Chokepoints: The New War Over Oil, Dollars, and Power

CHRISTIANE AMANPOUR: Now, for the first time since the war began, Iran says the U.S. and Israel have targeted parts of its oil and natural gas facilities, causing prices to spike. This is the world faces the biggest energy supply disruption in history following Iran’s blockade of the Strait of Hormuz. Our next guest knows this major passage well and highlights its geographic choke point in his book. Former State Department official and author Edward Fishman speaks to Walter Isaacson about the impact of U.S. military intervention in Iran on the global economy.

 

WALTER ISAACSON: Thank you, Christiane. And Edward Fishman. Welcome back to the show.

 

EDWARD FISHMAN: Thanks so much for having me on today, Walter.

 

ISAACSON: Your book, “Chokepoints,” talks about two types of chokepoints: geographic ones and economic ones. Let’s start with the most famous geographic one, the Strait of Hormuz. Explain to me what’s happening in the Strait of Hormuz and whether the Trump administration should have figured that out earlier.

 

FISHMAN: So, Walter, the Strait of Hormuz is by far the world’s most important maritime chokepoints. Of all, all the chokepoints — whether it’s the Panama Canal or the Straits of Malacca or the Bosphorus — the Strait of Hormuz takes the cake. And that’s because 20% of global oil supplies on a daily basis before this war went through that narrow waterway. And about the same in terms of liquified natural gas. And so what we’re facing now, because Iran has effectively closed the Strait, is a dramatic shock to the global energy system. In fact, the International Energy Agency, the IEA, has said that this is the largest disruption in the history of the world oil market already. We’re only, you know, two and a half weeks into this war. 

 

I think the thing that surprised the Trump administration — and by the way the markets and really confounded many analysts — is that the assumption was that if Iran were to close the Strait of Hormuz, they would actually have to physically block it. They would actually, they would have to lay thousands of sea mines that made, you know, sailing through the Strait impossible for anyone, including Iranian vessels themselves. And I think the assumption was that Iran wouldn’t do that because if the Strait of Hormuz was mined so heavily, even Iran’s own oil tankers couldn’t get out of the Strait. And of course, Iran depends on selling oil to run its economy. 

 

What Iran has showed is that just by virtue of using low cost drones — and Iran has become one of the world’s leading producers of these drones through their Shahed program — they can disrupt shipping. They’ve only attacked a bit over a dozen ships. And, you know, before the war as many as a hundred ships, commercial vessels, would go through the Strait of Hormuz on a daily basis. And just by attacking about a dozen or so, they’ve been able to change the risk calculus of the entire shipping industry. 

ISAACSON: Well, President Trump was saying our NATO allies should help, but what about our NATO allies, like, I think Italy’s doing — and France — who may wanna have discussions with Iran and maybe their ships get through?

 

FISHMAN: Yeah, I mean, there have been reports that both the French government and the Italian government have reached out to the Iranian regime asking whether their ships could get through. And I think this is only going to continue, you know in some ways it’s remarkable that oil hasn’t gone even higher. We’re already in the hundreds, but I think if this lasts for weeks, we could easily get to $150, even pushing to $200 a barrel. The all-time record set during the financial crisis back in 2008, 2009, was around $147 a barrel. So we are — this could get a lot worse if the crisis continues. And I think so long as this this Strait is closed, I expect many more countries, even beyond the ones that have been publicly reported, are gonna reach out to the Iranian government to see if they can cut a separate deal.

 

ISAACSON: You know, your book is not just about geographic chokepoints. You have a really interesting concept you’ve developed historically on economic chokepoints. Why don’t you tell us what those are?

 

FISHMAN: Sure. So throughout history, we really have focused on these geographic chokepoints. And, you know, a big reason why the Ottoman Empire was able to be so powerful for as long as it was, was that they controlled the Bosphorus, which, you know, to this day is such a critical maritime chokepoint. 

 

But what happened in the 1990s when the Cold War ended and you had China and Russia enter the global financial system, enter transnational supply chains, you had the creation of these invisible chokepoints, these parts of the global economy, where one country has a dominant position and there are few, if any, substitutes. So if you think about it, the dollar, which does kind of function as the lifeblood of the entire global financial system, you know, 90% of all foreign exchange transactions happen in dollars that provides the United States with a chokepoint over the global financial system, similar to the one we see playing out right now in the Strait of Hormuz over the global oil economy.

 

Last year as well, we saw that China possesses a similar chokepoint over rare earth minerals, these minerals that are critical from everything from producing missiles and drones to normal electric vehicles here in the United States. China was able to show that by withholding exports of rare earth minerals — and they refine about 90% of the global supply — within a few weeks, Ford had to, you know shutter one of its factories for its Explorer SUV. And so that’s the type of control that these invisible chokepoints like the dollar, like China’s rare earths, have given great powers today.

 

ISAACSON: Well, you talk about the dollar being an invisible chokepoint. Could the Iranian say, We’ll let ships through if they are trading in, say, the Chinese currency instead, and that would undermine our power with the dollar?

 

FISHMAN: Look, I think the Iranians have quite a bit of leverage right now. I think that they can demand quite a bit to allow ships through the Strait. I think one of the big misconceptions that I hear sometimes talked about in the U.S. is that, you know, Trump could do a TACO, you know, this acronym, “Trump always chickens out.” We’ve seen that with tariffs, when Trump has imposed big tariffs that have led to a stock market correction in the United States, he’s oftentimes just suspended them for, you know, 90 days or 180 days. 

 

The difference here is that with tariffs, Trump unilaterally can suspend the tariffs. But with the Strait of Hormuz, even if the U.S. were to say today we’re no longer going to be attacking sites in Iran, the Iranian government could say, Well, wait, we want more. You know, we want, you know, for instance, oil to be priced in RMB. I think a more likely ask would be for them to ask the U.S. to pick up and leave their bases in the Gulf, right? I mean, the Iranian government has said multiple times that the bases, you know, that the U.S. has in the Gulf region have been used as launchpads to attack Iran. And so my guess is if the U.S. were to, if Trump were to take that move today and say, you know, the war’s over the Iranian government may actually ask for more.

 

ISAACSON: How did sanctions get organized under President George W. Bush and then President Obama?

 

FISHMAN: I’m glad you asked this, because I think there’s an interesting analogy to what’s happening right now in the Strait of Hormuz. So in 2005, right after George W. Bush was reelected, the U.S. was fighting two wars, right: Afghanistan and Iraq. Neither was going very well. And to make matters worse the casus belli — the reason we got involved in Iraq — was ostensibly ’cause Saddam Hussein was developing weapons of mass destruction. Well, right when Bush was reelected a survey group came out and said, Well, Saddam didn’t actually have WMD. And to make matters even more awkward, just around that time, Iran elected a populist hardliner, a guy named Mahmoud Ahmadinejad as their president, and he immediately supercharged their nuclear program. And so the United States was fighting a war against Iraq to get rid of a fake nuclear program, whereas right next to Iraq, there was a country that was multiple times larger, more powerful, that was actually developing industrial scale nuclear capabilities.

 

And so it put George W. Bush into a bind. ‘Cause he didn’t wanna launch another war in the Middle East, and he didn’t think sanctions could work because the old paradigm for sanctions was that you needed full support at the U.N. and you needed to be willing to use a naval blockade. And there was no support for either of those. Well, thankfully there was a gentleman at the Treasury Department named Stuart Levey, who was the first Treasury Under Secretary for Terrorism and Financial Intelligence, who took Bush’s skepticism about sanctions as sort of a personal challenge. And he tried to think, is there a way that we can actually innovate sanctions and put more pressure on Iran? 

 

And there was one day he was in Bahrain — actually at a hotel eating breakfast — flipping through the Financial Times when he came across an article about a Swiss bank that had cut ties with Iran of its own volition. And a light bulb went off in Levey’s head where he realized maybe I don’t need to persuade the entire U.N. to block trade with Iran. I could just manipulate the risk calculus of the private sector. I can go to banks in London and Frankfurt and Singapore and Hong Kong and Dubai, bring with me dossiers of declassified intelligence, showing them how Iran oftentimes was using their banking networks to fund their nuclear program and persuade nine outta 10 of them to cut ties with Iran of their own volition. And for the one out of 10 who refused to cut ties with Iran, he could threaten to cut them off from the dollar. Basically say, You have a choice. Either you keep doing business with Iran or you continue to have access to the dollar, but you don’t have both. And that actually was the key. That is how U.S. sanctions have worked ever since. Manipulating the risk calculus of the private sector, which is very much what Iran has done by just targeting a few ships, it’s been able to manipulate the risk calculus of the entire shipping industry in the last two weeks.

 

ISAACSON: Well, in the history of sanctions and how they develop, you play a role. Tell me what you did when you were in government to move it forward, especially on Iran, but I think on Russia too.

 

FISHMAN: So I was part of the team that actually implemented the oil sanctions against Iran. So Stuart Levey — the aforementioned leader of the Treasury Department sanctions division — he’s a Republican, but he was reappointed by Barack Obama. You know, seems a bit quaint in 2026 American politics. But that is something that occurred. And he continued that strategy through the Obama administration and handed it off to his successor David Cohen. 

 

So my job was to go to the big oil buyers from Iran — places in Asia like Japan and Korea and India and China — and basically let them know that if they continued buying Iranian oil, they may lose access to the U.S. dollar system. And I can tell you, Walter, when my colleagues and I were working on those sanctions in 2013, we were skeptical, frankly, that they would work. It felt like a bit of a long shot given the importance of oil in the global economy. And to our surprise, we actually were successful in getting Iran’s oil sales to decline from 2.5 million barrels a day to about 1 million barrels a day. So a 60% drop in just about 18 months.

 

ISAACSON: You think that’s what drove them to the nuclear deal?

 

FISHMAN: Oh, certainly. And in some ways we got lucky, and you would know this as well as anyone historical contingency matters. Iran’s economy fell into a massive recession in 2013, right when Mahmoud Ahmadinejad, that hardline president, was term limited. And so they had an election in June of 2013. And two weeks before the election a gentleman by the name of Hassan Rouhani, in a publicly televised debate, came out and said, We need to negotiate with the West over our nuclear program because we desperately need sanctions relief. And in authoritarian systems, you almost never hear people speak the truth. And that led to such a groundswell of support that two weeks later, he won 50% of the vote in an eight candidate race, which is almost unheard of. 

 

And I think what that did was, even though Ayatollah Khamenei’s ultimately the decisionmaker at the time, he saw the groundswell of support in Iran for a nuclear deal to deliver sanctions relief. And that gave Rouhani and his foreign minister Javad Zarif the political capital they needed to cut a deal with the United States and our allies. So certainly the sanctions were the key to unlocking that nuclear deal that started in 2013 and culminated two years later in 2015. 

 

ISAACSON: President Trump, who’s not a big believer in sanctions, actually imposed sanctions on Russia and Russian oil, and even on, I think, tariffs for India for buying Russian oil and on the two biggest oil companies in Russia. And now he’s lifted those sanctions. Explain whether those sanctions made sense in the first place and what will happen now that he seems to have just lifted them.

 

FISHMAN: Yeah, so I would agree that Trump has never been a big believer in sanctions on Russia. I think his interpretation of the Russia-Ukraine war is quite different, I think from mine and many others, which is that Ukraine actually bears a lot of the blame as opposed to Russia. Setting that aside, last year, he did start imposing some pressure on Russian oil. First in August, he imposed really steep tariffs on India ostensibly because India was buying Russian oil, although I know there were other concerns he had around Prime Minister Modi’s refusal to negotiate him for the Nobel Peace Prize. 

 

But then the real key Walter came two months later. So in October of last year, the Treasury Department imposed sanctions on Rosneft and Lukoil. These are the two biggest oil companies in Russia. And they also said that anyone transacting with Rosneft and Lukoil could be sanctioned by the United States. It could be cut off from the dollar. Well, immediately, these big refineries in India, like Reliance, said, We can’t afford to lose access to the dollar. And so they started immediately cutting back their purchases of Russian oil. They, the Indian refineries went from buying around 2 million barrels a day, down to 1 million barrels a day at the beginning of this year. So a really rapid decline. And we had a situation where Russian oil was selling at about a $30 discount to the international benchmark. So for instance, if Saudi Arabia was selling oil for $65 a barrel, Russia could sell molecularly identical oil for $35 a barrel. So you can just imagine the hit that that was happening, that was giving to the Kremlin and I in February of this year. So just a month ago the Russian government had the single worst month they’d ever had for oil revenues. And so they were under significant pressure because of these sanctions. 

 

I think because of this oil price spike, the Trump administration has completely undone that policy. And just two weeks ago, they eased sanctions on India’s purchases of Russian oil. And then last week they actually expanded that such that now anyone in the world can buy Russian oil without a threat of U.S. secondary sanctions. And what that has meant is that Russian oil, which was previously selling, like I said, at a $25-30 discount, is now actually selling at a premium to global oil benchmarks. Because Russia is one of the big producers that actually doesn’t rely on the Strait of Hormuz. This has led to a windfall for the Russian government on the order of $150 million to $200 million each day. So unfortunately, I do think that this has taken a huge amount of leverage off from Vladimir Putin and made it much harder for us to actually push him to agree to a just peace in Ukraine.

 

ISAACSON: Have sanctions ever worked though against Russia?

 

FISHMAN:  I think we need to be realistic about what sanctions can achieve. And I’ve always said that changing Putin’s calculus may be too high of a — too tall of an order. And if you define the goal of sanctions against Russia as attrition, basically weakening the Russian military industrial complex to make it harder for Putin to execute his imperialist agenda, sanctions have certainly worked. And I think this is the thing we don’t often think about is, well, what would the Russian economy look like today if there were no sanctions? The Russian economy would be far more robust, far more wealthy. They’d have a far more fearsome military-industrial complex than they would otherwise have. And so, even though sanctions haven’t delivered this brass ring of a peace deal in Ukraine, I still think on balance, they’re doing a lot more good than harm.

 

ISAACSON: Former Secretary of State Madeleine Albright used to talk about arrows in the quiver that we had in terms of foreign policy — obviously military but then economic ones that you’ve described and sanctions and eventually soft power and all. Over the past 10, 15, 20 years, thanks to you and Stuart Levey and others, the economic arrows have become more important. Are we now beginning to see the end of that?

 

FISHMAN: So I think there are two reasons that really led to the rise of sanctions in U.S. foreign policy. One was the creation of these chokepoints. The fact that with globalization, United States could impose really substantial economic pressure on any other country in the world without the use of military force, without a naval blockade. All it takes is signing a document in the Oval Office to cut off a foreign bank or company from the dollar. You don’t have to, you know, blockade a port or put a siege on their cities. 

 

I think the other factor was that in the wake of the wars in Afghanistan and Iraq, the political support in the United States for the use of military force has just totally evaporated. I think what’s happened over the last year with Trump’s operation to bomb Iran’s nuclear facilities last year, Operation Midnight Hammer, and then of course the really spectacularly successful Maduro raid at the beginning of this year, Trump in some ways, I think, had this maybe exaggerated sense of the competence and sort of power of the U.S. military. And in some ways, I think maybe temporarily Washington forgot the lessons of Iraq and Afghanistan, that it’s much easier to start a war than to end it on terms that are advancing U.S. interests. 

 

So I do think in some ways we were creeping in that direction, but I do suspect that we all now are very viscerally aware in the United States and around the world of the very significant collateral damage that military campaigns can have. And so I expect that one consequence of this Iran war is going to be a renewed focus on the use of economic warfare, both by the United States and by countries like China around the world.

 

ISAACSON: Edward Fishman, thank you so much for joining us.

 

FISHMAN: My pleasure. Thanks for the great conversation.