Trump Goes A-Conquerin’

Photo of a ship in the panama canal

Trump just kicked around invading and coercing some allies. Oh boy….

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My Dream Alliance for the US – Part 1

When I picture my ideal US alliance system, I focus on stable, secure, and economically complementary countries. Part one of this two-part series focuses on the “safe” bets.

The inner circle will consist of Canada, the UK, Australia, and New Zealand. Sure, we’re all English-speaking and naval-oriented, but we’ve also got a long history of cooperation. And each of these places is economically resilient, consumption-driven, and relatively insulated from global demographic challenges.

Next on the list, we have Mexico and Vietnam. Mexico is our largest trading partner and developing a more holistic relationship with them would serve the US well. Vietnam is a rapidly growing trading partner that has secured its position in the global economy and maintains natural geographic defenses, making them a good friend to have in the region.

Focusing on this list of countries should be the main priority for the US, but there are plenty of other options out there. So, tomorrow we’ll discuss the countries that are sitting in the minor leagues waiting for the call up.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey, everyone. Peter Zeihan here coming to you from the Brett’s track in New Zealand. Almost done like 4k left. Anyway, question from the Patreon crowd. If you were to craft the perfect U.S. alliance system for the future, what would it be? Well, I would always start with the family. So what I like to call the Grand Hongqi Alliance, all the all the Anglo states. 

So that’s the United States, Canada, the United Kingdom, Australia and New Zealand. These are countries that share more than the common bond of English culture and history. They’re all naval powers, what they can do, which is kind of regard, and so they have the ability to defend themselves in a degree that’s much simpler than it is for a land power. 

So security complications are quite limited. The economic growth is largely consumption driven. So it’s going to be something that’s really interesting and positive to have in a globalizing world where populations are aging out everywhere. It’s less true for those countries. And we have a long track record with the Anglos, called the Five Eyes Alliance, which is basically intelligence sharing. 

Throughout history, whatever we find that isn’t a complete individual national state secret is shared among the five, that makes the most powerful, strategic decision making apparatus that you can possibly have. So start there. Number two, you look for countries that are up and comers, that have the potential to do very well in the world to come at the very top of that list, are two countries, Mexico and Vietnam. 

These are states that are already in the United States as top seven trading partners. Mexico is number one. Vietnam’s number seven. And they have the demographic to, continue doing this for a very, very, very long time. The security issues, in the classical sense, worrying about other countries are quite limited. Vietnam is backed up by mountains and jungles on all sides. 

And Vietnam’s, most insecure border is one the heads of the United States. So if I was to give any advice to presidents now or in the future, let’s find a way to make relations with Mexico as wholesome and as well-rounded as possible. If you’re only talking trade, if you’re only talking drugs, you’re only talking immigration. You’re not really doing anyone a favor. 

This needs to be a broad border conversation that involves not just security. And, in the way that we’ve defined it on the border, but in the broader sense, it needs to involve culture and finance and transport and logistics and infrastructure and everything, that is benefiting, what has been the strongest bilateral economic relationship in human history already? 

Can you imagine if we actually put some effort into that? Okay. Next, countries where the security issues are relatively limited and they could bring a lot to the table? France and Japan are at the very top of that list. Japan, obviously, an archipelago has two, super carriers, which are the only two outside of the five ice agreement. 

The others that are not American or British. Second strongest navy in human history. The Brits are third, and an economy that has already relatively globalized proofed it. It’s still a massive importer of energy and raw materials. But this is not the Japan of the 1980s that was completely dependent on trade, only trades for GDP, about 15% of the total, which is very similar to the American number. 

And so this is a country that while its demographics are bad, it is developing a series of technologies to cope with it, which is something that we will learn in yourselves in the future. France on the far western side of Europe, there’s sometimes our, our estranged sibling, but that simply underlines that they are family. 

The French and the Americans have always gotten along when it really matters. Although we’d like to do things our own way, they also have a positive demographic future. They have a huge fleet of atomic power stations, so they’re not nearly as dependent on petroleum or natural gas imports as anyone else in Europe. And they have a military that’s roughly right sized to their needs. 

So you kind of group those together and you kind of get the dream team. Once you have that in place, I would look around for the low hanging fruit places where there’s technologies that are kind of concentrated, think Taiwan, that would be very useful, or places that don’t have security concerns because they’re isolated from everybody else. Spain and Portugal might fall into that category. 

But overall, this is the cluster. These are the countries and do really well in the future. And then once you’ve got that, you can start thinking things that a little bit more ambitious based on whatever your goals are, however, you define them. I’m a little hesitant to put my stamp on anything beyond that list, because the technologies in 1015 years may look significantly different. 

And the, the goal posts will shift with that. But for now, these are the countries that I see as being relatively stable, relatively wealthy, with a good growth trajectory, and very little chance of anything knocking them off. 

Bring on the Chinese Investments in LATAM

Photo of the Chinese yen

A lot of you have been worried about all of China’s investments in Latin America. I get that it might sound a little scary, but you need to put these actions into the broader context of China’s circumstances.

China is in terminal decline. Its population is aging, and its resources are dwindling. So, they’re not going to be able to sustain these LATAM investments long-term. And don’t try to bring up the Monroe Doctrine, because recent administrations haven’t been enforcing it anyway.

Places like Peru, Brazil, Colombia, and Argentina are getting a sweet deal, since this is basically a form of subsidizing future industrialization of the region. And the US is only going to benefit from that as well, since we are partners to many of these countries.

So, if China wants to spend their limited resources (and time) laying the groundwork for a brighter future in a region that the US is so closely tied to, why should we stop ’em?

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Transcript

Hey everybody. Peter Zeihan here comes to you from Tongariro National Park in New Zealand. This is Taranaki Falls, just about done with the circuit. I thank God my back hurts. Anyway, taking an entry from, the Patreon page specifically. 

Tourists, specifically. It’s. Do I worry at all about China’s investments into Latin America? There’s a big port going into Peru. 

There’s a lot of mineral extraction stuff going into Brazil. There’s a general infrastructure going to Colombia. And then, of course, purchase agreements for everything under the sun to Argentina. What do I worry about? You know, I mean, don’t get me wrong, there’s a Monroe doctrine thing here going on, but, we haven’t had a president in the last 25 years who’s really acted on it. 

Certainly not, Obama or Trump or Biden. So, this is a very bipartisan kind of slouch strategically if if that’s the thing you’re concerned about. But I’m really not concerned about it. Remember that the Chinese are literally dying out. And if they want to throw some of their limited resources into the Western Hemisphere to build physical infrastructure that will help industrialize the Western Hemisphere to prepare for when China’s going to recover after China storm, I say let them, specifically the port in Peru probably isn’t going to get too much activity. 

There isn’t a really good transshipment port anywhere on the west coast of South America, so having one makes sense. And here, lo and behold, the Chinese are building it for everybody. In Argentina it’s more straight up sales issue. Those things can always go somewhere else when the Chinese are no longer the high price bidder. Colombia is a mountainous country where the population. 

Well, it’s unique, usually, like in Mexico, you live on the top of the plateaus to get above the tropics or anywhere else. You live at the bottom of the mountains where it’s cheaper to build. But in Colombia, because it’s right on the equator and the mountains are really steep and there’s jungle. They live on the side of the mountains. 

The top is tundra, the bottom is hard jungle and everyone lives in the middle. And so infrastructure is really hard. And if the Chinese want to pay for that grid because the U.S has a free trade agreement with Colombia, and any Colombian success is one for us as well. And then finally there’s Brazil. The Chinese are spending to build infrastructure from the coast up the skirt mint where Sao Paulo is, and then down into the interior again, expensive geography to develop and the Chinese are paying for it all. 

So if the Chinese want to pay for tomorrow’s world, I say let them. 

Is Federal Regulation Coming to the Texas Power Grid?

Photo of powerlines and grid

That innate sense of independence that every Texan comes out of the womb with has also made its way into the energy sector. With an isolated grid managed by ERCOT, Texas has found itself in an energy pickle of its own.

Since the Texas grid stands alone and the capacity market disincentivizes peaker plants from being built, it’s more vulnerable to certain things like natural disasters that cause prolonged outages or fluctuating weather patterns and high temps which intensify energy demands.

The big concern is that energy demands in Texas are expanding…rapidly. To sustain the industrial expansion and population growth, the Texans might have to do something that goes against every fiber in their being: accepting federal regulation to help connect their grid to neighboring states’ grids.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from the Austin airport. Yesterday we talked about how California has found the new in a unique way to increase their energy insecurity, along with increasing prices. And today, it’s time to talk about the same topic in Texas. We’re going to go with an electricity story today. There are three kind of mega grids in the United States. 

One that kind of roughly, cuts down in front of the rocky line separating east from west. And then something called Ercot, which is Texas’s electricity reliability, group, which is basically just Texas. And Texas has its own grid because it has a different, philosophy when it comes to regulation from most others, which is a fancy way of saying they like as little as possible. 

But that doesn’t necessarily mean that they have no regulation, and that doesn’t necessarily mean their approach is working. One of the big things we’ve seen in Texas in recent months and years was there’s not a lot of depth or durability to the system, because unless there’s a very clear economic rationale for doing something on a day by day basis, it typically isn’t done because there aren’t going to be regulations about how long power can be off line for maintenance or redundancy in case of a storm. 

And Texas is a Gulf Coast country. And so when a hurricane comes through like one did earlier this year and hit Houston, power is out for 2 to 3 weeks over much of the city. They have a much bigger problem coming up just around the corner now. There’s something called a capacity market in Texas and regulations have been around for a while. 

Basically dissuade people from adding power to the grid unless that power is going to be used all the time. So there’s a little bit of an ideological slant here. The idea being that solar never works at night. So if you can’t pass on the cost to the end user because it can only be used half the time, can only pass on part of the cost, then maybe won’t. 

We won’t get as much solar. Solar is doing just fine in Texas, especially out west where it’s just a brilliant economic model. But this capacity market restriction has also restricted the Texans from building what are called peaker plants. Every day there’s a certain pattern where power is in higher or lower demand. And the smart people in the electricity market have figured out a way to ramp up production for those times. 

As a rule. And it’s going to vary location by location, season to season. Peak demand tends to be between 6 and 9 p.m. at night, when people are coming home and getting dinner and watching TV, and then it tends to drop off a cliff around 10:00 am and doesn’t pick back up until people are waking up around 6 a.m. the next day. 

Well, in Texas, because of this capacity market thing, they don’t get a lot of plants to generate power specifically for those windows. And I don’t know if you’ve been to Texas, but it’s a hot place. And so when you have peak demand from 6 to 9 p.m., everyone’s running their AC full bore and the peak is much stronger. 

You add in the erratic nature of weather in Texas, whether it’s the great Plains or the Gulf Coast or the interaction in between, and they have the most extreme variations between low and high. So if anyone needs a lot of speakers, it’s going to be Texas. But the capacity market actually dissuades people from building those. So we are now in a situation where Texas has had 35 years of incredible industrial and population growth, and considering what needs to be done over the next few years, the industrial growth really needs to continue. 

But there’s not enough electricity to power it, and the capacity market is now getting in the way. So we’re probably going to get a Texas two step of outcomes here. Number one, the Texans are going to have a series of rolling brown and blackouts as the power system fails. It’s just not stable. And then second, the Texans will probably be asking the federal government to dissolve the seam that separates Ercot from the rest of the country in order to import huge amounts of power from neighboring states. 

And in doing so, they’re going to have to subject themselves to at least some degree of regulation from the federal government. The alternative is rolling brown and blackouts and the failure of the Texas industrial expansion model. So basically, the Texans are going to do something they really don’t want to do. They’re going to have to ask for help from… Oklahoma.

Why Is Gas So Expensive in California?

Photo of gas pumps at a station

Picture this: you’re driving down the PCH in a sports car with the top down, hair is blowing in the wind, and then the gas light comes on. You pull into the first gas station you see and a gallon of gas costs $14.99. Okay, maybe I’m exaggerating a little, but California is heading towards a massive energy crisis.

California has been living in its own energy world for quite a while. As if its distinct gas formulation designed to reduce air pollution, high gas taxes, and dependency on foreign oil weren’t enough, the state now requires refiners to keep reserve supplies (raising costs further and creating more logistical issues).

Since California isn’t a beneficiary of the shale revolution, they still import crude from the Persian Gulf and use outdated methods of collection. This makes them vulnerable to global energy shocks and could lead to extreme gas prices throughout CA. So, if you were planning to head to the west coast, let your hair down, and take a cruise along CA State Route 1, you may want to grab a few extra gas cans before you cross the state line.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Huntington Beach, California. Behind me is the old Huntington Beach refinery. This used to be a major oil producing zone. In fact, there’s still a handful of producing wells across the L.A. area, with one of the most prolific ones being inside of a mall in Wilshire Boulevard. Never say that the Californians aren’t capable of a bit of, double dealing. 

Anyway, the reason I wanted to talk about this, and this is what, you know, made me think of it, is we’ve got a bit of a crisis going on in California. I’m going to rotate around a little, not only is the view better, but you can even see some of the old, oil platforms out in the ocean. 

Hey. They’re okay. Anyway, short version is that California has a very high tax regime for, a lot of things, but none more so than gasoline, where it has the highest gasoline taxes in the country. And as a result, gasoline in California is ridiculously expensive, often goes over $5 a gallon. I think it’s where it is right now, actually. 

Anyway, there’s some other reasons for this, but, we’ll get to those in time. Bottom line is the Californians have become a nerd, but angered by very, very high gasoline prices and very, very volatile gasoline prices and more so than everyone else, you know, everyone else is, you know, used to the up and down of crude prices of how that affects things. 

There’s more going on in California for you that was worth exploring. The governor of California, Gavin Newsom, has recently signed into law a project that will force refiners to maintain storage of gasoline grades for the California market as a cost of doing business in the state. The intent is so that when maintenance happens, especially unscheduled maintenance, that there’s always a reserve that the state can fall back on to keep energy prices out of control. 

Unfortunately, it’s going to do the absolute opposite. And the cost of, complying with this new regulation combined with all the other regulations in California and at the energy sector, which are already, the stiffest in the country, means that a lot of refineries are evaluating whether they even want to stay. And, shortly after the new law was signed, Phillips 66, which maintains a refinery near here in Los Angeles, announced that, next year will be the final year that there are refineries operating and they plan to shut down and redirect their efforts to other places, most notably other states. 

A couple things here. Let’s talk about the technical of why what Newsom and the Democrats here are doing is just purple idea. First and foremost, California, in order to control air pollution, has a different formulation from the rest of the country. So any refinery that is producing, gasoline or unleaded or whatever else for the California market has to produce a very specific type of fuel that doesn’t have a demand anywhere else in the world. 

And so no refineries outside of the state produce for the state because there’s no margin added for them. So it’s just the locals. Second, not every urban center in California has the same regulations. And in the summer, a lot of them had different regulations. So not only do you have to produce a strain that is different for the state as a whole, but when you get to the summer months, you have to produce several different ones. 

And all of this drives up costs because it reduces scale. The idea of the regulation that you have to have storage makes sense. But gasoline, once it’s refined into a fuel, if it’s stored for any appreciable amount of time, you know, more than days to a few weeks starts to degrade. So the cost of keeping this up is really high, and the waste that comes out of it is not minor. 

And so from a carbon point of view, this isn’t a great idea anyway. There’s any number of reasons why this isn’t a great plan, but the Californians are doing it anyway. And that means that California is setting itself up for a bit of a problem down the road, more than just high prices. You see, California is the only one of the lower 48 that is not participating in the shale revolution in some way. 

They have a significant oil field here in the Monterey Shale that’s out in Kern County in in the valley. But the techniques that are used for fracking have specifically been banned. But oil production has not. So, the locals are using technologies that are older and arguably dirtier than shale tech in order to produce crude for this local market. 

This new regulation further separates California from the rest of the country. Also, keep in mind that the United States is now far and away the world’s largest exporter of refined oil products. By the end of this calendar year, we’re looking about 5 million barrels a day of exports of things like gasoline and jet fuel. Obviously, none of that’s coming from California. 

But for the rest of the country, we’re awash in an embarrassment of energy production and fuel production, whereas California is in huge deficit. And now California is the state that is most dependent, not just on energy imports, but energy imports from another hemisphere. Yes, all the refineries in Louisiana and Texas like to use imported crude. They mostly use, Venezuelan, Mexican and Canadian and to a lesser degree, crude grades from the Eastern Hemisphere. 

But everything, almost everything that California gets comes from the Eastern Hemisphere. And almost all of that comes from the Persian Gulf. So the next time we have an energy shock, for example, because I don’t know, Israel bombs Iranian oil production and export facilities and that Iran returns the favor by hitting Saudi Arabia. We get to know what are you prices? 

Most of the United States is like, whatever. But here in California, they have made themselves uniquely exposed to international shocks while also being uniquely exposed to their own. So one way or the other, we are looking at a significantly darker chapter in California economic history. Just around the corner. And that’s before you consider things going on in Silicon Valley or the capital market or the general aging of the millennials, all of which are already hitting California pretty hard. 

So stay tuned. When it gets bad, I’ll be back because it’ll be cheap. 

A New American Imperialism?

American imperialism is not the same as European imperialism. The Europeans wanted power, prestige and economic gain, while the US was in it for security. So, what will this look like for the Americans moving forward?

With current strategic holdings in places like Guam, the Northern Mariana Islands, and American Samoa, further expansion in Asia is more of a nice-to-have, than a need-to-do. Should the US want to make some moves, here are some of the places and considerations that would be involved.

Places like Sao Tomé and Principe, the Azores, and Canaries have some nice positioning for Africa, and Socotra could be valuable for Middle Eastern operations. Then there are some places that bring in another layer of risk, but offer some big incentives – Panama for the canal, Greenland for strategic positioning, or Iceland for importance in the North Atlantic. Cuba and Singapore are interesting, but more complicated. There’s some obvious history with Cuba that makes involvement spooky, but having a foothold would make national defense downright breezy. Tampering with the very solid security partnership with Singapore seems too risky, but having a firmer foot in Southeast Asia could be important in a deglobalizing world.

Yet to existing cooperative security arrangements, the US already enjoys the benefits of influence in almost all of these places without the need for boots on the ground, much less the grinding migraines that come from actual occupations. Expanding into new territories would require managing populations and infrastructure, which could weaken US strategic stability and risk turning allies hostile. What I’m getting at here is if it ain’t broke, don’t fix it.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey everyone, Peter Zeihan coming to you from the Bay of Islands and everyone is talking about conquering countries all of a sudden. So I figured it’d be a good point to review American imperialism. And if there were to be a new chapter of the United States going at and grabbing territories, what sort of territories would we be interested in? 

Key thing to keep in mind. Imperialism. American style is not like imperialism. European style. The Europeans are relatively small countries compared to the United States, whereas the United States has a continental landmass that has some of the best lands in the world. So for the Brits and the French and the Germans and everybody else going out to grab a chunk of territory in order to Improve their own economic prospects. That makes a certain amount of logical sense. For the United States, it never really has. When we were going through reconstruction industrialization, we were still processing the best parts of one of the largest continents in the world. And now that we have a heavily driven services economy that is the most productive on the planet, it’s really hard to imagine the United States going out and occupying a piece of land in order to get X, resource or a trade route. 

Instead, when the United States thinks about imperialism, it’s about not about the money. It’s about security. So we’re not French. We’re not after just to get a big chunk of land that looks good on the globe map. And we are not British, where we’re looking to go out and grab economic nodes that we can then profit from. 

We’re looking for small chunks of very easily defendable land with low populations that don’t generate security heartburn, but instead provide strategic opportunities or limit the strategic opportunities of our foes. And that is a very short list of countries, especially when you consider places that the U.S. already controls. So, for example, if you’re in the Pacific, you look at places like the Northern Mariana Islands, which are not too far from Japan or Guam, which is not too far from the first island chain or American Samoa in the South Pacific. 

These are chunks of territory that the United States gained from the last round of expansion in World War Two, and before that, in the age of imperialism, the 1800s. And there’s really nothing else in that area that we need. We already have what we need. If you’re going to look at, further west, there are a few chunks of territory that I would find strategically interesting. 

The most complicated of them would be a place called Sao Tomé and Principe, which is a small African island nation in the Gulf of Guinea off the south. You know. Well, you know, you know, how Africa just kind of does that thing. It’s it’s in that part in the middle or that’s West or Southwest. I don’t know. 

Anyway, you’re talking about a country with a population of 200,000 or, you know, if you go for, just for principle, a country with just a population of about 10,000, that is something that kind of fits the bill, would allow you to project power in the entire belt of territory from South Africa to Nigeria, to Senegal, with having a very small defense platform. 

Even better would be territories like the Canaries or the Azores, which allow the United States to block potential foes from coming in from the eastern hemisphere of the Western Hemisphere and project power to Europe as well. Now, if those last to the Azores and the Canary sound familiar, it’s because we’ve already seized us at one point during World War Two, and we gave them back because the countries who control those are Portugal and Spain, who are NATO allies. 

One of the things that the United States, excels at is convincing someone that we’re an ally and we take care of all the naval power issues, so you don’t have to worry about it because it’s expensive. If in exchange, you give us security, supremacy and specific footprints of land, that is absolutely our deal with the British when it comes to Diego Garcia, which is our preferred platform in the western Indian Ocean. 

So American imperialism isn’t like classic imperialism in many ways. We don’t even change the nameplate on the chunk of territory, so long as we can have physical access to it. So these are all the things that the United States, for the most part, already has, whatever access it needs. And so there’s no need to go out and physically grab the territory. 

The exception would be Sao Tome and Principe. Only reason you would do that is if you decide you really want to be a major power in Africa on a day in, day out basis. No American administration has made that decision yet. So, you know, we haven’t really gone for it. Let’s say you wanted to step it up and loosen your definition of what’s a good idea, and go after territory that, still has good security parameters for projection, but it’s going to be a lot heavier. 

Carry, in terms of running it, because it either has a larger population or it has land borders. You’ll notice that everything that I’ve laid out so far is an island. And you’re really willing to put your back into a security based empire in a semi-classical sense. This is where Donald Trump has plucked Panama and Greenland. 

Panama has a country, has a population of over 4 million. And one of the biggest drug problems and human smuggling problems in the world. So if we were to go into Panama just for the canal, we would very rapidly get caught up administrating a place. It’s kind of a basket case. And you would only do that if you felt that the canal was that important. 

Keep in mind, the United States already has unrestricted access to canal, and while we do have to pay for transit because we are not paying for upkeep, that also means that whenever the US military wants to go through, everyone else gets shoved to the back of the line. I’d argue got a pretty good deal there already. 

 Second one, Greenland is, of course, all in the news these days. Trump is wanting to buy Greenland for quite some time. And yes, while you can project power from Greenland, no argument there. And we use it for space tracking. And yes, it has a population under 100,000 people. 

It’s a huge chunk of territory, and the people who live there are extremely poor. And if the United States were to take it over, we would then be responsible for the entire territory. One of the beautiful things we have about the make up right now is that Denmark is one of our fastest allies when it comes to doing things in Greenland, they have never once said no. And when it comes to doing things in the Baltic Sea, in the North Sea, which are an order of magnitude more important, they have never said no. 

So if we were to go in and snag Greenland, obviously we could do it if we wanted to. It might cost us, one of our strongest and most loyal allies in one of the most sensitive parts in the world. Moving forward. I would say that that’s not the best plan. Iceland kind of falls into the same category. 

Population of under million dominates the North Atlantic. It’s an independent country. But if you wanted to project power into the Russian sphere, it is a fantastic platform, especially in collaboration with the United Kingdom. But we already do that. And the Icelanders take care of their own business, and they have decided publicly to never field a military. 

They will just let the United States do it. But the cost for that is the United States is allowed to do whatever it wants, whenever it wants. So we get all the benefits of occupying the territory without actually having to pay for occupying the territory. 

The final two that might meet this criteria are a pair of countries Singapore and Cuba. Singapore dominates the Strait of Malacca, and any American military presence there would allow us to empower or destroy any country, depending on that route for trade. And that could be Russia. That could be Iran, that could be Saudi Arabia, that could be China. 

So, you know, that could be handy. And, Cuba, because it dominates the interest of the Gulf of Mexico, is a very, near and dear issue to American strategic thinkers because without it, it’s very difficult to do any sort of maritime shipping between the Gulf Coast and the East Coast. And as we found out during the Cuban Missile Crisis, if the Cubans were to host some, intermediate range weapons systems, that would be a real problem for us as well. 

But but in both of these cases, you know, these are big countries. Cuba has this many people. Where Singapore is about 5 million. Singapore is one of the most advanced countries on the planet. And Singapore has kind of made a deal with us, very similar to, say, Denmark. So the United States actually has a dedicated aircraft carrier berth in Singapore that the Singaporeans built. And whenever we’ve had a security issue going back to the time of the Vietnam War. The Singaporeans have always been extraordinarily helpful. 

So you get all the benefits of having the military footprint, but none of the costs of running or administering or occupying a country. Cuba. More problematic, of course, because of politics. If we were actually going to invade a country and occupy it with the intent of making it ours, I would say Cuba would be at the very top of that list. 

But we’ve tried that before in the 60s. It wasn’t a lot of fun. We controlled this territory through most of the time between the Spanish-American War and then, we’re basically ran it as a colony, generated gobs of bad will. And we discovered it’s just easier to base things out of the continental, the United States or Puerto Rico, rather than deal with a population that is pathologically hostile to you. 

So as long as in strategic issues, Cuba is neutered, we really don’t have a problem with it. And ever since, Castro died a few years ago, the Cuban government, while they’ve been prickly, has gone out of the way to make sure that we don’t think that they’re getting in bed with anyone we really don’t like in any ways we really don’t like. 

So they don’t provoke an invasion. So where do we go? You know, I would argue that the United States right now, from a security point of view, has all the benefits of a globe spanning empire, but without actually having to pay for it. If we actually go and start taking over territories, that changes. You have to occupy populations. 

You have to build infrastructure. The way we have it right now is most of these countries want to preserve their independence, and they feel that the best way to do that is to have a differential relationship with the United States security establishment going out there and taking the territory. Turns that on its head. You don’t just lose allies, the places that you are already projecting power from suddenly turn hostile on the inside. 

And that is how empires ultimately fall apart. 

Oh one more off Africa. And again, we would only do this if we felt that we really need to project power into Africa. There was an island called Socotra. It’s Yemenis. It’s off the Horn of Africa. A small little place. Easy enough to build the infrastructure if you wanted to project power into the Persian Gulf. As well as the Red sea in the entire east coast of the African continent.

Trump’s New Grand Strategy

President Trump suggested that Europe should buy US oil and gas to address trade deficits and strengthen alliances. I have a few qualms with this.

Trump talks a big game, but backing it up is a whole different story (meaning I wouldn’t recommend holding your breath while we wait and see if this comes to fruition). That’s not my only concern here though. Europe is facing a whole lot of issues, and prioritizing energy exports to a struggling region isn’t in the best interest of the US.

Instead, America’s energy resources should be allocated to emerging economies in regions that the US could use as strategic footholds and partners down the road. I’m talking Southeast Asia rather than Europe. Carefully selecting allies as the world deglobalizes is going to be very important…so, let’s hope Trump can do more than Tweet about all this.

Prefer to read the transcript? Click here

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Transcript

Hey everybody. Peter Zeihan here coming to you from. Okay. Who are okay. Who are. Yeah, I think that’s it. On the Cape Brett track in Northland, New Zealand. Today we’re going to do a, something I’m not going to get in the habit of and commenting. And one of Trump’s threats, specifically says that the Europeans should purchase American oil and gas, in order to address their trade deficit, in order to cement the alliance. 

Normally, I’m not going to do this because Trump says a lot of stuff, that usually just doesn’t survive the room. And he is packing his cabinet with functional incompetence. So the chances of any of his policies actually making it into, reality, whether it’s domestic, foreign, are pretty low. And this is no exception to that. 

But, it’s an interesting hypothetical exercise to, think about because we are in a period where the world is reshaping and seemingly incoherent. Things like this actually could have an impact. So, the volume first, Europe. And I’m using Europe in the broadest sense. It includes the Balkans, includes Switzerland, includes the United Kingdom, as well as all of the European Union. 

They use about 13 million barrels of crude a day. If you include refined product, as well as about 45,000,000,000 cubic feet of natural gas a day. And that’s roughly 50 to 60% of what the United States uses. They have more people than the United States has, significantly more. But their economy is smaller and it’s less energy intensive because they don’t have a lot of manufacturing. 

And while the United States has been gone, going through this big Three industrialization boom, much of Europe is actually industrializing because they’re running out of energy because they’re under net of workers, because they’re running out of finance. It’s a demographic story as much as anything else. Anyway. If if, if the United States did decide that it wanted to fuel Europe, it would need to expand its oil production by like 2 or 3, 4 barrels a day, which is probably going to happen in the next five years anyway. 

And for natural gas, we need to build out significant, LNG, liquefied natural gas export capacity. We have to double, almost triple what we have right now. And there are enough projects in the pipeline for that to happen over the next decade. So from a numbers point of view, it’s not a ridiculous idea. It would mean not sending product anywhere else. 

And so problem number one with this plan is right now our number one energy destination for energy exports is Mexico. And without those exports, the lights go off. In Mexico, roughly half of Mexican electricity, for example, is generated by the use of American natural gas. And we send them over a million barrels a day of crude and refined product as well. 

 And that’s built into our manufacturing system. So if we were to send that somewhere else for, our number two destination is, Japan, which is a much tighter ally than many of the European countries. And in general, if you’re doing this to address a trade deficit, taking something we already sell and have no problem selling from one place and send it to another just generates a different numbers problem. 

That’s part of the problem with Trump’s things is that, he assumes that every individual thing stands alone when it’s all usually interconnected anyway, let’s assume for the moment that Trump is serious that Trump’s team can make it happen, that the Europeans are amenable. The trade deficit isn’t the issue here. Never is. The issue is a strategic block. 

We’re moving into a world where globalization is ending. And it’s not that I think the United States is going to have a problem finding takers for its commodity exports. Now, the issue is that not everyone will be able to afford or have the security situation. Well, that will allow them to access those materials. And if the United States were to make a strategic decision not based on the trade deficit, based on who we want to be our ally, who do we want to encourage to continue to exist in a globalizing world? 

Europe is one of the places that should be considered, it keeps the Russians in a box. It gives you a foot in the Middle East without being in the Middle East. And there’s a lot of cultural history or baggage, if you prefer, with the European family, which is where the vast majority of Americans eventually trace the roots back to, there’s a very strong argument to be made that Europe is it. And that’s where we should play. And if the United States were to pour all of its energy exports because it would take all of it, then that is a viable bloc. And then you can talk about what comes from that agricultural fusion, manufacturing fusion, military fusion, and the idea that you have an American dominated system that includes the entire cultural West. 

There’s an argument to be made that in a world that breaks into factions and regions, merging North America and Europe is arguably the most powerful option. Just keep in mind that if we do that, we no longer have the resources that are necessary to say, do the same thing with Korea and Japan, which are two advanced countries we currently have excellent relations with or with Southeast Asia, which is likely to be the most rapidly growing part of the world 

Moving forward, the United States is going to have to do many of the things that other countries are going to have to do in a globalizing world. We’re going to have to make some choices. They’re going to be a little difficult. And choosing to pour all of our energy resources into Europe, which is a region that’s experience. 

A demographic bomb might not be the biggest bang for the buck. Germany, for example. The industrial base is probably going to collapse within a decade because they won’t have a workforce in addition to their energy problems. A much better bet is probably Vietnam or Thailand or Myanmar or Indonesia. Malaysia, and I would expect that as the eurozone faces problems, because if you don’t have a consumption led economy, it’s really hard to have a currency as a eurozone prices problems. 

The United States is going to be able to choose to work with individual European countries. France looks much more viable. The U.K. is much more viable. Spain is much more interesting. Central Europe will probably last longer than Germany, Italy in a worse demographic situation than Germany. But its geography is much more friendly for power projection. It’s easy to kind of break Italy off from the rest of Europe’s strategically. 

So there’s a lot of ways you can cut this pie. And I applaud Trump for starting the conversation on what might be possible. But the specific idea that Europe buys American energy, the end. It doesn’t take us very far, but it does get us looking in the right direction. 

Quick addendum from further down the trail. Because I know I’m gonna get some hate mail for that one. So let’s make sure that the hate mail is well informed. Hate mail. The reason I say that Polish is under Donald Trump just don’t tend to happen is, he tweets something out or whatever social media he’s using, and then he leaves the room, and usually that’s the end of it. 

And that’s before you consider that he is appointing people to his cabinet who are functionally incompetent in their areas. It’s a little less true in foreign affairs. Some of the people look interesting. But the primary purpose of being on Donald Trump’s cabinet is to stroke his ego, to tell him he’s wonderful and to make him look good in public. 

And the heartbeat that you step away from that, you lose your job. So in Trump’s first term, he went through more cabinet level secretaries, than any other three American presidents in history combined. There’s just not enough time for a meaningful policy to be discussed, formed, and put in practice before the person is kicked out. But even if that was not true, Trump is a horrible personnel manager. 

One of the worst we’ve ever had. And the only other person in modern memory, who comes even close is Barack Obama, who was arguably the worst of the second worst. It’s just a difference of styles. Obama insisted on micromanaging every little thing, but then hated people and hated having conversations with them. So he never was available for anything to be managed. 

So nothing happened. And so for eight years, we really only got one law consequence passed and we had no foreign policy whatsoever. Trump is of that caliber when it comes to outcomes. So you look at our last three presidents Trump, Biden, Obama. We’ve had 16 years where the world is falling apart, where globalization is ending. And decisions like this on regionalization really are important and do need to be made. 

But we’ve had no one to lead the conversation or to carry it forward, or to turn it into policy. So kudos. Seriously, kudos to Trump for starting the conversation. And I will be pleasantly thrilled. Should the process proceed from here?

Jimmy Carter and Jihad – MNNO’s Take

You heard Peter’s take yesterday…and now you get a different perspective on Jimmy Carter’s “legacy”.

Cover photo from Wikimedia Commons 

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Jimmy Carter’s Consequential 4 Years

I typically avoid the analysis of late U.S. presidents, but Jimmy Carter is a special case. Arguably the most consequential U.S. president (in terms of global affairs) since WWII, Carter set in motion some of the most pivotal policy changes the U.S. has ever carried out. For those of you screaming at the screen about Clinton, Reagan and Eisenhower…just bear with me.

In his four years in office, Carter laid the foundation for arming the mujahideen, got the ball rolling on America’s first smart weapons, shifted the ideological approach to tax policy which led to the 90’s boom, and trust me, I could go on.

So, what made Carter so consequential? We can’t just look at his four years in office; we need to zoom out 40+ years to fully understand the lasting impact he has left on the world…and maybe this will help us realize that the policies and ideologies implemented by current presidents DO MATTER.

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Playing Jenga with Maritime Shipping

Cargo ship with containers

In my books, I highlighted how even a minor, seemingly insignificant event could cripple global maritime shipping. Well, not only did one of those events just happen, three did. We’re talking about a Russian cargo ship sinking, Israel targeting the Houthis in Yemen, and Finland impounding a Russian ship.

A Russian cargo ship went down in the Mediterranean and some foul play could be involved. This ship was critical for Russia’s nuclear icebreaker fleet, as it carried equipment necessary for construction. This will delay (or even cancel) these construction timelines, which marks a significant blow to Russia’s merchant marine capabilities.

Israel expanded its operations against the Iranian-backed Houthis, with efforts to disrupt supply chains. This could even spill over into targeting ships transporting Iranian weapons.

Finland’s seizure of a Russian ship accused of severing subsea cables escalates tensions in the region. This ship was already under scrutiny for its unsafe condition, but its suspected involvement in sabotage activities was the final straw.

Global maritime shipping relies upon trust, insurance and the US securing the sea lanes. These three events that have unfolded in the past weeks are causing the pillars propping up maritime shipping to teeter. It’s only a matter of time before maritime shipping, and globalization along with it, come falling down.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Wynona Bay. Just outside of Carmel Town in north east New Zealand. Doing a lot of little things have happened in the last 48 hours that are threatened to boil up into, something very significant. So let me go through the three items in our time together. First of all, the Russians had a cargo ship that sank in the Mediterranean. 

There’s some question as to whether sabotage was involved. What’s unique about this ship is, you know, the Russians don’t have much of a merchant marine at all. And this one was a roll off, roll on vehicle that can just accept vehicles from pretty much any sort of facility. Doesn’t even have to be a proper loading port or anything. 

There were also a couple construction cranes on board and a lot of specialty equipment for the Russian icebreaker fleet, most notably its nuclear fleet. Anyway, without this ship, the Russians are going to have a hard time moving things around the Mediterranean, where they’re in the process of evacuating their forces from Syria. And in the longer term, there, icebreaker, nuclear or icebreaker, which is under construction, which was supposed to be operational already has been pushed back to 2027 and 2030, probably will never be built because the Russians can’t build, the sort of specialty parts that were on board, one of which is something as simple as hatches. 

So we’re looking at the beginning of the end of the Russian merchant marine because they now can’t move the pieces around. Sanctions prevent them from moving or buying everything else that they need. Second, Benjamin Netanyahu, the prime minister of Israel, has announced the beginning of a much broader assault against the Houthis of Yemen. Now, the Houthis are a militant group, Islamic, that are sponsored by the Iranians. 

And the Iranians have basically been supplying them with weapons over the last 20 years. 

Yeah, it’s probably too much. It’s got 15 years, in order to destabilize all kinds of things in the country, because they see the Houthis as an eminently disposable ally or proxy, whatever the right word is. Because basically they’re a bunch of desert fighters who have never been able to hold anything together, completely incompetent at administration, and not very good at attacks either. 

But they know how to operate a chunk of equipment that flings a weapon. So they’ve been used to attack population centers and oil facilities in Saudi Arabia. They have been used to take out some things in Israel. They’ve engaged in some, like piracy, and they’re just generally a strategic nuisance. The countries in the neighborhood that have tried to quell them, most notably Saudi Arabia, have done bombing campaigns in the on again off against sponsorship of other sides in the ongoing Yemeni civil war. 

And but the terrain is very difficult. The Houthis are, if anything, persistent. And it has basically been impossible for anyone to bring Yemen to heel. And that is not something that this is the last ten, 15 years. That goes back centuries. It’s an unruly place with a difficult geography, and no one has really had a lot of fun operating there. 

I don’t think that, the Israelis will be successful in rooting out the who? These. Fabulous. Put that to the side right now. But, the Israelis have definitely demonstrated some interesting out-of-the-box thinking over the last few months, and in doing so, have participated in the destruction of Syria as a conventional power had destroyed Hezbollah in Lebanon. 

And, well, their operations in Gaza against Hamas, are let’s just call that complicated. Hamas is definitely in a box and cannot strategically expand at all. So to say that, success against the Houthis is impossible is, of course, ignoring recent history. I’m more concerned with how they would interrupt the flow of the weapons systems that they have a problem with, because the Houthis have been doing long range drones and missiles and talking to Israel directly. 

And to go after that sort of stuff, they would have to go after the ships that sail from Iran to supply the weapons systems. So that’s two third Finland just all over the place today. The Finns have, boarded and impounded the first ship of the Russian shadow fleet. One of the things we’ve been seeing over the last several months, really started about 18 months ago, but really accelerated recently is that the Russians have been either directly or through third parties, like the Chinese. 

Getting ships operating in the Baltic Sea to drag their anchors to sever subsea physical infrastructure, within the northern Baltic, specifically places that transmit data or electricity among Sweden, Finland, Estonia, Latvia, Lithuania, and the ship that they have now impounded is accused of basically dragging its anchors and severing five different cables in a short period of time. 

Now, in the past, what has happened is when the Russians have done this, they’ve done it to one at a time. They’ve done it through a third party vessel, most notably a Chinese vessel. And the ship has gone before anyone realized what was going on. But this time, two things have changed. Number one, the, all the Scandinavians, all the the Baltics, all the Nordics are more on to it. 

And they’ve been watching a lot more closely. And the Russian vessel, did several in short order. And the vessel itself is part of the Shadow fleet, which means it’s old. It’s rusty. Probably couldn’t pass a safety inspection in Guatemala, much less in Finland. And so the Finns were already watching it. And so when these cables got snapped one after another in a short period of time, they really had no doubt as to what was in play. 

Okay. That’s a lot. What’s going on here is we’re seeing a multi vector challenge to the naval order that allows international trade to happen. One of the things that we had in the world before World War two was unless you could provide naval security for your ships, you just didn’t sail somewhere. Or if you did, you did so without any insurance or confidence, that the ship could make it. 

It was very, very risky business. One of the many, many things that globalization has been very successful about is about making it so that anyone can sail anywhere at any time and interface with any partner to access any commodity or any product. And that has engendered not just global trade as we know it now, but the expansion of various economic sectors in a way that just simply wasn’t possible before. 

So, for example, today, over half of all internationally traded oil sales, long haul ships. And that means if you’re going from the Persian Gulf to the East Coast or Northeast Asia, wherever, you can do so without much fear that your cargo is going to be anything inopportune. And for that rare occurrence where something might go wrong, you can buy an insurance policy for your vessel and its cargo, which only costs about 1% of the cost of your ship every year. 

Quite affordable. Same thing for food production. Roughly a third of all food production globally is shipped in a similar manner, with a similar insurance for fishermen. And the very existence of a manufacturing sector in the world is courtesy of this sort of security set up. Because if you’re looking at something like, say, a stereo, you know, there’s roughly 400 parts in that thing. 

You’ve got 400 different producers for each part, some of which have their own supply chain stretching back several steps, and intermediate products are shuttled around. Well, especially in East Asia, almost all of that, well over 95% of that is done on the water. And none of this would be possible without a relatively peaceable international system. Well, now we’re seeing that system hit from a number of different angles. 

You’ve got the Russians who are basically turned much of the Black Sea to no go zone. You’ve got the Ukrainians who have started to go after Russian shipping in that space. We now have the Baltic states and the Nordic states, Scandinavian states, sorry. Most notably Finland, that have just impounded one of the ships that is taking advantage of that order in order to evade sanctions. 

And we now in the Middle East have a situation where the Israelis, on a little bit of a high after the fall of Hezbollah and the fall of Syria, are going after another strategic irritant, the Houthis, which means they have to go after the shipping in order to interrupt the weapons. All of this is happening at the same time. 

And one of the things I hit very hard in my, my last book, The End of the world, is just the beginning. Talking about the end of globalization is that the maritime order is based on trust. The trust that your ship will get there, the trust that the Americans will enforce the sea lanes, the trust that no one will challenge that. 

And all of that is now falling apart. And in the book, I mentioned that, you know, it doesn’t really matter, what it is that breaks the system of trust. I must admit, having Israel and the Houthis or the fins and the shadow fleet on the bingo card. Not specific things I predicted, but it doesn’t really matter what it is. 

Because as soon as states, for whatever reasons, have a vested interest in going after the system, the trust is broken and the insurance system can’t handle it. And that’s when we get a rapid fire breakdown in all types of shipping, because it’s no longer profitable or safe manufacturing is definitely the sector where we will feel it. First, in the United States, for most of the rest of the world, it’s going to be a race between energy and agriculture. 

So we are in the witching hour of this system right now. And based on how any of these issues unfold could get really rocky, really quick and never take your eyes off the Russians because they’ve just lost the ability to maintain their icebreaker fleet, which means the entire Arctic route is something that is no longer strategically viable for them. 

And if that is the case, then the Russians have a vested interest or may perceive that they have a vested interest in challenging parts of the system itself. We’ve been in this weird little holding pattern globally for the last decade, roughly where it wasn’t apparent that the Americans had the will, the interest or the ability to maintain the global order. 

And lots of countries that are American rivals started challenging the US and various points thinking that the future was the Americans will keep the world safe for everyone, but they can carve out whatever they want for themselves, and we’re about to see all of that blow up in everybody’s faces. The future on the other side of this, from my point of view, is pretty clear. 

You basically have regional powers that can guarantee regional security for the waves. And so you can have regional trade systems or national trade systems, but the days of long haul multi continental shipping that have dominated manufacturing, agriculture, 

And energy since 1950 were at the very end of that. And it’s going to be interesting to see whether it’s Finland or Israel or Russia that fires the shot that formally breaks the system. 

But these are just three examples of how easy it would be for this whole thing to come unwound. And we may very well see this before I get back from New Zealand. Yikes.