Cmdre Steve Jermy. Andy Burnham can't save the sinking ship Britannia; the blob won't let him.

[00:00:00]At some point over the next period of weeks, possibly a couple of months, we'll have a new Prime Minister in the United Kingdom and that seems most likely to be Andy Burnham. Will we just get more of the same or will he genuinely bring something new to the table including on foreign policy? I'm glad to welcome back my good friend Steve Jermy to the show. Steve actually had an illustrious military career in the Royal Navy reaching the rank of Commodore. He was head of the Royal Navy for a while for a period of time. He's also um He's also kind of commanded ships and a squadron of ships at sea. But since his retirement he he built a successful career in the energy sector the renewable energy sector and I want to kind of delve into that a bit as well.

[00:00:46]Steve, welcome back.

[00:00:48]>> It's It's a pleasure to be back and and it was good fun for us to meet up as we did in in Tbilisi and spend time with Glenn Dyson and George Gammon and and Pascal and and Danny Davis and so many others just to meet with people in person and and be able to swap views. Very good fun.

[00:01:08]>> Yeah, I mean to be honest it is my favorite event of the year and it's only the second year I've been going to Tbilisi. As you say lots of like-minded people. Being a realist can feel very lonely at times particularly in the United Kingdom so it's great to have that fellowship and fantastic to actually literally fly out with you and fly back. So yeah, great to have that time.

[00:01:27]>> [snorts] >> So I mean I I see no room for anyone other than Andy Burnham to become the next PM.

[00:01:35]I mean what's your kind of what's your hot take?

[00:01:38]>> Um I think you're right. Um there's no doubt that Streeting is feels himself competitive. I think the only question is how this all happened.

[00:01:47]I think the fact that um um Burnham has won decisively is a big issue in terms of of any any prospective leadership election. I suspect that there will be a leadership election. I'm I'm curious to see if actually the the um Prime Minister actually decides to compete. You know, he's saying that he will compete, but I would imagine that lots of people would be advising him him not to. So, we'll see. Um I think the question really is, and let's let's um make this a working assumption that it is um Andy Burnham, and the the question is, how does he balance all the challenges he face? And I know that's something he wants to discuss, but equally it's it's pretty um pretty very pretty difficult time to be taking over um not over the leadership not over the leadership of the Labour Party, but also the leadership of the country um with the crisis that are going on and the paradoxes that we face in foreign policy and defense policy.

[00:02:44]>> Exactly right. And he's promising real change, much-needed change. Well, that's a tall order because it seems to me, and I don't support any political party, as you know, I find myself basically homeless in an empty center. Let's put it uh that way. But I mean, the the local election results emerged, in my view, from a real clamor amongst ordinary working-class people to have their needs met, to have a government that focuses more on the domestic than you know, than the foreign. Um and I'm not sure that uh Burnham's going to have much wiggle room to, you know, to do both, back out of the foreign and actually do more on the on the domestic. I mean, let let's start with, for example, military spending.

[00:03:29]You know, we're we're nailed on to increase military spending by, you know, up to over 60 billion pounds a year, you know, by 2035.

[00:03:38]I don't know how we're going to make it happen.

[00:03:42]>> Um I I don't think we can make it happen, Ian. Um or if we do, it will be at um acute cuts elsewhere in domestic policy. And again, that goes against the um the agenda that that Burnham appears to be coming in. I think he's right as well, I think to actually focus on domestic policy. But the fundamental issue is the economy.

[00:04:04]As Bill Clinton said, it's the economy, stupid. And if we've got an economy which at the moment is, I think you could say it's um you could say it's borderline falling into recession. But this is without any of the deep impacts of the Austerity 4.0 yet arriving with us.

[00:04:19]So, I did some forecasting work and I've just been updating it and that forecasting work tells me that we're we're headed for a recession, a severe global recession. I'd be surprised if if Britain is is anything other than in the same the same boat. So, that then circles back to where is the money going to come from to increase defense spending, do better at home, and and support a what appears to be a failing war in Ukraine.

[00:04:48]To my mind, you you can't do all of these things. So, they will need to be changed. But it's not necessarily the change that Andy Burnham is is is envisaging, I imagine. I suppose the big question really is not so much Ukraine. We're there's not much we can do. So, not so much the Austerity 4.0, not much we can do about that other than be prepared to weather the storm.

[00:05:10]The question is how we respond and and the consequences for Britain's foreign policy. And there are where you and I have both extreme interest, of course, with the Russia-Ukraine war.

[00:05:20]Uh specifically and more generally, our relationship with Russia, um the world's major energy superpower, with whom we have and the rest of Europe have cut ourselves off from the from the energy that we might otherwise have, had we not done so.

[00:05:36]>> Yeah, exactly right. I mean, it seems to me that a lot of the answers to our domestic policy challenges in terms of our fiscal, you know, headroom, in terms of our industrial kind of growth if we can even have any of that starts and ends at the Ukraine war and actually, you know, really the need for that to end.

[00:05:56]But nobody seems to want it to end and I'm not sure that Burnham, you know, one of the challenges he'll face is that being so fixated on the domestic, he may just resort to default, you know, on the foreign and just say, "Well, let's just keep keep doing what we're doing." And I think that could be a big trap for him. What's your view?

[00:06:15]>> Yeah, I think it I think it is. I think essentially that's what the the last the Prime Ministers that all of them have followed in Boris Johnson's footsteps have done.

[00:06:23]Um uh and and mistakenly, I think, unfortunately. I think that they're um they're um none of them were ready for a foreign policy specialist. I think Boris thought he was a foreign policy specialist, but by his actions he showed that he wasn't.

[00:06:37]Um by by um, you know, stopping a what could have been after a month of the war uh a closure to the war. And now what have we got? You know, we're now four four plus years into it and how many millions of people have been squandered and um the Ukrainian economy has been has been devastated. You know, yeah, essentially Ukraine's a failed state now, been kept alive by European money.

[00:07:00]So, now with none of them being foreign policy specialists, the danger is that they revert to the advice that they're being given by the the official elites and the military elites. And from what I can see from that advice, um you know, it's it's over uh over burdened with a sort of systemic Russophobia, which I really don't quite understand. Um I was at a at a conference up in Oxford um about 2 weeks ago. Listen to a former Chief of Defence Staff talk.

[00:07:29]And uh he was interesting. He was sort of he said he was open to talking to um >> [snorts] >> to Russia, but but closed to talking to Putin. And I thought, "Goodness me, this is a this just shows you how >> [snorts] >> deeply embedded in in the British elites the Russophobia is. And I just don't see the strategic logic of it. It's it's working against us in so many ways.

[00:07:57]And I don't know what you think. You'll know better than me. And but I think think as far as the Russians are concerned, then public enemy number one is not America, it's Britain.

[00:08:06]You know, we're the ones who actually sort of um uh you know, leading the charge and trying to actually prolong a war which we can't win.

[00:08:14]Whereas Americans are very much more vacillating. We'll see what the what the what the neocons do >> [snorts] >> uh if they eventually end end up with a solution to the to the to the Iranian war.

[00:08:26]But I'd be surprised if we get huge amounts of support um from America. It's just not in their national interest.

[00:08:32]That's the that's the point about it.

[00:08:33]But again, I don't know what you think about um what the Russians think of the British. It does seem to me that that although it's the American the Russians, the British, the Germans, and the French are the ones that they'll be most concerned with. Of those three, we seem to be the maddest. Um well, I don't know. Perhaps perhaps perhaps the Germans are coming up on the outside.

[00:08:53]Let's see.

[00:08:55]>> Yeah, well, you hit the nail on the head actually by saying we're public enemy number one because uh Russia's ambassador to the UK, Andrei Kelin, actually told me that himself.

[00:09:04]You know, we had tea two or three months ago at his residence. And uh that the he that he They are exactly the words that he used.

[00:09:13]And the Germans, uh they have a very complicated relationship with the Germans for very very obvious reasons. Mhm. But there's always been a sense that there's a large faction within the German business community in particular that is just in a holding pattern waiting to kind of re-engage, you know, when everything, you know, is finished up. So, that's complicated. Likewise, you know, with the French. But for us, it's hard-boiled. Uh as you say, that kind of Russophobia. And I think for Burnham, I think that's a huge challenge because he's the king of the north.

[00:09:42]Apparently, you know, really, really popular guy coming to a massively failing government with a huge job to do.

[00:09:52]If he starts to do anything that looks like rapprochement or some sort of orderly settlement of the conflict in the Ukraine, the whole system is is going to turn against him. The media, you know, the NGO community in Whitehall, you know, the think tankers, the deep state, you know, within King Charles chief box or other places main building and that sort of thing. And his honeymoon period will very quickly grind to a halt. I mean, that's what I see. I mean, what Do you share that sense?

[00:10:25]>> Um yeah, I do. I share that in the short term, but I do think he's got one slightly unusual ally in Whitehall, which is the Treasury.

[00:10:35]Um because I would have imagined that the Treasury are looking at this in a much more concerned that the at about their capacity or otherwise to balance the books cuz they're being pressed on the one hand to to increase defense spending and to, you know, to to to to 2.5% and then beyond.

[00:10:53]On the other hand, to actually provide money to support uh the Russians, sorry, the Ukrainians in the same way that the Europeans have.

[00:11:01]They have um I think that 85 billion euros that the Europeans have offered to Ukraine.

[00:11:08]I don't know what you think.

[00:11:09][clears throat] I don't think it'll ever be paid back.

[00:11:11]So, it'll be the same for all the British money which has been has been supposedly loaned and what was going to be paid back. Where will it be paid back from a country which is essentially is a failed state with a failed economy?

[00:11:22]So, you know, this is good money after bad and and the Treasury are much I would imagine would be very concerned, not least of because they've got rising costs well elsewhere. And of course um all all is all would be and that would be challenging anyway if we were on a stable position in terms of the economy and economic growth.

[00:11:44]But um what's almost certain and I did some modeling for this about a year ago.

[00:11:49]This is right now about a month ago.

[00:11:51]What's almost certain is that that that as the impacts of the straight for most start to arrive and we can perhaps talk a little bit more about that. But as these start to arrive and the consequences of huge amounts of oil being taken out of the global economy then we we will hit a recession. Now when we're a recession of course then you got a number of challenges. The first is that um >> [snorts] >> is the amount of tax receipts will go down. So um Biden will be being being invited to increase defense spending and to maintain spending for Ukraine at the same time that he's he's got less money to go around.

[00:12:27]>> [snorts] >> And that that eventually must surely play into um the overall political situation. I mean you can have military military people and defense people shouting and screaming about the need to actually increase defense spending. But actually if it's starting to really undermine the British economy I think I think you said in conversation some time ago I think it was while we were at Tbilisi that it's not armies that win wars and it's it's economies that win wars. And strong economies are are what win wars and that that's that was really what differentiated us in the um in the Second World War um and uh it seems to me that if we are in this situation so I think we're at a rather interesting time because I feel at the moment that as regards the um the oil issues and again happy to talk about that in more detail. But I feel that we're a bit of a phony war.

[00:13:16]I was chatting to a Singaporean um contact um two days ago in global offshore wind and the The of petrol in Singapore have doubled. Yeah, we don't feel it quite as much here cuz we've got quite a large tax element in that. So, the um the the the the you know, the original oil bit of it is not quite so much. So, we just doesn't feel quite so stark. But, the Far East uh is certainly a an area of real concern. And so is the um and and so is Europe. So, as these start to play into um you know, the government's situation, then it'll put them in a very, very tricky situation. I mean, we if indeed we do see more more inflation as a consequence of oil prices going up, and it's almost inevitable. I just can't understand how economists can't see that. But, you know, if the price of oil goes up, well, the price of just about everything goes up cuz we're critically dependent on it for for fishing. We're critically dependent on it for farming, uh construction, uh you name it. Uh it's it's it's a fact there. Now, of course, what what happens is the economists tend to see this as um they they call it inflation.

[00:14:27]And they measure inflation by by what actually is indexation. And I always think that inflation actually has two index CPI indexation has two elements. Firstly, it has an element of money supply.

[00:14:39]And the increasing money supply or decreasing money supply. But, the second element is input costs. And uh the way that um economists and central banks tend to just tend to try to to deal with inflation is putting the interest rates up. And of course, if you're going to do that into an economy which is shifting from a stagnation into um a an acceleration recession, then that's only likely to intensify matters.

[00:15:05]So, it's a very, very, very tricky hand to take over. I don't think it's a hand that's been well managed um by Starmer.

[00:15:12]Not least of all cuz I think his focus has been much more to do with the the the foreign side. Where ironically, he's sort of been praised by some. I mean, not not by those of us in the alternative media >> [snorts] >> who see um you know, the the sort of um trying to butt up against Russia as a as a as a sense of strength. I see it as a sense of Well, it's a bit like Bambi trying to butt up against um I mean, it's Godzilla, isn't it? You know, we we I've said elsewhere that um Theodore Roosevelt said um speak speak softly but carry a loud stick a a large stick. You know, we're doing exactly the wrong thing. You know, we're speaking loudly but actually carry a very small stick. You know, we've got a weak relatively weak defense.

[00:15:56]Um defense spending is is is also poorly um done.

[00:16:01]I think think I looked at this very quickly and and the Russians spend about twice as much on defense as we do.

[00:16:08]But for that, they get about 10 times as much capacity. They've got an army which is about 10 times the size and very well very well very very successful. They've got a um an air force which is the same and a functional navy. Whereas uh uh you know, we're really struggling with our navy. When when I was commanding a destroyer squadron, I had six ships in the squadron.

[00:16:27]We now have five frigates in the navy.

[00:16:30]Uh the rate squadrons um each with about the same. So, we had 70 or 80 frigates and destroyers. You know, I think we're just about at we're just about 11 at the moment. So, even even naval spending is poor.

[00:16:41]So, no, it's a really difficult hand to take over and um I think the big mistake, although I suspect it's one that's um will be defaulted to is to continue doing what we're doing in Ukraine notwithstanding that it's damaging us.

[00:16:57]>> Yeah. I um completely agree. We're we're hemmed in by slogans. Every time something sensible is suggested, some slogan will appear that says, "Well, we can't do that." And when it comes to energy, one of the popular slogans is uh we made ourselves too dependent on Russia Russian energy. And of course, in the UK, actually, we were never dependent on Russian energy. At its peak, I think we got about 2% of our energy, you know, from Russia.

[00:17:25]Obviously, some states got 100% of their energy from Russia, including Finland and and so on. But we, you know, we never were dependent on on Russian energy. But but the point is, you know, when you take out a massive slug of supply, you're just going to drive up costs including us, even though we don't get much Russian energy.

[00:17:46]And this is such a self always been such a self-defeating policy at a time when the Russians don't suffer from all our embargoes because they just sell it all to other people.

[00:17:56]>> Yeah.

[00:17:56]>> Not us.

[00:17:58]>> [laughter] >> It's it's only getting back to a normal energy relationship with Russia, I think, that we can really help to address some of the underlying economic and and industrial challenges we face in Europe as a whole.

[00:18:14]But to get to that, you know, you've got to fight your way through all sorts of propaganda and and blockages including in, you know, Zelensky himself appears to be one of the biggest ones of all.

[00:18:25]>> Yeah.

[00:18:27]I think what we're dealing with, Ian, as well as you you are absolutely right in the the issues about energy. What we're dealing with is a um it's not only a leak, but a country which is generally speaking energy blind.

[00:18:40]And and I would I say that having worked in the sector and even within the sector, there there are those who who are a little bit energy blind as well. I mean, a lot of people who routinely say, "Well, it doesn't matter. We'll we'll move from um from Russian hydrocarbons and um onto renewable energy." I mean, it's it's it's pathetic thing to say. It's it's it's self-evidently impossible. I say to people that if you take hydrocarbons out of the system, then that the nuclear and uh renewables will die almost immediately because we're critically reliant on hydrocarbons for our supply chains.

[00:19:14]So, almost everything that that's mined or um you know, grown or is somehow part of a supply chain for a a wind turbine or a nuclear power station that's being built, it relies on hydrocarbons. We're critically dependent on diesel.

[00:19:28]Um hydrocarbons are critical for steel, plastics, I could go on. So, I think this this is a a a key issue and I think the key issue there is that energy has been relatively cheap and it's been abundant abundant and high-quality for very very very many years, but we're now at a moment in time where um the uh what is known as peak oil, which is peak oil supply is is where there or thereabouts as as the great um oil geophysicist or statistician M. King Hubbert forecast back in the 1970s that this would happen.

[00:20:01]Now, [snorts] um I wrote in I think it was September '22 after I sort of um arrived at a conclusion about the Russia-Ukraine war.

[00:20:10]I said that actually the sanctions would be boomerang sanctions and they would do us more damage um they would do the Russians. I think I think that's Well, I think it it wasn't that difficult to be pressing because it was obvious.

[00:20:21]Um [snorts] not least for because actually sanctions never work in the first place. So, um or there's very little um evidence of them working. But but the energy issue is now going to become critical and I think what we will start to see um is um the consequence of that playing out in a very unhelpful way.

[00:20:39]I mean, we we were way we were insulated from it in the Russia-Ukraine war because as you say, we weren't weren't quite as dependent. But also as you say, energy um oil is fungible.

[00:20:50]So, there is an international market and you know, the the if the oil companies who who um drill for oil in the North Sea uh provide you know, get that can sell that more expensively elsewhere, then they will. So, you know, the the commodity traders uh are politically and naturally neutral. So, the fact is that as you say that as we as you take oil out of the international market, then there is bound to be a reflection in the price. And of course, that reflection was we were just about coping with it globally, I think. But then if you take um it's not 20% of the world's oil that's been taken out. It's probably more like 13 or 12% million barrels a day. Roughly speaking, it's about 100 million barrels a day.

[00:21:35]But if you take that out of the out of the system, then you know, that that is a um it's a huge shock. It's the biggest shock that we've seen in modern history.

[00:21:44]Bigger than the two oil shocks. Um bigger than the um the Russia-Ukraine shock. And that coming on top of the Russia-Ukraine war um and the way that the West has um cleverly insulated itself from cheap energy by by sanctioning it. Um is going to play um very into a very very um >> [sighs] >> it's going to make for a very very difficult time. What one of the things that um is interesting is that the relationship between oil and GDP growth um is the mathematical correlation between the use of oil and gross domestic product is close to one.

[00:22:21]It's an extremely close relationship.

[00:22:23]So, what that means is that as you take oil out of the system then the consequence is contraction in the overall global economy. Again, that's what I've been forecasting. I think the the thing that we found difficult, we've all found it very difficult as energy analysts is to work out quite how when this would happen.

[00:22:41]And one of the issues of course is that that the supply chain for oil oil in particular is um it's one that's moving slowly. So, the straits for most are closed, but of course every tanker is going at 12 knots, which is about cycle speed to get to wherever it's going. So, the consequences in places like Cushing which is the major hub in the states for um for refining. The consequences of there are being felt now. So, it's the speed with which it moves. Even in when it's in pipelines and it's moving between 3 and 8 miles an hour. So, it's quite Um and when you when you then take into account that you've got you've got inventories which are being run down and petroleum reserves which are being run strategic petroleum reserves which run run down. And last but by no means least but also interestingly the the Chinese had we think 1.3 billion barrels of oil which is could be between a year and 4 years worth of their their um their requirement. So, they've been building that up for a long time. In fact, they've been thinking about this for as far back as 2003 from what I can see.

[00:23:53]So, when you got all those with the those sort of mitigations in place, then I think what we've seen is a it hadn't felt quite as dramatic as people expected. But, I've always thought this is a funny war. It's a funny war because now most strategic petroleum reserves are very low except for the Chinese.

[00:24:14]Inventories will will be gone.

[00:24:16]So, you know, don't don't let us be surprised if July is a is a a month in which we're really starting to see the consequences play out again. Not least of all because I don't know about you, I've just heard um from Catherine my my Catherine your wife's name is Catherine as well. I've just heard from Catherine that um the the Straits of Hormuz are closed again.

[00:24:37]So, um >> Yeah. And this is what this is what happens when you make a deal between the USA and Iran and Israel isn't in the room and they just carry on bombing Lebanon anyway.

[00:24:49]It's just it's just complete madness. I mean, how they can't put the Israelis on a leash, I just don't really I how Trump is so weak.

[00:24:58]and you know I think time is running out for him slight slight digression but I think time is running out for for Trump ahead of midterms because okay well he hasn't ended the war if they reclosed the Strait of Hormuz you know today but they seem to be nudging closer towards some sort of diplomatic settlement the economic ramifications will still be rumbling on by the time we get to the midterms in the USA it seems to me so he's not going to be out to the woods or so he also >> I completely agree indeed I I was when I did the analysis on the the speed with which the the Strait of Hormuz thing would play out I also had a look at the speed with which we would recover and one of the there are a couple of very interesting things in there the first is that the speed with which the maritime logistics system recover is slow and when I say slow I mean really slow there are there's good evidence to say that the consequences of the Red Sea battle between the between the Americans with European support and the Hutu is still being sorted out when the Evergreen the container ship went to ground in the straight straight in the Suez Canal went to ground for every one day it was a ground it was six days recovery so even if you take a sort of well it's let's say it's only three days you know we we've had a straight have been closed for three months now and even if that was successfully open now I wouldn't be surprised if it's not until the middle of next year that we actually start to see some some actual get back to something which is is you know more like normal but even then I think there's another subtle point as well you'll often hear in fact you hear a lot of it at the moment you hear that the commodity traders especially oil traders saying that we need oil we need demand destruction By which they mean yeah, we need to use less oil. So, we So, So, and then we need to get supply and demand back into balance. But of course, what demand destruction really means it means economic destruction.

[00:27:04]And of course, economic destruction means shutting down companies. It means doing things. It means losing jobs. It means all of those sorts of things. And the problem with that is that even if the oil starts flowing, it doesn't necessarily mean that those companies that went bust, those people who were let go are immediately going to be drawn back on. So, the consequences of this are profound.

[00:27:25]I think you you may or may not have heard of Art Berman, who I'm a great fan of and have sort of become quite friendly with.

[00:27:32]But he he I saw him on a recent on a podcast with Danny Davis and he said something similar to me. He said he said we may never get back to where we were.

[00:27:41]And I think he may be right.

[00:27:43]I can't prove it yet mathematically, but I think he may be right. So, we are into a world where actually I suspect the global economy will uh will have contracted.

[00:27:53]People say that that's um this is fine for Russia. I think it is.

[00:27:58]And people also say it's fine for China.

[00:28:00]I don't think it is quite as simple for China because I think that the way the Chinese will be thinking about it is even though that they're well insulated, the fact that they're the factory of the world and they're actually producing stuff that they want to sell ashore sell abroad means that they don't want collapse in the Far East. The Far East are their markets. So, I think the Chinese will be as interested as anybody in in getting this moving again. In fact, everybody should be.

[00:28:26]So, let's hope that they and the Russians and although the common sense and the common sense that exists in the rest of the world is able to put pressure on the Europeans and the Americans to get get both of these war closed off cuz both of them are having a deleterious effect on the oil markets.

[00:28:46]>> Yeah.

[00:28:47]Exactly. And I I mean Russia we discussed this in um in Tbilisi. I mean Russia is perhaps the only truly energy independent global power.

[00:28:57]I mean even the US isn't strictly speaking as you explained that in in more granular detail than I can and China certainly isn't even though it's kind of moving rapidly into renewables.

[00:29:07]Uh but Russia is and you know their export earnings which you know have thrived thrived during the first year of the war and doing very well this year compared to last year have never really suffered since the war in Ukraine started compared to the historical average in terms of the you know current account surplus they put in every year. It's slightly above the historical average in fact uh in terms of their surplus. You know that that those earnings subsidize >> [clears throat] >> domestic supply.

[00:29:37]>> Yeah.

[00:29:38]>> So they're able to provide discounted energy to domestic often nationalized you know factories because of the wealth they generate through export earnings and that's that's just the model that they they use and it works very successful. And and to go back to your point about the you know twice as spending but 10 times the bang for the buck well partly that's PPP of course but partly it's it's input costs as as well right? Uh you know in terms of the cost of the energy that they've got which is absolutely abundant because it's you know because it's Russia.

[00:30:12]One of the things I've discussed with some people is is the the the I think one of the things that cripples us in the West is that perhaps it's an Anglo-Saxon thing it's a very short-term mentality and a very short-term perspective in terms of how we plan and how we devise policy which isn't the case certainly isn't the case in China but I think it's also not the case in Russia either or or for that matter in Iran you know quite frankly but um uh and that that cripples us I think our inability, and you know, coming back to Burnham, uh I'm not sure he'll he'll be able to see that bigger picture that we need cheap energy.

[00:30:50]That actually that the most sensible thing as a slight kind of it's not really a tangent, it is related, but you know, we we unsanctioned, you know, diesel and jet fuel for Russian oil coming out of India, coming out of Indian refineries just a few weeks ago, a couple of weeks ago.

[00:31:11]But and then we seized an oil tanker >> Yeah.

[00:31:14]>> in in the channel >> Yeah. Yeah.

[00:31:16]>> taking oil to India. It was I mean, you couldn't make it up. But >> Yeah.

[00:31:22]>> It is short-term considerations and the desire for publicity and stunts and sound bites has a grip on our decision-makers, it seems to me.

[00:31:35]>> I mean, I think that I looked at that that those instances in the the channel with concern. I mean, I looked at them with concern because actually the sort of the advice from the MMG was they're not connected. Well, of course they're connected.

[00:31:51]You know, they're the first thing is that that we boarded and seized a Cameroonian flagged, it would appear, tanker.

[00:32:01]But the the point is that the way the the reason for the boarding or the reason cited by the MMG was UNCLOS 110.

[00:32:09]What that is is actually it's about flag status. So, it's essentially a technical a technical issue and it's nothing to do with sanctions. And yet the the the captain of the ship who has been imprisoned in Britain is being charged under a a British domestic law on sanctions.

[00:32:31]You know, so you know, we've we've to me we're actually really prejudicing the idea um uh what's known as um innocent passage, which is that vessels are allowed to actually um transit people's um territorial waters um provided they do so on innocent passage. And one of the what you can't do under the UNCLOS, which is the United Nations Convention for Law of the Sea, what you can't do under UNCLOS is is actually just board somebody cuz you don't like what they're carrying or you don't like the way they do thing. You have to have um you have to have um some very clearly prescribed reasons for doing it. So, the first thing is that we do that and then make great um play of it.

[00:33:15]So, I think it's that's an act which actually undermines um undermines the Law of the Sea, which where which to me is terribly important.

[00:33:24]And of course, ironically, we're complaining about the Ukrainian and the Iranians um you know, preventing um um transit through the Strait of Hormuz.

[00:33:33]But then, the second thing of course is that then then we're a little bit surprised that actually the Russians are very the Russian frigate is very um is very trigger-happy, but it wasn't trigger-happy. To me, that was what's called a rule of the road situation, rules of the road.

[00:33:47]So, at sea, you have the same sorts of things that you do do in the highway code. There's a code of things and um as I listened to it, it seemed to me that the that the that there it may well have been that the um that that both were slightly at at odds with each other. But the the um the point there is that the Russians weren't trying to do anything other than warn uh the the vessel.

[00:34:12]But the idea that this was that this was um the two events were were um um unrelated is is fantasy because of course, there's a high attention at the moment between the British and the Russians because of our actions, because of the fact that we're leading the charge in the provide pro- provision of things. We're talking about boarding of ships at sea, even though it's illegal.

[00:34:33]And and that high tension is bound to play through into the Russian navy. So, I would imagine I mean, as far as that um captain of the frigate is concerned, he he's off an enemy coast.

[00:34:43]You know, and he doesn't know what's happening. So, you know, I would imagine they would be very cautious about what's what's going on. And and you know, the sooner we can start you know, let's let's get back to diplomacy, please.

[00:34:54]How are we going to do this? The sooner we can start talking to Russia. I mean, I just find it extraordinary that people um in the West uh well, in Europe in particular can actually make a great um great uh make it make it seem such a good thing that we don't won't talk to Russia. And as Glenn Diesen says, cuz we might reward them. I mean, even during the height of the the the the 38-year troubles, the British and the IRA were talking. It was very delicate and very very gentle and through you know, through sort of um third parties. But, we really ought to be talking to the Russians and just seeing what we can do. I suspect and that this is all going to start to come to a head if as I'm right if I'm right that actually this this economic recession starts to hit. Cuz at that stage, I think people will become to realize once again that it's the economy, stupid. And that you can't run a successful economy without adequate energy supplies. And you certainly can't do it with just renewable energy. Not that I'm don't think renewable energy is important.

[00:35:54]But, as a little segue, as well, I think it's I think um I felt that that even a even a a month and a half ago that the midterms were lost. I thought they were lost because I knew that the consequences of the straight for most closure would actually be playing out um over months, probably towards the end of the year. So, again, I've got a friend in um in North Carolina who says that it's a real you know, it's really hitting people hard the the increase in diesel and petrol prices. So, I think I think the the midterms are lost.

[00:36:25]And I think actually the economic consequences for Europe will mean that actually hopefully some some as I say some it's the economy stupid people will start to think actually perhaps we can't afford to to keep these wars going for what appear to be very spurious the wrong word but but but but but whatever you think about the legality of the wars and you and I think share a view that actually that's that in both cases it's much more nuanced than that just Iranians are bad people and the Russians are bad people much much more nuanced than that but what even even if that were true are we prepared to keep wars going at the cost to the British people of of undermining an economy which is not exactly cooking on gas at the moment.

[00:37:13]>> Yeah, I've said you know before that foreign policy and diplomacy and and not the same thing and unfortunately when you don't have a clear foreign policy that then you know you struggle to kind of then deploy diplomacy in you have a policy that isn't really clear and the people don't understand. I don't think anybody really understands what it is we're trying to achieve you know in Ukraine there lots of people think we can inflict a strategic defeat on Russia which subsequently we can't and I've said before that you know any Europeans are slowly and they've been doing this for at least 8 months now talking about well maybe we should open a diplomatic track with Russia nothing has happened yet but any peace deal for Ukraine has to involve some sort of separate negotiation between Europe Britain and Russia they're separate from the Russia Ukraine bit they're separate from the Ukraine EU membership bit there's several bits to this piece but one big bit it is our future relationship with Russia and that has to I mean it'll cover many things but it has to cover energy our energy relationship with Russia. You know, why would we not want abundant inexpensive supply of energy? That has to be a ticket out, you know, uh for us in terms of fixing our relationship with Russia, helping solve our domestic economic woes, and so on, right? I mean, that to me, I mean, that that that makes obvious rational economic, you know, sense, but I don't sense anybody can really see that or is thinking that far ahead. I mean, what do you think?

[00:38:51]>> No, I think you're right. I I struggle to understand why as well because um uh I I think it is still this institutional insane institutional, but actually it's sort of very wide widespread um energy blindness. We We used to talk when I was at sea about sea blindness and not people not understanding um how the sea work, but but a lot of it is that people are so used to um um expecting things to arrive from China. Um So, they've been you know, taken across the sea and uh globalization there's always going to be there'll be more and more of it. Well, actually I think globalization is likely over the next the next sort of years to actually withdraw. Well, we'll start doing less globalization. The reason is that it's it's expensive to ship stuff around the world. I mean, bunker fuel costs I think are up up by a factor of two. I've heard three.

[00:39:38]Um you know, aviation fuel costs are up.

[00:39:40]You had Lufthansa I think were were I think even as much as 6 weeks ago where um uh um shutting down 20,000 flights. So, it's it's all the same thing. You have cheap um our economies rely on cheap, plentiful, high-quality energy, and we're moving to a period where we have scarce, expensive, and lower-quality energy. And so, uh it was always going to be difficult anyway because of um peak oil and increasing or decreasing quality of the oil that we're getting. But, what we've essentially done over the last for Western part of foreign policy reasons, not just the Americans, but Western foreign policy generally, is we're shutting down our access to that energy. Part of it, I'm afraid, is ideological. It's an ideological thing on the renewable sector and on the climate.

[00:40:28]And then, of course, there's there are issues to talk about on the climate, and I'm as an oceanographer by first degree, as you know, I was a climate scientist, if you like. It's one of the key climate things.

[00:40:38]>> [gasps] >> But but but the fact is that the the steamroller that's coming at us is energy and not the climate. I'm not saying that we mustn't mustn't be responding to the climate. We must be thinking about how we adapt.

[00:40:50]But and the the thing that is going to affect the West, indeed the world, politically, is going to be more expensive um energy costs. That's bound to If you look back over time, I've often thought that you can go as far back as the Arab Spring and track that back to the start of peak oil and the start of the fact that actually the Tunisian guy in um who set fire to himself, the trader, didn't do so for political reasons, and he did so because actually the Tunisian economy was struggling.

[00:41:28]And and again, it was a time when actually oil supplies were going up around the time around just before the great financial crisis. And surprise, surprise, cost of oil was 150 $150 a barrel.

[00:41:39]Yeah, and and was that related to the great financial crisis? In my mind, almost certainly, yes. Um people say, "No, it was to do with um subprime mortgages." Even that's questionable. I think there's some open question about the eurodollar and whether it was to do with the eurodollar reduction in in in finance of the eurodollar, which is sort of the off Yeah, sort of what I we could sort of called not off world, but off off balance sheet um creation of money through um uh through um different banks working in different ways, not central banks, but but actually if if that was right and if it is if it was the start of reducing energy supplies then then this is just going to get worse. I had expected us to start to um to be put in a situation because of reducing oil supplies of what we're talking about. But what I hadn't expected was firstly um the the Russia-Ukraine war and how that would start to intensify. And then secondly, the Americans and these Israelis would think it was a good idea to to attack Iran and with the obvious risk of shutting off 20% of the world's oil supply. So, >> Yeah.

[00:42:53]>> Yeah. Yeah, let's see where we get to.

[00:42:54]Um >> Yeah, let's see where we get to. I mean, final question, I suppose. Um I I think increasing numbers of politicians in the UK are turning their focus back to the North Sea >> Mhm.

[00:43:07]>> in terms of the need to kind of reinvest there. I know we former. And actually, I was listening to an interview this morning with somebody from the Conservative you know, uh party. I mean, Ed Miliband's got the Labour Party stitched up in terms of, you know, >> [clears throat] >> the climate sort of side of things.

[00:43:24]Uh but but how much can that help? I mean, in your professional assessment, having worked in the energy sector for for many years, yeah, how much can that actually kind of help us? I don't think it completely replaces the need to to have a normalized relationship with Russia. I don't think that it does. But I mean, you know, what what's your sense of the opportunities there for us in in the North Sea?

[00:43:43]>> I think there's I think I haven't got the figures exactly in front of me. It's round about 47% of our oil and gas is available from the North Sea. Again, that necessarily mean it comes from the North Sea, but I think it's also the other important thing is actually quite high-quality oil and gas as well. Um you know, the country that's really well off in Europe is is Norway. You know, Norway is energy independent, frankly. Um so, it can help us.

[00:44:04]It will take time to bring back on, and it's not a long-term solution as much as North Sea oil peaked around about turn of the century. So, I think about 1999, and it's been steadily tracking down.

[00:44:16]Um if if I were the energy sector, I'd start it tomorrow. And that will be something which upsets people in my my sector, the offshore renewable sector.

[00:44:25]But but the plain fact is that that that these we've got to stop thinking about these as either or. We do tend to think about renewables and oil and gas as either or.

[00:44:35]You know, people talk about fossil fuels, and uh they talk about the oil companies as being the um Yeah, the some the Yeah, the great satans in a way. But they miss the fundamental uh fact, which is that the renewable sector is critically dependent on the hydrocarbon sector, critically dependent. And and it will be for at least 20 to 30 to 40 years.

[00:44:54]So, I think you've got to stop seeing this as an ideological debate, um which it it too much it has become um cuz the other side of it is the oil and gas advocates and people uh in reform and and the conservatives who are talking about the need to do fracking. Again, that misunder They don't understand that how fracking works, and that actually fracking is very very short-term. A fracking oilfield generally peaks in production after 6 months, and after 24 months, it's actually down to about 10%, and then it's gone.

[00:45:23]A fracking is poor-quality uh oil and gas, and it's extremely expensive in energy terms to extract. Um it's worked well for the Americans, but they've got some of the best uh fracking resources uh in the world. As indeed probably have the Argentinians. For us though, I I would certainly start it, but I would I would For listeners, the way to think about the energy is not oil or gas and nuclear or renewables. Think about the whole lot of an energy system. We need to think of it as a combined system, which we're all working together, and which the transition is a and it will be a difficult transition. It's one where where actually it's not a sort of rapid uh determination to shut down oil and gas.

[00:45:59]I I the Of course, the climate matters, but I was fortunate enough to know James Lovelock, who is the Well, you'll know as the the inventor of the Gaia theory and the originator, if you like, of climate science. And James said that our understanding of the climate is about our understanding of human body in the 1750s.

[00:46:20]And there are some very, I think very the assumptions the assumptions of the climate modeling but I don't mean the modeling itself, but the assumptions of the modeling take are based on demand assumptions of what we can do with oil and gas supposed to what we can probably supply. So, I think that we will start to see reductions in oil and gas that the that the climate scientists are keen to have. We won't see them for policy reasons, we'll see them cuz we're running out.

[00:46:47]So, I'm less worried about the climate in that respect and more worried because it's it's a longer-term thing and more worried about the fact that we are running out and for societies which are designed around implicitly or they're designed explicitly designed to achieve economic growth, but that requires high levels of oil and gas and and energy, they won't do it. So, we're running for a period of um a very very difficult time. So, it's a long answer to to the question, but yeah, I'd do it tomorrow, but I wouldn't I wouldn't see it as as a panacea.

[00:47:21]Um but the only good thing here is that because we didn't do it, we now have some left cuz otherwise we would have burned it all off. That leaves you with >> Well, yeah.

[00:47:29]That's good. Uh thanks uh Steve. I I I made a sort of a rather sardonic comment on X the other day or the other day before after Zelensky launched more drone strikes on Russian oil refineries.

[00:47:42]Um you know, that they only prolong the war as far as I can see it. They don't shift the strategic balance, you know, one bit. I said Europe is literally paying Zelensky, you know, to deindustrialize to deindustrialize Europe, you know, by by by pulling these stunts. So, I mean, promise of burning if he's going to be burning, let's see.

[00:48:02]I think he probably will be, but I think the first thing you need to do is is sort of his foreign policy. And there's a massive energy dimension to that, and that means a much more normalized relationship with Russia. It's just inescapable logic, but let's let's see what happens. Thanks, Steve, as always, for your insightful comments. Thank you, everybody, for watching, as always. Uh wherever you are in the world, whatever your nationality and religion, I wish you very much peace. And uh yeah, uh please do subscribe to this channel for more information. And once again, Steve, let's do this again soon. Thanks for joining today.

[00:48:32]>> A pleasure, Ian. Keep up the good work.

[00:48:35]>> Thank you.