Joe Weisenthal: Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway: And I'm Tracy Alloway Tracy. We're recording this the morning of March 19th, around 9 a.m., and that's how you know it's bad when you have to throw in the hour and the minutes 9:07 a.m., nine or 7 a.m..

Joe Weisenthal: And I think the story right now is just the degree to which people are realizing more and more energy infrastructure in the region. We're talk about our Iran war, of course, more and more energy infrastructure in the region. I mean, it's literally on fire.

Tracy Alloway: Yeah. The thing that I've noticed, having recorded these sort of emergency podcasts over the past I guess two weeks now is that we will talk about a hypothetical like, you know, oh, what happens if Iran strikes the port of Salalah in Oman and then a couple of days later it happens, which gives you an indication of how quickly things are progressing. And one thing that has happened in just the past day or so since we recorded an episode with Bob Brackett on Nat Gas is we had Israel bombing Iran's infrastructure in the South Pars gas field. And that was kind of a hypothetical that we talked about with Bob, and it happened shortly after. And then after that, we also had Iran bombing Qatari energy assets in the south Pars. So it's it's just progressing quickly.

Joe Weisenthal: Yes, that's right. Our colleague Dylan Griffiths has put together a really excellent list... There is just a lot that's damaged, which of course means that the Strait of Hormuz is only one aspect. Maybe it becomes maybe it gets opened. But then there is, of course, the question of like all the infrastructure that's been damaged and how long it takes to come back online at anything near full capacity... One is that it seems like the US and maybe Israel to some extent weren't expecting Iran to get back against various energy infrastructure assets or even cities this hard right... And then secondly, the thing I'm wondering is how much financial pressure does this actually put on Iran?

Tracy Alloway: All right. Well, we really do have the perfect guest, someone we've spoken to before... Greg Brew, senior analyst at Eurasia Group. He is the author of two books that directly relate to this petroleum and Progress in Iran, Oil Development and the Cold War and the Struggle for Iran, Oil Autocracy and the Cold War. So, Greg, thank you so much for coming back on Odd Lots.

Greg Brew: So I think I'm shocked. I think I'm officially shocked after the events of the last 24 hours where you saw both Israel attack the South Park gas field in Iran, which supplies 70% of Iran's gas supply. And then quite quickly, within hours, Iran responding by striking the Ratcliffe on LNG processing facility in Qatar... whenever anybody asked me, you know, is Iran going to close the Strait of Hormuz, I would say only as a last resort. Hmm. Only in the event that the regime fears feels that its survival is being threatened... But this war, this attack was interpreted by Iran as a threat to its survival, a threat to the regime survival. And it responded in a way that it has been saying it would respond for a long time.

Joe Weisenthal: You know, the expectation is Trump is going to takot because he can't stand oil at 100 or more and that this will prove to be a forcing mechanism for him to one day just declare victory... Do you have an idea for why perhaps the collective assumption of an imminent Trump takot has not borne out and why he is actually seems to be willing to accept some economic pain and prolong this longer than just, you know, declaring victory anytime.

Greg Brew: If you go back over the last 30, 40 years, Trump is always talking about gas prices, right? Keeping gas prices low... And then suddenly, Trump is acting like that. Doesn't matter. Like he doesn't care... I think in this context, he is maybe more conscious of looking weak than taking the tako and taking the short term win... If he does back down right now, it feeds directly into the Iranians narrative of victory, this sense that Iran is tougher, more resilient, more able to withstand pain, and that eventually they will outlast not only the United States, but more specifically, the U.S. president.

Tracy Alloway: Okay. I realize this is kind of a difficult question because I'm not even sure that Trump himself knows, but do you get a sense of what victory actually looks like in his mind for this particular situation?

Greg Brew: Going into this, there was a belief in the administration and perhaps a belief from the president himself that there was an opportunity in Iran to replicate the experience in Venezuela, that there was a way to kill Ali Khamenei... Now, the problem which they encountered immediately was that the individuals they expected to lead that political shift inside Iran were also killed alongside Ali Khamenei... So the goal is just to weaken Iran militarily, they've done that, but it's probably insufficient. Right now, what I imagine the president is thinking about is how what can I do against Iran that allows me to claim a more decisive victory and offers me a politically and also strategically viable off ramp.

Joe Weisenthal: But I have this sense that Western commentators... have this vision of Iranian society as one in which there is a very broad mass of people that are like deep down liberals who are dying to cast off their hijabs... and that there is this very small group of religious hardliners oppressing them... First of all, is that an accurate characterization... and how different is that gap between the complexities and realities of essentially Iranian domestic politics?

Greg Brew: There is a huge gap between the Iranian people and the Iranian regime... The regime can probably count on the support of a hard core of maybe ten to 15 to 20% of the population. Okay. That's probably enough for them to stay in power. The other aspect of this... What that means is that there's really no organized political opposition inside Iran... The other aspect of it is there are whole institutions that are built into the fabric of the Islamic Republic, the IRGC... who exist solely to preserve the regime from internal and external threats. They also happen to have all of the guns.

Tracy Alloway: So on that note, why did Iran actually decide to go after countries that did not attack them? You know, Gulf countries, Israel and other than the United States? Because, again, like it's never really done this before.

Greg Brew: The bigger scenario that the Iranians are more concerned about is a scenario where Iran turns into Lebanon or Iran turns into Syria, a country that you can just bomb... They want to restore deterrence. And their way of doing that is indicating to everyone... that attacking us is not worth it... The Iranians are trying to show the GCC states, and particularly the UAE, your model of economic development... all of that will go away if we keep being attacked... we are going to turn the Gulf into a live fire zone.

Tracy Alloway: By the way, headline breaking just now from Reuters. Iran's attacks damaged 17% of Qatar's LNG capacity for 3 to 5 years. And this is a this is pretty extraordinary.

Joe Weisenthal: Greg, tell us about Kharg Island. I'd never heard of it before a week ago.

Greg Brew: So Kharg Island is a very small island... It handles around 80 to 90% of Iran's crude exports... It's designed to handle VLCCs, the biggest oil tankers... there is a belief, there is a theory that if you see Kharg Island... then you have sufficient leverage over Iran that you can get them to do what you want... The problem I have with that theory is that I don't think it's right. Iran has other means of exporting oil... Iran still has a limited capability of exporting oil by rail... oil gets smuggled out, particularly through Iraq.

Tracy Alloway: would you expect that grey market system to start to break or would you expect to see it sort of like, I guess maybe formalized to an extent or grow even stronger in the face of U.S. pressure like on Carr Island?

Greg Brew: I think the upshot of trying to cut off the flow of oil... only incentivizes the Iranians to turn to these alternative routes. At the same time, what you're doing on a market level is you're putting more upward pressure on prices... which only further incentivize incentivizes grey and black market activity because now the profits are even better.

Joe Weisenthal: Is there anything about the situation that has surprised you as it's been playing out?

Greg Brew: how little the Iranians have needed to do to Hormuz to keep it shut... The threat was enough to keep it closed, which I thought was surprising. The second surprising point... my understanding was that this was a scenario the U.S. Navy had prepared for... And the U.S. response has been insufficient. It's not only that they haven't done enough to open the strait, it's that they didn't seem to have expected this at all.

Joe Weisenthal: So I was thinking like, one of the things that still amazes me is that geography still matters in the world, right?... Yes, geography, geology, etc. are extremely important to this question.

Tracy Alloway: the time frame for the actual impacts of all of that to come to fruition and ripple throughout the economy are very, very long.