September 2023 - Zeihan on Geopolitics

Ukraine War: Russia Targets Grain and Power Grid

If you’ve been around since July, you might remember me talking about Russia targeting Ukrainian agriculture instead of the power grid. If you want a little refresher, just click here:

As of September, Putin has sufficiently disrupted Ukraine’s grain exports and overall agricultural sector. Meanwhile, the Russians were bolstering their wheat exports, so global supply has held steady, and prices are still down.

Don’t rely on this Russian grain, though, because new sea conflicts, impacts on shipping routes and an unpredictable climate could change everything at the drop of a hat. The best course of action would be to help Ukraine develop better rail infrastructure and grain transport options.

As the temps begin to shift, we will see the Russians change up their strategy once again. They will transition from attacking Ukrainian agricultural infrastructure back to targeting the power grid…but just because the Russian’s focus has shifted, doesn’t mean grain markets will be stable.

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.

Hey everybody. Peter Zeihan here coming to you from Colorado today. The topic is going to be the next phase of the war in Ukraine and from an economic point of view. For those of you who’ve been watching for a while, you know that last winter the Russians went out of their way to hit the power grid in Ukraine wherever and whenever they could, because that was the way they could generate the most casualties and have the most political impact on decisions in Kiev.

And then in about May, once it had warmed up enough that you didn’t necessarily need heating in Ukraine, they switched targets to the agricultural supply chain system with a very, very heavy emphasis on the infrastructure that collects and especially exports the grain take it out. Things like grain silos and ports first in places like Odessa, and then later moving on to the Danube River Delta, which is where the Ukrainians and tried to get the stuff out.

In this, the Ukrainians have kind of faced a triple bind. Number one, they import most of the materials that are necessary, like fertilizer, in order to grow crops in the first place. Number two, there isn’t a lot of storage in Ukraine that was available because of last year’s efforts in the war. Most of the storage was full completely.

So the Ukrainians were focusing on getting that out so they could make room for this year’s harvest. And in some degrees, there has been failure there. And this stuff has nowhere to go because number three, almost 80% of this maybe even a little bit more, goes up by water, primarily through the Odessa region. And with that kind of off line, the only other option is to rail it out.

And that means you have a limited number of rail cars. You have to ship it through other countries that are already grain exporters like Bulgaria, Romania and Poland, who don’t like the idea of that stuff being dumped on their market. So most of them have barred Ukraine from having terminal arrivals for their grain and you have to keep on going.

So for every kilometer you have to go further. That’s a kilometer that that railcar has to be committed. So all in all, you’re talking about over an 80%, nearly a 90% reduction in Ukraine’s ability to get the stuff out. And now that a lot of these ports on the Danube have been damaged, there’s just no place to put the stuff from this year’s harvest.

So from the Russian point of view, mission accomplished. And now they’re switching targets. This past week, the week of the 18th of September, they’ve started switching targets again because we’re now getting into fall and they’re going after the power grid again. And over the course of the next month, I would expect that general shift to be almost complete.

They’ve destroyed the Ukrainians ability to play in international grain markets any in any meaningful way. And now they’re going to have the power grid to cause mass casualties again there. So definitely, you know, the Russians have absolutely won this round. The only way that the rest of the world might be able to help is to massively, massively expand the rail connections between Ukraine and their neighbors.

And then the next line of countries beyond. It’s not enough just to get the stuff to say, Poland or Romania. You’ve got to get it on to the water. And that means you also build out the lifting infrastructure for transferring something from rail onto a ship, because these countries were already grain exporters. That stuff is already used to capacity.

You can basically need to double the entire thing. Normally you would expect something like this to be really bad for grain prices are good, I guess. Depends on your point of view. Send them up. But miracle of miracles. The Russians have had a bumper harvest so they have increased their wheat exports by over a third and that by itself is nearly enough to compensate for all the Ukrainian grain that has left the market.

So wheat prices are actually down. Now, I am not a grain trader and I’m not trying to give you anybody price recommendations, but just a couple of things to keep in mind. Number one, the Russian climate is incredibly erratic. And so just because they had a bumper crop this year doesn’t mean they’re can have a bumper crop next year.

Keep that in mind. Number two, the Russians have said that any vessels, civilian vessels anywhere in the Black Sea going anywhere near a Ukrainian coast, they reserve the right to attack. The Ukrainians are trying to convince people to come anyway and they’ve had very, very, very limited success. But that war risk is always there. And for their part, the Ukrainians have said and have demonstrated that they can strike Russian ports as far away as never seasick, which is their major green loading facility for the Russians.

Now, they have not gone after civilian vessels yet, but again, there’s still the possibility that we can have a widespread war on the water, in which case all civilian shipping in the north eastern half of the sea is in a degree of risk. So for the moment that there’s enough grain out there, I’d not get used to it.

But at the moment, that’s where we are. Okay. Talk to you later.

African Coups: Will the French Get Involved?

There’s been a surge in coups throughout African countries, and there’s a common thread connecting them – most are former French colonies.

Looking back at the colonial histories of the French and the British, two very different strategies were implemented. The Brits opted for the economic route – targeting regions and areas of strategic significance. The French took a more ego-driven approach and focused on the biggest swaths of territory.

While the Brits primarily wanted a cut of the profits from their colonies, the French wanted to be in charge of everything, so they hollowed out systems and put their people in charge. Fast forward to the present day, the French have packed their bags and left shells of colonies primed for coups and prone to external influence from China and Russia.

As these coups run their course, French involvement could take on a number of different forms. That’s what makes this so interesting….the French are a wildcard, and their involvement comes down to how they see themselves.

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.

Hey everybody. Peter Zeihan here coming to you from Colorado. If you’ve been watching places like Africa, you notice that coups are just happening fast and furious. Obviously, I’ve lost track of how many we’re at now, at least five. But almost all of them have been former French colonies. And that is not just a correlation. There’s some something very real there linking them together.

And so I think it’s worth exploring how this is going down and why and why it’s here. And that will allow us to project for the future a little bit. So the French colonial experience was significantly different than that of the British one. The Brits were a mercantile empire, a corporate empire. They saw the empire as a way to make money.

And the French had a very keeping up with the Joneses sort of approach. So the French like the way the maps looked, whereas the Brits like the way their accounting books looked. So the Brits would go out and they would look for connection nodes, productive lands, if they can find them. But mostly with the notes where everything linked together and they put themselves in there into a cut of everything coming through.

They didn’t try to reinvent the wheel. They just tried to profit from the wheels coming through. Whereas the French it was more an issue of national prestige. So the bigger the block of territory on the map, the better. And it was kind of a sorry French people. It’s kind of a kindergarten approach to geography, trying to make your political map look great, whereas the Brits were concerned with the economic map.

So I think the best example I can give you in this region, in West Africa, there’s a country called Senegal, which was a sizable chunk of territory, former French colony. But there’s a little bite right out of the middle of that along the Gambia River called a country, say, the Gambia. And The Gambia is a former British colony.

So the productive capacity mostly is on the land that the French controlled. But all of the ins and outs and the logistics and the trade was controlled by the Brits. And so the Gambia was a much wealthier colony, would generate a lot more income for the locals and for their British overlords were Senegal. Even today is kind of not the best.

And this is reflected throughout the entire region. So the Brits would go after things like the Nile, so they would take them to Egypt or they’d go after the Highland Plains that have good agricultural zones and minerals like, say, South Africa, where, as the French would take the entirety of West Africa regardless of what was there. So a lot of the French territories are in a place called the Sahel, which is where the desert of the Sahara starts to get a little bit of moisture.

And so, you know, you can have some people and then transition into the rainforest. It’s the transition zone that economically is subpar and based on climate shifts, whether from human made climate change or things going back, it moves what areas are dry and wet. So the French were able to take control of it very easily because the local populations were, in many cases nomadic, but they never had dense population patterns.

They never had a lot of cultivation. They never had a lot of mining. They never had a lot of wealth. But the French could control it. And these are the territories that are now going through these political ossification and breaks. And now so no coincidence that it’s the French territories that are not as durable politically and economically as the former British colonies.

The second issue is one of political culture of the empires, since the Brits were primarily concerned with the income that they could get. They did not want to disrupt the initial original political and economic classes. They just installed their colonial overseers as governors general about that and allowed the locals to run. Most businesses themselves. And the Brits just took the cuts.

The French? No, no, no, no, no. It was about French control. So one of the first things that the French did whenever they came into a community is get rid by death or otherwise of anyone who was in charge. And then the French colonials would take over everything directly. They might not understand the local economy then that might not be permitted wormwood which could be a problem.

But more importantly, it meant that when the French colonials finally did leave, they didn’t leave a whole lot behind. I mean, the Indians will tell you no end of stories of how horrible the Brits were to them. It’s a case to be made there, but the Brits never really disrupted the political leadership. And so when the Brits did leave, the Indians were perfectly capable of ruling the country themselves.

In the case of the French, the French might have helped set up a specific group to take over when the French left, but that group, because it was hand-picked, would probably be resented by everyone else who was there. And by the time you fast forward to the 2020s, some of these dudes have been there for 50 or 60 years, or the sons of the original deputies and the locals don’t think very highly of them.

And so they’re getting offed in this sort of situation. The French have gotten pretty good at interpersonal relationships, and they’re very comfortable at backing the big man who’s in charge of everything. But because they never got into that kind of societal management of the British, they’re not very good at fighting the support mechanisms, aside from, say, guns and intelligence that are necessary to allow these big men leaders to actually run their countries in a capable way.

So you have a coup before all institution of government fails and is replaced by something else. It becomes very much a blank slate. Now, in blank slate scenarios, it’s fairly easy for an outside power to come in giving them on the ground floor or something new and try to usurp French power a little bit. Because the French power got wiped away when it got turned into a blank slate.

And this has provided significant opportunities for, say, the Chinese and the Russians to go into an area where they were never the colonial powers, where the historical experience is minimal. It actually makes a real gains. But this is temporary. It’s a blank slate. Nothing is established and the French are still much closer. And the local language is typically French.

And you’re dealing with an environment where the French know how to play this game, because if it’s someone else’s institutions, the French are perfectly capable of coming in and making their own blank slate. Remember, the French are much less squeamish than the Anglos about things like suitcase, size of cash and assassinations. And so what we’re seeing right now is the French are trying to decide their plan of attack.

Do they want to wipe out the people who wiped out their people double blind slate? Or do they just want to see if these people can successfully consolidate, in which case they go with that suitcase of cash? Or are the French or the Chinese going to get there first and set up their own institution, in which case the French have to come in and assassinate someone?

These are all viable options from the French point of view. But perhaps the single most important thing that people miss when they’re looking at the French and their former colonies is because the French ran their empire is basically a giant ego stroking machine as opposed to a moneymaking machine. That means that they don’t actually have significant national interests in most of these countries.

And there is nothing like, say, the British exposure to a like Gibraltar, where it’s actually a strategic interest for India, where there’s an economic interest. The French are capable of just swallowing their ego and walking away. But I think the most important thing to think about here is the French are much more comfortable in this environment and know how to manipulate it.

They’re better at assassinations if they don’t like the way it’s going to go. And because they don’t have any sunk national interest in this stuff, they have no problem walking into someone else’s experiment and just destroying it. So don’t think a French intervention or not intervention in West Africa as the sort of thing you might see out of the Americans or the Brits or even the Russians.

The sunk costs here are low, and that makes the French perhaps the most interesting thing that can happen in an interaction all tussle unpredictable because it all comes down to how the French see themselves and everyone else. Due details.

The Chinese Collapse: A Housing Overbuild

Trying to predict what the Chinese system will look like as it collapses would be a fool’s errand, but exploring China’s housing market in this context could be fruitful.

China has an investment-based economic model, which means resources and capital go towards infrastructure development and construction. As Japan and Korea have shown us, this economic model isn’t sustainable; diminishing returns will settle in, and the economy will grow stagnant.

Japan and Korea had private enterprises to help the economy balance out, in addition to international investment opportunities. In the case of China, capital flight is restricted, so citizens look to speculative bubbles for investment opportunities…and housing is the most problematic of the bubbles.

And so Chinese citizens dumped their life savings into housing, generating the world’s most massive overbuild. As China collapses and people’s money is tied up in this useless real estate, it doesn’t take much to imagine what happens next. Let’s just say Xi might be losing some of his fan base.

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.

Hey everybody. Peter Zeihan here comes to you from Colorado. A lot of you have been writing in and asking for scenarios of what the Chinese system will look like as it collapses. And Chinese history is rich with how it’s all going to hell. So putting my finger on one specific scenario I don’t think is very useful, but a lot of you have also written in asking about the Chinese housing market, and I think kind of exploring these two things hand in hand is worth a little bit of time.

So the Chinese follow a capital intensive investment model. There are there’s three types of economic growth. You’ve got consumption. Like you go out and you buy a home or you buy an iPod or whatever it happens to be. In the United States, that’s about 70% of total economic activity. Private consumption. Then you have exports. So, you know, you make something like Boeing and you sell it to the Indians.

Export led economic growth that is a system that is more popular in a place like, say, Korea or Germany. And then you have investment led economic growth, which is the building of stuff where regardless of where you get the capital, you get you build a road, you build a factory, something like that. And this has always been the method that has been favored in China and to a lesser degree, all of East Asia, because it’s something the government, for the most part, can control.

And it tends to be directed towards things that the government feels needs to be done. So roads, bridges, industrial plant and all of the East Asians have followed this pattern to a certain degree. The problem with this pattern and this type of growth is if you do it enough, you start to distort the economy and you absorb more and more capital and more and more labor and more and more resources.

And eventually you get to the point where there’s diminishing returns because you only need so many roads, you only need so many factories. In the case of Japan. They reached this point in the 1980s and they went from having stratospheric growth because this generates a lot of economic activity to just kind of a stall out. And they were left with a stack of loans worth about 50% of their GDP, $2 trillion at the time that was invested into assets that probably should have never been built in the first place.

And it took the Japanese system 30 years to churn through that, and that was 30 years of basically not having economic growth at all. Eventually, they realized the debt burden was so bad that they needed to focus what they could do on more productive stuff. And that turned out to be stuff that was not in Japan. And so we started this generation long outsourcing, the sourcing, whatever you want to call it, to countries that had better demographics and better debt profiles, most notably the United States.

And here we are now, 35 years after that process started. And the Japanese economy is more or less back in health. But it’s happened as the demographic situation has turned inside out. So consumption led growth in Japan will probably never happen again. They’re just too old. Something similar went down in Korea, but the Koreans attacked it with a fervor that the Japanese couldn’t muster, and they decided to deal with it by investing more, but going further and further up the value added chain.

And this could work in Korea because they were already among the most highly educated populations in the world, and they eventually generated things like the Samsung and the Daewoo and the Hyundai that we know today. It came at a cost. Extraordinary levels of turnover in the corporate world as entire chaebol, which are kind of giant industrial conglomerates, would go bust, which would generate a huge surge of unemployment and credit risk, which the government had to step in and assume the risk of itself in China.

It has done something similar to both of these as well as a third one. So first, building bridges to nowhere. The Chinese absolutely reached that level probably back in the early 20 tens. And most of the construction we’ve seen across China is of questionable economic use and the debt has been building up. Corporate debt has basically doubled since 2010 and it started at a level that was already in excess of American debt.

So, you know, we’re talking about a huge amount of money that has been put into things that probably are never going to have a return. They tried to follow the Korean model as well, but what they discovered is that their workforce was already fairly unproductive. And while overall productivity for the Chinese labor forces have gone up by 50 to 100% in the last 10 to 15 years, the debt load has gone up by a factor of five.

So from a cost benefit point of view, Chinese labor has actually decreased in terms of its overall productivity once you consider the cost, because in that time frame, the cost of Chinese labor has gone up by more than a factor of five or six. And then there’s a third model, unlike Japan, unlike Korea, which are, for the most part, private enterprise driven systems, the Chinese are absolutely state centric and in China and excuse me, in Korea, in Japan, the people always had options for where to put their own personal money to make their bets on their futures, prepare for their own retirements, expand their own wealth.

The Chinese don’t have that. Capital flight is strictly regulated, in many cases forbidden. And every time that the people find a new way to get money out, the Chinese government changes the law and so it all gets bottled up at home. Now, for the Chinese development model, this has proven successful at keeping the Chinese citizens money as part of the process that then funds all of that investment.

So whereas in Japan, it’s a mix of corporate and creates a mix of corporate and government. In China, the average citizen in many ways is being forced to help underwrite all this bad debt, and the Chinese citizens don’t really appreciate that, as you might expect. And so they’re always looking for outlets. Now, they can’t send their money abroad, so they looking for outlets at home.

And so China is famous for massive speculative bubbles that happen in commodities or gold or anything. And the one that has proven the most problematic and the one that has generated the most economic growth to this point has been housing. The government does allow you to own your own home. So people do that with gusto. And then they started buying apartments.

And second apartments and third apartments and fourth apartments. And basically we got an Enron style financial boom driven by growth in construction of the housing sector. Now, the new news that has come out in just the last few days that kind of crystallized this all for me was a dude in China by the name of he king, great name, who used to be an uppity up in the Chinese Statistics Bureau.

And his estimate now is that there are more there’s more housing units available that are unoccupied in China, so many available that they could house the entire Chinese population. So we’re talking an overbuild in excess of 100%. Do you kind of put that into perspective? The American subprime crisis at its peak had less than 5% overbuild because of subprime, probably closer to 3%.

And it was only because we bound up those mortgages with more healthy real estate investments and asset backed securities that it actually turned into the crisis. And we all know how that felt here. Ultimately, we had a financial crisis that lopped 5% off of GDP. If in China, you’re talking 100% overbuild in a country that is suffering from the advanced stages of terminal demographic decline and is already experiencing massive population losses against in the United States, where we had less than a 5% overbuilding, we still had population growth and inward migration.

The mind reels in coming up with a historical precedent here because there isn’t one in time. The Korean or the Japanese models were able to mostly recover from the overbuild, in part because private citizens were not wrapped up in the damage this time around in China. This specific aspect of the overbuild, which is the biggest in human history, isn’t even reflected in the debt data because a lot of Chinese have been able to pay for these apartments with cash and they now have invested for the most part, their total life savings in an asset that is probably worth at most a quarter of what they paid for it.

So in China excuse me, in Japan, in Korea, national coherence, public support for the very existence of the government was never damaged because people’s finances were only hit indirectly because of economic growth issues. But in China, you’re talking about a complete wipe out for what, for most Chinese citizens is their primary and maybe even only method of savings on top of a failure of the Korean style expansion to improve productivity on top of a failure of the Japanese style program to improve public infrastructure.

This is going to hit them from every possible angle when it breaks, and it’s going to do so by ripping the heart out of public support for the entire system and the CCP and the government in particular. So no, I am not particularly optimistic about how this is going to shake out. Quick addendum. I did a quick fact check before we went to print with this one print release, whatever on Mr. Hes data that he estimates that there are sufficient empty apartments to house the entirety of the Chinese population.

That was wrong. He says there’s sufficient spare housing to house twice the Chinese population. So everything I said before stands just underline most of it.

China’s “Diversionary” War with Taiwan: The Good, Bad and Ugly

China invading Taiwan isn’t a new topic, but would China ever use this war as a diversion or distraction? This is an unlikely scenario, but as long as Xi is in charge, we must consider every possibility.

Despite challenges to China’s political and economic system, with a leader like Xi, there isn’t a need to “rally support” for a war. In addition, capturing Taiwan wouldn’t provide China with a strategic advantage, and it would likely lead to hefty economic vulnerabilities.

The odds of a “diversionary” war happening are never zero, though. In a system like China, all it would take is a miscalculation on Xi Jinping’s part or some dark realizations setting in…

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.

Hey everybody. Peter Zeihan here coming to you from Colorado. Now, last week, I released a video on why none of us should be really surprised if the Chinese system falls apart. We’ll leave the link here for those of you have not seen it. But the most common follow up question that I’ve received from viewers has been wouldn’t this justify in the Chinese mind a diversionary war or distraction war to increase public support?

I can’t rule it out, but I don’t think that’s going to go down for three reasons. Number one, this is not a democracy. This is an autocracy where the CCP has control of the public space is huge and their ability to shape public opinion is massive. And in that sort of an environment, you don’t get the same relative effects and you also don’t have the same in stability from economic problems that you might have in a more pluralistic society.

So I don’t want to say no, but the government’s ability to shape public opinion and to stir up nationalism is pretty robust. If anything, the government sometimes has a bit of a problem containing the nationalism, not not getting it going. So from a legitimacy point of view, I don’t think it’s really necessary. Second, anyone in China who can read a map and do math knows that if they launch a war for Taiwan, it will it will not end well, not the war itself, but what happens to the next day.

China is dependent upon the international community for roughly three quarters of their energy sources, and most of that comes from a continent away. On top of that, China is in terms of absolute volumes, the most dependent on imports and exports of any country in the world. And they import the vast, vast, vast majority of the materials that allow them to grow their own food.

So if you have even a moderate effort by a small number of countries to go after Chinese commerce in the aftermath or because of a war, this country will be facing a industrial collapse in just a matter of months and a famine that will kill half the population in a couple of years. And I have no doubt that at least several years ago that the Chinese leadership understood that.

And so they primarily used Taiwan as a rhetorical issue. And most of the threats that we’re seeing now are not necessarily coming from the decision makers. Well, a third let’s assume that the Chinese can capture Taiwan in a matter of weeks with minimal damage. That doesn’t really give them anything. I mean, yes, it technically is a break in the first island chain, but the Chinese are still dependent on the international system to get everything that they need, and they’re dependent on the U.S. Navy to patrol the global oceans so that their commercial cargo can come and go.

In fact, this would actually put their potential sea lanes by Taiwan in greater risk from the Japanese, who have a better, longer range navy than anything that the Chinese have. And then there’s talk of the semiconductor industry that the Chinese would be able to scoop. But the Chinese can’t operate their own semiconductor industry. It’s not just run with foreign equipment and software.

It’s run by foreign personnel. And the Taiwanese facilities are the most advanced in the world. And honestly, the Chinese wouldn’t know what to do with it. I don’t mean that as a slam to the Chinese. I don’t think any country that took them over would be able to operate them in anything less than a decade timeframe for the Chinese would take a lot longer than that.

So it really doesn’t check any boxes now saying that it wouldn’t work, saying that a diversionary war would be unwise and would achieve nothing for the Chinese is not the same as me saying. I don’t think it would happen, but the rationale would be very, very different. So two things. Number one, it could be a miscalculation, not in the traditional sense that, you know, we don’t think anyone will do anything but a miscalculation by JI.

Remember that JI has formed such a tight cult of personality that no one’s bringing him information. So he’s literally making information, making decisions in a box without any idea of the information that flows in or the reality of the world around him in that sort of decision making structure. Sure, he could pull the trigger, but it wouldn’t be because of any of the reasons that you would normally expect.

So whether it’s economic, strategic, political or whatever, whatever we would say, you know, this might force a country to pull the trigger. None of that applies to Xi because it’s all in his head. And it’s not something that we can really guess at because we don’t know what’s shaping his decision making, because we know he’s not being fed the information he needs to run the country.

The second reason is quite darker. If you’re like me and you believe that we’re looking at the end of the Chinese system over the next decade for demographic reasons alone. Forget politics, forget energy, forget vulnerability, forget the debt, forget trade wars, forget everything else. Then there’s something to be said for pulling the trigger. Because if the Chinese system is facing that same industrial collapse and that same population collapse for other reasons, and there’s nothing that the Chinese government can do to stop that, maybe buy a little bit of time, and that’s it.

Then pulling the trigger, choosing the time and the place of a war, even if you think you’re going to lose, even if you know it’s going to result in the death of half of your countrymen, if it allows you to command the narrative of the future. Well, that means that the CCP for the low, low price of half the country’s population might be able to rule into the next era of Chinese history.

And if you’re completely amoral about it, you got to admit that might be a compelling reason to launch a war that you know what will destroy you for dark. Not saying that’s happening, but we can’t rule it out at this point.

Chechnya: Russia’s Influence and a Volatile Future

Today, we’re looking at Chechnya’s tumultuous history with Russia and what the future might hold. After two wars, a few decades of nominal Russian control and ruthless leadership, the tides might be turning for Chechnya.

That ruthless leader I mentioned, Ramzan Kadyrov, hasn’t quite set the Chechens up for success. However, as his health comes into question, so does the future of Russia’s role in Chechnya.

If Kadyrov kicks it, several complications arise for the Russians. There’s no succession plan, the flow of information could be cut off, regional allegiances could shift, and with the ongoing war in Ukraine…things could get spicy.

While it may seem like all of this is contingent upon Kadyrov’s death, most of it is inevitable. Sure, Kadyrov could help speed things along, but Chechnya (and this region as a whole) has plenty of dynamism and volatility in its future.

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.

Hey everybody. Peter Zeihan coming to you from Colorado. We’re doing the next in kind of an open ended series on the Russian positions throughout the former. Soviet world and how they’re disintegrating and what that can mean. We’re talking about Chechnya today now. Chechnya is a little statelet, a republic of the Russian Federation that tried to break away back in the 1990s when the Soviet system collapsed.

There were two major wars. In the first one, the Russians were soundly and embarrassingly defeated and in the second one, the Russians were able to split the Chechens into groups and allied with one of the more powerful factions. And in doing so, reassert nominal Russian control. Emphasis on the word nominal. Basically, the Russians provided this one group with troops and equipment and intelligence and money and combined with the Russian forces, they were able to defeat the others.

Part of the terms of the deal were was, though, that the Russians pretty much had to leave. And so the Russians still lost control of Chechnya. But at least nominally, this faction does adhere to what Putin says he wants to do, even though, for all intents and purposes, this faction is independent. Now that faction is run by the Kadyrov, claim a courier off.

The father was killed in an assassination attempt back. And I want to say 2000 2000 won. And his son Ramzan is, I think the most clinical way I can put it is an absolute fucking psychopath. Tortures people, murders people, runs the place in a reign of terror. Definitely not the kind of guy that you want to meet under any circumstances, or preferably even read about if you have an option anyway.

Kadeer off the junior has become part of the political support system for the entirety of the Putin regime across Russia, where he engages in a lot of intimidation, provides shock troops for, say, things like in Ukraine and does a considerable amount of what work, which is, you know, a fancy name for assassinating people that Putin doesn’t like. Now, the news that has come out over the last few days is that there’s something wrong with Rahm’s health.

Now, he has released a video as of the 21st of September showing that he’s clearly alive. And so whether there’s anything true to the rumors, I have no idea what I can tell you, that the situation where could here if JR is in league with the Russians is of limited duration and a lot more fragile than people think.

Remember, he’s basically being paid in men and equipment and intelligence and of course, cash to be on the Russian side. So if something happens to those fellows, his loyalty is, you know, available to the highest bidder. Also, he is the leader of one faction, a powerful faction. Yes, but only one in Chechen society. So if you had a change in circumstances, it’s easy to see that you can have a power struggle erupt in this area very, very, very, very quickly.

And who knows how that would shake out. And it’s perfectly reasonable to think that this would descend into a bit of a civil war among the Chechens themselves, because there are Chechens in Ukraine fighting against the Putin government and the Chechen shock troops that Kadyrov has brought in. I mean, this is not a unified polity by any stretch of the imagination.

So there are kind of four things you have to keep in mind here, that if something were to happen to Kadyrov, that we would see a lot more instability and especially incapacity for the Russians to maintain the position. The first is that there’s no second in charge in Chechnya. It’s just Ramzan himself, his sons. The oldest one is 17.

They’re certainly in no position to take over. And it’s not like they were raised in the rebellion. They were all born after the war ended. They were have been raised in the lap of luxury. And they have very active Instagram accounts. They’re social media stars among Russian nationalists and Chechens. But it’s very clear that it’s all airbrushed. And these are not people who have actually had to do any real fighting.

Could they rise to the occasion if their father was just to disappear? Maybe. But there would be plenty of others who would also try. And that’s the whole point would end in a struggle. Number two, it’s not clear that this the group of Chechens that are working for the Russian government are easily replaceable. One of the things we’ve learned throughout all of the conflicts in Ukraine with first the Orange Revolution and then the made in protests and then the 2014 war in Crimea.

Now, most recently, the 2022 war in Ukraine is that Russian intelligence authorities are not nearly as competent as they used to be. Most of the good ones went off in the 1990 and early 2000s and kind of got into business and got into crime themselves and haven’t come home. So Putin is really relying upon Kadyrov clan to do a lot of the work that used to be done by kind of the dirty hands of some aspects of the intelligence bureaus.

And if that were to vanish or, God forbid, turn on Putin, it’s not clear that it would go really well. Third, there’s more going on with the Chechens who are working for Putin than just the stuff within Russia and Ukraine. The Chechens have their fingers in a number of other frozen conflicts in the region, in the Caucasus, most notably a trio of regions within the former Soviet Republic of Georgia, which has often found itself on the receiving end of Russian violence.

There’s a Chechen enclave in a place called the Pankisi Gorge, which is just north of Tbilisi. That kind of is a de facto independent zone. And then there are two zones, Abkhazia and South Ossetia, where the Russians actually have regular troops there. And they’re physically maintaining the independence, really occupied nature under Russian control from the Georgian authorities. And if the Chechens were to flip and just go neutral in those positions, it’s not clear with the Russians being as distracted as they are by Ukraine whether or not these areas could continue to be functionally independent.

And the Georgians, of course, would love to take those territories back and then fourth and most importantly, one way or another, we’re probably going to see a reckoning here in terms of strategic control. If the Ukrainians are even marginally successful at resisting the Russians, eventually some aspects of this war are going to get to the city of Rostov on Don in southwestern Russia.

And Rostov is the primary launching point for Russian forces operating in eastern Ukraine. And it is the only launching point for Russian forces operating in the Crimean peninsula itself. And if it becomes constrained, that is what the Ukrainians need if they’re going to ever win this war. But Rostov does more than just serve as a launching point for Russian operations in Ukraine.

It’s also the primary launching off point for Russian operations throughout the entire Caucasus, including in Chechnya. So even if Kadyrov remains loyal, any even moderate success by the Ukrainians is going to impinge upon the Russians ability to influence the Caucasus at all. And then Kadyrov, when it becomes clear that the weapon and the men and the money might not be coming in the same value, he is going to have to make some decisions on his own.

And if even as he sticks where he is, other groups throughout the Caucasus, the Azerbaijanis, the Georgians, other Chechen groups, the Dagestan, he’s it’s the long list are going to start looking at the change in circumstances when the Russians simply can’t project power in force to the Caucasus region. And when that happens, the Russians will be dealing with a multi-front series of rebellions and wars that they really have proven.

They don’t have the logistics and the manpower to deal with. So Kadyrov is clearly important and his health, his survivability, his political standing, where he sides with this faction, that matters greatly. But if you step back and look at where this is going from a big picture point of view. Kadyrov’s Change of heart or change of health could only speed things up.

A lot of this stuff is inevitable. A lot of this stuff has to happen anyway. It’s just Kadyrov could make it happen tomorrow instead of three years from now.

Armenia vs. Azerbaijan: Unpacking the Nagorno-Karabakh Conflict

Today, we’re looking at some of the recent developments and shifting dynamics in the South Caucasus. The assault on Armenian-controlled Nagorno-Karabakh appears to be a tidy victory for Azerbaijan, but there’s more at play here.

As Azerbaijan emerges as a regional power and adds to its economic and strategic advantages, Armenia is quickly realizing that Russia isn’t there to protect them. Armenia is grasping at straws for protection to avoid being entirely land-locked and cut off from the world. Some of Armenia’s adjustments would functionally end the relationship with Russia.

With all the movement in the region, I suspect this won’t be the last time we chat about Armenia and Azerbaijan.

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.

Hey everybody. Peter Zeihan here coming to you from Colorado. It is the 21st of September. And in the last three days, we’ve seen like 30 years of history in the caucuses fall apart and reform. So a lot to unpack here. First of all, what are the caucuses? They’re a double series of mountain chains that are under the land bridge that connect to the former Soviet space and northern Eurasia to more classic Middle Eastern zone, such as Iran and Turkey and Mesopotamia.

These mountains, for the most part, go east west. They serve as significant blocks to movement in all directions, really. And there’s a number of different climate zones in there. You combine the climate zones with the mountains, you get a lot of minor powers, three of which have consolidated into semi coherent countries Azerbaijan, Armenian, Georgia. And then they’re surrounded by three much larger powers Russia, Iran and Turkey.

And between the very small ethnicities, the larger ones are the three small powers. And then, of course, the three mega powers. This place has always been a mess. It’s a zone that even the Mongols had some problems with. Anyway, geopolitics in this area has kind of been froze in since at least 1992. But arguably going back to the start of the Soviet system at the end of World War One.

But things are finally moving. And the whole point of this series is to give you an idea of what to see and where things are most likely to break, because in the last few days, something has very much, very much broken. What’s gone down is that the Azerbaijanis have launched a military assault on territory controlled by Armenia, territory that the Armenians have controlled since the end of the Soviet period back in the early nineties.

And in essence, the Armenian position has completely collapsed. The Azerbaijani appear to have achieved an unconditional victory. Now I would argue that taking the big picture into account here, an Armenian defeat was always inevitable. Has been for 30 years. Azerbaijan has independence, had three times the population and four times the economy. And that was before the regions became a major energy exporter, with them sending about a million barrels a day of crude in the European direction right now, as the region also has better partners.

It’s got its ethnic kin in places like Turkey. It gets along pretty well with the Europeans because of that energy. It’s seen as a bypass and as an alternative to the Russians who the Europeans now all see as warmongers. So the idea that Azerbaijan would emerge on top here isn’t really a surprise. The issue is that it took so long, and that is because of the Russians.

Russians strategic policy since the end of the Cold War has been about finding groups that it can leverage and turn into satellites and drive as wedges into different parts of communities or turn into roadblocks in the others. In this case, it’s definitely the roadblock argument. The Russians gave a blanket security guarantee to the Armenians in order to cause problems for the Azerbaijanis so that Azerbaijan could not emerge from under Russia’s shadow and become maybe a significant minor power in its own right.

As long as the Armenians under Russian sponsorship were able to occupy as a prisoner in the territory at the most one fifth of the entire country, then it was difficult for Azerbaijan to function and it made it questionable whether or not the Azerbaijanis could even qualify for the sort of investment that has generated the energy production that they have today, which has made Armenia a very weird place, because when you got a guy on the outside who doesn’t exactly have an interest in your own personal excellence, just using you as a pawn, and you know that there’s nothing economically or strategically or military or even diplomatically that you can really do to help yourself.

You kind of rest on their laurels. So for the last 30 years, Armenia has done really nothing but become poorer and less educated, more corrupt. The people with ambition and skills have left the country, but they remained active in the local politics, and so they would send money home and influence their new home countries in order to pressure international governments to help Armenia.

So the diaspora beyond Armenia became very, very robust in anti Azerbaijani operations, even though the Azerbaijanis were on the receiving end of the wars to this point. Well, that has all stopped as of the 20th of September. Azerbaijan has recaptured all of the territories lost, including an area called Nagorno-Karabakh, which is a sliver of mountainous territory, home to about 100,000 Armenians who it’s the best way to put this.

Nationalist Armenians consider Nagorno-Karabakh to be the birthplace of the Armenian nation, and it is now once again under Azerbaijani control. And as part of these forces surrenders to the Azerbaijanis, they have agreed already to be completely demilitarized. And the formal negotiations, which really at the end of a gun now to formally incorporate this into Azerbaijan proper with no autonomy have begun.

The end likelihood here is that the Azerbaijani will do to the Armenians the same thing the Armenians did to the Azerbaijanis and push them out so that they don’t have to worry about assimilating these people at all. There’ll be some drama in that later, but really all of the economic, diplomatic, strategic and military factors are now in play, and there’s really no where that the car of Armenians can go, and there’s only almost certainly that they can’t stay.

So it’s me. So let’s look at a map. Okay. We’re looking at a zoom in on the South Caucasus here. You’ve got southwestern Azerbaijan over there in the right and the bulk of Armenia over on the left. The capital of Armenia. Yerevan is just off the map right here. And the Russian military base that is officially in charge of guaranteeing Armenian security.

It’s a place called our Rumi. And I apologize, Armenians, I’m going to butcher all your names, but it’s actually off the side of the map. Like what? We’re about right here. Now, these green territories and these aquamarine territories, those are territories that the Azerbaijanis lost to the Armenians in the initial wars that happened as the Soviet Union was breaking up and culminating in a real hot war in 1994.

And these are territories the Azerbaijanis look to the international medias like look, they took a fifth of our territory. How can you not side with us? And the answer, of course, was the Armenian lobby in the United States and France are very, very powerful anyway. Bit by bit, we saw hotter and hotter circumstances until culminating in 2020 after years of the Turks providing the Azerbaijanis with military training and especially drones.

There was a lightning assault back in 2020 that lasted less than a month that basically obliterated every Armenian military asset that came into range of the Azerbaijani forces. And as part of the ceasefire, the Armenians had to give up the territories in green and the Azerbaijani just flat out conquered the aquamarine territories. And what that did is it left Nagorno, which is this little area, Nagorno-Karabakh, largely cut off.

There’s this little section down here called the locking corridor. And that was the only way that the Armenians were able to get supplies in and out. And so over the last two years, what the Azerbaijanis have done is they reestablished control of the real territories as they started impinging upon this access point. This is a very, very mountainous area and this map, obviously everything looks flat, but it was very easy for the Azerbaijanis to limit access.

And today, not only is there no functional road access, there’s no electricity going into Kabul as well, which is going to make it very, very easy for the Azerbaijanis to force the car of Armenians to be calm for Armenia proper or places elsewhere. So this whole zone, all of this which is now reclaimed territory, is Azerbaijani under international law, always has been, but now it’s under their de-facto control and they’re going to shape the cultures of the areas there to their liking, really with limited problems from anyone else.

Of course, just because this war is over doesn’t mean that all wars are over. And for the next trick, Azerbaijan has another problem. There’s this Exclave over here called Ivan Southern. Sorry, Azerbaijanis. I’m going to mispronounce your names too. And it is a again internationally recognized part of Azerbaijan. But as you can see, it’s not physically connected at all.

There’s a little sliver over here where it connects to Turkey, and that’s really their only link to the outside world, because there’s a de facto embargo in both ways and along this entire border, as well as along this entire border. So the next phase for the Azerbaijanis will be to assert some degree of control over this road here, or maybe even this road up here in order to get direct, unending access to their enclave.

Now the Armenian government realizes just how screwed they are, because that’s a couple of things here of change. Number one, the Turks have put their fingers on the scale with those drones, and that’s something the Armenians cannot stand up to at all. Second, the Russians, who have been at least nominally the security guarantors for the Armenians for the last several decades, well, they’re kind of busy in Ukraine.

They’ve actually thinned out the troops they have in Armenia, and they’ve proven completely incapable of helping the Armenians at all. So if you’re in Armenia and you realize that your eastern border with Azerbaijan is blocked and hostile, your western border with Turkey is blocked and hostile. And your northern one was with Georgia, who is at most going to be neutral.

And the Azerbaijanis are looking at cutting this link with Iran, which is your last remaining outlet. You’re on the verge of being landlocked and surrounded by hostile states on all sides. That’s not feasible for a country that has less than 3 million people and no economy to speak of. So they know they had to give up Nagorno-Karabakh and they know they have to accept the terms of Azerbaijan.

They know they have to be proactive in offering Azerbaijan access to their other enclave, which means all of a sudden you can get regular Turkish military going through the enclave, through southern Armenia, into Azerbaijan and back. They realize that the very existence of Armenia as a state is now physically under threat, and it’s only them rolling over very energetically that they might be able to throw themselves at the mercy of their would be conquerors.

That’s a problem. That’s a difficult position to be in. So the Armenian government has to go out of their way to find a way to make this work, because if they wait for Azerbaijan to be ready for the next conflict, they’re hosed. So the Armenian government has not simply quietly accepted all of the circumstances around them. And not only are they speaking with the Turks about normal relations, they have started ratifying the International Criminal Court conventions.

The idea, from their point of view, is that at least this way we get a layer of international law in place that might be able to protect Armenia as a state and Armenians who remain in trouble with some sort of international legal action. It’s a bit of a reach, but it’s all they’ve got to work with because the Russians are now useless.

But as part of ratifying the ICC, that means they have to abide by things like arrest warrants that the ICC issues and an arrest warrant has been issued for none other than Russian President Vladimir Putin. And I’m sure, I’m sure, I’m sure some of you guys are going to start screaming about the United States on this. The United States is not a signatory to the ICC.

This is the rest of the world because, you know, when you launch a war and start bombing civilians and setting up rape clinics, that’s usually considered legal. And so the security guarantor for the Armenians is now internationally wanted. And Armenia’s only road for that they can see means severing the relationship with the Russians completely. This is something they can do because they don’t have a choice.

Again, they’re ringed by potentially hostile countries. The only way that the Russians can bring forces in and out are, ironically, through those hostile countries Azerbaijan and more likely, Georgia. But the Georgians have a choice that the Russians are occupying, too. So that’s not exactly something that the Georgians are really eager to do. This is what it looks like when history starts moving again.

We’ve had three decades of the Russians holding this all at bay and it’s all breaking free all at once. And this isn’t the only place that Russian power is failing and allowing the logjam to finally break free. This isn’t the only place we’re going to be seeing rapid historical level shifts, and for the next one, we have to turn to Chechnya.

Ask Peter: Is Hydrogen the Future of Energy?

Is the hydrogen economy really the future? Or Is it all a farce? I don’t want to get too far ahead of myself, but it’s somewhere in between…

All the math and science behind using hydrogen checks out. And yes, it removes the carbon question from the equation, but where do you get the hydrogen from? Ideally, we would use clean energy sources to separate water molecules, but that’s too energy intensive for solar and wind to get us there this century. We could source it from fossil fuels, but it would be more carbon-intensive than what we do now. So no utopia for us quite yet.

Some bridge technology uses ammonia to create hydrogen, but it’s not all sunshine and rainbows. Ammonia comprises one nitrogen and three hydrogen atoms; unfortunately, nitrogen is critical for much of the world’s fertilizers. And when you have to choose between having food with dirty energy or starving to death w/ clean energy…the answer is pretty straightforward.

So while this is interesting technology and SHOULD be experimented with, that does NOT mean we should start implementing this tech at scale. We’re working with finite resources here, so the tech needs to be thoroughly vetted and proven before we take that next step.

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.

Transport: The Economics (and Politics) of Railroads

Today’s video comes to you from Needle’s Eye Tunnel on the Rollins Pass Railroad.

My walk along the railroad tracks inspired some pondering on why rail gets such a bad rap. Yeah, I know it’s not as fast as planes OR as versatile as vehicles OR as cheap as water…but that doesn’t mean there’s no place for it.

The rail conversation comes down to is where and how it is used – i.e., don’t send trains up and over huge mountain passes like the one I’m on. However, most rail lines aren’t really built for “economic” reasons; instead, they are used to project political power over large swaths of land. The US did this with the transcontinental railroad, and the CCP is still doing it today.

While rail might be the redheaded stepchild of the transport industry, it is still very much an integral part of the family.

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.

War Breaks Out Between Armenia and Azerbaijan

Well, my attempt at prepping a video this morning and getting ahead of a brewing war between Armenia and Azerbaijan has failed. Hostilities broke out within minutes of me finishing the recording, but here’s what’s what…

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.

Good morning from Foggy, Asheville, North Carolina. Peter Zeihan here. And today we’re talking about some things that are going on with the Armenians and the Azerbaijanis. Now, Armenia and Azerbaijan are two of the 15 post-Soviet republics. They were constituent parts of the Soviet Union, and they sell into war between the two of them, while the Soviet Union still existed gives you an idea of the depth of the animosity.

I could write a small book about the details of why they were warring, but the bottom line is, is that the two of them have an integrated geographic system, and the people that we today consider the Armenians, and to a lesser degree the Azerbaijanis, have kind of moved around throughout history. So the irredentist claims on each other’s territories are pretty robust, but most importantly, the access points to and from their core population centers intermingle.

And it’s very difficult for one of them to have security if the other one does. In the 1980s, the war basically took a pretty familiar form. The Armenians, using backing and security guarantees from the Russians, were able to launch a series of assaults on Azerbaijani positions and usually outmaneuver them not just because they had better trained troops and higher morale, but the Azerbaijani troops were honestly, completely incompetent.

And in the course of the war, Azerbaijan ultimately lost control of over a fifth of their territory, and a lot of that remains occupied by the Armenians today. The biggest change in the war happened a little over. Guns had been two years now. Yeah, it’s been about two years. When Azerbaijan got a hold of a bunch of Turkish combat drones and in a lightning conflict that lasted under a month, just decisively destroyed every Armenian force they came up against.

Now, a couple of things here. Number one, this was the first time we really saw drones in combat as a regular plank of military policy as opposed to just doing a little recon or assassinations here and there. It was the mainstay of the be Azerbaijani effort to the Azerbaijanis only had the drones as majority troops, maybe better trained, had better equipment that they did back during the war of the 1990s, but they’re still broadly incompetent.

So the Azerbaijanis were only able to follow up on those assaults in a very limited way. Which brings us to today. The we’ve had two big changes in circumstance. Number one, the Azerbaijanis have spent the last year turning up. The regular forces were still undoubtedly awful, but they’re not as awful as they used to be. And so if we were to see a repeat of the war of two years ago when the drones cleared the way the Azerbaijanis undoubtedly would be able to advance further and take more territory.

And they know it and the Armenians know it. On the other side of things, the Armenians security guarantor, the Russians is bogged down up to its eyeballs in Ukraine. Sorry for the mixed metaphor there. That’s all they got. And they’ve been steadily pulling troops out of every other operation that they’ve got everywhere. A lot of the African troops have been pulled back.

The the forces that the Russians used to keep on NATO’s borders have largely been relocated. There are other troops in the Caucasus that have been returned. As for the Russian forces in Armenia that are supposedly there to guarantee the secured their ally, you know, will they fight here and they fight. And is all their equipment still there? And do the Russians even have the capacity to think about getting involved in a secret military conflict?

Remember that Russian forces don’t have a land connection to Armenia. That’s direct. They have to go through either Georgia or Azerbaijan, two countries that obviously have a vested interest by happening. If they feel they can stand up to the Russians, which now they might. So if you were Armenia, your only solution here is to find another security guarantor.

And options are thin. Number one would be the United States, which would be a big push. But as a region or to get along pretty well with the Americans and anything that with the Americans is going to require some sort of return to the status before the war in the 1990s, which means the Army to give it up all the land that they’ve conquered.

That could get interesting. Number two is Turkey. But Turkey is a tight ally of Azerbaijan. So again, same problem that just leaves Iran. Now, Iran is Muslim, Armenia is Christian. But as geopolitics knows, no loyalties. The two of them have been de facto allies for most of the time since the post-Soviet collapse. Iran and the Russians, while they don’t always see eye to eye broadly, do see the Turks and the Americans as a problem.

And Azerbaijan is populated by Azerbaijanis, and the single largest ethnic minority in Iran are people of Azeri descent. So the Iranians have always been concerned about having an independent as region on their borders. Which brings us to an interesting little quirk here. The Armenian lobby in the United States is very powerful, not just because of culture. You know, this isn’t to share in the Kardashians.

It is very deeply rooted, certainly the USA’s State Department and into Hollywood. And as a result, usually the second, third or fourth largest single component of the U.S. aid budget has been going to Armenia. And that was established during the wars in the 1980s when it was the Armenians who were very clearly the aggressors. Cause it’s a potent force even today, especially in Congress, which means as Armenia is looking for alternatives, we’re going to see something really colorful in the United States.

We’re going to see the entrenched Armenian lobby going head to head with the entrenched anti-Iranian lobby, because the two of them on this topic are going to be diametrically opposed. And against all of this, you’ve got the Azerbaijanis trying to figure out what they can do next. Whenever you have a mountainous territory, it’s all about the access points.

There are very few places and a lot of mountain chains where you can run supplies or troops or transport or economics and you fight over those corridors. There are a couple of those corridors that are now in dispute or they were always in dispute, in hot dispute between the Armenians and the Asbjorn, is that if the Azerbaijanis get their way, they’re going to be able to cut a connection.

Really the only one that matters between Armenia and Iran altogether that can’t help but trigger a response from Tehran. And all of a sudden, U.S. policy is very interesting on this topic. It’s one of the weird things where domestic politics and foreign politics can merge in a way that is, well, delightfully lively. I don’t think that the Azerbaijanis are confident enough to do a general assault, but cutting a single corridor and putting a few troops in there and order to engage the Turks in the Americans responses.

Yeah, I can see that totally working. All right. That’s it for me. I’ll let you know more as I see it.

Don’t Be Surprised by China’s Collapse

It’s time to come out from under your rock and face the music – China is collapsing. If that comes as a shock to you, I have two recommendations. First, it might be time to refresh your news feed. Second, the Chinese have concealed this fairly well, so watch this video to get up to speed.

Whether you look at it from a domestic, international, heck, or even extraterrestrial point of view, the Chinese system is riddled with issues that are becoming increasingly apparent. Between economic issues, a crumbling political system, awful demographics, and a long list of other problems, China’s collapse should no longer surprise anyone.

Now that you’ve been warned, you need to ask yourself: are you ready? Between disruptions to global supply chains and a myriad of other issues, the world better be prepared to manage the fallout.

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Hey everybody. Peter Zeihan here. Coming to you from home in Colorado. And if you haven’t been blind and immune, be marginally aware of international news. You know that the information out of China these past few weeks through July and August and into September has just been atrocious. Consumer spending is down. Lending is down, which should never happen in a country that is just capitalist driven.

The Chinese basically force feed capital into everything, and so lending should always be going up. And it’s not. We’ve had the foreign minister go missing and then be dismissed, the same as now happening for the defense minister or the head of the missile forces. Information that’s coming out about youth unemployment is atrocious, so they just stop collecting the data altogether.

Information on bond transactions is gone. And if you’re going to try to get into a more sustainable economic structure, you obviously need a bond market. They’re not collecting information on patterns anymore. So supposedly the moving up, the value added scale that the Chinese been talking about for years is now not even part of the plan. It feels like we’re looking at a broad scale societal and economic and political breakdown, and we are.

The shock, though, is that this is all happening at once. And after years, if not decades, of the story of rising China and hearing that from Beijing and oftentimes from political parties in the United States and around the world, for it to all of a sudden go completely inverted due seems like quite a shock. But here’s the thing.

It hasn’t all been happening at once. It’s just that this is when we’re noticing it. If you look back on the last few years, things have been odd in all things China. So first, let’s deal with this from the outside point of view and then from the inside point of view. So outside think of what’s gone on the last few years.

We’ve got the Ukraine war. We’ve got the Iranians on the warpath. We had four years of the Trump administration and we had two years of a more internally focused situation. And the Biden administration, the Europeans were dealing with the tail end of their financial crisis. The Japanese have been preoccupied with the demilitarization program. Everyone has been dealing with their own stuff, and it’s only kind of now that the noise out of China has gotten so loud that we’re even noticing that it’s not good news anymore.

As for the Chinese. Two big things. Number one, COVID killed the COVID. COVID cozied for three years. It was nothing but COVID in any sort of statistical release or news out of China was always viewed through the eyes of COVID and even if there was bad news, you could always lay that at the altar of growth. IT consumption was down a quarter.

That’s COVID problems with supply chains. That’s clearly with COVID problems with linked in their industrial production to news in the wider world. That was because we adjusted our consumption because of COVID. And so we’re only now kind of getting our first good look after years of COVID and then also within the Chinese system, that had a significant shift.

But when Chairman Xi, he started a series of purges under the guise of the like corruption campaign. And in his first five years, he removed every regional power center so he could never rise to national prominence. And then he went through and gutted the two factions of the previous presidents, Hu Jintao and Jiang Zemin, that put them in power to make sure that they could never come back.

And then he spent the last couple of years gutting the bureaucrats and the private sector of anyone who might be able to rise to national prominence. As part of that, he’s removed certain sorts of data collection to make sure that they can’t assist anyone from rising. So, for example, college dissertation, the information is not published anymore. It’s probably not even collected anymore.

So no one can take the economic route to prominence. And political biographies are no longer put together by the state. So any sort of local politician or younger politician has no way to rise in the situation that might down the road and generate a potential rival. So we’ve seen this ever tightening information vacuum across the Chinese space. All of these things have been going on for five and six years.

And during that five and six year period, we had an inflection point that was absolutely the high point of the Chinese system, and that’s largely demographic. We still don’t have what I would consider to be truly accurate information. But the most recent full data to be released by the Chinese in the last two three months tell us that the birth rate has dropped in China by nearly 70% since 2017.

That’s the fastest drop in the historical record of China, of humanity throughout all of recorded history. And in that timeframe, if the Shanghai Academy of Sciences is right, they’ve all recounted their population made over 100 million people, all of whom would have been working age people under age 40, meaning that in the last five or six years they’ve had that just peak workforce and the last year peak workforce probably in the earlier part of that process.

And they just don’t have enough millennials to do consumption at all. And we’ve seen the cost of the workforce increase by a factor of 14 or 15 in the last 22 years. So in the last five or six years in China, if you could somehow have a crystal ball and have access to all the data, especially the supplement collecting anymore, we would see that they’ve already fallen off the cliff and it’s only in the last few months that it’s become so obvious that it’s cut through the clutter and the noise and the preoccupations we all have with everything else in our lives.

And now it’s obvious that this system is breaking down. The demographic collapse is not correctable. There are not enough people under age 40 for them to even try, even if they had the macroeconomy, the structures that allowed or encouraged people to have families of the role. And we’re seeing an ever increasing rate of decline in terms of their industrial competitiveness.

On top of that, we have the issues with the Ukraine, where with China’s starting to come into the crosshairs of sanctions. We have China being more and more exposed to energy and food insecurity because the Europeans have taken everything else that is proximate to them. So they don’t have to use Russia and the infrastructure between Russia and China is so thin that stuff has to go out west past Europe through the Suez War around Africa and around India and around Vietnam before getting there, making it the most exposed supply lines in the world.

So we’re going to see more disruptions moving forward based on what’s going on in China with demographics and political situation. And we’re all certainly going to see disruptions in their ability to access the wider world for trade, merchandise exports. And that before you consider that the Biden administration is the most protectionist administration the United States has had, at least in a century, far more so than Donald Trump.

So the Chinese are getting hit from every single angle and Chairman Xi is so purged the system that it’s an open question whether he can even become aware in a reasonable amount of time that something needs to be done, much less have the capability to come up with a coherent policy to deal with whatever the issue is as it arises.

So demographically speaking, we know that this is China’s final decade as a coherent economic power, but now we see exposure and political failure that absolutely can bring that date forward. And that assumes that no one in Washington or London or Japan or the rest put their fingers on the scale and push this forward. This has been coming for a long time, but because of all the noise, we missed a lot of the signals in the last five years of just how quickly it was coming and now it’s here.

The biggest risk in all of this is whether or not we have enough time to adapt. If things like construction spending for industrial projects in the United States have risen to a level we didn’t even see in World War Two, the pace of the industrial expansion and the reshoring trend really is huge. Should have hopefully started five years earlier by better late a mother.

The biggest concern I have now is that the information vacuum out of China is so complete and the decision making capacity in China has so collapsed and the pace of decline is now so steep. And the fact that we’re coming so late to the understanding of all of these things means that we might not all realize the China really is broken until the product simply stops arriving.

There’s a lot of industrial demand for product in this country for things like transmission towers and transformers and other industrial equipment that is necessary to build out the industrial plant here that’s still made in China that we’re still depending upon. And some of these things already have waitlists that are more than 36 months. But we might now be in a situation where it’s not obvious that this stuff is never coming until the shipments simply don’t arrive.

And at that point, we will be in a bit of a pickle because we will not build out our industrial plant fast enough in order to get by without the Chinese in the mid-term. That’s our biggest risk. Now, luckily, from an industrial growth point of view and an employment point of view, this is a good problem. But it does mean that the Chinese collapse is likely to cause a lot of follow on damage here because of shortage.

And the only way around that is to build more and make sure that we don’t need those products in the first place. Unfortunately, we need a lot of those products in the first place in order to get built or no real body around that except for to start yesterday.

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

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Transcript

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