Fears Grow for a Return to War Between US and Iran

**SPEAKER_1** (0:02)
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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec. On Bloomberg Radio.

**Carol Massar** (0:32)
Edward Fishman is back with us. He is Senior Fellow and Director of the Maurice R. Greenberg Center for Geoeconomics at the Council on Foreign Relations. He's also author of the New York Times bestseller, Choke Points, American Power in the Age of Economic Warfare. He's a perfect voice for us. Ed, thank you so much for coming back on here. As I keep saying, and Anna, one of our producers say, what is this? Like when we were talking about in our planning call, conflict, denuclearization, a war, tough peace talks.
Hard to know where we really are in this situation, and we have days where the markets look through it and some days they don't. Where are we in your view when it comes to the US war with Iran?

**Edward Fishman** (1:13)
Look, I think that there's a fundamental, irreconcilable difference between the United States and Iran, and that is, what is the status of the Strait of Hormuz moving forward?
This war, when the United States and Israel started it in February, was clearly aimed at regime change. When it became apparent that that was not going to happen, the United States sort of pared back its intentions to try to get denuclearization. But I think it became apparent that Iran's closure of the Strait of Hormuz was imposing so much pressure on the global economy, and on the US economy in particular, that it has really become a conflict over that issue. And even the Memorandum of Understanding, the deal that was signed last month, it left some serious ambiguities over the future status of the Strait of Hormuz. And I think that's what's bubbling to the surface right now. The US and Iran really fighting over what the status of the Strait will be moving forward.

**Tim Stenovec** (2:04)
Well, Edward, I want to stick on there, stick on the Strait. Could all the influence that Iran has on that waterway, could it kind of change the power dynamic in the Middle East permanently?

**Edward Fishman** (2:15)
Oh, certainly. And I think that's what Iran sees and why Iran believes it's so important for it to retain control over the Strait of Hormuz moving forward. Because for Iran, the Strait of Hormuz offers really two major benefits. First of all, it's a deterrent that anytime the United States or Israel or any other country threatens Iran militarily, Iran can say, well, guess what? We are closing the world's most important energy choke point and we can inflict significant harm on you. That's obviously what we've seen over the last few months. But I think there's another benefit for Iran and that's just in terms of revenue. The Iranian government officials have said that they see the Strait of Hormuz as about a $40 billion annuity, just from charging service fees, insurance fees, other fees for ships going through the strait. That's a huge amount of money for Iran. That would basically double the amount of money that they earn selling oil, which is their one major export. I think it's going to be very challenging to get Iran to give up that control. But, of course, the only way to get Iran to give up that control would require the US to escalate militarily, and that doesn't seem like something President Trump really wants to do.

**Carol Massar** (3:21)
Why not go back to where we were? Give Iran the strait?
It seemed to work pretty well. If we can get the denuclearization, which I thought was really the main goal here and maybe a regime change, but that is obviously tricky, why not? Doesn't the US say, okay?

**Edward Fishman** (3:41)
Yeah. I think there's a few reasons, but I think first of all, free and open navigation of waterways is a linchpin of the international system that the United States has really buttressed since the end of World War II.
Donald Trump on multiple occasions has said that there will be no charges in the Strait of Hormuz. Marco Rubio has been even more explicit saying that if Iran were to set up a toll at Hormuz, that that would cause chaos. But the thing that's unusual though, Carol, is if you read those really strong statements made by President Trump and Secretary of State Rubio, they really cut across the grain of what the US agreed to in the MOU. Because the MOU very clearly, it says that Iran won't charge tolls, but only for 60 days. It leaves the future of the Strait beyond 60 days not defined. Then also, the MOU said that Iran will determine the future status of the Strait alongside Oman. Gave Iran this role.