Bombing and Talking at the Same Time | Robert Pape on Iran and the Escalation Trap

[00:00:00] Good morning, everyone, and welcome to the At the Waters Edge Podcast. We are back with our next installment in our ongoing series, The Escalation Trap, with Professor Robert Pape from the University of Chicago. Iran and the U.S. are getting catalyzingly close to signing a memorandum of understanding, until they're not. Oil prices are continuing to be sky high with no signs of abating, and ceasefire violations in Lebanon appear to be dethraling this entire process. Well, what does it all mean? What options are left for U.S. decision makers? We'll get the professors' take on all that in just a minute.

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[00:01:27] Well, good morning and welcome back yet again to the podcast. How are you doing? Doing great, Scott. Thanks for having me. Pleasure as always. So we took last week off for the holiday, so it's been two weeks. And a couple of things have happened, but the more I observe what's happened, the more things appear to be staying the same, actually. You know, we bombed Iran. They went after an air base. Supposedly, the ceasefire is still in place. But the most recent development has been this memorandum of understanding that keeps getting kicked around as something we might actually sign.

[00:01:54] And there's two things about it, one of which seems like it might be real, and the other one seems like it might not matter. The one thing that makes it seem like it might be real is that everyone in Trump's orbit who has been pushing for this war seems worried about it. The other thing about it, though, is that apparently just kicks the nuclear question down the road, which is the big hang-up here. So even if it does get signed, it probably doesn't actually matter. It just pushes the next thing out another 60 days. Seems like we're still stuck in the same spot we were two weeks ago. What's your take?

[00:02:23] You are tracking the details here. Excellent, Scott, as you always do. Let me just point out that what you're really experiencing and what the folks here in the Gulf are going to be experiencing is that the instability is becoming normal. We're moving to what I call an age or an era now of instability where it's going to become a normal part of going forward.

[00:02:51] So this feeling you're experiencing it, which feels like things are pushing in multiple directions at the same time, this really isn't going to go away. It's been going on and building for quite some time now, but it was really unclear and evidence in the last few weeks as you're describing. And there are some key reasons that this is going to go on for some time.

[00:03:16] It's not simply just that we're getting used to a negotiation or getting used to something or something. This is unfortunately going to be with us. Now, the first thing I want to start out, though, before we get into the details, is what you're also seeing is clear evidence that President Trump is squarely stuck in the escalation trap. So our military did a splendid job in winning battles and maybe not absolutely perfect.

[00:03:45] So the girls school can't really ignore that. But nonetheless, the fact is, overall, what you see is America did a splendid military job in winning a battle. But by winning the battle, its strategic position has gotten worse. And as the strategic position has gotten worse, President Trump has a choice.

[00:04:09] Capitulate to Iran's growing demands or go back to escalation. And what you are seeing is that fork in the road here is really not off the table. In fact, the age of instability, you're going to see this is going to continue. Now, you're quite right.

[00:04:32] Let's talk about before we deepen the age of instability or let's let's talk about some of the things you just you just pointed out. You're quite right that if you look at the atmospherics, some of the folks who are the biggest proponents of regime change. I was watching Mark Levin last night for as long as I could. It's actually I'm sorry to say I watch almost all of President Trump's rallies and speeches. I taped them here.

[00:05:00] So it's not that I have a hard time following it. But but for I watched for about half an hour here just before General King came on, I said I pretty good understand what he was going to say. And it really is the case that it's kind of hard to listen to because he's so upset about the possibilities here. In fact, I went and checked my phone. I said, wait a minute. Did I miss something? Did President Trump just sign the MOU? I said to my wife that we missed something here. It was that is that. I literally stopped watching all that stuff.

[00:05:30] I just couldn't take it anymore. I just read. I just read the headlines later. Twitter is better than watching. President Trump had not signed the MOU. OK, so no, there was no actual change. Just the idea that there might be a possible change was was very upsetting. So that that is clearly that's that's clearly the case that that side is is extremely upset. On the other side, however, you're hearing from the leaks coming from the West Wing that the reporters are are saying.

[00:06:00] And you also hear this in J.D. Vance here about how these are like progress is there. It's not just President Trump saying it. They're trying to be optimistic. And the reason is because from their perspective, the price of gas, everybody politically for the domestic politically would like to get this.

[00:06:21] Not just talk it down for a day or two or a few days, but to try to get this price of gas issue behind them because we're coming to a cliff. There is an inventory clip that we'll talk about in just a bit. They know it. The public is not focused on it. But it's it's a bit like what happened with the housing crisis in October 2007, which I remember very, very well.

[00:06:49] So the what we need to understand is people don't see the big crisis really coming in the public until it actually hits. And the reason is because everybody, the media, the markets are all trying to sell nothing to panic about here. No panic here. And then when you actually hit a wall, as we did in the middle of October 2007, all that months of, oh, we can handle all these dot, you know, no doc loans.

[00:07:18] No problem. Suddenly that all disappeared. And you had a giant crisis that went on for about two years. So so that issue here, I'm sorry to say, is is with us. So you're picking that up correctly, Scott. But the bigger issues here are, number one, the red lines between what President Trump wants and what the Supreme Leader has articulated in public.

[00:07:46] Iran wants are as diametrically opposed as they could be. President Trump wants no nuclear enrichment and he wants the current stockpiles to be physically out of the country. There's a tiny little wiggle room on exactly how that might happen. But those two are clear.

[00:08:09] And the Supreme Leader, on the other hand, has said this is the sovereign right of Iran to continue. And these stockpiles are going to stay in the country here. So these are really pretty far apart. And then on the Strait of Hormuz, President Trump is saying that he wants the open the waterway open with no tolls, no fees whatsoever, no control, no reporting to Iran.

[00:08:37] Whereas the Supreme Leader has said that it's keeping control of the Strait of Hormuz because this is it's one of the key guarantors of future security against future attacks. So he said this in his statements. So these statements, Scott, are pretty far apart. Now, that said, both sides have some interest in getting something initialed. So I wouldn't be surprised. I don't think it's necessarily like above 50-50.

[00:09:06] But don't be surprised if something gets initialed here in the next week or so. But there is a big set of buts here that go with that because these points here are extremely abstract. And, yes, there might be somehow deeper understandings. But what's going to be initial is probably not going to be a 20-page document. I think we'd be lucky if it's one or two pages.

[00:09:33] And then what you're going to see is then there's going to be not just the deal to get negotiating for a deal, but then there'll be the negotiations of what the deal meant that was about to be the deal to get to the deal here. So does signing this Memorandum of Understanding, if it does happen, does that meaningfully change any of the long-term trajectories that this conflict is on inside the escalation trap? No. Or is this just padding the timeline?

[00:09:58] So it will have some effect for at least maybe a few days or so of calming, of reducing oil prices a little bit. But the audience I'm speaking to when I'm talking to you, I'm assuming, and this may only be a part of the audience here or not at all, but I'm just going to assume that it's the folks here really serving in the military and serving specifically in the Gulf here.

[00:10:23] From their perspective here, this is simply another step along a road of instability that's going to remain unstable unless President Trump physically removes those forces from the Gulf. Now, if that happens, that's a different story, Scott, for the folks that we're talking to. Okay?

[00:10:49] But I'm going to speak in the next 15 minutes or so as if that's not happened. So I'm going to make an assumption, which is an assumption, but I want to be absolutely blisteringly clear. Where's the red line that would get me to start to move what I'm about to say? And that would be if, say, one of the two aircraft carriers was removed and was not replaced. That would be if, say, a third of the other ships were removed and not replaced.

[00:11:17] That would be if, say, three of our 13 military bases were now physically closed down and removed and so forth. Now, if those things happen, okay, which I'm not expecting in the next month or two, but that's what it would take, I believe, Scott, to truly walk away in a way that would change the actual dynamics of the situation. You see?

[00:11:45] So when people say, well, he'll just declare victory and go home. Well, okay, let's not just – they focus on the declare victory part and they forget go home part. And what I'm doing is I'm saying no from Iran's perspective and all the people in the region and the inventory drawdown, okay, the thing that is – that would really matter is whether America literally goes home or a portion, maybe 30, 40 percent of the forces go home.

[00:12:13] So I understand not all of it would happen all at once. But that is what it would take to really change these dynamics. Okay. So what are you expecting to see going forward in the region with this era of instability? So the key thing to focus on the next 30 days – so what I'm going to do, Scott, is there's bigger pictures as well, but especially for your group, I want to focus on just the next 30 days.

[00:12:42] The key thing to notice in the next 30 days is that all the discussions with this MOU have a 30- to 60-day time horizon. That is, there'll be some deal, possibly single, but it's over a 30- or 60-day time horizon after which none of this really matters. You see, so you have to get a final agreement, no matter what, over 30- to 60 days.

[00:13:10] Well, that overlaps, Scott, with the inventory countdown that is occurring on our oil inventories. So this was a big point I made yesterday in the live briefing. I showed slides. I showed the inventory drawdown here. So I've been explaining this was coming, these issues of the economic crunches and so forth. Got these multiple articles about this. And we've been on the timelines I've been suggesting.

[00:13:37] But now we're getting to a more critical point, and it's also becoming something beyond simply Professor Pape. You're seeing now more studies almost on a daily basis here by either Exxon oil execs or Brookings or somebody. I'm pretty sure the IMF is going to come out with something in the next week or so.

[00:13:56] And what they're all based on, Scott, is the predictable drawdown of the oil inventories between now and when they run out at the end of July. So we have a predictable countdown. It's literally a countdown. And every week, every day, we are expending from various reserves and so forth.

[00:14:25] Millions of barrels of oil we're drawing from those reserves. Well, those are not being replenished. That's a one-time draw. And so you can actually watch this go down. And that's one of the things I showed on the screen yesterday. But notice, that time period I just explained to you of it going down over, say, the next six weeks to this critical level, six or eight weeks here, is exactly the timeline of negotiation. So what does that mean?

[00:14:53] That means Iran's leverage is going to grow day by day by day. Because Iran can last out much longer than just a few months. If it needs to, it can kill its own people. I hope this doesn't happen. This would be absolutely horrible. But they just did this in January. So the idea that, oh, they would never do this is just not – it's very far-fetched.

[00:15:19] Well, we've seen reports that they've increased their domestic executions in the past couple of weeks. Well, exactly. So this idea that people were touting here, that Iran is going to buckle and we've had this water cone. I mean, all these arguments, Scott. Oh, my goodness gracious. And none of it has lasted more than a few days. And I know because I've been debating the people on TV. So it doesn't come back.

[00:15:43] They come up with – it's just the infinite sets of arguments about why Iran is just about to crack. Now, of course, it could always happen. But it's not going to happen because of their arguments. And what you're seeing is Iran's leverage here is going to grow, Scott. So whatever is we're going into, the idea here that this is going to be a stable set of negotiations,

[00:16:10] it's just there's a fundamental problem, which is there's an underlying instability in the environment, which is the drawdown is going to occur, and it's going to favor Iran in its leverage going forward. And then there's another big point I want to make to kind of put a bow on this that people, I hope, can remember.

[00:16:35] What that means, Scott, is that instability benefits Iran. It benefits Iran. So if you're looking at this from a power perspective, and I'm a realist, as you know, and a lot of the folks listening will be realists. They'll be thinking about power here.

[00:16:58] Once you know instability is a source of power for your government, I mean, for Iran here in particular. I don't mean for the United States. It's the opposite for the United States. Once it's a source of power, then that instability is not something that that state is going to want to just sort of give up. So we live in a world where people think, oh, nobody wants instability. It's not just the United States.

[00:17:26] We all understand instability is a bad thing. The United States doesn't want instability. China doesn't want instability. Russia doesn't want instability. Iran doesn't want instability. Well, I got news for you. Okay. There's an era of instability that has been evolving, and that's why I'm giving it a name, a new era of instability. And that instability is not just environmental. It's not just the normal warp and woof of instability.

[00:17:56] There's actually actors who benefit from that instability. And one of the big actors here that's benefiting from that instability is Iran. So for Iran, and just to put another point on this for the folks to follow here. So one of the things I've said in the last two weeks, Scott, I've written a little another one of the posts here,

[00:18:22] is that one of the things we're not doing in the negotiation is focusing on the critical metric that we're going to really care about, which is the price of oil. And so there's no point in these MOUs. Is there an agreement? The price of oil should go back to the pre-Feb 28 level. So right now, none of that is being discussed. It's all being assumed. We're making these assumptions. We're modeling in this and so forth.

[00:18:50] Okay, well, I do modeling. I'm perfectly happy of this, but that doesn't mean it doesn't. It really does matter whether Iran agrees that the price of oil should be going back to the pre-war level. I'm, as you can tell, skeptical. Don't they make a lot of money off oil? Isn't high oil prices good for Iran just as a layman? And this is what I did yesterday in the briefing, Scott.

[00:19:17] I'm laying out how these instabilities favor Iran's power, you see. So number one, they do make money, and they would continue to make money at the price of oil state high. So absolutely, in absolute terms, that's true. But even, and that's important for their government coffers, just as it is for Putin's government coffers and so forth here.

[00:19:42] But there's more than that, which is it weakens their opponents, for example, just to give you one of the mechanisms I laid out. So this is a, it's not just that Iran has a short-term sort of nominal benefit here, which with the prices, but also there's the relative power gain over time.

[00:20:05] And as you can see, the more that there's, and this is this fear that we were talking about earlier about the West Wing. Why does the West Wing want to see something initial? Well, because they're trying to talk down the price of gasoline at the pump. It's a talking point. Talk it down as much as you can here. Well, that's telling you right off the bat here.

[00:20:30] We're the real kind of, you know, sort of geopolitical power of this lies. And it's, America is not, you know, the West Wing is not doing that because they think that somehow this is going to, you know, they're doing it because they know they're getting weaker. And so they're trying to stop getting weaker. Well, Iran sees that immediately. So, you know, I talk to people who know way more about oil than I do, but just to walk the dog on that logic for a bit.

[00:21:00] If the straits do open back up and the other Gulf states wanted to flood the global markets with oil in order to bring down prices, and let's say that we can leverage Saudi Arabia in our relationship there with Kuwait or whoever, like, yep, you need to double your oil production. One, Iran could curtail that again if they want to by shutting down the strait again. Two, those same countries also make more money off of high oil prices. And three, I mean, shipping's been disrupted so much at this point that it would take, you know, six, eight weeks just to get shipping back up to where it used to be.

[00:21:29] So the current price of oil is not going to be responsive to supply for at least another six months. And just to give you a concrete case. So remember, I like case studies here. We just had with the Houthis, the Red Sea crisis in 2024 and 2025. Now, that's kind of like a much smaller version of what we're seeing here. So that's why it didn't create all the consternation and so forth.

[00:21:56] But if you look, you will see that even though that President Trump, this was a case where he walked away. So last May, he did 40 days of bombing the Houthis, couldn't knock them out. You know, it would start to look very similar, okay, to what we're seeing here in a microcosm. And then he just calls it off, says, ceasefire, walk away, do something else. Bomb Iran. So that's why we kind of forgot about it. Maybe we should have kept bombing the Houthis instead. I don't know.

[00:22:23] No, I'm just pointing out that you say, well, walk away, be careful what you wish for. So anyway, but what happened in terms of the economics of this, Scott, this is what I was trying to get to. You can actually look and you'll see that 60% of that traffic never came back. It never came back. Now, and this was a case where they could reroute it at great cost, okay. But 60, this is not a case where, oh, the war ended. Everything just went back to normal.

[00:22:51] Also, insurance rates never went back here. So what's happening in that case, again, it's a small case. It's a microcosm. I definitely know there's a difference in magnitude. But it gives you a concrete data point to put on the logic you just laid out from those economic projections, which is they're not just based on whiteboard academic thinking, what you just said.

[00:23:18] They're based on the realities of what has been experienced in a nearest case you could possibly have in history, which was with the Houthis. And then I want to also add right now the inventory drawdown. As it goes down, that puts more value on the workaround pipeline oil that's going out through the Red Sea.

[00:23:45] Well, who do you think in the last month has been talking about adding tolls in the Red Sea? The Houthis. So we're focused, of course, on the issue of tolls over here on the Hormuz. Okay. Well, this is not a one-off. This is not like, oh, nobody could ever imagine tolls at another choke point. Okay.

[00:24:09] And as I'm explaining it here, the incentive structure, it makes it more, there's more leverage with those ideas with the passage of time. You see, because fundamentally, the world's oil supply is becoming more fragile. And so we can keep ignoring the risk of fragility here. And President Trump can keep talking it down. Just as I was saying with the housing crisis, people were talking it down.

[00:24:38] The Bush administration, oh, nothing to see here. No real problem is going to happen here. Okay. Well, the problem is there's an actual risk that's bubbling under the surface. And that's what I'm focused on. I can't tell you what the markets are going to do. I am not trying to make money on market timing here. That's not my role here. I don't do that here.

[00:25:01] Just as during the housing crisis, I wasn't trying to play the futures games of how do you, you know, game the no-die crisis exactly, exactly, exactly. And so because what happens in Wall Street is they move as a pack. And Washington moves as a pack. I mean, people move as packs. We just do. Okay. I see this in my department. We move in a pack. There do seem to be a lot of realists at the University of Chicago. I don't know.

[00:25:31] I've not read a lot of constructivist literature coming out of Chicago recently. Well, we used to have Alex Wett, by the way. So we did where we were a multipolar system for a while. I do see a lot of co-authoring with, you know, liberalist authors, but they're all other institutions. Like, you'll talk, but stay on your side of the neighborhood. It's where the realists at Chicago all learn their realism is department politics.

[00:25:59] So I don't know if that affects my joke is I don't know if it really explains the world, but my goodness, you read John Meersheimer. Man, this will totally explain to you what department politics is really all about and how the game is actually played. You know, well, Chicago also gave us Obama. So, you know, I think it's a really, really a hard knocks place for a realist of the first order with the velvet glove.

[00:26:25] I'm just telling you, the velvet glove ideas here, if you, you know, you listen to John talk about how the world works and the velvet gloves and all this other stuff. He was department chair. Just point out. He was department chair before he did tragedy of great power politics. Oh, wonderful. So he learned it for real. Awesome.

[00:26:53] Well, I know that's time for today, but thank you so much for hopping back on with us. Looking forward to chatting again next week. And do you have any events coming up? They really should expect that there could be over the next 30 days bombing and talking at the same time. There's been a bit of this over the weekend, Scott. But this idea has been a tried and true part of American diplomacy since the Vietnam War. In the Vietnam War, we bombed and talked for years.

[00:27:22] In Bosnia, Richard Holbrook to win a war. That 300 page book is all about how he orchestrated bombing and diplomacy here. And he thought he was doing it like a maestro here and so forth. So people should go and read that book to get an idea that bombing and diplomacy a lot of times here go side by side.

[00:27:48] And that's important for folks in the Gulf to realize so that they don't think, oh, yeah, they don't overread the diplomacy as. And they keep wondering, well, wait a minute. We say we're having a ceasefire. We're negotiating. And this doesn't look like any ceasefire I was expecting. Well, that's because this is normally what happens with bombing and talking. OK, well, well said. Thank you. Absolutely, Scott. Thank you very much.