 Hello and welcome back to War Economy and State. This is the Mises Institute's foreign policy and international relations podcast. I'm Ryan McMakin. I'm executive editor with the Mises Institute and with me as always is my co-host, Zachary Yost, one of our writers who specializes in foreign policy. And Zach, we're going to talk this time about the Middle East because I went back and looked at all of our old episodes and it turns out we have not really devoted any episodes primarily to the Middle East at all. And as you pointed out, that seems almost kind of natural because the U.S. hasn't really been focusing much there. These days, so much talk about Ukraine and China. The Middle East seems like something of an afterthought. Of course, if you're my age and you were an adult, I was about in my early twenties during the days of Iraq War II in 2003, the Middle East was a big, big deal. And everyone was paranoid about Islamism. And we were supposed to think all day long about Iran and Saudi Arabia and Iraq and Israel and all of that stuff and that's kind of gone on the back burner. But I think some recent developments in the Middle East have really showed, I think, maybe where trends are going globally in relations with China, in U.S. relations with the Middle East. And a lot of those relationships are pretty important. And the indications are that while the U.S. will certainly continue to be important in its own way and not just it won't cease to be important at all, but clearly isn't the only dominant factor anymore in the Middle East. And but before we get into what's going on right now, it might be helpful just to talk about some of the historical realities in the Middle East and what really guides a lot of the relationships there because I think the average American, even our informed audience is generally pretty well read and smart people. Unless you keep up with that stuff, you might use a refresher about what are the relationships in the Middle East. And I think all of this news about Iran becoming friendlier again with Saudi Arabia has been pretty important because I think one of the important factors in the Middle East in the last 50 years or so has been that Saudi Arabia, and especially since the revolution in Iran in 1979, Saudi Arabia and Iran are not friends that their competitors as being the dominant power in the regime. And if you look at the map, you got one on the northeast side of the Persian Gulf and you got one on the southwest side of the Persian Gulf. And so they're just natural enemies of sorts, if you will, or at least natural competitors over dominance of that region and of over important oil resources, being able to export their own energy and really dominating perhaps the global oil trade through those methods. So that's just something to keep in mind in the background about the Middle East and also then there's more ancient problems of religious factions as well, right? Saudi Arabia, these are Sunni Muslims and in Saudi Arabia specifically, even the more extreme version of Saudi Islam, which is Wahhabism. And then on the Iranian side, you have Shia, or what we used to call Shia, the more popular recent term apparently is Shia Islam, which is a different group and they're just not the best of friends between the Sunnis and the Shiites. And the US has, of course, sided with the Saudis for a long time. This stretches back at least to 1971, the closer relationship goes back that far, after the US went off bread and woods and realized that there might be some serious problems in terms of global demand for the dollar, the US sent to Nixon, sent to Secretary of State, I believe it was, to Saudi Arabia and said, hey, we'll offer you implicit military protection if you agree to mostly do business in dollars. And that'll prop up demand for the dollar. And by the way, now that you're sitting on this mountain of dollars, Saudi Arabia, you can plow it all back into US treasuries and that'll help prop up US deficit spending and US debt. So then you had the creation of what's known as the Petro-Dollar. And then as time went by, there was some sort of creepy relationship between the Bush family and the Saudi Arabians. And this was all very evident in Gulf War I in the early 90s and then later in Gulf War II or the Iraq War in 2003. And we saw pictures of George W. Bush walking around holding hands with the head dictator of Saudi Arabia. And there was clearly some sort of close relationship there that helped sideline Iraq and Saddam Hussein. So there's just been a long relationship there and also has helped explain why the US has decided, in spite of all the claims about paranoia over Islamism, why the US decided to ally itself not with the secular Arabs in Syria and Iraq, but with the most extreme Islamists in many cases in Saudi Arabia, many of whom, a country who was mostly their citizens who were involved in the planning and execution of 9-11, at least according to the official account. So it's been just kind of a weird journey over the last 50 years or so in terms of the US relationship with Saudi Arabia and with Iran. And by the way, Israel has always had an interest in sidelining Iran and Syria. They have been close allies also with Lebanon and Hamas. Some of its funding has come from Iran and from Syria and the Israeli state has always had a big problem with that. And so now, if Iran is becoming close to friends with Saudi Arabia and Saudi Arabia, by the way, just recently invited Syria back into the Arab League. And that's not Saudi Arabia's thing officially, but Saudi Arabia dominates the Arab League. This all that's bad news for Israel. It kind of sidelines the US to some extent. And as you noted, it certainly is important to China as well. So there's even some other factors here with the Chinese side of things. And maybe you can kind of note the importance of that as well. Right. Yeah. So there's lots going on. Middle East is a big, complicated mess, has been for quite a long time. And yes, as you know, I just want to sort of touch on something that Saudi Arabia, Sunni, Wahhabist, Iran, the home of Shia Islam. And you can point to relationships around the Middle East on this sort of axis. The Syria is the home. I forget their technical name, but they're sort of the Assad's are sort of this offshoot of Shiaism. Hamas, Shia, the Houthis in Yemen are Shia. So you can point to like, oh, this Shia axis sort of thing versus Sunni. But on the other hand, it's not that this is the exclusive lens through which relations take place. Iran is a buddy buddy with Armenia. They have the first official Christian state. And that's because of Azerbaijan, a Muslim state they don't get along with. So just to point that out. Yeah, it's one could make the argument that the U.S. involvement in the region has been immensely destabilizing. I mean, obviously in the Iraq war and all that millions displaced people war going on for decades. You can point in the previously the U.S. government had a policy of balancing Iran versus Iraq. And we would play off one against the other. Then I believe it was sometime in the 80s, we said, we're just going to contain both of them ourselves. We won't use one to contain the other. We'll just contain both. And then we have all this intervention in the Middle East and whatnot. And basically ever since then, then the Arab Revolution, Arab Spring happened and there's been all this trouble. Now the U.S. has been forced to take a step back from the region because contrary to the national security doctrine of last year, the U.S. is not capable of doing everything. I mean, we still are involved in the region. We have a whole fleet in the Persian Gulf. We have I don't even know how many now a few thousand troops in Syria doing who knows what. And but we're not as involved as we were before. And people have made the argument that this is why is it where peace is breaking out. You know, relative before, because if you can count on someone else to be paying your bills, basically subsidizing you, then it changes the calculation of, you know, fighting. You know, the U.S. is very, very involved in facilitating Saudi Arabia's war with Yemen and things like that. Now we've taken a step back and all of a sudden all of the incentives and all the, you know, calculations change because now without the U.S. there sort of as a sugar daddy. Oh, well, peace war is expensive, problematic, peace is breaking out. And as you noted, in both cases, the Saudi Saudi Arabia and Iran broke relations, I think in 2016, they did not have diplomatic relations. They restarted those relations. That's facilitated by China. Similarly, with the sort of peace deal between Saudi Arabia and Yemen that was facilitated by China. And we like, let's look here, it's in China's interest to have a stable Middle East. They import tons of energy resources from the region. It's sort of in almost everyone's interest for a stable Middle East because everyone, you know, has to have an IV of petroleum products hooked up to their veins. So some people are shrieking, well, no, the U.S. is being supplanted as the, you know, global power broker and China's taking our place. And to that, I would just respond, who cares? There are several factors here as to why we can say who cares. Just in general, our goals are aligned, ours and China in terms of wanting to have access, you know, wanting to keep the oil flowing. To, you know, oil is a global commodity. It's called the bathtub theory of oil. It's all of the oil just pours into the global market. So it's not as if, you know, if say Iraq or someone just was like, we're not selling oil to the U.S. anymore, which, and I'll get to this in a second, we don't really import much oil from the Middle East. Say they said, we're not going, we're embargoing the U.S. Unless they just take the hit and are like, we're not selling oil to anyone, that oil will be sold to someone else who then won't be buying oil from another place and we could buy the oil from there. But a major shift in all of this that it seems some people have not caught up with is sort of the shale revolution here in the U.S. I mean, for actually a year or two, we were net positive on oil production. We're sort of a smidge below that now, but it's not, we're very close. And Canada and Mexico have lots of oil. We're not really relying on the Middle East for oil anymore. So you can see why the gears are spinning in the heads of the Middle Eastern despots as to they need to change the relationship with the U.S. And also I would say this is why I've lost count of all the crazy projects that Saudi Arabia has announced, the like ginormous like 100 mile long city or something and all kinds of crazy stuff. It's like, well, we have all this money. We better find something other than oil. But anyway, so yeah, I would say those are sort of things in play here and another tick in the column of, you know, why are we so involved with Saudi Arabia and all these, you know, I mean, Saudi Arabia, they literally cut a journalist up with a hacksaw, you know, I mean, these aren't nice people and it's don't get me wrong. Sometimes we have to work with people who are unsavory. But I would say we don't have to in this instance. So let's not, you know, we're, you know, have been kissing Saudi Arabia's toes for decades. And what are we getting out of it? I mean, recently it's been a big deal and people are starting to get mad about it about Saudi Arabia cutting oil production. And they just cut oil production again two days ago. So we've bend over backwards for Saudi Arabia and we're getting literally nothing out of the deal. We can't get them to pump more oil of what they're, they're of no use to us at all. So, you know, and they're realizing that it's probably coming down the road, hopefully, so that's why they're altering their strategy. We should note also that by cutting oil production, they're helping Russia too. Oh, right, yes. And so that's just another way they're thumbing their nose at the US is not only does it further help OPEC essentially, but OPEC plus, which includes Russia. And this then just funnels more money to the Russian regime, which of course is the opposite of what the US is trying to do right now. And yes, so many examples of this. And we should know this is all stuff like in the last two years that if you go back and you look at Soviet or Saudi Iranian relations just in 2020, it was pretty bad. And the US certainly was still carrying on what it had wanted. It's general policy. This is when Trump, of course, around maybe his 2018 or so, traveled to Saudi Arabia and spent a couple of days there with, which I mean, just it was sickening to watch how much he was fawning over the Saudi regime. The orb, the orb, so many memes about. And vice versa. And he sold them insane amounts of weapons. And so then they just turn around and you can see that they just don't really care that much what the Americans think. And I wonder how much was the long-term strategy or how much was it of China just in the last couple of years really upping efforts to really do something to secure access to oil in the regime. But yeah, looking at that, right, all of these issues that played to the US's favor, right, the ongoing conflict in Yemen, which continued to stoke, I think, anti-Iranian sentiment in Saudi Arabia because there was a loose alliance there between Yemen and the Iranians. Also convincing the Saudis to eject Syria from the Arab League but which Saudi Arabia is now, that's all past tense now and really have just diminished importance there. And now they've normalized diplomatic relations with the Iranians. Iran the other day or Saudi Arabia, the other day hosted Maduro from Venezuela just like, I don't know, a day before Blinken shows up in Saudi Arabia to talk about US interests there. That was some interesting timing. And so just the whole thing is just really quite remarkable and very little mention of Israel's interests in any of this from US policy. The US hasn't really been doing anything to really stick up for the state of Israel, which I don't think the US has any obligation to do that. I just think it's unusual that you're not hearing more about it. Right. Yeah, I think part of that is Netanyahu is very unpopular among the quote unquote enlightened sophisticated classes these days. And I can't remember if it was some other leak or if it was from the Pentagon leaks we talked about last time. But apparently the US government is like, yeah, we actually don't. We don't know if Israel is going to bomb Iran's nuclear weapons project or not. So I mean, it's sort of who knows. I mean, they could do that, which would stir up the pot just as the US is already trying to do too many things at once. But I mean, I've not been following Israeli domestic politics too closely, but it's rather tumultuous. There was I forget they had like a record breaking number of elections and governments in a very short amount of time and then Netanyahu was out of power and the Israeli Arabs were in the government for like, I guess the first time ever now Netanyahu is back in power and he's also being like prosecuted for things. And so it's sort of a mess there as well. But yeah, I would say it's we're not as obsessed about what Israel is doing, but also just so people are up to date. There's been a lot of talk about Iran's nuclear weapon project and recently there's been talk of like, oh, gee, maybe we actually can't blow it up now because there's been like a low key sabotage campaign against it for a long time. Massad agents, you know, throwing bombs onto nuclear engineers cars and things like that. And we have like these called they're like these missiles or bombs called bunker busters. I think they can penetrate like a hundred or 200 feet down into the earth, which is sort of wow, that's scary. But now the US Iran is now building facilities beyond the reach of any known weapon basically. I mean, if you build something in a mountain, you could nuke it and it'll still be there more or less. So it does seem that the ship might have sailed on stopping their ability to create a weapon if push comes to shove. I mean, sort of the ideal position for a state to be in is where they don't have a nuke, but they could have a nuke if they wanted it in six months or something. And so the ability to not have the program wiped out in those six months is the key factor. Yeah, so if it will be interesting to see what happens, we could see some nuclear proliferation in the region because if Iran is, you know, six months away from the bomb, other places might want to be, you know, at the same level. Who knows, we'll have to see. But yeah, it's things are changing hopefully for the better for the US who can say about the people there themselves. Yeah, well, of course, if there is proliferation there, you want you want to keep the US as minimally involved as possible then and let them let them fight it out just like it would become insane to get involved in Pakistan, India relations where you've got two nuclear armed states that are still fighting over Kashmir and some of those they got some border issues there and they just don't like each other and yeah, stay out of that. And that's another comes to mind. Another horrible partner in Pakistan was cooperating with the Taliban all 20 years. We're in Afghanistan yet we're still, you know, buddy buddy with them. It's quite strange. Well, we should note by the way that the US probably shares a lot of the blame in basically forcing Iran into the arms of China, thanks to the US abandonment of the joint comprehensive plan of action, which right the the international treaty that was designed to really finally work with Iran to put a lid on its nuclear program and find peaceful uses of nuclear energy only in that country and and this would all be in exchange for normalization to some extent for repeal of a lot of these sanctions on Iran, which are very harsh sanctions like they they catch not millidon just military aid and stuff but like medicine and food and lots of things and gravely impact the standard of living there for regular people but what has become apparent I think to the Iranians since Trump is that no matter what they do, the US has an interest in ratcheting things up and making more and more demands on the Iranians and so you could see why they would just come to the conclusion where well this is just going nowhere we have no reason really to work with the Americans no matter what happens the Americans will never accept us so let's go talk to China about it and that seems to be a pretty important issue there with China having happily accepted the entreaties and then this provides an opening for Iran to make friends with everyone else in the region if it can to some extent so that there seems to be just a cascading of events here where the US says well no matter what you do we're not going to live in peace with you and so that just that just gives them reason to abandon the US altogether in any hopes they had of of being a US part of the US access if you will that's just gone so I think the US is certainly had a sizable role in that right yeah I I don't I think part of me suspects it's sort of like just our weird inability to you know just improve relations with Iran part of it might just be like a boomer thing to some degree the boomers cannot you know let go that they took Americans hostage from the embassy it just like ingrained in their mind you know for as long as they're around Iran just must be punished similarly Iran's not friendly to Israel lots of people want to support Israel and also it's somewhat ironic there's sort of an overlap between Israel and Iran in terms of they both have lobbies here in the US Iranian expatriates hate the government of Iran and I mean it's it's sort of a meme among some circles about how like Iranian expatriates like you know typical Iranian expatriates some guys being interviewed and he's like you know the government should have bombed Iran not Iraq you know and it's just and also I mean lots of Iranian expatriates are like wealthy California so that also plays a role in things I'd say it's sort of just the double whammy yeah never forget about the importance of just domestic interest groups in these sorts of things that just a few years ago one of those wealthy Iranian families which owns a bunch of pistachio orchards in California and maybe also Arizona was opposing the normalization of trade with Iran because it would have negatively impact the pistachio trade in the US it would have massively pushed down pistachio prices because apparently they they produce a lot of pistachios in Iran so it's sort of a bootleggers in Baptist sort of situation where you've got both though you got foreign policy people who are obsessed with foreign policy and Israel joining forces with just some rich Californians who want to keep the lid on trade and so you just then have endless perpetuation of these existing policies but yeah I think the fun thing of it is I just wonder how many old timers at the CIA and stuff are just pledged to as long as I'm here there will never be normalization of relations with Iran because of how they humiliated us in 1979 and I think maybe that explains somewhat of the partial normalization of relations with the Cuba is a lot of the the people who are around in 1959 they're just dead now so that's it. Yeah, the joke is the cold war is over everywhere except for Miami and this is worrisome when it comes to Cuba because I think as I said in our Monroe doctrine episode you know I'm like normalized relations with Cuba immediately you know the I do think that the prominent role of Florida is taking in GOP politics could render that a difficult thing to make happen for the foreseeable future who knows. Yeah and on the sanctions thing it's also worth pointing out Yemen like 75% of its population is food insecure basically because of the sanctions put on the country. So yeah it's just the frustrating thing about sanctions is they just have a record of not ever working North Korea is still alive and kicking and testing ballistic missiles you know they've been sanctioned beyond you know belief and they're still here Iran still here. Everyone who's sanctioned is still there in the end. Venezuela. Yeah and on the on the normalization with Iran or whoever else. I I look to Charles de Gaulle as sort of the model statesman when it comes to recognizing international realities and sort of like the the shining moment that I look to you of what I aspire to when it even in my personal life when it comes to you know having a level headed sort of real politic view of things is you know after the fall of France there's a lot of concern in the UK about what's going to happen to the French well you know the Vichy French Navy. And a large section of the French Navy was stationed I don't remember if he's in Tunisia or Algeria basically French North Africa in the port. I don't know if I'm pronouncing this correctly but of Mears El Kabir I think and the British shout the French fleet ships were sunk. Bunch of French sailors were killed French were very outraged and de Gaulle himself was understandably quite outraged. But so like you found out about it at night and he was like super angry then the next morning he had a meeting with the British and he said if I was in your position I would have done the same thing. So sort of this ability to separate you know instinctual spur of the moment emotions from thinking in the long term trying to stand in other people's shoes and understanding why they do things I think is helpful not just in foreign policy but even in your own personal and interpersonal relations and all that sort of stuff but it's sorely lacking in the US and part of it is because we don't need to we're so strong and powerful we can do whatever the heck we want and you know we don't have to worry about our cities being bombed really and things like that. So it in a way it's sort of one could argue it would be good for multi polarity to emerge around the world in that it checks the US and obviously we don't want it to get out of hand we don't want another cold war but just sort of if people can get through their heads that the US can't just do whatever it wants because X is out there you know hopefully not in a super military cold war fashion but just where we live in a multi polar world are you know we lack self-restraint so we need external restraint in a way. Yeah and of course the world recognizes that you don't even have to become on the same level militarily with the US to just limit the US's ability to meddle in your region endlessly and I think you're seeing some of that now with the headlines the last couple of days has been Iran running around telling everybody that it's about to form this Gulf wide Gulf region wide naval alliance design I haven't seen that again. Yeah check it out. It's in Reuters this morning and National Review has an article about it. It's actually hard to find much upset about it from the Saudi side but what they're saying hey hey we're going to have joint naval exercises now this is what the Iranians are saying we're going to have joint naval exercise now with the Saudis and with other Gulf states and we're all going to agree on security for the Persian Gulf and we're going to make sure that oil flows in and out of the region without any any outsiders meddling to tell us how it's going to happen and National Review of course takes a dim view of this because they think the US should be in charge of the Persian Gulf and already talking about how well this is this is this is okay if they're just going to fight pirates or something but if this if this takes on a defense dimension where they're actually defending the region from foreign interlopers well that's just terrible. Now that's such an American way of looking at things right is that you could see being alarmed if the Gulf states wanted to form some sort of offensive capability right to send a boat to the Gulf of Mexico or something they have no plans for that all they want to do is maybe be able to keep people out of their business in the Persian Gulf which is no threat to the United States whatsoever and as you notice not even threat really to US energy resources they would just force the US to maybe play nice with the Venezuelans to get some of their oil or the Mexicans to get some of their oil is already happening with Venezuela by the way I think we covered Cameraman or Chevron or Shell or that's right of the giant oil conglomerates got permission from the US government to sort of get back into Venezuela which is all to the best. Yes I mean it's the America this fits right into our other episode about the Monroe doctrine right if there's plenty of stuff close to home that the US could focus on rather than meddling in the Middle East so yeah if if Tehran wants to have something going on with Riyadh in terms of a local naval alliance there's really no downside for the US there as you know and if China somehow sponsors all of that and gives them a bunch of money fine okay that just makes life easier and cheaper for the American taxpayer so it is a sort of multi polarity then I think regional multi polarity of sorts. Yeah and we could you could argue that really what the US strategy now is doing is subsidizing China's access to oil through the Strait of Malacca and everything it's like we've got to keep the superhighway of oil to China open I mean that's one way of attacking people are you soft on China you want to that's why you're so concerned about the Middle East and also just as an interesting side note Eugene Golds but I think is that Notre Dame now he has all kinds of interesting papers on various things about sort of global markets and things like that but I think he worked for the Pentagon or some government agency at one point where he produced this enormous report on whether it was even possible to stop the flow of oil out of the Persian Gulf and so he uses the case studies of I think it was called the tanker wars sort of during Iran Iraq and just points out like even like the Strait was mined for goodness sake there's a war going on and the tankers kept on coming in and out you know he talks about how insurance rates shot through the roof but it was still profitable for these tanker companies to be coming on in and out so it's yeah and I'd also point out one point that people will argue about is the US needs to maintain the open seas sort of thing and this I mean this is one way in which trade which I'm all for but can intersect with sort of an imperialist outlook on things is sort of we have to by force keep open these sea lanes and whatnot and we had that episode I remember if it was the Monroe Doctrine episode or a separate one where we talked about near shoring it's like sure let's protect the sea lanes of the Western Hemisphere but it just sort of like if all these Gulf states want to take care of their own sea lanes that's great I mean it's not like as we talked about the oil markets and all that but it's it's not like they're going to shut off all trade you know through the region it's it's that's just not going to happen that's in no one's interest so let them take care of pirates and preventing I don't know some rogue state from trying but probably failing to close down the trade routes well it should be in terms of trade to Iran just finds itself I think thanks to the war with Russia in a improved position as well as you've noted right it's it's funneling more oil to China so China's really expanding their their strategy there but but Russia sees Iran as a crucial partner in terms of pipelines and trade and moving trade through Turkey and the Caucasus and to that part of Iran that's outside the Persian Gulf sometimes people forget that a large portion of the Iranian coastline is outside the Strait of Hormuz and they're looking at building pipeline pipeline terminal there and basically port cities and really developing some of those areas so even if you did somehow managed to close off the Persian Gulf Iran could just keep moving oil to China without any real choke points there at all and that provides a trade outlet for Russia as well if they can get their goods down because they can go straight through Turkey and into Iran and now that the Iraq is much a closer Iranian ally more US mismanagement that it's all just part of a large global trade scheme so yeah these these are smaller countries they can't afford to cut off trade unless they want to become horribly impoverished right and this is something I think lots of Austrians are very good at pointing out how like sort of the current international trade situation is not exactly like a natural free market sort of how things would emerge in a stateless world or something there's so many all these treaties and things that are you could say distorting trade and one way of looking at it is that US the US has been subsidizing sort of the global trade infrastructure for so long and now when people are like oh gee it's not great to be so dependent on the US we're seeing patterns of trade emerging that might have emerged otherwise absent the US action I mean there's a plan for a big pipeline from Russia that will cut through Mongolia things like that yeah it's my understanding that trade on the Caspian Sea has bumped up quite a deal a great deal since the Ukraine war has happened and all that there's the Belt and Road Initiative which China is pouring Gajillion's of dollars into I'm not it's in a way China might be making a similar mistake to the US in that land transportation is many many times more expensive than sea base transportation but if they want to give Kazakhstan and whoever else Gajillion's of dollars go ahead you know why should we care I mean there are people who say we should care but I don't think we should and it's just we will see how things emerge and all the people freaking out over the closer relations between Russia and China someone is some I would argue that this relationship is probably I mean really it's historically an aberration between the history of China and Russia and seems to be a product of the US and our policy so if the US policy changes perhaps we'll see that relationship fracture who knows but I think there are all these arguments that don't really get a mainstream hearing by the blob of why it's okay for the US to not be doing X well we'll go ahead and wrap it up with that for this Middle Eastern episode I'm sure we'll have to return to the topic before too long but for those listening thank you for tuning into this episode of war economy and state and we will be back next month with another episode and we'll see what new disasters we have to report on at that time but until then have a great month thanks