The Iran Shock Is Not Over: A Conversation With Jason Bordoff and Meghan L. O’Sullivan

I'm Dan Kurtz-Phalen, and this is the Foreign Affairs Interview. The U.S. is now the world's largest producer of oil and the largest producer of natural gas. And what that means is that the price effects in the U.S. have been comparatively muted to other parts of the world, dramatically muted compared to some developing countries. This might mean that America is more resilient to the consequences of its own foreign policy decisions. It is simply implausible to think that every country is going to be able to produce all the energy, all the critical minerals that it needs within its own borders. It is going to have to work with other countries. It's incredibly expensive, inflationary for countries to try to make everything at home. When Iran closed the Strait of Hormuz six months ago, the world seemed to be on the verge of an energy crisis. It was, as Megan O'Sullivan and Jason Bordoff pointed out in our pages at the time, the largest disruption of global energy flows in history. The world's ability to manage that disruption has been surprising. The crisis many expected has not come. But in just the last few years, Russia's invasion of Ukraine, the fits and starts of the green transition, and the AI build-out have remade energy markets and the politics undergirding them and shown energy to be a devastating factor. Bordoff and O'Sullivan have mapped out this new energy order across a series of essays for Foreign Affairs. Now they warn that the relative stability of recent months cannot be cause for complacency. Bordoff is director of Columbia University's Center on Global Energy Policy and was senior energy advisor in the Obama administration. O'Sullivan is director of Harvard University's Belfer Center and was deputy national security advisor in the George W. Bush administration. I spoke to them on Tuesday, September 8th. About the future of the Strait of Hormuz. About China's clean energy dominance and the Trump administration's Venezuela oil deal. And about how the return of the energy weapon is transforming geopolitics and national security. Jason, Megan, great to have you back on the podcast. Great to be here. Thanks so much for having us. Thanks, Dan. It was, I have to say, a little disquieting to go back and read the fantastic essays you two have written for Foreign Affairs over the past few years. And see how many of the dangers you warned about came to fruition within a matter of months. To take two of those, in late 2021, you wrote a piece called Green Upheaval that described some of the most destabilizing dynamics that ensued after Russia's invasion of Ukraine a few months later. And then in late 2025, you wrote a piece called The Return of the Energy Weapon, which, among other things, warned about the use of Hormuz as a checkpoint. So I was, I have to say, not thrilled to read your most recent piece that we should be worried about further and much more. Much worse, Hormuz-related disruptions. But let's start with Hormuz and really go back to those weeks when Iran first managed to shut down traffic through the Strait. You wrote a piece for Foreign Affairs about a month into the Iran War. It was called The Iran Shock. And it noted with considerable concern, as many others had at the time, that the closure amounted to the largest disruption of global energy flows in history. Jason, let's start with you on this. What did you expect to happen in March, if you could go back and inhabit your mindset in that moment? Well, I think it's a great question. I think it's a great question. I think and appreciate your going back and reading all the articles and really proud of the work Megan and I have done and have loved collaborating with her for so many years in your pages in Foreign Affairs. As you said, in late 2025, we wrote a piece about why we feared that energy in a world of collapsing geopolitical order and growing competition and conflict would be both a source of vulnerability and also increasingly be used as a weapon that countries would have to deploy in great power conflict. And in many other ways. And within months, we saw the leader of Venezuela removed. And as Megan also wrote in Foreign Affairs, oil placed prominently as one of the reasons for that. And then, of course, the attack on Iran and Iran's closure of most of the Strait in response in a way that I think energy security scenario planners have been thinking about what might happen in the mother of all nightmare scenarios where the Strait of Hormuz would be closed 20% of the world's oil, 20% of the world's oil. 20% of the world's liquefied natural gas and how catastrophic that would be for global energy markets. The ease with which Iran was able to do that, thanks to drone technology, among other factors, was a bit surprising. And I think like many energy analysts and the vast majority, if not nearly all, thought that within a month to two months, not too much longer than that, you would see sort of catastrophic oil prices in the realm of $150,000, $200,000. $200 a barrel when you lose 20%. And it wasn't all 20%. There were some workarounds that were possible, but say 15% of the world's oil supply. The fact that that did not happen, we can go into what the factors were and why that did not happen. But I think that has surprised many people. And I think we tried to write in the piece in March what we thought would happen as oil was weaponized, countries faced a severe energy crisis. We did see initially in the early months some real shortages, particularly in emerging and developing and more vulnerable countries, and how countries would respond to the increased fears that were now materializing about the use of energy as a weapon to try to look inward and try to make themselves more resilient. Megan, in the more recent piece, the follow-up piece the two of you did in our pages last month, you noted that, quote, by almost any measure, the world should be suffering a far more severe energy crisis for all the reasons Jason just laid out. As you look back at the six months since the war started, six months or so, what happened that conformed to the expectations you had at that time? And what has surprised you? What, to the extent those predictions of a crisis on the scale of the 1970s, to the extent those were wrong, why? Sure, it's a great question. And I would say it's one of the things that has been most surprising to analysts of all kinds over the course of the last five months is why, in the face of what the IEA has called the largest disruption of oil flows. Historically, ever to happen, both in terms of absolute amounts and percentage amounts of global oil flows much greater than 1973, why the price response has been so muted. And part of what we do in this article that Jason and I wrote, and I, too, have been very happy to work with him and very pleased that you have published us, but in the course of that piece, we sort of lay out a number of reasons why this has been the case. And I'll spell them out briefly. But we also take the opportunity to warn that those buffers that we highlight are not necessarily going to be in place forever. They're not buffers of longevity, but they're buffers that get eroded over time, and they have been eroded. So I would say the first thing to note is that when the Strait of Hormuz was closed, global oil markets were at a comparatively good situation. You had more supply than demand. And so you had a surplus. You had a surplus in the global market. And so that set up the whole world to be in the best place conceivable for an oil shock if one has to happen. But there are really three buffers that we highlight and consider to be the most consequential. The first, and now I think your listeners will be well aware of these buffers, were the bypass pipelines and the other measures that countries, particularly Saudi Arabia and the UAE, had in place to actually circumvent Hormuz. So if Hormuz. If Hormuz was exporting 20 million barrels of oil a day, there was the opportunity to get between 25% and 30% of that out through other pipelines through Saudi Arabia to the Red Sea or around the Strait of Hormuz when it comes to the Emirates. And so that was a very meaningful piece of resiliency there. Did you and other observers of the region and energy analysts not anticipate how quickly that could happen? Were those countries able to adjust in ways that just didn't seem imaginable? When we were contemplating this ahead of time? No, I wouldn't say that that didn't seem imaginable. I mean, those pipelines were built in the 1980s for this very purpose. So, you know, people were aware that they were there. I think the big question was, how much oil were they going to be able to move through those pipelines? You know, those pipelines already were carrying some oil to those alternative ports. And then the Saudis and the Emiratis, you know, were able to, I don't know if the right word is juice the pipelines, but really get them to carry absolute maximum capacity. So, I mean, that's significant. Let's say it's 7 million barrels of oil a day. It's significant. But in the face of 20, there's still an enormous gap. And so then the question is, what were the other things that helped fill in this gap? The second one was the release of the IEA stocks. So really, I should say the coordination of the International Energy Agency of governments around the world to release stocks into the system. It was the largest release. It's still going on, but it's almost at its end. The largest release in history, 400 million barrels. And that had a number of salubrious effects. And one of them was that it allowed the U.S. to actually start exporting at even greater volume. So you see a huge uptick in the export of American oil and crude around the world. And that was very helpful for countries that were trying to replace crude that had been coming through the strait. And then finally, and maybe most interesting, was the role that China played. And I think that you've had people write about this in Foreign Affairs, that China, the biggest importer of global oil dramatically reduced the amount of oil it was taking from global markets into the country. You know, there's somewhat a lack of clarity of the exact numbers, although we have gotten greater clarity over the last weeks or so. But essentially, the Chinese had been importing a lot of oil, much of it to go into its stockpile, and it stopped stocking oil for a rainy day. And it also stopped bringing in so much oil to its refineries. It had a number of reactions to this increase in price that actually took about 5 million barrels of oil of demand off the market. And that had a huge impact on the world's ability to manage this disruption without a commensurate price shock. I think there's something interesting we could talk about. Or Jason could comment on it, is I think a question that many are grappling with now, like, why did the Chinese do that? Or how did they do that? Was that a strategic move? Does that give them a new foreign policy tool? Or was it just a reaction that wasn't strategic at all, and may or may not be replicated in future oil shocks, or even in what could be a new chapter of this oil shock? We did note in the piece that complacency would be the wrong lesson to take from this. And I went back and looked, Daniel, at it. The day you sent us an email reply saying, this is great, let's move forward with it, and assigned one of your great colleagues to work with us as an editor, oil was $77 that day. And today it's just about $100. Jason, picking up on the China point, how do you assess Chinese decision making? Obviously, some of this is opaque, as Megan says, but how do you balance the strategic factors versus just kind of Chinese improvisation, trying to limit the economic? Yeah, I've seen sort of conspiracy theory type ideas that, you know, there was a secret deal with Trump and Xi and how China would come to the rescue of the global oil market and keep prices rising in the United States. I sometimes think the simplest explanation is the most straightforward one. And I think the simplest explanation here is China was doing what was in China's interest. China, China has built a strategic reserve and commercial inventories of something like one and a half billion barrels, maybe a little shy of that, significantly reduced oil consumption and oil imports through more electrification, also from a coal and its chemical sector. So it built up a capability to reduce demand, to switch some demand in short order, to release, and really what it did, not even like releasing its strategic stocks, but it was, it was building up a capability to reduce demand. China was, it was buying about a million barrels of oil per, per day to fill its strategic stocks. And it stopped doing that because oil got very expensive. And then it ordered its refineries to, to curtail runs and to operate at lower capacity because it was expensive. And so they restricted their exports of refined petroleum products like gasoline and diesel and jet fuel at the expense of their neighbors that depended on that. So I think it's easy to look at what China did to significantly curtail oil imports when it was buying about a million barrels of oil per day to fill its strategic stocks. So I think it's easy to look at what China did to significantly curtail oil imports when prices soared and the world was short oil as what was in China's economic interest. And it happens to be that in a global market, when you do things like that, it accrues to the benefit of everyone else. It's no different than the Strategic Petroleum Reserve in the United States. When we release hundreds of millions of barrels of oil, we put those barrels into a global market and it helps to cushion the price shock, not just for the United States, but for other countries as well. I think the three of us would probably recognize that over the last decade, you know, a consistent failing of American foreign policy analysis, like anything that China does, we assume it is part of a deep strategy. When in case it may just be, you know, China responding to what makes the most sense at that particular moment. What's interesting, I would say, is regardless of the motivation, we see the effect. And the effect is real. And it opens up some new possibilities and some new questions. The new possibility is that when we are faced with an energy or an oil shock, we don't just have supply, you know, moderation to help manage it. We also have demand modulation. And that perhaps even though China may have not been trying to make any kind of strategic statement in these last five months, they might recognize that they have this ability to do it should it be in their strategic interest in the future, say potentially in a Taiwan contingency. So it may not be a strategic plan on the part of the Chinese for the last five months, but there are strategic implications. So it's quite notable to see it in this case. But let's pick up on the risk of complacency that you warned about in the recent piece. If we were having this conversation again in six months and rather than the benign, relatively benign scenario we've seen so far, we've in fact seen a big disruption and major global crisis and, you know, global economic downturn and everything else that might come with it. What worries you? What would have caused that kind of less benign scenario? What would complacency bring? Well, as you wrote in the piece, buffers can be exhausted. And so the many factors that Megan walked through for why this was not nearly as bad as some people had feared, some of those will persist, like pipeline bypass routes. And even those are becoming a little bit at risk as Huti attacks in the Red Sea and other things pick up. So those are vulnerable as well. But certainly, as Megan said, we have a historic release of strategic stocks, and those are coming to the end of their scheduled. Scheduled release. There's only so much you can dip more into strategic stocks before they start to run dry. The same with commercial inventories. And I think as the market, I commented that when we traded emails to start the process of editing the piece, oil has gone up about $20 since then. So just in that short period of a little over a month, I think the market has come to appreciate that this might not be over as quickly as people thought. And if this persists for some period of time. If this persists for some period of time, we're going to start to run into some real problems in terms of our ability to access enough supply to continue to meet global demand without prices having to rise higher to force demand destruction. It is also the case that more oil flows are going through the Strait of Hormuz, and there's some disagreement about exactly how much. And the Trump administration has put some rather large numbers out there. I think that may have been limited to a particular moment. I'm not sure that's the daily flow. But it's certainly the case that something like 70%. Seven, eight, nine million barrels a day are probably moving through the Strait now, which is a higher number than before. But if this continues, there's only so long you can take whatever the number is, five, 10, 15 million barrels a day off the global market before prices have to rise high enough to force demand to decline by that amount, absent those buffers. And a lot of those buffers are temporary by nature. While we're looking at crude prices, and thus far we've been talking about crude prices, what is really becoming on the radars of lots of people? Right now are the prices for refined products for diesel in particular. We mentioned this in the piece, but I think, you know, even in the last couple of weeks, this has become much more acute. The workarounds that Jason mentioned that are happening in Hormuz and, you know, seeing more oil get out of the Strait is true and it's having a positive effect, but that's crude. It's not refined product. And so we have this kind of convergence of conflicts where the Ukrainian. Bombing of Russian refineries and the lack of ability to get refined product out of the Gulf has really come together to really create problems in these markets that are already reaching, you know, some level of crisis. And so I think that could certainly intensify over time. The other concern I have is of a totally different nature. And we talk a little bit about it in the piece that while we're talking about how the world weathered this energy. Shock much better than was expected, it kind of glosses over the distributional effects of the harm and that in fact, the economies that did really well in this shock were the advanced economies. You know, Europe did probably better than it expected and other advanced economies, but the United States really probably did the best here. And this has a lot to do with the fact that the US is now the world's largest producer of energy. The largest producer of oil and the largest producer of natural gas and what that means is that the price effects in the US have been comparatively muted to other parts of the world dramatically muted compared to some developing countries. And one of the geopolitical implications that Jason and I tea tea up is that this might mean that America is more resilient to the consequences of its own foreign policy decisions. And so that creates. An interesting and potentially difficult dynamic with our friends and partners where decisions that America makes the costs are borne by others disproportionately. the interesting geopolitical points of this crisis. Megan, let me ask you to put your Middle East policymaker hat on for a second rather than your energy-focused hat. Do you expect the current status quo in Hormuz, which is not exactly a stalemate, but there's some flow through the strait, there are occasional strikes, do you expect that will more or less be in this dynamic for the months ahead? And from a U.S. perspective, given where we are, do you think that's the best we can do at this point? Or if you were, you know, back in the White House, is there something else you would be trying? I think that we should expect more of the same going forward. And I would say it's not more of the same on a day-to-day, but like, you know, there's an oscillating escalation, de-escalation dynamic that's going on. One thing to watch that could change is whether or not Iran feels like it no longer is able to disrupt Hormuz as much as it would like. So if it is, in fact, the case that two-thirds of the ships are actually getting out of Hormuz, Iran might feel it needs to disrupt other parts of the global oil system and, you know, harm other actors. Because if it's not going to be able to, you know, reach its objectives, then it's going to try to keep others from reaching their objectives. And I say this particularly in reflecting on the attacks on Saudi Arabia today, and on, you know, the, you know, the, you know, on some of the refining capacity in Saudi Arabia. And, you know, that certainly could be a way that Iran is trying to make others pay. There's definitely potential for this to go back into escalation mode. And I think this past weekend really suggested that. But on the whole, my feeling is regardless of what happens, even if there is a political deal, even if the deal between Oman and Iran actually comes to light, markets and particularly insurers are not going to feel that this is a stabilizing, de-escalatory thing. It's going to be more of Iran exerting itself in an institutional architecture over flows out of the Strait of Hormuz, which is not going to, you know, give confidence to global markets. So I think, you know, we're really looking at this sort of disruption for some time. And is that the best the Trump administration can hope for given all that's happened in the last six months? Or is there some other policy, option you think would be preferable? Well, I think the real issue with the Trump policy right now, from my perspective, I'm putting actually on my sanctions hat rather than my energy or Middle East hat, but they all kind of, they're all kind of the same hat in some way, is that, you know, right now we have a policy where we're using lots of different tools and we're pursuing lots of different objectives, but it's not clear how those tools are aligned to make a strategy towards a particular objective. And that's the only way that we're going to be doing it. And that's the only way that like economic pressure every ever translates into strategic gain. And so it's very common. We've seen it across administrations for decades that, you know, administration will put an economic pressure strategy in place and assume that, well, if it doesn't achieve regime change, maybe it will achieve behavior change. And if it doesn't do that, at least it will do containment. But the reality is that you need very different strategies for each of those objectives. So I feel the Trump administration's best option is to put a strategy in place. And I think that's the only way that we're going to be right now is probably something that looks like a containment strategy where it would marshal, you know, military force would be in support of economic sanctions, which would be, you know, really imposed in order to try to isolate Iran until something changes and a different outcome is possible, either through a negotiated solution or through internal change in Iran. And that's not, you know, that's not a quick victory. That's not an agreement. That's not a collapse. It's something that looks a lot less satisfying to the Trump administration. But I think it's the most practical solution that could be achievable now. And a lot of that gets to whether or not this administration is going to be willing to put more pressure on China, or there's some kind of arrangement that President Xi and Trump can come to that leads to a greater understanding on Iran amidst all the other bilateral issues in the relationship. And I have to say that's seems fairly unlikely watching the least initial signals around the Trump-Xi summit and in a couple of weeks. Jason, one of the other warnings that you issue both in the piece from last spring and the piece from last month, is that countries will kind of learn the wrong lessons or overlearn one particular lesson from recent months. And that's about the kind of dangers of globally connected energy markets, which, you know, the two of you see is actually one of the sources of resilience in the last six months. To what extent do you see early moves suggesting that that concern is an urgent and valid one? And as you assess the lessons of this, what would you be urging policymakers to do to prepare for future such shocks and to put themselves in a better position down the road? Yeah, Megan and I have written over many years and in several places that integrated energy markets have been a source of security that have made countries better off. It's one of the, you know, positive developments of the last half century since the Arab oil embargo. There's often rhetoric around energy independence. But in fact, one of the things that came out of the Arab oil embargo was an effort to create more cooperation, more interdependence, cooperation through things like the International Energy Agency and integrated global energy markets. Oil was not a fungible, globally traded commodity back in the 1970s. It was sold in long-term contracts between buyer and seller. Over time, transparency is a key component of energy independence. But it's also a key component of energy independence. And I think that's a key component of energy independence. But a broad reversal of an era of, as Megan put it, and one of the things we wrote, copacetic geopolitics toward an era of competition and conflict and the sense that the global order is collapsing is causing countries to look inward, causing countries to think that being connected to global markets and connected to other countries is a source of risk, not of security. And countries are looking inward as a result. They're defining security by reducing or eliminating imports, by being able to self-sufficient. And there's some benefit that comes from that, for sure. We wrote about why the United States is in a stronger position in this conflict, because it is a much larger producer. It is now a net exporter rather than a huge net importer of oil and gas. But it is simply implausible to think that every country is going to be able to produce all the energy, all the critical minerals that it needs within its own borders. It's incredibly expensive, inflationary, for countries to try to make everything at home. And so we lay out in the piece a number of steps we think that would make sense for countries to take. These are longstanding lessons of energy security, but they're all emphasized, put a spotlight on them by this conflict in Hormuz, which include maintaining a commitment to those well-functioning markets and then putting other buffers in place to make yourself resilient in the process. More domestic production, more buffers like strategic stockpiles or bypass routes for pipelines. Energy security, you can think of as an insurance policy. What premium is society willing to pay for extra redundant infrastructure that, like the large pipeline moving oil across Saudi Arabia right now, was not fully used before, but it was built just in case for a scenario like this. In a world of more energy security risk, countries are going to need to be willing to invest more in those sorts of security buffers. And as Megan said, one of the challenges will be lower income, middle income countries that are more vulnerable to those shocks, may lack the resources to do that. And then the last thing we point out is using less in the first place. Energy efficiency has long been job one of energy security. The U.S. economy is much less energy intensive today than it was a half century ago. And that means the impact of energy price shock is lower today on the U.S. economy than would have been the case several decades ago. So all of those are lessons that countries should take to make themselves more resilient. We'll return to my conversation with Jason Bordoff and Megan O'Sullivan after a short break. Art News Magazine calls Independent 20th Century a staple of the season and experience historic modern art from around the world and one of New York's most iconic spaces, September 24th to 27th. To learn more, visit independenthq.com. Did you know that Foreign Affairs has an app? Enjoy professionally narrated audio, playlists, and adjustable playback speeds for a personalized listening experience. Save your favorite pieces for later or listen on the go. Search for Foreign Affairs in the App Store. or visit foreignaffairs.com slash app. Jason, do you see any sign that countries are committing to clean energy in new ways as a result of the shock, or is that a kind of fanciful hope at this point, just given how the politics of that issue have shifted? There are signs of that. EV sales have been increasing. Solar deployment is increasing in different parts of the world. We saw some of that in Europe after Russia invaded Ukraine, where Europe invested more in energy efficiency, in electrifying some parts of energy consumption, like heating, and also vehicles. A desire to reduce import dependence and then get more, if you're an import-dependent region, reducing imports of oil and gas means electrifying more of your economy and getting that electricity from domestic sources, and most of those would be pretty clean. Solar, wind, geothermal. Battery storage, nuclear power. Many European countries are rethinking their approach to nuclear in this era of energy security and affordability challenges. Coal is also a domestic energy source, and we saw an increase in coal consumption in Asia, so that's a big caveat to the story that many would hope would be true, that we would move in a cleaner direction because of energy security concerns. And the other caveats to that story that we lay out in the piece, one is that while I do think it will give a boost to, uh, forms of clean energy, like electric vehicles, it is also absolutely the case that countries are going to want to invest more in the resilience of their oil and gas system. If the mother of all nightmare scenarios for oil supply disruption, cutting off 20% of the world's oil supply, resulted for at least six months so far in an oil price shock that was not nearly as bad as people thought, it was pretty manageable, a lesson many countries could take is that this oil and gas system is pretty resilient after all. And maybe if we invest in its resilience, through more strategic stockpiles, more diversity of routes in pipelines, more domestic refining capacity that our energy, so there'll be more investment in oil and gas in the name of resilience. And I do wonder whether, as we wrote in the piece, it is possible that countries could also in the relative scale of energy security risks, you're worried about oil and gas import risk, but people are also worried about the integration of global supply chains. And nearly if you want to move more in the direction that China has moved in the last 20 years, electrifying more of your economy, solar batteries, electric vehicles, right now you have to buy most of that kit from China. And the question is how concerned countries will be about depending on China for those clean energy supply chains. And I wonder whether the fact that the first thing China did in this crisis was look out for China by restricting exports of refined petroleum products might make people a little worried about being fully dependent on China for those clean energy products. I want to go back to the China dimension of this, but first just to stay on the Middle East and Megan to ask you to once again bring together the Middle East policy and energy policy parts of your work. The other fascinating dynamic has been watching the range of reactions from regional players. The rift between Saudi Arabia and UAE, the United Arab Emirates, precedes this war, of course, but it's been kind of playing out in fascinating ways since the war started and in the varied responses. Then of course the UAE left OPEC, the Organization of Petroleum Exporting Countries a few months ago. How do you understand those regional dynamics? And as they intersect with the energy dimensions of this, especially when it comes to OPEC, how do you imagine that shaping both energy politics in the Middle East, but also the Middle East more broadly? It's a big question, but it's the right question. I think we went into this war period with a Middle East that looked increasingly bifurcated, you know, where you had the UAE kind of moving in one direction, and Saudi Arabia and a few others moving in another direction. And I feel that by and large that distinction or that cleavage has probably been reinforced by the war, in part because Saudi Arabia and the UAE have been kind of not affected at all in the same way. In fact, the Saudis up until this morning were relatively insulated from some of the negative effects and in fact, probably, I haven't done the numbers recently, but it was looking like their revenues were doing pretty well because you had higher oil prices and you had them able to export a lot of their oil through this alternative pipeline. Whereas in contrast, the UAE has suffered pretty significantly, not just in terms of revenues and things, but also in terms of just infrastructure damage and physical damage, you know, receiving more missiles than Israel has received in this conflict. And so you do see a divergence of those interests there. That could change over the course of time, but it's rooted not just in the way the war is played out. It's rooted, as you allege to, to a number of different things about, you know, the orientation of the region and where the future should be, and also which direction the world is headed in terms of the energy transition. Is this going to be something that you need to monetize your resources quickly, in which case the UAE has. kind of moved in that direction? Or are we looking at a much slower energy transition where that's not the priority and therefore keeping prices higher for longer is the priority? So you have a divergence of interest across a number of things. I wouldn't, however, rule out circumstances in the future in which Saudi Arabia and the UAE do find ways to cooperate together that might be in their self-interest. So I'll just give you one scenario that people are thinking about, although it seems distant now. It will happen at some point, and that is when the strait does open, you know, whether that's in a month, which I think is unlikely, or whether that's much further down the road. If you suddenly have a lot of oil dumped into global markets, the price could go down dramatically. So suddenly the world could see a dramatic drop in the price, and this would have implications for all the world's producers. So you could imagine in that scenario that they might actually find a way to cooperate again. More generally and briefly on the region as a whole, I think what we are seeing is this desire to build resiliency from the Strait of Hormuz is creating all kinds of new and interesting opportunities. So if we look at Iraq, the idea of a pipeline taking oil from the Gulf through Syria or expanding the oil that flows from Iraq through Kurdistan through Turkey, you know, these things seemed like fairly remote possibilities not too long ago. But now you see, you know, big companies taking the possibility of building that infrastructure very seriously. And if that does happen, that could be a game changer for places like Iraq. If they, you know, because of the imperative of not relying on the Strait, you know, there could be interesting political and economic developments in other parts of the Gulf, which could be quite positive. Jason, if that's a potential positive effect, I want to look at one of the other negative ones. You referred to that piece from last year of the return of the energy weapon. Where, if you're being a bit paranoid about this, do you see risk of the energy weapon being deployed in aggressive ways as countries have watched both China's weaponization of some of its clean energy supply chains and now Iran's use of the Strait of Hormuz? Where else would you imagine that we might see similar kinds of use of energy as a weapon in coming months and years? Well, as you said, we have seen it with China and its dominant position in clean energy supply chains, particularly critical minerals and heavy rare earths where there were restrictions imposed over the course of last year in response to escalating tensions with the United States. This is a weapon that China used with Japan over a decade ago, a decade and a half ago in response to a conflict with Japan. So China has not been unwilling to use leverage where it has it. And right now China has a much more dominant position in not just clean energy, but including clean energy, many technology supply chains, batteries, electric vehicles, not just the mining, but especially the refining and processing of so many of the critical minerals and heavy rare earths that have been deployed in the United States over the last decade. So China has not been willing to use leverage where it has it. But it's not just that. We see the United States now take an equity stake in a private company for the development of Venezuela's resources. We saw how the United States government, when it tried to put pressure on Venezuela before the removal of Maduro from power, used not just economic sanctions, but a physical military blockade to prevent the export of crude oil and the import of some of the lighter oils that Venezuela needs to produce its very heavy oil. It did the same with Cuba to try to put pressure on the Cuban regime. And of course, you know, one of the most prominent examples since the 1970s was just a couple of years ago with Russia cutting off most gas pipeline exports to Europe after the invasion of Ukraine. So we're seeing around the world that integration between companies with all the benefits Megan and I have written about, we're seeing around the world that integration between about can be weaponized as well. And that's why it is important for countries to think about diversification. As Winston Churchill famously said, security in oil lies in diversity and diversity alone. It's one of the reasons why China's dominant position of 70, 80, or 90% in many of these supply chains is much more concentrated. The largest oil producers in the world are 10 to 20% of global supply. So there's less concentration there. You want diversification. You want to diversify your sources of energy, more electrification, more domestic energy production, all of which makes you more resilient. We had a statistic in the piece, which came out of a Dallas Federal Reserve paper that looked at what the economic, adverse economic impact in the United States would be of a roughly 15% disruption to global oil supply. That was about what we saw this year. And they estimated that in 1980, that would have reduced U.S. real GDP 5.6 percentage points. And today it was 0.3 percentage points. So roughly 24%. And that is because the U.S. both is a much larger producer. We import less, but also because we are so much less oil intensive. We use a lot less oil as a share of our economy, all of which makes you more resilient in this new returned era of energy weaponization. So if I could just add to that, to your question of where might we see energy being used as a weapon in the future, sort of a provocative answer, is potentially the United States. And that we heard a news story about the United States, and that we heard a news story about the United States, and that we heard a news story about the United States, and that we heard a news story about the United States, and that we heard a news story about the United States, and that we heard a news story about an interview with Secretary of Energy Chris Wright just a couple of days ago, where he was asked about, you know, what are the ways in which the United States is looking to help manage the prices that American consumers are experiencing? And he said, we consider all options of how we can move prices that are favorable for American consumers. But right now we're leaning in on maximum production. And that, you know, says exactly what it says, but it also doesn't rule out the export controls on refined products, or things to help manage, help Americans. American consumers have better prices at the pump, but this could have very significant impacts for others around the world. So, you know, whether Americans would call that energy weaponization, there will certainly be big parts of the globe that will, if in fact the administration decides that's what's in its economic and or potentially even political interests. Megan, sticking with U.S. policy, Jason referred to this staggering Venezuela deal that has been rolled out in recent weeks. You wrote a piece for us in January, warning about some of the mistakes that the United States could make in Venezuela based on past interventions. One of the warnings that came through most clearly in that is that the U.S. had to prepare for the, quote, inevitable toxicity of the narrative that it is only after oil. That warning seems to not just be unheeded, but almost kind of flagrantly defied in this oil deal. It's so kind of staggering that I'm having a hard time even formulating a question here. I'm just curious what you make of it, what it means for both Venezuela's oil production, but what you think it might mean for the success of this project in Venezuela, you know, potential for a kind of stable political transition going forward in that country, given what this means for the oil sector. Yeah. Well, you're right to be a little bit flabbergasted because it is an extraordinary deal. It's almost a concession-like deal going back, you know, many, many decades since we've seen anything like this, where you actually have the U.S. government will have an equity stake in Venezuelan oil and will have the right to buy a significant percentage, I think about 20% of it at cost. And then we'll have the right of refusal to purchase the rest. This is a very, very unusual deal. This is already having a political backlash in Venezuela as Venezuelans. And I would say Americans look at this deal and see it as extremely kind of reminiscent of almost colonialism. And this, I think, bodes poorly for the prospects of Venezuelan political stability. And of course, ironically, it is that political stability upon which the benefits of this deal rest. So, you know, I think many people have been looking forward to seeing how the Trump administration is going to advance its stated objective of helping Venezuela return to a democratic system. I feel that this deal makes it highly unlikely that this will be in the interest of the Trump administration or the Delce-Rodriguez administration, or even potentially the investors who might become involved in this deal, because it does not look like it will necessarily be politically durable with a change of government in Washington or in Caracas. So I think there's a lot to be concerned about. Is there a scenario under which this deal works out, this deal is beneficial to global markets, is beneficial to the American consumer and to Venezuelans? Sure. But I think a lot of that rests on having some kind of long-term political stability in which American and other international investors are going to have to deal with this deal. And I think that's a lot of that rests on having some kind of long-term political stability in which American investors would be comfortable making these very long-term investments in Venezuelan oil and turning those equity investments into actual production. Right now, we're talking about, you know, 17 fields, only a few of which are actually producing right now. So we're looking at something that would only have implications for global oil markets many years down the road. Yeah. And I would just add to that, Dan, that I'm skeptical about the durability of this deal on either side, if you see political change in the United States. Also, if you see political change in Venezuela, as Megan said, it's generated backlash from people there. And there's a reason, I think, that you didn't see this deal with something like a Chevron or an ExxonMobil, but with a somewhat more obscure company, North American Blue Energy Partners. There's some historical precedent for this. In 1943, Harold Ickes proposed U.S. government ownership of the with the ones that pushed back on that and said, this is not how we're supposed to go about doing this. The idea that there can be a positive role for the U.S. to play in rebuilding Venezuela's battered oil industry makes all the sense in the world. Venezuela will benefit from the revenue from recovery of its oil industry, a once great oil industry. In the 1990s, Petravesa was one of the most respected oil companies in the world. But the way to do that, as Megan said, is stabilization and economic recovery, strengthening the rule of law to attract private capital rather than what seemed to be not profitable. So I think that's a good idea. Fully transparent, somewhat opaque schemes for government equity stakes in smaller companies in Venezuela. And in fact, just tying it back to something that Jason just mentioned in his previous response, what we've learned over these many decades is that interconnected global markets is the best form of resiliency in a situation of supply shocks. And these concession-like agreements are the best form of resiliency in a situation of supply shocks. And these concession-like agreements could measure or some metrics that you might say would indicate the economic impact of those strikes. And some of them are manifest in the long lines that are in multiple cities throughout Russia for oil, for gasoline, for refined product. Another metric is just simply that the Russians continue to restrict the export of refined product and, in fact, are even going to private refineries in Kazakhstan to try to acquire some refining capability. So all of those things suggest real impact. But in talking about sanctions or military force, we have to distinguish between impact and then effectiveness. So the real question is, does that impact, which I think is now visible to us, even those of us living far from Russia, does that impact translate into impact on Putin's goals in his conduct of the war in Ukraine? And there, I'm less confident just because of the existential nature of this war from Putin's perspective. You know, I think it's not a coincidence that now is the time where members of the Trump administration or Jared Kushner and Steve Woodcoff are trying to reinitiate a diplomatic track because perhaps there is some more openness because of the economic pressure. But just as in Iran, I mean, Iran is another place with a severe economic crisis underway, but we can't automatically assume that that economic crisis changes or impacts the conduct of the war. It could, but it's not necessarily a straightforward relationship. And Jason, to close, I want to go back to the issue of the clean energy transition. This was part of the focus of the first piece the two of you did together on foreign affairs, Green Upheaval, shortly before the outbreak of the Ukraine war. That piece was in part about the geopolitical complications of that transition and the kinds of instability that we might see. And we certainly have seen plenty of instances of that in the subsequent years. Whether the transition itself is proceeding as we expected it to in 2021 is a separate question. How have you seen the arc of the transition change in recent years? There's a lot of reason to be pessimistic. Is it right to be so? How far off target are we as you assess changes in the last few years? Well, we're very, very far off track from goals that countries around the world committed to informally. We should say the science of what we know about climate change, which those impacts are here and now, and they are going to worsen and intensify over time. One and a half, well below two degrees, two degrees Celsius of warming. We are not on track for goals like that by any means. And at the same time, there is a lot of progress. We are seeing for all of the headwinds of the Trump administration's policy in the United States, rolling back clean energy tax credits in the United States, making permitting, in some cases, particularly offshore wind, harder, where there's a focus now on energy affordability and energy security, a race to build more energy generation, particularly electricity. We often talk about energy prices. Typically, that was oil and gasoline prices. We're talking more about power prices now, which had been roughly flat over the last two decades or so, along with power demand. It's rising again. Most of the growth in power generation in the United States is going to be met by solar and batteries, because it's pretty cheap and it can be done quickly. A lot of natural gas, too. So when you look around the world, we're seeing dramatic cost declines in many forms of clean energy. And that means that with a reset in the conversation about the energy transition, which is clearly going on, where issues of energy security, affordability, reliability are front and center now, along with questions about the energy transition. There is a possibility, and we wrote about this, that there is a possibility that a green energy transition could help facilitate cooperation between countries, could reduce conflict and the role of energy as a weapon. I still believe that that is possible, but there are a lot of challenges and tensions there, including the concerns people have about many of those clean energy supply chains we just talked about before and how some of those can be weaponized. So there's a lot of progress in clean energy, but energy security concerns have the potential to give a push to a lot of clean energy technologies, but that's not going to happen by itself. You're going to have to address the energy security concerns that are legitimate and do exist for clean energy, and we haven't done that well enough yet. And you're still going to need policy, whether it's a carbon price or something else, regulations, you're going to need to address that. And I think that's going to be a lot of progress in clean energy. So there's a lot of progress in clean energy, but energy security concerns have the potential to account for the fact that there are a lot of social benefits, a lot of benefits to people in the form of reduced pollution and otherwise, to set a level playing field between oil, gas, and coal and all the forms of clean energy that we need to grow much faster than they are today. Thanks so much to you both for doing this today. We've had occasion to go back to the two of you many times over the past few years, and I don't exactly look forward to this because it probably means that something grim will be happening in the world, but I'm sure we'll have opportunity to pick up these questions as we continue to see these developments, both in Iran and elsewhere in months ahead. So we'll look forward to that. And for now, thanks so much. Great. Thank you very much, Dan. Great to be with you. Thanks for having us on, Dan. Thanks, Megan. Thank you for listening. You can find the articles that we discussed on today's show at foreignaffairs.com. This episode of the Foreign Affairs Interview was produced by Adelaide Parker, Adrienne Feinberg, Ben Metzler, and I. With audio engineering by Todd Yeager and original music by Robin Hilton. Special thanks as well to Irina Hogan. Make sure you subscribe to the show wherever you listen to podcasts. And if you like what you heard, please take a minute to rate and review it. 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