Apologies to all for having not written much in the past three weeks. The Ukraine War has been unfolding with such unforgiving speed and complexity that I’ve just not had time. While the pace hasn’t exactly slowed, the conflict is setting into a couple readily identifiable patterns. That enables me to peer forward a bit.
 
First, the patterns.

• The Russian military has massively underperformed while the Ukrainians have massively overperformed, and that before all the West’s massive weapons transfers could make it to the front lines. Of particular note I’d like to point out the Ukrainians began the war with but a handful of Stinger anti-aircraft missiles supplied by the Baltic states of Estonia, Latvia and Lithuania. Stingers are the magical equipment the Afghan mujahedeen used against the Soviets to such great effect. Soon Stingers direct from US stores will arrive in the hundreds. Expect Russian aircraft loses to increase massively.
   
• Russia has begun applying its civilian obliteration tactics: ring a city, fire artillery at everything and anything until there is nothing left but rubble, advance with ground troops and eliminate anything that moves. It’s a tactic the Russians developed in the Second Chechen War and perfected in the razing of Aleppo in the Syrian Civil War. It’s nasty. It’s bloody. I’d argue it’s a war crime. And it’s what the Russians are doing to Kyiv, Kharkiv, Mariupol, Mykolaiv, and soon Odessa. Once Odessa falls or is destroyed, that’s the utter end of Ukraine’s participation in global agriculture. And that will bring the war home to everyone, everywhere.

More on both of those topics in good time. Today I want to kick around something else.

Spearheaded by the West, there are now more sanctions on Russia than all other countries combined…ever, and that without significant energy sanctions having yet been applied. (They are coming, btw.) Imports, exports, SWIFT, it’s a really hefty list of really hefty sanctions, but all of them combined pale in comparison to the fact that the sanctions include the Russian Central Bank itself.
 
Central banks do more than steward a national economy, they also serve as a clearinghouse for all international transactions. By sanctioning Russian banks and the RCB, Russia is functionally cut off from moving money in and out of the country, even if the money the RCB would like to move is Russia’s. This includes anything done in US dollars, euros, yen, Korean won, Canadian dollars, and Australian dollars. It also includes Russia’s $640 billion in currency reserves.
 
The evening of February 27, Russian President Vladimir Putin went to bed with literally $640 billion in the bank. Enough to cover Russia’s bills for months. Probably even years. On February 28 he woke up to discover two-thirds of it fenced off permanently. Of what remains, $135 billion is within Russia in gold – which is beyond useless for stabilizing the domestic market (gold bugs take note). The rest is $60 billion equivalent in yuan (which nobody wants – not even the Chinese).
 
Overnight one of the world’s largest monetary authorities and its attached Finance Ministry just…stopped…functioning.
 
While we are certainly in some uncharted territory, the full default on all Russian government debt has now shifted from the inevitable to the imminent. The only reason we might not see it in March is because the Russian Central Bank chief – Ms Elvira Nabiullina – is arguably the smartest person alive on the planet.
 
(By the way, Western governments? If you’re looking to poach top-notch Russian talent, Ms Nabiullina is absolutely someone you should try to recruit. She’s been one of those people sitting in the cluster of officials 1.7 lightyears downtable from Putin of late, and she does not look…pleased.)
 
Beyond implementing capital controls – which Ms Nabiullina has already done – the task of avoiding a full default on every Russian bond is simply beyond her. Operating in a vacuum is operating in a vacuum. Either Russia’s finances crash due to sanctions which deny Russia the hard currency in which nearly all of its debts are denominated, or the Russians choose not to pay on their government debt to stick it to their (primarily Western) creditors. Either way, total default lies before us. Probably in April, as April 15 is the end of the 30-day payment grace period on the first big batch of government debt. After that Russia can look forward to the familiar menu of carnage that accompanies a full-scale default: economic breakdown, hyperinflation, food shortages.
 
It’s time to talk next steps. A bit of history is in order. Way back in 1997, a series of Thai equity investors realized their sector had a fishy stench, and so they cut and ran. Within a few weeks, the Thai baht was in the toilet and its falling managed to pull most of their Southeast Asian neighborhood along for the flush. In under a year, the contagion had spread to encompass South Korea, Brazil and Russia as well. Four countries that had nothing to do with one another.
 
The original Thai trigger was both tiny and local. The Russian federal government has about $60 billion in outstanding bonds. Plus Russia’s regional and city bonds. Plus the bonds of state energy majors Gazprom and Rosneft. Plus those of the fifty-odd other major firms in Russia’s resource and industrial space. They are all going to zero. Again. (For students of Russian history – military or financial – there’s little about this past month’s events that has the ring of originality.) Every investor who holds nearly any sort of “developing nation” bonds or indexes or funds is exposed, as are most who hold some flavor of commodities funds that target producers rather than product streams.
 
What’s next? Not really sure. Personally, I still get confused when I try to trace how some cut-and-running Thais managed to inadvertently tear down economies several times larger and a half a world away. I do know two things. First, Russian flushing sounds will not be alone in the night. Until the financial world changes how it assembles funds so that Russia is no longer in the same bucket as Vietnam and Brazil, you should expect some insane and insanely-unpredictable volatility.
 
Second, I know that for reasons demographic and geopolitical the world was edging to the end of our current financial models even before the Ukraine War kicked over the table. In my upcoming book, The End of the World is Just the Beginning: Mapping the Collapse of Globalization, I delve into why our concepts of currency and economic management – honed over literally centuries of experiences – are no longer appropriate for the world we are devolving into.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Demographics is one of the cornerstones of how we understand the world here at Zeihan on Geopolitics. Few countries have had as difficult a series of demographic challenges as the Russians.

Beginning with World War I, the Russians faced serious demographic headwinds. The Soviet famine between the mass casualty events of the two World Wars did the population few favors. The move toward urbanization and the packing in of Russian families into state-built tenement multifamily housing pushed birthrates down. As did the economic downtown of the late Soviet era.

Russia’s population is unlikely to grow again in any significant manner. They’re not alone here; South Korea, Japan, most of Europe have terminal demographies. But Russia also faces a mix of relatively low life expectancy leading to a caving out of expertise and the general Russian “brain trust.” 

We see this everywhere. In Russian industry and innovation. In their crumbling infrastructure. And most important, in their government and military. There is not an emergent cadre of young leaders ready to step up to the plate. The last time Russia could boast a bunch of starry (or hammer-and-cycle-eyed) youths with big plans for the future? The late 70s and 1980s. Putin’s generation. And after decades of intimidating or eliminating and arresting rivals, there are precious Russians left who have meaningful statecraft experience that were not brought up in the Soviet Era.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Please join us today, March 11, for our webinar and Q&A session on the impacts of the Ukraine War and Russian sanctions on global agricultural markets. 

Fertilizers, fuels, feed grain and cheap wheat–we’ve seen prices across the board jump in recent weeks following Moscow’s invasion of Ukraine. We know what happened last time Russian wheat exports didn’t reach markets in 2008–a series of price spikes that left several vulnerable governments reeling. Across the Arab world, we saw these consequences play out as the Arab Spring. 

But what happens when food inputs are not only more expensive, but impossible to find? What of the globalized agricultural market, where producers across the global are dependent on imported inputs to grow exported feed grain? Where subsidized bread is made from imported grain? And the transport systems moving everything face rising fuel costs?

Join us TODAY as Peter Zeihan walks us through the end of global agricultural as we know it. It will be a wide-ranging discussion that encapsulates all the many trends in play today, from Chinese Communist Party Chairman Xi Jinping’s cult of personality, to dangerously low energy investment to, of course, the Ukraine War.

REGISTER FOR THE UKRAINE WAR: AGRICULTURE EDITION

Can’t make it to the live webinar? No problem! All paid registrants will be sent a link to access the recording of the webinar and Q&A session, as well as a copy of presentation materials, after the live webinar concludes. 

The London Metals Exchange halted nickel trades today after prices approximately tripled. Nickel is a metal that surrounds us in our daily lives, primarily as an alloy component in stainless steel: bridges, cutlery, appliances. 

But nickel’s importance in our future lives may be even greater still. While not as flashy – at least, before current events in Europe started pushing commodity prices higher – as lithium and cobalt, nickel is every bit as important for green tech. Nickel’s ubiquity and commonplace role in our lives actually helps hide its importance. When was the last time you read a think-piece on nickel supply chains?

As we look toward technologies of tomorrow, their positive impacts have to be weighed against the variety of new and growing inputs going into goods such as electric vehicles; you might be able to detach your economy from a handful of problematic energy exporting countries only to open yourself up to dozens of smaller, more precarious trade relationships.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Russia’s ongoing invasion of Ukraine is now in its second week. The rage that swept the Western world — particularly acute in Europe — has not abated, with all talk about how to punish Moscow more thoroughly. New sanctions are under discussion. Goals range from gutting Russia’s oligarchic class, to starving the Kremlin of income, to broadly shutting Russia out of the global economy completely. So far, the combination of government sanctions, public outrage, and corporate boycotts are putting us well along the path to that goal.

There are costs. Costs that the world is only now starting to consider. Russia is the world’s largest exporter of natural gas and nickel, the world’s second-largest exporter of oil and steel, and the third-largest exporter of coal and aluminum. We can live without these things, but make no mistake, it will hurt.

What we cannot live without food. Russia is the world’s largest exporter of wheat, and it has invaded Ukraine, the world’s fifth-largest exporter. Russia’s war strategy uses techniques pioneered in the flattening of Groznyy in the Second Chechen War, that were then honed during the destruction of Aleppo in the Syrian Civil War. Russia’s artillery is now obliterating Ukraine’s civilian infrastructure one city at a time

It is gruesome. It is inhumane. It is unforgiveable. And it is only the beginning of the destruction. We are being treated to a feast of visual violence in the ongoing destruction of Ukrainian cities we have recently become familiar with: Kyiv, Kharkiv, Mariupol. But lost in the noise of the burning of Ukraine’s large population centers is Russia’s far more methodical, downright Hitlerite, annihilation of Ukraine’s towns and villages. The towns and villages that are the bone and sinew supporting the Ukrainian agricultural sector. Ukraine will not plant crops this spring or summer. The world has lost one of its largest and most reliable sources of wheat, sunflower, safflower and barley.
 
Nor will Ukraine return to the ranks of major food suppliers anytime soon. Russia’s wave of deliberate destruction will soon reach the port city of Odessa. Not only is Odessa Ukraine’s commercial capital, not only will its fall signal an end to Ukraine’s maritime frontage, Odessa is also the export point for nearly all of Ukraine’s agricultural bounty. Until it is freed from Russian control and rebuilt, large-scale Ukrainian exports will remain beyond reach.

This, all this, is unfortunately only the tip of the Third Horseman’s spear. Russia’s willful destruction of Ukraine is only one of a host of factors adding up to the most stressed agricultural markets in post-World War II history.
 
Join us this Friday, March 11, as Peter Zeihan lays it all out in the context of the Ukraine War. Inputs, outputs, producers, products, markets, transit, consumption, and the beginning of the end of global agriculture.

REGISTER FOR THE UKRAINE WAR: AGRICULTURE EDITION

Can’t make it to the live webinar? No problem! All paid registrants will be sent a link to access the recording of the webinar and Q&A session, as well as a copy of presentation materials, after the live webinar concludes. 

Much of the current focus on the Ukraine war is currently on the shelling of the major urban centers of Kharkiv and Kyiv. And from a political and humanitarian perspective, that certainly makes sense. 

But there is a broader strategic and economic perspective that I feel as though some are missing when it comes to the Russian campaign along Ukraine’s southern coast, currently focused on the week-long bombardment of the southeastern port city of Mariupol. If (sadly, I think this is now more of a case of “when“) the port of Mariupol falls, there will be little to stop Russia from sending troops west from Russia proper, through the Ukraine separatist regions, to the Crimean peninsula, and onward to Ukraine’s primary commercial port of Odessa.

Given the considerable effort Russia will have expended to reach Odessa, there’s little reason to expect them to stop there…

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Few things in are more complex than energy logistics, and the world is about to get a masterclass.

Different crude grades with different chemical make-ups with different reliabilities lead to different refining dependencies. Some crudes are thick (heavy). Others thin (light). Still others are laden with impurities (sour), while others are pure (sweet). Small mismatches in crude quality can typically be managed with some creative blending.

That’s totally not what’s about to happen.

Cancelled ship insurance policies. Customers and shippers not wanting to be caught with potentially-sanctioned oil. Investor abandonments. War disruptions. Sabotage. The world’s single-largest crude grade by volume – Russia’s Urals blend – is vanishing from the market. Within weeks some 5% of global oil production will be gone. For years. At a minimum.

The result isn’t simply the biggest energy shock we have experienced since World War II, but one whose effects will vary wildly country to country. And one that will force a great many players to take action to secure their ongoing economic capacity. That will not go over will with others.
 
Join us TODAY – March 4 – for the Ukraine War: Energy Edition. It is the first in our open-ended series on the economic effects and aftereffects of the Russian invasion..

REGISTER FOR THE UKRAINE WAR: AGRICULTURE EDITION

Can’t make it to the live webinar? No problem! All paid registrants will be sent a link to access the recording of the webinar and Q&A session, as well as a copy of presentation materials, after the live webinar concludes.