How Tariffs and Drones Saved Ukrainian Agriculture

Ukrainian agricultural exports are finally having the boot lifted from their throats thanks to new tariffs on certain goods in the EU and Ukraine’s adoption of water based drones.

Exporting Ukrainian agricultural products has been no easy feat; between Russian bombardment, infrastructure attacks, and European interdictions on Ukrainian goods, there wasn’t much movement early on in the conflict. Between the proposed tariffs by the French and some recent success with water-based drones, Ukraine might finally be able to get some product out.

These new tarrifs will free up the markets for Ukraine’s primary revenue generating products, wheat and sunflower. The recent water-based drone attacks on Russian vessels have helped to reestablish the grain corridor through NATO territories, easing pressure further.

Although this is just a small victory for the Ukrainians, restoring their ability to earn through agricultural exports could help ease tensions across the board.

Prefer to read the transcript? Click here

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.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey, everyone. Peter Zeihan here coming to you from Colorado. quick update on the trade and war situation in Europe, specifically Ukraine. it appears we have or they have solved the problem of getting Ukrainian agricultural goods to market. So the quick backdrop is that because of the Russian war, the Russians were bombing places like Odessa and interdicting ships on the Black Sea.

And by water is how the Ukrainians ship out. Well over 80% of their agricultural output, or at least before the war, it was, but nobody wanted to get hit by a Russian missile. So basically everyone got locked up in port and we had backlogs, throughout the entire system. the Ukrainians started to ship things by rail west into the European Union.

they couldn’t get nearly as much out at most one third of what they could do, based on product and some products, less than 10%. But every kilometer that the, Ukrainian stuff was in a rail car, was a kilometer of ton rails that the Europeans could not use. So the Romanians, the Hungarians, the Slovaks and the poles, the border states in particular, were getting cheesed off because their farmers were having a hard time getting their crops to market.

And so they would say, you could transit, but you can’t actually sell that here. Well, if you have to go all the way to Germany, that’s a lot of ton miles that were suddenly not available for everything else. So it wasn’t a very tenable such solution. So these countries may on the whole be very pro Ukraine, but they don’t want to destroy their own agricultural sectors to do it.

So two things have changed. First, the French, the French have gotten involved. Though the French are arguably among the most agriculturally protectionist countries in the world. and none of this stuff was coming to France, but, the French economy is roughly as large as all of the border states put together. And so when the French did decide to get involved, it had an impact at the European level very quickly.

And they were looking at some of the secondary products that were coming in, things like poultry and eggs and honey and corn and oats, and they’re like, okay, we produce all of these things, and now all these things aren’t necessarily making it to France. They are making it to Central Europe, which is depressing. Prices within the European Union.

So how about we do this? We do it. We give everyone in Europe the ability, put tariffs on the products that we care about. And in doing that, we then open up the ability for everything else, most notably wheat and sunflower, which are, the Ukrainians, big money makers. now everyone in the border states grows wheat, but by freeing up some categories, then things could go elsewhere and things could basically be shuffled around.

The French got happy, and it took some of the pressure off of everything else. That was part one. Part two is a Ukrainian military strategy using drones. they basically been refitting small jet boats and jet skis and going in force after Russian vessels, especially Russian landing vessels. well, in the last few days, they’ve taken out another two or at least heavily damaged another two, as long as as well as a spy ship that allows the Russians to identify where launch sites and radar sites are.

And what this has had the net effect of doing is clearing the entire western half of the Black Sea of Russian vessels, and forcing the Russians to fall all the way back to an over a cease, and maybe even even to offshore on the eastern side of the Black Sea, which ports most of the western half of the Black Sea, out of range of even Russian missiles.

So this is opened up a grain export corridor going down the western side of the Black Sea through NATO territory, specifically Romania and Bulgaria, Turkey, to the Turkish Straits and out to the Aegean and the wider world. You do that, you take pressure off those bulk commodities like sunflower and wheat. So I don’t mean to suggest that this is solved, and I don’t mean to suggest that everyone has gotten everything that they want.

But a lot of the pressures that we were seeing that were locking up the cargo shipments are now gone, or at least severely ameliorated. And all of a sudden, Ukraine again has its single largest line item export earner back. and that will help everyone, because the more that the Ukrainians can put their own money into the war, the less pressure there will be politically on everyone else.

Why I Don’t Care About the Fallen Bridge in Baltimore

At this point, we’ve all heard about the Francis Scott Key Bridge Collapsing in Baltimore on March 26. While it may seem like this should drastically impact American shipping, I’m really not worried about it…

Before this catastrophe, I was convinced that the Jones Act hadn’t done anything good for America. However, I can now say that the Jones Act has one redeeming quality – since cargo transport on American waterways has drastically fallen since the Jones Act was introduced, the fallout of this bridge collapse won’t be as bad as it could have been. That’s a positive, right?

In a world without the Jones Act, natural port systems like the Chesapeake Bay would be teeming with manufacturing and short-haul shipping. I’m not convinced the prevention of some immediate disruptions is worth utterly stifling economic growth, but hey, I’ll let the policymakers come to their own conclusions.

Prefer to read the transcript? Click here

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.

Support medshare's ukraine fund
Support medshare's global efforts

TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. several of you have written into the Ask Peter forum asking why I haven’t had anything to say about the falling of the Francis Scott Key Bridge in Baltimore back on the 26th of March. the idea is, you know, this is controlling the mouth of the Chesapeake. And shouldn’t this be a big issue, considering how gung ho I am about water transport?

It’s about 1/12 the cost to move things by water that it takes to move them by truck. And so you would think that seeing an interruption in one of America’s greatest ports would be a problem. it should. It really should, but it’s not. So let me give you the backstory. first of all, the Chesapeake is the world’s greatest natural port system.

It has more miles of frontage that can be used for ports than any other part of the world, with the possible exception of the Texas coast. And even that’s a tight race. It’s in the Mid-Atlantic, so it’s the midpoint going north south on the American East coast. For the parts that are densely populated from roughly Atlanta all the way up to Boston.

And it has access to what used to be the national road through the Cumberland Gap, getting into the Ohio River Valley. So it should, should, should be a crossroads of the greatest manufacturing zone on the planet. it is not because of something called the Jones Act, which was a program passed in 1920 that was designed to keep jobs within the American system.

that says that any maritime vehicle, any ship, the transport, any goods, between any two American ports must be American built, owned, captained and crewed. And as a result of having that restriction on maritime transport, but not on truck transport or air transport or rail transport, people stopped using the river ways completely. And we’ve seen cargo on America’s waterways dropped by over 99% in the century since.

And so we’ve taken what is honestly the greatest natural gift that God could have possibly given to any culture and destroyed it. the United States has roughly 3000 miles of naturally navigable, interconnected waterways, and we hardly use them at all anymore. We certainly don’t use them with small ships. we should, should, should, should, should have thousands of tiny ships carrying a handful of containers here and there throughout the system, making our own multimodal manufacturing system that is the world’s most efficient.

Instead, we move half of our cargo by truck, which is the most expensive way to do it, which it shouldn’t work because we removed the cheapest way of doing it and then other stuff by rail. Well, because of this, our waterway networks, including the Chesapeake Bay, are barely used, and places like the Ohio River Valley and the Great Lakes system, which should be the busiest zones in the world, are barely used.

So we should have this rough pentagon of territory going from roughly Buffalo, New York, to Duluth, Minnesota, to Saint Louis, Missouri to Pittsburgh, and then with an arc going down to Baltimore that is the busiest section of waterways and the biggest manufacturing zone in the world. Instead, it’s the Rust Belt. there are many things that have caused the steel belt to become the Rust Belt, but I would argue that the Jones Act is the single biggest factor, because it raised the cost of transport among these systems and basically drove the business somewhere else.

So this should, the downing of the Francis Scott Key Bridge. This should be a really big deal. Instead, the only thing it does is interrupt a few cargo shipments coming in, container shipments, which can easily be rerouted to places like new Jersey or Savannah, as well as some internal, petroleum fuel distribution systems within the Chesapeake Bay itself so that these are non-issues.

But these are like minor rounding errors, considering how catastrophic of an event this should have been. if we had gone the other direction, we’d have an extra $10 trillion on the U.S. economy right now. Most of that in manufacturing, most of it in this zone. And then it would have been a very big deal. So I guess from a certain point of view, the Jones Act has saved us from problems by gutting our economic growth.

For the last century, the part of the United States that has suffered the most of those countries in the Midwest that border both the Great Lakes and the Ohio River Valley, so specifically Ohio and Indiana and Illinois, because these are the ones that should be at the heart of all of this, and they can’t participate in almost any of it.