TRANSCRIPT:
Paul Krugman in Conversation with Phillips O’Brien
(recorded 3/12/26)
Krugman: I’m not sure we have the resources for Cuba, but yeah. So okay. We’re recording this a bit less than two weeks into this new war with Iran. There are a couple of specific areas I wanna talk about, but first, do you have anything to say that might be a useful starting point?
O’Brien: I don’t think they know what they’re doing. And I don’t think that they had a plan. He basically did what megalomaniac leaders do. They underestimate their enemy and they think they will do this quickly. It’s what Putin did to Ukraine in 2022. “We will just march in, we’ll do what we want. We have this great military.” He was boasting about American military power, and I think he just thought this would be relatively straightforward. He liked to refer to the Venezuela model and I think he thought, ‘okay, what I’m gonna do is blow up the leadership, kill the leadership, and then I’ll get a new leadership that will be much more compliant and do what I want. I don’t wanna actually bring any kind of freedom or democracy to the Iranian people.’ Because, by the way, he’s talking about a leader for the next five to 10 years. So he is actually talking about putting another authoritarian in place. And he thought it would happen, a little bit harder than Venezuela it seems, but not much harder. And he completely underestimated what he was taking on. And what he’s done is caught himself without a strategic plan. They never thought through the second and third order effects, they were nowhere down wondering what would happen if the Strait of Hormuz was cut and they couldn’t get anything out of the Gulf. And I think they’re just making it up now as they go along.
Oil prices are already up. They dipped a little bit when Trump acted like the war was almost over. They’re back up. We’ve seen real problems with nitrogen supplies and real trouble with helium supplies. And the irony is, the only country shipping out of the Gulf is Iran. Iranian shipments of oil are up, so Iran is sending everything it wants out of the Gulf and they’re sending oil directly to the Chinese. I think the Chinese are laughing at this, that they’re seeing the US unable to have its allies get their oil out.
Krugman: Yeah. There were Chinese chartered ships going through the Strait of Hormuz broadcasting in English. “We are a Chinese ship carrying Iranian oil,” and they were transiting the strait. But just to enlarge this a bit, there’s a lot of talk about how the Strait of Hormuz is 33 kilometers wide at its narrowest point, but in some ways I think that, as I understand, it’s irrelevant. Essentially, the entire Persian Gulf or Arabian Gulf is easy drone range for the Iranians, right?
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