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00:00So this is the state of play we basically have as of Monday . Iran will have to stop buying dollars gold other precious metals plus automotive and aircraft components RBC calling this an inflection point is it. It's an inflection point on a political level. It's an inflection point as how the Trump administration is going to implement sanctions and conduct around policy. The actual sanctions themselves though are pretty marginal. These are the things that we did to address specific evasion schemes that the Iranians had running not things that we thought were going to shake the Iranian economy and then moving forward to November it's not just the midterms it's also the oil sanctions are going to wind up coming on November 4th. And that's much more dramatic for the industry it means it's a reinsurance insurance underwriting issue that oil transactions related to tanker companies in the energy sector. That's all shut down . Walk me through where we are in the state of play of oil sanctions. Well basically right now we have a Trump administration demand that all those who are purchasing Iranian oil need to go to zero or as close to it as possible which I think given where the market is is not terribly likely. I mean I don't think you can replace two point two million barrels per day without massive price increases. So instead what you're going to have is a lot of companies and a lot of countries with U.S. interests looking to get out. And we've already started to see that primarily in Europe. We've heard some of that same talk out of Japan and out of Korea and then it's a big question of whether or not this can be universal and whether or not we're going to see the same thing out of China India and Turkey . You're making the distinction though because under the Obama administration all you had to do is reduce your export your imports by 20 percent every six months and you were good to go for a waiver. That's not the dynamic with President Trump. How is he going to determine a waiver. Well I think thus far the State Department's been very squarely on this. They have said everything from we must see zero to we'd be willing to consider exceptions. I think candidly oil market demand dynamics are going to be the thing that influences their decision. It's going to make them have to look at exceptions and future commitments for reductions which is a a massive loophole that allows you to maybe do a little bit of reduction today and then promise to do much more in the future. The other lever that the U.S. has to pull in a way that the Obama administration wasn't going to was economic considerations. Do you feel like the sanction waivers will be separate from bilateral economic considerations. Absolutely not. And I think that's what now they say it's going to be even though they say yes. I mean I think if there's one thing we've learned about this administration is they are prepared to take from column A and Column B in column C to make some kind of deal. And I think if you're China right now if you're India right now you have to be looking at tariffs and how they could potentially be leveraged with respect to sanctions whether or not there's a trade that's there. And I think the same thing might apply with regard to even Europe and Japan. So I think it actually complicates the analysis in the Obama administration we knew 20 percent every single 180 days. Very very consistent very clear but this administration we really could see anything the next couple of weeks or months which brings us to the question of the oil market is how much will Iranian exports be reduced. We have a chart that kind of shows where we are over 2 million barrels of oil a day. There is a rhetoric in the market that we're gonna get enough oil from Saudi Arabia and Russia to offset the other story is that you're going to have China and India wind up buying more and offsetting any loss from Europe. What's your story. I think that's where I error to is that you're going to see Europe Japan and Korea make reductions. And I think in aggregate it's going to look somewhere between 600000 and maybe a million barrels per day of lost Iranian exports. But the big story is going to be China and India and I think the Chinese if anything are going to stiffen their spines. They're highly disinclined to cooperate with the president right now. So really the money might be in India and whether out the Indians are going to decide to make a play for better cooperation with Trump to deal with Pakistan to deal with domestic economic issues or whether or not they're going to keep that cheap oil flowing from Iran especially as the prime minister looks ahead to elections in India in 2008. And the other part of this is of course how it's going to spill over into any issues in the region the Strait of Hormuz being closed that's the threat. But it feels like most people putting that to the side. Well we have seen we have a good chart from RBC. It shows the amount of crude the attacks on Saudi Arabia in the second quarter they really jumped. Is this going to be a proxy battle for Iran . And what's the danger for the oil market there. Well I think it certainly could be. The Iranians have already said they don't pay attention or at least all of your attention to the Straits of Hormuz. We have many ways of interfering with global oil supplies. So I think the Iranians are trying to lean in and indicate that we shouldn't feel confident that just imposing sanctions will change Iran's oil picture. It might change everyone else's oil picture as well. But I would say this I don't think we should assume everything that these do is directed from Tehran. There is some agency that the WHO THESE HAVE that the Iranians may aid but not necessarily direct. So going forward for the next three months as we work towards that November 4th deadline what are the critical things that you're going to be watching for to tell us our path here. Well I think the first thing is going to be where Iran will trade is come September. I think we're not going to really know who's and who's not until we start to see the September data which won't really be until early October. But that'll give us a good sense of who's playing ball and who is not. Second it's what the Europeans are going to do. They are right now trying to see if they can keep sanctions relief on tap and whether or not they can keep money going to Iran to keep the Iranians in the deal . Whether or not they succeed or not is a big issue. And I think the third thing is that you know admittedly at this point everyone should acknowledge the Trump administration is going to implement these sanctions. I think in the market there's been a lot of sense of well maybe he'll back down. Maybe he'll change . He said he'll negotiate with Rouhani maybe that'll work. I think we need to assume as our base case these sanctions are coming .

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Three Things to Know About U.S. Reimposing Iran Sanctions

American sanctions lifted under the 2015 nuclear deal -- which the U.S. exited in May -- are being restored in two stages, with the first due to come into effect Aug. 6. The vital oil industry will face restrictions from November. Richard Nephew, a senior research scholar at the Center on Global Energy Policy and former lead sanctions expert negotiating with Iran at the U.S. Department of State, talks with Bloomberg's Alix Steel about the sanctions. (Source: Bloomberg)

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