The UAE, Iran, and the Hostage at the Heart of the Oil War

0:00Just before we start, today we are all UAE, Abu Dhabi, Dubai, United Arab Emirates. We're talking about why they left OPEC, what this decision means for politics, for the price of petrol in your car, and for the choices that small countries might have to make in the future. So it's politics, geo-economics, petrol, oil, oil crises, all that stuff, all coming up

0:29David McWilliams: in a couple of minutes.

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1:46David McWilliams: If you're interested in what's coming up in the podcast, you may well be interested in this wonderful, wonderful event at the Dorky Book Festival. It's going to be called The Oil Shock. Will Energy Prices Crush the Economy? With Mark Blythe, Sonny Kapoor, Samaya Keynes. It's all about oil, economies, inflation, and what happens next. That's at dokeybookfestival.org for tickets. We'll see you in Dokey in June. To understand the economy, you have to understand human nature. This podcast is powered by Acast. How you doing there? It is time for the podcast. I am in Croatia. I've just had the launch of Novats, John.

2:39Novats. Money in Croatia. It went really well. Big, big crowd. Lots of media. It's apparently selling very well, so the publisher is very happy with that. Brilliant. And it is, yeah, and it's lovely to be back in this part of the world. It's great to see the book in a different language, you know, and the different script, different grammar, the different language, all that sort of stuff. How many is that now? 21, is it? Yeah, it's about 20. I mean, it's 21 languages it has been bought in and it's been published in about 11 of those so far. Wow. And it will be published. It will be published. I got recently, I just got the Indonesian publisher, the Vietnamese publisher.

3:19So it's going to be kind of mad. And also the Ukrainian one. The Ukrainian one looks really, really nice. So you never know, John. We might have a launch in Kyiv. You haven't been to Kyiv before. Not yet. I've been to Kyiv. I can tell you all about it. Anyway, speaking of Kyiv, we are going to be talking about geopolitics today. Right? We're going to be talking about the United Arab Emirates and its move last week to leave OPEC after nearly 60 years as an OPEC member. It joined OPEC in 1967, so nearly 60 years ago. What does it mean? Why did they do it now? Is it a regional story? Is it an oil story?

3:59Is it a geopolitics story? Or is it just a basic self-interest story? So the UAE, we're going to focus on the UAE today, not least, John, because we have a large listenership. Yes, indeed. Yeah. So if you're listening on the Corniche in Abu Dhabi or in Dubai, welcome. It's lovely to have you with us. And we know there's a very large Irish expat community, but obviously a lot of our listeners are British expats as well. And they are out there too. I spent some time out there about 10 years ago, John. I kind of enjoyed it. Very strange place. Yeah. Have you ever been there? No, I haven't. It's the one I've flown through it.

4:37I have never actually spent time there. But, you know, it is one of those kind of places, I'm not sure if I've any grow for it. You know, it feels kind of, like my understanding of it, I mean, you can explain this, but my understanding is that it's all a bit, I don't know, false. Well, I suppose it is. It's false if you think that reality is based on history and legacy and provenance. So, you know, when you go to a Rome or you go to a Venice or even you go to a Dublin and Cork, there's a feeling of the place has been there before. There's a feeling of legacy. There's a feeling of what I would call the layers of history and civilization that you see in the architecture.

5:22You certainly see it in Italy. You see it around here in Croatia. I mean, this part of Croatia that I'm in

5:26David McWilliams: was originally conquered by the Greeks and the Romans. So you have Diocletian's palace down the road here in Split, which was an amazing... It was basically the center of Roman culture in Dalmatia for many years. Then, of course, you have the Austrian-Hungarian influence. But prior to that, you have the Venetian influence. And then you have the Yugoslav influence. And now the Croatian influence. So all these civilizations leave their indelible mark architecturally on a place. And you have a sense of people's surnames or whatever, where they actually come from or where their ancestors come from.

6:02And that's why I think when you go to Abu Dhabi and Dubai, It's like, there is no history here. There's no legacy here. This is a very modern, modern place. My own sense is that these places are both fantastical and grotesque at the same level. Yeah, it's the opulence of, like, it's dripping with wealth, which I just don't feel comfortable in that kind of environment. You know, the bling factor. It's blingtastic, it's blingtastic. So I ended up there, John.

6:32David McWilliams: I worked for the National Bank of Abu Dhabi, NBAD. Oh, yeah. the National Bank of Abu Dhabi in around 2012, 13, I had done a couple of speaking engagements for them. And then these big conferences, and I'd come over and been the sort of keynote speaker or maybe even maybe the fluffer. Maybe I wasn't the keynote speaker, John. Slightly under. But anyway, for whatever reason, they were impressed. And they said, look, would you come and work with us as a sort of a roving global economist? So keep your sort of day job as doing your freelance work, but you could actually fly in and out and you could have a view on Australia, have a view on Canada, have a view on.

7:12But I suppose that the other, the trade-off then at the time was, you know, you would have had to basically leave Dublin and do maybe two months on there, three months off and that sort of stuff.

7:23David McWilliams: What's not to love there? Well, I suppose what's not to love was maybe I just decided at the time it was probably going to be a bit too dislocated. I'm sure that Shan and the kids would have actually urged me to go at the time. and they'd be very, very happy to get rid of me for a while. As long as you bring back a stick of rock. Exactly. Well, I didn't take up the opportunity, but it has meant that having worked for the Arabs and having worked for the Israelis, I'm the only person in Ireland who can say they've worked in both Tel Aviv and Abu Dhabi, which was actually strange. So Abu Dhabi, John, is the main emirate.

7:56I think there's six or seven emirates, but the two big ones you know are Abu Dhabi and Dubai. Then there's smaller ones, but I'm not too sure what their names are. And they're dotted around that corner of the world where the Straits of Hormuz is. Abu Dhabi is, in a way, the older brother. It's mature. It is religious. It takes itself quite seriously. And, of course, Dubai is the messy younger brother that they've created. And Dubai is full of clubs and bars and casinos and money and, you know, So all that sort of bling and glitz and everything, right? And rock boys. Yes. But it's home to all sorts of savory and unsavory characters.

8:38It has become a mecca in the last couple of years for expatriate Russians that seem to have changed the place completely. Right. But prior to that, there was basically three or maybe four strata. And this is why you might feel it a bit weird. So you've got the Emiratis themselves, the Arabs themselves, who were a very tiny sliver of the population. I'm not too sure what exact percentage, but it could be as low as 5 % or 6 % of the population are actual Emiratis.

9:06David McWilliams: And then, of course, you have the expat population, which is the professional class or cast that runs the show on behalf of the Emiratis. So there are oil experts, bankers, insurance people, finance people, media people, all this sort of stuff. and then of course you have what we see then a whole underclass of Indians, Bangladeshis Pakistanis who work in everything that is manual and that's where what you see is an extraordinary feels like this is what maybe Dickensian London must have felt like you know that you actually do have a huge mass of people who are definitely under the radar and they are working conditions.

9:54What really fascinated me one time was I went for dinner at a friend of mine's house who's married to a Lebanese woman. He's actually a great guy called Sean Evers. You might have remembered him. We were having dinner in his house. What I found very interesting is a load Lebanese people turned up. Syrians and Iraqis, all their friends. And what they said to me was something quite interesting. They said, if you're born in Kuwait, if you're born in Iraq, if you're born in Syria, if you're born in Lebanon, and you're Arab, you're Arabic speaking, there's no real place in the Arab world to live a cosmopolitan life.

10:28If you're a, for example, if you are an ambitious young girl, ambitious young man, you want to live in an opulent, but totally democratic and open society, where you can express your own views to a degree, then in a way, Dubai is their New York. And we never really saw that because we only see oh, are there Arabs? Are there East Asians? Are there whites? Are there Emirates? Makes sense. So there's a huge Arabic diaspora in Abu Dhabi. But much more so in Dubai because Dubai is more tolerant. So again

11:06David McWilliams: if you want to live a slightly more Western life but still remain in the Arab world you can be in this area. Now of course Abu Dhabi is much more religious. Yeah. Dubai feels that there's no religion there. But Abu Dhabi is very, very religious. And I think they pride themselves on being a religious royal family. And the royal family runs the show. Yeah. And these are Sunnis, of course. These are Sunnis, yes. But it's interesting. These are Sunnis. But the region around which the Abu Dhabi and Dubai is, that part of Saudi Arabia that borders that region, And of course, Bahrain further north are full of Shia.

11:50So there is this slightly uncomfortable, I wouldn't say uncomfortable, there's a little bit of tension. You're made aware of it when you're working there. Don't really have a view on Bahrain. Don't really have a view on Iran in particular, because Iran is their great enemy. And I think the deal in these countries is, and maybe that was one of the reasons I thought, do I want to really spend six months a year in these places? There's a premium on conformity. And as you know, I don't like conforming. So I just thought, you know what? And you're like an old gargle from time to time as well. I like an old gargle.

12:25Well, you can find gargle houses always, always. But also, I stayed when I was there in a place called the Emirates Palace Hotel. Right, John? And it was so opulent. It was exactly the same. It was so over the top. Somebody told me it was a kilometre east to west in the hotel. It was so big. Wow. And there was domes everywhere and restaurants everywhere. But it gives you an insight into an incredibly dynamic part of the world, an incredibly important part of the world, and the part of the world that basically has held the rest of the world hostage periodically over the last 100 years, but particularly over the last 70 years since OPEC was set up.

13:02Because I was just thinking to myself, there were five founding members of OPEC. Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. They're the five founding members of OPEC. And think about what has happened to those countries in the last 60 years. It's like the curse of OPEC. Iran has had its Iranian revolution. Iraq has had two wars. Kuwait has been invaded. Venezuela is now basically a lackey of the United States. It's not even a real country. And of course, Saudi Arabia has been involved in wars and all sorts of espionage and also duplicity and mendacity over the last 60 years. So OPEC was set up in the 1960s

13:47David McWilliams: in order to break the stranglehold of the large British, American, French, and Dutch oil companies over the flow of oil. Right, okay. What had happened up to then was that the Seven Sisters, as they were called, Chevrons, the Essos, the BPs, the Shells, all these big brands that you know, What they did is they decided, and this is what you can always do as a monopoly. If you're in a monopoly or in a cartel, you can either set the price or the quantity, but not both. So what they did is they set the price of oil artificially low. Therefore, the oil flowed, cheap oil flowed into the West. And the Arabs and the Persians, and of course the Venezuelans who owned the oil, got less in return than they should have done because they were the people who owned the resources.

14:42David McWilliams: But they didn't set the price. They simply were the people who provided the quantity at the price seven sisters decided. So we've spoken about the anti-colonial past in Iran. We've spoken with the oil wars in the 1950s, the CIA, et cetera, et cetera. There was a gradual movement up until the 60s for all these oil producers to, in effect, take control of the oil market. And they did this through OPEC. And what they did, John, was they decided, okay, what we're going to do is we're not going to set the price. We're going to set the quantity. And we will let the price adjust to that. Let the market decide that.

15:21Yeah.

15:21David McWilliams: Exactly. So if the price is too high, we will release quantity onto the market to bring the price of oil down. If the price of oil goes too low, we will then stop production and allow that price to rise. So the only country that was big enough to be the swing producer in all this was Saudi Arabia. Yeah. Because Saudi Arabia has the world's cheapest drilling price, below$10 a barrel, to get the oil out of the sand. Yeah. Saudi Arabia. Because it's just under the sand, isn't it? It's just under the sand. Yeah. It has the world's most proven oil reserves that can be used. The Venezuelans have huge oil reserves, but it's glutinous and glumpy and all that sort of stuff, right?

16:10David McWilliams: And they had the capacity to do so. So basically, Saudi Arabia became a power broker as well as the swing producer in OPEC. And countries like, for example, UAE had to go along with that. So they didn't have any power. And the UAE for probably about 50 years, John, was very much a neutral player. Didn't get involved in politics, didn't get involved in economics. It was quite happy to allow the Americans and the Saudi Arabians to, in effect, formulate policy for them. And so I think their overwhelming notion, and that's why it was interesting to be there about a decade ago when they were starting to change.

16:54But their overwhelming notion has been, look, the business of the UAE is business.

17:00David McWilliams: So what we're going to do is we are going to cultivate our oil industry. We are going to attract in foreigners. Those foreigners will pay no taxes. So we will get the best foreigners or at least a very high quality foreign employee. They will build up our country and we will gradually then use the oil bonanza. to build up other industries, which is why, for example, Dubai has a big tourist industry. Yeah. Right? And a big shopping industry and all that sort of stuff. But that's what's so surprising, or it certainly seems to me that it was surprising that it seems like out of the blue, they decide they're going to pull out of OPEC.

17:43So why do they do that? And also, why now in particular? Yeah. Why now is the war, but I'll come back to that in a second, right? It's really interesting. this stuff has been happening for about 10 years. This is what I said. The UAE began about 10 years ago

18:02David McWilliams: to become disgruntled at being the junior player. Now, of course, the reason it became disgruntled is it is the seventh largest producer in OPEC. So it's phenomenal, right? It produces a little bit over 3 million barrels a day of oil. So that's 3 % of the world's global supply. It's the largest producer in OPEC, single producer after Saudi Arabia and Iraq. And it can produce just above$10 a barrel. So it's an incredibly efficient producer of oil. Their margins are enormous then. Their margins are enormous. And the UAE can stomach a price war. But only if that price war has got some economic basis.

18:50Now, what has happened over the past, in 2014 when I was there, the Saudi Arabians, and this is why it was very interesting for me to be there at the time, the Saudi Arabians, in a very aggressive act against the Americans of all people, decided that they wanted to destroy the West Texas shale industry. What the Saudi Arabians knew was that shale oil is only profitable at, let's say,$90 or$95 a barrel.

19:16David McWilliams: So if they could cut the price of oil by releasing huge supply onto the market, they could destroy the Americans and keep the Americans at bay because the last thing the Saudis want is some other big player coming into the game. So they were always very happy that the Americans were oil importers because it gave them leverage over the Yanks. They cut the price of oil from$128 a barrel to$22. So this is a massive change. Wow. And for a while, it did destroy the shale industry. What year was this? Between 2014 to 2015. So when I was there, that was really quite nice to be on the books of the MBAD at the time, because you were kind of aware of what was going on in their world.

20:04And of course, the reason they wanted an economist, John, is because the National Bank of Abu Dhabi will have been a recipient of a huge amount of the income from oil. They then wanted to reinvest that oil around the world. And so that's why they wanted to know what's going on in the US stock market or the American stock market or the German stock market or politics or whatever. So that was, the job would have been sitting on top of that oil spigot. Yeah. But advising them of where the money should go

20:33David McWilliams: and where and for how long and all that sort of stuff. But the Saudis decided that they wanted to teach the Americans a lesson. And of course, the problem for the UAE was that America is the UAE's biggest ally. So they didn't want to fall out with the Americans, number one. But number two, it meant that the UAE were just getting a lower price for their oil. They weren't swimming in any sort of geopolitical, I'm a big balls player as the Saudis were. Yeah. They had no say on the price at all. At all. So also then, think about what else has happened, right? In OPEC. The UAE were for many, many years a good member of OPEC.

21:19David McWilliams: What I mean a good member of OPEC means they abided by the rules of the cartel. So if the cartel said, we're not going to produce oil, they said fine. They accepted the price. Why? Because they knew that they and the Saudis could deal with low oil prices because they were so productive. It was so cheap to get oil out of the ground. And they didn't really have any other issues. Contrast that with Iran. Iran consistently busted the sanctions and the quotas by exporting to China, and it still does. Iraq has been busting the quotas all the time, even since Saddam's been deposed. And then a thing called OPEC plus, John, involves Nigeria and Russia.

22:04David McWilliams: And of course, Russia have been busting the quotas because they need money to fight in Ukraine. Even though they bust the quotas, they're still selling at the global market price. Is that right? They're still selling at the global market price, but the whole idea is to keep the price high. Yeah. Everybody has to abide by the quotas. Yeah, yeah, yeah. But what is happening is the Russians are selling stuff on the sly. The Iranians are selling stuff on the sly. The Iraqis are selling stuff on the sly. The UAE are saying, hold on a second, we're being the good boys in the class. Yeah. And we are getting penalized, right?

22:38And then, of course, the third and the most immediate issue is that they are now in a war where the UAE is the hostage

22:49David McWilliams: between the United States, Saudi Arabia, and Iran. And, of course, Russia that supports Iran. So what the Iranians have realized is that their leverage isn't over the Straits of Hormuz per se, It's actually over the Gulf states because the Iranians have understood in the last three months that they can disrupt oil production. Kids in the UAE are not going to school because of these sporadic attacks from the drones. The tourist industry is gone. The airline industry is gone. A huge amount of business is going to leave. the real estate industry in Dubai, which is based on it's always going to be good times and it's always going to be loads of money.

23:39That now is going to go into a massive, massive recession. And they've also experienced, Dubai has experienced two banking crashes like Ireland did 2008. Yeah. So the banking system is very fragile. The Iranians realized this. Hold on. All we've got to do is threaten the UAE and we threaten the world. So what did they gain then by leaving OPEC? Very little. Surely they had some sort of protection in a big group, in a big organization. Now they're out on their own. So what does that mean? Is there something going on that we don't know about with the US? Or is their sides changing? But before you answer that, let's do a bit of this.

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24:39David McWilliams: and are navigating what comes next. You know what strikes me about doing this show is every big economic story eventually lands on someone's kitchen table somewhere. A recession isn't an abstract thing if you're deciding whether to sell an asset. A housing crisis isn't academic if you're trying to figure out what to do with capital. The macro becomes very personal very quickly. And most people are navigating that without anyone who's actually been in the same position. You're absolutely right, John. And that's what Long Angle is. It's a vetted peer community, 8 ,000 members, no membership fee, where people at that level of financial complexity just help each other out, help each other to think clearly.

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26:39So, Mike, the big question for me is, while the war is going on, the UAE choose now to leave OPEC. So what's going on there? What's their game plan? What do they gain out of doing that at this stage? So the UAE are leaving OPEC in order to produce more oil, to get more revenue. Right. They believe that they have been playing second fiddle to Saudi Arabia, who have basically been dictating the price. Yeah. Right? So the UAE says, we're kind of sufficiently big. We're the third largest producer. We can affect the price of oil at the margin. That's the first thing.

27:18David McWilliams: So what the one piece of information the price of oil is telling us is that the war in the Gulf is not going to end quickly. That is what it's doing. That's, I think we're at about$112 a barrel today. Yeah. So what that is saying to us is that Iran and the United States will have an uneasy peace, which will be violated on both sides all the time because the Iranians are in a fight for their life. Yeah. So they have to keep the war going at some stage because that's the only leverage they have. And the Americans are also stuck there fearing that they're going to be involved even further. Yeah. And the ego involved as well kind of stops them from pulling out.

28:00David McWilliams: And the thing is, the Iranians have no incentive to stop the low-level war because the only leverage they have is in a time of conflict. And the main leverage they have is over the UAE. Yeah. Because the UAE is, in effect, the hostage. So basically, Iran says to the Americans, or the world economy, we have a hostage here. It's called the UAE. how much are you going to pay? And what the Americans are saying is we don't deal with terrorists, the usual stuff. The Iranians are saying, the Iranians are saying, well, that's your choice. But what they're ultimately saying is that on our slate of demands, for us to give you back the hostage, the UAE is, I know, the nuclear project to get back up and running, tell the Israelis to back off, whatever their demands are.

28:48David McWilliams: But the Iranian gun is to the UAE head, not the American head. Right? So the UAE are thinking, well, we have no say here at all. The Americans aren't giving us any real protection. The Americans haven't defeated the Iranians. The missiles are still coming in. And if we expand our production today, while the price of oil remains very high as a result of the war, then we can get a free lunch, which is we can expand our production without the price of oil falling. Why? Because the price of oil is going to be kept artificially high as long as the war goes on. So in fact, it's actually quite a smart move from their part.

29:33Right. And they also probably look at the OPEC and they think, you know, of all dysfunctional organizations, this is pretty dysfunctional, right? Think about who's in OPEC. Like, Tehran, Baghdad, Riyadh, Caracas, Lagos, Moscow. Hold on a sec, though, Mac. Yeah, so OPEC are still the ones that set the global oil price. So what happens to the oil price then if OPEC falls apart? Then is it kind of a free-for-all in terms of supply and pricing?

30:07David McWilliams: Yeah, absolutely. And I think, you know, this would be yet another multilateral organization set up in the 1960s to coordinate some part of the globe's falling apart. What's new? This is the story of the Trumpian world, John. Yeah, yeah, yeah. This is the World Health Organization for oil producers, right? But basically what you're having is that it's highly, highly dysfunctional. So two of the main players, Saudi Arabia and Iran, hate each other. Two of the other main players, the United States, which is now a producer, but not a member of OPEC, and Moscow, which is a producer, which is not a member of OPEC, are fighting over Ukraine.

30:49David McWilliams: They hate each other, right? So what the UAE have been trying to figure out is, can we follow an independent foreign policy that allows us to maintain our revenues while at the same time building up our economy because we have one eye on the fact that this stuff, this black gold, is going to run out. It is a finite resource. And then into the mix, you have this other part of the equation that has come up in the last few months, which is this weird and tacit, alliance is too strong a word, understanding between Israel and the UAE. Explain that. So the UAE are obsessed with stability. what their big problem and their big fear as a monarch-based society is Islamic extremism.

31:43ISIS, Hamas, Hezbollah, the Muslim Brotherhood, all those.

31:50David McWilliams: Because they are all based on ground-up anti-monarchist movements based on religious extremism. Or in the case of the Muslim Brotherhood, a combination of religious extremism and sort of communist left of center thinking. Yeah. So their big idea is, if they identify that the biggest enemy to their stability is religious extremism and fundamentalism, well, then who ends up being our friend on the basis of my enemy's enemy is my friend? And that's driven them into the arms of the Israelis. Right, okay. And we already know that the Israelis are supplying them with military technology, with anti-drone technology.

32:37David McWilliams: And this is why the world is weird. This is why when you hear all the Palestinians going on about Palestine being a pan-Arabic movement, it kind of is, and it kind of isn't. So you have a big Arabic player like the UAE, which is anti-Palestinian. What they have done is they have thought, and it's very much the line you hear from the Israelis, that over the years, the Palestinians got all these opportunities to do deals and Yasser Arafat always walked away. And you have, in effect, invited this catastrophe onto you, as they'd say to the Palestinians. Now, that sounds very, very harsh, but it's something I heard all over the Arab world when I was there, even 10 years ago.

33:18So that's why the UAE support Donald's Riviera. They're going to finance it.

33:24David McWilliams: And again, an interesting thing is the UAE are in a fight in Yemen with Saudi Arabia. Because Saudi Arabia is supporting the Muslim Brotherhood in Yemen. And of course, Saudi Arabia want Houthis to end up being subjugated into a greater Yemen. Yeah. And the UAE are playing a very odd game there, because they want it to be a two-state solution. It's interesting, they want a two-state solution in Yemen and not in Israel, which is kind of bizarre. So they want a Houthi Republic and a South Yemenis Republic. Why? Because they're easier to manipulate. Right, okay. And then, of course, in Sudan, they are supporting what we know to be a genocide or at least a vicious, vicious ethnic cleansing policy of, again, Islamic groups against, in effect, black people.

34:19Yeah.

34:20David McWilliams: And that's what, remember I was in South Africa and the South Africans were saying to me that there's an interracial war going on in Sudan and it's basically white against black or Arab against black. So I didn't realize all this sort of stuff. So into the mix, John, you have all these variety of different things. And then finally, what the American-Israeli war with Iran has proved to the UAE is that they have to, have to devise their own way because they can't absolutely depend on the Americans because the Americans can't win in Iran. They can't absolutely depend on the Saudis, because the Saudis will always act in their own self-interest.

35:00David McWilliams: Iran is not going anywhere quickly. Russia continues to support Iran, so they have the backing. And China supports Iran, so they have that backing. So the UAE are doing what all small countries never want to do, John, which is choose. Yeah. But at some stage, Napoleon once said, John, to govern is to choose. And the UAE are making those choices. Mac, hang on a second, though. I get all that. But what is now thrown up as well, though, is that America have now become one of the major exporters of oil. So what does that do to the global oil market? And what does that mean for kind of Europe and a little old Ireland?

35:49Little old Ireland. So basically, America is a major oil player at a certain price. That's what we really have to understand. Yeah. And that's a high price. It's at a high price. Yeah. Around 90 odd dollars a barrel, maybe even north of that, right? So if the UAE and the Saudis could get the price of oil down, that would eliminate the Americans as producers. Yeah. And why would they want that?

36:12David McWilliams: Because they would get far more of the revenue. So the Americans want, it's a very bizarre thing. The average Joe on the street in America wants his gasoline to be under$4 a gallon. American producers want gasoline prices to be close to that in order for them to be profitable. In the middle, then, you have a whole variety of taxes that the Americans can use. But what is very threatening for the Americans and for the Trump administration, of course, is the idea that gasoline goes to$5 a gallon by November. Diesel is already over that in America, which is amazing, actually. And that's all your farmers and your truckers and all these guys who are using diesel, right?

36:59David McWilliams: And the Iranians, obviously, are very happy to see the demise of Donald Trump through the elections at the midterms if they can keep the Straits of Hormuz closed. Yeah. so they will do this for their own political ends because they will take the view that we have negotiated with the Americans twice and they've bombed us while we're negotiating. We can't trust them at all. And they will take the view that America is, for all intents and purposes, fighting an Israeli war that the Americans don't want, but the Israelis think is existential. So that's the first thing. The UAE are just sitting there thinking, well, if that's the way the world is going and the price of oil is going to be high, But why don't we now take our chance and get as much revenue in as possible, knowing that we have to make this transition because the green transition is a thing.

37:56David McWilliams: It's not going to go away. Yes, yeah. And so they're probably betting that the time is ripe now for them to try and maximize their revenue, use that revenue into the transition, which they want to turn the UAE into a super hub for trade, a super hub for media, a tourist place, a high-tech place, an AI place they're investing enormously in. But this is doing a favor for the Americans in the long run, whether it's intentional or not. I mean, America, again, as an oil producer, is constrained by the fact that shale oil is incredibly expensive. So it's more geostrategic. And this gets us back to Donny J, John.

38:39David McWilliams: Donny J is obsessed with, or seems to be obsessed with, oil as an energy. Not nuclear, not solar, not renewables, but oil. And he's got a, it seems like he's got a very much, if you can imagine Rambo, when was Rambo? 1975 was it? 1980? It was the 80s early 80s wasn't it? 80s so he's got a kind of very Rambo world view right? You can imagine going up the stairs in Philadelphia up to the court house in Philadelphia right? No that was Rocky Fucking Rocky was it Rocky Rambo? Who was Rocky? Rocky was the It was the same guy actually I knew something was similar Shit it was the same guy It was Sylvester Stallone before he got the face lift before he got the new face Okay Right So, but Trump has that view that he who controls oil controls black gold, and black gold controls the world.

39:34David McWilliams: So that's why he is in Venezuela. That's why he wants to keep the shale oil industry going, because he believes there's something kind of manly and masculine in that sort of, you know, smelly oil production. And that's why he is constantly obsessed with the Straits of Hormuz and defeating the Iranians. It's not because of nuclear. It's because of his obsession with this very kind of old-fashioned 20th century energy source called oil. But he's also choking China by doing that. So it's all a part of a thing. It's all part of a great game. But again, the interesting thing with China is that the UAE are also trying to get close to China.

40:18David McWilliams: because they realize that for long-term commerce, but also for technological transfer, you know, what the Chinese can do, the Arabs cannot do, which is to make precision manufacturing at a price that the Arabs can buy. Americans can't do that. The only place in the world that can do that is Asia. So I think we conclude that our friends in the UAE are playing a canny game, a risky game, but a game, and I come back to this, if we are going into a world where the multilateral world is over, so the world that we were building since the 1940s, 1950s, of which OPEC is a part, meant in effect that small countries like Ireland outsourced a lot of our decision making to the European Union, to the United Nations, to all these organizations that we joined.

41:13David McWilliams: And we joined them for protection, but also those organizations allowed us not to make decisions. Yeah. Not to figure out, okay, we're on a high wire act here between the various different places. How do we figure it all out? And maybe what the UAE is showing is that the future is for small countries that you actually have to stand up and make hard choices. And that, I think, could be the biggest lesson in the last couple of weeks over there.

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