Musk Tries to Lock in His Tesla-SpaceX Dream Before Trump’s Exit

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This is Bloomberg Businessweek Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast. With Carol Masser and Tim Stenebeck.

Elon Musk has finally said the quiet part out loud. He's fully behind a historic combination of SpaceX and Tesla, his two most valuable companies, in what would be the biggest corporate transaction ever attempted. Here's what he said on the SpaceX earnings call. This was on Tuesday.

I do think there's a lot of merit to combining the companies as we are pretty much in the superintelligence singularity. And and there's a lot to be gained from cooperating on developing super-intelligent software, chip design, the TeraFab, obviously, robotics, mass-to-orbit with the star-mind constellation.

Connectivity.

So I think it.

Would be a good idea, but it's really up to the special committees of both companies.

It's a good idea, but it's not really my choice.

That's what I was going to say. It's a good idea. Let's just do it.

You know what else is a good idea? Max Chafkin.

Yeah, it's always a good idea to talk to Max Chafkin. He's senior reporter for Bloomberg Business Week. He's the co-host of the Everett is Business podcast. You can get it wherever you get your podcasts. I mean, did we all, is this going to happen?

He's going to try.

I mean, obviously, that's clear from the comments that Elon Musk made on the earnings call during the SpaceX earnings call on Tuesday. But it's been clear for weeks and weeks that this is the direction this has been going. The launch of Tesla's Roadster, the quote-unquote flying— The launch.

Yeah, exactly.

I'm doing my— It launched.

An apt choice of words because it was held at a SpaceX facility with, of course, SpaceX rocket thrusters on the back, kind of a physical manifestation of the idea of combining these companies, which makes, it does make a certain sense because, of course, you have one guy running both of them. He seems to be, at the moment, running them as if they are one company. We've seen, and we've talked about this for years, Tesla and SpaceX sharing executives, sharing technology.

At times, it's appeared.

That SpaceX has, or Tesla, they've sort of shared their supply chain as far as NVIDIA chips.

So it makes sense in that regard. I do think there are.

Going to be a lot of Tesla shareholders in particular that are going to say, why exactly would we want to give up the control? Or they don't exactly have control, but they have some voting power in Tesla in and trade that for SpaceX shares where there would be assumedly almost no voting power.

And there is a significant difference, right, in terms of Elon's control over SpaceX versus Tesla.

Yeah, I mean, Elon runs SpaceX as if it were a private company wholly owned by him.

There are outside investors.

Now it's a public company, but he controls the board, he controls the votes. It is not an independent company in the sense of a typical public company.

Tesla, on the other hand, Musk has.

A ton of power and we've seen him over the years impose his will on Tesla shareholders, get them to offer this unprecedented trillion.

Dollar pay package.

But there has been at least some check on his power in the sense that. you know, there are shareholders, there is a nominally at least independent board of directors that has to agree to this stuff. The, the board of Tesla has generally rubber stamped everything that Elon Musk does because of a dynamic.

With shareholders where shareholders very much want to go along with, with, with Elon.

Uh, so many questions here, not just what it would be called, but how this is actually going to make like, you know, when people do, when, when executives announce mergers, they always say, um, Two plus two equals five, right? Like we're stronger together than we would be apart. But would combining with SpaceX actually allow Tesla to execute better on its plans? Would it allow SpaceX to execute better on its plans?

Well, I think you heard a little bit of the rationale. I mean, Tesla is trying to develop driverless cars. I think it's been a bumpy road, to say the least, over the last decade, and trying to do that's taken much longer than they had hoped. But driverless cars rely on continuous connectivity. Starlink, SpaceX's satellite division, offers continuous connectivity.

So both of these companies, Tesla is doing lots of work with training and data sets. SpaceX is operating these massive data centers, which are currently in places like Mississippi, but one day maybe in outer space. So you can kind of start to see potential synergies there. And then I think the most important one is just that you have this very awkward situation where the two companies are competing for the CEO's time.

And maybe it would be better.

I think there's a reasonable case to be made that it would be better for both if you had some kind of centralized approach to Elon Musk's schedule instead of SpaceX executives wondering why is he spending so much time with Tesla today and vice versa?

One thing I'm wondering, and I was just going.

His entire family living under one roof, maybe.

All those kids, all those kids.

So I'm looking at revenues and SpaceX- For the 2026, I believe, it's like 47, almost 48 billion in revenue. And then for 2027, we're talking like 160 billion. There's some pretty incredible growth. If I look at Tesla, that was SpaceX, we're looking at about 107 billion in revenue for this year. The pay package, there are metrics for him to get it. How does a combined entity either change that, impact that.

I mean, this is gonna be something that the two special committees.

Will have to work out.

Looking at the pay package, there are tranches that are based on a number of metrics, including market cap, as well as things like how many cars are they making, how many robots are they making, They are a very long way from most of those metrics. So in certain ways, it's a moot point. However, in the case of a change of control, the sort of operational metrics go out the window and it's entirely about market cap. So I believe the first tranche, if my memory's correct, is at $ 2 trillion. So SpaceX, Tesla is some distance away from that now, but it's plausible that the acquisition could be above that.

When you look at the Tesla pay package, What it says is that they.

Want to align Musk's incentives with the shareholders, so you don't want to create a situation where Musk has an incentive to sell the company out from under the shareholders.

You're going to have shareholders complain about this, but I.

Do think it's not like he's going to get his full trillion if they merge. I will say there's another factor here in the merger that I should have mentioned at the top, which is politics, which is the fact that we are hurtling towards a midterm election where Musk is a very active player, where if things don't go Musk's way, and if you look at the polls and the betting markets, they may not, there is gonna be greater scrutiny on this guy's empire in all sorts of ways, and it's not like that's gonna lead to an antitrust issue, but I don't know, sometimes these combinations take a long time, and there is a window right now, if you are Tesla and SpaceX, or really any company that is interested in merging, you kinda wanna do it now or in

the next year, year and a half, Because you don't want to get into a situation where we have a new regulatory regime, maybe somebody who's more in the thinking of Lina Khan if Democrats prevail in 2028, and then you could have massive scrutiny. I should say, this deal will be scrutinized by other jurisdictions as well, EU and so on.

Elon is different, though, and in a different camp than the other companies that would want to merge. And the reason I say that is just in the last hour, the Wall Street Journal reported that President Trump spoke to SpaceX CEO Elon Musk asked him to lift restrictions on his company's Starlink satellite system. This, according to the Wall Street Journal, the president expressed frustration to Musk that the system's speeds were still being restricted at around 100 miles per hour, the report said, citing unnamed U.S.

Officials.

The White House also did not respond to a request for comment. I read that only to show the power that Elon Musk has, not just in the United States with being a defense contractor. But also with regard to Russia's invasion of Ukraine.

Yes.

And President Zelensky of Ukraine has talked about this repeatedly over the last few weeks. Elon is single-handedly able to, in the words of Zelensky... you know, make or break this war.

Yeah, well this is the second time where that Musk has been accused of cutting off communications to Ukraine.

The first time was in 2023.

You know, this is a, first of all, This is a confusing story because you have two parties, both of whom are saying, we didn't do it. So the Trump administration is blaming it on Elon.

Elon Musk has blamed it on the Trump administration.

And they're getting along again now, so I'm a little confused.

Yeah, so that is strange and odd, especially given that, as you said, Carol, Donald Trump and Elon Musk are very aligned at this point. And there's no sign of any kind of rift or anything like that.

It almost seems like.

It's two parties that don't want to take responsibility for what happened last week. The other thing is, this is going to be yet another issue for Democrats to scrutinize.

And you've already.

Seen some Democrats come out and suggest, okay, maybe we need to investigate this.

Was there anything criminal happening here?

And that is, you're going to just hear this drumbeat get louder and louder, I would predict, as we head towards the midterm and even after the midterm, depending how it goes.

And let's not forget, yes, it's about a combination. But I mean, this is a company, SpaceX in particular, right, that has government contracts. Like they are, you know, they get a fair amount of business from the government.

So it's the reliance on the government is decreasing very rapidly.

Is it?

Yeah.

I mean, they are still very much dependent on the government. They make a lot of money. The government is the main client for the rocket launches. There are lots of potential contracts going on right now.

But what about the government's reliance on SpaceX?

Well, yeah, that's what I'm saying.

The government, the Star Shield, which is the government version of Starlink, there's money there. Elon Musk has been tapped to be part of the Golden Dome, this ambitious missile defense effort. He's on a new Pentagon board to figure out ways to modernize the U.S.

Arsenal. That is another money-making opportunity.

So it's not like there aren't ways for the government to hurt Elon Musk. But as this company becomes more of a data center play and more of a play about broadband, it necessarily becomes less dependent on the U.S.

Government. Stay with us.

More from Bloomberg Businessweek Daily coming up after this.

Well, after decades of financial services experience at the likes of Goldman Sachs, Yahoo, and Jack Dorsey's block, Our next guest became one of a handful of billionaires to actually buy a bank and one that is growing exponentially.

Using mostly her own money, she became the largest shareholder four years ago in Lead Bank, which now powers some of the world's best-known financial tech companies, including NewBank, Stripe, and Affirm. Her Kansas City, Missouri-based firm has helped fuel the rise of those fintechs, Carol, many years. of which cannot provide most of their trademark services without actually working with a bank.

I got to say, all these words are in an incredible profile on Jackie Reese's by our own Paige Smith, now on the Bloomberg and at Bloomberg.com. So I highly recommend you check it out. We do welcome Jackie Reese's chair, co-founder and CEO of LEED, a banking as a service platform, former head of Square Capital, as we said, under Jack Dorsey, former chief development officer at Yahoo, and she sat on the boards of Alibaba and Ari Emanuel's Endeavor, among others.

She's also served on the Economic Council of the Federal Reserve of San Francisco. And she joins us from Palo Alto. We could talk to you for an hour. I'm just going to put it out there.

Jackie, welcome, welcome.

Welcome.

Hello.

There's a great profile by, um, our page Smith on the Bloomberg, but tell us a bit more about lead and why after so many years kind of making your way through the financial services and, and FinTech world, um, what was it that attracted you to lead specifically?

Why did I buy a bank?

Yes.

Especially in a world that's being disrupted and changing, as you know, um, Well.

We bought a bank so that we could disrupt the banking system, and we thought we should do it from the inside. And I think the insight that we saw was that banking infrastructure, which enables any company to build financial services products into their own suite of products, was something that was very antiquated. And so we took a highly technical team combine that with a very well-regarded Kansas City, Missouri bank called Lead Bank, and we built a prestige, wonderful banking infrastructure company that has best-in-class clients from all over the world. But the observation that we're sitting here with, and I think AI really fuels the fire on it, is that lots of different kinds of companies want to

embed financial services into what they do. You know, you get out of an Uber and a transaction is paid for. And that's the kind of service where people don't really think of it as financial services, but it is. And so the breadth of those kinds of behaviors are becoming more embedded into everyone's everyday life.

Yes.

And so right time, right place. We're excited about what we're building.

I was going to say so much so in some cases, maybe sometimes you forget that you didn't take an Uber and you took a cab and you get out without paying. And the drivers now are used to being like, no, no, no, you have not paid for this yet, at least here in New York. You have so much experience in the fintech space, and obviously you envision something and getting to that place. And I want you to paint that picture for us and sort of help us and our audience understand what you think the consumer experience should be versus what it is right now.

Yeah, I think the last 15 years have been incredible from an innovation point of view, taking us from bank apps that were incredibly painful to a place today where you have lots of different options as a consumer to have banking either in your core banking app or in lots of different services that you use. So it could be access to loans in all kinds of products. You know, you want to go get a home equity line quickly.

You want to go buy a car quickly. You could tap on your phone and get a loan really quickly or being able to move money around the world with the tap of your phone. I think those are the kinds of products that have really evolved over the last 15 years from, you to now having it feel seamless and almost like a beautiful experience, no different than another consumer experience.

When I was at Square, we were one of the.

First companies to make enterprise finance feel like a consumer experience. And I think that's the kind of products that exist now more broadly proliferated so that you can move money, you can store money, and you can have an experience around money kind of in your ordinary product. It doesn't matter whether you're buying a tractor, getting out of a cab, or paying a restaurant with toast really easily. It all just becomes an incredibly easy experience. And I think now when we move into the agentic world... we're going to see that in spades because now we're going to be programming our agents to engage financially for us.

Jackie, let's go there because personal agents that do move money and transact on a consumer's behalf, increasingly embraced by users. We were talking about it a lot more, but kind of hated by banks. So I'm just curious how you're grappling with this. What are you seeing and what are you considering? Because you do work with so many fintechs that enable the agents to but you've got to be mindful about liability as a bank. It's kind of an interesting world that you are in.

Let me frame where we're at today, because I actually think it'll put context around some of these issues that banks are facing today. So there's two different kinds of transactions. There's an actual card transaction, and you could see that as debit or credit. And those kinds of transactions, like a credit card transaction... actually has a failure path. It's chargeback protection, right? That makes sense. If you spend something, it's a mistake, there's a failure, it gets sent back, there can be a chargeback. In a bank balance, there's no failure path. If an agent acts outside of its own control, what is the failure path of that programming?

And today, even though we are giving it some level of control and programmability in the way.

That we're exacting those transactions.

There's not a path where if money gets moved out of someone's account or if access isn't revoked correctly, that there's a path for a consumer to correct that behavior.

And so I can see where this world.

Is bifurcated between agents executing transactions and versus agents having unbounded authority into a consumer's bank account. And I think on that element, we absolutely need more work to be done so that we can manage, you know, who has authority? What authority and what control is it? When is that authority revoked? And then can it be audited? Can you go back and see how that transaction gets audited? And so those four issues are one's which are in the process of being regulated, governed, developed more thoughtfully, so that there is a framework for conversation for what happens in the failure path. I think it's so much fun to be able to do these transactions as a consumer and to let your agent do all kinds of fun things.

What are you letting your agent do for you right now?

Oh, my agent goes crazy, actually. My agents.

And in fact, I'm about to go buy a robot that we have, my daughter bought, so that she's a programmer, a robotics programmer that we're going to buy, that we're going.

To connect into our agents at home.

And so I think I've gone down the deep end on how I'm letting agents into my personal life and into my home. But it does everything from travel planning to questions to insights to connecting with my assistant.

But I don't have it in my bank account.

I don't think there's the controls as of today to create bounded authority yet.

In order to have access.

I think we know how to fix it, both from a regulatory point of view and from a programming point of view. Both of those things are clearly within the horizon of being launched, but I think we're in the very early stages of watching those behaviors change. around letting agents have somewhat of a bounded authority into your bank account.

Hey, one thing I want to ask you about market share, given that a lot of fintechs are becoming banks themselves. So how much market share is substantively left for you as a bank because of that, that powers fintechs?

You know.

The market for our products are every company in the world who wants to put financial services into their system. And even some of the biggest companies in the world don't want to be highly regulated. So I think when we think about banks today and a proliferation of charters, I think what we're seeing is a very narrow universe of companies, some of which are amazing at fintech and see banking as their core business.

And that makes sense. Some of which are It's tangential.

And I think right now you're seeing companies make a decision about where their priorities lie. Are they leaning more into AI, stablecoin infrastructure and products like that, and letting folks like LEED, where we have a particular expertise on the banking layer, build that layer of transaction? And so I think we're starting to see that conversation change as AI becomes.

More of a priority for companies.

Regardless, for us, the universe is every company that wants to put some type of financial service product into their system. And so that's a pretty unbounded opportunity for us today.

Jackie, when you were describing your vision in the future at the beginning of our conversation, it sounded like something that Chinese consumers have had access to for years.

Exactly.

Are they ahead of us? Just very briefly, 30 seconds.

Yeah. So, you know, I was lucky enough to be on the board of Alibaba years ago. And so I had a window into both Alipay and Alibaba and the evolution of QR codes and finance happening on super apps.

I'd say every country around the world is very different.

And it really depends on their own financial infrastructure, their orientation towards privacy and the own depth and breadth of their banking system. And so every country is totally different. In China, the banking system evolved around super apps because the banking system was bifurcated. Credit was non-existent for consumers.

That is really different than in the United States today, where you have a lot of use cases around credit cards that people love to use.

Stay with us.

More from Bloomberg Businessweek Daily coming up after this. U.S.

Stocks fell today. Meta tumbled.

Investors parsed its results along with the latest batch of tech earnings about spending on AI. Selling, though, as Carol has pointed out throughout the day, concentrated in these tech mega caps. The NASDAQ 100 fell almost 3%. That was the most intraday going back to June. The SOX tumbled 6.7%. Every single component of the SOX was lower, some down by double digits.

All this to say.

It's a really good day to talk to Brent Winton. He's chief futurist at ARK Invest. He joins us from Los Angeles. Brett, I have this last hour we had Max Chafkin come by, and he asked during one of our breaks, is this the beginning of the unwind when it comes to AI stocks? And I said, that's a good question to ask Brent. So I'm going to ask you, Brett, is it the beginning of the unwind? I think I know what you're going to say. No, this is the beginning of the beginning. I don't even think we've begun to get started, actually.

There's a few ways to approach the problem of where we are in the AI story. One is to look at what is the potential in demand for AI software. The world spends $ 40 trillion in knowledge work wages. If you look at how businesses spend on software, they basically spend 10% of the productive value they get out of the software out to the software vendor. We think AI can make knowledge workers 10x more productive, and businesses will only pay out 10% of that value. So there's, you know, at kind of total addressable market level, $ 40 trillion in AI software potential spend. We're obviously not there across all of the frontier labs. There's maybe $ 150 billion in recurring revenue spend occurring. And, you know, we see clear to

Something in excess of a trillion dollars in spend over the next couple years on a recurring basis accruing to those frontier labs. It's plenty to support the CapEx that we're spending to support those software products. And so people ask what inning it is. If you actually do the math on penetration, the first pitch hasn't even hit the catcher's mitt yet.

Oh, wow.

So does this mark the beginning of the end?

No, no, no, no, no.

This probably does.

Mark somebody who took a leverage bet on the pace at which these things are going to happen getting liquidated. But I think it's just a market burble that we'll look back on in a few months and be like, wow, that was weird. Because the in-demand story is very weird. I think Brett is what you'd call a true believer when it comes to AI.

I appreciate that. It does feel like there's an increasing drumbeat, whether it's Ken Griffin over at Citadel talking about an AI bubble. There are others who've come out to say, no, no, no. If we slow things down, it just kind of mess up what is real growth out there.

But I'm going to.

Take your baseball analogy and let's just say your star pitcher breaks his arm. Your top hitter breaks his leg. Okay, I'm going extreme here. But my point is that there are things out of potentially our control, whether it's Voters saying, I don't want these data centers.

So slowing momentum.

I talked to somebody, we were in Atlanta at a small business event talking about the fight for labor. And data centers need people to build them. I think about energy, having access to all the energy. There's a lot of things, supply chains, the grab, Brett, that could slow this down. And I do wonder how that could trip this up.

Yeah, I think that.

In fact, on the SpaceX quarter, which was a really fascinating quarterly report, I was anticipating that SpaceX also would say, you know, we were targeting 10 gigawatts online by the end of 27. And actually, it's going to be closer to five just because deploying these assets is really hard in the real world. Instead, they raised their guidance to 13 gigawatts. So at least for some companies, it seems like they can kind of blitz through that friction and opposition.

Now, SpaceX is a.

Really unique company in the universe, or at least the galaxy or the solar system. And so they are doing something that is remarkable in terms of deploying physical assets. And it would not surprise me if some of these cloud providers are running into that friction and having to slow down. How that will play through into the marketplace is that would feed through into better gross margins for the likes of Anthropic and OpenAI because you would just have more constrained supply against a dearer, more valuable product on the back end. It would lower the top-line growth estimates that I've thrown out there. to some degree, as in their ability to grow from $ 150 billion annualized to call it $ 800 billion annualized revenue over the course of

the next 18 months is predicated on more compute supply being able to come online. And so instead, they would have to accept a lower top line at a higher gross profitability.

What's your investment thesis on a SpaceX-Tesla combination?

Let's just go there.

I mean, Kathy has known Elon for a... Kathy Wood, of course. Elon for a long time. I remember my first interview with her, 7, 8, beginning of our.

Company, years ago.

Oh, it was way more than 7, 8 years ago.

It was more than.

I've lost track.

But, you know, likening him.

A dozen years ago.

To, you know, one of the brilliant inventors of all time. But I'm just curious... What do you guys think about a combined entity, and do you assume it's going to happen?

It's just timing.

It's not a guarantee that it happens, but we do think that there's a more than 90% chance that it happens, measured over a couple of years, the combined entity.

The way to think about it is that.

Starlink is an amazing opportunity and incredibly cash flow generative. but it's a smaller opportunity than CyberCab and RoboTaxi, which is hugely cash flow generative. And that would be useful for SpaceX because AI compute in space, driving GrokBot and serving as infrastructure as a service is an even larger opportunity than CyberCab.

And SpaceX has.

Great return on capital characteristics over a very large volume of invested capital. And so they could take the cybercab capital and put it to good use investing in their space assets. Downstream, you have optimists and humanoid revolutionaries. but that takes longer to bake. And it's not capital constrained.

It's really like time and execution constrained. So a merger between the two entities, I think, would be great for both shareholder bases as in. exclusive of the merger, they would both be worse off. And so they should find a way to get together and combine.

Yeah. Go ahead, Karen.

So do you think investors are wrong when we, and even media, highlight that the real value is Starlake?

Is that not really how you guys see it? At least going forward, longer term.

Yeah, longer term, I think space compute drives most of the value for SpaceX. And so by 2031, and even by the way in which they're accelerating their AI plans, Elon's saying that they can do $ 500 billion in recurring revenue on their AI segment by, I guess it's across the business, but it's heavily driven by AI, by end of 27. And that's consistent with our modeling if you assume they can really deliver that 13 gigawatts of active compute in that timeframe.

And so what has changed for us since the IPO.

Is the degree to which they would aggressively monetize their infrastructure as a service business, which brings more cash in the door, which allows them to keep compounding. And I think they have very credible plans to go after the core cellular providers in the U.S. And to be honest, I will be happy to be off Verizon, which has dead spots all over L.A., and be on a Starlink.

Phone, which can be connected.

And so I think that the addressable market opportunity for Starlink itself is in the we look at it at like a $ 500 billion opportunity, revenue opportunity.

Anyone who's flown on a plane, on a commercial airliner with Starlink, I think understands the difference with that technology versus everything else out there. Okay, Brett, I want to know if, again, this is hypothetical at this point, but let's say SpaceX and Tesla become one company. Is there anything within that portfolio that just shouldn't be there?

Yeah.

Do we have a tough time saying that resource should, should be spent on the company formerly known as Twitter and a company like SpaceX? Oh, Oh, I like, no, no, absolutely not. Everything that's under this umbrella should be under this umbrella.

Yes, as it's currently composed, I think the pieces fit together in a really synergistic way. I think that it is very likely that you will not just sign up for a Starlink subscription independent of an X subscription, independent of a Grokbot subscription, maybe even independent of like a robo-taxi, you know, a transportation.

Wait, you mean you're talking about like a new bundle of sorts?

Yes, yes.

I don't know, Carol, you have Starlink, but.

You don't pay for Twitter and you don't have... Grok, right?

I don't pay for Twitter, I don't pay for Grok, but I do have Starlink, yeah.

Huh.

I think you will pay for at least Starlink plus intelligence in a bundle, and likely Starlink plus intelligence plus media of some sort in a bundle.

And maybe that'll be.

Layered into some kind of, you get a certain number of miles on RoboTaxi along the way. So I think that there will be a lot of compelling reasons for Certainly the SpaceX part of the business to do bundled pricing. And if and as Tesla gets incorporated, it could be that transportation as a service becomes a part of that.

What's the risks to the Elon story?

I mean, how important, when you think about, this is a company so intertwined with the individual itself. And so, how do we have to think about that? How much of a risk that could be in a I apologize. You'll have to come back soon, but we only have about 30, 40 seconds.

Okay.

Well, I mean, I think that Elon has a unique maniacal urgency that is really useful across all of his businesses.

Yeah.

And you can see that in SpaceX's ability to deploy terrestrial data centers in half the time that others are at apparently only 60% of the capital costs that others are. And so there's certainly key man risk. I mean, he is a unique... gifted entrepreneur. And I think that there is regulatory risk that is looming in all sorts of different ways that he's navigating around. But I think that poses a risk across the entire space.

Stay with us.

More from Bloomberg Businessweek Daily coming up after this. Russia looks more inclined to intensify its war in Ukraine rather than end it, Romanian President Nikushor Don said, pointing to the rising number of provocations by the Kremlin inside the EU. Speaking to Bloomberg TV's Kayleigh Lyons and Joe Matthew, President Don says that Russia is looking to escalate the war in Ukraine.

Russia is trying to escalate this Ukrainian war, trying to provoke the other European countries. We do not want to escalate. We want to keep calm and shut down the drones that arrive to our territory or territorial waters.

That was Romanian President Nick Cushort-Dawn speaking earlier on balance of power. On that escalation, this headline really getting our attention today. Russian drones are already killing people within the EU. Seven commercial ships have been attacked by drones off the coast of Bulgaria and Romania since the start of October.

Forge authorities of both countries blamed Russia. For more, we're joined by Andra Timu, Bloomberg News reporter who covers Romania. She joins us from Bucharest. We appreciate you staying up because I know it's close to midnight there, Andra, so we appreciate it.

Thanks for having me.

Oh, no, thank you for joining us.

I just want to hear from you, as somebody who covers Romania and the Romanian economy for Bloomberg News, how you would characterize the effect of Russia's invasion on Ukraine and On the, on, on the feeling of security within Romania.

Um, so we've been five years into this conflict, um, and, uh, Romania is the country that shares the longest border with Ukraine. Um, and, uh, at first the feeling was very supportive of Ukraine and it still is to a certain extent now, but, um, it's starting to take a toll of finance from a financial point of view. for most of the European countries.

And you can see that in Brussels, they are discussing a new loan to Ukraine, a new financial support of up to 70 billion. And already countries are struggling to find this money. And Romania is one of them. Romania is a country that has one of the biggest budget deficits in the European Union. The support for Ukraine is still there. On the other hand, the entire region has been...

impacted by the security. And as you can see in our story today, the war has taken a new toll and Russia's provocations are increasingly dangerous. We have had several incidents, drone incursions, but over the past month, these have started to become deliberate. So they are attacking ships which they say are headed to or coming from Ukraine. But these incidents and these attacks happened on commercial ship, oil tankers, chemical vessels. So these are very dangerous. And the death toll of these attacks has increased significantly. So we have had a commercial ship hit in Bulgarian waters and it sank in like three minutes. So that is probably killing, well, killing all of them. So they didn't stand a chance.

And now the ship companies are really, really concerned. Insurances have gone up significantly. So the entire region is impacted.

In your reporting, you point out nations on NATO's eastern flank, no stranger to drone incursions, growing numbers of Russian and some Ukrainian drones have breached the airspace of the Baltic states and Poland triggering air alerts and damaging civilian infrastructure. It often feels like we are a world at war.

This feels like an escalation that could lead to what some have said is a world war. Is this seen by folks on the ground there and increasingly in the European region as an escalation that could turn this war into something much bigger?

Yes, the concern is definitely there, even though the authorities and you could hear our president say that European countries are trying to de-escalate and are trying not to get into a direct conflict with Russia, while at the same time they are doing everything possible to be better prepared to face these attacks, to face these incursions. And we also have a lot of hybrid provocations. from cybersecurity, interference in our elections, all sorts of attacks. So this is like, it's probably a new type of war and people are increasingly concerned. It's unclear whether or not we will see a typical war troops or if Russia really wants to uh attack a nato country which analysts and security experts

don't rule out but say it's hopefully not gonna happen.

You know i you mentioned that uh there's some unification on how europe feels about uh russia and ukraine right now just very briefly in the last minute we have i'm wondering how you're looking at what's happening in some countries including germany where there's like a rising movement that basically says um that it's not as big of a deal when it comes to keeping ukraine secure from russia i'm thinking of the the rise of the afd in germany is that happening in in other countries right now as well where there's sort of splinter movements Yeah, we have.

A far-right movement as happening in Eastern European countries as well. Even though Eastern European countries, the Baltic states, Poland, Romania, have a long experience with Russia, they have been the countries that repeatedly warned NATO and European allies about the danger that Russia poses for the entire region and for Europe. Nevertheless, because of this war fatigue, maybe, and because of the financial burden that all European countries have to face in order to support Ukraine, the growing movement of the far right and people and politicians who try to take advantage and to say, OK, we have to put our interests first.

This is the Bloomberg Businessweek Daily Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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