Assessing Winners and Long Term Consequences

With no fees or minimums on checking accounts, it's no wonder the Capital One bank guy is so passionate about banking with Capital One. If he were here, he wouldn't just tell you about no fees or minimums. He'd also talk about how Capital One cafes are open seven days a week to assist with your banking needs. Yp, even on weekends. It's pretty much all he talks about in a good way What's in your wallet? Terms apply, seeee capital onene dot com slash bank guy. Capital onene NA. member FDIC From the New York Times, I'm Natalie Kitrowf. This is the Daily On Sunday, we reached an agreement with Iran that achieves everything we set out to accomplish, everything and much more After the U. S. and Iran signed a deal to end the war and reopen the Strait of Hormuz this week The Trump administration touted it as a huge victory. We in the broader region win Iran is weakened, their nuclear program destroyed, their economy in desperate straits But when the actual terms of the agreement became public This will go down as a tremendous foreign policy blunder prompted a wave of criticism from lawmakers in both parties about what exactly the Trump administration had given up It's not even comparable to the Obama deal. It's worse by a lot. Iran ends up stronger Our allies in the region are weaker. There's no specific commitment to the verifiable dismantling of their nuclear weapons program. History demonstrates that giving billions of dollars to theocratic lunatics who want to murder us is an exceptionally bad idea. I think it's a deep mistake. Today, my colleague David Sanger explains what the US. gets out of the deal just how much Iran stands to gain It's Friday June nineteent David, hello again. att this point, it feels like you are on the daily almost every other day. So thank you so much for giving us so much of your time Great to be with you, Natalie, as always We talked to you earlier in the week when we learned that we had a deal to end this war, which at that point, no one had actually seen. And then on Wednesday, the Trump administration came out with the details of what was actually in it And I think it's fair to say that those details elicited a very big reaction in lots of interesting ways, which we want to get into But first, what is in this deal Start with what the U. S. got The main thing that the US got Natalie was a sixty day ceasefire in the war and sort of a return to the status quo, at least for a little while that existed before the US and Israel attacked Iran. But the key thing to know is that it didn't really address any of the issues that led the Pident and Prime Minister Netanyahu to attack Iran It just sort of resets the clock and it has one paragraph on what was the underlying cause of this war which is Iran's nuclear program. And what does it say about the program Well, this is the only paragraph that actually puts an affirmative obligation on Iran And let me read part of it to you, Natalie because I think you'll Get a sense. The first sentence says The Islamic Republic of Iran reaffirms that it shall not procure or develop nuclear weapons. The president's been making a big deal of this. that The Iranians have promised not to do this. The only problem with that is They made the same promise in nineteen seventy when they ratified the nuclear nonproliferation treaty. Right. They made the same promise in twenty fifteen when they signed the Obama era deal, it's on the first page. The keyword there seems to be reaffirms. Reaffirms. Then it's got a second part of this saying that they agree to sit down and about what they're going to do about all of Iran's nuclear program It's stockpiles of uranium its nuclear facilities programs to continue enriching uranium And they set a minimum level here And the minimum level is Iran agrees they're going to take their eleven tons of material, although they don't specify The number here and they're going to down blend it And what does that mean? Exactly. What is down blending Gownplanting means diluting it essentially. And their concern is that we know the Iranians have about nine hundred and seventy pounds that's enriched to sixty percent very close to what you could use in a box But then they've got literally tons of other material enriched at different levels So what the US is saying here is You're agreeing that as a minimum, you're going to downblelend that basically to reactor level If I understand this correctly, diluting it sets back the program Does it destroy the material? Is it effectively the same as destroying the material, which the president has said again and again is the goal here No, Natalie, diluting it is not the same as destroying it This is a daily broadcast, not a physics class, so I won't bore you with the details. You never bore us, David. But the fact of the matter is It all depends here on the details of what they do with it If they simply down blend it There is always the risk that later on they could reenrich it The important thing to know here is what they're not committing to which is actually shipping the material out of the country Why is that significant? Well, during the Obama era deal in twenty fifteen They actually did agree to ship out about ninety seven percent of the stockpile they had at the time. Now they built up much more over the past eight or nine years since President Trump left that agreement in twenty eighteen And the fact of the matter is the Iranians have not yet agreed actually ship it out of the country, which of course would be the safest thing from a nonproliferation standpo To that point On the whole, when it comes to everything relating to nuclear weapons in this deal Do it compare to what Obama got? You've told us how much Trump cares about his deal being better than Obama's. So is it Not yet. So the administration talks a lot about conversations that they have had understandings they think they have struck with the Iranians on the side. that would resolve the big nuclear issues That negotiation is going to be so complex that they kicked it to a completely separate set of talks that are supposed to start in the next few days and run for sixty days. Although everybody, including the president, has said they expect it to take longer So when the administration is promising that their deal is going to be better than Obama's, they're really counting on those future negotiations because right now That just isn't the case That's right. And you can't even compare these documents because The Obama era agreement was one hundred and fifty pages of What you do with the material how you'd inspect it kind of facilities you have to close, which ones you can keep open. It was incredibly detailed. And the Iranians fought over every paragraph And so that's not what this document is. This document is about a ceasefire It's only got one paragraph that really deals directly with the nuclear program at all. And so The big issue here is what do you get in the second negotiation Okay, so that remains to be settled. What about the Strait of Hormuz? This is obviously the thing that was absolutely necessary for the US in order to get to this deal in the first place. You told us earlier in the week that the administration has been touting that the strait would be open without Iran charging tolls for ships to pass through it That what's in the deal on that front kindind of It's in the deal for sixty days, the sixty days of this ceasefire go back and read it to you again, Natalie. This is from paragraph five of the deal. Okay. The Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vehicles with no charge for sixty days only from the Persian Gulf to the Sea of Oman and vice versa So It's short term And then that same paragraph refers to starting up a dialogue with Oman. define the future administration and maritime services in the Strait of Hormuz So What does that mean That tells you that after the sixty days is over document kind of acknowledges that Iran and Oman, which is right opposite in the strait may well figure out some way to exercise their sovereignty and charge something I doubt they'll call it a toll. They'll probably call it a service fee for keeping the straight open So That's not. Rurning things to the way they were in earlier mid February of twenty twenty six. Because back then, pre war, there was no fee or toll at all to go through the street. And now what this document seems to be suggesting is that The likely outcome is that we don't go back to that pre war status and instead They're going to come up with some kind of scheme where Iran and Oman will have oversight over a news structure That's right. And look, there's one side of this, which is money and I'm sure the people are going through the straight don't want to pay it. I don't like paying tolls going down the jersey turnpike, okay? But that you and me both That's life. But the bigger import of this is that it also suggests that Iran and Oman have some sovereign rights over this very narrow passageway that is also considered an international waterway And if you've got rights over it D Troyge Talls you may consider that you've got the right to shut it down in the future And if that's the case thenen the world has changed in a very big way at the end of this war from the way it was before So how should we think about this provision in the deal, David? Because What I'm hearing is that you may have Iran charging tolls, making money off of the traffic through the straight, which seems like a huge win for them. But on the other hand, the strait will be opened, which points to this other big obvious thing that the US gets from this deal, which is that now the war is over and you can have oil tankers flowing through this waterway. It should be good for consumers. We saw Wall Street had a huge reaction to that How do you assess Well, it's a big win for us because we get to go back to something that approximates the conditions prior to President Trump's decision to go to war M. So Yes, that's a reason the markets reacted so well. The price of oil dropped. Hopefully the price of gasoline will drop Over the long term If you have changed the concept of whether or not Iran has control over the straight That's a huge change because in the forty seven years of the Islamic revolution through the hostage crisis and the Iran Iraq warar And our attacks on their centrifugs both COVD in twenty ten and over last year when the facilities were bombed The Iranians never thought seriously about trying to close the straight And should we take from that that President Trump is prioritizing solving the immediate economic issues caused by the war over preventing Iran from having this new source of power long term Natalie, he said as much in Europe So the one thing I didn't want to see is I didn't want to see Economic catastrophe. If you? Kept this going. that could have happened Twice noted the experience of Herbert Hoover, the thirty first president, right? who presided over the stock market crash that led to the Great Depression. So rather than posossibly going into a depression. rather than having your favorite president be Herbert Hoover I was always the one I didn't want to be. And he said, I don't want to be that guy So I don't think I'll make mistakes like that. I lower taxes and don' raise taxes eff we just gave. And so it told you right away president who went into this war thinking first about Iran's nuclear and missile capability and the threats it poses had to emerge from it because he feared plunging the United States into a recession at best For him, this is not just an economic calculation political calculation His entire party was telling him that if these Gas prices stayed up T the summer when everybody's driving into the midterms that he's got a big problem And we all know that it's going to take months to have a significant economic impact for countries to be able to build up their reserves of oil again and for the prices to begin to drop in a serious way. So if you didn't do it now It wasn't going to happen before the midterm elections But despite that, you hear a lot of people in Trump's own party saying that this is not a good deal. You had Bill Cassidy, a moderate Republican senator calling it the worst foreign policy blunder in decades. Yes, it was a pretty striking line from Senator Cassidy and Similar to things we heard off the record until this agreement got published And now we're hearing more and more of it But that's mostly because how much Iran gets up frront We'll be right back With no fees or minimums on checking accounts, it's no wonder the Capital One bank guy is so passionate about banking with Capital One. If he were here, he wouldn't just tell you about no fees or minimums. He'd also talk about how Capital One cafes are open seven days a week to assist with your banking needs. Yep, even on weekends prettyretty much all he talks about in a good way What's in your wallet? 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Schwab has everything you need, all in one place. Visit schwab. com to learn more Okay, David, walk us through what Iran gets out of this because this is the part of the deal when it came out this week that I think was the most surprising. So what are the big upfront benefits for Iran bigiggest upfront benefit, Natalie is the blockade goes away And that American blockade remind you blockade against any shipping traffic comoming into Iran any going out, right? So it basically bottled up all of their oil shipments That's all over So they can start shipping and money will be flowing to Iran again through those sales And that all happens immediately Now once they get that oil money flowing Obviously they've got a lot of people suffering. They have a lot of rebuilding to go do But one of the big concerns is Once the money comes in, it will probably be spent in part on rebuilding many of their military facilities that were destroyed during the war. So just to be clear, once this oil money starts coming in, the US has no control over how it's spent or where it goes. Money is fungible and as soon as it comes in, and there's nothing in the agreement that restricts Where that money goes? Okay, so that seems very good for Iran. What else do they get right away Well, not right away, Natalie, but very soon, they begin to get access to some of that twenty four, twenty five billion dollars in frozen assets, Iranian money that has been locked up in financial institutions for years. And they've been deeply interested in getting it back. This has been a huge priority for the regime. It is the priority that you hear most often So let me take you back to the wording of this memorandum of undernderstanding. There's a hidden kind of phrase in here in which the agreement says that the money can be fully usable for payment any ultimate beneficiary designated by Iran's central bank Well, there are a lot of beneficiaries in Iran who are designated as terrorists Or they're on sanctions lists And this seems to suggest that they too could be recipients. So this sounds like another huge infusion of cash on top of the money from oil sales in which there aren't really any restrictions necessarily or strings attached The only string attached is that administration officials say that it will be doled out with performance or as the presresident says behavior It earned a lot of criticism. and why is that? Because for eleven years, many Republicans, including Donald Trump have been going after the Obama administration for returning one point seven billion dollars to the Iranians back in twenty fifteen But one point seven billion dollars, big as it is, really pales in comparison to twenty four billion doars And that's to say nothing of an even bigger pot of money that is described vaguely in the agreement And that would be a three hundred billion dollar economic deevelopment fund for Iran. Yeah, this has been confusing to me. First of all, that is just a staggering amount of money. And second of all, I'm not clear on exactly how this is going to work. Where is that money coming from, David Well, no one's quite sure. The US says it's not coming from American taxpayers But that it would get out of the way Others wanted to go invest in Iran So one way to think about this is a marshial plan for Iran, which is how we rebuilt Germany after the war., But not coming from American taxpayers. Presumably, it would come from the Gulf Allies. Now, let's stop and acknowledge for a moment. This may never happen right? I'm not even sure how the Iranian economy could absorb three hundred billion dollars And the place is so riven with corruption that A lot of investors would be rightly concerned to think that their money would disappear into the black hole of Iran where the IRGC, the military does not exactly conform with normal accounting standards. But the concept is that they would get the benefit And this has raised a lot of concern in Congress, Natalie. Right. The idea is that while there's a lot about this fund that is unclear at this point, the fact that it's in the deal suggests that the US will in some way, try to facilitate that money getting to Iran How does the administration explain that How do they defend this? Well, the first thing they say is, you can't reintegrate a country with the global economy unless you make it possible Remember, for years, we have used the treasury's huge powers to control the dollar. cut off all forms of funding that we can find coming into Irq And so this commits the administration to reversing all of that presumably again in return for performance. the markers of performance are not described in this document And what about sanctions relief? This has been another huge issue for Iran. They've been under strict economic sanctions for a really long time. That's right. And those sanctions are on all kinds of things. They're on banking, they're on export controls. And they come from all kinds of places. Some have been placed by President Trump, some were kept in place by Joe Biden, who never reversed the Trump sanctions, some go back to the Bush administration. There are sanctions that Congress has imposed There are sanctions the United Nations Security Council has imposed Layers upon layers of sanctions. It's a big complicated morass. But the agreement is very clear The U. S. undertakes to terminate all types of sanctions against Iran including all kinds of international sanctions Again It says that they will negotiate the details and the schedule of this partart of that sixty day negotiation So again, the administration is relying in a very trrumpian way concept that the Iranians will value Turning on the money spigot more than holding on to their nuclear program Taking all of these things together It feels like a pretty massive pile of financial wins that the Trump administration is giving Iran in this negotiation What do you make of that? It's a little surprising to me, to be honest Well first, this is hardly the first administration to try that strategy. It is based on the concept that Iran fundamentally wants to be part of Western institutions wants to be part of the global community again. And I'm sure most Iranians do. you know, We know that it's a very young population. They want visas. They want to be able to go study abroad. They want to basically do what their peers in many other countries in the region are able to go do Theory is always run into the underlying reality that the country is run by a revolutionary government. And there are many who think that it is their task complete the nineteen seventy nine revolution which is fundamentally based on opposition to the United States. And so Pident himself in February when he was arguing for regime change, in Iran basically making the case can't make a deal like this with the existing government Today He wants you to believe that we can David, we've mostly been talking thus far about the economic payoff, the economic incentives and benefits for Iran in this deal. There are also geopolitical benefits embedded in it. Just walk me through those Well, there are two big ones, Natalie. I mean the first one is The memorandum basically declares what it calls Pmanent termination of military operations on all fronts, including Lebanon And that basically is a rejection of Israel's concern about the threat posed by Hezbollah, which is of course, the Iranian funded and aligned militia group that's based in Lebanon And of course, the Iranians wanted that language because now they have a way to pressure the United States over any future Israeli attacks in Lebanon and say they're a violation of the deal. Right. But not only, you know what strikes me the most about this agreement, it's the stuff that's missing What do you mean by that Think about missiles, right? There's no reference in the entire Mmorandum of understanding to opening a negotiation about missiles And yet that was one of President Trump's immediate goals when he announced the opening of a war on february twenty eighth We heard Secretary of State Marco Rubio come back to it time and time again, saying the missile program the nuclear program and that Iran couldn't have missiles that can reach Israel And then yesterday in Europe The president turns right around on this and says, well, of course, they need missiles. The Saudis have missiles They can't be left without the ability to defend themselves That was not the understanding going in And that certainly wasn't the understanding you got from Secretary Rubio, who in tweets in Senate testimony, talked about the danger of their missile program Yes, this is a huge whichich is I presume why you have seen so much anger in Israel specifically over this deal. There's been a ton of criticism That's right. This is one of the biggest issues for the Israelis because They're in missile range of the Iranians and the United States isn't And it's one of the reasons you have seen so much anger from Prime Minister Netanyahu, but not just Netanyahu about this deal especially because they feel like they were frozen out of the negotiating process during it. And it's not just the missile issue they're complaining about There's no reference in the memorandum of Understanding that would block Iran from funding Hamas and Hezbollah or other terror groups that have long opposed Israel The administration says Don't worry, we'll get to that in the later negotiations, but it's not at all clear that they actually will What does the administration say about all this anger from Israel, their primary partner in this war Aer these terms Well, the most explicit response came from Vice President Vance on Thursday in Washington. Donald J. Trump is the only head of state in the entire world who is sympathetic to the nation of Israel at this moment in time. he basically said No one has had Israel's back more than Donald Trump. To some of these cabinet members in Israel who are attacking the president of the United States, the other thing that I would say is that over the last three months Two thirds Of the defensive weapons that have protected your homeland, have been built by American hands and paid for by American tax dollars. That he has saved the country any number of ways. If I was in the cabinet of the Israeli government, I might not be attacking the only powerful ally that I have anywhere left in the entire world The remarkable thing here is that just four months ago, we went into this war side by side with Israel and we're coming out of it ase split terms to end the work Right, this is a very new and confrontational posture toward Israel from the Trump administration David Just to step back I want to ask about your sense of who actually comes out on top here in this deal, in this negotiation Obviously the war has taken a huge toll on Iran's economy, on its military. It's caused massive destruction Does this agreement set the regime up to come out of this conflict in a stronger position Like, did the regime win Well In the short term, it's certainly weaker than it was before the war. They've lost their Navy, their air Force, A lot of their missiles It may take years for them to go recover Ultimately, there is a pathway here for Iran to become stronger Now just because they have the opportunity Natalie. to get all these economic benefits doesn't mean they actually will The Iranians have a long record of stepping on their own economic opportunities because somebody somewhere decides to go back to the agenda of making America the primary enemy. And that's always the internal battle inside Iran There is no question that they emerge stronger in part because they survived taking on the biggest military power in the world The Iranians knew they couldn't take the U.S military on frontally They would have been crazy to do so They set out on a strategy early on causing so much economic and energy disruption They believe the United States would be forced to blink first And when you heard President Trump say the other day that he didn't want to become Herbert Hoover couldn't risk another recession. It must have been heard in Tehran. as an endorsement of that strategy. What about how this leaves us here in the United States? Now that we have the clearest picture of the terms on which this war begins to end, at least, we know that under those terms, the US has not actually achieved any of the goals that it set out to achieve when this war began So is there any argument here that the US actually gained anything from this relative to where we were before this war started? Going into this war, President Trump said publicly, privately that he was following the Venezuela model that he thought he could just decapitate the country pick up with the existing government and turn it into basasically a vassal of the United States He didn't get anything like Venezuela here You've heard President Trump say several times that he had bigger plans. He really wanted to go take over the Iranian oil fields, for example but that the American people wouldn't stand for it. That was his way of saying he couldn't do anything that required a ground invasion. So in this competition in which The U. S. believed Iran couldn't take the pain And Iran believed the U. S. couldn't take the pain