transcript

Speaker 1:
[00:01] I'll put my money on a more dramatic change of heart coming from the United States at this juncture than the Iranians.

Speaker 2:
[00:10] I'm host Michael Allen with Beacon Global Strategies. Today, I'm joined by Mr. Richard Nephew, a senior research scholar at Columbia University and the former director for Iran at the National Security Council. Mr. Nephew joins us today to discuss the latest in Iran, including the possibilities surrounding the ongoing ceasefire agreement. Stay with us as we speak with Richard Nephew. Richard Nephew, welcome back to NatSec Matters.

Speaker 1:
[00:44] Thanks very much for having me. Always good to talk to you.

Speaker 2:
[00:46] Thank you. So Richard, we spoke before the war. I think both of us were convinced that the president was going to initiate hostilities. We're gonna get to a lot of topics today, but I'm wondering if you might sort of grade the military campaign so far and where do you think we stand?

Speaker 1:
[01:05] Well, look, I think kind of as I would have expected, the tactical sophistication and brilliance of the campaign, I don't think it could be underestimated. I mean, I think you see that there have been thousands of sorties, we've had cooperation, coordination with allies and partners in the region. That's not an easy thing to do. That requires a lot of sophistication. We've had a significant attritional effect on the IRGC, its ability to fire missiles and drones and those sorts of things. We've obviously seen the Iranian Navy is no more, which is a significant outcome in its own right. I think we've demonstrated to the Iranians that we can reach out and touch them in a variety of ways that they may not have anticipated. In that, we're prepared to do so with the variety of different tools that are disposable. So, from the tactical operational standpoint, personally speaking, I am not surprised by the sophistication of what we've seen, the effectiveness of what we've seen, but it almost underscores the big questions that still remain about the strategy and the objectives, and whether or not you can square up what we have done with what we were aiming to do, and what we have left to do, so that way we can decide that we've achieved what we were setting out to achieve. Those are fundamental issues, I think, from where I stand.

Speaker 2:
[02:30] Yeah, I hear you. Okay, so tactical brilliance, the military seems to have achieved a lot of its objectives. Let's talk about the nuclear file. So we'll get to the HEU in a second, but aren't we in a somewhat better position in the sense that when you consider the June 12-day war and today, the Israelis in the United States seem to have degraded about every scientist or every R&D facility, which I'm sure had something to do with either ballistic missiles, but probably nuclear weaponization. We've hit some other of the nuclear sites again and again, not totally sure what's going on there, and they've hit a lot of ballistic missiles. When you think of the fissile material, the weaponization, and the delivery system, it seems like this has been a good outcome, strictly speaking, about the nuclear file. We'll get to the missing HEU and Pickaxe Mountain in a second. But how would you grade it?

Speaker 1:
[03:42] Well, it's an incomplete. If we're not going to talk about the HEU and Pickaxe and other such facilities. Look, the way I've been characterizing this is, Iran has functionally now two programs. It had the basic from dirt to weapons program, its fuel cycle facilities that were badly damaged if not fully destroyed in the June campaign and which have only been attacked more over the course of the last several weeks. That program has been badly damaged, mauled, destroyed. It would take a significant effort to try and reconstitute it. Now, I think US government estimates going back for years had been it would take one to two years to rebuild that program, even if it was completely removed, and that goes to latent technical knowledge. But still, that is significant in terms of Iran's operational capacity. Then you've got the other part of the program, which is their ability to rapidly move to weapons, which is where we have to talk about ATU and pickaxe and Esfahan tunnels and all those sorts of things. I will say, in terms of scientists and so forth, it's actually hard to tell at this point what damage has been done to the scientific community. And I would say that on two levels. One, you're not hearing as much about raids that have killed AUI, the Atomic Energy Organization of Iran scientists and similar. You're hearing a lot about universities and laboratories and workshops being destroyed. But it's not actually apparent to me that that has degraded the technical capacity, the knowledge base of the Iranian nuclear program. And that means that they've still got the ability potentially not only to reconstitute, but to bring that into weapons dimension from that, that HEU and those other parts of the program that still remain out there.

Speaker 2:
[05:29] Okay. All right. Well, incomplete grade. All right. That's fair. So I consider it degraded, but there are definitely other big questions out there. So let's take them one by one. So at the end of the 12-day war, it was widely assumed that the so-called missing HEU was almost irretrievably buried. And that was as far as I knew till maybe six weeks ago, when the New York Times reported something to the effect of there's a narrow corridor to be able to get it. It's still buried, it'd still be tough to get, et cetera, et cetera. Is that your sense of how this evolved? We obviously don't have access to intelligence like we once did, but give me a sense of this missing HEU and where it came from.

Speaker 1:
[06:20] Yeah. So basically, what we thought at the end of June was that Iran probably had HEU in three places. At the former enrichment facility at Forto, now this is the big mountain that was destroyed, the massive ordnance penetrators dropped by the B2s back in June, that they probably had some HEU at the underground enrichment halls at Natanz. So these are the ones that back in 2002 were what started this whole thing when those very big bunkers were being discovered. Then we thought the lion's share of Iran's HEU probably were in the tunnel complex built at a place called Isfahan, which is also a major Iranian nuclear site. Those tunnels were actually built, frankly, to store Iran's enriched uranium. That was their purpose. Now, what we had understood is because of the geology, the United States military wasn't able to attack those tunnels in the same way we were Fordo and Natanz. Instead, what had happened both by the Iranians and by, frankly, the US, was to try and fill in the entrances to those tunnel complexes so that the Iranians wouldn't be able to gain access to it. The question had been since June all the way until now, have the Iranians been able to get access back to that HEU? And I think that's where there are still a lot of questions. I think that there are people who would say, no, we don't have any evidence that they have. There was also reports, though, even right before this current conflict, that there was a large delivery of blue containers that could have been additional HEU that were being put in the tunnel complex. My own sense, cutting to the chase, is that I think probably most of Iran's HEU is in that tunnel complex at Esfahan that probably remains very difficult for the US military to get at, either through airstrikes, where it's again, it's too deep, it's too buried by Iranian geology and so forth, or through putting forces on the ground. And so really, this is part of the reason why the president keeps talking about the way to enforce Iran not getting nuclear weapons is to maintain surveillance over that site, and remain vigilant to attack it if we see the Iranians going for it. But in my opinion, that's a high-risk maneuver. It may be where we are, but that is not comforting when you think about what the Iranians could do with that stuff.

Speaker 2:
[08:36] Yeah, I don't love it either. Okay, so what could we do about the HEU? So we could mount a raid. I've talked to a bunch of uniformed military, including General Joe Votel on this podcast about six weeks ago, where I think he basically said it's possible to do it. It's very high risk. If I'm not mistaken, I think his percentage was maybe 50-50 or it's just going to take a lot. So that's one option. Then as you mentioned, the president has said in the address to the nation, we can stare at it through satellites and if we ever see anyone approaching, it will just blow them to smithereens. Then the third is convince them at the diplomacy table to either ship the HEU out of the country which seems really unlikely or maybe to down blend it, which maybe is more face-saving for the Iranians because they're not losing the HEU per se. So is that how you see our options for the HEU?

Speaker 1:
[09:42] Yeah, basically. I think obviously I'll defer to any of our former military colleagues as to what their estimation would be. I would just say that high-risk maneuver is basically, I think, the sum total of the analysis that I've seen. Some folks are a little bit more skeptical. Some folks are a little bit more gung-ho. Frankly, that doesn't surprise me either from my experience in working with our uniform colleagues. I think the big issue that everyone keeps flagging is the amount of people it would require and the risk that would be required. This is not special operators. This isn't James Bond dropping and getting this stuff. You're going to need a lot of people. You're going to need scientific expertise potentially to help characterize this stuff. We don't know what's in those tunnels. The Iranians planted IEDs. The military options at this point are rough. It's not the thing you want to do in a contested space. It's worth noting that we have removed material before, but not in a contested space.

Speaker 2:
[10:38] The Kazakhstan and other things.

Speaker 1:
[10:40] Exactly. Some of those operations in Iraq and Libya to get rid of yellow tape. Yeah, there are examples, but again, not usually while you've got the IRGC firing missiles and drones at you in those.

Speaker 2:
[10:51] Well, that Kazakhstan thing was a very big deal. Okay, so we might have HEU at each of these facilities. Okay, fine. I thought Fordow was irretrievably destroyed in the times more or less, and it was mostly in Esfahan. But let's talk about the second thing I wanted to mention, which is Pickaxe Mountain. As best I can tell, well, first of all, please describe it for us. But best I can tell, I haven't seen us to hit it, and I'm not sure why we wouldn't have even tried. Go ahead.

Speaker 1:
[11:27] Well, so basically it's a new tunnel complex that's being dug near Natanz. It hasn't been declared fully, and so we don't know what the Iranians were intending to do with, that there was suspicion. You may remember back in June that the Iranians said they were about to announce a new nuclear facility, and the IEA was going to go take a look at it. There was suspicion that this was it. Subsequently, the Director General of the IEA, Rafael Grossi, has said actually the additional enrichment facility was at Esfahan, which by the way makes me incredibly nervous about what might be going on in those tunnels as well. That's speculation, but I'll flag it as speculation that is anxiety inducing. I think the most logical story I've heard for the US attack acts was that it was intended to be a much more buried, protected, geologically safe bunker installation for either nuclear material storage or for enrichment operations. Since the Iranians knew that the Natanz bunkers, the original ones were vulnerable to US attack. That had been long established and I think everyone knew that around elsewhere. But at this point, I think part of the reason why we might not have hit it is because there's a question as to what that actually achieves, especially if you can't penetrate those kinds of spaces. Part of it might also be that US intelligence shows that there isn't something significant from a nuclear standpoint in there. It might just be a big tunnel that's been dug at this point now and that there's nothing particularly relevant there. But it is one of those things that I've had in my checklist too, of when are we going to see some resolution of that facility?

Speaker 2:
[12:59] Okay. All right. I think that covers a lot of the nuclear things that we're worried about. I mentioned the delivery system, but more or less, don't we agree with the estimates that two-thirds of it have been degraded, or thereabouts? In terms of launchers and ballistic missiles? We've hit these underground cities and they're trapped in there, something like that. Something like two-thirds. Sorry.

Speaker 1:
[13:26] Something like two-thirds. But this is where I think we do actually have a little bit of ambiguity that's still important, which is how much of these attacks then but on the missile forces just locked in missiles or destroyed missiles, meaning in one case, missiles and launchers and the associated artillery equipment, if they're just locked in, well, then that's an excavation exercise that the Iranians can undertake, potentially doing so undercover, especially if a lot of these facilities are buried underground. If, on the other hand, it's destroyed, well, then that's harder for the Iranians to try and reconstitute. I think what to me has kind of shown through is that there was an initial set of significant losses and that probably did ultimately result in a lot of the curtailment of Iranian missile-related launches, but that now it's proven more difficult for us to identify those missiles before they're able to conduct a launch, and we don't know what the Iranians are doing to ceasefire now. I absolutely agree, there has been attrition. There are almost certainly fewer launchers available than at the start. There are definitely fewer missiles because if no other reason, then they launched a bunch of them. But what the remaining number is and whether or not the Iranians have the ability to launch them and evade defenses, that remains I think both a problem but also an unknown, at least in the outside.

Speaker 2:
[14:44] Yeah, I hear you. Okay, were you surprised that the president decided to initiate the peace talks or the Pakistani talks when he did? Because I allowed for it, but honestly, I thought we were getting into territory where he had promised to hit energy so many times. I was like, I don't think he can get away without at least a symbolic something. But no, once I saw that Pakistani tweet come out on that afternoon of where he's inviting the parties to come meet, I was like, well, this has been staged. This is how we're going straight to talks. What was your, how did you feel about all that?

Speaker 1:
[15:32] I think I had the same reaction as you, that at one point you were seeing the energy cascading in a direction where you were gonna see some very significant strikes in the US and potentially ones that would have targeted civilian infrastructure in a very big way. I will say, a sense that I had gotten over that 24-hour period since he started issuing those threats, especially given the number of both political actors here in the United States but also internationally that we're starting to register a, hey, this is gonna be really bad, not just in the specific sense in terms of the effects on Iran, but what Iran will do in an exchange, that I was less surprised that in the end he took the door that was marked for him and took him out. But part of that is because I continue to believe that he thought this was gonna be a real quick op and that he's been looking for the exit since basically week two.

Speaker 2:
[16:25] I have credited these newspaper articles that say, especially when it comes up, well, why didn't you do more on the or expect even the Strait of Hormuz that he thought they would have capitulated by now? I mean, Steve Witkoff has already said that too. So I think that's part of it also. Okay, so here he rolls into talks. Now you attended hundreds of meetings with the Iranians in your capacity as a negotiator and one of the chief advisors to the Obama era, JCPOA. So you knew, like I knew, that we wouldn't come out with anything big and substantive over the weekend, but nonetheless, what grade how that went? What do you think?

Speaker 1:
[17:15] Well, like you, I mean, again, my expectations were pretty low. I think a lot of people thought that there was going to be a thing, and I was pretty skeptical. I guess I was a little surprised that Vance came back as fast as he did, but I will say that may reflect a desire to change some of the Iranian tactical positioning that they have for many years, tried to keep us involved in talks and keep us in the room in talks, and just never end that process as a way of both find themselves times in space but also trying to explore the edges and see how far they could potentially get. From that standpoint, frankly, I thought tactically, it wasn't the dumbest thing in the world to leave Islamabad, and leave with the message being, we don't think you're serious, we're going to go. Now, whether or not the Iranians are serious, not set that aside from a tactical standpoint, I actually think that's not a bad idea to try and set the context. I think in terms of what we've heard come out of those talks thus far, it reaffirms where my head's been for awhile, we're just not close enough on substance to see any credible path to try and get to a real comprehensive deal. Now, a framework thing, that was being kicked about last year, a framework for future talks, something akin maybe to the Joint Plan of Action, which at this point has been a little bit lost in history, but it was the first go at a deal with the Iranians, and it basically was what we operated under while we were negotiating the JCPOA. I could have seen that. I still can see that, but I imagine that now it's going to be a lot more directed around ceasefire and straight-and-form moves operations than nuclear controls, which at the time was what we were most focused on the JPOA era. I don't think that the process is finished. I think there's plenty of reports now that they're still talking. I think the real problem ultimately is we still seem pretty far apart. If the president is actually saying he doesn't think a 20-year moratorium, which is what we were asking for and then Ryan said no to, is long enough. Well, then we're not even really in the same room. We're pretty still far apart.

Speaker 2:
[19:11] Yeah, I totally agree with you. I mean, we'll get to this in a second, but my own view is that we're just going to get into a situation where they renew by default a ceasefire situation. But let me ask you, well, you may have just answered then. Do you think the ceasefire is going to hold?

Speaker 1:
[19:30] Yeah. I don't think you see any indication the president wants to flip this thing back on. Especially, again, it's a weird ceasefire. There's active hostilities still engaging in Lebanon. There are reports of explosions in Tehran that may not be from F35s, but nonetheless, you have a active blockade. You have threats against ships that still are constraining shipping activity of the states. This isn't a great ceasefire from that standpoint, but as it is, I think you could imagine this persisting for quite a period of time.

Speaker 2:
[20:06] Okay. So let's get to the blockade. Now, in addition to all the other things you've done, I think you were an R and an expert in sanctions. You understand the insurance industry around the energy. And it was more or less just the prospect of the Iranians continuing or hitting oil tankers that led Lloyds of London and others to say, listen, we're not going to, we're either not going to insure this or it's going to be at such a high cost that you don't want anything to do with it. So can you help illuminate these issues? I mean, we're trying to reestablish the confidence of the world that the straight is now traversable, but how are you going to convince commercial insurers? And does your gut tell you that they're going to take a shot again? Or, you know, what do you think? Are they going to get frustrated in this in a couple of days and say, we're losing the leverage that we had, which was a gift, and we can't do that?

Speaker 1:
[21:11] Yeah, that's actually exactly what I think it is. And the Iranians have been today saying basically, now that our ships are being turned around, you know, we are going to consider, A, breaking the ceasefire and launching our own strikes again, and that we're prepared to do so if ships continue to be stopped. So I think this is part of the reason why the blockade... I've described a lot of the decision-making over the last few weeks from the United States as being incrementally logical, but inconsistent with the broader strategy. And this feels like another example of that. The president, you know, wanted to get a deal in Islamabad. He didn't get it. So he incrementally says, let's turn up the heat on the Iranians through a blockade. I mean, you can see why we went from A to B. That makes some degree of sense. But if the original ambition in the talks was to get traffic throwing through the Straits, establishing a blockade that therefore put a lot of pressure on Iran, while the Iranians still have physical capacity to attack shipping going through the Straits is not going to result in the Straits getting unblocked. Now, it creates trade space perhaps, where now the United States can say, we'll release the blockade if you release the Straits or Hormuz. But it's worth pointing out, the original US approach in the deal was in the negotiations was to also attack on nuclear and missile and other things. We've now actually ourselves potentially shifted the trade space of the talks between just how we're going to have people traversing a maritime passage, not if all of these other big sorts of issues. So I think, and I could be wrong here, but I think the Iranians will give us another day, maybe another two days. They've got that level of patience. They're going to see whether or not smuggling and evasion works. If it does, well, maybe they'll let this go a little bit longer. But if it doesn't, and if they really are starting to get jammed up, I think you're going to see maritime attacks coming from Iran again. You might see them say, we're prepared to break the ceasefire because the ceasefire is not being implemented. So you decide whether or not it was being implemented anyway. They'll test the United States in that regard and see what the US will do.

Speaker 2:
[23:14] That's amazing. The ceasefire won't hold after a few days if this is successful. They might hit a tanker or target a tanker or saber-rattle that they're coming back at it. What about, are they going to continue or resume hitting the UAE, Saudi, other Gulf Arabs? If they do, I assume it'll be their energy infrastructure.

Speaker 1:
[23:42] Well, they certainly could. I think the Pakistanis have taken some steps in terms of basing troops and engagement to posture themselves with Saudi Arabia that now make it a little bit harder for the Iranians to take a swing at the Saudis, but that isn't necessarily applied to Bahrain or to UAE or Qatar. But this is where part of the reason why I think the ceasefire is going to be extended, because I just want to come back to that. I actually think when the Iranians start taking swings again, you're going to see us and them tack back towards, maybe we actually do want to ceasefire. Now, what that requires is then a softer version of the blockade, perhaps. Maybe it's something that involves some amount of shipping getting through. Maybe it's a more formalized agreement that they will open the strait if we open the blockade. This is where what I think this has become now is a very transactional, including involving violence interaction and negotiation with the Iranians. Secretary Hegseth, when he said we negotiate with bombs, I don't necessarily agree with the way in which he was putting it, but in a de facto way, that maybe in fact what we're doing now is that we and the Iranians are going to start staking ourselves on tactical military positions that will then potentially contribute to a ceasefire that's closer to what I think the president thought he was getting a week ago. Still doesn't mean fundamental resolution or problems, and still means in the meantime, you potentially have attacks on UAE and ships and similar, but that may be the arc that this is going to take.

Speaker 2:
[25:13] The arc is very likely that they're going to strut their stuff again and take some shots, but we're both going to walk back from the brink.

Speaker 1:
[25:25] That is my inclination. That is how I see this going. This is part of the reason why I think the long arc of this is going to be a straight and overall waterway system that is more at risk, more turbulent, more militarized. There's going to be greater risk premiums. For everyone who is doing insurance and buying oil and petrochemicals and that kind of stuff, ship owners, you're probably going to have higher costs associated with all those things, but that there will be some movement as a result of all this, and if this ceasefire is to remain durable over a period of time.

Speaker 2:
[26:00] Okay. I think this is where we converge. We're either going to get to a de facto transactional, as you called it, ceasefire, which involves don't hit our ships in the Straits, and we'll quit, we'll make sure we're not hitting your mainland anymore. So either de facto or formal one, and then maybe framework. Because there's no, I think you and I totally agree that there is just a million miles between where the Iranians are and where we are on the fundamental issues of the day.

Speaker 1:
[26:38] Yeah. I think as long as we are all holding to our lines. Look, we always have to allow that 5 percent chance of some dramatic change of heart either out of the US administration or the Iranians. I'll be honest, I'll put my money on a more dramatic change of heart coming from the United States at this juncture than the Iranians. In part because, look, the president has variously said over the last, not only this year, but even in the past, the concept of MIGA, make Iran great again. Let's see whether or not we can get business deals going. Let's see whether or not we can get trade deals going. So it's not inconceivable to me that you could see him offering very significant sanctions relief, so much so that the Iranians could accept something more concessional when it comes to the nuclear program, especially because as we were talking about, they don't have much of a nuclear program anymore at all. I think the hangups of HEU, the hangups of whether or not missiles are involved, those are big issues and I think that's why ultimately, I still think, yeah, we're going to get a framework deal and not much more. But my 5 percent scenario, it allows for some significant concession that unsticks some of these other things in the shorter term.

Speaker 2:
[27:45] Blockade could still work on Iranian ports, right?

Speaker 1:
[27:48] Well, it can definitely have the impact of drying up Iran's ability to export oil for sure. It can have an impact in terms of stopping Iran from importing things that it needs, especially industrial cargoes and similar. The administration and CENTCOM have said they'll allow humanitarian trade to continue. So presumably, that'll continue on as well. But the Iranians will at times find it difficult to get ships willing to do that, especially in an active war zone. So yeah, I mean, look, the blockade can absolutely do a number on Iran's economy. It's worth pointing out, though, it can't necessarily collapse. That's in part because Iran does have the ability to get goods through its land borders, of course, right? This is only on one bit of the Iranian border space. On top of that, from a export income perspective, oil prices are high. So if the Iranians are able to sell their oil that's out on the water, which is still covered by a US sanctions license, by the way, and command $140 a barrel oil when it was 70, not too many weeks ago, that's a lot of money they can bank in a short period of time. That potentially gives them some insulation.

Speaker 2:
[28:57] Yeah. Well, and when you said earlier, maybe what we're doing is letting some oil through. To me, that says Trump's going to let the oil go to China. I think in the end, yeah. Well, I don't want to mess up his summit, and he's also claiming this morning they're not going to rearm the Iranians. We're going to take a quick break and we'll be right back with more of our discussion with Richard Nephew.

Speaker 3:
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Speaker 2:
[29:58] Let's say this economic squeeze, the blockade is working. Do you think that, and you know the Iranians, does that condition Iran to want to compromise and maybe go with the downblending of the HEU or something? Or what do you think?

Speaker 1:
[30:19] Yeah, look, I think that they would ultimately accept if they got some amount of sanctions relief on top of that. I don't think they're going to just agree to downblend the HEU off the bat, that they would be prepared to make that kind of trade. Look, the Iranians have said for years, they would be prepared to look at something like the JCPOA, in which there is some management of nuclear issues in exchange for sanctions relief. Now, they wanted more on sanctions relief and they've offered less in terms of nuclear concessions. But look, that's still a universe in which the Iranians be prepared to operate. I don't see any reason why they wouldn't do so again. But I think the connection back to the economic issues is important here. For them now, they have also got a lot of reconstruction that they're going to have to engage in as well. I think one of the demands the Iranians are going to make, it'll keep saying reparations. Practically, what that'll end up in is we need greater sanctions reliefs. That way, we can sell things, gain access to money, and to be able to do reconstruction on our own. The demand side on that might be going up while at the same time, on the nuclear side, we've got fewer asks. We've got important asks, like on verification, which hasn't really been talked about, but it's hugely important right now, especially with all the open questions that are there, and how you actually be sure that you're asking for phone insurance.

Speaker 2:
[31:38] So we would probably insist the IAEA is there for the down blend.

Speaker 1:
[31:42] Without a doubt. We'd be mad not to.

Speaker 2:
[31:44] We would say we need an inspection of Pickaxe Mountain.

Speaker 1:
[31:48] Yeah, we would want to inspect all the various different facilities that were destroyed to actually see what happened there and what's left over. You mentioned Fordo, and I think you're right. Ultimately, if there is HEU there, it is buried under a lot of rubble. It's going to be hard to come out with. The IAEA is going to say, yeah, we'll get some shovels. We're not going to do this. We're going to watch you do it. But we need you to dig that out because we want to actually know where all that stuff is. They're going to want to go to Esfahan and take a look at all the destroyed sites there and verify what's there, what's not there. Those are things that the IAEA will absolutely insist on. In fact, Grossi was saying something similar earlier today. We will also want. But that's not the only thing. It's worth pointing out that before the June operations, there were still open questions as to whether or not Iran had a cache of centrifuges that it had built up somewhere. One of the anxieties I have is that everyone's focused on HU. So the Iranians get rid of the HU. But they do still have uranium that they can enrich further. And if they have other centrifuges, if we don't have a tight enough deal, if we don't have verification provisions in a deal, well, they could give something away while at the same time building up that stockpile again. This actual HU at Esfand and similar, it is important, but it is not singular.

Speaker 2:
[33:05] All right, before we get to some energy questions and regime change, what can you say about, and I've always referred to this as centrifuges and crates buried somewhere that we don't know about. And I've heard different people say different things. I was at an event, it was the former secretary of state said, well, what's the big deal? Well, they don't have any centrifuges, so why do we care about the HU.? I've heard other people say, well, yeah, I don't know. They might have centrifuges somewhere. I don't know that we know definitively, for all we know, they're crates in Esfahan. I think we know that they're not actively enriching, but you know.

Speaker 1:
[33:49] Do we?

Speaker 2:
[33:49] What do you, I don't know. Do we think? I don't know. I have a lot of confidence in Israeli intelligence, but I guess we don't have a final word on, well, because you said Esfahan was mostly tunnels, right? And Pickaxe Mountain looks like a centrifuge hall.

Speaker 1:
[34:05] Well, it's also a tunnel complex, and that's where the question is, what was it destined to be? What were the Iranians intending to do with that facility once they dug it out? I mean, come back to your root question. Look, back in 2021, the Iranians were manufacturing centrifuges at above ground facility in Natanz. That facility was attacked, and as a result of that, Iran lost the ability to produce centrifuge components for six, seven months, something like that. And one of the results of that was the Iranians said, we are now not going to declare to the IAEA our centrifuge component production work. We're not going to do it. That was a JCPOA commitment. And they said, we're just not going to fulfill that commitment anymore because now we wanted to attack. From that moment until this moment, the Iranians produced unknown numbers of centrifuge components at unknown locations and transported them to unknown locations. We don't know what numbers we're talking about here. We don't know the locations question. Now you said an important thing, which is what about Israeli intelligence, Jewish intelligence? When I say we, talking about people, us here are on the outside. It is entirely plausible to me that the Israelis and US intelligence services know exactly where these things are, where they're being produced, know they're being cached and similar. I will say that if that were to be the case, obviously that would be a great relief because then that reduces the risk of other enrichment operations taking place. But I don't know, you and I have been through a lot. We love and trust your intelligence colleagues. I think we also have a healthy respect for the fact that it's hard. That you might think you know where things are and you might be wrong. The Iranians, if nothing else, have proven incredibly proficient at engaging in obfuscation when it comes to their nuclear program, which is why the verification piece is so hard. Is it possible Iran has no centrifuges? Sure, that's possible. Is it possible they've got 2,000 centrifuges stood up right now, someplace in a tunnel complex, Asfahan, Pickaxe, some other place that we're not even talking about? Sure, that's also possible. Until we get a verification mission in there, I will continue to have anxiety about what the Iranians might be potentially doing.

Speaker 2:
[36:19] All right. Well, we're not that far off. I assume there's some in Crait somewhere, but I wasn't convinced yet that there was a centrifuge hall up and working. All right. On top of everything else, you've become an energy expert through the years, and I think you even teach classes on that. Tell us about the difference that I keep hearing between a physical shortage of oil and a paper shortage of oil, and are things about to really start biting because the, quote, unquote, Iranian oil that was shipped, or the on-the-water oil that was shipped before the war is arriving places, and they'll soon have, it'll soon run dry.

Speaker 1:
[37:09] Yeah, I mean, it's actually one of the most fascinating things about this entire issue set right now has been watching market actors basically have different expectations for what's going to be produced in the future versus what is physically available now and pricing things accordingly. The physical barrels right now are selling for a lot. We have physical barrels at this point. I think I saw North Sea a couple of days ago, was it like $135 a barrel? It's less coming out of the United States right now, but that number is probably going to go up the more that people come and try and buy it. Ultimately, what this comes down to is a problem of everyone's expectations and what actual production damage has been done. We know that there is a bunch of oil right now in storage, both on ships and on land, that's plugged up in the northern part of the Persian Gulf, that if all of a sudden tomorrow, everyone was comfortable, would start rushing out and would go out to global markets. We also know that there are a number of ships that could make their way up the Gulf and take on some of that oil and bring it back out. But that's going to take time, and there's questions about how long that time will take, which is influencing where the prices are going on this. There's also questions about that physical damage, not just what the Iranians have done, but what turning off the taps has done at the various different oil fields that have been forced to shut in. Because at some point when you fill up your storage, you can't pump anymore, so you have to stop production. But the moment you stop production, you actually do complicated and problematic things with regard to the pressure of oil fields and with their operations and ability to keep pumping.

Speaker 2:
[38:53] And they become shut in, right?

Speaker 1:
[38:55] Absolutely, shut in and damaged. And some colleagues who I know who are a lot closer to the petroleum engineering side of things have said, look, the longer these things are not pumping, the longer it takes for them to be fixed. And even things that you don't think about, the pipes associated with the pumps fill up with goop that has to be de-gooped in order to get them to pump again, which takes some time. So that all is now being felt in the price, right? Because people are saying, listen, if the straits open and there hasn't been a lot of damage, well, we should be back to something closer to where we were at the start of the year than where we are now. But no one actually knows when that's going to take place. And that is causing so much difficulty to actually evaluate what the price is and what it's going to be, especially when you consider how the market tends to work, where people have got contracts for delivery in X number of months, right? And so people are buying at these prices, or are they? Because they think the price might be going down in the future.

Speaker 2:
[39:58] So what do you know right now on the commercial reluctance to go through on their own or the insurance companies? I mean, is there, I know the whole idea here of the first, the freedom of navigation operation, I see this as a spectrum. Now we're in the blockade phase and hoping Iran won't get involved. Maybe they do. Then I see it going all the way to an escort mission possibly. But tell us, where are the insurers now? Where is everyone? Are they feeling better about this? Would they feel better if there was an escort mission by the United States Navy through the actual Straits that they could actively defend the tankers?

Speaker 1:
[40:48] Probably not because US war ships are part of the conflict. Right? And folks go back to the late 80s and they say, well, it worked in the past. Why can't it work now? I mean, you could make an argument it didn't work in the past because in the end we did have to actually use force against the Iranians because of attacks that were still being made on shipping and US naval vessels that were transiting. But even then, if you were to say, well, it worked for a while, the problem is we weren't a belligerent then. We are a belligerent now. So arguably, US warships transiting would actually be exposing potentially people to additional fire that they might not otherwise get. I think the real fundamental problem is that defenses have thus far proven effective but still leaky, and you don't yet have people being prepared to run those sorts of risks. Now, what's been, I think, befuddling people is, okay, so the insurance prices have gone up, so okay, they go up, but you still go ahead and duck and transfer, well, if the price is so high that you won't be able to make it back up with the sale of your product, well, you don't create any incentive for anyone to move, especially if the risk of destruction of the physical ship, which is a expensive piece of property, is weighed in there as well. And so the impression that I have is that everyone is prepared to be maybe the fifth or the sixth ship that goes through, but nobody's terribly excited about being the first, unless they have a guarantee from the Iranians. And that's where the whole tolling concept came up. Basically, the Iranians said, well, we won't hit you if you pay us. And some people said, oh, that sounds all right. We're not happy about it, but look, that's fine. We need the oil. They paid them and the Iranians said, well, well, that worked. So yeah, now we'll do a tolling operation where if we think you're on the list, we'll let you through as long as you pay us money and has reduced that kind of risk. But you're still running against the economics of how much it costs and what those risks are for transiting if you think that there is any kind of risk. It's also worth pointing out that now that the president appears to have also at least criminalized, maybe is the wrong word, but has said that we will enforce US sanctions and potentially military action against those who pay the Iranians these tolls. Well, you probably also reduce some of the willingness for people to do that toll-paying as well, therefore, also depressing people willing to make the transit.

Speaker 2:
[43:13] So I'll have to do a little research myself, but maybe you know, I keep seeing tweets and news articles that say, oh, you know, 24 made it through today or 34 made it through. So what does that reflect? People with perishable items that are willing to take the risk or are those oil tankers? What do you know about this?

Speaker 1:
[43:37] So this is where getting to actual numbers is a bit hard, in part because also-

Speaker 2:
[43:41] Or maybe they paid. Or maybe they paid in crypto.

Speaker 1:
[43:46] I think there's some payment going on there, to be honest. And I think that's definitely happening. I think there's some ships that have switched off their AIS system, their identification system, which basically signals, you know, I'm the Voyager and I'm containing oil or whatever, right? And they blast that so that everyone knows that this is the ship Voyager and it's containing oil as it's going through. So some ships have turned those off, so we don't actually have as clear a picture as to who's transiting at one particular point in time. It could be that people are making a run on it. We've known that for a while that some people have been making a run on it. It's never been fully closed. And whether again, bribes are being paid and similar is a whole separate question. I think the numbers that we've started to see somewhere in the neighborhood of 20 do imply that there's a little bit of unblockage that's now happening, but still nothing compared to the amounts that were transiting freely when the streets were open. And so I think this is the question, are we seeing just people being willing to take the risk? Are we seeing bribes being paid? Are we seeing smuggling activity? Or are we seeing just a little bit of desperation at this moment where people say, probably the Iranians won't take a swing at it, in six weeks they might, so we might as well go? That might be part of what's going on there too.

Speaker 2:
[44:59] Yeah. Okay. Fascinating. So we're going to get to two more issues and then wrap up. Let me paint a scenario. I think I did a little of this earlier, but let's say this really begins to bite. The Iranian ships absolutely cannot get through. Others are getting through. Does the economic problems that the Iranians have caused them to make a material compromise? Or, as I'm usually inclined to believe, they don't like making compromises, especially with the United States. They would rather take a longer beating than be seen caving on something material to us. What's your sense?

Speaker 1:
[45:50] My sense all along has been that the Iranians have been planning this to be a very long conflict. I think that they've been planning for months.

Speaker 2:
[45:57] So they'll wait us out.

Speaker 1:
[45:57] As opposed to weeks.

Speaker 2:
[45:58] They'll wait us out.

Speaker 3:
[45:59] They'll wait us out. They'll wait us out.

Speaker 1:
[46:01] And I think they take their lesson from the Iran-Iraq War. I mean, everybody's saying that now, but I still think it's true. And I think that they will take from some of the president's comments, as well as impending midterms and other dynamics that are happening in the global economy, the summit with Xi, all these other indicators. And they'll say, yeah, it really feels like the Americans are going to want to flinch on this first.

Speaker 2:
[46:24] Well, yeah, if we keep saying, we're going to have it wrapped up by the meeting with Xi Jinping, we're not exactly saying we're going to hang in this very long.

Speaker 1:
[46:32] Yes, I have to say, I think the messaging discipline has been very poor from the administration and that they really, you know, they need to clean this up if they're going to continue with this because right now, everything they're screaming is, we're done here and we don't need to do this anymore and the Iranians are saying, okay, good, well, then we'll wait another day, so.

Speaker 2:
[46:51] Yeah, I've seen a real trade-off between what I think the president is doing, which is jaw boning the markets by having different messages all the time versus signaling resolutely that we're in this to win it. So there's a tension there. So let's deal here with the big question as we wrap up. Regime change. What was your sense when you helped with the JCPOA? I remember it was, let's buy time, I don't know, 15 years or something. I always heard during the argumentation about it was, we don't know what's going to happen at 15 years. Maybe they've collapsed by then. So we've bought some time. Did you believe that way back when? Do you think there's a higher, albeit probably not a majority chance of a regime change now? What do you think?

Speaker 1:
[47:50] So call me an optimist, but I've long thought that the contradictions intrinsic to the Iranian system are going to make it impossible to sustain, and that through continuing to highlight those contradictions, the fact they had a highly educated population, a very large population, a population that really didn't like its government, that had real concerns with the stifling nature of it, all the economic crimes, the corruption, the mismanagement was going to undermine and eventually result in a change in regime in Iran. That will remain my conviction. Frankly, I thought the sanctions relief steps that we had in the JCPOA would have accelerated that and help with that because we kept the US embargo in place but we kept secondary sanctions in place, our ability to sanction others for doing business with Iranian banks and the IRGC that was putting pressure on the Iranian system to make changes to how the IRGC was operating, its role in the economy and similar. Now, those did not have time to manifest. They were starting. We were seeing press about this in the spring of 2018, for instance, where there were a lot of debates about the IRGC's involvement in the economy is screwing up our banks ability to connect internationally. Maybe we shouldn't have that. All of those changed when we exited the JCPOA. Now, it's possible that all of those dynamics don't result in regime change. It is 100 percent possible that 15 years of JCPOA later and you've got a regime that is stronger, as made a generational change that is more in control than ever. It's possible. It's also possible not. I think where we are today though, is that we now have the IRGC both as a virtue of the sanctions running that they've been doing for a long time, and now, frankly, the collapse of the other parts of the system, where they are more politically powerful in terms of having eliminated opposition than they've ever been. Now, they're in a weaker position. I think this is a really important point about how the war ends. When the war ends, assuming it does, I think that one of our number one objectives should be to make sure that we do not accidentally improve the position of the IRGC. When I hear things about broad sanctions relief, when I hear about removing the US embargo and similar, I get really anxious because the idea is not to give the IRGC and the current Iranian leadership a lifeline, but to continue to force those contradictions to say, we'll allow some Iranian banks in, but not if we detect an IRGC involvement and similar. That might seem Pollyannish. But I think when you add to that, the dislocation the Iranian population have with their system as demonstrated in January through the protests and the fact that IRGC's political legitimacy is shot. All those add up to me, to if we maintain a containment strategy, that is continue to put pressure on the right parts of the Iranian system while enabling and supporting the population, I think you could see progress towards regime change. Not being orchestrated by a military campaign, not happening potentially overnight, but that the arc would again go back to the internal contradictions that regime undermined the IRGC's role in it.

Speaker 2:
[50:54] Terrific. The IRGC, just as a historical, well, I've read that Iran's only compromised in a real way twice to end the Iran-Iraq War, which they call drinking from the poisoned chalice, and then JCPOA. Did the IRGC acquiesce to the Obama era JCPOA, or did they actively oppose it or support it?

Speaker 1:
[51:20] Well, they were opposed to it and they pushed back on it, but ultimately the Supreme Leader endorsed it, in part because of Rouhani having come in and been elected with a very large out showing of support, especially after the Ahmadiyya era, where they basically had to engineer him remaining president, even though he probably lost the election, or didn't win it as big as he thought he did in 2009. And so all that ended up to the Supreme Leader at the time telling Rouhani basically, I'll let you have your JCPOA. I don't trust the Americans. I think they're going to back out of this, but we'll give it a go. And if I'm right, I get to tell you, I told you so. Now, the IRGC didn't just oppose it by saying, we think this is a bad idea and we don't want to constrain our options. They did other things like arresting people like Siomak Namazi and trying to undermine the ability of the Iranian government to implement its parts of the JCPOA. So this is where I come back to the internal political fissures created by the JCPOA were actually pretty significant. We didn't have a time to see how those were going to mature. The problem we have now is all those external voices at this point have been quelled. And I'm not sure where they're going to come from now other than from people being willing to take the streets, which they certainly aren't going to be doing if they think they're going to be attacked from there.

Speaker 2:
[52:34] And so now the IRGC, by all accounts, is more powerful now than they were.

Speaker 1:
[52:39] I think so. I think they're stronger, but with a more fragile foundation.

Speaker 2:
[52:43] Interesting. Certainly with Mochtaba. Yeah, I mean, just to finish here in the last minute, my best on regime change is maybe we're going to look back on this moment in a year in addition to the collapse of their currency, in addition to the protests as a milestone along the way to the ultimate weakening of the regime, but that the actual collapse is unforeseeable. And what the trigger is, like the Tunisian street fender who caught himself on fire, and somehow the Arab Spring breaks out. Is that plausible? Do you endorse that?

Speaker 1:
[53:25] It's very much plausible. And I'll just come back to as well. These things are brittle in that they can look very strong, but then you also see a fault line emerge that you didn't see before. It's worth pointing out Venezuela's economy was in utter shambles. And at the same time, that's not the reason why we were able to take Maduro out and similar, right? It may be part of the reason why Delci Rodriguez is playing ball now, but that was a multi-year process of atrophy and damage and something that ultimately, it was not sanctions pressure that brought down the Venezuelan government. In many ways, the Venezuelan government is still in place, just with different people in charge. This is kind of the problems that you emerge in when you're trying to engage in these kinds of course of economic strategies from abroad. You don't know actually what you're doing and you don't necessarily know how it's being felt inside and what the contours are. And then you don't really know when you're going to see real changes start to emerge.

Speaker 2:
[54:29] Richard Nephew, thank you so much for joining us again on NatSec Matters. That was terrific.

Speaker 1:
[54:35] No, thanks for having me.

Speaker 2:
[54:39] That was Richard Nephew. I'm Michael Allen. Please join us next week for another edition of NatSec Matters.

Speaker 3:
[54:49] NatSec Matters is produced by Steve Dorsey with assistance from Ashley Berry. NatSec Matters is a production of Beacon Global Strategies.