Transcript: The Iran War Energy Crisis Is Here (with Helima Croft)

The Long Game - Episode 16

Transcript - The Long Game with Jake Sullivan and Jon Finer

The Iran War Energy Crisis Is Here (with Helima Croft)

March 19, 2026

TEASER:

Helima Croft:

This is really an unprecedented disruption. We really are looking at 20% of the exports of oil and gas effectively blocked, and so the real question is when do we think this war unwinds? Because everything that is being thrown at this crisis right now, between strategic stockpile releases, discussion about potentially a ban on US energy exports or lifting the Jones Act, which requires US flagged vessels to move energy around the United States, that’s been repealed, none of that is going to address the core problem which we are facing right now, which is there is no viable export route to move this much oil and gas from the Middle East to global markets.

Jake Sullivan:

Welcome back to The Long Game. I’m Jake Sullivan.

Jon Finer:

And I’m Jon Finer. As the war in Iran approaches its fourth week, the Strait of Hormuz is blocked, Israel has attacked Iranian gas facilities. Iran has attacked Qatari gas infrastructure and is now going after the Saudi pipeline that carries oil away from the Strait of Hormuz. The situation is continuing to escalate and so are energy prices. Oil has surged over $110 and natural gas prices are skyrocketing. So we’re lucky to have another amazing guest today to help us make sense of this all, Helima Croft. She’s uniquely positioned to decode the chaos gripping global energy markets. She’s the head of global commodity strategy at RBC Capital Markets, and before that, before she was advising Wall Street, she spent a number of years at the CIA as a senior economic analyst tracking the exact kinds of geopolitical shockwaves we’re witnessing today.

As the war with Iran continues to upend supply chains, rewrite rules of global energy, there is literally no one better to help us understand the stakes and to think about the scenarios for what comes next.

Jake Sullivan:

So Helima’s going to help us decode what she has called the biggest energy crisis since the 1970s oil embargo, and after our conversation with her, Jon and I will introduce a new segment. We call it the Options Memo. This war is at an inflection point, and when you reach an inflection point, the national security team to a president has to define and present options for where to go from here, and in this case, those options will range from stopping soon and declaring victory to unbounded escalation that could go on for months. So Jon and I will unpack the main options, and all around, we expect this will be an action packed episode. So Helima, welcome and thank you for listening to that long wind up.

Helima Croft:

Thank you so much for having me.

Jon Finer:

So Helima, as Jake said, you’ve recently noted that the energy market is facing its worst supply shock since at least the 1970s. Some have even called it the largest disruption ever. It’s starting to feel like a shift from an acute short-term shock to something that could be more enduring. Could you start just by explaining to our listeners what you’re seeing and what the biggest implications are?

Helima Croft:

Thank you so much for having me on, and I would just say that this is really the worst energy shock we have ever had, because we’re facing a situation now where virtually all Middle Eastern energy exports, except for Iranian, and we’ll talk about that, are essentially now stranded assets. The Strait of Hormuz, as you mentioned, is effectively blocked, except for a few Iranian cargoes that are going through every day. And when you mention gas and the attacks on the Qatari gas facilities, Ras Laffan, which is the world’s largest natural gas facility, that has been shut actually since the start of the conflict, but was actually struck yesterday by missiles, so we now lost all of Qatari LNG, which has big implications for the consumers of gas in Asia and in Europe as well.

Jake Sullivan:

So Helima, we want to unpack all of that, including some of the things that have happened just in the last 24 hours. We’re recording this on a Thursday and things are happening hour by hour, but I just want to take a step back for a moment. You made a point before the war that I thought was really interesting. You said that the market, I think your words were was very sanguine about energy risks and that the message from the traders was essentially, “Call me when there’s a disruption.” Well, now there is one. There is such a big one that you’re saying it’s the largest energy crisis we’ve ever seen. So can you just explain, were markets complacent? Were policymakers? And if, as you’ve argued, the price of oil is now a broken barometer for geopolitical risk, are the markets and policymakers still complacent? Is the situation actually worse than people think even sitting here today?

Helima Croft:

I think it’s worse than people think it is right now. One thing I would look at is a difference between where Brent prices are trading, and we actually reached a point of almost $119 after the attacks that just happened in the last 24 hours, versus what we’re seeing in terms of Middle Eastern grades. And I would say Brent pricing reflects the paper market, traders trading oil as a financial asset, as well as physical. But if you look at purely the grades we’re seeing out of the Middle East, like Oman barrels, they’re pricing at $160, and we think that’s a much more accurate reflection of where the physical market is.

But in terms of why the market was so sanguine, I think there was recency bias, and we can go back to the previous administration. You remember it so well, both of you, what happened after the Russian invasion of Ukraine when we had that really big run up in energy prices, and there was a real concern that we could lose three million barrels of Russian oil. Remember, Fatih Biro, head of the IEA, was coming out warning about the loss of multiple millions of Russian barrels because of sanctions, and so people really bet on a supply shortfall that never happened. Because we didn’t get really, really serious energy sanctions on Russia in the early days of the war, and then we had price caps that enabled Russian barrels to move to India once Europe went forward with energy sanctions. So we never got a real Russian supply shock, and a lot of traders essentially said, “I lost money betting on a supply disruption that never occurred. Call me when we actually get a disruption.”

And since October 7th, we’ve had these run-ups periodically where people have thought, “Okay, maybe we might lose some barrels.” And then when it’s clear we’re not going to do so, they fade the geopolitical story. And I think what people were really looking to when this war began was what happened in June. They said, okay, there was this 12-day war. We had no physical loss of Iranian barrels. Some domestic Israeli and domestic Iranian infrastructure was targeted on the energy side, but nothing when it came to Middle Eastern export facilities, so they thought it would be the same story all over again, even when we heard clear warnings.

I had just been in the Gulf. I’d heard warnings at the end of January and the beginning of February that energy leaders in the Gulf were deeply concerned that another round of engagement with Iran would lead to Iran trying to internationalize the cost, targeting energy facilities throughout the region, and yet that fell on deaf ears in Washington, at least it seemed with the White House. And traders basically said, “Nah, we are going to basically wait to see if this really happens, but we’re betting it’s going to look like June.”

Jake Sullivan:

Interesting. So the lesson of really the last year or two has been that missiles can fly all over the Middle East but the oil just keeps flowing, and traders thought that’ll happen again this time around.

Helima Croft:

And what’s really changed as well, if we go back even beyond what happened with Russia-Ukraine, the shale revolution I think has really changed people’s mindset. Now that we have so much production in the US, people believe they’re more shock absorbers when it comes to crises in the Middle East. So now they’re basically saying, “I’m not going to price fear of disruption. I’m going to price it after the disruption.” And so oil prices are now a lagging indicator, they’re not a leading indicator of potential unrest in the Middle East.

Jon Finer:

It does underscore this notion of energy independence or sometimes what this administration calls energy dominance, maybe more rhetoric than reality in the current moment, in spite of the fact that US production has increased as much as it has.

Helima Croft:

But as you know, we could have prolific US production, but at the end of the day, the US is a just in time producer. We’re not sitting on spare capacity except for what’s in the SPR, but US shale producers, they basically produce it and they sell it. They’re not Saudi Arabia, they’re not Kuwait, they’re not the UAE. They’re not sitting on barrels in reserve that they can bring on to the market or take away. Saudi Arabia is really the only country that effectively tries to act as a central banker for oil, and again, why I think people were complacent as well is because I think they assumed there were more OPEC barrels out there that could be deployed if there was a supply disruption.

The problem is we don’t have a lot of OPEC barrels because OPEC has been bringing forward production the last 12 months because President Trump has asked for more OPEC barrels. The Saudis and UAE and Kuwait, they’ve complied. So there’s not a lot left when it comes to the additional barrels they could bring on the market. But even if they wanted to bring those barrels back, they’re effectively shut in because you can’t move anything really through the Strait of Hormuz right now.

Jon Finer:

So just for our listeners, you referred to the SPR, which is the strategic petroleum reserve that the United States maintains for situations of energy shocks like this. And they have made clear that they’re going to be deploying some of those reserves to try to address this crisis, although given the scope and scale, the amount they’re likely to release may not move the needle here.

Helima Croft:

This is really an unprecedented disruption. We really are looking at 20% of the exports of oil and gas effectively blocked, and so the real question is when do we think this war unwinds? Because everything that is being thrown at this crisis right now, between strategic stockpile releases, discussion about potentially a ban on US energy exports or lifting the Jones Act, which requires US flagged vessels to move energy around the United States, that’s been repealed, none of that is going to address the core problem which we are facing right now, which is there is no viable export route to move this much oil and gas from the Middle East to global markets.

Now, there is a few couple offset options. One is UAE’s port in Fujairah, which sits outside of the S-curve of the Strait of Hormuz, but that’s been attacked on multiple occasions since the war started. All eyes are now on the East-West pipeline, which is a pipeline that the Saudis spent billions of dollars on. It allows them to move about five million barrels a day across Saudi Arabia for export through this port called Yanbu on the Red Sea. Only problem is, as both of you know, it was struck in 2019 by the Houthis, and we just saw, in terms of the events that have happened in the last 24 hours, attacks on that Yanbu port. It is still operational, but that has become the main alternative offset for the Strait of Hormuz, and so if people believe that that is not safe, then we’ve basically locked everything up in the Middle East.

Jake Sullivan:

With respect to that Yanbu pipeline taking oil to the export terminal on the Red Sea and thereby skipping the Strait of Hormuz, Iran is very familiar with the fact that that is an alternative way to supply the global market. They have taken a shot at it, as you said, just in the last 24 hours. The Saudis were able to defend against that, but we have seen before the Houthis be able to hold it at risk, as you said, and Iran is going to keep trying to strike that. So that feels like a quite fragile solution if it’s a solution at all, and even if it can be up and running at full capacity, how much of the oil from the Strait of Hormuz can it replace?

Helima Croft:

We’re talking about trying to swap out the Strait of Hormuz, which on any given day moves 17 million barrels of oil and product, with a pipeline that basically is capacity, seven million, but probably running between four and five million a day, so in no way is it replacing the volumes that come through the Strait of Hormuz, and we really have to watch, if the Houthis enter the conflict as well and people start thinking about the Red Sea being very unsafe. Because remember, a couple of years ago, we were talking about the Red Sea being the dangerous choke point, Bab al-Mandab. If that becomes a problem once again, I think oil will just move higher, and I don’t think market participants have fully woken up to the fact that this is not a secure alternative route.

Jon Finer:

Recognizing that you don’t have a crystal ball, part of your day job is not just analyzing the present, but looking forward at where things could go in the future. And you’ve talked about how the oil price could eventually exceed the very short Russia-Ukraine war high period of $128 a barrel, or even what I think is the overall record, the 2008 price of more than $140 a barrel. What are you looking at in terms of inflection points that could push oil to those levels or even beyond, and is there any ceiling here for how far this could go?

Helima Croft:

Well, the ceiling is demand destruction. At what point do prices go so high that it basically crashes demand globally? I certainly think that if this extends beyond several weeks, if we’re in a multi-month conflict, we will take out the ‘08 highs, and so then it becomes a question of when does demand destruction start to balance that market? And obviously, if you’re having demand destruction causing prices to pull back, you are in a very, very serious economic crisis globally, so that is not the way you want to have lower prices. So I am very focused on two factors. I’m very focused on duration of the conflict and I’m very focused on what points we are already starting to see cascading shut-in. So it’s not just that we can’t move the oil. It’s that now, storage is reaching tank tops across the Middle East and you have varying storage levels.

Different countries have invested more in pipelines than others, more on storage than others. Iraq, for example, it’s basically already reached tank tops, so they can move maybe 300,000 through Turkey, but essentially, you’re looking at basically shutting in about four million barrels soon. They’re over three million in shut-ins. Shut-ins are piling up across the entire region, and it’s not going to be like a light switch to turn that back on. So if you effectively shut everyone’s fields down, then you have to think about how long does the war go on, and then when the war ends, how quickly can you get this production back up online?

Jake Sullivan:

Helima, you’ve introduced a new concept for me. I thought tank tops were just a kind of shirt that I could never wear. I hadn’t heard that-Jon Finer:

For the next podcast.

Jake Sullivan:

... a description of reaching the top of the tank so that at that point, you can’t store more oil, and therefore, you can’t bring more oil out of the ground, and that’s what this concept of shut-in means. And once you’ve shut in production, it’s not just a matter of ending the war and restarting it. You actually have to take time to get that production back online.

Helima Croft:

Right. You’ve got to get yields back up online. I think the Saudis will be faster because Aramco is such a best in class national company, but I worry about how long is it going to take Iraq to get back up online. They were already facing such a severe financial crisis before this war started. They have not made the investments that they need to in terms of storage, in terms of pipeline capacity. It’s a system that is able to produce, but they’re not able to easily move it or store it, and so you worry really about that infrastructure and the challenges they’re going to have bringing this back online.

Jake Sullivan:

And just for our listeners, Helima spoke very eloquently about demand destruction. Demand destruction is basically a shorthand of saying the price of oil goes so high, the businesses simply can’t afford it, so they stop growing. And then as a result, they stop buying oil altogether, and essentially, economic activity shuts down and you get a massive recession. So the ceiling being demand destruction is a pretty alarming fact, but goes to these two things that Helima is asking us to look at, one being how long does the war go, and two being how much oil is shut in and how long does it take to bring back online?

But obviously, Helima, it’s not just oil, it’s gas, and you were referring earlier to what’s happening in Qatar in particular. They had previously shut down a significant portion of their liquefied natural gas LNG output, and then in this massive escalation over the past day or so, first, Israel hit Iran’s main gas field this week, and then Iran turned around and hit Qatar’s facilities. Qatar obviously is a major supplier to both Europe and to Asia. I read today that the head of Qatar Energy said that 17% of Qatari gas could be offline for three to four years.

Helima Croft:

Yes.

Jake Sullivan:

And that’s obviously in an instant ballpark analysis, but can you just talk for a minute about what you’re seeing when it comes to market disruptions on LNG, who suffers from that and what we should be watching for?

Helima Croft:

The gas story is so important because we can talk about, well, as long as East-West stays operational and you can move it to Yanbu, there’s a modicum of relief on the oil side. Or if the Fujairah port is operational, maybe you can move an additional 1.4 million out of that and avoid Strait of Hormuz. There is no offset for gas. There is no alternative route to move this. When the Strait of Hormuz is effectively blocked, there is no way to move Qatari gas anywhere in the world, and the Qataris were very, very quick to shut in Ras Laffan, again, the world’s largest LNG facility. They did it almost as a precautionary measure.

There had been an attack on the facility in the early days, or there had been reports of like a drone and debris fell on it. And they were very quick for I think safety reasons, precautionary reasons, even though we heard there was not a lot of damage in that initial drone incident, but the one that occurred in the last 24 hours, much more serious. And again, 17% are the early numbers that we’re hearing, but we obviously have to wait and see for the full damage assessment.

But you mentioned that field South Pars that the Israelis struck, they share that field with the Qataris. That’s the world’s largest field, and so it caused a lot of alarm bells because people were like, “Wow, if you’re going after South Pars, that is going to prompt a very, very aggressive Iranian retaliation.” And we saw it in terms of Ras Laffan, but the Iranians targeted UAE facilities and they targeted Saudi facilities. And so the question is is this going to continue to escalate? Is Israel going to stand down in terms of attacking Iranian energy infrastructure? Is Iran going to pair back? There’s nothing to indicate yet that we’ve reached any type of off-ramp when it comes to energy attacks.

Jon Finer:

For the big energy importers, Helima, both oil and gas, isn’t part of the problem on gas that oil is actually easier to store large quantities, for at least a period of time? Gas may be a much more acute, earlier crunch for some of these countries.

Helima Croft:

Oh, a hundred percent, and so we’re looking at the consumers in Asia being hit particularly hard. So that’s going to be the frontline economic effects will be felt in Asia when it comes to Qatari LNG, but pay attention to Europe as well. And you two know this so well that when they decided in Europe to start pairing back Russian gas imports, they got imports from the United States, and the Qataris freed up gas that was not needed in Asia because it was warmer weather, and that was a decision they had to take at the highest levels in Doha. And they basically allowed that gas that wasn’t needed, was contracted but not needed, moved to Europe. And so you are going to be facing problems, particularly in a country like the United Kingdom which imports large quantities of LNG from Qatar. And so again, if this crisis does not abate, UK consumers are going to feel this pretty strongly.

Jon Finer:

We were both quite involved in trying to break the very unhealthy dependency that the European countries had on Russian gas. I feel like they are now increasingly feeling insecure about their current energy mix, and you’re already seeing a few European leaders muse about the possibility of going back to Russian supplies given what’s happening in the Middle East.

Helima Croft:

Well, I think what’s really interesting, and we’re going to be watching in the next 24, 48, 72 hours, are we start going to see United States talking about banning exports to deal with the crisis. And you think about Europe, and there was a discussion I was hearing in Europe a couple of months ago about are we too dependent on the United States now for energy? Are we now in the dynamic of concentration risk, that we take too much from the US? And so I’m going to be watching very closely, if we do start announcing energy bans, export bans, what does that mean for our relationship with our allies that we encourage to take more US energy exports?

Jake Sullivan:

Let’s imagine the Trump administration actually did follow through and say, “We are now banning crude oil exports from the United States.” What would be the practical impact of that, first here in the United States for American consumers? And then second, you’ve just elaborated some of the consequences globally, and in particular, the impact on the perception of the world of the United States as an unreliable energy supplier, but can you just talk for a minute about how this could actually even work? Because it would be quite a striking thing if the United States decided we’re retreating from the global oil market, we are going to ban crude exports, which we used to do in the past, but essentially, we’re going to have our oil for ourselves and shut ourselves off from the rest of the world. So can you just talk our listeners through the implications of that from your perspective, and do you think that that is actually something that we might possibly see here in the coming days or weeks?

Helima Croft:

The problem for this administration is that they are throwing a lot of things at the wall and nothing is sticking, and so we’re cycling through policies, and again, nothing is going to the heart of the matter, which is that we’re not able to unlock these exports from the Middle East. But we’re already starting to see market participants price in the idea of an export ban. Part of the reason why West Texas intermediate prices are lower than the international benchmark Brent is because some market participants are starting to anticipate that we will ban US energy exports on the crude side for now. And what that will mean is that yes, WTI will trade lower, so you will have potentially a little bit of relief for US consumers, but the problem is that if you think about our refinery slate, particularly in the Gulf Coast of the United States, a lot of those refineries are geared to run heavier barrels and medium barrels.

That’s why we still import oil. That’s why we import millions of barrels from Canada, is because our refinery system is geared in the Gulf Coast to take those heavier barrels. And so the problem is it’s a bit of a mismatch that US shale producers produce a lot of light sweet barrels. We can’t refine all that here. Part of the reason why we lifted the ban on exports was to make these companies and these investments more commercially viable, because there was not a market for all of that light oil here. These producers would not produce that much oil if there was no market for it. They produce it and now they export it. So if we ban those exports, what’s that going to mean? We’re going to mean that we’re going to basically start to see lower US production, and that’s what President Trump has really prided himself on, being the architect. Even the Shell Revolution we really started to see in the Obama administration, but he’s really taken great pride in his deregulatory agenda when it comes to US oil and gas, permitting reform.

But if you do an export ban, you’re really going at the heart of the business model of a lot of US producers, and again, our refineries are geared to run, in the Gulf Coast, a lot of them are geared to run heavier barrels, so we’re going to end up with a refinery mismatch.

Jon Finer:

You keep coming back to what I think is a very accurate and important analytical point that for all the ways in which people are trying to problem solve around the fundamental blockage of the Strait of Hormuz, as long as that remains the situation, this is going to be a very hard circumstance to address. You’ve also said that Iran, not the United States, not Israel, is the country that holds the key to doing that. And I guess I’m wondering, how are you thinking about, how are markets thinking about the possibility that the United States could by force, military force, go in and open the strait? Is that something that markets believe, that you believe is a plausible solution during the conflict at this point? How are you thinking about that?

Helima Croft:

Well, again, I think in early days, a lot of market participants gave the White House the benefit of the doubt. Remember, we had that big run up in prices over a Sunday night when the Asian markets opened. We had Brent prices closing in on $120, and then on Monday, you had President Trump come out and say, right before the closing bell by the way, this is going to be a short war, and we had this big selloff. And then the next day, we moved a leg lower when you had Energy Secretary Wright tweet that the US had escorted a ship through the Strait of Hormuz. Later turned out to be a phantom escort because there was no US escort of a ship through the Strait of Hormuz. But I think a lot of market participants early on were like, “This is going to be a short war,” so they would sell on any indication that that was going to be the case, and they believe it’s easy to escort ships through the Strait of Hormuz.

I was telling some of my clients, this is not like getting a tug in the Hamptons when you run up on a bank or something. This is actually a very, very complicated operation, and you can go back to, as you know, the tanker wars in ‘87 where we reflagged Kuwaiti tankers during the Iran-Iraq war and helped escort those tankers through the Strait of Hormuz. I think we had about 80 vessels involved in that effort to try to secure passage of those ships through the Strait of Hormuz, joint operations I think with the UK and France. But we’re an active protagonist in this war. In the Iran-Iraq war, we were not engaged in active military campaign at the same time we’re trying to escort ships through the Strait of Hormuz.

So I think there was a misperception about how easy it would be to do this, and I think now, people are starting to realize, wait a second, if there is no escort, it’s because it’s complicated, that we can’t just move ships over and reopen the Strait of Hormuz. It might actually take some type of US ground involvement along the coast, that this is a much more challenging operation. I think that is starting now to dawn on many market participants.

Jake Sullivan:

So Helima, the larger implications of this for other countries are real too and in other theaters. Russian crude prices have skyrocketed. The Treasury just authorized countries to purchase Russian oil stranded at sea to help try to stabilize markets. That sure looks, as you just said, like Russia’s the big winner. Are we reading that right? And if you’re sitting in Moscow right now, not that we’re asking you to put yourself in the position of an advisor to Vladimir Putin, but how are you looking at this if you were in fact in the Kremlin right now? You’d probably be pretty psyched about the situation. Is that a short-term thing or will they gain over the longer term on this? How do you read the overall impact on this on Russia’s capacity to generate revenue from increasing prices for Russian crude?

Helima Croft:

Maybe I’m going to be Alexander Novak, the deputy prime minister of Russia-

Jake Sullivan:

If you can muster that.

Helima Croft:

Or the secretary of .... I’ve watched Alexander Novak for years at OPEC. He’s actually a very, very skilled energy diplomat. But I would say if you’re Alexander Novak and you’re in conversation with your boss, you’re like, “This is working out wonderfully for us.” We’ve gone from a situation where at the end of 2025, the United States imposed full blocking sanctions on the two largest Russian energy companies, Rosneft and Lukoil, making it very difficult for Indian refiners, particularly the all important reliance refiners that were taking 500,000 barrels a day of oil from Rosneft as part of a special agreement, all of a sudden, Reliance, because it’s so deeply embedded in Western capital markets, had to basically say to Reliance, “We can’t take those barrels anymore.” We started building Russian barrels at sea. That’s why we have 140 million Russian barrels sitting on the water, is because the impact of these escalating sanctions meant it was hard to find a home. China can only take so many sanctioned barrels, particularly these teapot refiners.

And so if you’re Russia, we now have a situation where we’ve just, with a stroke of a pen, said, “You know what? Don’t worry about those sanctions. India, back up the truck, take those barrels again,” and Russia’s getting full economics for those barrels as well. No one’s really talking about trying to enforce a price cap on those barrels, so Russia now is essentially refilling its ATM as a result of this war in the Middle East. So if you had to say winners or losers, top of the list would be Russia in terms of who is getting the economic dividend from this war.

Jon Finer:

It’s interestingly not just Russia that the United States is looking at advantaging to some extent through policy interventions. Somewhat paradoxically, it’s also Iran. We’ve had the Treasury secretary come out over the last 24 hours and talk about lifting sanctions in the middle of a war against Iran on about 140 million barrels of Iranian oil that are sitting in tankers around the world. What do you make of that? It’s a striking consequence of launching a war on Iran that they could end up getting sanctions relief out of it. I don’t know that I saw that coming. Do you think that’ll happen, and would it even make a dent given the volumes that we’re talking about?

Helima Croft:

Gosh, what a time to be alive. I could not have imagined that this would be the policy option that we’d be landing on, but again, I think it just speaks to the fact that we are cycling through policies. Remember, when this war started, the White House was not signaling that there would be any major economic impacts from this. They said it would be a short war. We had plenty of oil, don’t worry about it. We would not release from the SPR, the Strategic Petroleum Reserve. We’re now talking about doing potentially another US Strategic Petroleum Reserve release, and as you just mentioned, we’re now talking about not only waiving Russia sanctions, but potentially waving Iranian sanctions. And the only vessels that are really moving through the Strait of Hormuz are these very large crude carriers, VLCCs, that are fully loaded with Iranian barrels moving to China.

So this is a situation where the only Middle Eastern country that is exporting through the Strait of Hormuz is Iran. They may now be able to get maybe full economics for their sanctioned barrels, and yet they are the ones that we are on the opposing side of in this war. So it is just speaking to the fact that there was not probably a lot of advanced planning about how you would deal with a major supply disruption in the Middle East.

Jake Sullivan:

By the way, Helima, does it surprise you that Iran is still able to move its own oil through the Strait? I would not have expected that.

Helima Croft:

They wouldn’t attack themselves. I think it goes to the fact that-

Jake Sullivan:

But we’ve let it go, right? It’s interesting that they’re holding everyone else at risk, but they’re moving their oil and everyone’s accepting that situation. Now it’s turned out, of course, and that oil is going to China, so the US has essentially created a circumstance where the oil is not supplying global markets, the price is going up, and yet Iran can keep getting revenue by sending oil to China. That’s a a strange circumstance. And now it seems like the direction of US policy is as much oil as Iran can sell, we’ll help them sell it, not only by allowing them to move it onto the water, but by lifting sanctions as well. Just curious if this was baked into the dynamic from your perspective when this kicked off.

Helima Croft:

Again, I think this shows that the White House was not anticipating the crisis that we’re facing now, because this is an administration that has taken great pride in lower energy prices. The best theme of their affordability agenda has been cheap gasoline, and if you think about it, $4 retail gasoline, it’s really a psychological pain point for many US consumers, and that is definitely ... We’re already seeing it in some states that we’re crossing that mark, but that is absolutely going to be the reality for US consumers. And so it just talks about the multiple agendas this administration is facing right now, and how do you reconcile them if you do not have an offramp for this war? So the fact that you still are so focused on trying to control the price of gasoline that you would allow Iran to receive additional revenue when you’re trying actually to end this war with Iran or to defeat Iran, it’s very hard to see how this unwinds in a clean fashion.

Jon Finer:

So we launched this war, we, the United States, created the price environment that we’ve all been discussing during the course of this conversation, and the US government has tried now a number of different policy interventions to try to get the price spikes under control, but most of them have been pretty ineffective up till now. Releases from the strategic reserves, an insurance scheme from the Development Finance Corporation for tankers.

Helima Croft:

We can talk about that, yes.

Jon Finer:

That was one of the early ones on the table. Now, we’re talking about a possible export ban or removal or lifting of sanctions on Russian barrels, on Iranian barrels. Are there other policy steps that you see or could anticipate that are still on the shelf that could actually help in this situation, or have we basically exhausted the toolkit?

Helima Croft:

We are exhausting it pretty quickly, and so I’ll go back to the insurance situation. The issue with the DFC, the Development Finance Corporation insurance scheme, which again, market participants reacted initially pretty favorably to that because they came out very, very confident in saying this was going to solve the problem, but that insurance scheme only covered the Strait of Hormuz. It did not cover the rest of the waterways, and we’ve seen unarmed, unmanned boats fold with explosives attacking tankers off the coast of Basrah, for example. So we have contested waters. The blast radius from Iranian attacks is pretty wide. It’s not confined in any way to the Strait of Hormuz, so that insurance plan did not cover anything outside the strait. Also didn’t cover loss of life or environmental damage, and so there were not a lot of takers for that insurance plan.

And so that was one of the early things that was announced, got some traction for about 24 hours, but then people looked at the details and energy companies were like, “That’s not going to get me excited to move my vessels.” And Shaikh Nawaf Al-Sabah, someone we all know, the CEO of Kuwait Petroleum Corporation, he came out in an interview and said early on, he was not going to move Kuwait’s strategic tankers unless there was some guarantee of security from the United States, and again, that is what is really needed to unblock the Strait of Hormuz. People have to believe that their vessels are not going to be targeted in a way that leads to the loss of life, that were not going to have oil spills. This is a really frightening situation for these shipping companies, for these energy companies, and that’s what needs to be fixed. We need a policy that can address that primary concern, and I don’t see how you do that.

Jake Sullivan:

So Helima, we’re going to get you out of here on this one looking from today down the road to the future. This podcast is called The Long Game. If you were still at the CIA and you were asked to write a national intelligence estimate, which is an intelligence informed analysis-

Helima Croft:

As I know.

Jake Sullivan:

Right?

Helima Croft:

Yes.

Jake Sullivan:

For the senior most US officials for our listeners, a national intelligence estimate to present to those senior most US officials on global energy security beyond the next few months, talk to us about what the key findings would be. And to put a finer point on it, the supply shock back in the ‘70s caused a major shift in how countries like the US approach their energy policy and strategy.

Helima Croft:

Like the creation of the International Energy Agency, yes.

Jake Sullivan:

Right, right. So do you think we’re going to see something here similar, that we don’t go back to some version of normal but that this is a disjunctive event and that the future of the global energy market will end up looking a lot different, or do you think that still depends on how this all resolves? Tell us how that NIE would look if Helima Croft were writing it.

Helima Croft:

Well, Helima Croft used to do a lot more current intelligence assessments, so I was actually covering an oil producer that was losing significant quantities of oil as we were headed into the Iraq wars. I was actually the analyst covering Nigeria, so I used to have to write these intelligence briefings on how much we were losing out of Nigeria, how quickly could we get it back online, and so I was used to covering supply outages. When Nigeria was losing 800,000 barrels a day in March of 2023, I’m showing how old I am, we also had a Venezuelan oil strike that was causing about a million Venezuelan barrels offline as we were going into the Iraq War. And so we had a lot of conversations about, gosh, how do we better insulate the United States from these outages? And I think after this crisis, there’s at a minimum going to be an investment in storage.

I do think that is going to become one of the primary policy goals of key oil producing countries, is we better basically ensure that we have much more storage, and maybe not just have it in the Gulf, but also be able to store our oil closer to our actual market, so I think that will be a key investment.

I think countries that are consuming countries are going to invest more in rebuilding their shock absorbers in terms of strategic petroleum reserves, so I do think we’re going to see countries really invest in saying, “You know what? I may need a better rainy day fund.” And one country we haven’t talked about a lot is China was buying aggressively for the last 12 months of all commodities, but a big, big purchaser of oil and they’ve spent a lot of money building out storage. And I do really wonder right now if China engaged in better risk management than a lot of other consumers, because I do think that China has better shock absorbers in place because they’ve built so much in terms of their strategic reserves going into this crisis.

Jake Sullivan:

Yeah. They seem to have learned a slightly different lesson from last year’s 12-day war than the rest of the world.

Helima Croft:

Yes, yes.

Jon Finer:

Helima, incredibly grateful for your time, for your insights, and I hope that there is somebody with your level of expertise or something approximating it inside this administration giving the kinds of advice you’re giving our listeners to the president, because it’s quite clear that they need it.

Helima Croft:

And I’m sure there’s incredible talent still in the CIA. I have to tell you, working on those energy issues, I was surrounded by people who were just extraordinarily talented, so I do believe there is probably some incredible analysts that are producing reports that I hope the administration is reading.

Jake Sullivan:

Amen. Thank you, Helima, for joining us.

Helima Croft:

Thank you for having me.

Jake Sullivan:

So Jon, a lot to digest in what Helima laid out. I thought she gave a fantastic laydown of frankly, how the markets missed this, and as the subtext of that, how the Trump administration missed this, and also how the ceiling on this is quite a scary one. It is the price of oil goes up so much that it craters the global economy. So I think she had a lot of interesting things for us to watch on duration of conflict, how much oil gets shut in. I learned some new things like tank tops. I also thought it was quite interesting when she was talking about VLCCs, very large crude carriers. It reminded me of the Princess Bride’s rodents of unusual size. The oil markets appear to be incredibly literal, just like the writers of the Princess Bride, so that was interesting to me. Probably not the biggest thing other people took away from it, but quite a striking set of observations and extremely timely given everything that’s going on, even as we speak, in terms of the trading of shots at energy infrastructure across the Gulf.

Jon Finer:

One of the things she started to allude to, but that we’ve been thinking a lot about and I think are going to have to come back to at some point, are the knock-on effects in other areas of the economy beyond energy, which is obviously the near term area of greatest focus that could be quite significant and even strategically important, and even geopolitically important down the road. And I think there are a number of those areas that are just starting to feel the pinch of this, and as Helima has said, the longer it goes on, the deeper those impacts are going to be.

Jake Sullivan:

Amen. We really spent our time with her focusing on the headline grabbing energy shock, but when we look at the effective closure of the Strait of Hormuz, we also have to be deeply concerned about how this ripples through a whole host of other critical supply chains, because this waterway is not just an energy corridor. It’s a massive artery for raw materials leaving the Gulf, and frankly, also for vital goods entering it. If you look at fertilizer and the way in which countries, particularly in the global South, are looking around saying, “Are we going to be able to grow our crops this year?” If you look at petrochemicals, the Gulf accounts for 13% of the global chemical trade, and the disruptions we’re seeing to the flow of some of those core products, they’re already hitting major Asian petrochemical companies, which here, we’re talking about the foundational building block for everyday plastics, for packaging materials, you name it.

Then you’ve got industrial metals. Because aluminum smelting is so energy intensive, the Gulf has quietly become a massive hub of aluminum smelting, handling something now approaching 10% of total world production. So when you’ve got those exports bottlenecked, then you’re going to be staring down real supply shortages that could drive aluminum prices to historic highs. That’s everything from car manufacturing to commercial construction, and Jon, I know you’ve been particularly looking at the impact on the tech sector, on semiconductor manufacturing, which also will ripple through here.

Jon Finer:

Yeah, I think there are a couple big things that are worth paying attention to, maybe starting with the fact that the Gulf countries and the sovereign wealth funds that they control have been incredibly important, in some cases, even primary drivers of the AI buildout, data centers and other infrastructure in the United States, around the world. We’re talking about hundreds of billions of dollars that are being deployed already, in large part driven by some of these funds, but that are also anticipated in the years ahead. And now these countries are going to have a fundamentally different set of priorities coming out of this conflict, including rebuilding, reconstituting their domestic energy infrastructure that we’ve just been talking about, much of it being taken offline. So how much of this money is going to be available to the tech sector in the way that it was I think is a big open question.

And then the microchip industry, in particular, semiconductors, are reliant on this region. Qatar is one of the world’s largest suppliers of helium, which is a byproduct of natural gas extraction that we were talking about, and it’s essential for semiconductor manufacturing and fiber optics, MRI machines and the like. So you combine the helium squeeze with the fact that the Gulf produces also about half, almost half of the world’s sulfur exports, which gives us high purity sulfuric acid that’s required to build these clean silicon wafers and tech hubs like Taiwan and South Korea, and now we’re looking at a serious bottleneck in the semiconductor manufacturing industry. And then there’s the risk of the dogs that haven’t yet barked, accidents and whatnot. So this disruption is going to extend, is going to ripple well beyond the areas that we have been talking about.

And then when you talk about the Gulf specifically, this is a two-way street. While the world relies on the Gulf for energy, the Gulf relies on much of the rest of the world for food imports. They import billions of dollars worth of cereals and meat and fresh produce almost entirely by sea, and right now, hundreds of dry bulk carriers are trapped or actively avoiding the region entirely, which holds staple shipments, rice, South American grains, so you’ve got a food insecurity risk that’s tied to this as well. So this is a lot that we’ve just put on the table, but some of this is about flagging where the puck could be moving on these issues in the weeks ahead, and we will definitely come back to this, I think, periodically during the course of this podcast.

Jake Sullivan:

Jon, did you have helium shortages on your bingo card when this conflict kicked off?

Jon Finer:

Absolutely not, and have been digging into it. It’s one of the funny things about these moments, is people who are experts in extremely abstract areas of the global economy all of a sudden acquire, let’s just say tens of thousands, if not millions of new people interested in their work. And so I’ve been trying to suss out who follows helium trade and helium production, and these people are available and this is their Super Bowl.

Jake Sullivan:

There is a guy actually who is identified in a lot of these articles as running a Helium consultancy, so he’s been there working on this critical input to so much of the semiconductor industry and so many other things as well, quietly in the shadows, and yeah, like you said, it’s the World Cup for Helium now and he’s having his moment in the sun. But across all these different places, one of the things that we learned very painfully over the course of our four years is the fragility of global supply chains and their susceptibility to disruption when conflict breaks out, and that the farthest reaches of the world are touched by conflict that happens on the other side of the globe, and we’re seeing that. The effects-

Jon Finer:

I don’t remember the word supply chain being uttered in the situation room during the Obama administration in my first stint in government.

Jake Sullivan:

In the Biden years, you rarely didn’t have it mentioned in one of these contexts.

Jon Finer:

It was a core of our work.

Jake Sullivan:

Yeah, amazing. Amazing. Okay. So we’re going to watch all of that, I think energy obviously as the headline issue, but these other elements being really critical to the proper functioning of the global economy and just to the lives of everyday Americans. So something that in future episodes, we’ll keep coming back to to see how long these disruptions last and how long it takes to recover from them. But now, we’re going to use the rest of the time that we have in today’s episode on a new segment. We’ll be road testing it here. We call it the Options Memo, and Jon, this is yours, your baby, so why don’t you introduce it?

Jon Finer:

I like to think of it as ours, but I will introduce it. This is an idea that came actually from a listener who I met during overseas travel who wanted to talk a bit about the podcast and had a suggestion for a segment that I thought, I guess we thought was a good idea. So basically, when a policy reaches an inflection point and the president faces major decisions, his advisors, we play these roles, owe him a clear, clean presentation of options for his consideration for how the country can proceed. Usually, this comes in the form of a paper, the options memo. That paper is usually generated by the NSC, which we ran, and often, the discussion revolves around three options, because otherwise, it either feels like too few or too many, such that it can become unwieldy, so often, these are three option papers.

Sometimes, by the way, people game the options memo by two very extreme options on either side of what they consider to be the reasonable middle path to try to steer the discussion in that direction. We are not going to do that Goldilocks style just right approach. We will try to be honest about the options that the administration faces.

Jake Sullivan:

By the way, the Pentagon loves that in particular. Their options memos are frequently nuclear war, nothing, or our preferred option. Those are your-

Jon Finer:

Or what we think you should do. Exactly.

Jake Sullivan:

... choices. Right.

Jon Finer:

So basically, the staff generates a memo that gets refined in meetings that take place in the situation room where key people are sitting around a table, no windows. The paper is distributed in advance, so people come in prepared to discuss it. Usually, that takes place first at the level of deputies, the deputy cabinet secretaries, which is a group that I chaired, and then sometimes we allow the principals, the group B chair, to look at it too. Principals can’t always be trusted for these purposes, but every now and then. And then ultimately, the decision goes to the president to make a call, either in the form of a recommendation if there’s a consensus behind one particular approach, or what we sometimes call a split memo. These departments and agencies or these cabinet members believe X, these other ones believe Y. We need your decision on where to proceed.

So while we have no idea if this administration is following anything like this sort of process, we did develop some options for discussion at what feels like a pretty significant moment in this war. And just to stipulate upfront, we have been against all of this from the start. We wish we had never gotten to this point, but we are here, and since we are here, it’s worth really thinking hard about what the president should do.

Jake Sullivan:

So we have identified three options. The first option is essentially declare victory and wrap it up, the second is escalate to deescalate, and the third is go big or go all in. So let’s start with declare victory and wrap it up. This option would basically involve the White House, the president, saying, “We have achieved our objectives, and now we are going to bring this war to a close,” and say that we have accomplished what we set out to accomplish. There was an Al Jazeera article called the US-Israeli Strategy Against Iran is Working, that was the headline of the article by a guy named Muhanad Seloom, that basically made the case for a version of this option. Said the US and Israel have been successful. They’ve badly degraded Iran’s ballistic missile capabilities, set it back years. The nuclear program has been set back. The proxies, the terrorist proxies like Hezbollah and others have been badly weakened, the top leaders have been eliminated, and so the administration at this point can say all of the operational objectives have been met and we can wind this down.

The benefit of that, coming off of the conversation with Helima Croft, is that you could, if you were successful in ending the war right now, and that’s an if I’ll come back to, you could get the Strait of Hormuz reopened, you could get energy and other commodity flows restarted, you could begin to alleviate the disruptions to the global economy, and you could put a lid on what the possible other spillover and escalation impacts and effects might be. This may be the most risk averse of the approaches, but it’s one that has real attraction, particularly at this moment, this inflection point, as you put it, where this thing really could continue to spiral out of control.

Now, what is the problem with that? Well, number one, Iran gets a vote in whether or not the war ends right now, so even if the United States and Israel were to say, “We’re done. We’ve accomplished our objectives. The war’s over,” Iran could say, “Not so fast. We’re not simply going to let you stop and then let the Strait reopen, and then wait for you to come hit us again in a few months. We are going to keep the Strait closed until there’s some greater guarantee, in what form is a little unclear, but some greater guarantee that you’re not just going to come back and hit us again.”

So that is a challenge that would have to be worked through, and for those arguing for the declare victory and rapid up strategy, part of what they would probably advocate for is some back channel communication with the Iranians to see if there was a way, not a formal agreement to end the war, but a way for each side in a sense to declare victory, call it a day, and have the hostility stop and the strait reopen. Whether that’s possible or not remains very much an open question.

The second big challenge is that that Al Jazeera article ultimately identified what it says is a, quote, “clear endgame,” and I’m going to read the sentence that is the clear end game. It is the permanent degradation of Iran’s ability to project power beyond its border through missiles, nuclear latency, and proxy networks. The word permanent is doing a lot of work there. If this war ends right now, one, the regime is still intact, and as our guest last week, Danny Citrinowicz said, is probably more motivated, more hostile, maybe more open to trying to go for a nuclear weapon.

Two, when it comes to the nuclear program, Iran would still be sitting on a stockpile of highly enriched uranium, would still have centrifuges, and would still have the know how to build them, and now would have a heck of a lot more incentive to ultimately try to sneak out to a nuclear weapon at some point.

And then three, yes, its ballistic missile capabilities and its proxies have been badly degraded, but those can be built back. We’ve seen Hezbollah already get built back over the course of the past year and the ballistic missile program get built back since the 12-day war last year.

So this is ultimately a risky strategy in that it does not solve many of the larger problems and leaves in place a significant number of challenges, even if Iran decided to go along with it, which itself is a big if, and yet among the options is the one that restores or works towards restoring global economic activity, energy flows, commodity flows most rapidly, and most reduces the possibility of some greater set of catastrophes, including a larger loss of American life and a widening of the conflict to even more energy infrastructure and potentially even beyond that. So that’s the argument basically for the wrap it up, call it a day option among our three options.

Jon Finer:

I would just add before switching to option two, and having argued for this option in our red team, blue team exercise last week and probably believing candidly that this is the best of the three, all of which are highly problematic, the declarative part-

Jake Sullivan:

By the way, Jon, I did not even try to replicate your MAGA Jon thing because I think it cannot be touched again.

Jon Finer:

It felt a little too comfortable, honestly. It makes me nervous.

Jake Sullivan:

It cannot be replicated, so yeah, I played a straight man.

Jon Finer:

But one point I didn’t make and you didn’t make last week but is the reality is the declare victory part of this option is becoming more and more challenging by the day. You have the president coming out and having said we’ve destroyed a hundred percent, I think he said, of Iran’s military capability, leading many people to joke that with 0% of their military capability-

Jake Sullivan:

They’re still keeping strait closed.

Jon Finer:

... they are wreaking quite a lot of havoc. And the nuclear program was obliterated, but as we will discuss in a moment, there is still significant elements of the nuclear program that have not been fully dealt with, the regime is still intact, et cetera. So there will be an Iranian victory narrative if the war ends today that will be extremely compelling as well, and so you’ll be in this narrative battle that will succeed the military battle, although my view would be if we’re only in a narrative battle, given the economic impacts of the military battle, we’re probably in a better place than we are now, so it’s just not going to be clean.

The second option that we want to put on the table we call escalate to deescalate. This is an idea that comes up actually quite a lot in policy discussions and I think there are good reasons to be wary of it, which we’ll get to, but the theory is that the willingness to go further on your side either achieves some sort of limited objective that makes it easier to stop or changes the calculus on the other side of the conflict. They see that you’re willing to go further so they are more incentivized to end the war, to back down, to make concessions, and that actually escalating can lead to a more rapid end to the war than our option one, which is just declaring victory and stopping.

One version of this could be the idea that we debated last week, going in and seizing the highly enriched uranium, about a thousand pounds of it that remains, we believe, although we don’t know for sure, in the tunnels underneath the Isfahan nuclear facility, and that could be rapidly enriched further into weapons grade material if Iran chooses to go down that path and ultimately lead to a bomb. So the US could decide that one way to end this conflict faster is to embark on this high risk operation, grab the highly enriched uranium, and then use that as a pretext to actually end the war. Now we’ve accomplished everything that we intended to accomplish.

Another version though of escalate to deescalate is what we saw play out yesterday.

Jake Sullivan:

Absolutely.

Jon Finer:

Which shows, I think, the folly and the danger associated with this option if you haven’t fully thought through how the other side could respond. So I think the theory of the case, and we know this to some extent because as with everything in this administration, the internal discussions end up in public before not too long, that the United States and Israel, Israel taking the strikes but the United States approving of them, believed that escalating attacks on Iran’s energy infrastructure, in this case, South Pars gas field that we talked about with Helima, would lead Iran to think, “Okay, now the consequences are so severe that we have to look to deescalate ourselves,” and in fact, Iran made exactly the opposite calculus.

Iran decided to essentially mirror image the US authorized Israeli attacks and go after energy infrastructure in the Gulf, so instead of escalate to deescalate, we ended up getting escalate to escalate, and that made the United States uncomfortable quite clearly, because then you had the President of the United States come out and say, “Actually, I was never for these Israeli strikes on energy infrastructure,” which I think we know is probably not the case based on the reporting that had already been in the public record, and that it should stop. Both Israel should stop attacking Iranian energy infrastructure and Iran should stop attacking infrastructure in the Gulf in response. And I think the likelihood that Iran is going to listen to that, given that they had their facilities hit first, is uncertain at best going forward.

So that episode, which also created, by the way, a significant rift between the United States and Israel, because then you had Israeli officials coming out and essentially contradicting President Trump. “Oh, no, no, we ran those strikes by the United States and they were just fine with them, including the president,” Israeli officials said on background. So the result of this escalate to deescalate strategy was Iranian escalation and a split between the United States and Israel, which have tried to maintain strategic alignment in the course of this conflict.

There are other risks associated with escalate to deescalate. If you try a high risk operation, as we’ve discussed, like seizing the highly enriched uranium, it could go wrong. And say a number of American Israeli forces are killed, or say you go in and you look for the highly enriched uranium and it’s not there, and you’ve just launched this very high profile, high risk operation and accomplished nothing from it, well, what do you do at that point? Then do you just stop? Then do you have to escalate again? It creates a lot of these strategic dilemmas that there are not easy answers to.

So I worry about this policy option every time it comes up in the situation room, which it does often. I remember, going back to the Syria conflict, the theory that was articulated for why the United States should do more militarily to try to dislodge President Assad back 10, 12 years ago was if we escalated more, it might be a quicker off-ramp to him deciding, “All right, I don’t want to be president of Syria anymore. I’d like to just transition away to a more democratic leadership.” And the arguments that were made on the other side were the ones that I just laid out that are disadvantageous in the current moment. So escalate to deescalate is intellectually appealing. I think in reality, it can be highly complicated. We saw that yesterday.

Jake Sullivan:

I would just add one point. I think that’s all extremely well put, and you’re right that this is this kind of trope that comes up constantly in the situation room, let’s just escalate to deescalate. And the additional point I want to put on the table is that when you’re on this kind of escalation ladder where both sides are testing and probing the other side’s willingness to go further up that ladder, you really have to think hard about putting yourself in the other person’s shoes and what they perceive your appetite for escalation really is.

And in this case, if you’re sitting in Tehran and what you’ve seen in the last 24 hours is the President of the United States seeming to authorize a strike against your gas facility, but as soon as you hit back, he disowns that strike and then says, “We won’t do any more of that,” and then says, “We’re actually going to unsanction Iranian oil,” the literal opposite of maximum pressure, which was the big Trump tagline for sanctions on Iranian oil in the first term, you’re probably sitting there thinking, “This guy’s reasonably sensitive to energy markets and he doesn’t really mean it that he’s going to keep going up the ladder.”

And so an escalate to deescalate strategy is particularly dangerous if the other side simply doesn’t think you’re credible, and I think right now, that’s the reality, is that the Iranians don’t think President Trump is credible, they’re prepared to go tit-for-tat. They’re prepared to call and President Trump is not prepared to re-raise, but in fact, appears to be, at least in this instance, folding, so that creates an especially dangerous dynamic for escalate to deescalate.

So I think we see all of the challenges and risks associated with that one, which leads to the third of the three options, which is really go big, go all in, and here, the core purpose would be to force the strait back open coercively or militarily, and potentially to seize Iran’s capacity to export energy by taking Kharg Island. And we’ve talked about that potential scenario in previous episodes. 90% right now of Iran’s oil exports go through the export terminal at Kharg Island, this island some number of miles off the coast of Iran in the Gulf, and the idea would be for the United States actually to put boots on the ground to take that and try to hold it against Iran, which would obviously attack it to try to dislodge us, or at least to cause great harm, and thereby, essentially to take command of Iran’s capacity to export energy through the Gulf.

In addition, it could also mean something Helima referenced when we were talking about trying to force open the Strait of Hormuz, the need for boots on the ground along the strait itself to try to ensure that there can be safe passage through that strait without relying on Iran’s good graces for it.

Now, one big challenge with making an objective of this campaign getting the Strait back open is the reason it closed in the first place was you started the war. So a thing that was not closed before you started the war, opening it now becomes your core objective. That almost feels like a self-licking ice cream cone of military logic. I think very dangerous for us to go down the road that we now must physically open the strait through some combination of naval and land operations around the strait.

And then the idea of going and taking Kharg Island I think may be somewhat appealing to a president who always likes seizing the oil of other countries or controlling the oil of other countries, as he’s talked about repeatedly in Iraq and Syria and as he’s just done in Venezuela. But of course, trying to sit on Kharg Island with US men and women in uniform, subject to attacks being lobbed across the water from mainland Iran indefinitely, that to me feels like a recipe for a certain kind of quagmire that is very dangerous.

And then of course, as you try to force the Strait open, Iran is going to use every countermeasure in its arsenal to try to, A, keep it closed, but also to inflict as much pain as possible. That could mean, again, more loss of American life. It could also mean attacks on Gulf countries that expand beyond just energy infrastructure to include things like desalinization plants or other critical infrastructure that sustains the economy, and frankly, human life in those countries.

So the go big option has a certain kind of appeal in that you’d be saying, “We’re going to finish this thing once and for all. We are going to fully defeat Iran.” But that appeal starts to fade pretty rapidly when you think about both what it will take in terms of the resources and what it will mean in terms of the risks. But that option is something that certainly, the Pentagon is putting in front of the president. They are probably not advocating for it I’ll bet, but they’re putting in front of the president. “This is what it would mean, Mr. President, operationally to physically try to do this, both on the island and in the Strait, in addition to all the other steps that we’ve already described that could include an Isfahan operation as well within this option.”

So that’s available to the president. It comes with a massive amount of I think the technical term is hair on it, but one that would have to go in the options memo for his consideration.

Jon Finer:

So two quick things on this, and agree with how you laid it out. One is we have not yet seen the full measure of Iranian naval capabilities to counter an attempt to force open the Strait of Hormuz. For example, one of the things that we’ve been most worried about, the United States has been most worried about, is a more extensive mining campaign in the strait, which would be extremely time-consuming, dangerous, challenging to deal with. The Iranians have flirted around the edges with mining but have not yet gone all in on mining, in part I think to avoid having to cut off their own exports through the strait, but if the full weight of the United States Navy is going to go barreling into the strait, I suspect we should be prepared to deal with sea mines in that situation.

The second is that Iran famously uses these small, fast, highly maneuverable boats to menace US naval ships in the strait. Even during peacetime, they’ll drive up to the edge of much larger, much more capable US naval vessels, and the risk there is you pack these things with explosives to go ramming into the side of a ship and you can do a lot of damage to it, maybe even sink it if you’re not worried at all about the crew of your little vessel being killed in the process, which they probably wouldn’t in this circumstance. So there are other Iranian capabilities that have not yet been brought to bear fully in this context, but they could be in the context of a bigger naval assault.

But the second thing, to where you ended, I do think the administration is signaling a very real willingness to consider this option. They are deploying a Marine expeditionary unit to the region, about 2,500 Marines on a flat top ship whose core mission normally is some amphibious landing of some kind, that’s what they’re trained for, and they will be in theater in somewhere over a week from now I think is about the timeline.

Jake Sullivan:

Yeah, a little more than a week.

Jon Finer:

And there is talk of other US military units, the 82nd Airborne and others, being put on a higher level of alert status and readiness. And that could either be signaling to Iran in this escalate to deescalate category that we are ready to go further, or it could be genuine preparation to do what you just laid out. But they are buying the president this option through some of the preparations that they’re making, and rhetorically, the president himself has not taken boots on the ground off the table. In fact, he said something to the effect of, he used a golf term, “I don’t have the yips,” I think he said about boots on the ground at one point, basically indicating that he would look at it. So I think this is a real option, even for all the hair on it that you described.

Jake Sullivan:

By the way, the whole mine threat, which is real and we’ve seen that spike a bit over the last several days, would probably be better dealt with if we had not decommissioned US mine layers just a little bit before this conflict broke out. It’s just another indicator of how we didn’t exactly plan for all of the various scenarios we might be confronting as we got into this whole thing.

We’ve laid out those three scenarios. As Jon said at the outset, we have been very clear that we thought this war was a bad idea from the start and we think it should end as soon as possible for the American national interest and for the sake of the world, but we wanted to go through this exercise to lay out how this is going to be discussed, framed, potentially presented in the White House, in the situation room, in the Oval Office.

And we’ll have to watch both the moves and the statements the administration makes to see which line they’re likely going down among these three flavors of options, and obviously there’s a spectrum among them as well. So that’s what we will be looking for over the course of the coming days, and in the meantime, we will just have to see what everyone else, what every other actor, starting with Iran but also the countries in the Gulf and beyond, will do to react to the fast-moving developments here.

Jon Finer:

And by the way, if you’re left thinking, “That was pretty unsatisfying. It doesn’t feel like there’s a good, clean, comfortable option here.”

Jake Sullivan:

Where’s the good option?

Jon Finer:

Welcome to policymaking. Unfortunately, this is often how it goes and why it’s such a hard job to be the President of the United States, because you have people like us walking in and say, “Here are three things that you could do.”

Jake Sullivan:

They all have big problems.

Jon Finer:

“And here are innumerable problems with every one of them. Which do you choose?” That is what decision making is like at this level, for better or for worse.

Jake Sullivan:

All right. With that, we’ll wrap it up, and look forward to coming back to you guys next week.

Jon Finer:

Well, that’s all for today. We’ll be back next week with a new episode of The Long Game.

Jake Sullivan:

In the meantime, send us your questions and comments at longgame@voxmedia.com, and find us on Substack at staytuned.substack.com. The links are in the show notes.

Jon Finer:

That’s it for this episode of The Long Game.

Jake Sullivan:

If you like the show, please follow, share with friends, and leave a review. It really helps listeners find us.

Jon Finer:

For updates and more analysis in your inbox, join the community at staytuned.substack.com.

Jake Sullivan:

The Long Game is a Vox Media Podcast Network production.

Jon Finer:

Executive producer, Tamara Sepper.

Jake Sullivan:

Lead editorial producer, Jennifer Indig.

Jon Finer:

Deputy editor, Celine Rohr.

Jake Sullivan:

Senior producer, Matthew Billy.

Jon Finer:

Video producers, Nat Wiener and Adam Harris.

Jake Sullivan:

Supervising producer, Jake Kaplan.

Jon Finer:

Associate producer, Claudia Hernandez.

Jake Sullivan:

Marketing manager, Leanna Greenway.

Jon Finer:

Music is by Nat Wiener. We’re your hosts, Jon Finer.

Jake Sullivan:

And Jake Sullivan. Thanks for listening.