Iran Now Controls the Red Sea's Only Oil Bypass | Robert Pape

[00:00:00] Well, the Houthis now control the Red Sea, and we are back with Professor Pape to understand what the heck that means for the rest of us and find out if he learned anything interesting on his trip to Europe. It's the 13th of September, a Sunday episode breaking news, and welcome to the At the Water's Edge podcast. If you've enjoyed this content with the professor, please be sure to like, subscribe, share an episode with a friend, all that good stuff. With that, let's get to Pape! Well, professor, welcome back. How are you doing today?

[00:00:24] Well, I'm doing very good and always better when I talk to you, and it's such an honor to talk to all the folks in this audience. So this is of all my podcasts here and then things I do, this is my favorite one to do. And don't tell anybody else because I don't tell them that. So it's not like I say that, but this is my favorite one. Well, we appreciate it. And so just on behalf of the folks listening, so you just got back from Brussels, lovely location, and you talked to the European Union.

[00:00:54] Awesome people. We love them, of course. So since the U.S. Navy— They're missing us already, Scott. Oh, I'm sure. I'm sure. I'm sure. It's Christmas cards are going to be heart-wrenching. So since the U.S. Navy is tapped out on the Strait of Hormuz, now that the Houthis basically control the Al-Malbandi Strait, the Red Sea,

[00:01:14] I'm sure every blue-water-capable ship in every European Navy is currently mustering in the Mediterranean to go through the Suez Canal to reopen the Red Sea. Yes or yes, is that what's happening? They're suddenly on Arctic duty. Oh, well, I mean, countering Russia. Got it. All right. Has anyone called Egypt or Turkey? Yeah, I think that it's busy.

[00:01:45] Jesus. Okay. Well, that's troubling. Well, so here's what I'm tracking is going on, and you can let me know what I'm missing. So a lot of us have been looking at the Houthis for a while and we're almost wondering, like, why they haven't done more in this conflict. Well, this weekend they started doing more, and they appear to be in control of the Red Sea at this point. And the Houthis, of course, is a proxy for Iran, which we've talked about before. This seems bad.

[00:02:15] Like, 4% of global oil is bad. Yeah, yeah, it's pretty bad. It's pretty bad, and it's going to get worse before it gets better. But these three days are shaking the world. So this isn't just the, you know, these are pretty important days here, and they've been building. So it's important to know that. So in podcasts I just did before yours, I had to go into the history a bit of this back to the proxy war starting in 2015. So I don't think I have to do that in this audience.

[00:02:45] So there's a whole backstory that just goes on. And Middle East has all of these going on and on and on. So, but what really is important to understand, I think, for the frontline forces here is that we are seeing right on schedule Iran's period of maximum leverage.

[00:03:07] And that period of maximum leverage, if you go to my June 15th post on the escalation trap, you'll see that this is the post that is the one explaining how Iran is about to go on the offense. It's going to seize the initiative. This was at the point where we had even had the MOU side.

[00:03:33] Okay, so this is really explaining the incentive structure of the balances of power and what to expect. And so that was June 15th. The MOU and all that was about was about how the the world's buffers on oil were going to start running out. And what are those buffers?

[00:03:55] The American Strategic Petroleum Reserve, which is running down China, which is took five million barrels of day off the off. But basically, you can't expect any more out of China. And then the third was the Red Sea, the Houthis, the Houthis. So all of the these are the three buffers. And the one that was really in Iran's control was the Houthis, always the Houthis.

[00:04:23] So that's why you see me laying this out of what this period of maximum leverage would look like. I explained on that piece on June 15th that the goal is going to be to kick American forces out of the region. This isn't a peace deal. This is what the goal would be here. And now you see that is exactly what the objective is. And then starting literally a month later on June 12th. You can even date it to July.

[00:04:52] I'm sorry, July 12th, July 7th, because July 7th was the attack on the Ever-Loverly. So the MOU really fractures and shatters essentially on July 7th when Iran attacks the Ever-Loverly. Now, we can get into who's to blame for that, which maybe we'll do a little bit differently. Here, I just want to tell the story of the trajectory so we get the trajectory right.

[00:05:18] So starting on July 7th, you have the Strait of Hormuz shipping start to come down again. It had gone up for a few weeks. And then this goes on for several weeks, actually. It gets worse and worse. We have the 13-day bombing campaign. All of that stuff is happening here in the middle of July. But then comes the 20th of July. That's when the Houthis start to act up.

[00:05:48] That's when they start to do something. Now, why? And it's against Saudi oil tankers, to be specific. It's not just generalized use of force. Saudi oil tankers specifically, that third bypass is now starting to get hit. Why does it happen on July 20th, Scott? It happens on July 20th because about a week before, and we have news reports and video of this,

[00:06:13] IRGC advisors went to Yemen to talk to the Houthis about spinning things up. And the reports are they were talking to them about how to make better use of their drones and missiles. Now, we don't know the details. I think our intel folks at the tactical level may be able to find those details here.

[00:06:33] But it's only a few days after these advisors land in Sana'a that you get the Houthis start to actually take actions against the Saudi tankers. And this goes on for weeks. So it's not that they hit a Saudi tanker every single day, but they are starting to hit the Saudi tankers.

[00:06:55] And so what you have been seeing over since really the middle of July is a coherent, concerted, offensive plan by Iran that's multi-pronged. It's offensive with Hormuz, you know, shutting down shipping. Just in the last couple of days, Iran has declared a new restriction zone in Hormuz and has attacked some tankers.

[00:07:25] It is offensive with respect to the Houthis, where they're having direct connections with this. It's not just verbal encouragement. And then now in the last three days, we see the Iran-backed militia groups. They have attacked the east-west pipeline. And now the Saudis have shut down the pipeline.

[00:07:48] And that's why it's not even a matter now of Houthis having to attack ships going from Yanbu north to the Suez. There's no loadings at Yanbu because there's no oil coming to that. So this is a—and by the way, if we go back to the middle of July, and a lot of your folks here who are tracking all this will be able to connect these dots.

[00:08:10] We also had the attacks apparently by the Iran-backed militias in Iraq against targets in Egypt. So that's around the Suez. So what you are seeing here, Scott, is the unfolding of a plan that the IRGC started to explain publicly—and by the way, the IRGC, the generals have been explaining this plan along the way. They start to explain it at the end of May. It's around May 22nd.

[00:08:40] They start to lay out their security resistance belt ideas here. So I'm just following what the bad guys are saying. I'm not—all I'm doing is, if you want to know what they think, I'm listening to what they say. And they're doing pretty much what they say. It may take a few weeks. You know, it's not happening literally that day. But it's on a certain trajectory. They're laying it out.

[00:09:10] And they are trying to establish that they control the oil and energy coming out of the Persian Gulf through all the pathways.

[00:09:24] So this Scott Besson idea that you're—in two years, you're going to, you know, sort of eviscerate or weaken the—you know, have so many bypasses from Hormuz that Iran's power over oil will disappear. You know, they've been way ahead of this. Okay? They've been moving on this since spring easily. And they're already anticipating this.

[00:09:50] And we're just a day late and a dollar short, or I would say three months late and like $300 trillion—not trillion—$300 billion short. So we're way behind on this curve. You see what I mean? And what they're doing in just a couple words is becoming a world power. Right in front of our eyes, they're becoming a world power.

[00:10:11] You know, if I was to think through, you know, U.S. military formal training, you know, we have this process called MDMP, Military Decision-Making Process, which is basically a framework how to break down problems and align resources to achieve objectives. But when you go through MDMP in a deliberate way, you develop different decision points, different triggers. Some of them are condition set. Some of them are time set.

[00:10:33] But it almost seems like we're watching Iran go through their deliberate decision-making process and make certain decisions based on either time-constrained triggers or condition set triggers. And the time-constrained one that appears to be coming up is that we've heard about this potential for an October surprise prior to the midterms.

[00:10:50] And it almost seems like the Houthis going full bore to taking over the Red Sea and at least holding that for as long as they can, at least long enough for no one can respond to, was a time-set trigger to set conditions for something else to happen in October prior to the midterms. I totally believe this, Scott. I'm going to be publishing a lot of pieces this week and more about this on the escalation trap here. It may be a few days. I'm doing a ton of traveling, as you know.

[00:11:20] So I'm trying to do all this while I'm— Happy to catch you while you're home. Well, yeah, for a few hours. And anyway, my wife's working today, which is why we can do this. Otherwise, I'd spend some time with my wife. Anyway, but what you are seeing is quite right, Scott, here.

[00:11:41] And so if you imagine what they're doing, they are solidifying their base, their economic base for becoming a world power. So where is—on the escalation trap, I've given some briefings where I've tried to have some depictions of this. So what I mean that Iran is going to become a world power, I mean they'll become the hegemon in the Persian Gulf region.

[00:12:10] I don't mean with Turkey and Pakistan. I mean specifically the Persian Gulf region. And then they will have a sphere of influence from the Mediterranean to the Red Sea to the Persian Gulf. And that's that security resistance belt. That's like their sphere of influence. So you have their core, their strategic core, which is the Persian Gulf. Then you have the security resistance belt.

[00:12:37] Well, what you see since July 12th is basically incremental step-by-step consolidating their core, their control of Hormuz and shipping through Hormuz. And some of that means political with Oman. Of course, it means dealing with the Americans, of course. But also then you see the security resistance belt.

[00:13:00] And now what is—once you establish your core and your sphere of influence, it's no surprise to me they're tickling Pickaxe Mountain right in front of our nose. And I'm going to be talking about this in detail. I'm going to talk about the different possible approaches to Pickaxe Mountain in detail, not just hand-wavy stuff.

[00:13:24] And I'm going to be hopefully getting these—I'm going to try to do it as a series of posts, not just one post, so that we can really understand where the incentives are going to end up being on this. Because—and I'm not doing it because—and with Pickaxe Mountain, what that implies is, just to make sure everybody who's listening understands, is that Iran will test nuclear weapons. Iran will test nuclear weapons.

[00:13:49] Now, the Pickaxe Mountain activity that you see being leaked out in the last week, I've been fully expecting this. So this is not at all a surprise here. The surprise is—others are surprised. That with Pickaxe Mountain, it's quite clear there is new activity that is occurring. We probably have even more details about this than has been put out through Seth Jones. Seth Jones is one of my students from Chicago. So he was a Ph.D. student at the University of Chicago.

[00:14:18] Mearsheimer was his chair. I was on his committee. So I've known Seth forever. I mean, well, forever. You know, I don't know, 25 years. So forever is, you know, a long time. But so 25 years. So—and I think the world of Seth, very smart guy, et cetera, et cetera. So he's the one who runs the CSIS Center that has been putting out that report. So—but it's coming from the Pentagon, essentially. It's getting leaks. And then there's other stuff that I'm sure is coming from civilian sources.

[00:14:47] And so the—what I think is the timing of this is around October. Because what would be the most politically embarrassing thing of all politically embarrassing things for President Trump? Well, number one is the price of gas going through the roof between now and November 3rd. And it's going up. Just in the time I got off a plane, you know, here, I came back from Brussels. And I went to Austin. Then I came back from Austin, Texas.

[00:15:17] And in that time, that 36 hours, the price of gas went up outside my door. And I told my wife, I should have filled up. I know. I think diesel's already the historically highest price in U.S. history right now. That's right. Which drives groceries. Like, all the stuff you actually buy is the diesel price, not the gas price. And on my YouTube channel, I'm about to, after you, tape a video about what to expect more on the price of gas. So because I've done stuff on it. Anyway. But coming back to this October surprise.

[00:15:47] So the second thing is, and the one that would be the really most politically damaging, I think, for President Trump, would be that Iran tests a nuclear weapon. And it might conduct multiple tests because that would be the strategically smart thing to do. And so far, they've been pretty smart. So, but this would be the October surprise. Well, why is that? And now, will that certainly happen?

[00:16:14] I'm not sure it's going to certainly happen, that those pickaxe mountain is going to lead to the test, Scott. What I think is that they're dangling that in front of the administration like baits. But it's like a bait and bleed strategy out of Mearsheimer's tragedy of great power politics. If you, people go read that book, you know, we got to keep the Mearsheimer, the pay, got to keep them right there. Shelling, arms and influence. Okay.

[00:16:44] I've got bombing to win and how states think on my desk right now. Yeah. So I'm just telling you, you know, if you're not up on this stuff, you're seeing why. Anyway, but the strategy of the baiting, you see, the baiting, I think Iran is dangling the pickaxe mountain stuff right in front of our noses to bait us to do something on pickaxe mountain.

[00:17:10] Now, I'm going to assess whether that's bombing, atomic bomb, you know, nuclear attack or ground power. But those are the only three options here. We're not talking about it. We're not having another round of negotiations about pickaxe mountain between now and the midterms. So these are what I think is when we talk about the October surprise issue, Scott, I think we have to be a little more sophisticated about this and see that Iran knows we are tracking pickaxe mountain.

[00:17:41] Uh, they are making it very easy for the world to pick up activity in pickaxe mountain. I, I just don't believe this is happening because they're stupid. Okay. I don't buy it. Okay. I mean, they've been too smart on other things. I don't want to say they're a, a students, but they certainly in the B plus a minus range.

[00:18:06] And, um, uh, they are, uh, so I think that this would be pretty obvious. Well, if Iran's B plus a minus, what are we right now? Oh, we're, we're, we're, we're way below. Uh, we're not even average. We're, we're way below at this and it's not our tactics. Uh, so keep it. I'm, I was grading Iran on a, not on a curve and on strategy, uh, here, not on tactical proficiency.

[00:18:34] I think one of the reasons that you asked me earlier, why they didn't do things earlier with the Houthis and so forth quicker. I think some of it is they're, they're going, um, a little more deliberately. I don't know if they're going slowly exactly because they're trying to, uh, have some tactical success as well. And you might say, well, gee, how hard could it have been to take Parham Island? Well, I don't, I don't know, but you want to, you don't want to have a desert one.

[00:19:02] And that was when Jimmy Carter sent these helicopters out to try to rescue our hostages in Iran. I mean, we're supposed to have the greatest special forces in the world. And this was one of the special forces of disasters of all time. So, you know, and you might, and it couldn't, and it was in a, like a sandstorm. I mean, my goodness, the, the number of things that happened in that operation, Scott.

[00:19:24] Um, so I'm just saying, if you're, if you have any familiarity with military operations, you don't really take even the gimmies as a gimme. Yeah. No, anyone who's been to a, you know, the Florida phase of ranger school, uh, knows just how difficult it is to take a platoon full of ranger students in a stateside environment and have them paddle inflatable rafts across a bay. Forget the enemy. Like there's so many things that could go wrong just with that. Just logistically getting to an island in the middle of the Red Sea.

[00:19:54] That's actually with an untrace, like that's actually a big one. I actually brag about the U.S. military in, in the 1991 Gulf War in my classes when I explain how much we moved in six months, 4,000 miles. And I say, uh, and it's usually the opening day of class or in the opening week.

[00:20:14] And I say, let's just imagine we all decided today we're going to take this class of a hundred students and we're going to do something fun like fly to Paris tomorrow. How many of us do you think would be there tomorrow? And they all got it immediately. They got, they get it. Yeah. That, that, that doesn't get easier with scale and guns. Uh, exactly. And so I weigh out the, and so that's my point.

[00:20:41] My point, what I'm trying to say is that the, the, the reason for the going slow, I think was to, uh, give a little more chance for things to work out tactically. And unfortunately, um, luck has been with them. There haven't been those surprise, uh, like say sandstorms or something that has come up. Um, it doesn't mean it'll stay with them by the way. Uh, but the, um, uh, but in October, I think we have to be really prepared that this is going to get even more embarrassing for president Trump.

[00:21:08] And we know he feels the pressure he just offered at Dallas last week, 5,000 bucks. And by the way, he didn't even offer it just to MAGA. I mean, which I was really like, whoa, that's like every, that's a, that's a, that's a lot of money. Yeah. There, there are 260 million adults minimum in the United States, Scott.

[00:21:35] So you multiply that by 5,000, you're something like what? 1.3 trillion dollars. You know what? I gotta say, if we can afford that and the war with Iran, you know, hats off to Trump. America really has the best economy in the world. If that can actually work out. I think AI is just brainwashing the white house. So anyway, but what I think is that this is where things are going to get pretty tense now.

[00:22:02] Now, and, and by the way, the midterm pressure that I'm talking about, and, and at some point, maybe even though it's, uh, you'll, you'll decide if our, the book, our own worst enemies is going to come out and, and, and, and it's, um, coming out soon. You might want to, uh, we might, we should do a standalone talk just about that. But I'm just letting you know, it's, it's, and it won't be, you know, it's not going to be fun for the folks in the military.

[00:22:26] I'm telling you, cause anyway, but the, when I say the midterm pressure here, I don't mean it's over on November 3rd when the votes are counted or, I mean, are in, uh, or, or election day. What I mean is the first week in January, just to be very clear, because you have a situation in our country, and this was before the Iran war.

[00:22:53] This was going to be the most contentious, dangerous midterms in our lifetimes. The Iran war has just made this all worse, but you have a situation where, um, mega sections of the public don't trust the votes are going to be counted fairly. This isn't even just one side. And by the way, president Trump is already, um, um, planting those seeds so that if they, that if he loses, it's because of, uh, the, the elections were, would be rigged.

[00:23:20] So a lot of Democrats are starting going down that road too. This is not just on the one side. So you have a situation here where you really have existential politics inside of the United States. And they just, it's not just, uh, about polarization or something. It's deep, deep distrust of the other. And so the, um, the election will come on November 3rd.

[00:23:47] And then the first week in January is when the, the victor is going to be seated, uh, in Congress. Well, that's going to be a very, a very tense time because, um, if the Republicans, um, uh, win, are the Democrats going to just say, oh, sure. They won fair and square. Uh, if the, um, uh, Democrats win, um, are the Republicans going to come and, uh, have a major protest that'll get out of control like January 6th.

[00:24:17] President Trump didn't exactly order them to attack the Capitol on January 6th. He encouraged a lot of feistiness and then he wouldn't stop. You see, my book explains these distinctions. So the, um, uh, so the issues here that everything is going to be just fine as we have another transition of power. Oh man, I hope it's true, but that's why I, all of my predictions starting in June, June

[00:24:47] 15th, I started to make predictions through January. And this is a big part of that reason, which is we got to find out what's going to really happen after the midterm with the midterms. And we won't know that in a like confident way until in January. And, um, the day the Congress, uh, constitutionally has, is supposed to take power is January 3rd,

[00:25:15] which is a Sunday, which is what happened in 2021. And they moved it to January 6th. So that's how January 6th became January 6th on a Wednesday. So, um, we have things that are in the constitution, but then there's a way for Congress to just give a few more days so people don't have to fly in and take the oath on a Sunday. So we'll see, we don't know exactly the day the Congress is going to, um, uh, take, uh, power. The new one, new Congress will be seated.

[00:25:44] If they don't pass a law, then it's Sunday, January 3rd. If they do pass a law, it could be again, January 6th. Yeah. Let's definitely set that up. Cause I remember I always like to be in Afghanistan on January 6th and waking up and seeing the news and, you know, our, you know, was already in the process of starting to rotate home at that point. And the fallout from January 6th was wrapped up pretty quick. But if we have an extended event from November to January, January 6th is going to be a lot worse than the first, whichever died would, would do it.

[00:26:14] And it's not necessarily at all. It's like a lot of things. It won't happen exactly the same way. Uh, you know, it's not, you know, this is, um, you know how we, they, we say, uh, history doesn't repeat, but it rhymes very similar here. That's what happens with political violence. It's never a hundred percent the same. Um, but that doesn't mean that there's not patterns and that's what you see here.

[00:26:41] So that's what, anyway, but this is what we, we, we, and, and the folks here, um, we don't have a spare couple of carriers. Well, let's talk about that too. Like at what point, I mean, there's only a handful of blue water navies that could possibly go to the Red Sea and intervene here. We're essentially tapped out in Hormuz right now. You know, Japan's number two on the list. If you cobble together Great Britain and France, maybe. And then we got Russia and China.

[00:27:07] Like, is there anyone actually able to go to the Red Sea and intervene? No. So what I'm already listening on the podcast world when I'm on the planes, I can listen in the waiting areas. Um, and a lot of the podcasts have been saying, well, no, we don't have a Navy. So let's just bomb the daylights out of them with B2s. These are former military people. We already did that. Biden did it and then came out and said it didn't work. Well, and the reason is the concept of hammer and anvil, Scott. It's important in bombing to win.

[00:27:36] And in my publications in the last 30 years in foreign affairs, I talk a lot about in the precision revolution, it's important to understand. But it's not that air power can never be effective and it's a worthless tool. It's got to be a hammer and anvil approach where you have the air power hammer and a ground or surface force anvil so that the enemy combatants are forced into a catch 22.

[00:28:05] Either they disperse to avoid the air power hammer and then the ground power or surface power anvil mops them up easily. Or they concentrate against the ground or surface force and the air power hammer blasts them to bits. That's the concept called hammer and anvil.

[00:28:27] That is the operational concept of denial that I have, you know, been putting forward for 30 years in different wars. That's how we beat ISIS. And so that's how you would beat ISIS. All these different campaigns. That's what happened in ending the Bosnian Civil War, for example, with the Muslim Croatian ground offensive and the U.S. air power hammer. Anyway, so it's hammer and anvil. So but what you are hearing by folks in the military, these are folks who are flag rank.

[00:28:57] OK, and what they're saying is, oh, OK, so we don't have any we don't have the Navy to do it and neither does anybody else. So we should just turn loose the B2s and do what's called arc like strikes like we did or B-52s like we did in Vietnam, where we're just going to load them up with our J-DAMs, you know, because we got a lot of we're not running out of precision J-DAM. We're not running out of those. OK, so we have a lot. We have plenty of bombs is what I'm trying to tell you.

[00:29:26] OK, and they're saying, let's just load them up on our B-1s or B-2s or B-52s and just blast the daylights out of the Houthis. Well, the problem here, Scott, is there's no anvil. OK, and the Saudis aren't going to be strong enough to have a ground force anvil. They're they're they're too weak on the ground. So there's no anvil. So what you're going to get is we can run a box.

[00:29:51] We can have bombing runs and carpet bomb areas and kill boxes like we did in Vietnam and also Desert Storm on the front lines. So we can do that up or tactically. But the bad guys are just going to disperse. They're not going to sit there in clusters. Yeah. One in a half click by half click kill box and wait to get blasted. This is just not happening. Well, I mean, with.

[00:30:21] Houthis take control of the Red Sea. They shut down the pipeline that Saudi Arabia was bypassing the stratiform it was with. They've already blown it up. Saudi Arabia shut it down after that. Well, they damaged it. Saudi Arabia shut it down. But that may come back and forth on. So with transportation bomb, you heard me talk about this in New York City. So the thing, the pipelines are a version of railroad tracks trying to bomb railroad tracks. And World War II, we tried this a lot. We did this in Korea and Vietnam.

[00:30:48] The problem with transportation bombing is they're easy. The tracks are easy to repair. Well, the pipelines are a version of that, Scott, because when you attack a piece of the pipeline, as the Iran-backed militia groups did from Iraq here, then the Saudis can shut down and seal it so that the oil is not just splurting everywhere. You see what I mean? And then they can send in some crews to patch the holes.

[00:31:16] That's probably what's going to happen this week or maybe next week. It might be a two-week period of time. We don't know how long exactly because we don't know the details of how bad the holes are. But, and here's the but, which is that between the Houthis, the Iran-backed militias, and Iran itself, they've got plenty of ability to keep hitting the pipeline sections again and again. And you can't move the pipeline.

[00:31:44] So it's not like with railroad tracks, you can actually try to move them a little bit. Here, once you've got the coordinates of this stuff, you're probably going to build it right there again. You see what I'm saying? Yeah. It's not a moving target. It's not like a launcher, a mobile launch. No, that's not how this works. So it's going to be easier to keep that shut down.

[00:32:11] That said, it may come on a bit, off a bit, on a bit, off a bit. It will be up to Iran how much they want to shut that down. Well, so let me ask you, if Iran is getting to the point where they're now controlling that pipeline too, and that's like different nations, I think it's like 4% of global oil or something, which is massive. Yeah, yeah, yeah, yeah. Does this ever get painful enough where U.S. allies and partners who have stayed out of this conflict decide that they have to get in because it's too bad for them?

[00:32:39] Does Japan ever steam their fleet to the Red Sea? Yeah, I don't think it's going to get painful enough between now and, say, January. So this is going to take some time. So as the price of gas is going to go up, so my price went up here, but I think there's a good chance you're going to see the average price of gas in the United States right now is about $4.30, $4.45 a gallon, something like that. It went up almost 20 cents in the last week.

[00:33:06] And I think there's a good chance you're going to see this get into well over $5 and maybe even into $5.50, which is diesel will be far higher than that. But the actual consequences of that, Scott, they take time to play themselves out. They don't, even though the price goes up and people's complaining goes up here, they haven't maxed out their credit card yet. They haven't. So this is what's going to happen.

[00:33:32] There's going to be a couple of months, but not years, where now that the price is actually going up, the costs are going to go up. Probably diesel is going to then have knock-on effects on food prices going up. But people are still going to have things like space on their credit cards. But that, too, is being squeezed because of the 10-year Treasury bond. So now we're getting into the technicalities of stuff where we sometimes lose people.

[00:34:01] But the bottom line is the 10-year Treasury note is what is used to peg most of the credit card bills, interest rates, and also the mortgage rates. And they just went up to near over 4.8% here for the first time this week. They get over 5% here. This is all going to start to become real. But it doesn't become real like in a week. It becomes real over time.

[00:34:31] And then what – and this is how then bubbles burst. Wasn't them getting 5% the prelude to the housing crisis in 2007? Yes, but it takes a little bit of time. What I'm trying to say, Scott, people want to polymarket this so that they can bail the second or the day before the bubble burst. That's my plan. I'm going to cash out my 401K and just try to polymarket the next six months to 10x that's worth. I'm telling you, this is just not – you can't – it doesn't work that way.

[00:35:01] They're all doing this. Everybody's doing exactly the same thing. Or almost everybody. And even the people that have the inside knowledge here, like, say, the president and Scott Besson, the problem is they often don't know where the real damage in the hull of the ship is. It's actually going to sink. That's what happened with Lehman Brothers in the fall of 2007.

[00:35:31] So people can go and look up Lehman Brothers. That's what actually started to burst the bubble here for the housing crisis that went on for two years after that. Here, it's Lehman – basically a ship sunk, Scott. And once that first ship sinks, everybody – oh, this is much more real than we all thought, you see.

[00:35:55] And that is the way the markets – that's why the bubbles keep going up as the prices keep going up, even as the structure of the bubbles continue. And it's very – if you could see which of these ships was about to have their hull burst, you would try to fix it in advance. The problem is you can't always catch them all. So we tried to catch Japan just about a month ago.

[00:36:23] Scott Besson did some Band-Aids on Japan's yen-carrying trade. It looks like it maybe helped a little bit. But the truth is that's what they're going to be doing in the Treasury Department. They're going to be trying to figure out where – who's the next Lehman? And they're going to try to do their best to do whatever it takes to prevent that. But eventually, there's going to be one they can't see. And that's the bubble. That's how they burst.

[00:36:52] So this is not as – the fact that it hasn't burst yet and taking 20% of the world's oil off the market, it's just not reasonable to think there's no problem here, you see. But anyway, that said. And what you're seeing with the price of oil is since the middle of July, it's straight up. Straight up. That's what's happening with the price of oil. It's not going jig-jag. President Trump's not talking it down anymore.

[00:37:21] He tries, but he can't because it literally is the case that the fundamentals of supply and demand are now actually occurring. And the SPR, I was just showing some people what will happen with the SPR drawdown if we go at the same rate here. And even at these rates, nobody believes we can actually get to of 150 barrels.

[00:37:48] We basically completely run out of the SPR in April, early April next year. Damn. So if you're Iran and you've run this sucker all the way down this far and you're already hungry and everybody's already, you know, suffering here. Why exactly are you not running this down to April? I mean, just explain that one to me. Okay. You know, why exactly? We're going to – you're going to be Iran.

[00:38:16] You're going to suffer all these costs, okay? And then you're just going to let America and the economy off the hook because you're just such nice, moral people. Instead of let's really run the experiment to find out what happens when America's SPR completely evaporates. And it's not that long. Six more months and it's over. It's over. You're such a cheery fellow. Well, these are the problems with not – you know, I'm trying to explain.

[00:38:45] I mean, people want to stick their head in the sand and they want to pretend that none of this is ever going to really matter. And the problem is that it usually just is a matter of time. Let me ask you this since you just came back from Brussels. You know, what's the attitude amongst European – I actually – I'm not going to call them allies and partners at this point.

[00:39:10] What's the attitude amongst European states about what they are willing to do and what they think they actually can do to resolve this conflict? They're not worried about Iran. They're worried about Ukraine and Russia. Even though our whole talk was titled The Iran War, Israel and the United States and the Iran War. And I was there for two hours with the members.

[00:39:37] The – I would say – and I only had like an opening couple minutes before they started to ask questions. So the 80-plus percent of the conversation was about the global effects, meaning the impact on Europe of the post-American world. And then it was within that 80 percent also the Russia-Ukraine issue.

[00:40:08] How do you navigate that? Because this is a very, very complex problem for the EU. So you've got people who are – you know, have differing viewpoints on Russia here. This is true of members of the EU. There's 720 members. This is true of the different countries and the delegations as a whole. There's 27 delegations.

[00:40:33] So you have a variety of issues here that they're trying to – they're thinking through. And the idea that they're going to go sticking their nose into Iran, I just don't see this. This certainly wasn't – all the operational stuff we were focused on was Ukraine-oriented. It was not the Persian Gulf-oriented. So I don't see this on the horizon.

[00:41:04] I don't see anything. So I – and the more the economic problems go up, the more that they're having the dark winter that they're clearly expecting. The big thing is what does that mean for Russia and Ukraine? That's what they're – that's their top priority as far as I could see. And the fact that America – they see America as bailing out of the situation.

[00:41:31] It's not that they don't see that Radcliffe went to talk to Putin or to the Russians or that there's not a little bit of diplomacy occurring. But they didn't see any sign of the United States providing any new money in this case. And I think that from them, their guns and butter tradeoff, Scott, is guns and butter related to the Ukraine war.

[00:42:00] That's their tradeoff. So they know that their economies are in deep trouble here. But as the economy is in deep trouble, I didn't get the sense they thought they could really play anything of a – any role, positive or negative, here with what's happening in the Gulf. The big thing they're focused on is Europe itself.

[00:42:23] And that's made – you know, we've said – Trump's said forever, and I think he's basically right, that the Ukraine war should always have been more about Europe than the United States. Well, that's now happening. That's just happening. Do you think this American focus on Iran and this realization in Europe that American interests and European interests are diametrically opposed in this instance, is this going to make the European Union more resilient and robust?

[00:42:53] Or is this going to cause them to fracture because this multilateral institution was a fantasy to begin with? Well, that's what I told them where they're – so you know how I put things on the horns of a dilemma, a fork in the road? So that's exactly the fork in the road that I presented to them, which they don't like because I said these words out loud. So you've got to remember – You're not actually supposed to make people uncomfortable in Europe. Well, I'm just trying to say this is all – there is a videotape of this.

[00:43:19] So this – a little bit – but the – what I – my position was that the key is understanding Europe's interest is in regional stability, not winners and losers defined narrowly.

[00:43:36] And that regional stability is – as they think about the Russia-Ukraine issue, it's not supporting Ukraine to get Ukraine's – every inch of Ukraine territory back in the hands of Zelensky. And it's not bailing on Ukraine so that Putin has a free run. It's stability.

[00:44:00] It's building – and my model for them was Korea, the Korean War, and having an armistice like in the Korean War, which would then allow for trade. South Korea is not formally part of NATO. Ukraine doesn't have to be formally part of NATO or even part of the EU. The issue I said – I said that would only become – make for less stability because that's going to be a thorn in the eye of Russia.

[00:44:28] So what you should do is you should try to look to the Korea model and focus on stability. And then if you can get a buffer area here right at the line of contact, I said, you don't have to have Ukraine promise its surrendering its sovereignty. You just have an armistice. But then after a few years, you allow open trade with anybody for everybody.

[00:44:56] And then that's pretty much what you do. And so this is an idea to try to get out of the – a lot of what I see, Scott, with Russia and Ukraine is which team are you on? Are you on Team Ukraine or are you on Team Russia? And a point I'm making – I just did this. It'll come out tomorrow on my YouTube channel that I'm making is I'm not on Team anybody there.

[00:45:23] I'm on Team regional stability, you see? And this is what – we're kind of missing the value of that concept, you see? That's way too practical for cable news. We don't do that here. Well, we do – we're more and more. I mean, honest to God, we're doing quite a bit. So you're seeing some – you're seeing a lot of progress here.

[00:45:47] But getting a little more sophisticated is now – I'm seeing real progress in this with the different – all the social media platforms I've been on and the things I've been doing. And so we're able to talk this way about different concepts, and I think that this is – I think the way to go forward. So that's really the issue.

[00:46:11] The issue is can we, in a more sophisticated way, talk about how to create – and I think regional stability is tremendously in America's interest. I was right up front with the Europeans. I think that this should be America's interest is regional stability. This is one of the issues with whether we're siding too much with or against Israel. This shouldn't be part of the calculation. It's just – it's not like do we love Israel or hate Israel.

[00:46:41] It's – we have our own interest. It's called stability. You see what I mean? There's another way to think about this. Sacrilege. How might you dare say out loud that this interest of two states, like America and Israel, might not be completely lockstep forever? Or completely opposed forever. You see what I mean? It's – this idea that we're all – it's all emanating from your position on Team Israel, for example.

[00:47:09] I just think it's a fundamental mistaken way to think about balance of power, to think about America's national interests. And I think that the stability is the most important thing. So the stability – did I love the Obama nuclear deal? Absolutely not. Did it provide some stability? Absolutely it did.

[00:47:36] Was it replaced by something more or less stable? These are the questions Professor Pape is thinking about. You see, it's not am I pro-Obama? Am I anti-Obama? You know, these are just not the issues. Hey, for the folks listening, if you want to know more about the JCPOA and what was going on with the Obama administration, when they got that thing signed with Iran,

[00:48:01] we'll be publishing a conversation with Robert Malley, who led the team to reach that deal with Iran, tomorrow. Check it out. Mm-hmm. Yeah. I know you're busy. One kind of question in closing for you. What we've seen over the past three days with the Houthis, has this actually changed the trajectory of what's going on in the conflict, or is this just a continuation of the path that we've been on?

[00:48:27] It's a continuation but hardening of the fork in the road escalation trap. So we have, think about it as there's been a degree of strategic ambiguity around the trajectory, as you know, we talk about and we try to get clarity on. It's getting harder. The trajectories are getting harder and hardening and hardening and hardening. And that's what's really occurring.

[00:48:52] So if we go through the next few months here, the next six months, Iran's not done gaining power. So let's say that we do nothing between now and April. This is why I think I'm getting all these invitations to go all these capitals in the front-line states, which I don't know if I can go. I'll try to go as many as I can. But that's a long trip from Chicago, by the way. And I'm teaching. So they're not canceling my classes either.

[00:49:21] Just bring the class with you. You already talked about it. It's a case study in logistics. Yeah. Well, pretty – but anyway, but the – that's right. But the – but my point is that the next wave of this, Scott, is going to be political instability and more political influence and control of the capitals and the governments in the front-line Gulf states. Because after all, if we thought regime change was fair game for us to inflict on Iran,

[00:49:50] why exactly is that not fair game for Iran to inflict on them? I mean, why exactly? Because it's morally okay for us to topple those regimes. But, oh, no, no. They should just never think about doing that. Okay. And the idea that, you know, the Sunni-Shia split – well, the Sunni-Shia split didn't stop MBS from wanting to do regime change in Iran. So let me just understand this.

[00:50:16] The Sunni-Shia split is supposed to protect the Sunni states. But it doesn't stop the Sunni states from doing regime change on the Shia state. I'm not quite – you know, maybe somebody can write in to me and explain to me the higher-level math here. Well, and it's like Hamas is a, you know, a Sunni organization, and then Iran's a Shia organization. Yet they're somehow allied, and October 7th was really Iran. Yeah, it's called Realism 101.

[00:50:44] Realism 101 is what's occurring here. This is not sophisticated. It's Realism 101. And if you see a rising hegemon, part of what hegemons do to become the dominant state is they exert political influence over governments. Some is weak influence. Some is strong. Some is direct control.

[00:51:06] You see this with the United States since – even before World War II, since World War I in Latin America, the Western Hemisphere. Donald Trump wanting to just grab Maduro just because he woke up one day and said, yeah, I want that guy. Okay? This is what great powers do in their backyards. And now we're going to be – I'm not going to be surprised. So, again, I'm laying out what's the, you know, the next six months, what to think about.

[00:51:34] So, if we – and why does that matter, Scott? That matters because they have hundreds of billions of dollars, those central banks on those Gulf Front states of U.S. Treasuries. Iran has already now, in the last three days, established a tight grip on our artery of oil. Tight grip now. And that's going to impact our inflation and our costs in the United States. The next step would be control over the governments.

[00:52:04] That is control over our financial house. You see? So, this issue of the pressure here, you see, we should never have done the war. Once we did the war, President Trump should have declared victory on the first Monday after the bombing and just gone home and said, all I want to do is another Maduro. I'm done. I'm good. Going on to Cuba. Okay. Okay. He didn't do that.

[00:52:31] Then, April 8th here, Iran looked like maybe it was going to cut a deal. Okay. For real. And what did we do? We slap the economic blockade on, the naval blockade. We're just running out of, we're just, you know, those off ramps here, they're gone. You know, that's what we think we started with. You know, we're going down the road and we're telling the kids, yeah, that one's not good enough. That's a Wendy's. I want a McDonald's or whatever. I want Starbucks. Okay. I'm going to wait for the Starbucks.

[00:53:01] And it's never coming. Okay. And this is, and we're running out of gas as we go down that road. Literally running out of gas. And I run out of gas, but I'm running out of credit to buy it with. Well, and I think what we have to do is understand what the situation is so that we can try to have better long-term policies. But the better long-term policies are not coming because the Europeans are going to magically bail us out. China's going to magically bail us out.

[00:53:29] The Russians are going to magically bail us out here. No. I mean, we are ultimately going to have to be the masters of our own fate. And so far, we're not doing a good job of it. Well said. Well, Professor, it was wonderful talking with you today. Really appreciate your time. Yeah. And we'll talk in a week. Yes. And we'll set up a time to talk about your book soon. Absolutely. Great stuff. Thank you, sir. Thank you, Scott.

[00:53:57] And thanks for everybody and all their service who's watching. Thank you. Thank you.