welcome t welcome to the. we begin with lail brainer the - lael brainer. >> we want the imf in there. they have an unparallel track record bringing credibility and technical advice to make reform hang together and to help restore countries to grow so we want their advice at the table. the other thing that we bring to the table, and this is with, you know, a fair amount of kind of battle scars is this is the president that navigated the biggest financial crises we've seen in decades. and president obama has, you know, a very good sense not just of the economic requisites for kind of financial crises fire

fighting but also how you build a political support. we continue this evening with a look at the energy crises and the price of gasoline with daniel yergin awe ter of the quest, energy security and the remaking of the modern world. >> if we were looking at $4.50 or $5 gasoline in the united states, that would be a pretty big set back for economic recovery. it would affect consumers, it would affect spending, it would take tens of billions of dollars out of consumers pockets. it would affect a lot of companies and it would affect something else which you can already see. it would start to affect confidence in people would pull back. lael brainard and dan yergin when we continue.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose.

>> rose: lael brairnd is here, she's a treasurer department's undersecretary for international affairs as america's top financial europe for urgent task to convince europeans to build a firewall to prevent the economic crises from spreading. today the leaders agree for a bailout for greece blejing 100 n yueuros. i'm please to do have her at this tain for the very first time. welcome. >> thanks, glad to be here. >> rose: what are the sticking points and what were the hurdles to overcome and how did they do it? >> well, this has been a deal that has been long in the making, as you know. and the difficult hurdles have been really for the greek parliament and greek political leaders to sign up for very tough structural reforms that are not popular but ultimately

are going to be necessary to restore greece to competitiveness after a period where it has really lost its competitiveness and it has been growing far too slowly. and that is something that greek people are going to be working on for some years. >> rose: are they convinced that they will be able to politically achieve this? >> well, the european finance ministers in the imf have been very engaged with the prime minister and the political parties to put forward not only a set of reforms to get them passed in parliament ahead of time and to commit ahead of time that they will remain committed to them as they go ahead and impreliminary that and the commitments on the part of the political leaders were very significant with that regard. as you know, there's also a

separate set of discussions going on with private invoters and they reached an agreement on a voluntary bond exchange which will significantly rules greece's private sector. >> rose: to get them beyond 50% that we thought was the nurm they were shooting at important. >> they targeted 120% that's the gdp ratio which is really necessary foo put greece on a sustainable path. >> rose: 2020. >> 2020. they were to make shooter measures both on the greek and voluntary bond exchange would bring the debt down to a sustain level. i think it was on the basis of a very strong set of structural reforms that europe came together in support of greece. now of course in the days ahead, we have to see votes on the part of european parliaments and part

of this package. so it's an important step but there are a number of additional steps that are going to be necessary to put greece firmly on a sustainable path as part of a kind of overall framework to put europe on a much stronger footing and to reduce financial stresses. >> rose: can you have this kind of austerity with this kind of interest commitment spoment and stilspoment -- responsibilid still see growth. >> it's important to see growth in europe. and i think european leaders know that and they are grappling with the challenges of supporting growth at a time when several of the countries are also trying to get their fiscal different saturdays dowdeficitse sustainable levels. if you look at europe going into the crises what really stands out for most of these countries is not the fiscal, it's the extent of internal balances that arose during the years leading

up to the crises. the savers and the surplus countries like germany were more than happy to finance the deficit countries like italy and greece and others. and of course that has changed now. the private market's pulling back. what's vitally important is for countries like italy and greece and others to grow on the basis of more competitive private sectors. and those are the reforms they're putting in place, you know, given the right overall environment. i think those structural reforms can lead to growth and they need to lead to growth. >> rose: what worries you about it? >> well, what has been consistently most challenging about the european crises has been that the political dynamics are necessarily inevitably slower than the market dynamics. here you are in a monetary union where there's monetary

integration, but the fiscal side of course still fits with 17 national parliaments. so for the very fundamental reform they're putting in place and these are fundamental reform it requires first of all 17 heads of state to come together to reach an agreement and then 17 national parliaments to approve, to deliberate and approve. so it has been a case where very significant strides have been taken. but of course the markets always get out ahead. you know the other thing of course that's important, and we are very mindful of this is europe is just so important in the global economy. it's huge trading partner of ours. 15% of our exports go to the euro area are financial sectors. are interconnected. and so europe's health and vitality matter for us. >> rose: it's an important market for china too. >> very important export for a

lodge of emerging markets. so for us here in the u.s. and the president when our recovery has been fragile, it has been extremely important to try to sustain our recovery and make sure that the risks emanating from europe are well managed. and so that's why we spent so much time on the european financial crises and you know we've worked very closely with our european partners. they made strides again. you know i think it's very notable on four areas, you know, the sort of four key areas, the reform that we're talking about across the board. different reforms in different countries but all with a beauty to it eventually ultimately got to be about growth. and a fiscal compact over arching that. they get grief on a sustainable course. thirdly the steps that mario and the ecb have taken to make sure

the banking system has the requisite liquidity and the capitals buffers. the full thing whic final thinge president talking about and the secretary of the treasury about firewall firewall firewall to protect the larger economies from spillovers as some of these countries are working through their reforms. >> rose: what did you do there? what was your role. >.were you negotiating or explaining america. were you marijuanaing, wer nudgu appreciating. >> we're not at the table. we have huge intrls in how they and-a-half dpait. >> rose: we have a special gain. >> we have huge interest because again this is one of the significant risks out there. >> rose: it doesn't mean that we're making some, we have something -- >> so the president, secretary,

myself, we have stayed very engaged. we do a lot of back channel diplomacy with the key decision makers at the table, we spent a lot of time around the table at the g20 at the g7 with our european partners and of course we do have a significant ability to influence through our majority, our sort of largest single share holding in the imf. and so as they are engaged and they are central partner on these reforms, we say -- the international monetary fund, christine laguard has been very much at the negotiating table. and we want the imf in there. they have an unparalegal track record of bringing credibility and technical advice to make reforms hang together and to help restore countries to growth. so we want their advice at the table.

the other thing that we bring to the table, and this is with, you know, a fair amount of kind of battle scars is this is the president that navigated the biggest financial crises we've seen in decades. and president obama has a very good sense not just of the economic requisites for kind of financial crises fire fighting but also how you build a political support for moving forward on reforming the financial system, making sure that you know as we do with our capital assessment program for the bones an banks and making se bank are carrying enough capital. >> rose: this is becausal three -- >> you'll remember what the oak administration undertook was to submit our largest banks to supervisory adequacy assessment

and require them, our largest banks, require them to build the capital. and this is something the europeans are just now undertaking but it was critical important to the resill yenls of our financial system and is serving us well today. our banks are better capitalized in managing their quudit liquidy better so they're in a better shape today. >> rose: they say about this occasion as you well know, it will in fact restrict their growth. >> there are discussions about regulatory reform that our financial institutions are looking at a profoundly transformed regulatory environment with much more intensive supervision, much more trans parency, much more accountability on compensation. and of course they're all going to be having some concerns about adjusting to the new environment. but i don't see how we do

otherwise on the heels of the major disruption that came with the financial crises. and the one thing we are doing is working hard to make sure that every other major financial jurisdiction puts in place the same kinds of tough reforms. >> rose: and has that happened because in conversations i've had since this economic collapse and all the things that have taken place, the one question was always raised was can we find international agreement, can we find international standards for this. >> do you know what has been remarkable, is that we have worked in parallel. as congress was working on the reforms under the dodd-frank act we worked on getting conforming agreements internationally. so you mentioned bozzl. we got the same capital and requirements that our banks are coming in conformance with. those are adopted in other financial jurisdiction. when we talk about bringing them out of the shadows into

transparency and subjecting them to supervision for the first time, well europe and singapore and other jurisdictions are signing up for the same kinds of changes. >> rose: i'm not quite sure. i yet when you were there and you were part of these negotiations, what tools are you using to, as pressure points? >> well you know, the reality is that we bring ideas to the table. we bring our experience to the table. so you know, we are leading in a very different way. we are leading -- >> rose: what does that man, we're leading in a very different way. >> well you know, coming off of the last decade of excess, if you will. the united states really had to earn back credibility in international arenas. and we've done it. i think we've done it by working hard to ni fix our own flaws inr financial system. working hard on our economy. and then working hard in international, like in the g20

where president obama came in very early on and said look we understand that the world has a set of emerging markets that need to be at the table. and we're going to shift to make the g20 which includes brazil and china and india. bring the emerging markets to the table, let's sit down and work through the new rules together. which we've been doing. so i think when we engage in these conversations with our european partners, for instance, you know, we bring to the table some ideas based on our own experience which we think have helped and we also do so from a position of having very quickly to address some over our own issues. >> rose: you have a reputation as a very tough negotiator. >> i -- >> rose: according to what i read in the "new york times." my question is what were you negotiating. let me move to the question of the chinese. what participation did they

have. because they came over and they had cases about what was going on. obviously there was some effort to bring them inn terms of making a financial commitment. >> so with regard to international negotiations we've been working in ar areas making sure the world has better financial rules similar to our own. in the case of european crises we've been working hard with our european partners to make sure they see the crises the way we do, share the sense of urgency with partners from around the world and i can assure you that china and the emerging markets are as ininvestigated i investe- >> rose: everybody understands what was happening here. >> making sure everybody understands. china has worked pretty well with us and with the international community on supporting europe but at the end of the day it's really europe. it has the capacity and the

resources to manage through this. ultimately it's europe's responsibility to chart a path forth that will fundamentally restore market confidence and show the world that the euro area is going to be sustainable and viable into the future. so at the end of the day it really sits with them. >> rose: when you come back to washington and you report back to secretary geithner and the president, do you say we got this firewall that was necessary for the united states and its economic recovery? >> it's certainly one of the key priorities. and yes, the piece of the european crises response that is still a work in progress, i would say, is that firewall. they've made a lot of progress on it. they are going to assess the size and strength of that firewall in early march. we're looking forward to that review and we think that will be extremely important signal to send international markets to

help restore confidence. >> so we shoul >> rose: we should not worry as much about italy today as we did a week ago. >> the prime minister has really transformed investor reviews about italy. peace come in and he's built political support first for a fiscal path forward that strikes that balance. and secondly, very importantly in italy, the key is to restore the dynamism of the economy. he's put a set of reforms over time to really help restore growth in the italian economy. so that has been critically important but you know i also think building a stronger firewall overall for europe is very much in the interests of the reforming economies like italy, like spain. >> rose: do you see any similarities between this and what happened to the united states? >> you know, i think that these

if you look at greece it's really a very unique case in terms of its loss of competitiveness in the private sector over the previous decade. united states has challenges but these are wholly manageable challenges. our private sector remains enormously dynamic. in fact, if you look at the auto industry what you is a there is a transformation in a very short period of time, restored competitiveness with very positive record on exports and on making products that the world wants. i think we're going to see much more of that in the years to come in the u.s. with our manufacturing sector really warring back. but we do have to make sure that we can continue to invest in the long term competitiveness of our economy. that means infrastructure, that means education, that means innovation. in order to do that, we have to come together also around our fiscal challenges. again, we are in a good position today to do that but it does

require people to come around both sides of the political spectrum. we know we need to rules our deficits and get our debt on a decleanindeclining pat several . >> rose: right now we neat growth. >> we need growth. right now we need an insurance policy against shocks that might come from abroad. that's why it's so important that congress came together around extending the payroll tax cuts. we can do that. we have the capacity as a nation to both support short term recovery, job creation, extraordinarily important and chart a fiscal path forward. we've tried to do that in the budget. it's going to require both revenues and expenditures to be on the table. but that is just a, the very clear pat forward. and it requires some hard choices. >> rose: looking to the visit recently by president china what

was achieved by that visit and the understanding of global economic issues. clearly your husband and the state dent has been of the cutting edge and you have been on the cutting edge. china has been a focus of yours. the currency issue. >> yes. >> rose: and they constantly sort of push back because they believe it has to do with employment in china. >> you know, china has made quite a bit of progress on the currency issue. and they show every indication that they understand that they need to move to a market-based exchange rate system. >> rose: is there a butt to this? understand butt. >> if you look at their currency, just over the last year and-a-half, bilateral appreciation of the currency adjusted for the dollar in influence 12%.

very significant. you if look at their overall current account, it has come down from 10% surplus at the peak to under 3% in just a handful of years. when we talked to chinese leadership and president obama was very direct with the vice president on the issue of currency eighty - -- they can'te way they've grown in the past. >> rose: they can't expect double-digit growth or do they. >> i would say it's more about the sources of growth. they had a model that was extraordinarily dependent on exports. >> rose: they just called ankers port model. >> export driven. very high level of investment in export industry.

>> rose: how long was it in your judgment to turn that around so it is a consumption-driven economic model. >> they're going to have to do it. their demographics are going to shift very rapidly on them. if you look even on the next five years, their labor forms is going to peak out over the next five to eight years. and their labor force is going to decline very quickly. and so they're going to have to find ways. >> rose: let me under that. the labor force will peak out and decline rapidly meaning what? >> meaning essentially they will turn from an economy that had a very large working force population relative to young people and old people the and the economy. so during that time period they had tremendous advantages of advantages in terms of abundant and low cost labor. you're seeing a shift now where wage rates are growing at double digits faster than inflation in china, particularly in export

centers in china. their exchange rate is appreciating and the work force now is going to have to become more highly skilled and their production is going to have to be higher value added relative to where they've been. and of course you know, in making that transition, if they want to continue growing at the rate they've been growing and to move to middle income status, they're going to have to move to domestic consumers as the engine that drives that economy. >> rose: so they want to see their people have more disposable income so they can consocial more of the thing they're manufacturing. >> absolutely. >> rose: this is the old henry ford theory. so they can buy the thing you produce. >> that's starting to happen and this will be good for us. this helps a lot in terms of having a more balanced and fair relationship which is really important. the president has put a lot of emphasis on that. and of course it will help with

our exports because a lot of the areas where we're strong are the areas that they're going to be buying more. high area services where they've really lagged behind. there's a shift that's going to take place in china and really the question is how quickly it happens and what kinds of policy changes are put in place. and what of course want to ensure that the policy changes move more rapidly like on the appreciation of the exchange rate but also in a way that levels the playing field. we did make some important progress during vice president's vite. they opened up this auto insurance market to our providers for the first time which was a big step forward. we got a deal that really improved access for our film industry, for audiovisual products into their market. and -- >> rose: is prio piracy a huge

issue. >> it's still a huge issue and we'll keep working on that issue. we got earlier in the context of heapresident hu they made an abt face on their policy to design and favor their innovators over hours. that has been undone. >> rose: how did this policies favor their innovators. what was it that they did that was offensive. >> the chinese were putting in place policies that were intemedded to give preferences and procurements for instance to products whose innovation took place in china. and you know, they announced this policy and immediately we said look, this is not the right way to shift your economy to more value added and more innovation. what you want is to have more competition and more innovation globally which is the model that we have seen work so well for

the u.s. and so they did, they were worth those preferences, and we are seeing them moving forward in the areas like tech transfer. >> rose: that's big issue for them. we'll talk about that later with dan yergin. but when you look at oil, china, you see iran saying no more exports to britain and france. what impact will that have to the chinese and the indians are prepared to come in there and buy all they can get. am i right or wrong? >> i think that in fact you know we've had a set of very important dialogues with all of the major consumers of oil around the world. china, india, japan. and they general share our strategic goals, that's very important. >> rose: strategic goals being we do not quantity them to have a nuclear capability. >> that's right.

>> rose: they share the goldman but do they share the means to get there. it has to do with sanctions, oil embargoes. >> we're seeing that many of our partners around the world are taking very seriously the need to move away from dependence on iranian suppliers of oil. and are looking for -- >> rose: they are prepared to take some of the burden. >> there are a number of things in the oil market that should be seen as positive. libyan oil supplies are coming back on-line quicker than many people anticipated. other producers have indicated willingness to step up and provide additional supply. but you know, at the end of the day obviously gas prices are very important hitting the pocketbook of american consumers so we're going to have to stay engaged on this issue. and we're going to keep up the kai logs witdialogues with otheg nations and consuming nations to make sure this doesn't impact

american consumers. >> rose: one last question about china. what is the operative, what is their -- as they make their economic projections for their five-year plan, what economic growth rate. what are they projecting? is it 8%, is it 9%? >> you know, i don't have the precise growth rates. what i do know, having spent a fair amount of time in conversations with chinese count parts and also participating in these very senior level meetings is that their 12 five-year plan is promised fundamentally on a shift to -- >> rose: they make sure that's it. >> they have targets in there for consumer income as a share of gdp, for services as a share of the economy. they have the kind of key touch stones you would want to see a big rebalancing. of course china succeeds on that front, it will be enormously helpful to sustain a global growth more generally and to

helping rebalance the relationship, the economic relationship between china and the u.s. in a way which we think will be supportive of our economic growth. their economic growth and of course of broader economic relationship. >> rose: in dealing with them, have you noticed any kind of change in terms of their own for lack of a better word, confidence? i mean of the said that several years ago they were enormous confidence watching the united states deal with economic collapse. more confidence in themselves and then pull back a bit from that. i mean what have you seen? >> i think that you know generally, in many of our international dealings, certainly in the g20 bilaterally, you know, people were watching and waiting to see how we were going to deal with our financial crises. and i think they have realized the u.s. is back, you are know. that we came back very quickly. we addressed the root causes of the financial crises by strength thing our beeks by putting in

place, you know, very fundmental transformation of the financial system and reforms and by supporting the recovery. so in that sense i think our confidence as a nation is very much in the process of being restored. and you know, as china charts a path forward, they take at a very high priority perhaps the highest priority steering a constructive relationship with the united states. you could see that in the vice president's visit this week. you can see it in all of the interactions the president has. this is a high priority for them. >> rose: do they fear that we're trying to contain them or has that fear been eradicated. >> it's certainly the case that in all the discussions that i have been party to at a very senior level, the administration, senior administration official, the

president has put forward the aspiration to work constructively with china to work on global problems together, to work to establish a much more balanced and fair economic relationship, and i think that's all done in a positive vein of saying we need to chart a path forward into the future. >> rose: the new president seeft worl --presidency of the . are you going to help choose the president. >> i want to step back for a second because many of your viewers are probably not as aware of the good work that world bank does. let me just say, this is a very important institution for the u.s. the world bank is on the front line in a lot of plays helper -- places helping to establish the economy where our troops are withdrawing like afghanistan. the world bank is engaged in the next generation of emerging markets helping to put in place the soft infra fraw structure the rules to make it easier for our businesses to sell into these markets.

it's a very important institution for us. bob sellig have been a very good leader for the world bank both for the world and the u.s. and i think congress just voted in december in a by partisan basis to recapitalize the world bank to fund its lending and grant making to the poorest. stw of support for continued u.s. engagement in that institution. there is a process to put forward a candidate for the leadership. >> rose: and your judgment should be for an american. >> no. what we have said is that the institution's important to us. that our leadership in the institution has served the world well. has served america well and we're going to 35089 forward a candidate in the next short period. the nomination period is scheduled to end on march. >> rose: you're smiling because you know in certain

quarters of the world they're saying it doesn't necessarily have to be an american. they would like to see other candidates from other parts of the world considered. emerging nations are saying that especially. >> we're going to make sure that the institution is, continues to be led well led because again this is an institution that if you look at what we have at stake now in the middle east and north africa, the world bing has been and will continue to be a very important investor in places like egypt and around the world. >> rose: you cannot emphasize that too much. after the arab spring they come together like a political convulsion. how do you create economic help and help them build an economy that will create and influence their own stability. >> i think that's exactly right. >> rose: that would be more important. >> in these arab spring countries these were ushered in

by young people often with economic greafnlsz, an opportunity to build a better life for themselves, their families, start new businesses and dact see democracies have tt delivering it. there are institutions doing fine work there. >> rose: you are a daughter of a diplomate and went all over the world what might be called -- in certain countries in europe. how did that influence you in terms of what you saw. >> well i did, are i grew up in communist and was in germany before unification and went back and forth across the iron curt ima great deal -- curtain a great deal and it developed my view on how america leads in the world. we lead by inspiring people. we led in spotter b part by offa

brighter half in terms of an economic neump and political future. and so i took from that that we can be an incredible force for g secondly, you know, the importance of dynamic private sectors in under burdening stable societies in robust democracies. we really saw anemic economies in many of the communist countries. sowing the seeds. in the private sector i've been very focused on the economic underpinnings for democracies and open societies. >> rose: and in that experience both in growing an academic experience and lands on experience with the treasury department and with secretary geithner. what's the most important lesson you have learned about negotiations? >> well, you know, i would say

most important requisite is to, you know, to bring good ideas to the table. tend of the day we prevail on the strength of our ideas. there's a lot of lure out there that the u.s. writes checks and that's really why we have influence. that's not my experience at all. i was in the clinton white house during the years when we and-a-half gated thnafgated thel crises. the reason we're at the table is because we're proactive and we tend to come into negotiations with good ideas. where we can find policy solutions that is going to make a difference in people lives. we bring those to the table. we don't always win but we always make a good effort. >> rose: thank you. >> thank you. >> rose: glad to have you.

>> good the t to be here. >> rose: we turn now from the sovereign debt crises in europe to the increasing concerns over the rising cost of oil. iran terminated all exports to britain and france this weekend. the decision was a preemptive response to the european union imbargain on european exports to begin in july. tehran signaled it would cover the ban for other european countries. markets have responded by buying up oil futures in fear of a shortage. there's a nine month high of over $5 o 00 barrel a. daniel yergin is joining me. he received a pulitzerer prize. his new book is called the quest, energy security and the remajorring of the modern world. i'm very pleased to have him on this program. welcome. >> thank you. >> rose: tell me what the risk is and the factors contributing to rising oil

prices. >> the risk is that prices continue to go all of up or that there's some kind of disruption or shortage. and it's driven really by two things. number one is the rising tension with iran. the west's effort to constrain iranian oil expoarlts and the iranian to shut down the traits of hermuz and all of that is reflected in the price of oil and thus the price people are paying at the gasoline pumps. >> rose: do people take serious the threat to shut down the strait of humoze. >> i think it can cause harassment but the iranians would say it's aimed at the west but when the premier of china was recently in that region he warned against shutting it too because china is dependent on

the flow of oil out of that region. china is the most dynamic rapidly growing oil market in the world and interestingly now in the united states our domestic oil production is going up and our imports are going down. >> rose: that's good for us in the long run. >> it's good for us in the long run. it's good for us in the medium run and it's probably even good now because if we were not producing more oil domestically, if we were not being more efficient in using it then the world oil market would be even tighter and we would be looking at higher price. >> rose: but china and india both have gone to iran and said we want to buy all the oil we can get, haven't he they? >> i think the messenger is ambiguous. the chinese as important as their relationship is with iran, more important is their relationship with the united states. also important to them is the relationship with saudi arabia and the other countries in that region. i think china has a balancing act. i think india's policy seemed to be kind of less well developed and less explifer explicit but k

the chinese are really trying to balance here right now. >> rose: balance what, their interest between iranian oil and their relationship with the rest of the world? >> the rest of the world including the other oil producing countries. we'll see what they do. i think they may not want to increase their dependence, their proportional dependence on iranian oil although i think the iranian are looking at them as the market of last resort and will presumably we prepared to discounted the price to sell it to china. the next president of china was here in the united states and he's focused on his relationship with the united states too. >> rose: the saudis haven't they promised all the countries that import oil from iran if there's a shortfall they'll paying it up. >> yes. they haven't said we'll replace iranian oil. they said we will meet the need of our customers and you can

read into the parent these if you rules the amount of iranian oil you're take being will make it up. they do have the spare capacity to get more oil into the market. >> rose: or mousse -- what's tn separators on this. >> the speculators, that's always what you hear and i think we'll hear a lot about speculators and gougers in the next few months particularly in this plie political system. the speculator is on the other side of hedging. if you're airline or trucking company you want to hedge your price so you don't get really whawwallop. we've seen a financialization of oil in which financial markets, financial players are more active in the oil market than they used to be i think it's more than speculators it's investors. people with hedge funds but also people in pension funds, state

pension funds as well. >> rose: at what price would oil have a devastating impact on the world economy? >> well, charlie depends what you mean by devastating. i think as oil prices go -- >> rose: put the brakes on the economic recovery in the united states and around the global, around the world. >> well i think if we were looking at $4.50 or $5 gasoline in the united states, that would be a pretty bug set bac big setr economic recovery. it would affect consumers, it would affect spending. it would take tens of billions of dollars out of consumers pockets. it would affect a lot of companies and it would affect something else which you can already see it would start to effect confidence and people would pull back. so i don't think we're there yet by any means. but i think that's kind of one of the risks that were there. and by the way the iranians have every interest, they're very shrewd to create fear in the

market and drive up the price because by the way then they make more money. >> rose: they may need more money. >> yes, they do. it's a country, although their oil revenues have gone from $20 million -- billion dollars a year a decade ago to a hundred billion dollars. that country is in bad economic shape and those oil revenues are so important. and that's why you have the europeans and the united states trying to really go to the heart of the matter and squeeze iran's oil revenues to put real economic and hopefully they hope political pressure on iran to come to some kind of arrangement about its nuclear program short of a nuclear weapon. >> rose: or short of the capability to have one in a minimal amount of time. >> that's right. >> rose: is there a level that will cause them to say we have to make a rational evaluation here and we choose to give up and be transparent about our nuclear capability? >> charlie i think that's the

calculation because you know people who are developing these sanction programs the e ba embas say you do nothing and try to have some kind of containment like the cold war or you have the risk of military conflict. the middle ground is sanctions so there isn't a lot of precedent for what's happening right now. when you look at history. but it's thought that iran's economic situation is such that this really will put pressure on it, that this is a, this is really a new game that's being played with iran because these sanctions are so much more serious and so much go to the heart of the matter compared to anything that's happened. you can see what's going on here is that they keep talking about keeping the other option on the table. some kind of military option or the least not taking it off the table so the iranians don't know what's going to happen. and it really is a game in which

there's a lot of uncertainty. the iranians for instance they did make an effort to in some way disrupt supplies to the strait of hormuz. so communication is not very good on either side real ascribing it. but i think that the k50eu78d of one debate is are the iranians rational. i was having a discussion with one of the key people yesterday and the question they put is we do think the iranians are ultimately rational. i think the riernse iranians frr point of view saying look qaddafi gave up weapons of mass destruction. he's gone. this is part of what they see as maintaining the regime. the ayatollah khomeini, the primary leader has said that he

needs empty wit emenmity with td states. i think what the europe and the u.s. are trying apply economic rationality that creates a situation ask that splilts really th -- splits really the leadership in iran even though you don't have a score card with each player where they're going to line up on this. >> rose: back to the question of u.s. economic eradication of our dependence on oil in terms of fossil fuels. is that in the cards in the near future? >> no. i think not in the near future. i think we're going to become much more efficient in how we use fuel. we're going to go from cars that get you know 23 or 30 miles per gallon to cars that get 54 miles per gallon. and the other thing that's happened that's kind of come as

a surprise is after all these years of seeing our imports going up, we're seeing rising domestic u.s. oil production owing to the vables of advance f technology. so i think the picture is the western hemisphere will be relatively more self reliant than it would have been thought five years ago, we'll be more efficient in how we use fuel. and so we'll be in a better position but i think the big change in our energy sist till probably don't happen until after 2030 because it takes so long and the energy system is so big and it requires so much cant investment to get there. >> rose: so speak to me about natural gas and all the all tifer sources i --alternative se they play and the impact they can have on the price of oil. >> natural gas i would say we've seen a lot of progress in solar and wind but the biggest innovation in the last couple decades what happened with natural gas, we were headed down

a path to spend $100 billion importing natural gas. now what's called shale gas or unkeunconventional gas we have e a surplus of it. we've been using more natural gas in our power system replacing coal. now will we see natural gas used in transportation in a something unway. will we see it used with heavy duty truck and things like that. and i think the longer that gas prices are down and the bigger the began between oil and gas prices, there's more tendency to use natural gas as one of the alternatives in our trans portation system. and that's where we mainly use oil in transportation. >> rose: where is china on that whole question because of their own investment in finding alternative sources. >> china is on this very fast track that probably by the end of this decade they'll be using

as much oil as we are. more new cars are now sold every year if i china that the united states and that's happened very fast. so the chinese are very concerned about energy. they see it as very basic to their economy. they have 20 million people a year moving from the countries to the cities who need housing who need jobs who need transportation. all that involves energy. so their oil companies are out there around the world seeking new oil resources. they are trying to be more e fution. they are trying to promote renewable energy so they're kind of doing everything at the same time. and now they're very interested with what's happened with natural gas in the united states and they're beginning to think their own geology gives them the same kind of opportunity so that might be the next frontier for energy in china. >> rose: bill gates who obviously has made enormous contributions to global health said last year if he was allowed one wish to improve humanities lot over the next 50 years one wish to improve humanity's lot

over the next 50 years he would choose an energy miracle that would produce energy, cheap energy with no carbon dioxide emissions. is it within the realm of possibility? >> well you know, i think we're in a period, ircal i call it th- there's more focus on innovation all across the energy sector than we've ever seen before. i think there's a lot. you go to a university like mit. there are 3400 who belong to the energy club there. a lot of bright people are working on this and i think there my well be things we don't really see right now whose impact we might see in 20 years because it takes time. but i think that this kind of globalization of innovation is you know basic reason for optimism and the kind of aspiration that you just quoted from bill gates. >> rose: when yogates. when you look at the world economy it's going to be $100

trillian probably in 20-25 years. the world is going to need energy so inexpensive environmentally responsible energy is a very big contribution to achieving that kind of future. >> rose: the demand has gone no where but way up trill. >up -- >> it's certainly going to go up. we're not going to see our oil demand go up. in fact this year oil demand at this time of year is about 4% lower than a year ago. >> rose: is that because of the -- >> i think it's partly because it's warmer, partly because people are driving less partly because more efficient vehicles. if you look at the hundreds and hundreds of million people in china and india and other parts of the world who are getting out of offerly and their incomes go up their energy use goes up and that's where the growth is in the future. >> rose: suppose some very smart people with a lot of money to give you said give us your

considered judgment about the price of oil over the next six months because we want to make some assumptions about our own future. what would you suggest would be the range for the price of oil over the next six to nine months. >> well i think charlie it goes back to kind of the questions you're asking before and it really, you know, in something, you know, really goes off the tracks with iran, then you could see price go up very quickly. you see the strategic petroleum reserve used to bring it down. not only in the united states but other countries. so so much depends upon this doamplets that ardevelopments tn with rarnld combined with what h what's happening in the global economy compared to other years because of what's happened in europe and other countries. so you can't, i mean you can

have very differ scenarios but are they really derived from these two basic facts. geo politics in the persian gulf and the global economy. >> rose: thank you video tape. again the book he has reign is quawstled the quest, energy, security and the remaking of the modern world. thank you for joining us. we'll see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org