Haass: Investors Should Fasten Their Seatbelts

Summary

In this insightful discussion, Ambassador Richard Haass addresses the escalating tensions between Iran and Israel, highlighting the potential for further conflict and the involvement of regional actors like Saudi Arabia, UAE, and Jordan. He emphasizes the complexity of the Middle East's shifting alliances and fault lines, particularly concerning the Palestinian issue. Haass also delves into the dire situation in Ukraine, where Russian aggression is intensifying, and stresses the importance of continued U.S. and European support. He underscores the critical nature of this support for global stability and the perception of U.S. leadership. Haass further discusses the implications of geopolitical tensions on investors, advising caution and vigilance, especially in light of upcoming U.S. elections. He concludes by stressing the importance of American leadership and the role of businesses in supporting democracy and internationalism, both domestically and globally.

Takeaways

• 📰 **Iran-Israel Conflict**: There is a potential for escalation following Iranian strikes against Israel and subsequent Israeli drone strikes in retaliation.
• 🚨 **Straits of Hormuz**: A possible strategic move by Iran could be to close the Straits of Hormuz, affecting global oil supplies.
• 🔄 **Regional Dynamics**: The involvement of Saudi Arabia, UAE, and Jordan in supporting Israeli defenses indicates a shift in regional alliances due to shared concerns over Iran.
• 🏛️ **Palestinian Issue**: Differences over the Palestinian issue continue to complicate relationships between Israel and Arab nations.
• ⚖️ **Middle East Fault Lines**: The Middle East is currently experiencing tensions along multiple fault lines, including Israeli-Iranian conflicts and issues in Gaza and with Hezbollah.
• 🇺🇸 **US Role**: The U.S. is attempting to reassure Israel while also urging restraint in retaliation against Iran, reflecting a delicate balancing act.
• 🇺🇦 **Ukraine-Russia Tensions**: The situation in Ukraine is deteriorating, with Russia increasing pressure on Ukrainian forces, highlighting a need for more support from the U.S. and Europe.
• 📉 **Aid to Ukraine**: There is a call for the U.S. House of Representatives to resume aid to Ukraine, which is critical for European and global stability.
• 🤝 **Diplomatic Solutions**: Over time, Ukraine may achieve more through diplomacy and economic coercion, with continued support from the EU and NATO, rather than military means.
• 💼 **Investor Caution**: Investors are advised to be cautious due to the unpredictable geopolitical climate, with a focus on seat belt-like risk management.
• ⏳ **Election Impact**: The period following the U.S. election until inauguration is被视为 a potentially volatile time, with implications for domestic and international stability.

Q & A

What is the primary concern regarding the recent Iranian strikes against Israel and Israel's subsequent drone strikes?

The primary concern is the potential for escalation into a cycle of retaliation and violence, with a particular focus on whether Iran might take steps to close the Straits of Hormuz.

How might the involvement of Saudi Arabia, UAE, and Jordan alter the situation?

Their involvement, whether tacit or active, could subtly change the calculus of the conflict, as reports suggest they may have assisted with Israeli defenses, indicating a shared concern over the Iranian threat.

What is the current state of relations between Israel and its Middle Eastern neighbors regarding the Palestinian issue?

While there is a shared concern over Iran, differences over the Palestinian issue make it difficult for countries like Saudi Arabia, UAE, and Jordan to move closer to Israel.

What is the U.S.'s role in trying to manage the situation between Israel and Iran?

The U.S. is attempting to reassure Israel while also urging restraint to avoid direct retaliation against Iran, similar to the strategy used during the Gulf War in 1991.

How does the current Biden administration's influence over Israel compare to previous administrations?

The Biden administration's influence is considered weaker compared to previous administrations, such as during the Gulf War, due to a lack of the same level of military presence and centrality in the region.

What is the current situation regarding the conflict between Russia and Ukraine?

The situation is deteriorating, with Russia increasing pressure on Ukrainian forces in the east. There is a shortage of munitions and equipment, leading to frustration and a call for increased support from the U.S. and Europe.

Why is the support for Ukraine considered critical for global stability?

Support for Ukraine is critical not just for the country itself, but also for maintaining stability in Europe and the world, as it sends a message to other nations, including China, about the U.S.'s commitment to international order.

What is the realistic outcome for Ukraine in its conflict with Russia?

Realistically, the best Ukraine can achieve in the short term through military force is a tie, preventing further territorial losses, with the hope of achieving a win through diplomacy and economic coercion over time.

What advice would you give to investors regarding the current geopolitical climate?

Investors should be prepared for uncertainty, with a focus on seat belt-like caution. They should be aware of the potential for increased protectionism, inflationary pressures, and political violence, especially during election years.

What is the most dangerous moment according to the transcript?

The most dangerous moment is described as the period between Election Day and Inauguration Day, with concerns of political violence and instability, and the potential for foreign adversaries to exploit this uncertainty.

What is the role of the United States in maintaining global order, as mentioned in the transcript?

The United States has a significant role in maintaining global order, as it cannot afford to act in isolation. Its actions have a ripple effect on how it is perceived by allies and adversaries alike, and it must play a large part in shaping the world's course.

What are some positive developments mentioned in the transcript that could influence the geopolitical landscape?

Positive developments include the strengthening of Japan's alliance, improved ties between Japan and South Korea, India's economic progress, and the united front presented by the U.S. and Europe in support of Ukraine.

Outlines

00:00

😐 Middle East Tensions and US Role

The first paragraph discusses the escalating tensions between Iran and Israel, with recent strikes and retaliations. Ambassador Richard Haass provides insights on potential areas of escalation, such as the Straits of Hormuz, and the roles of Saudi Arabia, UAE, and Jordan. He highlights the complexity of alliances in the region, particularly concerning the Palestinian issue. Haass also touches on the unseen aspects of these conflicts and the U.S.'s attempts to reassure Israel while urging restraint. He draws a parallel to the Gulf War, noting the Biden administration's limited influence compared to previous U.S. administrations in the Middle East.

05:03

😨 Ukraine's Struggles and Global Stability

The second paragraph shifts focus to the situation in Ukraine, where Russian forces are increasing pressure. The discussion emphasizes the critical nature of continued U.S. and European support for Ukraine, not only for the country's survival but also for broader European and global stability. The potential implications of election-year politics in the U.S. and the importance of maintaining a strong international stance are also considered. The advice for investors is to be prepared for volatility, with an emphasis on the uncertainty of the political climate both domestically and internationally. The speaker suggests that the period following the U.S. election is crucial, with the potential for severe dysfunction and violence, and calls for unity and proactive measures to support democracy and international cooperation.

Keywords

💡Iranian strikes

Iranian strikes refer to military actions taken by Iran against another country, in this case, Israel. The video discusses the recent Iranian strikes and the subsequent Israeli drone strikes in retaliation, which are central to the theme of escalating conflict in the Middle East.

💡Straits of Hormuz

The Straits of Hormuz is a narrow waterway between the Persian Gulf and the Arabian Sea through which a significant portion of the world's oil supply passes. In the video, it is mentioned as a potential area of strategic importance if Iran were to take steps to close it, which would escalate tensions and have global economic implications.

💡Saudi Arabia, UAE, and Jordan

These are countries in the Middle East that have a complex relationship with Iran and Israel. The video discusses their potential role in the current conflict, suggesting that they may have assisted Israeli defenses, which indicates a shift in regional alliances and a shared concern over the Iranian threat.

💡Palestinian issue

The Palestinian issue refers to the long-standing conflict between Israelis and Palestinians over land and statehood. The video mentions that differences over this issue make it difficult for certain Middle Eastern countries to move closer to Israel, despite shared concerns about Iran.

💡Hezbollah

Hezbollah is a political and militant group based in Lebanon, which has been involved in conflicts with Israel. The video discusses the worsening situation between Israel and Hezbollah, which is part of the broader theme of escalating tensions and conflicts in the Middle East.

💡U.S. role

The U.S. role in international conflicts is a key theme in the video. It discusses the U.S.'s efforts to reassure Israel while urging restraint, and compares the current situation to historical contexts, such as the Gulf War, to highlight the changing dynamics of U.S. influence in the region.

💡Ukraine

Ukraine is mentioned in the context of its ongoing conflict with Russia. The video discusses the worsening situation, with a focus on the critical support that Ukraine receives from the U.S. and Europe, which is vital for its ability to resist Russian aggression.

💡Election year

The video touches on the implications of an election year in the U.S., suggesting that political competition and protectionist policies could have economic consequences, such as inflation and labor shortages. It also raises concerns about potential political violence and instability during the transition period after the election.

💡Geopolitics

Geopolitics refers to the study of the effects of geography on international politics and international relations. The video discusses the complex interplay of geopolitical factors, such as the conflicts in the Middle East and Ukraine, and how they impact global stability and the U.S.'s role in the world.

💡Investment advice

The video provides investment advice in the context of the uncertain geopolitical landscape. It suggests that investors should be cautious, highlighting the importance of understanding the broader political and economic trends that can affect investment outcomes.

💡Democracy and internationalism

The video emphasizes the importance of democracy and internationalism for global stability and the role of the U.S. It calls on CEOs and others to support policies that promote democracy domestically and internationally, as these are crucial for the context of American business and the world order.

Highlights

Iranian strikes against Israel last weekend and Israel's drone strikes in retaliation at the end of the week.

Ambassador Richard Haass discusses the potential for escalation and the involvement of regional players like Saudi Arabia, UAE, and Jordan.

Reports suggest that Saudi Arabia, UAE, and Jordan may have helped with Israeli defenses, indicating a shift in regional dynamics.

The Middle East is operating along different fault lines, including Israeli-Iranian tensions and issues in Gaza and the West Bank.

The U.S. is trying to reassure Israel while urging restraint against Iran, reflecting a delicate balancing act.

The Biden administration's influence over Israel is weaker compared to previous administrations, impacting the U.S.'s role in the region.

Increasing pressure on Ukrainian forces in the east by Russia, with a debate on providing more support to Ukraine.

The situation in Ukraine is deteriorating, with shortages of munitions and equipment, highlighting the need for U.S. aid.

The importance of U.S. support for Ukraine for the stability of Europe and the world, and as a measure of U.S. global leadership.

The potential for a 'tie' in Ukraine, where the country can continue to exist as a viable state despite Russian aggression.

The possibility of a long-term strategy for Ukraine that involves diplomacy and economic coercion to achieve a 'win'.

The impact of geopolitical tensions and U.S. domestic politics on investor sentiment and the global financial market.

The advice for investors to remain cautious, with a focus on seatbelt-like risk management amidst global uncertainties.

Concerns about the period between Election Day and Inauguration Day in the U.S., and the potential for political violence.

The importance of the U.S. role in maintaining global order and the need for unity and effective governance.

The potential for the U.S. to undo its international architecture if there is a change in leadership, affecting global stability.

Positive developments such as the robust Japan-U.S. alliance, improved Japan-South Korea ties, and India's economic progress.

The critical question of whether the U.S. can avoid severe dysfunction and violence post-election and maintain its role in the world.

The call for CEOs and others to influence the election by supporting policies that are pro-democracy and pro-internationalism.

Transcripts

At the top of the news again this week in the wake of the Iranian strikes

against Israel last weekend and then Israel's drone strikes in retaliation at

the end of the week. We asked Ambassador Richard HAASS of

Centerview Partners and author of the newsletter Home and Away how much

escalation we could see or potentially into a cycle of escalation.

Not, not, not definitely. And if it were to happen, I think the

most obvious area, other than the emotional reaction to violence there,

would be do the Iranians take steps to close down the Straits of Hormuz?

Did the calculus change, even if subtly with the role, whether tacit or active,

of Saudi Arabia, UAE and Jordan? Because in retrospect, there are reports

that, in fact, that helped with the Israeli defenses, which I think may be

something different in that region. It does.

And it shows you just how alienated they are from Iran and how worried they are

about the Iranian threat. But at the same time, when Iran is not

front and center and if we read coverage cycle back to Gaza or the West Bank,

it's difficult for these countries to move closer to Israel, given their

differences over the Palestinian issue. So you've almost got a middle East now

that's operating along different fault lines, the Israeli Iranian one directly.

What's happening in Gaza, what's happening in the north, which has gotten

worse in the last few days between Israel and Hezbollah.

Many of us follow the news carefully, whether on TV or reading The New York

Times, Wall Street Journal. But much of what's going on, we don't

see. It's below the surface is where you were

part of that when you were in the State Department with Colin Powell.

You've been in those rooms. Give us some sense of what you think may

be going on that we don't know about and particularly what the US role is or

should be in this? Well, the big thing is, is the U.S.

is trying to be reassuring to Israel. At the same time, they're trying to urge

them not to respond against Iran. The parallel here, David, is when I was

at the White House in 1991, it was the opening days of the Gulf War.

Iraqi Scuds were landing on Israel. And we, the Bush administration, Bush

41, prevailed upon the Israelis not to retaliate directly against Iraq.

We were worried that could break apart this coalition we had built.

But we were in a very strong position that we had half a million American men

and women in uniform over in the Middle East.

We were at the center of it. The Biden administration does not have

that kind of influence over over Israel right now.

So I think its hand is somewhat weaker. Turn for what if you were to Ukraine?

There are a lot of reports that the Russians are really putting more and

more pressure on Ukrainian forces in the east of the country.

And we have this debate going on the United States and efforts in Europe to

try to give more support to Ukraine. How bad is the situation, do you think?

It's well, it's bad. It's getting worse.

The shortages of munitions, the shortages of equipment is it's

frustrating. It's it's it's tragic.

It's irresponsible. Let's be honest.

Hopefully the House of Representatives will correct this and reopen the spigot

of aid to Ukraine. And if they do, Ukraine will not be able

to liberate Crimea or the eastern lands, but they'll be able to hold the Russians

at bay, as they've pretty much done for the best part of the last two years.

So this is critical. This is critical not just for Ukraine,

but for stability in Europe. And this is critical really for

stability in the world. Chinese are taking note what we're doing

here and people are judging the United States.

You know, when you're a great power, you don't have the luxury of doing things in

isolation. What you do on one square of the

chessboard affects inevitably how you're perceived by friends and foes alike

everywhere else. Richard, You always take a strategic

view of these things, not just tactical. But given what you just said about

Ukraine at this point, realistically, are we if I can put us together with

Ukraine in the Western world, are we playing for a tie rather than a win?

As you said, it's unlikely that Ukraine, any time soon, is going to liberate the

eastern part of the country. Look, tie is not as good as a win, but

it's a hell of a lot better than a loss. And I believe, given Russia's scale,

given its war economy, the best Ukraine can get for the foreseeable future

through military force is a tie. Then I think over time and this may have

to wait. David, beyond Vladimir Putin, I think

Ukraine, if it has close ties to the EU, close ties to NATO's, we continue to arm

and can play for a win not through military liberation, but through

diplomacy and the use of economic coercion.

So you almost need to break this down in phases for the foreseeable future.

Let's get a tie. Let's get it.

Let's get a situation where Ukraine can continue to exist as a viable,

successful country where Putin is frustrated.

Then over time, we can get Ukraine what's rightfully theirs.

So Russia, we, of course, try to address long term investors, big time investors

here at Bloomberg. Give us your best advice that you would

give to investors right now. You talk about the Middle East.

You talk about Ukraine. By the way, we haven't mentioned China

with now new tariffs on Chinese steel coming in in an election year.

And we have an election year which itself may pose some real issues for the

United States and even financial markets.

If you're an investor, what do you need to have on your dashboard?

What do you need to be most concerned about?

You need to have a seat belt and keep it fastened.

David More than anything else, look, you've got the two parties competing

over how tough they can be on China over protectionism to some extent, which is

all problematic and obviously has all sorts of consequences for inflation.

The pressure will be to tighten flows across the border, whatever, even though

that's a good thing, I would argue, in terms of security.

Also, again, that could add to inflationary pressures if we suddenly

don't have so much labor that's available.

I worry, David, about the 75 days between Election Day and Inauguration

Day. That's the period four years ago when

January 6th happened. Imagine this is a close contest.

Imagine we have. Not just division and dysfunction, but

political violence. A lot of people around the world can get

unnerved. A lot of foes around the world might see

that as a moment of opportunity. And then again, after Inauguration Day,

what would be functional or dysfunctional is what's happening over

this aid bill. Is that an exception to the rule or will

that be the rule after the election? So I think there's lots of issues that

obviously, if Mr. Trump were to win, does he try to undo a

lot of the architecture in the world that has served this country well over

over 75 years? So if you're an investor, there's a

degree of uncertainty. This combination of geopolitics in the

world against the backdrop of America that's no longer certain or united as to

its role, this is actually the most dangerous moment, I would argue.

Not that not just since the end of the Cold War, but in many ways since the end

of World War Two. And you talk about that, as I recall, in

your most recent book, Below Obligations.

And I guess my question to try to end on something, how do you see any progress?

You talk about the risks and the dissension and the real danger for the

fundamentals of our democracy. Are you seeing any progress at all?

Well, I see lots of progress. You just had the visit of the Japanese

prime minister. Look how robust Japan is in this

alliance. It's we've seen the improvement in ties

between Japan and South Korea. We see India doing pretty well

economically. So, yeah, I see some positive things

around what's happened in Ukraine until recently.

The fact that the United States and Europe were willing and able to step up

to make Ukraine put help, put Ukraine in a position where it could frustrate

Russian aggression and ambitions, that that was that was pretty impressive.

So to me, the biggest single question is whether we come together at a minimum,

avoid really severe dysfunction and violence during those critical 75 days

after the election that we see no reprise of January six.

Then afterwards, we'll see who's sitting in the Oval Office, who's sitting, who's

controlling the House and the Senate. Can we essentially govern?

You know, I don't have a crystal ball, but all I know is, David, that so much

depends upon our role in the world. The world is not self order ordering,

self-organizing. We have got to play a large a large

role. And the real question is, is whether

we're able to and I would say the people watching this show, they have a big

stake in this, you know, the rule of law here at home, a stable world.

This is this provides the context for everything American business does.

So I would basically say to CEOs and others, they ought to really think hard

about what they can do to to influence this election in the sense of make it

easy for their people to vote, give them opportunities to get informed, to

support policies that are pro-democracy here at home and pro internationalist in

the world. They have an enormous stake in that.