The Podcast of the Lotus Eaters - PREVIEW LIVE： Realpolitik #65 ｜ Escalation Traps Everywhere

00:00:00.480 Hello, and welcome to another episode of RealPolitik, at the start of which I just got the hiccups.

00:00:07.900 Which is really exactly how you want to start the show, because there are various hiccups happening

00:00:15.060 with the plans of the United States against Iran and against Russia.

00:00:22.800 And so, let's maybe get into that.

00:00:25.480 The first thing that I want to get into is this very interesting statement from Trump's ambassador to the United Nations, where he basically acknowledges that there is no timeline for ending the war with Iran.

00:00:39.660 This means that everybody is stuck exactly where they are because the war is inherently unwinnable.

00:00:45.440 now they don't want to admit this and instead mike waltz is pretending that the economic

00:00:51.860 pressure on iran is going to yield a different result and it's going to eventually allow the

00:00:58.460 united states to win this conflict because of the naval blockade and things like that but

00:01:03.540 this is simply unrealistic and it's getting more and more unrealistic because of the gains that the

00:01:09.820 Houthi militia who are allies of Iran in Yemen right here have made in the last few days.

00:01:18.820 And specifically, what the Houthis have been able to do is march from about, where shall

00:01:26.760 we start, from about Hodeidah here in the middle of the Yemeni coast on the Red Sea

00:01:35.200 all the way down to the tip of Yemen, right on the border with Bab al-Mandab,

00:01:44.400 which is the strait that controls access into the Red Sea,

00:01:47.440 as well as them having taken control of this island, Mayun,

00:01:52.940 and of the Hanish island chain that sits in the middle of the strait. 0.65

00:01:58.600 So if you look at it now, you will see that the Houthis are now in a perfect position to control a second strait, allowing them to disrupt all shipping through the Red Sea, on top of the fact that Iran is largely, not completely, in control of this strait, the Strait of Hormuz, where 20% of the world's oil flows. 0.74

00:02:28.600 So the Americans, seven months into the war, have lost a second straight. 0.91

00:02:34.120 This is the big development that has happened, and we're going to be talking about that and what it means

00:02:39.220 and what the reactivation of the Houthi means and their ability to make these gains is going to imply for energy markets.

00:02:49.340 As I'm sure you've seen, the Houthi then proceeded to attack the East-West Pipeline,

00:02:54.840 which begins somewhere here in Saudi Arabia's eastern province,

00:02:59.400 goes through Riyadh and then the capital of Saudi Arabia,

00:03:04.360 and then passes by Medina, one of the two holy cities of Islam,

00:03:08.680 and then terminates here at Yanboa.

00:03:11.440 And this has been used by the Saudis to export the bulk of the oil

00:03:15.380 that they're actually exporting because Hormuz is closed.

00:03:19.200 So what do the Houthi do?

00:03:20.320 they blow up the pipeline and they destroy maybe three pumping stations. And that has forced Saudi 0.96

00:03:28.340 Arabia to say that they are suspending their deliveries of oil to Europe in the next couple

00:03:34.980 of weeks. And this means that the Iranians now have massively increased their leverage over the 0.78

00:03:41.980 oil markets. And even though there is rumors that the Saudis are going to repair the pipeline 0.69

00:03:46.900 quickly and you know they will fix it in a very rapid order their reality is that the saudis are

00:03:56.480 massively exposed and this kind of attack can keep on happening particularly because the iraqi

00:04:02.980 government and the saudi government have said that the attack on the east-west pipeline

00:04:06.640 came from iraq itself via the militias and the issue here for the saudis is that their oil

00:04:15.700 industry is concentrated in the Shia-majority eastern province. And the extraction happens

00:04:23.440 around, a lot of the extraction is concentrated around this area, whereas the processing and

00:04:28.480 exporting happens here in Jubail, especially in the industrial city, and in Rast al-Nura,

00:04:37.460 where the Saudis have some of their biggest export terminals. The problem for them is that

00:04:44.100 the Iraqis sitting right here can target this energy infrastructure much more easily than the 0.99

00:04:53.420 Houthis can in Yemen. And what this has become is a war by the Iranians intended to break Saudi 0.55

00:05:00.660 Arabia. Because if they break Saudi Arabia and they stop the Saudis exporting oil, then a lot 0.67

00:05:09.000 of what's going on in the Strait of Hormuz and the fact that the Americans are escorting

00:05:14.540 some ships via the Strait matters a lot less.

00:05:18.200 The Americans are being forced to deploy the Navy to get any oil out.

00:05:26.060 And that is the oil that is coming out of, say, Kuwait and Iraq and sometimes from the

00:05:32.020 UAE. 0.86

00:05:34.020 What the Iranians are saying is that we can absolutely put a stop to this, and we can

00:05:39.060 destroy Saudi's energy industry, and we can stop Saudi Arabia from bypassing the Strait 0.91

00:05:43.880 of Hormuz. 0.84

00:05:45.040 Not just that, but if the Iranians wanted to, they could disable Saudi capabilities even 0.94

00:05:53.880 more by striking this location's up cake, which they did in 2019. 0.66

00:06:01.820 Houthi claimed it, but it turns out the attack actually had come from Iraq.

00:06:06.940 So the situation that the war is now is the Americans are fighting a limited war with Iran over controlling the Strait of Hormuz.

00:06:17.900 The Americans are improving their position in that conflict. 0.78

00:06:22.520 The Iranians are coming in and saying, we can destroy a lot more of Saudi's export infrastructure. 0.93

00:06:31.820 and we can say that it's the Houthi and the Iraqis who are doing it, and now the Americans are stuck.

00:06:38.260 And so Trump was considering launching an attack on the Houthi to stop them from controlling

00:06:47.260 Bab al-Mandab, the second straight. So the Americans have lost a second straight,

00:06:52.960 and the Iranians are saying we can destroy more energy exports. Trump, under pressure from the

00:07:00.480 Saudi Crown Prince, Mohammed bin Salman, briefly decided to conduct attacks against the Houthi.

00:07:07.660 And we saw jets going up in the air, and we saw a bunch of American embassies in the region

00:07:13.840 saying, you know, get out of the region, there's going to be a pretty big escalation.

00:07:19.540 Trump in the end backed down. Because what he's realized is that Biden bombed the Houthi,

00:07:25.560 he bombed the Houthi, Trump himself bombed the Houthi. The Houthi have been getting attacked

00:07:31.180 by Saudi Arabia since 2015. And in 2022, the Saudis had to basically give in and sign a peace

00:07:40.420 or a ceasefire with the Yemenis, which included the Saudis paying the payrolls of the Yemeni

00:07:46.640 government. There's a dispute over how much they have to pay because the Houthi added a huge number

00:07:53.440 of their own people on the payrolls. But the concession was made, in principle, that Saudi

00:07:59.520 Arabia is going to have to underwrite the finances of the Yemeni government, including the parts of

00:08:05.380 the country that are controlled by the Houthi, to stop the Houthi from attacking them. And so Trump

00:08:12.000 has realized that this is entirely pointless. He's being put under pressure by Saudi Arabia

00:08:16.920 to drag him again into a conflict with Yemen. But if he goes back into a conflict with Yemen,

00:08:22.500 this has been tried in the past and it failed and he's going to have to escalate against the

00:08:29.420 Iranians directly to beat the Houthi. But if he could have beaten the Iranians in a straight fight 0.84

00:08:36.320 there wouldn't be a Iranian blockade on Hormuz and a counter-American blockade on Iran.

00:08:43.860 seven months into this war and really the americans have gained nothing this isn't to say

00:08:53.720 that the iranians are in suffering i know people bring that up yes the iranians are taking a

00:08:58.620 punishment and their currency is collapsing that's absolutely true but conversely the americans are

00:09:04.640 nowhere near winning this and there is no way out and the and american officials have been telling

00:09:12.040 Trump that there's a strong possibility that this war is going to continue pretty much until the

00:09:18.500 end of his term. So where we are right now is that the Israelis were able to get to the United States

00:09:25.060 to launch this war, and this war has become comparable to what happened to Iraq in 1990,

00:09:31.220 which is a point that I've been repeating a bunch of times. In 1990, the Americans went in and kicked

00:09:37.940 Saddam Hussein, the ruler of Iraq at the time, out of Kuwait. It had taken him five or six hours

00:09:44.700 to invade Kuwait. And then the Americans built a massive force, half a million soldiers, huge

00:09:52.080 amounts of equipment. It took them months to engage in that military buildup, and they

00:09:57.060 destroyed the Iraqi army. But having destroyed the Iraqi army, nothing was solved. 0.57

00:10:03.140 And in the end, the Americans had to go in with ground troops in 2003 and remove Saddam. 0.72

00:10:11.780 What's being prepared for Iran is something similar.

00:10:15.120 The idea is that now the Americans are locked in. 0.93

00:10:19.900 They can't give up the fight because if they do, the rational thing for the Iranians to do will be to build a nuclear weapon as quickly as they can, 0.97

00:10:27.580 rebuild their missile inventory as quickly as they can, maybe even take over countries, 0.98

00:10:35.420 especially Kuwait, maybe Saudi Arabia's eastern province, put themselves in a much stronger

00:10:40.500 position. And even if they don't physically invade these countries, simply by taxing their

00:10:46.120 trade via the Strait of Hormuz, they've made these countries submit to them, meaning that the 0.99

00:10:52.040 Iranians end up in control of 20% of the world's energy supply. And what's the solution? To cut 0.99

00:10:58.500 off 20% of the world's energy supply. And this war is going to continue in an open-ended way

00:11:07.860 because no deal can be made unless a deal is reached between the Israelis and the Iranians 0.67

00:11:14.380 under the table behind the Americans' back, and then the Americans get informed that there's a

00:11:19.920 deal that's been reached. This is where the conflict is going. These are the only two possible

00:11:25.280 outcomes. And looking at the Israelis, they have zero interest in a deal right now. 0.91

00:11:30.700 They're not interested in it. They want the Americans to keep on pressuring Iran.

00:11:35.380 And in the meantime, nothing gets solved. And nothing, in fact, is solvable.

00:11:40.520 and the oil price is going crazy even though it's gone down a little bit in after the initial attack

00:11:51.040 on Saudi Arabia's east-west pipeline physical oil oil that has to be delivered soon that is going

00:11:58.980 through the roof still and that is still going upwards and it's a pretty terrible situation

00:12:06.980 partly because of the cost of shipping.

00:12:09.620 And things have gotten so bad that even major research houses like J.P. Morgan,

00:12:13.740 which is a huge international bank connected to Epstein,

00:12:18.940 these guys have come out and said,

00:12:22.240 for the first time since the start of the Iran conflict,

00:12:25.620 we don't have a baseline view.

00:12:27.680 We simply don't know how to model the endgame.

00:12:31.200 At the onset, we thought we did.

00:12:33.600 We assumed that there were economic red lines.

00:12:36.980 the U.S. administration would be unwilling to cross $100 oil, gasoline near $5 a gallon,

00:12:46.660 a 4% headline inflation, or 10-year yields going above 5%.

00:12:53.700 Those constraints gave us an implicit timeline, and we expected that by June,

00:12:59.300 there would be some form of agreement to reopen the strait. This is J.P. Morgan.

00:13:04.740 Six months later, many of these lines have been crossed, yet the exit strategy is still

00:13:11.540 less clear, not more. Oil is above $100. The 10-year yield has a five handle, as in it's above

00:13:21.920 5%. Gasoline is at 437 at record seasonally adjusted levels, even though peak driving

00:13:29.080 season is behind us. More concerning, diesel is at an all-time high of 631 a gallon in the

00:13:36.100 United States heading into winter. In Europe, it's more or less double that, if not more.

00:13:44.160 So this means that Trump has pretty much accepted an economic crisis

00:13:51.880 and can't end the war still.

00:13:56.420 He's thrown the midterms.

00:13:57.960 He's given up on trying to win the midterms.

00:14:00.880 He's quite possibly given up on 2028.

00:14:03.900 His children and he are very busy enriching themselves

00:14:07.740 in all kinds of crypto scams, investments,

00:14:11.160 so on and so forth.

00:14:13.220 But he's simply surrendered his presidency.

00:14:16.220 And he's going to be spending the next two years 0.86

00:14:19.280 as a lame duck, regardless of the midterms,

00:14:21.180 after he loses the midterms he gets impeached we don't know how the senate ends up looking like

00:14:27.440 but could you see a few republicans defect and vote for impeaching him and deciding actually

00:14:35.820 we might be better off with jd vance going into 2028 it's a possibility it's a possibility but

00:14:43.620 the establishment for some reason hates jd vance even though he will go to the israelis to the

00:14:50.020 Jewish Republican committee, and tell them as best as he can, I'm your friend, I will do whatever you

00:14:56.440 want, they're still snubbing him, they're still making him go through humiliation rituals, 0.65

00:15:00.800 and they still prefer Marco Rubio, who is seen as a more reliable entity.

00:15:08.760 And there's simply no way out. That's the long and short of it. Meanwhile, the Iranians are just

00:15:14.860 trolling Trump. It's Schrodinger's. The empire is in the Strait of Hormuz cabinet with falling 1.00

00:15:22.580 plates, projecting hegemony but fully exposed, trying to suffocate Iran without blowback. 0.93

00:15:28.600 This endgame cannot be modeled. The Strait of Hormuz will be opened, that is, and Iran's hand 0.94

00:15:34.240 is already on the lever. And the plates in the imagery are really fantastic. Missile magnet

00:15:41.660 bases that's referring to the american bases in the middle east that have been largely crushed

00:15:47.900 floating carrier targets the iranians have tried some attacks against carriers

00:15:52.940 it isn't obvious that they have hit any and if they do it's a real problem if they just score

00:15:58.780 a hit against one of the carriers that is a very real real problem for the americans because the

00:16:03.740 The implication is that the Chinese and the Russians can do a much better job. 0.87

00:16:13.800 Global IOU casino, the financial market that is, genocidal proxy, Israel, rentier sheikdoms,

00:16:21.440 the Gulf states that are looking to collapse, ATM states, the global debt system, green

00:16:29.300 screen hegemony the pretense that the americans can dictate their will on pretty much everybody

00:16:34.980 regime change charities the sort of various ngos that are um that are in charge of trying to get

00:16:43.700 regimes changed be it in ukraine or previously in georgia or even in lebanon these guys are out

00:16:49.700 there uh throughout the middle east these ngos were involved in various regime changes

00:16:55.420 Fool-based order, that's brilliant, instead of rules-based order. 0.63

00:17:00.580 Democracy TM.

00:17:02.780 And this is Galiboff responding to the note from J.P. Morgan

00:17:08.240 saying that they have no idea how this is going to play out.

00:17:12.560 And my suspicion is Galiboff is more correct than J.P. Morgan.

00:17:19.940 The whole thing is at stake.

00:17:22.220 the americans know that the whole thing is at stake that's why they are committed to fighting

00:17:28.040 this war they don't have a way out and if for some reason uh the aircraft the aircraft carriers

00:17:36.920 are overextended and need to be withdrawn if there is a problem with the maintenance schedule

00:17:41.580 if there is a fault with training if there's a fire on one of the carriers if the sailors on

00:17:47.880 one of the carriers decide that we've had enough, we're going to disable various systems

00:17:52.400 on the aircraft carrier, that's what falls apart.

00:17:57.900 That's what falls apart.

00:18:01.500 And because the stakes are so high, the Americans have to see this war to its conclusion. 0.88

00:18:09.680 Now what Galibaf might be wrong about is that 10 years down the line, Iran would have been

00:18:14.640 insufficiently weakened for things to change, or three years, or five years.

00:18:19.680 But where we are now, we can't see that endpoint.

00:18:24.620 And the two alternative endpoints are genuinely the collapse of the system, as we know it,

00:18:32.460 or an indefinite war.

00:18:33.540 These are the endpoints that we can see.

00:18:36.660 Could it be that the Iranians end up falling apart? 1.00

00:18:38.760 Yes, yes. 1.00

00:18:40.140 But it's going to take them a while.

00:18:41.580 I've already mentioned in previous episodes the examples of Saddam and of Assad. 0.84

00:18:47.100 These countries find a way to just limp along indefinitely, 0.83

00:18:52.700 and if they get enough backing from somebody like Russia or China, they do limp along for a pretty

00:18:57.420 long time. And what this is doing as the financial crisis accelerates, you're going to get countries

00:19:04.220 saying we don't care about american sanctions we have to get some oil otherwise our own societies

00:19:11.980 are going to rebel against us and this could happen in a place like malaysia or indonesia or

00:19:17.100 the philippines or south korea or india all of these asian countries that are heavily reliant

00:19:24.460 on crude from the middle east these are suffering the most followed by europe and europe's situation

00:19:32.300 is something that we will get to but if the americans can't impose their will here the

00:19:39.500 whole thing falls apart because remember as i've mentioned in the past the existing debt system

00:19:45.960 functions on the basis of the american dollar and on the basis of the americans endlessly printing

00:19:53.340 dollars if interest rates go too high they can't print dollars indefinitely because the dollar

00:20:02.240 expense itself becomes so high that it leads to runaway inflation. Because the budget deficit

00:20:10.460 gets bigger as they spend more money, the budget deficit gets bigger, there's more pressure on the

00:20:15.480 interest rates to rise, etc., etc. And as the interest rates rise, countries like France,

00:20:24.400 the United Kingdom, Greece, Italy, Spain, all of these heavily indebted countries end

00:20:32.520 up needing major fiscal adjustments, and if one of them runs into trouble, it brings the

00:20:39.860 whole system down with it, Japan being a very obvious one. 0.81

00:20:45.500 So the whole thing is a big Ponzi scheme, and the survival of the system is at stake.

00:20:51.520 Galibaf is right to note this. And the other thing to note is that Galibaf has

00:20:59.680 been clearly planning this outcome for some time. Back in April Trump was

00:21:09.420 talking about how the US holds all the cards and he explains supply and demand

00:21:15.460 and explains what the cards are.

00:21:19.040 Strait of Hormuz, partly played.

00:21:21.900 Bab al-Mandab, the one that they just took in Yemen,

00:21:25.060 partly played.

00:21:26.220 Now it's going to go to fully played.

00:21:28.520 Pipelines, unplayed.

00:21:31.700 That's the supply.

00:21:34.240 Equals the inventory releases,

00:21:36.600 and now the inventories are at a record low.

00:21:39.660 Demand destruction, that collapses the economy

00:21:42.940 because fewer things get produced

00:21:44.780 then there are shortages. Now we are there because of the higher prices of gasoline and diesel

00:21:50.660 and more price adjustments, higher prices. This is where we're going. So in April,

00:21:59.260 Galiboff was thinking about the crisis that was going to face the United States

00:22:03.180 in summer. Summer has passed, the crisis is playing out, and now Galiboff is thinking about

00:22:12.540 the interest rate question now the interest rates the sort of required

00:22:20.640 interest rate is the natural interest rate plus the inflation rate or the

00:22:28.620 other way around a plus the difference between nominal and real plus the

00:22:36.780 yearly adjustment plus now the Strait of Hormuz reality minus the Strait of Hormuz adjusted plus

00:22:46.060 the adjustment for Bab el-Mandab. And now the Federal Reserve has been pushed into hiking

00:22:53.880 interest rates. Normally the Federal Reserve calculates their interest rates excluding what's

00:23:01.660 happening in the energy market. The Federal Reserve has had to raise interest rates in the

00:23:06.760 middle of an energy supply shock in order to adjust for the fact that markets no longer want

00:23:12.100 American debt at this price. They want a higher price for the debt. And what he's pointing out

00:23:16.920 is that hiking interest rates doesn't release oil. That's the reality. That's the reality.

00:23:27.660 so there what he's explaining here is that there's no upper limit on interest rates

00:23:34.860 and so galibaf is thinking about the crisis that is going to hit in two or three months time

00:23:41.980 in the same way that in april he was thinking about the crisis that was going to hit over the

00:23:47.240 summer and what this suggests is that the iranian negotiating position is no actually time is on

00:23:55.880 our side, which is a direct counter to the statement by Waltz, Trump's UN ambassador,

00:24:05.240 saying that time is in the is in the interest of the United States.

00:24:11.320 So this is the lay of the land. And this says that it's a completely open-ended conflict

00:24:20.040 with no end in sight because the bet is on the survival of the system itself.

00:24:29.320 The longer this continues, the bigger the humiliation for the Americans

00:24:35.120 if they end up accepting an agreement.

00:24:39.540 Therefore, the more discredited the U.S. Navy is as a guarantor of the dollar system,

00:24:45.520 therefore the bigger systemic collapse.

00:24:47.220 that's what galibaf is pointing out and so he's playing for keeps and he thinks that he has a

00:24:55.060 strong position even though the iranian rial is absolutely collapsing completely falling apart

00:25:00.300 and this is uh pretty crazy uh this is very dangerous 0.98

00:25:10.440 two regimes are at stake not one the global american empire the gay 0.68

00:25:17.820 and the islamic revolutionary regime in iran both regimes have staked their survival

00:25:26.340 on this conflict which makes compromises much harder if you enjoyed this preview

00:25:34.800 please consider subscribing to lotus eaters.com starting for just five pounds a month

00:25:40.440 Thank you.

The Podcast of the Lotus Eaters - September 23, 2026

PREVIEW LIVE： Realpolitik #65 ｜ Escalation Traps Everywhere

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