving towards a nuclear weapon, but
we're interested in a diplomatic deal. Be reasonable. Iran is not being reasonable and it has no allies.
No, I mean you said that the nuclear program has effectively been destroyed. There's a lot of concern among a number of circles about the four hundred kilograms of enriched uranium that have gone missing that previously were held near Isfahan, as well as equipment that was taken out of four Dah before the attacks. Do you have any sense of either where that could be or how close that could be to being to restarting some of the nuclear programs that are on previously had So those.
Are valid concerns. So we should be concerned about Iran's remaining nuclear material. It will have nuclear scientists, it will have nuclear knowledge, and it will have parts and equipment related to centrifuges that it did not declare to the IEA that it could in theory assemble and recreate in a covert facility. But let's think about that for a minute. If you believe what you read in the newspapers, the United States and Israel have is some extremely good intelligence
on Iran. So they're going to have to put this together, get away with it, and then the United States and Israel are going to have to not learn about it and not destroy it. Now that's possible, but it's unlikely. But it is something that's going to require diplomatic pressure so that it can be identified and removed, and it's probably a card Iran will play in the talks.
What do you think the Foreign Minister of Iran is doing over in Russia today, we know that he is meeting with Vladimir Putin, and there's a real question around what the ask is and whether it will be the response that Iranians are looking for.
Diplomatic support pressure in the UN. Iran has obtained consistent diplomatic support at the United Nations Security Consul, the International Atomic Energy Agency, and other diplomatic fora from Russia and China over the years. In fact, these two countries have block any major pressure on Iran for its proliferation missiles, nuclear program and terrorism. And this is really the moment
where these two countries can can produce this. It's unlikely that either of these countries are going to provide any military support. The Strategic Agreement that has been signed between Russia and Iran it doesn't provide for that sort of relationship. But Iran, again it has no allies, but it does have partners who have provided a support in international fora that may help on diplomatic talks.
Norman, just before you go, just a brief assessment of this operation thirty seven as long one hundred and twenty five aircraft B two bombers, fourth and fifth generation fighters as well thirty thousand pounds bunker buster bombs missiles launched from a submarine as well. Norman, how smooth, how well executed, with the logistics, the precision of this operation.
This operation speaks to the training, leadership, and the technology of the United States military has had for a number of years. This operation has been stayed in the press, has been practiced for many years. This is not something that has occurred in any recent administration, but this recent administration it had to refine. It significantly matched the target set. But what you are seeing is a technology and capability
in leadership and no country can match. And I think North Korea and other countries in the world to include China and Russia are looking in the past weeks and saying the world is also a little different from their perspective.
It's a strong final point Norman appreciated time. Sir Norman role Valley, former senior US intelligence official. Down story for a gobent snacks right in the following. A hypothetical sustained a very large disruption of energy supply transit would likely push oil and European natural gas price is above one hundred and ten dollars per barrel. Joining US now is down story for a golment Sachs, Dan, that's the hypothetical. Let's talk about a base case. What is the base case?
Forem of the team so found the smarting.
Yeah, so base case remains that we don't see significant disruptions neither of oil or natural gas in the Middle East. And in our base case without disruptions, we actually have energy prices gradually declining, with brands reaching around sixty dollars per barrel in the fourth quarter of this year, and with TTF europe natural gas prices also declining, especially next year with the arrival of all these extra energy supply cargo terminals.
Dan, how high could oil go if Iran does not close the Strait of Hormos but does other potential attacks on energy infrastructure or tankers that potentially disrupt the flow of energy coming out of the region.
Yeah, so you know, old prices could rise significantly in those scenarios. And the key reason is that the Middle East the Gulf countries are remain the largest regional producer in global global oil markets. In general. Our estimate is that for every one million barrels per day drop of supply that sustained for about a year, brand should be about eight dollars per barrel lower. That takes into account the fact that higher prices reduce demands somewhat an incentivized
USHL two to produce more. I think one challenge big picture with potential supply disruptions in the Middle East is that the most important buffer that the oil market benefits from against supply disruptions namingly quite a bit of spare capacity among OPEC core producers that's not necessarily available if the production to the capacity to produce would would be affected by bipotential disruptions because we think the bulk of the spare capacity oil markets is concentrated both in Saudi
Arabia and the UI.
Are you seeing any reductions to Iran in barrels right now?
No? In fact, are now casts of Iran crude supply is added three year high three point six million barrels per day of crude. Iranian supply has actually doubled over the last three years or so, and we're actually seeing very high export flows at the moment. I think the idea is to get the barrels out safely. Why while we can, and at the moment, prices are are relatively attractive given that Dan.
Do you think that if there is some sort of calming down of the tensions, you could see a huge decline in oil prices.
Yes, So we estimated the jubilical respreamum around Tendall's per Beryl. You know, if we if we increase, if the market were to increase its its probability of our base case that you don't see disruptions, this respremum could you know, could come down. Uh, you know, it may take some time for for us to to really learn whether we're
going to see see disruptions. Now. I think the hypothetical scenario where where the three spremium comes up the more quickly would be uh, you know, a successful rotori into the negotiation tables between the US, the US and Iran. But I think otherwise it would take some time for for markets to you know, to get more confidence in the basic case outlook for disruptions.
On the flip side, Dan, there's this question about how much the US is going to be affected versus other countries or other regions. I'm thinking of Europe, I'm thinking of Asia. How big is the dispersion in terms of which areas would get disproportionately hit in terms of their energy costs based on a myriad of potential disruptions to oil supplies.
Yes, so I would rank the vulnerability of the three big regions as follows. Most vulnerable Europe, both because of the exposure to oil prices but also natural gas prices, and but also diesel prices where Europe no longer imports diesel products from Russia, but it is heavily dependent on
the Middle East. Second, I would put Asia and the third vulnerable, But the least vulnerable is the US because the US natural gas market is quite insulated from global markets, because the US is a large producer, and because the US exports are basically at capacity. So if we were to see large disruptions, oil prices would also rise and increased costs for the US, But the US would be the least vulnerable among the top three regions.
Here, Dan, I love to pick up your point about how Iran is at a three year high when it comes to their barrels that they're producing and exporting. At the same time, the Trump administration says they have maximum pressure right now on Iran's oil industry, and they're going after the teapots and the banks in Hong Kong and China that facilitate all of this. How are they so high if this administration says they're at max pressure.
Yeah, So to your point, about ninety percent of Iran's liquids exports. Iran is exporting just over two million barrels
play of liquids. About ninety percent goes to China, and I think over the last two years the system has built out an alternative supply chain with shipping companies, with ports, with refiners, with alternative financial institutions that together ensure that these barrels continue to reach global markets, and in particular are quite price sensitive Chinese deepot refiners which have margins and they basically need those those discounts to continue operating.
Donks Jovan of Goma Sachs down, Thank you, sir as always stunning events. Over the weekend America's attack on around years in the banking a stewth thirty six don long operation named Midnight Hammer pilots dropped some of the largest bombs in their arsenal on Iranian nuclear facilities. Joining us now to discuss is the former US Defense Secretary Mark Esper.
Mister Secretary, welcome to the program, sir. We'd love to lean on your experience the work to execute an operation like this one and your rarely high level assessment of his success.
Well, good morning. Look, it was clearly successful in terms of the execution. Our aircraft were able to make it in drop what fourteen GBU fifty seven's, the submarines launched ta lambs from offshore. We were out with impunity. Nobody was hurt, and I just I think it speaks to the skill and professionalism of the United States military. And now I think what we have to do is two things.
First of all, get a good battle damage assessment, and that will take a few days and maybe even then will be incomplete until we get inspectors on the ground. And then secondly, we're all waiting to see what Iran's response will be. And there are various predictions you guys have been talking about it what they may or may not do. But that's what we're all waiting for now.
If you're advising the president right now, what would you say to him in terms of what to expect in terms of Tehran's retaliation.
Yeah, Look, I think there are a range of things they could do, you know, were they could first of all, use Shia militia groups in Iraq to target our people and facilities there. Secondly, much like they did during my time in early twenty twenty, they could launch Asavov missiles against US forces in the Middle East, and there are a couple dozen bases there with over forty thousand US service members that they could go after. A third, there could be sales here in the United States and globally.
Or they can go against American officials as they did a couple of years ago and try that. And then they could go after shipping in the straight of Hord moves, which I think is unlikely, but to me, those are the range of outcomes that they may pursue here in the coming days.
In twenty twenty, when cost them Sulimani was struck with that drone strike, we did see retaliation, but it was telegraphed through back channels to the US administration. Do you think we could see Iran take that same approach this time around?
Yeah.
I think what they have to do is calibrate this so that they do enough for domestic consumption, feel like they've satisfied the military. They've struck back, tell the Iranian people they struck back, but not so much that President Trump really upset anti climbs that escalation ladder and really
hits them back fairly hard. Within hours of the missile strikes at Eli Saud, we had Iranians on the phone privately reaching out to us saying they were done, they had no more, they wanted to stop fighting, et cetera. And that was, of course long before we knew that Americans service members suffer concussions and TBI. But nonetheless they'll do a lot of backchilling because they look they can't go much further. They're being dismantled, their leadership, certainly the
military side is being taken apart. Their nuclear sites have been pummeled, and so the question is how long? How much long can they go on?
How can they even decide on some sort of retaliation or strike against the United States. If the Supreme Leader is reportedly hiding in a bunker, he's in his late eighties and he has no access even to electronic communication.
Yeah, Look, that's the big question is who's in charge, How complete, how effective is the chain of command right now? Are there instructions left behind to the IRGC or to the missile forces to launch attacks that may may explain why they haven't responded here in the twenty four to thirty six hours since the US strikes on FDA, n Ton's and Esfahan.
There's one theory out there, Secretary, that this could potentially reignite some of the efforts that are on has made to achieve nuclear status, because that is the only deterrence, and especially with the four hundred kilograms of enriched uranium missing into action, how concerned are you about that reality going underground and really having the Iranian officials expedite those efforts.
Yeah, Look, you bring up a good point that I was going to raise. There's still nine hundred pounds of sixty percent enriched uranium that's fairly close to what they would need for ten nuclear weapons out there that we don't have control. We don't know where it is. The IE doesn't know where it is, so first of all, we have to track that down. Secondly, we don't know to what degree the Iranian infrastructure has been destroyed, and even if it has, it's just a matter of time
before they rebuild. Now that at this point probably looks more like years than anything else than months, but nonetheless, until there is a fundamental change in the ambitions of the regime or a fundamental change in the regime itself. This is likely an ambition that will grow back over time, arguably moreized than before because of what has happened here in the last couple weeks.
There's a larger point, Secretary that other people have been making this morning, which is that it is a deterrent to say Russia to China, showing what the US military can do and is willing to do in the face of some sort of red line that gets crossed. Do you see it that way or do you see other nations and seeing the need to become nuclear or having some sort of deterrent that really takes this potential outcome off the table.
You know, deterrence is based on two things, capability and will. And I think everybody's understood the United States military has the capability to do a lot of things. I don't think anybody ever doubted we could do what we did with regard to be two stealth bombers entering Iranian airspace and dropping these bunker busters. I think what is different here is President Trump has shown the willingness to do it despite domestic voices coming from both the right and
left saying he shouldn't do it. So I think in this regard it's more of his willingness to take action, which probably caught Rushes and Beijing's attention.
Well, this is one criticism of the previous administration, as you know, missed the secretary. The faibiates provide a satisfactory terrance in key waterways in this region, and I'm thinking more of the Red Sea over the last few years as we think about the Strait of Hormos, Can you just share with us what you learn about the best way to provide it to Terrance and to prevent the disruption of those waterways. Yeah.
Well, look, I think sending a clear message first ball is important. But secondly, and I say this in light of the fact that the Iranian Parliament yesterday voted that Iran should close the Straight of Horror Moves, I think there's going to be a good argument if they strike back to take out the Iranian Navy, particularly those elements of the navy that could shut down or obstruct or hijack shipping in the Straight of hor Moves. So you
could sink the mind layers of the navy. You could go after the swarm boats that tend to come up upon cargo tankers and take them ashore. You could knock out Iranian missile batteries on the coastline. So I think, to me, that would be the top of my list.
If Iran tries to shut down the strait or takes more aggressive action, beat it to take that card out of their hand, because everybody is concerned about shutting down the straight of horror moves, and yet even though we fly in the face of their own interests, they continue to threaten.
That difficult to answer the next question, sir, but just to find a question. Do you get the sense that American involvement in this operation is over or do you think this might be ongoing.
I think it's to be determined based on how Iran responds. I think President Trump's instincts have long been since the time I work with him. He does not want to get involved in wars. He doesn't want this to go on and on and on. I think if Iran shoots missiles and they're largely effectless, I think we stand back. We probably continue to support the Israelis with munition and
intelligence and defensive air defense capabilities. But I think in terms of continuing strikes, we probably step back at that time and then urge a negotiation. By the way, a negotiation between Iran and Israel that's going to have to include a return to the non proliferation room and inspectors and verification mechanisms on the ground in Iran.
That's absolutely critical parteically thoughtful conversations. And we appreciate your time. They former US Defense Secretary Marc Astro stop of the price section and your morning coast. Let's send back to our top story about pricing for Iran's response after the US attacks. It's nuclear sites over the weekend, joining US now is standing and is ready. Ambassador to the United Nations, ambassador com monitor.
It's good to say morning, thank you for having me.
Let's talk about the events over the weekend, and let's talk about this also. Who's in charge in a round right now? Amory has been talking about this all morning, the chain of command. Who's in charge?
Well, it's Aututel, you know, the other regime which still hath control over the population. But you know, U see statements coming out the minute door for in a furld is flying all over sending threats to either to the US. I don't think that they run today in a position to threaten anyone. They should think very carefully about the next steps, what they want to do, what they should do. You know, our position was very clear that we had the gold in this operation to degrade the capabilities. I
think we achieved a lot so far. We still have more targets, but I think when you look at Iran today and you compare it to the last time I was here a week ago, it's a different ballgame. They don't have those capabilities over the reactors, and I think we were able to push back, you know, significantly a one more than expected.
You were here just a little of a week ago, the morning after those versus rarely strike started and you said it would take days or weeks.
This operation.
We heard from the Prime Minister's day Benjaminett and Yahoo he said they're very close to completing the goal of elimiting the dual threats pallistic missiles and nuclear capabilities.
Where are we on the timeline?
So I can also give you exact dates, but I think you know the main challenges we had, which were the nuclear reactors. You know, with alt of the US attack magnificent, you know, the US they had the capabilities that we don't have. So on that issue, I can tell that we achieved most of what we wanted, but still we have the ballistic missiles, which is a major threat.
To as well.
It's important to know that we all speak about the nuclear threat, but when you have one thousand ballistic missiles targeting well, it's a problem. So we took a lot of those launchers, but we still have.
More to go when it comes to nuclear facilities. Though.
This morning the IDEA said that they went after four dough dreances and exits to make sure they were preventing the removal of these materials. How do you assess what is what around has right now in terms of their nuclear capabilities.
Well, it is a big country and they were hiding a lot of the materials and they were trying to move stuff. So we cannot guarantee the result. But when you look at the infrastructure, at the machine of tale that they built, and by the way, they spent hundreds of billions over the years, now it's not there. So we cannot guarantee one hundred percent result, but we can tell they don't have the the actors. It would take them decades. Do we build it.
There is a question about how much regime change is part of what Israel is trying to do. We've heard President Trump discuss that as well. What's your sense of how much that's also one of the aims.
Well, I can tell you feelings. You know, we all wish that they would be a regym change for the people of Iran. They're victims of this regime, you know, so we pray for that. But the question if it's the goal of the operation, I think you know, it's not our goal, and we help President Trump also, it's very hard to tell the people of Iran what's good for them. They should decide, and I hope that they will take the right decision.
They deserve better. You're the ambassador's in that Nations.
Earlier this year, Israel withdrew from the You and Human Rights Council, following the US and doing that. What role does the United Nations have to play in some of these negotiations at a time where people are wondering about its institutional relevance.
Well, I agree with you that they should think for carefully. Yesterday there was an emergency session of the Security Council in some countries condemned the US, and they told them, where will you or all though the US when they reach the UN, you when they build the reactors, now you come and you and you condemn Israel in the US. So the UN should be much more effective. And basically they're allowed Iran to do what they did all those the US and I still believe in the UN, but
I think the UN should be reformed. We expect the new US ambassador to arrive soon, and I think that together we can change what's happening there.
There's a line that used earlier in the conversation. You reflected on the US capabilities and you said that the US has capabilities that we don't have, and it raises the question I think makes some people in this country uncomfortable. This Israels start an operation knowing that they wouldn't be able to complete it without US involvement.
No, absolutely not, And I said it. I think last time I was here, we have the capabilities. It will take longer, it would be more painful, but we can deal with the threats. So I think what the decision of the US was the right decision because now it would be a s shorter wall, and I think it's much more effective how are.
You preparing for the retaliation?
So first we have to acknowledge it's not easy for us. You know, the entire country is not functioning today. You know, people are not going to walk, people staying next to the shelters, and they talk about nine point five million people for almost two weeks. It's heavy. But we are willing to continue as long as it takes. But we believe that we as they said earlier, we achieved most of the goals. Now we have a few more things we want to take it off.
And now with are those few more things.
You know, mainly the ballistic missiles, the industry. You know, they built a huge infrastructure to produce ballistic missiles. They wanted to compete with the US and Russia and they were very close to get there. So we want to make sure that it would be very hard for them to rebuild those capabilities, these.
Kind of blistic missiles coming from around and their nuclear program.
This is the point of the regime.
Can you decimate their ballistic missile program, their nuclear program.
Without death mating the regime.
Well, we hope that they will not have the desire after what happened in the last two weeks that they will understand that we will be there if they will continue with the aspirations to eliminate Israel, it will will be there before the attack us. We learn the lessons after October seventh, we are not taking any chances.
Ambassador. We appreciate your time. Once again, thanks for thanking the Australian pansador to the un There, Danny Denaud, This is the Bloomberg Sevenans podcast, bringing you the best in markets, economics, an gio politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business Amp