The US is leaving an Iranian island untouched

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Today is Tuesday, March 10th, and this is your FT news briefing. There was some relief in the oil market yesterday, and a small island off the coast of Iran seems to be untouchable. Nobody has touched Cog Island in retaliation. If you blow it up, then you have a real problem going forward. Plus Anthropic is going head to head with the Pentagon. I'm Mark Filipino, and here's the news you need to start your day.

The red hot energy market cooled yesterday on two major updates. US President Donald Trump said yesterday afternoon the war in Iran was quote very complete pretty much, end quote. And earlier in the day, G seven finance ministers said the group stands ready to release petroleum from emergency reserves. The idea is that more supply would lower energy prices. Brand crude fell below ninety dollars a barrel that was down from a whopping one hundred nineteen dollars earlier in the day.

Meanwhile, countries are trying to save energy as much as they can. Bangladesh closed universities, the UK Automobile Association is telling people to stay off the roads if they can help it, and Germany's government said it's not ruling out any measures to contain rising energy prices. The G7 is expected to make a final decision on releasing emergency reserves today.

One of Iran's most sensitive targets is a tiny coral island in the northern Gulf. Somewhat ironically, it's also one of the easiest to hit. It's called Karg Island, and it's crucial to Iran's oil industry. But so far, US and Israeli bombs haven't touched it. Here to discuss why that is, is the FT's energy editor, Malcolm Moore. Hey Malcolm. Hi Mom. So tell me a little bit more about Carg Island. How significant is it? So it's tiny. It is about twenty five kilometers off the Iranian coast.

And the reason why it's important is if you think about Iran, it has a very shallow coastline. There's basically almost nowhere in the country where you can bring in one of these super tankers that you need to load oil apart from CAG. And so Karg is basically the center of the Iranian oil industry.

There are other places where they can start to load oil, but Karg is responsible for about nine out of every ten barrels of oil that they load. Now what would an attack on Karg do to Iran? Has that ever happened before? So Kag has been attacked in the past. In the nineteen eighties, during the Iran Iraq War, Iraq bombed Kag and they basically had to shut it down a number of times. The issue is, of course, if you shut down the only route for Iran to export its oil, then you cut off

all of the revenues to the Iranian government from oil and it is an oil revenue dependent economy. You know, I spoke to Richard Nephew, who's a former US deputy special envoy for Iran. He said The Iranian economy bottoms out without it. Essentially, you don't really want to cut it off, you don't want to destroy it, because then in the future, any future Iranian government will be in a very weak position. They won't be able to sort of monetize their oil.

So not only would it hurt Iran now, but also future governments. What about outside the country though? Could there be any global implications?

If you think about what has happened over the last year, you know, we had the war with Israel last year, the so-called 12-day war. During that entire period, super tankers were loading up at Karg all the time. During this conflict, Even though, you know, Iran has been bombing oil fields, they've been bombing refineries, they've been bombing gas terminals everywhere through the Middle East, nobody has touched

CAG Island in retaliation and that is a sign of how important the administration sees Carg. They don't want to touch it because if you blow it up, then you have a real problem going forward. And of course, Iran is a big oil producer. I mean, almost all of it goes to China. But if you remove that oil from the market, then you would cause another spike in oil prices. Potentially you would see more instability in the oil market. And then that will feed through um to the global economy.

Are there any circumstances where there would be an attack given how important this is to the global oil market? So there's been a lot of chatter about an attack. We've seen on social media, we've seen people talking about it in Israel, we've seen people talking about it in the US. They're all saying, Why not bring this war to an end? Iran is attacking energy infrastructure, just take out Kog and game over for the regime.

Alternatively, they're saying, you know, send some Marines in there, seize the island, again, game over from the regime, control the oil. Both of those scenarios seem to be extremely unlikely, according to people I spoke to. In terms of blowing it up, you have that situation where if you want regime change, you don't want to damage the incoming regime. So you're thinking about that all the time.

Having said that, I spoke to some people who suggested that if this war continues to escalate, if we see Iran causing large numbers of civilian deaths in other Gulf countries, then some Gulf countries could retaliate. And Saudi Arabia has also said that if Iran actually tries to blow up any of their oil fields, they will blow up Kog Island. So there's kind of that threat there. In terms of seizing it, because it is only twenty five kilometers away from the Iranian coast,

You might be able to seize it, but how long can you hold it for under fire from the Iranian army? Presumably once you have it, they are going to attack you with everything they have. That's the FT's energy editor, Malcolm Moore. Thanks, Malcolm. Thanks, Malk.

The clash between Anthropic and the Pentagon just got a whole lot more serious. The AI startup sued the government yesterday over classifying it as a supply chain risk. It's all started as a dispute over how the Pentagon deploys anthropics technology and has potentially big implications for how AI is used.

I'm joined now by the FT's George Hammond in San Francisco to explore this. Hey, George. Hey. All right, a lot of moving parts here. So let's back up first and talk about what happened in this dispute leading up to the lawsuit. So Anthropic and the Pentagon have been negotiating terms for the last few months. It's currently the only AI company whose models are used in the most sensitive operations, so classified operations.

And the centre of this dispute is what anthropics AI models can be used for in military operations. The Pentagon and Defense Secretary Pete Hegzeth have pushed for the use of these models for all lawful purposes.

which is a a fairly wide definition. And Anthropic have said we're comfortable with that in general, but in particular we need assurances around two particular uses of AI, one of those being Domestic mass surveillance, and the other being the use of AI models for lethal autonomous weapons. And the the negotiations have already run aground on those two issues. And then the Pentagon went and slapped Anthropic with this designation as a supply chain risk. What was that about? Why did they do that?

So yeah, this is this is the part that's that's really unprecedented. As the negotiations were were coming apart, then became this very assertive move from the Pentagon of declaring anthropic a supply chain risk. And that's a designation that is normally reserved for companies from China or Russia who might be

looking to to take technology from the US supply chain and and co-opt it. And what that means in real terms is that companies who are partnered with Anthropic on military contracts will have to cut the company out of those contracts. Uh the the Pentagon say, you know, we don't want an AI company, a a private company to have any say over our operations in in the particulars. So that's that's really where the dispute is now.

All right, so that brings us up to yesterday when Anthropic files this lawsuit. What is the company claiming? Anthropic's claim is that the Pentagon's case is arbitrary and capricious. In effect what they're saying is that this is politically motivated, it's not a real designation in any sense. and an attempt to force Anthropic's hand.

And according to independent legal experts, they have a a fairly strong case to challenge this designation in the short term. What they're trying to do is is get an injunction against it so that those partners on military contracts can continue to work.

And a a part of their argument is that they are currently the model being used in v various warfighting operations, including classified missions. So there is a there is a bit of cognitive dissonance here where they're being declared a supply chain risk, but also are the model that's being used for continuing operations. Now the Pentagon has said it won't comment on the lawsuit, but George, what broader implications could it have on how AI is used in the future?

So it's worth touching on anthropics particular complaints or issues with how its technology might be used here. So on on domestic mass surveillance, their perspective was that even under this designation of all lawful purposes, that AI could be used effectively to conduct mass domestic surveillance because it is a more powerful technology than those currently covered by the law.

And on autonomous weapons, the fear that the company expressed was that, you know, the technology in its current form is not sophisticated enough to be used in lethal autonomous weapons, so that is drones that could act independently of human control. And the Pentagon has said, you know, you can trust us effectively to use this in a responsible way. We have no intention of of doing either of those two things.

But really the debate gets to this very sharp point of how AI should be used, a very powerful technology that we are still coming to grips with, how it should be used and whether existing legal parameters are are sufficient to control its use.

And I think what Anthropic have done is really surface that debate and we've seen that now bleed into other AI labs. It's a very live debate, uh, opening eye, and as we understand it, Google as well. Um so I think we've seen much more prominence given to this conversation. That's the FT's venture capital correspondent, George Hammond, in San Francisco. Thanks, George. Thank you.

Before we go, I wanted to let you know that the FT is holding a webinar tomorrow on the war in the Middle East. Specifically, what is the endgame? It's a question a lot of us have, and FT journalists like Katie Martin and Gideon Rockman will try to unpack it. That's tomorrow at 11 a.m. UK time, and it's only for FT subscribers. Register through the link in the show notes and send your questions ahead of time. See you there.

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