Risk of Dangerous Miscalculation Rises in Gulf

(Bloomberg) --

The waterways that bring Middle Eastern oil to international markets have become a conflict zone after the latest attack on two tankers near the Strait of Hormuz, the only sea passage from the Persian Gulf into open ocean.

The U.S. blames Iran, and has released footage of what it says are Iranian forces removing a mine from one of the tankers after another mine damaged it. In a statement, Secretary of State Michael Pompeo rattled off a long list of recent alleged Iranian acts of aggression.

Iran denies involvement. President Hassan Rouhani, at a summit in Kyrgyzstan, accused the U.S. of seeking to “destroy international rules and structures.”

The president of one of the tankers’ operators says there’s no way a mine caused the damage: Crew on the ship saw it being hit by a projectile.

U.S. President Donald Trump has indicated he does not want to get pulled into war in the Gulf, and has said he remains open to talking. There's been a flurry of diplomatic activity — including a visit to Iran by Japanese Prime Minister Shinzo Abe this week — to try and settle things down. European nations have also urged calm.

It’s unlikely the U.S. would have broad international support for a fight. But the risk of miscalculation as navies circle each other is real.

“I’ve been saying for the past month that the threat of war with Iran is over-hyped,” said Ilan Goldenberg, a former Pentagon official who's now at the Washington-based Center for a New American Security. “Not after today.”

Global Headlines

Battling Boris | Boris Johnson was the face of Brexit in Britain’s 2016 referendum campaign and three years later is on course to become prime minister. He is the run-away leader in the race to succeed Theresa May after Thursday’s first round of voting in the Conservative Party leadership contest. Johnson’s rivals are licking their wounds and weighing up how they can stop him, or if they should give up trying.  

Crossed wires | German officials emerged from a secret White House meeting last month convinced they’d been offered a way to avoid auto tariffs. But as Birgit Jennen, Nick Wadhams and Patrick Donahue report, the U.S. side thought they’d emphasized how real the threat is. It’s just the latest example of the breakdown in the relationship between two of the world's key economies.

Budget breakthrough | After all-night talks, European Union finance ministers struck a deal on the design of a common budget for the euro area. They also agreed on broader powers for the European Stability Mechanism, the bloc’s bailout fund. Meanwhile, Viktoria Dendrinou and Eleni Varvitsioti detail in a new book on Greece’s financial crisis how the EU prepared for the potentially catastrophic consequences of a Greek exit from the common currency.

Radical gain | Brazil lost its third minister in six months after President Jair Bolsonaro fired Carlos Alberto dos Santos Cruz, the government secretary and one of the more moderate voices in his cabinet. While the dismissal represents a victory for the most radical forces in his government, since Santos Cruz’s replacement is also from the military, the change may have limited impact on the administration’s reform agenda.

Shifting fortunes | Some of the biggest names on the Las Vegas strip have ties to Republicans through donations or high-profile political involvement by executives. But a deluge of California transplants and a growing population of Latinos and Asians are transforming Nevada politics — and with it the casinos, some of which are betting more of their chips on Democrats.

• Click here for more on the unlikely similarities between the populist messages of Trump and Democratic presidential candidate Elizabeth Warren. 

Mending fences | Weeks after Liviu Dragnea, Romania’s most powerful politician, was jailed for graft, the woman he picked to run the government is plotting to mend the damage he did to ties with the EU. The country is on the brink of following Hungary and Poland into the bloc’s bad books after Brussels accused it of backsliding on democracy. Prime Minister Viorica Dancila is trying to ensure Romania avoids sanctions.

What to Watch

• A top adviser to Hong Kong leader Carrie Lam said her administration underestimated the depth of opposition to a China-backed extradition bill, as the former British colony girded for another mass march on Sunday.
• White House Press Secretary Sarah Huckabee Sanders is leaving the Trump administration at the end of the month after a turbulent tenure — and isn’t ruling out a run for governor in her home state of Arkansas.
• The Democratic National Committee unveiled the list of 20 candidates who will take part in the first presidential primary debates of the 2020 election, in Miami on June 26 and 27.

And finally...When Trump bought 436 acres in upstate New York two decades ago, he envisioned creating two new championship golf courses. After local leaders nixed those plans and his subsequent efforts to sell to a homebuilding company faltered, he gave the land away — but not before attempting to get it reappraised at more than five times the assessed value. Lynnley Browning traces how the overgrown, tree-tangled parcels became the dilapidated Donald J. Trump State Park.

--With assistance from Kathleen Hunter, Tim Ross, Michael Winfrey and Ben Sills.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net, Anthony Halpin

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