Surveillance: 2020 Is A Tipping Point, Eurasia's Bremmer Says

Eurasia Group. And what he's done like any lead singer running a good band, and to be sure, everybody in the band is better than him. And he has put together an outstanding team at Eurasia Group over the years of true experts. So let's dive in with Ian Bremer with the top risk of You had to rip up the script of risk here and rewrite it on Friday and Saturday. Where does iraq a ran all of these tensions fit in to the global risks of this year. Oh,

we had to include it, certainly. But let's be clear, when you look at the big trends out there is a tipping point and that's true because an economy that's been growing robustly after financial crisis is now starting to get softer, a geopolitical recession is in serious uh capacity right now, and that the alignment between the United States

and its allies is vastly weaker than it used to be. Globalization, which is the one thing that had driven so much of the good news um, is now taking a significant step backwards as the United States and China decouples from each other on the technology front. Those three things coming together is frankly an unprecedented stead of trends over the

course of the last few generations. And it does mean that even though we don't believe that Iran war is going to suddenly lead to regional confrontation or World War three, we do believe that the Resilian's globally is so much less. You sat down today, inn and you said to me, I just want to get away from the hysteria. I've

been doing that all weekend. You know. It's like excepter Neil Ferguson's wonderful essay in the Times of London, Time Freedman writing and others about some of the historical perspective. If we're to get away from the hysteria and get towards clear thinking on these immediate matters. What is the clear thinking as we look at Tehran, Baghdad in Washington, clear thinking is that the United States is likely to

be forced out of Iraq. It's troop presence, which Trump didn't want to have to begin with, but nonetheless not because of the United States, because of Iran, and because the Shia, who are the majority in Iraq, um are going to turn very significantly against the United States following the series of bombings that you've seen um without any premi from the Iraqi government invasion of their sovereignty. Having said that, the power asymmetry between the United States and

Iran is massive. If the Iranians were to actually engage in serious strikes against Americans in the region, they do risk their regime. And that's very different from the risk they thought they were taking when they went after a US base in the last week, or when they went after the U. S embassy in terms of the recent demonstrations, violence, and occupation. So there now is a level of deterrence. Trump is certainly enormously unpredictable, not very experienced leader from

a foreign policy perspective. That's different from saying that our expectation is US Iran war. We don't think that's gonna happen. There's so many ways to go, your folks, and I think what I'll do is start with the immediate newsflow as you wake up across the nation, and one of them is to see the House Foreign Affairs Committee say on the back end of I believe it was a tweet.

Mr Trump, you are not a dictator. Interpret force what your raisor group says about this Warpowers Act, how we've come out of the fractions seventies, the legacy of Vietnam, and now Congress in the executive branch should work with each other given these tensions. Most should and will are two different things. Let's be very clear, um. I think that if Maddis, McMaster, h Kelly, if they were still in the administration, I don't think Sulimani would have been killed.

I think the constraints on Trump the adults in the room are not what they were. Pompeo is very smart, but facilitates Trump, and he's about to leave office and run for Senate in Kansas in any case, so I do think that that is a concern, and it's a concern that is rightly brought up by Congress. But the more important issue is that impeachment we are about to see is no longer functional as a political constraint on

the president. And that's new. In other words, we're gonna have a guy running for office that will be acquitted by the Senate and he's going to have no no ability of others to say, if you take the following actions, you'll be removed from office. Only the people will be able to do that with the vote, and his efforts to manipulate and delegitimize that vote is going to be

unprecedented in recent times. And I guess my question, Dr Bremer is synthesizing the Democrat candidate responses to what we're seeing in the last three days. But more than that, synthesize in the United States election into your top risks of For the first time in twenty three years, we view US domestic politics is actually the singular top risk, and we don't usually think about that because the US

is so resilient, the political institutions are so strong. But here the concern is that we end up in an American Brexit, not because the US is leaving anything. But because the outcome of the election is seen as uncertain, is seen as contested and delegitimized. So it's not that you vote for Trump or that you vote for some Democratic candidate, but rather that whoever you vote for, half of the population believes that person should not have actually

gotten the presidency. It's like core Bush, but without the Supreme Court concluding the outcome. And and and we haven't seen that since in teen seventy six in the United States, with the election of Rutherford Hayes. There's quite something to think about the world's largest economy going to have that kind of atturning point moment with our upcoming election. Let's let's move to some of the other risks that we see this year. I want to touch on a few

here very quickly. On China, and of course you've been wonderful in China with your Meritith sumter um Ian Bremer's take on the next step of China not Phase two in the trade talks, but almost Phase G Trump. What's the next thing we should try to observe of these

two world leaders. We should observe that China has changed a lot more than the United States, j and Pink's consolidation of power, his decision to make China into an ai superpower and to decouple itself from the United States, his belt and Road, his end of term limits, his anti corruption campaign. Those are the sea changes that we're seeing. The United States has it's only bipartisan consensus on foreign policy, is largely on a harder line response to the just

because the timing. You know, I've got to get to this. You use the phrase a long march, which of course has all that color of another time in place in China. What does the new long march of China look like? Well, Jiji and Ping uses that phrase and that that phrase is about the Chinese not being able to be hit by the United States on critical issues of national security,

most importantly their technology system. So it's building their own supply chain, having control of the countries that really matter. It's not needing the United States. That is decisively in opposition to everything that mattered to multinational corporations in the West for the last generations. We see the image of Tehran. We get out our map of a run like we got out our map of Iraq and two thousand three, Tehran's in a bowl. They have a lot of air pollution.

We see the images of men the Indian cities with horrific air pollution as well, and that gets us the climate change. It's the vogue, but it's a different vogue this year. Climate change is different now than it was four years ago, isn't it. It's different because UM it's causing more domestic political response in backlash when the governments and the leaders aren't taking actions themselves to get to

two degrees to point five degrees UM. The Chinese, the Indians, the Americans, nobody UM is on track UM to make their commitments. What that means is that you're going to start to see UM non organized responses like you have in the financial markets right now, and that's definitely changing how we think about UM. The multiples of shares in fossil fuels, for example, or the companies that are served by them, certainly going to change how we think about

portfolio allocation. Let me circle back to what I've noticed since Friday. I've had to speak to adults in the room. James Travitas, the Atimal, mark him at the general time, Beckett of the United Kingdom Military, you as well, and in others. We're all trying to get to clear conversation in non hysteria over this. What should we listen for in the coming few days, is this unfolds Iraq irun in the United States. Let's watch what the Iranians do

and don't say. It's very interesting that the Foreign Minister has focused on in the last twenty four hours leaving the nuclear deal but also saying they'll come back if the Europeans are able to continue to uphold and get them the sanctions off. They're focusing on um the uh Iraq uh pull out of the legislature, saying that the U. S troops should leave. If they're focusing on things that look like winds but aren't about we have to, you know,

sort of kill American military. For me, so far, I'd actually say the diplomacy from Iran, not the demonstrations, but the diplomacy feels more climb down, feels softer rather than harder. There they are not in a position of power. If you're the world's only superpower, your room for miscalculation is greater. It gives me no pleasure to say that, but it's true, and the Iranians are highly aware of it. We're gonna have to wrap this up. Ian Bremer with us with

your Asia group. Of course, many more conversations through the morning is well, and of course we'll look for this out on social particularly on Twitter and on LinkedIn as well. An important document the top risk from your Aisier group. Pharaoh is sick and he is going home. He maybe Yeoman's duty to come in earlier today and we hope that Mr Farrell kills it, makes it through it. I've had the plague here in the last few days and now Farrell he got it for me. Is how he

has blaming on the with Paul Sweeney. He is and Paul Sweeney uh is here and we're thrilled that we can move forward. And we do that with a very special broadcast. We welcome all of you worldwide, particularly on a Pacific rim in your evening in Asia, to our annual visit to euro to do Eurasia Groups offices in New York and of course the centers around the top

risks of for Asian. Now we do this, Paul with a market chourninger all the news slow coming off of a rock and a run, and of course in Washington, and we'll let others we'll describe that over the hour as well, but certainly with futures of negative sixteen DA futures negative one fifty eight yields jumble. This morning we had seventy dollar oil sixty ninety two on Brent crude, and the global Litmus paper that I use dollar yen showing me a little bit of calm there one O

eight sixteen on yen churning at this morning. So certainly, Paul, I don't see panic out there to you, I do not, and we kind of made that comment on on Friday as well. But clearly a new level of risk in the market and the market participants across the risky asset classes time you mentioned oil as well as the end trying to figure out kind of where this goes next steps here as relates to renewed min East attentions. A lot of news slow there this morning. Course, Kevin Serilllean

Washington monitoring this as best he can. It is the top risky and of COURSI and Bremer and Cliff and others had to rip it up and write a new ideas. And I believe their third risk of the year, which is on the Middle East and particularly on Iran but so much of this is about China. Maybe they don't leave this year with China. They look at the US

election is their lead risk. But Meredith Sumter, with this head of all their research and of course truly expert on China, is well, what's the nuance here in China of this January versus a year ago. A year ago, Tom, I think there was a great deal more expectation that the U. S And China would have some kind of trade confrontation but would find some way to resolve their differences. A year on where we stand now we have a

Phase one trade deal. But even with the deal, Tom, there is no real truth between the world's two largest economies. Does China need a truce? Jan Ping doesn't believe so, and he is girding up his population for what he believes is going to be a long march to increase China's own self reliance and reduce its dependency and risk exposure to the United States. The dependency is around sanctions. I'm a bit confused here, as I'm sure all my listeners are about what sanctions are coming on, which ones

are coming off. The hope and prayer of getting back to some form of not lazy, fair free trade, but at least less sanctions. Give us a sanctions update as you see it. What's the dynamic of sanctions into two thousand twenty. Well, in two tho markets are going to be looking for or a partial reduction of tariffs, but for the most part, the majority of the tariffs are are going to to stay in place. Uh, And we could be seeing more tough measures from the US towards

China this year. It's it's an election year and product is nothing changes? Is that right? Not much is changing. But I'll tell you what is changing on the negative front is you're going to see a hardening of this confrontation and locking in that hardened confrontation for the longer term. So that's why we have US China as our third top risk. But tied to that is our second top risk, TOM,

which is the Great decoupling. This is essentially China in the US, the two largest economies disentangling from one another in a way that's going to have spillover effects not just in global technology, but in business activity, in research, in media and entertainment, in culture. You're going to have more of a risk of a true bifurcation of the global order in a way that really haven't taken seriously

since the Cold War. So, Meredith, we had yet to see anything really on paper as it relates to Phase one. So I hate to even go to phase two. But is there any sense of what Phase two could encompass, uh, and maybe any sense of timing or is this just a tweet out there in the wind terrific question. I would say the President and US here Bob Lizzheiser, are

supremely focused on a phase two. If you talk to the actual trade negotiators on the US and China side, though, who are going over the substance of what those negotiations might entail. No one seriously believes that we're likely to see a Phase two negotiation reached completion, And believe me,

there's a whole lot left on the table there. Phase one really is just about a partial teriff reduction, a resumption of of some Chinese purchases of of US products, namely agg But the core issues at at at the heart of the conference tation, industrial policies, subsidies, the misalignment of the Chinese economy with the U S economy, that all remains, and that's not likely to be fundamentally changed

by onward negotiations this year. So, Meredith, one of the things that this administration has done is it as UH really taken trade negotiations with China to arguably the next level, a more direct level including tariffs and so on and so forth, a more bilateral approach, more aggressive approach. Do you think this is the new normal for US China UH negotiations or if there is another administration coming in, it might go back to something UH that we're more used to. This is a this is a new normal

for US China with the Trump administration. But you know, even if you get a democratic administration in office in one UH, there is still going to be a hardened US approach towards China. Now, they might take a and and look all of the Democratic candidates who are still in the field. Not one of them has said that they would reduce tariffs on China. The difference in approach, however, might be more of a collaborative strategy with other allies to to play sort of collective pressure on China to

adjust its approach. One of them is, that's so wonderful what your Asia group is. All the horses you're bringing here. You've got Robert D. Caplan in helping you out advising. Of course, this book Asia's Cauldron and was in my Book of the Year a couple of years ago, and it is about the South China Sea. How does China right now interpret the South China see? Is it just as simple as they say, it's ours? It has always been in China's mindset, there's and what you're seeing. It

is it is, but it's it's what you're seeing. We're talking about the bifurcating world. Tom. For China, it's reality and the sound China see. They've built their outposts, they're exercising influence, maybe not absolute control, and maybe they don't they don't get a chance showing the flag enough on the U S sign We are in in the area. But I think that there's enough of a question about US staying power in the region and US commitment to partnerships and alliances in the region to where the other

countries in the region are already hedging their bets. Meridith sumter with us with your Raiser group, folks, as we look at their top risk. A lovely conversation here and look for this on our podcast. We are thrilled to re emphasize our podcast in this January obviously out at Apple Spotify for their names. I'm not hip enough to remember, but the podcasts have been hugely, hugely successful. And we'll lead with Brummer and Sumter. Uh. This day you read?

Do you read Chinese? Right? Can you speak it? Uh? Not as well? It's hard, it's hard to make that lead. What what do you read in China? Explain to our audience who are kids? My child's going to take Mandarin and that lasts for like two weeks. It's like, you know, Ellen lessons. When you read Chinese? How do you read it? What do you profession? Is there like a Beijing newspaper you read every morning or is it research reports or secret things that come in like you know, on pigeons, wings,

on ravens, wings, like Game of Thrones. When you read China in Chinese, what do you read? You read a variety of different newspapers. Um, all of them sort of state bad. But there are different nuances with the with the different newspapers out there. But it's it's a wonderful language. Uh. And I think when you when you actually get in to the language, you get a sense of the whole holy different worldview that is coming from from Beijing. And again it sort of leads back into this bifurcated world

that we're that we're moving into. Neither China nor the US is strong enough or is going to take enough of the pain to push the other off of the helm of global leadership. But they've got to find a

way to co exist. And what you see in Chinese print media, uh, and in commentary frankly on on wayble and and and other media social media platforms is increasingly China is looking to project its own interpretation of what international technology, international trade, international financial architecture, international rules and regulations, how those should be shaped to account for Beijing's and China's own interests in addition to the interests of the

traditional Western liberal order. Mare, could you just give us a quick update on kind of what is the latest from Hong Kong. We know there's been some leadership changes there right well, we've we've seen actually just in the last couple of days, Beijing appointing a perceived sort of hardliner to to go in and be their chief representative in Hong Kong. Uh, this is to be expected. Uh, Beijing's approach is to strengthen their reach in control over

Hong Kong, even as the protests show no signs of abating. Uh. And you know speculation that Carrie Lamb will be stepping down perhaps later this year after the leon Quai, China's own sort of meetings in March of their National People's Congress and Consultative Conference. But she might step down, but that's not going to do anything to to take the floor underneath the protests that we see happening in Hong Kong. This has been wonderful, Maritus Sumter, thank you so much.

I thank you to all your research capabilities. Here are the different voices we've heard this morning at eur Asia Group. Without question, this is our interview of the morning. He is Henry Rome and he is far, far too young to be this good. He's out of Princeton where he had a modest knowledge of the Persian language, and then it's going on to a sterling academic career studying the Levant and Persia, and he joins us today is truly

one of the nation's Persian experts. With your Aisia Group, I should point out we're thrilled that we have the top Risks of two thousand twenty four Ian Bremer's e Raisia group this morning, Henry, thank you so much for taking time with us. What is the number one thing Americans miss of the present Islamic Republic and its linkage back to a Persia of long ago? Sure? Thanks, Tom,

It's it's great to be here here with you. I think the number one thing that that Americans missed is the prevalence in in today's Iran of the same nationalism that we've seen over the past hundreds of years. That while Iranians today obviously majority Shia country, but the depth of religion and only gets you so far. Really, the nationalism, the pride and the empire is still very strong, and I think the government today uses that very effectively to

try to rally around the flag. And then we're seeing it right this morning with with the funeral processions for costumsula money. We whether we read Dexter, Philkins or George Packer the others out in the media, Tom Friedman and others writing and the last number of days there seems to be a debate about the Islamic Republic. I get the idea of nationhood and everyone coalescing. What does the

new Islamic Republic look like. It's not the same one of nineteen seventy nine or even eighty nine after the war, is it. No, it's not. It's it shifted in a number of important ways. One is that after the revolution you've had a much more institutionalized mechanism that have I think become or solidified I should say, the the rule will of of of the clerical elite, and also I think limited or or disabused people of the notions that that this would be a that this would take a

more republican, a more democratic route. So there so there's been I think in in in aspect of disappointment, especially among the revolutionary generation. I think also the government's proclivity, of government's willingness to crack down viciously on the population when it feels threatened, I think is a more recent phenomena, going back uh to to two thousand and nine. Certainly they were protests before, but the events of two thousand nine, combined with the ones over the past few months, I

think have been quite um quite quite quite impactful. And I think that the last point I'll make is is the kind of UH intensification of of official corruption of you have folks who are ostensibly men of God but are also involved very significantly in the Iranian business sector. And and and I think you have a um a disappointment of expectations among many Iranians. Now, does that mean they want to overthrow the government? No? And I think that's that's what we're seeing very clearly uh in Tehran

right now. So anyway, I guess what a lot of observers are wondering at this point as we wait for some type of retaliation, is this going to be a series of tips for tat's kind of thing, back and forth, back and forth, you know, relatively low level engagement, or do we really run the risk of this escalating into some type of war, however limited. I think it will be more of the former, more of the tip for TAT exchanges. But but there's going to be bloodshed and

and and it's going to be very turbulent. So I would say that that that that the Iranians will continue to have US forces in their sights. They said very publicly over the weekend that military retaliation is what they are going to do. And I think once that happens, President Trump will be compelled to respond, and there will

be a cycle here. But but there is a ceiling to this, and I think the ceiling is is reinforced by the structural factors on either side that are pushing the two sides away from the kind of brink of brink of a larger escalation. On the U s side, I think Trump remains a verse to military conflict. I think recognizes that, uh conducting a major war essentially in the middle of an election campaign is would be extremely damaging. And I think from the Iranian side, they are very cautious,

They're calculated. They do not want to fight a war that they're going to lose. So I think the that imposes some constraints on what we're going to be seeing over the next weeks and months. Henry, just quickly, what is your best estimate of when we could or when Iran could really make a move here in retaliation. I think within the next days or weeks, UH, so fairly soon.

They're using the Sulamani funeral as a way to generate and and and consolidate nationalism in the country and also as a way to buy time to figure out exactly what to do. But but but I would say, you know, imminent essentially, Henry, thank you so much. We really look forward to your analysis, your synthesis here in the next number of days. Henry Rome is with Eurasia Group, and of course one of his focal points is the Middle East and it is a top risk for two thousand

twenty four Ian Bremer and Eurasia Group. This is a joy with your Asia Group as we look at their top risk for two thousand twenty is midg Rahman, who over the last two three years has been dead on of a very very new, indistinctive Europe. Midge, what is the distinction in your European report as you look at

the top risks of Thanks for having me, Tommy. It's really, I think a year where Europe is going to try to do more geopolitically, and and that I think is a direct reflection of the fact anglom week at home cobbled by a wobbly coalition while Emmanuel Macron is sitting on top of a super majority and a mandate that's

probably going to see him win the next election. In Macron is decisively off this view that Europe should be doing more in the world, taking on China and its centralized political and economic model, dealing with the fact Trump is erratic, inconsistent and cannot be relied upon, and in that in that space, I think a believer in the idea that Europe needs to be the defender of multilateralism and needs to speak up in world affairs, well, some of that is and I've seen as so much in

the last number of days, including all that's going on in Tihran and Baghdad, and that is the yearning look back to a Westphalian system. There's almost this in a nostalgia mide raman of going back to what was? What do we want to go back to post World War two? Or something even more distant like the Treaty of West Failure.

I agree, I agree, there is something historical and almost mystical about what the French are trying to achieve, and actually, in practical and real terms, you know, what can the European Union do to prevent escalation between this U S and IRUN crisis? And the answer at the moment is absolutely nothing. But I think it's that precise answer that's driving the French in particular to say, look, we need to be able to speak up in world affairs more effectively,

and we need to be able to do more. And I think in the first instance, what the Europeans are going to try and do is leverage their market to give them a bigger voice in world affairs. So they're going to try to use the internal market to promote cross border military trade, to promote more technological development within your Europe, to make them less dependent on other parts of the world for defense and for the protection of

their own interests. That's where I think they start with the market in major I find your comments about the EU trying to assert itself in global affairs extraordinarily interesting, just at a time when one of its most important members is leaving the block. How do you think the EU is going to deal with the UK and Brexit really over the coming weeks and coming months. I'm just kind of trying to get a sense of how harder soft this whole thing. Maybe, Yeah, it's a great question.

I think, you know, the the European Union doesn't have a great strategic answer for the fact the UK is leaving. They're desperate to keep the UK in its diplomatic orbit, and I think the statement last night from Chancellor Merc le French President Macron and Boris Johnson will go down well in Europe in the sense that Boris has firmly aligned himself for now at least with the EU camp in calling forward the escalation, and as you'll know, there

was no reference to Trump in that statement. But in terms of pure Brexit negotiations, I think the landing zone looks quite hard because you have a government with Boris John's and that basically wants to do things differently. You know, their interpretation of Brexit and the mandate they have is the right to do things differently. They don't want to

follow EU rules in the future. They want to be free and they want to do things their own way, and that's going to immediately impact how close the two sides can indeed be, because ultimately market access for the UK depends on following EU rules and if the UK no more no longer wants to do that because they want to be democratic and sovereign, well, that's going to have an impact on I think how close economically the two sides can be, which suggests there is a degree

of risk for Sterling, a degree of economic disruption that we're going to see manifest towards the end of the year when that becomes apparent to the investment community. Image. Just give us a sense of in the City of London in Parliament, what's the confidence level that the UK can actually negotiate a meaningful and positive trade agreement with both the EU and also the U S. I mean, we have it. It's kind of going on live now

between the US and China. These things aren't easy to do. Yeah, I mean you saw you saw the end of December when the when the government announced it was not going to extend the transition period. So basically we're in a standstill transition now until the end of the year. The government said they're not going to extend that into one and there was an immediate dip in sterling, something of

a crash. I think markets are still working off the assumption that the government is going to soften its approach and that ultimately economic objectives will prove imperative and that will driver closer relationship between the two sides, and I think that's misreading where this government is. I think they do as I say, want to do differently. That suggests negotiations are going to be complex, both with Europe but also but also with the US, I mean the price

of the trade agreement with America. Who is going to be difficult for this government because obviously the US are going to ask the things the government doesn't want to agree to. I'm not going to be challenging. I think if you're just joining US, Midje Ramen with US. Here is with Eurasia Group as we look at their top risks for twenty twenty Midge. In the last forty eight hours, we've all had to become more expert on the collapse of a nuclear accord between the United States and Iran.

And it's something that Europe has tried to triage almost through the recent months and even quarters. What does Europe want out of a nuclear redo with Iran? Did they go it alone with Iran? How will that work? I mean, I think based on based on what's happened in the last twelve hours, I think, honestly there's the likelihood that they're on nuclear agreement now hoses, you know, falling close

to below zero. I think that was I think the immediate objective and conferent for the European Union last night. I wrong is going to now back out of the nuclear agreement More broadly in the region, led by the French. There's a desire to stabilize Iraq and allow Iraq to be fully sovereign, and then of course a priority to attack Dash and Isis. I think that's absolutely top of mind,

certainly in the Elise and also in the Chancellery. That's how I'd argue Europeans are thinking about their strategic objectives in the Middle East, but do they really have the means that diplomacy, the politics to allow them to achieve those goals. I think, and I'm quite skeptical. Frankly, we don't have an army. Foreign and defense policy is heavily uncoordinated in Europe. Capitals are basically doing their own thing, and that's why I think this is largely going to

remain something in the American theater. I think US Iran is a US are an issue. Europe will try and be relevant, but I think, frankly speaking, it's not going to be particularly effective. It's it's just first thing to me. So it's to be clear on this medge is does Europe have of voice in Tehran? Not not allowed one,

not a very prominent one. I mean, if you think about the number of UK nationals that are being held hostage in Iran, and the amount of political capital that was invested by Jeremy Hunt, the previous Foreign Secretary Boris Johnson when he was Foreign Secretary and now as Prime Minister, and the Iranians are simply not moving and there's not that much the UK or indeed the European Union can

do to get the Iranians to budge. So I think I think that's why Tom the French are so eager to redefine more broadly the European Union's place in the world. That's why MacLean intent on your being a geopolitical player, because he recognizes the gap in his aspirations and where the EU is today. So right, do you think, what do they have this? I'm sorry my fault. Did they have a sense of isolationism like the president and like

a good part of the love America. I mean, I think it's it's lesser celt I think to be to be honest, Tom, and and again it's that the problem with Europe is structurally, states are basically not coordinated in the area of foreign and security policy. It remains the prerogative of the member states, and the member states have competing objectives. I think Macron is of the view that real sovereignty for the EU is a function of the more stand up army. They want to invest more on

the militarily sad on the military side. The Germans don't want to do that. The Germans want to dabble at the edges of defense policy, but not do much more, certainly not get close to the two present the Trump that the US administration and Trump is asking for. So there are a big competing strategic objectives within Europe about

how it can achieve the sovereignty. The Macron team are asking for what is necessarily in order to fulfill that objective, and there is no agreement, and that that really, I think always hamstring the ability for Europe to be influential on the globals aage mid drama. Thank you so much for joining us images the analysts that you raised your group, covering all things your We have Brent crude sixty nine dollars a barrel that's up another one percent today on

that Mid East tension. Do you get a sense of how this may play out in terms of global energy? Welcome Amy Myers Jaffee. She's the David M. Rubinstein, Senior Fellow for Energy and the Environment at the Council on Foreign Relationship, joins us on the phone. Amy, thanks so much for joining us. So again, quite a shock to financial markets, including commodity markets and oil. How does what is your sense of kind of how oil is going to play out here of the coming weeks and months. Well,

you know, you have two things going on. One, we had this narrative that was held in the oil price down, which was that there wouldn't be a trade deal between the United States and China. Um. So to the extent that we continue to hear positive things about a possible deal coming in a week, and if it actually comes to fruition, um, that that's going to keep the short sellers at bay. And then the second step is what

happens in the Middle East. One of the things that I think characterizes the market now is that every time we have these increasing geopolitical risks, the market becomes less resilient to the next event. So now I think the market has to worry about loss of Iraqi oil production to the market, and that could come away. Uh, that

could come about in one of two ways. Uh, We've already seen that the very small nust for real oil field go down for a day or two because the demonstrators, So we could see more disruptions and production that's come about because of violence on the ground inside Iraq. UM or if it turns out that UM the Trump administration, things don't go smoothly, we don't have a diplomatic solution

and and tensions escalate. You could see the Trump administration being taking a stronger position on whether there's oil smuggling between Iraq and Iran and which what if that oil production is being sold in the international market and that could take some barrels off the market UM, and then of course the market is worried about what if there's

a tremendous escalation which hopefully we will avoid. UM and it was engaged with UM oil facilities because as we all know from the history of the Iraq Iran War, in that case, which was an extended war UH, the oil industries of both Iraq and Iran were completely destroyed

over the courses of UH the ongoing conflict. So, Amy, do you believe that the primary risk to the global energy markets is direct attacks or retaliatory attacks on Mideast refining production and that type of thing is that probably what is the most risk driver for global energy prices. Well, I think there's also the possibility of sort of you know, just unrest in the country and it affects their oil industry.

I think that's an additional risk. But the thing, you know, I think the market probably will part a distinction between these. You have the risk that the Iranian government will respond as it as with you know, direct attack UM on some kind of oil facility in a in a neighboring country.

But you also have the risk now with the sort of calls for revenge the death of Commander um Sleimani, that you might have a splinter group that decides that they want to attack energy facilities UM in Iraq or elsewhere UM as part of their own you know driver, And so you have sort of a more of a terrorism risk that's probably higher today than it was a

week ago. And then you have the overall risk, which I thought the market was undervaluing post to appcake attack UM, that something would happen that would cause Iran to sponsor a second attack on energy facilities in the Gulf Amy we winn in doubt get out the map in the bottom line is the Iranian oil reserves are concentrated at the northeast top of the Persian Gulf and up the river. And am I right that literally just over the river

are the Iraq oil reserves. I mean, how easy is it is it for Iran to co opt the Iraqi oil reserves if they choose to, Uh, Well, I would say very easy. And I would say, in my opinion, um that behind the scenes, you're already seeing some of

that helped service the Iranian economy um. And you know, maybe not at at scale, but but I think part of the things that you see when you listen to the demonstrators that were calling for Iran to exit Iraq and calling for new political leaders that weren't so tied I'm sorry Iraqi demonstrators calling for Iran uh to exit the country and to have its political leaders be less tied to Iran. I think that there's sort of cozy

um relationship and oil swaps and things like that. We're part and parcel of that and and and if you think about Iran and Iraq um, and then you go back in history to when people had concerns that is Iraq somehow we're to stay in Kuwait. They could threaten um you military force to threaten oil post the whole Gulf. We're in that same situation today, and you can imagine a nuclear Iran announcing that no shippings going through the straight of her moves, and that would be a much

more complicated declaration than the current round making that declaration. Well, we gotta leave it there, Amy Myers, Jeff, you thank you so much, Just really really love that. We greatly greatly appreciate today with the Console on Foreign Relations, the Rubinstein Senior Fellow, Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom

Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.