STEVE INSKEEP, HOST:
How far could the United States and Saudi Arabia push a confrontation with Iran?
DAVID GREENE, HOST:
Well, the allies are considering how to answer an attack on oil facilities in Saudi Arabia. The United States cast suspicion on Iran without yet offering evidence in public. The Saudis have offered what they say is evidence that the attack was, quote, "sponsored" by Iran. The Saudis dismissed the armed group in Yemen that claimed responsibility. Iran says it is not to blame here. So what now?
INSKEEP: Let's work through this story with NPR's Peter Kenyon, who's been following developments from Istanbul. Hi, Peter.
PETER KENYON, BYLINE: Hi, Steve.
INSKEEP: What did Saudi Arabia present?
KENYON: Well, they showed some drones and missiles that they said were clearly Iranian weapons. What they didn't do, in so many words, was declare that they have any proof that the attack was launched from inside Iran. They say that's still under investigation. So we'll have to see if that's just a matter of time or whether Riyadh may be leaving an option open to avoid escalation.
INSKEEP: Yeah. And I guess if they say sponsored by Iran, that actually still gives a little space between saying it was actually Iran committing the attack. But have any outside groups, independent observers of any kind, been able to weigh in on the quality of the evidence?
KENYON: Well, France has said it doesn't find the other claim, which was by the Houthi rebels in Yemen, that they were responsible for the attack. France says that's not a very credible claim. And of course, Washington's laid out, in quite a lot of detail, why it doesn't believe the Houthis are capable of an attack this big, this sophisticated, carried out over a several hundred miles' distance.
INSKEEP: And Peter, as you know very well, this comes amid rising tensions between the U.S. and Iran - and the Saudis, for that matter. Have the U.S. and the Saudis, on their side, found very many allies?
KENYON: Well, they're gathering a coalition. Secretary of State Mike Pompeo talked about that. It includes the U.S., the U.K., Australia, Bahrain. And then most recently, the United Arab Emirates joined. It's not clear exactly what they'll be doing. But the stated goal is to protect shipping in Mideast waters, including the Strait of Hormuz, rest of the Persian Gulf.
On the plane to Saudi Arabia, by the way, Secretary of State Pompeo was asked about this very expensive missile defense systems that have been sold to the Saudis, which failed to stop the Iranian missile. And he acknowledged such systems can't guarantee a country won't be hit. Here's how he put it.
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MIKE POMPEO: We've seen air defense systems all around the world have mixed success. Some of the finest in the world don't always pick things up. We want to work to make sure that infrastructure and resources are put in place such that attacks like this would be less successful than this one appears to have been. That's certainly the case.
KENYON: Yeah. And that's just one reason why world leaders and Mideast analysts are calling for diplomacy to kick in here to de-escalate the situation. Now, Iran's supreme leader was not especially helpful on that front, ruling out any meeting between Iranians and Americans at this month's U.N. General Assembly meeting, for instance. But Iran analysts say lower-level private talks could still be possible. The French foreign minister, for one, says the U.N. assembly could still be an opportunity for diplomacy.
INSKEEP: Some past confrontations have not quite led to war. What's the risk of a wider war this time?
KENYON: Very big question. The immediate answer will depend on how the Trump administration responds to this attack or if the Saudis themselves respond and, if so, how. President Trump has been quite clear, the U.S. has options short of military action. Pompeo has been careful to point out no Americans were killed in this attack. Beyond all of that, if there are further strikes, however, either by Iran or Houthi rebels, that could greatly ratchet up pressure for a response, which has so far been sanctions ordered by Trump.
INSKEEP: Peter, thanks so much.
KENYON: Thanks, Steve.
INSKEEP: That's NPR's Peter Kenyon.
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INSKEEP: All right. Just as he launched a campaign for reelection, Canada's prime minister is forced to confront his past.
GREENE: That's right. Time has published a photo from an old yearbook. It's from 2001. And in it, Prime Minister Justin Trudeau appears in brownface makeup at a costume party. The prime minister says he was attending an "Arabian Nights" themed party at a private school where he taught before he entered politics.
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PRIME MINISTER JUSTIN TRUDEAU: I dressed up in an Aladdin costume and put makeup on. I shouldn't have done it. I should have known better, but I didn't. And I'm really sorry.
INSKEEP: In some ways, this story echoes events in the United States, where an old yearbook photo prompted calls for Virginia's governor to resign. Now, the journalists who looked into Prime Minister Trudeau's past include Anna Purna Kambhampaty, who is a reporter for Time. Welcome to the program.
ANNA PURNA KAMBHAMPATY: Hi. Thanks for having me.
INSKEEP: We heard Prime Minister Trudeau say what he was doing. But what do you see when you look at that old photo?
KAMBHAMPATY: Right. When we first saw the photo, we couldn't immediately tell it was him. And, you know, everyone in the other photos alongside are all wearing appropriative costumes, but no one went so far as to actually paint themselves and do brownface. So it immediately stood out.
INSKEEP: Yeah. This photo, I'm looking at it now. I see that he's in the photo with four women, and they are dressed like women at a party. There's nothing really remarkable about them. Trudeau is - in and among them, he's got his brown-painted hand around one person's shoulder, and he's wearing - what is that? - a turban on his head, as well?
KAMBHAMPATY: Yeah. Yeah. It appears to be a costume version of a turban.
INSKEEP: What did you think when you saw this?
KAMBHAMPATY: That it is highly insensitive, whoever this was, before we even identified it, and that they went way too far with this costume.
INSKEEP: Did you try to find other people who were in that photo or at that party?
KAMBHAMPATY: Yeah. We contacted several other people who were at the party - you know, parents, teachers, former teachers. And yeah, we were just trying to see who had a first-person account of this.
INSKEEP: Did anybody admit to being there?
KAMBHAMPATY: Yeah. We had several people admit to being there. We had people who knew about the photograph before we even brought it up with them. But no one really wanted to go on the record to identify him.
INSKEEP: You say they knew about the photograph. Where was this, exactly? It wasn't exactly hidden, was it?
KAMBHAMPATY: No. It was in a 2001 yearbook.
INSKEEP: And had you just thought to go through yearbooks and see what you would find?
KAMBHAMPATY: No. Actually, we - I had heard about this photograph as a source of gossip in the Vancouver community and, you know, went to look for the yearbook after that. And this is what we found.
INSKEEP: Vancouver community. What was Trudeau doing there at the time?
KAMBHAMPATY: He was a schoolteacher. He taught a few different classes at West Point Grey Academy.
INSKEEP: OK. Now, as you know, the reaction in Canada has been pretty fierce. His conservative opponent in the upcoming election has essentially said this means Trudeau is not someone who's fit to govern the country. How has Trudeau been responding?
KAMBHAMPATY: I mean, since we went to his campaign, Trudeau has been pretty honest and straightforward with us. And he's even admitted to a previous incident that mirrored this. So he seems to be, you know, responding pretty honestly to it.
INSKEEP: Thanks very much for your reporting. Really appreciate it.
KAMBHAMPATY: Yeah. Thank you for having me.
INSKEEP: That's Anna Purna Kambhampaty of Time.
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INSKEEP: When the economy is strong, the Federal Reserve typically raises interest rates. It's an effort to avoid inflation.
GREENE: By many measures, the economy would seem to be strong right now. But for the second time this year, the Fed has lowered interest rates. It's the kind of step the Fed typically takes to ward off recession. The Fed Chair Jerome Powell explained the drop of one-quarter of a percentage point.
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JEROME POWELL: We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.
INSKEEP: NPR chief economics correspondent Scott Horsley is with us. Hey there, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: What are the notable developments and ongoing risks?
HORSLEY: The main risks that the Fed chairman cited for the economy are a slowing economy in other countries and the ongoing trade war. Both of those have had the effect of depressing U.S. exports, as well as business investment. Powell said explicitly yesterday that businesspeople had been telling the central bank they're wary about spending money on their businesses because they don't know what direction U.S. trade policy is going to take.
INSKEEP: OK. So those are the ongoing risks. But this was a decision made by committee, as happens inside the Fed. Did everyone agree with it?
HORSLEY: No. This was not a unanimous decision. There were two members of the Fed's rate-setting committee who wanted to leave interest rates where they were. And there was one member who wanted a more aggressive rate cut, of a half a percentage point, rather than a quarter-point. Powell said that he welcomed that diversity of viewpoints. He has acknowledged in the past that the economic signals that the Fed's been getting lately have been somewhat murky. And so it's not altogether surprising that there should be some difference of opinion on the right course of action to follow.
INSKEEP: Scott, is it entirely a coincidence that this interest rate cut happens to be just what President Trump has been quite loudly lobbying for?
HORSLEY: Well, it's not exactly what the president's been lobbying for. This was one small step in the direction of lower interest rates, and the president really wants to see a giant leap in that direction. He had been calling on Fed to cut rates to zero or even below. After the Fed issued its statement yesterday, the president actually tweeted that the central bank had failed again. He accused Powell and his colleagues of having no guts and no vision.
The stock market took a kinder shine to the Fed's action. It dropped at first but later rebounded, and the major industries ended the day in positive territory. And Powell, as he's done in the past, shrugged off the president's criticism and said the Fed will continue to act independently.
INSKEEP: But they are moving in the direction the president demanded. And it is a bit unusual since the economy would still seem, by most measures, to be strong. And that does raise a question about risk, Scott Horsley. If rates are going down now - when, as far as we know, the economy is still growing - what is left for the Fed to do if another recession were to come?
HORSLEY: That has been a concern. And some have said the Fed should, in effect, keep its powder dry for a real downturn. The counterargument that Powell and others have made is that if you only have a limited number of monetary bullets, as it were, with rates already pretty low, it's better to use them early and not wait till you see the whites of the eyes of the recession. That's what the central bank's doing here with this preemptive rate cut.
INSKEEP: Will ordinary people feel this quarter-percentage-point change in any way?
HORSLEY: This could mean lower borrowing cost on things like car loans. It will also prop up the stock market, which will make at least some consumers feel a little wealthier. And that could encourage spending. But keep in mind, Steve, consumer spending has not been the weak spot in the economy. Consumers are already spending freely.
It's business spending that's been weak. And that's not because it's too expensive to borrow money, but because business people aren't sure they're going to have demand for their products. So it's not clear this rate cut's going to solve that problem.
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INSKEEP: Scott, thanks for your insights.
HORSLEY: You're welcome.
INSKEEP: That's NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.
