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Hey, it's Jess.
And Ryan.
Before we kick off today's episode, we have a fun announcement to make.
We are doing a live show, again.
We love doing our live show in New York so much that we decided to take it on the road.
This time we'll be in Los Angeles at the L-Ray Theater on Tuesday, April 28th.
And just like last time, we're going to have special guests.
And since we'll be in LA, you can prepare for a night of money, business, and power conversations
about Hollywood.
And after the show, Ryan and I will stick around to meet you all.
Tickets go on sale this Wednesday, March 25th at 10 a.m. Pacific.
You can find the link in our show notes.
And again, the show is going to be at the L-Ray Theater in LA on Tuesday, April 28th.
Tickets go on sale this Wednesday, March 25th.
Hope to see you there.
Hope to see you there.
Hope to see you there.
I'm going to let nobody thought we took a little excursion because we felt we had to
do that to get rid of some evil.
I think you'll see it's going to be a short-term experience.
How good is our military?
Since the war in Iran started, President Trump
has been saying that it would be over quickly,
thanks to a swift military campaign.
And the campaign has been swift.
The US and Israel have delivered a significant blow
to much of Iran's military capabilities.
The campaign has killed Iran's supreme leader,
along with dozens of others in the country's leadership,
destroyed many of its missile launchers, decimated its navy,
and inflicted even more damage to its nuclear program.
But despite the success, Iran seems to think
that it has the upper hand.
By control of the thermals, you control the price of oil.
Therefore, you control the clock.
Yaroslav Trafimov is the journal's chief foreign affairs
correspondent.
And he says that Iran has taken the Strait of Hormuz,
a historically open waterway where a quarter of the world
oil passes through, and turned it into a powerful economic weapon
by threatening to attack any ships that dare enter.
So the longer this goes on, the higher the prices
get, the more severe the shortages are in the world.
And the more pressure there is in President Trump,
and from the energy markets, but also from bond markets
to accept Iranian demands.
And so, I mean, the Iranian calculation
is that as long as the control of the Strait
of Time works in their favor.
After talking with sources throughout the region,
Yaroslav says it's now clear what Iran wants to get out
of this war, and what its endgame is,
to turn the Strait of Hormuz into a massive toll booth.
What Iran is doing is saying, look, now it's our waters.
Anybody passing through here must pay us a toll
and get permission from us.
And so they are trying to basically transform
this international waterway into a toll booth
that will sustain the regime going forward.
And if that is life to happen,
that would really transform the balance of power
in the entire Middle East and the world,
because Iran would be dominating global energy markets.
So now they are, in a way, in a much stronger position
than the way before the war.
And if the war ends with them, still control the Strait
of Hormuz, that would be a strategic victory
for this time of the Republic of Iran.
Welcome to the journal, our show about money, business,
and power.
I'm Ryan Knutson.
It's Tuesday, March 24th.
Coming up on the show, what Iran wants from this war?
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Can you take me inside the Iranian regime?
What is left of it at this point?
Well, I think the Iranian system was always very complicated
because you had on the surface elections and the parliament
and a president who is still there,
but who really holds very little actual power.
Then you have the Revolution of Guard, the ERGC,
that is really the strongest force and has the strongest military muscle.
On top of this entire system is the Supreme Leader.
The last one was killed at the start of the war.
And after his death, his son, Mosh Tavahaminay,
was named as the new Supreme Leader,
but nobody has seen him.
Nobody has heard him since then.
It's not clear whether he's alive and if he's alive,
he's been injured and how badly.
And so, in fact, the power seems to have come to the Revolution of Guard.
The Revolutionary Guard is described as a state within a state.
It's a tough military force.
It was hardened by a long and bloody war with Iraq in the 1980s.
So the commanders, they are determined to keep fighting.
You know, this is a very solid organization with many layers.
They've been preparing for this war against what they call the Great Satan and the Little Satan.
And since the Revolution in 1979, they knew it was going to happen.
And they made plans, perhaps unlike the US.
And so, and now they are executing them.
One of the ways to fight against the US and Israel,
what Iran calls the Great Satan and Little Satan,
involves the Strait of Hormuz.
It's a 100-mile stretch of waterway that connects the Persian Gulf with the rest of the world.
At its narrowest point, it's just 21 miles across.
About 20% of the world's natural gas passes through it,
as well as about a quarter of the world's oil.
There's also aluminum and fertilizer.
And then again, if you look at the Gulf states,
a lot of the imports that sustain them, food, cement, you know, you name it.
It's all coming to their ports through the Strait of Hormuz.
So it's a three, one of the most vital waterways in the world.
And Iran is holding the Strait hostage
by threatening to unleash missiles, drones, or underwater mines at any passing ship.
And for the past couple of weeks, no ships have passed through the Strait
without Iran's explicit permission.
They're letting a few very small numbers
from so-called friendly countries like China and India.
But they are talking about making this impermanent system
and they insisting that any ceasefire will lead
with the U.S. will involve a new international arrangement
for the Strait of Hormuz.
I'm honestly a little bit surprised that Iran hasn't tried to
create a toll booth out of the Strait of Hormuz in the past,
given how much leverage it gives the country.
Why haven't they?
Well, you know, Iran's strategy for the decades
was to create this network of proxies,
a Casbola in Lebanon, like the Houthis in Yemen,
who would fight its enemies and would absorb the blows
while the Iranian mainland was not bombarding anyone
and the Iranian people that, you know,
we are maintaining the country at peace.
So directly intervening the Strait of Hormuz
would have brought war into Iranian shores,
something that they tried at all costs to avoid.
I see, but now that war has arrived on its shores, regardless.
But exactly, now that the U.S. and Israel launched this war in Iran,
they have nothing to lose.
The regime is in survival mode, and they're using, you know,
every point of leverage that they can possibly get to survive.
Exercising this leverage has allowed Iran
to have a huge impact on the world's economy.
Well, the back has been colossal, you know,
the price of oil at some point almost doubled.
There is also a disparity between oil futures
and the price of physical oil,
because you have actual shortages in some countries
like Bangladesh and Sri Lanka that are, you know,
cutting short the work week and imposing rationing.
Obviously, there is a lot less impact in the U.S.
because the U.S. is the world's largest producer
and now export of oil.
But again, you know, if prices rise globally,
they're also rising in the U.S.
and people are seeing this at the pump.
Gas at this station here in Maryland,
quickly approaching $4 a gallon,
and that is becoming the norm across the country.
Gas jumping nationwide from an average of $2.92
in Kansas to more than $5 a gallon in California.
It's still a dollar higher than it was a month ago.
The impact on the global oil market has been so severe
that the U.S. decided to lift sanctions
on Iranian oil that was already at sea.
While the decision will release some oil
into global markets,
it could also result in billions of dollars
going to the regime.
And, you know, if you listen to the administration,
they were arguing that the money will not necessarily end up
in the Iranian hands,
but that's still a drop in an ocean.
You know, that doesn't really do much to offset
the colossal shortage that is being caused
by this blockade of the city of Amuz.
By taking control of the strait during the conflict,
Iran now has control over the strait,
and they aren't going to give it up easily.
Meaning, the U.S. can't just pull out of the region
without making a bad situation permanent.
If the U.S. just declares victory in cuts and runs,
well, you know, that would leave Iran empowered,
that would leave Iran in control of the strait,
you know, the stock in Iran now
of passing new legislation that would actually formalize
this control and require every passing ship
to pay money, lots of money,
to the Iranian state,
and that would transform the geopolitical situation
in the Gulf. It would turn all these Gulf countries
into, in a way, dependence of Iran
because, you know, they will not be able
to do anything with Pharaoh and oil and gas
without Iran in permission.
And that is a strategic victory for Iran,
if that happens, and it would be a massive defeat
for the United States.
So, how can the U.S. turn things around?
That's next.
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You're also now that Iran has effectively
taken control of this straight
and doesn't seem likely to give it up easily.
What are the US military's options for reopening it?
A lot of the options are really good.
It's a mountainous area.
You now have drones, you now have portable missiles.
So any military operation to reopen it will likely
and cause significant casualties.
One option would be for the US to seize the island of Kharg,
which is where Iran's primary oil export terminal is located.
And use that as leverage and negotiations
with the Iranian regime to say,
okay, well, you know, if you want to export the oil,
let's open up the straight and then, you know,
you can have the oil terminal back.
The challenge is that the island is located deep
in the Persian Gulf,
and the US would have to pass through
the straight of our moves to access it.
Another option is to use the US military to escort tankers.
You know, back in the 1980s,
the US and other nations were escorting tanker ships
through the straight out of the Persian Gulf.
That's a little bit more difficult,
much more difficult now,
because technology has changed.
Because now, Iranians have access to drones
that are really hard to detect.
They can fly the entire breadth of this straight
and strike ships.
And the Iranians are currently attacking tankers,
you know, in the vicinity of the straight
with drones almost every day.
On Saturday, President Trump took the truth social
and gave Iran an ultimatum.
The regime had 48 hours to reopen the straight.
If it didn't, the president said the US would
quote, obliterate Iran's energy infrastructure.
But before the deadline expired,
Trump said the US would hold off
on those infrastructure attacks.
Because he said the two countries were making headway
on negotiations.
We'll see how that goes.
And if it goes well,
we're going to end up with settling this.
Otherwise, we'll just keep bombing our little hearts.
So I actually want to back up for a second,
make sure I understand this correctly.
So Iran has the control of the straight-of-form moves.
Trump is frustrated by that.
And so he makes a threat, right?
He says that I'm going to escalate
by bombing energy infrastructure
if Iran doesn't reopen this.
And then he said, actually,
there's been productive talks,
so we're going to not do that yet.
Correct.
Correct.
So the Iranian response to this was,
well, it was an empty threat,
and it would hold his bluff.
Iranians also said there actually weren't any talks
taking place between the US and Iran.
So it's a little unclear what's happening.
The positions are still very much far apart
because Iran thinks it's winning.
And Iran thinks the time is on its side.
And this state of a Trump was seemingly in Iran
as a victory because the Iranians have warned that, you know,
if Trump strikes Iranian energy infrastructure,
they will strike back across the Gulf
and plunge Gulf countries into darkness.
Under what conditions does Iran say it will end the war?
The demands they are issuing right now
officially are a massive reparations,
so billions and billions of dollars
to be paid by the US tax pay to Iran
to compensate for all the destruction
in the last three weeks.
Be the removal of all American bases from the Middle East.
So America has to basically surrender the Middle East
to Iranian domination.
And three permanent Iranian control
over the state of America moves
with Iran being paid by a very ship that passes through it.
Well, that does not sound like a country
that's negotiating from a position of weakness.
They're asking for the whole shebang, basically.
Correct.
Correct.
And that's what they're holding out for.
That's obviously something that
neither the US nor the Gulf states find palatable.
So it seems like the US and Iran are extremely far apart
on coming to any sort of agreement
over how to resolve this conflict.
Well, absolutely.
Absolutely.
They have any far apart.
And so the very fact that they're talking
doesn't necessarily mean,
even they're talking, as President Trump says.
That doesn't necessarily mean that any agreement
is possible in the foreseeable future.
Let's all remember that Russia and Ukraine,
and I have had negotiations since March 2022,
and went out four years later, and it's still a four.
If Iran were to control the
state of Hormuz indefinitely,
oil prices would remain high, affecting everything
from the price of gas to food to plastics.
And at this point,
it appears reopening the strait will take months,
meaning what was once envisioned
as a short military excursion
could turn into something much longer.
And the question is,
now, is the American public opinion ready
for several more months of this conflict?
Is the American public opinion ready for casualties
that will have to be encouraged to reopen the strait?
How do you see this ending?
Well, it's really hard to predict
because what I know if we're in the beginning,
or in the end of this war, or in the middle,
I think there are no easy options
for President Trump
and how to extricate the US from this war.
Maybe the two main,
sort of, pathways,
it's either acquiesce,
largely tyranny and demands,
and undercut America's global role as a result,
and allow Iran to proclaim victory,
or you go in with the ground forces
and double down,
and then it could become a four-ever war.
So, what casualties?
And maybe also,
at the end of the day,
you lead to US defeat,
months or years later.
And so, unfortunately,
wars are easy to start,
but very hard to end.
On Tuesday,
the Pentagon said it was planning to order
a deployment of 3,000 soldiers
to the Middle East,
in order to support operations in Iran.
That's all for today.
Tuesday, March 24th.
The Journal is a co-production of Spotify
and the Wall Street Journal.
Additional reporting in this episode by Laura Seligman.
Thanks for listening.
See you tomorrow.
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