Latest / Balance of Power / Trump Says Iran Strikes to Be Short; Commerce Secretary Lutnick on AI, Tariffs and Canda

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Trump Says Iran Strikes to Be Short; Commerce Secretary Lutnick on AI, Tariffs and Canda · Balance of Power

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  Speaker 5: We are seeing oil prices climbing once again today, a
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  Speaker 5: 90 handle on WTI, approaching $ 96 a barrel on Brent
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  Speaker 5: on the escalation of hostilities in and around the Strait
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  Speaker 5: of Hormuz as U.S. forces strike Iranian targets or were
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  Speaker 5: striking them overnight for the second time in three days.
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  Speaker 5: And of course, Iran, as it promised, did attempt to
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  Speaker 5: strike back against U.S. interests in the Middle East. and
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  Speaker 5: other Gulf states. That is what has triggered this rise
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  Speaker 5: in oil prices. And the question, of course, is whether
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  Speaker 5: this means that we could go back to an active
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  Speaker 5: kinetic phase of this war, this conflict, which of course
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  Speaker 5: is now past the six-month mark as of last Friday.
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  Speaker 5: We want to get into this now as we turn
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  Speaker 5: to Bloomberg's Skylar Woodhouse, a Washington correspondent for us here
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  Speaker 5: at Bloomberg, who is live from the North Lawn right now. Skylar,
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  Speaker 5: we have heard from the president today on True Social
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  Speaker 5: not about whether or not the U.S. will continue strikes
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  Speaker 5: today or whether that should be expected, but instead an
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  Speaker 5: assertion that the U.S. is in control of the Strait
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  Speaker 5: of Hormuz and suggesting that because that is true, the
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  Speaker 5: name of the Hormuz Strait should potentially change to the
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  Speaker 5: Trump Strait. Is that all we can expect to hear
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  Speaker 5: from the president on this today? Does he have any
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  Speaker 5: events opening up in which we could potentially get some
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  Speaker 5: finer details on the plan?
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  Speaker 6: Yeah, Kayleigh, well, the president today is expected to meet
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  Speaker 6: with travel industry leaders and executives. Now, that meeting, as
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  Speaker 6: of now, is closed. And here at the White House,
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  Speaker 6: we are all waiting to see if that meeting could
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  Speaker 6: potentially open up to press. which could give an opportunity
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  Speaker 6: for reporters to ask questions to the president on what
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  Speaker 6: the latest developments in Iran are, and to potentially ask
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  Speaker 6: him if he really thinks that he can change the
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  Speaker 6: name of the Strait of Hormuz to what he would
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  Speaker 6: like to see. So, look, we'll see if that meeting opens.
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  Speaker 6: But as of now, we're not tracking anything where we
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  Speaker 6: might be able to get an update from the president
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  Speaker 6: on the Iran developments.
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  Speaker 5: Yeah, I mean, I guess if he can change Lake
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  Speaker 5: Ontario to Lake America and have Google Maps and Apple
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  Speaker 5: Maps reflect that, at least for those in the United States,
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  Speaker 5: I don't know what would necessarily stop him from naming
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  Speaker 5: another international waterway. But unclear if he was really serious
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  Speaker 5: about that. Skylar, in terms of the actual strategic messaging
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  Speaker 5: being put forward by the administration, before these strikes began,
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  Speaker 5: began again in earnest just a couple of days ago,
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  Speaker 5: it seemed that there was a pivot from kinetic activity
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  Speaker 5: to economic warfare. It's why last week the Treasury Secretary
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  Speaker 5: made a big to-do about economic D-Day. Is there actually
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  Speaker 5: a strategy shift underway here, or is the administration trying
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  Speaker 5: to pursue both things at the same time?
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  Speaker 6: Well, Kayleigh, the president last night said he, quote, couldn't
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  Speaker 6: care less if Iran signs an agreement. That was what
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  Speaker 6: he said on True Social yesterday afternoon. So, you know,
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  Speaker 6: I think what we're trying to figure out now is
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  Speaker 6: what is the president's thinking and where does he sort
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  Speaker 6: of see the war going next? It does appear that,
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  Speaker 6: you know, maybe the administration is sort of boxed into
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  Speaker 6: a corner as they try and figure out their next
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  Speaker 6: strategy and what their next move will be, especially as
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  Speaker 6: the November midterms are quickly approaching. And as you mentioned earlier, Earlier,
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  Speaker 6: those gas prices are continuing to skyrocket, which is something
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  Speaker 6: that they are trying to quell as those November midterms
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  Speaker 6: quickly near.
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  Speaker 5: Yeah, which is where Venezuela enters the conversation, Skyler. The
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  Speaker 5: Energy Secretary, Chris Wright, is down there today, as is
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  Speaker 5: the CEO of Chevron, which is announcing a $ 7 billion
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  Speaker 5: investment into their joint ventures there over the next five years.
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  Speaker 5: But what are we hearing from the administration as to
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  Speaker 5: how quickly the access to those 65 billion barrels of
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  Speaker 5: oil fields in Venezuela is actually going to translate into
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  Speaker 5: lower prices in Is there an expectation that any of
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  Speaker 5: this is going to be in U.S. control realistically and
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  Speaker 5: changing things for American consumers in this president's term? Forget
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  Speaker 5: before the midterms.
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  Speaker 6: Yeah, Kayleigh, look, these things take time. And what we
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  Speaker 6: know about Venezuela, obviously, is their infrastructure is something that
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  Speaker 6: is going to have to be sort of rebuilt and remanaged.
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  Speaker 6: And so what we're seeing right now is that the
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  Speaker 6: president is trying to sort of really get things moving
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  Speaker 6: very quickly, but only time will tell to see how
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  Speaker 6: fast do those barrels really get moving. I mean, especially
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  Speaker 6: as the president and the administration is trying to reduce
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  Speaker 6: the influence of China and Russia and Venezuela. Secretary Wright
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  Speaker 6: is in Venezuela right now. And so, you know, we'll
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  Speaker 6: have to see sort of what comes from the meetings
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  Speaker 6: down there and that trip. But only time will tell.
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  Speaker 6: And look, these things take time. Nothing can really happen overnight.
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  Speaker 6: And if it does happen overnight, then that is that
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  Speaker 6: is really spectacular. But, you know, these things will take time.
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  Speaker 6: And who's to say if it'll happen by the time
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  Speaker 6: the president is out of office or not?
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  Speaker 7: All right.
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  Speaker 5: Skylar Woodhouse reporting from the North Lawn of the White
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  Speaker 5: House for us today.
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  Speaker 8: Thank you so much. Now, she's right.
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  Speaker 5: Not a lot is able to happen overnight, at least
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  Speaker 5: in the modern political climate.
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  Speaker 8: A lot of things take time to complete.
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  Speaker 5: But we have seen some things completed on Capitol Hill
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  Speaker 5: in the last 24.
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  Speaker 3: Hours or so.
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  Speaker 5: As, of course, the House was able to pass a
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  Speaker 5: continuing resolution to keep the government funded through December. It
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  Speaker 5: now heads to President Trump's desk. The expectation is he
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  Speaker 5: will sign it. A shutdown will be averted. But the
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  Speaker 5: lame duck session could be very much an open question.
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  Speaker 5: And for more, we turn now to the chair of
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  Speaker 5: the House Budget Committee, Congressman Jody Arrington. The Republican representing
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  Speaker 5: Texas's 19th district is joining us now live. from Capitol
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  Speaker 5: Hill on Bloomberg TV and radio.
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  Speaker 9: Mr.
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  Speaker 5: Chairman, welcome back to Balance of Power, and congratulations on
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  Speaker 5: getting the CR done. What happens on December 10th, though?
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  Speaker 5: Could it be another continuing resolution? Should we expect the
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  Speaker 5: regular appropriations process will be completed in the lame duck,
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  Speaker 5: or could everything fall apart and the lights turn off
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  Speaker 5: before the holidays?
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  Speaker 1: Well, Carrie, great to be with you.
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  Speaker 10: Look, it's sad to say, but for Congress, it's a
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  Speaker 10: big feat these days to actually come to some agreement
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  Speaker 10: on a continuing resolution versus shutting the government down. We
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  Speaker 10: saw that last year over extending a COVID-era fraud-ridden expansion
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  Speaker 10: of Obamacare, believe it or not. That was a 43-day shutdown,
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  Speaker 10: followed by another shutdown of Homeland Security.
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  Speaker 1: That was 76 days.
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  Speaker 10: So those were the longest shutdowns ever. Hurt our economy
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  Speaker 10: in that one quarter. That would be the fourth quarter
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  Speaker 10: of last year. About a percent and a half of
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  Speaker 10: GDP not to mention the disruptions it causes on our country,
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  Speaker 10: taxpayer cost, and especially with respect to our defense now
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  Speaker 10: that we're in conflict. So glad that we could get
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  Speaker 10: at least consensus on a continuing resolution. I think there's
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  Speaker 10: going to be great urgency and all the right impetus
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  Speaker 10: to find a full year sort of agreement, four-year, four-corner agreement, rather,
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  Speaker 10: from House and Senate, both parties.
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  Speaker 1: We've gone through regular order in the House, Kerry. We
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  Speaker 1: We passed all 12 appropriations out of committee.
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  Speaker 10: We were working through regular order, had three off the floor.
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  Speaker 10: The Senate had zero, like not one had they passed.
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  Speaker 10: We also, by the way, before we broke for August recess,
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  Speaker 10: we put out a budget reconciliation measure, a budget resolution
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  Speaker 10: with reconciliation instructions to provide defense, which would be emergency
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  Speaker 10: supplemental funding for defense. And then, of course, we had
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  Speaker 10: the SAVE Act and election integrity reform measures.
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  Speaker 5: Well, on the supplemental, what are you hearing from your
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  Speaker 5: counterparts in the Senate as to the future of that
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  Speaker 5: when they return from recess on September 14th?
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  Speaker 1: Well, unfortunately, I don't know that the will is there.
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  Speaker 10: I really, I say that with great grief because our
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  Speaker 10: troops need to know we've got their back. Certainly, practically speaking,
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  Speaker 10: they need a replenishment of munitions. They They need to
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  Speaker 10: fill up the tanks, so to speak, to finish the
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  Speaker 10: fight and come home safely.
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  Speaker 1: I don't think there's a more important endeavor for.
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  Speaker 10: Us as Congress to deal with than to support the
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  Speaker 10: common defense and back our troops. You can debate the conflict.
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  Speaker 10: You can debate all kinds of the strategies. We can't
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  Speaker 10: debate supporting our troops. are men and women in uniform.
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  Speaker 10: So that is paramount, and that's why we got it
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  Speaker 10: out of the House in a timely way. I just,
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  Speaker 10: you know, I hate to say this, but I don't
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  Speaker 10: have a lot of confidence we're going to get a
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  Speaker 10: reconciliation back prior to the election. Now, going into lame duck,
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  Speaker 10: I think we'll have even a bigger aperture on what
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  Speaker 10: we can do through reconciliation in terms of investment in
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  Speaker 10: modernization of the military, not just supplemental resourcing for the
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  Speaker 10: current conflicts.
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  Speaker 1: But that's, again, that's after the election.
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  Speaker 10: I just hold very little hope out prior to the
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  Speaker 10: election at this point that we'll get a return serve
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  Speaker 10: from the Senate.
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  Speaker 5: Well, and when we consider this supplemental funding, it was
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  Speaker 5: not planned that there would be offsets for this spending.
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  Speaker 3: And Mr.
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  Speaker 5: Chairman, I ask you this, knowing that in the bond market,
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  Speaker 5: as we speak, we are seeing yields climbing to the
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  Speaker 5: highest level in decades in terms of the longest duration,
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  Speaker 5: the 10-year yields at 480 right now. There seems to
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  Speaker 5: be a reckoning in the bond market about the outlook
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  Speaker 5: for inflation, yes, but also for the reality of the
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  Speaker 5: fiscal situation the United States finds itself in. For how
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  Speaker 5: much longer can you continually spend without offsets for it?
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  Speaker 10: Well, it's a great question, and there's a lot to
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  Speaker 10: say about it. First, I would say you're right. We
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  Speaker 10: are running out of fiscal space, and that space is
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  Speaker 10: needed because we're borrowing $ 2 trillion in a $ 7 trillion budget.
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  Speaker 1: And climbing, by the way.
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  Speaker 10: Also, of the $ 2 trillion we borrow, half of that
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  Speaker 10: is just paying interest to service the debt. At some point,
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  Speaker 10: we're going to have a strain and even a difficult
• 10:32
  Speaker 10: time borrowing, which would create austerity and potential tax increases,
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  Speaker 10: really bad scenario and economic harm, not to mention it would,
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  Speaker 10: you know, squeeze our ability to fund our national priorities
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  Speaker 10: like defense.
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  Speaker 1: Now, this has been going on a long time.
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  Speaker 10: Both Republican and Democrats, when they had control of Congress,
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  Speaker 10: have not sufficiently dealt with the structural deficits and imbalances in.
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  Speaker 1: Our large entitlements.
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  Speaker 10: That will only happen when Republicans and Democrats come together.
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  Speaker 10: We have lowered the cost, basically reduced spending on the
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  Speaker 10: discretionary side for three years straight. CBO says it's over
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  Speaker 10: $ 2 trillion in a 10-year budget window. We reduced mandatory spending, waste, fraud,
• 11:16
  Speaker 10: and abuse in entitlements, mandatory spending by $ 1.
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  Speaker 1: 5 trillion.
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  Speaker 10: That's twice as much as anyone has ever done in
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  Speaker 10: the history of our country.
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  Speaker 1: But that still, we're overwhelmed with the deluge of a
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  Speaker 1: demographic problem.
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  Speaker 10: 10,000 baby boomers every day getting onto Social Security and Medicare.
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  Speaker 10: The retiree-to-worker ratio is not It's not going in the
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  Speaker 10: right direction. So Republicans and Democrats are going to have
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  Speaker 10: to come together, which is why in my next budget hearing,
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  Speaker 10: we're talking about a fiscal commission. We're talking about a
• 11:47
  Speaker 10: Simpson-Bowles-style commission where we bring both parties together to work
• 11:52
  Speaker 10: out the solutions on all fronts so we have a
• 11:57
  Speaker 10: game plan in the long term to bend the curve
• 11:59
  Speaker 10: on mandatory spending as we grow the economy, because that's
• 12:03
  Speaker 10: a big part of restoring the fiscal health of the country.
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  Speaker 5: Have you been in conversation with the Treasury Secretary Scott
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  Speaker 5: Besson or the OMB Director Russ Vogt about this? Because
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  Speaker 5: Secretary Besson recently has suggested that there is a coming
• 12:16
  Speaker 5: plan around fiscal consolidation, in part to try to assuage
• 12:22
  Speaker 5: the bond markets. Are you involved in that? Do you
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  Speaker 5: know what he's talking about?
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  Speaker 1: Well, I think I won't get into any details.
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  Speaker 10: I'll let them roll that plan out. But I will
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  Speaker 10: say they have worked hand in glove with Congress in
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  Speaker 10: the first reconciliation bill that has set the table for
• 12:42
  Speaker 10: pro-growth activity. And we saw that prior to the conflict
• 12:46
  Speaker 10: with even 4.3 percent GDP growth, 10 percent increase in
• 12:51
  Speaker 10: business investment, you know, on almost every economic level. indicator
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  Speaker 10: and metric, it was moving in the right direction. But again,
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  Speaker 10: there are the real drivers that I think are more
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  Speaker 10: politically difficult for both parties, and that's why everybody has
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  Speaker 10: sort of stayed away, taken a pass, kicked the can
• 13:12
  Speaker 10: down the road.
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  Speaker 1: And we're just we're running out of room.
• 13:15
  Speaker 10: Social Security, for example, will will go insolvent and there'll
• 13:20
  Speaker 10: be a 27, 25 percent haircut for every beneficiary if
• 13:25
  Speaker 10: Congress doesn't get ahead of that and address it. And
• 13:29
  Speaker 10: we can't do it in isolation from either party. It
• 13:32
  Speaker 10: has to be bipartisan, like Ronald Reagan did with Tip
• 13:35
  Speaker 10: O'Neill the last time we addressed the insolvency and the
• 13:39
  Speaker 10: sustainability of this incredibly important program for 60-plus million seniors.
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  Speaker 10: So that, I think, this time calls for real leadership,
• 13:48
  Speaker 10: and it calls for tapping into the love of country
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  Speaker 10: and patriotism from both sides. Both sides of the aisle.
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  Speaker 10: This is a unique challenge, and it's one that has
• 13:57
  Speaker 10: to be met. And it will, by the way, on
• 14:00
  Speaker 10: the watch of the next president, you will have this
• 14:03
  Speaker 10: expiration of the Social Security trust fund. So we better
• 14:07
  Speaker 10: start sounding the alarm. I think the American people have
• 14:10
  Speaker 10: to engage in this. It's certainly going to be a
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  Speaker 10: front and center issue for the next president and the
• 14:16
  Speaker 10: next presidential election.
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  Speaker 5: Well, you clearly feel very strongly about this, Mr. Chairman,
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  Speaker 5: as well as the need to address fraud. You have
• 14:24
  Speaker 5: an op-ed about that today. But I want to go
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  Speaker 5: back to what you were saying about the strong economic
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  Speaker 5: figures that we were seeing prior to the conflict and
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  Speaker 5: how that is influenced by another issue that is obviously
• 14:37
  Speaker 5: at the very center of political conversation right now, data centers.
• 14:40
  Speaker 5: How much of— of the economy right now is reliant
• 14:43
  Speaker 5: on the billions and billions of dollars being invested into
• 14:46
  Speaker 5: the AI data center infrastructure build out.
• 14:50
  Speaker 8: And does that mean that this political.
• 14:52
  Speaker 5: Pushback we're seeing across the country comes with great economic risk?
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  Speaker 10: Man, that's a loaded question, Kerry, because there's a lot
• 15:00
  Speaker 10: of sides to that, but I'll do my best here.
• 15:04
  Speaker 1: I mean, we have to win the AI race.
• 15:05
  Speaker 10: There's not a sector of our economy, there's not a
• 15:08
  Speaker 10: vector in our national defense apparatus that will not be
• 15:12
  Speaker 10: not only significantly impacted, but transformed by AI.
• 15:17
  Speaker 1: AI and quantum. I think the.
• 15:19
  Speaker 10: Footprint will shrink over time, the need for energy, water.
• 15:23
  Speaker 10: We have to put guardrails in. I think Texas is
• 15:26
  Speaker 10: really the standard bearer here on how to protect ratepayers, consumers,
• 15:31
  Speaker 10: but also tap into the wealth of energy reserves and
• 15:35
  Speaker 10: resources that we have in Texas. Because this is the
• 15:40
  Speaker 10: future for our country. And we'll all benefit, not just defense,
• 15:45
  Speaker 10: but the quality of life for every American.
• 15:47
  Speaker 1: So, yes, we've got to be all in on that.
• 15:49
  Speaker 10: Lots of things to manage and balance.
• 15:51
  Speaker 1: For sure.
• 15:53
  Speaker 5: Indeed.
• 15:54
  Speaker 8: All right, Mr.
• 15:54
  Speaker 5: Chairman, thanks so much for joining us. The chair of
• 15:56
  Speaker 5: the House Budget Committee and Republican of Texas, Jody Arrington,
• 16:00
  Speaker 5: here with us on.
• 16:01
  Speaker 8: Balance of Power.
• 16:02
  Speaker 1: Stay with us on Balance of Power.
• 16:03
  Speaker 11: We'll have much more coming up after this.
• 16:08
  Speaker 4: You're listening to the Bloomberg Balance of Power podcast. Catch
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• 16:27
  Speaker 5: I'm Kaylee Lyons here in Washington. We're about to head
• 16:30
  Speaker 5: to North Carolina where the G20 Innovation Ministerial Meeting is happening.
• 16:34
  Speaker 5: It saw the Commerce Secretary Howard Lutnick sitting down for
• 16:37
  Speaker 5: fireside chats today with both the NVIDIA CEO Jensen Wong
• 16:41
  Speaker 5: and the CEO of OpenAI, Sam Altman. No surprise, both
• 16:44
  Speaker 5: of those conversations animated. By the push around artificial intelligence
• 16:48
  Speaker 5: and on data centers in particular, the Treasury Secretary Scott
• 16:51
  Speaker 5: Besson actually was just speaking about this also in North Carolina,
• 16:56
  Speaker 5: suggesting that AI firms need to explain to the public
• 16:59
  Speaker 5: how it benefits them, saying that he would give the
• 17:02
  Speaker 5: AI industry a D minus on their communication around it,
• 17:06
  Speaker 5: saying the industry has done a terrible job. These are
• 17:10
  Speaker 5: the words of the Treasury Secretary on explaining AI themselves.
• 17:14
  Speaker 5: This echoes what we heard from him at the conclusion
• 17:17
  Speaker 5: of the G20 finance ministers meeting in Asheville yesterday, where
• 17:20
  Speaker 5: he suggested that there is messaging issues around this. And
• 17:23
  Speaker 5: it's something we've talked a lot about here on balance
• 17:25
  Speaker 5: of power, the political difficulty that those running for reelection
• 17:29
  Speaker 5: or to take office for the first time have in
• 17:31
  Speaker 5: messaging around data centers and data centers and the AI
• 17:33
  Speaker 5: companies that are reliant on that infrastructure's counter messaging or
• 17:37
  Speaker 5: the attempts to do so to convince communities that these
• 17:41
  Speaker 5: are okay to have. in their communities and that they
• 17:43
  Speaker 5: will ultimately serve as a benefit, not a detriment to them.
• 17:46
  Speaker 5: It is something that has powered a lot of spending
• 17:49
  Speaker 5: in this midterm cycle. Sherrod Brown, who is running to
• 17:51
  Speaker 5: retake a Senate seat in Ohio, has spent $ 2. 4 million
• 17:56
  Speaker 5: on data center-oriented ads so far this cycle, according to
• 18:00
  Speaker 5: Ad Impact.
• 18:01
  Speaker 8: And he's not alone.
• 18:01
  Speaker 5: There has been a lot of money flowing through this,
• 18:05
  Speaker 5: to say very little of the money that is flowing
• 18:08
  Speaker 5: at the data centers themselves and the billions and billions
• 18:10
  Speaker 5: of dollars that in capital.
• 18:12
  Speaker 8: Expenditures that are being thrown toward this effort.
• 18:14
  Speaker 5: It is all on the mind, I'm sure, of the
• 18:16
  Speaker 5: Commerce Secretary, Howard Lutnick. And he's sitting down right now
• 18:19
  Speaker 5: with my colleague, co-host of Balance of Power, Joe Matthew
• 18:22
  Speaker 5: in Chapel Hill, North Carolina.
• 18:24
  Speaker 2: Joe.
• 18:27
  Speaker 11: All right, Kaylee, thank you so much. We are on
• 18:29
  Speaker 11: the ground here in Chapel Hill, and I'm surrounded by
• 18:32
  Speaker 11: a who's who of AI. It's the Mount Rushmore of
• 18:35
  Speaker 11: artificial intelligence as you walk around the Carolina in here.
• 18:39
  Speaker 11: Think Jensen, Altman, Karp, and we'll add another name, Lutnick.
• 18:45
  Speaker 11: The Commerce Secretary is hosting this CONFAB in North Carolina
• 18:49
  Speaker 11: and joins us right now live on Bloomberg TV and radio.
• 18:51
  Speaker 9: Mr.
• 18:51
  Speaker 11: Secretary, it's great to see you here at the G20.
• 18:53
  Speaker 3: It's great to be here with you.
• 18:55
  Speaker 11: So we were just talking about the sales pitch and
• 18:57
  Speaker 11: some of the comments that the Treasury Secretary made last night.
• 19:00
  Speaker 11: You're surrounded by arguably the smartest people in the world.
• 19:03
  Speaker 11: You've been having fireside chats with them, and I've been
• 19:05
  Speaker 11: fascinated to listen to these conversations. Are you surprised they
• 19:09
  Speaker 11: have not been clever enough to sell the American people
• 19:13
  Speaker 11: who might be skeptical about this technology and the means
• 19:16
  Speaker 11: with which we're developing it through data centers?
• 19:18
  Speaker 3: And I think today was sort of the first day
• 19:21
  Speaker 3: that they really sort of grabbed onto it and tried
• 19:25
  Speaker 3: to understand that they really, they were saying the word intelligence, right?
• 19:30
  Speaker 3: Like data centers create intelligence. But the right way to
• 19:33
  Speaker 3: say it is the way they said it today. at
• 19:35
  Speaker 3: the G20, which is it's education in a bottle. And
• 19:39
  Speaker 3: what they were saying is imagine if all the world,
• 19:42
  Speaker 3: the smartest people in the world, were willing to move
• 19:45
  Speaker 3: to your country, speak your language, speak your language. and
• 19:50
  Speaker 3: work on the projects you want them to work on.
• 19:53
  Speaker 3: Would you really keep those people out of your country? See,
• 19:57
  Speaker 3: that's what AI is. AI is Education. It's the ability
• 20:02
  Speaker 3: to ask the smartest people in the world to do
• 20:05
  Speaker 3: what you want them to do. And that is what
• 20:08
  Speaker 3: I set out to do today, to have the world
• 20:10
  Speaker 3: understand that they can grow and build using the American
• 20:16
  Speaker 3: tech stack and AI.
• 20:17
  Speaker 11: You've talked about our adversaries. potentially spoiling the narrative here
• 20:22
  Speaker 11: through disinformation when it comes to data center. Is that true?
• 20:25
  Speaker 11: Where's it coming from?
• 20:26
  Speaker 3: I do. I think data centers, I mean, think about it.
• 20:29
  Speaker 3: The number one product that uses water is an almond farm.
• 20:35
  Speaker 3: Next thing is cattle. I mean, data centers don't use water.
• 20:40
  Speaker 3: This is just misinformation.
• 20:42
  Speaker 11: Well, the early generation did, right? I know the newer
• 20:45
  Speaker 11: plants are closed circuit and use different cooling systems, but
• 20:47
  Speaker 11: people Remember these old data centers that made a lot
• 20:50
  Speaker 11: of noise, they used a lot of water and drained
• 20:51
  Speaker 11: a lot of power.
• 20:52
  Speaker 3: So basically, if your community embraces data centers, you're going
• 20:57
  Speaker 3: to have great economics. You'll have more power will be
• 21:01
  Speaker 3: built and the price of power in your community will
• 21:03
  Speaker 3: go down. And you'll have the economic power of their
• 21:07
  Speaker 3: paying taxes. And they're making your community better. So if
• 21:10
  Speaker 3: your community doesn't embrace a data center, some other community will.
• 21:16
  Speaker 3: And I think data centers are part of the mix.
• 21:20
  Speaker 3: They're not the mix, because you can always rent a
• 21:23
  Speaker 3: data center from another community that's using it. But the
• 21:25
  Speaker 3: fact is, education matters. is coming, democratized education is coming,
• 21:31
  Speaker 3: and the opportunity in entrepreneurship, which this will really work
• 21:36
  Speaker 3: for America, because we are the most entrepreneurial country. Do
• 21:39
  Speaker 3: you realize, compared to last year, entrepreneurship, new startups, up 40%,
• 21:45
  Speaker 3: usually it's like up 2%, up 40% year over year,
• 21:50
  Speaker 3: this is really the greatness of America coming.
• 21:55
  Speaker 11: Sam Altman put a very fine point on that when
• 21:56
  Speaker 11: he was speaking to the roomful of folks in a
• 21:59
  Speaker 11: fireside chat that you were just leading. When it comes
• 22:01
  Speaker 11: to disinformation, though, have you confronted your Chinese counterpart about this?
• 22:05
  Speaker 11: Have you met on data centers?
• 22:08
  Speaker 3: We met with our Chinese counterparts and we really talked
• 22:11
  Speaker 3: about how we could work together. Remember, the G20 is
• 22:16
  Speaker 3: all about a collaborative way to how to do things together, right?
• 22:20
  Speaker 3: Can we come up with a set of pillars, a
• 22:24
  Speaker 3: set of really instructional items on AI and technology? Can
• 22:30
  Speaker 3: we all work together, all G20? And I think we
• 22:33
  Speaker 3: are going to reach consensus amongst us all.
• 22:36
  Speaker 11: Isn't this zero-sum, though? Somebody's got to lose, Mr.
• 22:39
  Speaker 3: Secretary. No.
• 22:40
  Speaker 1: Am I wrong?
• 22:40
  Speaker 7: Yes.
• 22:41
  Speaker 11: Are we trying to beat China?
• 22:42
  Speaker 3: Yes, we are trying to have the... American AI tech
• 22:47
  Speaker 3: stack be out there in front. But if you think
• 22:50
  Speaker 3: about AI, if we talk about it as education, the
• 22:56
  Speaker 3: smartest frontier models in the world are American. They're the teacher.
• 23:01
  Speaker 3: And if the teacher is relentlessly studying to stay at
• 23:04
  Speaker 3: the frontier, the smartest, the greatest in the world, the
• 23:08
  Speaker 3: students are always going to be a little back. And
• 23:12
  Speaker 3: that's what you have right now with Chinese open source models.
• 23:15
  Speaker 3: They are studying from us, but it's open AI. It's anthropic.
• 23:20
  Speaker 3: And by the way, Tom Brown was here. He's a
• 23:23
  Speaker 3: founder of Anthropic. He was one of my fireside chats
• 23:26
  Speaker 3: earlier today. And the idea is those are the teachers.
• 23:29
  Speaker 3: Those are the frontier teachers. And the Chinese open source
• 23:32
  Speaker 3: models are a couple of generations back, because that's what
• 23:35
  Speaker 3: students are going to be when the teacher is the
• 23:38
  Speaker 3: smartest in the world and keeping at the frontier.
• 23:40
  Speaker 11: Yeah, and China is the student, to your point. Fascinating
• 23:43
  Speaker 11: to see you sitting down with Tom Brown. Has Anthropic righted...
• 23:49
  Speaker 11: its relationship with this administration?
• 23:51
  Speaker 3: They did. They did. We had a good kerfuffle. Yeah. Right?
• 23:55
  Speaker 3: It was out there. But, you know, they've gotten religion.
• 23:59
  Speaker 3: They understand.
• 24:00
  Speaker 11: What's the religion?
• 24:01
  Speaker 3: The religion is that there is no country better than America.
• 24:06
  Speaker 3: And that you have to be on side with America
• 24:08
  Speaker 3: because America's on your side.
• 24:09
  Speaker 11: Did they need to be taught that?
• 24:11
  Speaker 3: Well, I think... They were a little confused about the topic,
• 24:15
  Speaker 3: but we sorted that out. The president sorted that out
• 24:19
  Speaker 3: and I helped sort it out. And now I think
• 24:21
  Speaker 3: we're all in tune together. So OpenAI was here with Sam,
• 24:24
  Speaker 3: but so was Tom Brown with Anthropic. Jensen was here.
• 24:28
  Speaker 11: Yes, indeed.
• 24:28
  Speaker 3: And now Alex Karp. So we're talking, trying to get
• 24:31
  Speaker 3: the world's. G20 ministers to understand that the American tech
• 24:35
  Speaker 3: stack is going to democratize education. They should bring it in.
• 24:39
  Speaker 3: It'll speak in their language, right? And use it to
• 24:42
  Speaker 3: make the world a better place. This is the opportunity
• 24:45
  Speaker 3: to make the world a better place. And it's the
• 24:47
  Speaker 3: American tech stack that's going to drive it. Well, we've
• 24:50
  Speaker 3: got China on our mind here. There's a question about
• 24:53
  Speaker 3: tariffs when it comes to chips. I don't know if
• 24:55
  Speaker 3: we're talking about all semiconductors or Mr. Secretary, if it's memory,
• 25:00
  Speaker 3: if it's beyond that, but what are you preparing to unveil? Well, remember,
• 25:04
  Speaker 3: the Trump administration has always said, if you build here,
• 25:08
  Speaker 3: there's no terror. And you know we set out as
• 25:11
  Speaker 3: one of our key things that when the Trump administration
• 25:15
  Speaker 3: walked in the door and I walked in the door,
• 25:16
  Speaker 3: we had like 1% production of semiconductors. And our goal
• 25:21
  Speaker 3: is now 40%. And if Intel can be successful, which
• 25:24
  Speaker 3: it's clearly on the way to be, we can get
• 25:26
  Speaker 3: to 50% domestic.
• 25:28
  Speaker 11: By the end of the term.
• 25:29
  Speaker 3: By the end of the term, we want that shovels
• 25:31
  Speaker 3: in the ground building. And we'll all be complete, but
• 25:33
  Speaker 3: there'll be shovels in the ground building it to get
• 25:36
  Speaker 3: us to 40 or 50 percent production of semiconductors. And
• 25:39
  Speaker 3: the idea is very simple. And it's been very successful
• 25:43
  Speaker 3: with pharmaceuticals. Build it here and you won't pay a
• 25:47
  Speaker 3: tariff while you're building. But if you're not willing to
• 25:49
  Speaker 3: put shovels in the ground here, then you should pay
• 25:52
  Speaker 3: to have access to the greatest market in the world.
• 25:55
  Speaker 3: And I think that's our objective. We're going to shoot
• 25:57
  Speaker 3: for 50% market share, right? 50% of our own consumption
• 26:02
  Speaker 3: should be built here. And that's our objective. And we
• 26:05
  Speaker 3: have commitments already, already of $ 1. 2 trillion building. So TSMC. Yeah.
• 26:12
  Speaker 3: $ 265 billion. Micron, $ 250 billion. That's two companies. Over $ 500 billion.
• 26:20
  Speaker 3: So you can see they're coming to America. They're building
• 26:22
  Speaker 3: to America. The policy is working.
• 26:25
  Speaker 11: So it sounds like if you're SK or Samsung, you're
• 26:27
  Speaker 11: on notice.
• 26:28
  Speaker 3: You are on notice that they are going to build here.
• 26:31
  Speaker 3: They need to build here. It's vital that they build here.
• 26:34
  Speaker 11: Can we build Foundry fast enough? to get to that
• 26:37
  Speaker 11: level in the next two years, that's breaking the sound barrier.
• 26:40
  Speaker 3: I don't know that we can finish in time, but
• 26:42
  Speaker 3: surely we can be way shovels in the ground, big
• 26:46
  Speaker 3: construction projects going, TSMC, huge projects going, huge, $ 265 billion.
• 26:53
  Speaker 3: So shovels in the ground, cement being poured, huge numbers
• 26:57
  Speaker 3: of construction projects, huge long-time orders. Same with nuclear. We're
• 27:01
  Speaker 3: going to do the same thing with nuclear. We want
• 27:03
  Speaker 3: to build in America. We want the Trump administration, while
• 27:07
  Speaker 3: he's in office, to have launched the clear factory build
• 27:12
  Speaker 3: that makes advanced manufacturing in America, semiconductors in America, pharmaceuticals
• 27:17
  Speaker 3: in America, nuclear in America. Let's get this going so
• 27:20
  Speaker 3: that America wins.
• 27:22
  Speaker 11: Can't mention tariffs without asking you about Canada. I talked
• 27:25
  Speaker 11: to Doug Ford last week. He said the United States
• 27:27
  Speaker 11: can't move on the gold posts. You see it very differently.
• 27:32
  Speaker 11: Is there a chance to figure this out or is
• 27:33
  Speaker 11: this dead?
• 27:34
  Speaker 3: No, what happened was we negotiated, Canadians approached us and said,
• 27:39
  Speaker 3: come on, let's try to get an interim deal done.
• 27:42
  Speaker 3: So we worked, you know, before we start doing the
• 27:45
  Speaker 3: big USMCA sort of big, big thing. And we sat
• 27:48
  Speaker 3: with them six weeks of negotiations and we hammered out
• 27:53
  Speaker 3: a deal. Mark Carney starts talking to the president, calls
• 27:56
  Speaker 3: him multiple times. I'm in the room with the president.
• 27:59
  Speaker 3: And they reach agreement. And the president, like, truths out.
• 28:02
  Speaker 3: We have a deal. He had a deal because he
• 28:04
  Speaker 3: talked to Mark Carney.
• 28:06
  Speaker 10: Right?
• 28:06
  Speaker 3: And then we were just putting the finer points on it.
• 28:09
  Speaker 3: And Friday at 4 o'clock, for example, my Canadian counterparts,
• 28:15
  Speaker 3: they called me and said, we'd like heavy trucks. And
• 28:18
  Speaker 3: I said, no, no, listen, listen. It's Friday at four o'clock.
• 28:21
  Speaker 3: We're signing it at like six or seven. There's no
• 28:24
  Speaker 3: new topic that you're coming up with now. And I
• 28:27
  Speaker 3: said to him, are you trying to blow this up?
• 28:31
  Speaker 3: And the answer was, and I quote, I'm not allowed
• 28:35
  Speaker 3: to say that. They decided for political reasons, domestically, domestic Canada,
• 28:41
  Speaker 3: they'd rather fight with Donald Trump, even if it's bad
• 28:44
  Speaker 3: for the economy of Canada, for their political ambitions. To
• 28:49
  Speaker 3: get certain elections. Now remember, Quebec has the sovereign party
• 28:54
  Speaker 3: was in the lead. So that's why they came up
• 28:56
  Speaker 3: with this French nonsense. You think the American side talked
• 28:59
  Speaker 3: about how people speak in Quebec? We do have a
• 29:03
  Speaker 3: deal with France. We have a deal with Italy. We
• 29:04
  Speaker 3: have a deal with Germany. We don't care about their language.
• 29:07
  Speaker 3: None of that was true. Alberta's got an independence vote.
• 29:11
  Speaker 3: This is the Canadian Liberal Party using their economy to
• 29:16
  Speaker 3: get themselves elected, even if they're selling their own citizens
• 29:19
  Speaker 3: down the river. It's sad and disappointing, but that's just.
• 29:24
  Speaker 9: The way it is.
• 29:24
  Speaker 11: That sounds like we're not getting a deal any time soon.
• 29:26
  Speaker 3: It doesn't sound like it does.
• 29:27
  Speaker 11: Wow. All right.
• 29:28
  Speaker 3: Mr.
• 29:28
  Speaker 11: Secretary, you've been generous with your time, and I have
• 29:30
  Speaker 11: to ask you lastly about 25 years since 9-11. What
• 29:34
  Speaker 11: must be going through your mind? And I'm sure that
• 29:37
  Speaker 11: you'll be taking part in tributes. You'll have your own
• 29:39
  Speaker 11: personal experiences. at the end of this week. But can
• 29:42
  Speaker 11: you tell our audience, can you tell the markets that
• 29:45
  Speaker 11: America is safer now than it was then?
• 29:48
  Speaker 3: I make America is by far safer now. We think
• 29:51
  Speaker 3: about things. We study things. You know, being a part
• 29:55
  Speaker 3: of the government, you know, with a very high security clearance,
• 29:58
  Speaker 3: I get to read all the time. And our adversaries
• 30:01
  Speaker 3: wish us ill. Make no mistake about it, they wish
• 30:05
  Speaker 3: us ill. But we are smart, we are thoughtful, and
• 30:07
  Speaker 3: we are capable. And what actually hurts me the most
• 30:11
  Speaker 3: is when I see people running for office in America
• 30:14
  Speaker 3: who hate America. you know, like say something like America
• 30:18
  Speaker 3: deserved it. I mean, how horrible to suggest that my
• 30:23
  Speaker 3: brother and all my friends who were living the American
• 30:25
  Speaker 3: dream and just came to work that day, for someone
• 30:28
  Speaker 3: to say that we the great America living the American
• 30:32
  Speaker 3: dream deserve anything. We deserve happiness, prosperity, and the pursuit
• 30:38
  Speaker 3: of the American dream. That's who we are. That's who
• 30:41
  Speaker 3: we've always been. And people who are jealous of us
• 30:44
  Speaker 3: don't deserve airtime. And I wish they didn't get it.
• 30:47
  Speaker 11: Well, what would be your message to young people who
• 30:49
  Speaker 11: were not alive then? This is something that they've read about,
• 30:51
  Speaker 11: that they've heard about. And there's some very troubling conversations
• 30:56
  Speaker 11: that we hear in high schools and on college campuses
• 30:59
  Speaker 11: about this. What do you tell people who were not
• 31:02
  Speaker 11: alive on 9-11, who do not realize what a big
• 31:06
  Speaker 11: deal that was for the history of this country?
• 31:09
  Speaker 3: The American dream lives inside of each of us. It's
• 31:13
  Speaker 3: part of our DNA and our heritage. It's who we
• 31:16
  Speaker 3: are and who we become. And the rest of the
• 31:19
  Speaker 3: world just does not have that entrepreneurship, the energy, the
• 31:24
  Speaker 3: vision that I can be born and I could be
• 31:27
  Speaker 3: the president of the United States of America. Anybody can.
• 31:29
  Speaker 3: And they are. And so what I would say to
• 31:32
  Speaker 3: them is you have inside of you the American dream.
• 31:35
  Speaker 3: And if other people are jealous and other people are
• 31:38
  Speaker 3: nasty and other people hate you and jihadists want to
• 31:41
  Speaker 3: kill you, the fact is the beauty of America is
• 31:46
  Speaker 3: the American dream. And you should always protect it, defend it,
• 31:51
  Speaker 3: and love it because it's inside of each of us
• 31:54
  Speaker 3: and it makes us what we are, which is great
• 31:57
  Speaker 3: and special.
• 31:58
  Speaker 11: Thanks for having us today in Chapel Hill. It's the
• 32:01
  Speaker 11: Secretary of Commerce, of course, with us live on Bloomberg
• 32:04
  Speaker 11: TV and radio. Howard Lutnick, thank you. Kayleigh, we'll send
• 32:06
  Speaker 11: it back to you. All right.
• 32:09
  Speaker 5: Joe Matthew, great conversation with the Commerce Secretary. Thank you
• 32:12
  Speaker 5: so much. Coming to us live from North Carolina, reflecting
• 32:15
  Speaker 5: both on the past and talking about the future.
• 32:19
  Speaker 1: Stay with us on Balance of Power.
• 32:20
  Speaker 11: We'll have much more coming up after this.
• 32:26
  Speaker 4: You're listening to the Bloomberg Balance of Power podcast. Catch
• 32:30
  Speaker 4: us live weekdays at noon and 5 p.m. Eastern on
• 32:33
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• 32:36
  Speaker 4: Listen on demand wherever you get your podcasts or watch
• 32:40
  Speaker 4: us live on YouTube.
• 32:42
  Speaker 5: Charlie keeps track of oil prices for us. President Trump,
• 32:45
  Speaker 5: of course, has suggested prices could come down at some
• 32:49
  Speaker 5: point due to the new deal that the U.S. inked
• 32:51
  Speaker 5: with Venezuela to have a stake in $ 65 billion worth.
• 32:56
  Speaker 8: Oil reserves.
• 32:56
  Speaker 5: That's if we can get to it, have the infrastructure
• 33:00
  Speaker 5: ready to deal with it, be able to refine it
• 33:03
  Speaker 5: in the U.S., and then maybe swap some things out
• 33:05
  Speaker 5: to fill the strategic petroleum reserve with it, as the
• 33:07
  Speaker 5: president has suggested is his aim here. We know, Mike,
• 33:11
  Speaker 5: that this is an effort that will require a lot
• 33:13
  Speaker 5: of time and investment. And we are getting some news
• 33:16
  Speaker 5: on investment from Chevron today, planning to invest $ 7 billion
• 33:20
  Speaker 5: over the next five years through its joint venture partnerships
• 33:24
  Speaker 5: in Venezuela. But of course, $ 7 billion only goes some
• 33:27
  Speaker 5: of the way to what, the $ 100 billion price tag
• 33:29
  Speaker 5: expected for this effort?
• 33:30
  Speaker 7: Well, and also, when you look at the oil infrastructure
• 33:33
  Speaker 7: that is in place now in Venezuela, it will require
• 33:38
  Speaker 7: a complete overhaul, and that will take years. And in
• 33:40
  Speaker 7: a way, Kayleigh, it is like some of the big
• 33:42
  Speaker 7: promises we've heard from this administration and even the past
• 33:46
  Speaker 7: on other infrastructure, such as with AI and data centers.
• 33:50
  Speaker 7: It is a quick start, but a long time to delivery.
• 33:54
  Speaker 7: And so for the president to get the return he
• 33:56
  Speaker 7: wants in terms of lower oil prices, there may be
• 33:59
  Speaker 7: quite a bit of a wait.
• 34:00
  Speaker 1: Yes, indeed.
• 34:01
  Speaker 5: And this is something that Tyler Kendall discussed today with
• 34:04
  Speaker 5: the energy secretary, Chris Wright. She actually traveled to Venezuela
• 34:08
  Speaker 5: alongside him, sat down with him in Caracas to talk
• 34:11
  Speaker 5: about this deal and what all It entails, and here's
• 34:14
  Speaker 5: a piece of their conversation.
• 34:16
  Speaker 3: Those fields, Tyler, are already in active development today.
• 34:19
  Speaker 2: NABEP produces around 200,000 barrels of oil a day. They're
• 34:23
  Speaker 2: the second largest private producer in Venezuela. So there's scale
• 34:27
  Speaker 2: already in several.
• 34:28
  Speaker 1: Of those fields.
• 34:29
  Speaker 2: A number of them haven't seen any meaningful development yet.
• 34:33
  Speaker 2: Some of them were at Russian partnerships or Chinese partnerships or, frankly,
• 34:37
  Speaker 2: criminal partnerships. So this is to bring these fields into
• 34:41
  Speaker 2: real commercial development. But the speed of things, I mean,
• 34:45
  Speaker 2: so far we have gone at Trump's speed in Venezuela.
• 34:49
  Speaker 2: Country production is up 25 percent. Exports are up 50 percent.
• 34:53
  Speaker 2: We think even from production today already elevated, that could
• 34:56
  Speaker 2: double by the end of this decade.
• 34:58
  Speaker 9: 65 billion barrels is a massive number. It's my understanding
• 35:02
  Speaker 9: that North American Blue Energy partners can't develop this all
• 35:05
  Speaker 9: on their own. Are you actively working or in talks
• 35:08
  Speaker 9: to bring in other operators for these 17 fields?
• 35:11
  Speaker 2: Oh, I'm certain that will happen. But of course, the
• 35:14
  Speaker 2: deal was just signed on Friday. So this is brand new.
• 35:17
  Speaker 2: But yes, that reserve base is so large, clearly additional
• 35:21
  Speaker 2: partnerships will be formed to develop those resources.
• 35:24
  Speaker 9: When it comes to these specific fields, China is still
• 35:28
  Speaker 9: owned billions of dollars from the Venezuelan government.
• 35:32
  Speaker 8: Are there any assurances.
• 35:34
  Speaker 9: That the barrels from these fields aren't going to be
• 35:37
  Speaker 9: used to pay back Chinese debt?
• 35:40
  Speaker 2: Now, look, Venezuela's got a lot of historical debt, and
• 35:42
  Speaker 2: one of the major efforts going on right now is
• 35:45
  Speaker 2: to do a debt restructuring, to get things in order.
• 35:48
  Speaker 2: Who are the real creditors?
• 35:49
  Speaker 1: What is an arrangement going to go to move forward?
• 35:52
  Speaker 2: But no, these fields will be developed for the benefit
• 35:55
  Speaker 2: of the Venezuelan people, for the benefit of Americans, and.
• 35:58
  Speaker 1: For the benefit of global energy markets.
• 36:00
  Speaker 2: President Trump's agendas drive down energy prices of all kinds
• 36:05
  Speaker 2: across our economy and across the world.
• 36:07
  Speaker 9: But just for clarity, China won't have any claims of
• 36:10
  Speaker 9: production or revenue related to this deal that the U.S.
• 36:13
  Speaker 8: Government struck?
• 36:13
  Speaker 1: No, no, they will not.
• 36:15
  Speaker 9: Broadly speaking, people familiar with the matter have told Bloomberg
• 36:19
  Speaker 9: News that Venezuela is.
• 36:20
  Speaker 1: Considering actually leaving OPEC. Have you had any of.
• 36:23
  Speaker 9: Those discussions with the Venezuelan government, including when it comes
• 36:26
  Speaker 9: to talks around this deal?
• 36:28
  Speaker 2: I have not discussed OPEC with the leaders of Venezuela.
• 36:32
  Speaker 3: Do you think that they should leave?
• 36:34
  Speaker 2: That's a dialogue for the sovereign state of Venezuela.
• 36:37
  Speaker 3: That's a decision for them to make.
• 36:39
  Speaker 9: But I think part of this question is that wouldn't
• 36:41
  Speaker 9: it be difficult for the U.S. government to take all
• 36:46
  Speaker 9: of this oil as part of the deal if Venezuela
• 36:48
  Speaker 9: is subject to OPEC quotas? I know at the moment
• 36:51
  Speaker 9: they're not, but if we're talking about ramping up so
• 36:53
  Speaker 9: much production in this country, wouldn't they be down the line?
• 36:57
  Speaker 1: Again, that's a separate issue.
• 36:58
  Speaker 2: But also, Tyler, to be clear, we're not taking any
• 37:02
  Speaker 2: oil here. This is a deal between a commercial enterprise
• 37:05
  Speaker 2: that's operating in Venezuela today. We're just coming in as
• 37:08
  Speaker 2: a partner, a passive partner in that role, but with
• 37:11
  Speaker 2: very active controls to make sure highest business practices are
• 37:15
  Speaker 2: followed and to work with them to bring more capital
• 37:18
  Speaker 2: so we can accelerate the development of these reserves. Venezuela
• 37:21
  Speaker 2: today has about 17% of global oil reserves and just
• 37:26
  Speaker 2: over 1% of global production. That's the problem of the
• 37:30
  Speaker 2: last 25 years, but it's the opportunity for tomorrow.
• 37:36
  Speaker 5: Part of Tyler Kendall's conversation with Energy Secretary Chris Wright
• 37:39
  Speaker 5: in Venezuela earlier today. And as we consider the impact
• 37:45
  Speaker 5: of this deal, both for the United States and for
• 37:47
  Speaker 5: Venezuela itself, we turn now to Chris Kennedy of Bloomberg Economics,
• 37:51
  Speaker 5: where he's our lead for economic statecraft.
• 37:53
  Speaker 8: He's here with us in our Washington, D.C.
• 37:55
  Speaker 9: Studio.
• 37:56
  Speaker 5: Chris, you co-authored a piece of research out about this.
• 38:00
  Speaker 5: You suggest that this deal actually risks worsening the political
• 38:05
  Speaker 5: and economic outlook in Venezuela for years to come, and
• 38:08
  Speaker 5: that also it risks squandering a rare strategic opportunity for
• 38:12
  Speaker 5: the United States.
• 38:13
  Speaker 7: Why?
• 38:14
  Speaker 12: So the biggest issue that we see with this deal
• 38:17
  Speaker 12: at Bloomberg Economics is that it introduces another level of
• 38:20
  Speaker 12: political risk to the investment climate in Venezuela, specifically by
• 38:26
  Speaker 12: essentially endorsing this deal, 100-year concessions that's inked with an
• 38:32
  Speaker 12: interim government that's not democratically elected, you're creating a scenario
• 38:36
  Speaker 12: where companies are not going to be confident that the
• 38:39
  Speaker 12: next U.S. administration will necessarily back this deal, but more importantly,
• 38:45
  Speaker 12: that when there is an eventual democratic transition in Venezuela,
• 38:48
  Speaker 12: that new government may not conform or comport to the
• 38:54
  Speaker 12: details of this particular deal.
• 38:57
  Speaker 7: How does the Chevron announcement today of a $ 7 billion
• 39:00
  Speaker 7: plan to invest in the country square with that analysis?
• 39:04
  Speaker 7: And I ask only because Chevron, in a way, is
• 39:07
  Speaker 7: being rewarded for having stuck it out for 20-plus years.
• 39:11
  Speaker 7: through a lot of U.S. sanctions and restrictions?
• 39:14
  Speaker 13: Yeah, so that's a great question.
• 39:16
  Speaker 12: I think if we look at the details of that reporting,
• 39:18
  Speaker 12: it's clear that Chevron is making a distinction between its
• 39:23
  Speaker 12: planned investments and what the U.S. is doing with this
• 39:26
  Speaker 12: 100-year concession.
• 39:27
  Speaker 3: So Chevron has.
• 39:30
  Speaker 12: been considering and, you know, from the very beginning since January, well,
• 39:33
  Speaker 12: not the beginning, but since the January operation, Chevron has
• 39:36
  Speaker 12: been a little bit more open to these sorts of
• 39:38
  Speaker 12: investments compared to other U.S.
• 39:40
  Speaker 13: Majors because of their history. in the country.
• 39:42
  Speaker 12: But I think, again, when we see the reporting is
• 39:45
  Speaker 12: that Chevron is planning to do this outside of the
• 39:47
  Speaker 12: terms of this deal. And some other reporting suggests that
• 39:51
  Speaker 12: Chevron and other companies that have been considering investing in
• 39:54
  Speaker 12: Venezuela aren't particularly keen on this announcement for two reasons.
• 39:58
  Speaker 12: Number one, it shows that the U.S. government might actually
• 40:01
  Speaker 12: be competing with private entities. But then secondly, of course,
• 40:05
  Speaker 12: it raises these larger concerns about this sort of neocolonial
• 40:10
  Speaker 12: mercantilistic model that the U.S.
• 40:12
  Speaker 13: Might be introducing.
• 40:14
  Speaker 5: Well, and to the point you were just making about
• 40:16
  Speaker 5: the greater political instability that this could inspire, if you're
• 40:19
  Speaker 5: a company trying to assess your risk and making an
• 40:21
  Speaker 5: investment into a country like this, that has to factor in, no?
• 40:24
  Speaker 13: Certainly, and we've seen this for decades.
• 40:28
  Speaker 12: We used to have a system of investor-state dispute settlement mechanisms.
• 40:33
  Speaker 1: The U.S.
• 40:34
  Speaker 12: And other developed economies really abandoned that over time, and
• 40:37
  Speaker 12: it really created a situation where Western companies weren't able
• 40:40
  Speaker 12: to invest in risky environments like Venezuela, ceding ground to
• 40:43
  Speaker 12: China and Russia. This creates another level of risk, though.
• 40:47
  Speaker 12: What happens when there is a democratic transition in Venezuela?
• 40:50
  Speaker 12: And it really is a question of when, not if. Clearly,
• 40:54
  Speaker 12: the US is comfortable with Delcy Rodriguez leading the country now.
• 41:00
  Speaker 12: The current administration of Washington is only going to be
• 41:02
  Speaker 12: here for another couple of years.
• 41:03
  Speaker 13: What happens after that?
• 41:05
  Speaker 7: So what assurances does the Trump administration need to provide
• 41:09
  Speaker 7: oil majors, not only from the U.S., but from elsewhere,
• 41:12
  Speaker 7: thinking of Repsol and other producers from outside Venezuela? What
• 41:19
  Speaker 7: sorts of assurances do they need? to confidently proceed with
• 41:23
  Speaker 7: partnering in this U.S.-led investment?
• 41:26
  Speaker 13: We think that the most important thing the U.S.
• 41:28
  Speaker 12: Can do is follow through on its plans to advance
• 41:31
  Speaker 12: a democratic transition in Venezuela. Only when there is a
• 41:34
  Speaker 12: democratically elected government will we be in a situation where
• 41:37
  Speaker 12: investors can have long-term confidence in the investment climate in Venezuela.
• 41:42
  Speaker 5: Well, as we talk about all of this, these are
• 41:44
  Speaker 5: longer time horizons than perhaps would be most politically advantageous
• 41:48
  Speaker 5: for President Trump. If his end goal here is to
• 41:50
  Speaker 5: eventually bring oil prices lower and refill the SPR, that
• 41:53
  Speaker 5: is not something that is going to happen overnight. At
• 41:55
  Speaker 5: the same time, the higher oil prices are being driven
• 41:59
  Speaker 5: even higher in the last several days because of a
• 42:01
  Speaker 5: reigniting and tensions between the U.S.
• 42:05
  Speaker 8: And Iran.
• 42:06
  Speaker 5: Can you just talk about the the trajectory we can
• 42:11
  Speaker 5: likely expect in the oil space in particular, when you
• 42:14
  Speaker 5: consider all of these things simultaneously, what does it net
• 42:17
  Speaker 5: out to?
• 42:19
  Speaker 12: So I think just off the top, this announcement about
• 42:22
  Speaker 12: Venezuela is not going to have any material impact on
• 42:25
  Speaker 12: global oil markets for the time being. Chevron made its
• 42:29
  Speaker 12: announcement about $ 7 billion. They're going to double production that
• 42:32
  Speaker 12: increases to 600,000 barrels a day that's from 300. Not
• 42:36
  Speaker 12: a huge amount. It's going to take them five years
• 42:37
  Speaker 12: to do that. We're a ways off from this having
• 42:39
  Speaker 12: any impact on global oil markets. Now, that said, like
• 42:42
  Speaker 12: you said, I mean, there are major challenges right now.
• 42:45
  Speaker 12: We have renewed hostilities in Iran. I think the bigger
• 42:47
  Speaker 12: challenge we face right now is on the product side
• 42:50
  Speaker 12: in the near term. And this is obviously most relevant
• 42:52
  Speaker 12: for the US political climate.
• 42:54
  Speaker 13: We have midterm elections coming up.
• 42:55
  Speaker 12: Diesel prices just hit their highest level since the war began.
• 42:59
  Speaker 12: And we're on a trajectory for diesel prices to hit
• 43:01
  Speaker 12: their highest level ever within the next couple of weeks
• 43:03
  Speaker 12: if something doesn't change.
• 43:05
  Speaker 7: Is there enough refining capacity to be able to handle
• 43:08
  Speaker 7: the kind of crude that would come from Venezuela? My
• 43:11
  Speaker 7: understanding is that it's much heavier, requires different sorts of
• 43:14
  Speaker 7: treatment than from other sources. can it be absorbed quickly
• 43:19
  Speaker 7: and will that kind of infrastructure also need to be
• 43:22
  Speaker 7: built to be able to take full advantage of what
• 43:25
  Speaker 7: the President has outlined?
• 43:28
  Speaker 12: You could have some displacement of Canadian oil, and we've
• 43:30
  Speaker 12: seen that happen as Venezuela has ramped up some crude
• 43:35
  Speaker 12: oil output over the past few months. But yes, we
• 43:38
  Speaker 12: would have to have more refining capacity come online. There's
• 43:41
  Speaker 12: a global refining shortage right now, and part of that
• 43:44
  Speaker 12: is driven by the Ukraine-Russia conflict, with Ukraine knocking out
• 43:48
  Speaker 12: a lot of Russia's refining capacity.
• 43:50
  Speaker 5: Hence the diesel issue that we were speaking to earlier.
• 43:53
  Speaker 5: If we see all-time highs on diesel ahead of the midterms,
• 43:56
  Speaker 5: It's going to be perhaps even more difficult if you're
• 43:59
  Speaker 5: an incumbent running for reelection of the majority party. Chris
• 44:02
  Speaker 5: Kennedy from Bloomberg Economics.
• 44:04
  Speaker 8: Great analysis. Thank you so much. You can, of course,
• 44:06
  Speaker 8: find his work on the Bloomberg Terminal.
• 44:10
  Speaker 11: Thanks for listening to the Balance of Power podcast. Make
• 44:13
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• 44:16
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• 44:18
  Speaker 1: And you can find us live every weekday from Washington, D.C.
• 44:21
  Speaker 11: At noontime Eastern at Bloomberg.com.