This Ain’t Your Father’s Tanker War

Navy warship with guns facing forward

No, the U.S. can’t escort tankers in the Persian Gulf today as it did during the 1980s Tanker War.

Back in the 80s, the U.S. swooped into a regional conflict where attacks on shipping were limited, and the Strait remained open. Neither of those is the case with the Iran War. The U.S. Navy has fewer ships today than it did back then, so widespread protection is a much different conversation (especially with thousands of commercial ships trapped). And of course, modern warfare has evolved. We’re dealing with drones and missiles that leave the U.S. Navy much more vulnerable.

You add all that up, and we’re looking at a very different Tanker War than the one your daddy saw in the 80s. So, the only path forward is likely a political one.

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Transcript

Morning everybody, from a foggy Colorado. Today we’re taking a question from the Patreon crowd specifically why the US can’t escort tankers and civilian ships like them to and from the Persian Gulf like we did back in the 1980s during the Tanker war? Well, three big differences. Number one, first, the nature of the conflict. 

The last time around in the tanker war, the United States was a late comer. It was originally a conflict that was a subset of the Iran-Iraq War of 1980 to 1988, and by the time we got to the town of that conflict, both sides were trying to destroy the other’s economic opportunities. And since they lacked the military capability to make a meaningful pushes towards oil production, they went after concentrations like the tankers. 

And so you had Iraqi aircraft that were Iranian tankers, and the Iranians would use a combination of surface ships, speedboats and missiles like the Chinese Silkworm to go after Iraqi and everyone else in the street was just kind of caught in the crossfire. 

Most of the damage done, most of the attacks were in the northern part of the Gulf, where most of the was originally exported. And so the United States came in with an aircraft carrier battle group, put it in the Gulf along with multiple task forces. And at any time involving 40 to 80 ships and some ships like Kuwaiti tankers would be reflagged and others would just be escorted in. Each cluster typically had five destroyers and a number of Coast Guard cutters assigned to it, and they would go in big convoys. 

That’s all different this time. This time it’s a direct conflict between the United States and Iran. And Iran has chosen shutting down the strait as a direct means of attack in the United States has chosen shutting down Iranian shipments as a direct means of attack. So unlike last time when the strait itself was open and the Iranians and the Iraqis were selective in their targets, now are on is willing to attack, pretty much anything in the United States is blocking all shipments from all Iranian ports. 

So that’s the first big difference. The nature of the conflict is very, very, very different. Second, the the nature of the US Navy is very, very different. Back then the United States had a 500 plus ship Navy. Today we’re under 300. And while today ships are faster and tougher and far more lethal, they are fewer in number. And so putting as many vessels into the Persian Gulf is just not an option. 

Also, something that was present back then was the Coast Guard. But the Coast Guard has been steadily whittled down over the course of the last 40 years and doesn’t have enough ships to spare. In addition, the US ships that are involved are tend to be larger and tougher, and if they’re going to slow down in order to convoy, that’s a bit of a problem. 

So remember, there were like 60 ships at any given time that were part of the escort effort last time. Today we only have 60 destroyers, and half of those at any given time are designed to protect the carriers and United States under Donald Trump, I think, wisely, has chosen to not put a carrier in the Gulf. Yes, you would be able to use closer munitions that are cheaper and easier to replace, and that’s our very real consideration. 

But it also means that a carrier could be attacked by the third difference, which is a new generation of warfare. Back then, Iran was only emerging. I was on the tail end of a really long, grueling war with Iraq. Its weapons choices were somewhat limited. You had the Chinese silkworms that had a range of about 50 miles and 1,000 pound warhead, and the Persian Gulf isn’t 50 miles wide. So it was pretty easy for something like a carrier to be over the horizon, be basically immune to anything that the Iranians can do. That’s not where we are anymore. Today’s drones might need GPS targeting, but we now have a series of things called super heads, which don’t, which means that they can choose their own target when they get close. 

And if there was a carrier in the Gulf, I can guarantee you that the United States would be under constant missile bombardment. And as we’ve seen with the Arabian side of the Persian Gulf, the U.S. is basically run out of interceptors, and the ability to protect its own ships would be limited. Over the weekend, when we saw the first effort by the United States to escort vessels, that was really the first time we’d seen major surface combatants from the United States in the Gulf at all. 

In this conflict, we’ve been doing everything at arm’s length. That means we’re running out of long range munitions, which is a problem. But it also underscores the degree to which that this is contested space now. And the United States can’t just sail in and break it open. In addition, when we did this in the 1980s, you were talking about typically 11 ships at a time as part of the convoy group. 

There’s 2000 ships trapped in the Gulf right now. So we’ve got different ships. It’s a different kind of conflict. We don’t have the numbers, and the numbers that need to be moved are just massive. The only way to open the Gulf is with a political solution with Tehran. And again, talks have yet to begin on that topic. 

About the only good news I can give you is that we’re now seeing early signs that the Iranians are starting to shut in oil production because they don’t have anywhere to put it. Just keep in mind that the Iranians do consume a couple million barrels a day themselves, and that will never get shut in. So they can be selective about what they’re shutting in. 

It’s not like you just flip a switch tomorrow and all of a sudden they’re out of money. But for the first time in the conflict, we are now seeing economic pressure on the elements of the regime that are making the security decisions. That is encouraging conversation. Those conversations just haven’t really started yet. The biggest takeaway is that the United States is the world’s most powerful navy, with the best projection power in human history, and we now know for the mix of geographic reasons and economic reasons and technical reasons, that the US Navy no longer has the ability to impose a strategic reality on a local basis against a to be perfectly blunt, fourth rate security power. This is a big change in how the world works. It is very, very, very easy to deny civilian access now. And it is very, very difficult to restore it. And you can play this specific scenario out on almost any place in the Eastern hemisphere. And it’s difficult to see the US Navy doing any better. So if we do get into a fight with a real country in the future, we should count on those waterways being closed for at least the duration of the fighting.

Welcome to Captain Phillips’ Nightmare

A jolly Roger Flag on a ship

Captain Phillips is shaking in his boots because piracy is returning to the high seas, specifically in the Red Sea and off the Horn of Africa. Somali pirates have already attacked multiple ships.

With a large share of the global oil supply offline, the U.S. preoccupied with the Iran war, and nobody else able to step in, I would expect things to worsen quickly. The Red Sea will quickly become a no-go zone.

This would disrupt a major global shipping route and force vessels to reroute (which isn’t an option for everyone). So, the already strained global system will face even more shortages and disruptions.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about piracy because it is back in the off the horn of Africa and the Red sea. We have seen Somali pirates active again with at least three ships being attacked. This is a direct outcome of the Iran war, and we should expect a lot more in the days and weeks to come. 

So very, very short version. In case you haven’t been paying attention, the Strait of Hormuz. is offline. And that means roughly three quarters of a billion barrels of crude haven’t made it to the market. That’s roughly equivalent of 10 to 15% of global supply is just gone. Probably not coming back. And the United States has this largest concentration of naval forces in the area, really in the history of the region. 

So those two things, make it almost impossible for people to patrol countries that might be a little hostile to the United States, say, China. They’re not going to put any of their naval vessels in the In an area with so much American military ordnance running around. And number two. The oil shortages means that more conventional navies, because most navies in the world are not nuclear powered, can’t actually get the fuel to keep their economies running. 

So the idea of doing a long range projection force into a war zone to fight pirates? No. So what we basically have is the United States concentrated on Iran the Strait of Hormuz It no longer has the bandwidth to patrol the Red sea and the coalition of forces from ten, 15 years ago that did it can’t function in this environment. 

What it basically means is, as this ramps up, not only is the Strait of Hormuz a no go zone, the Red sea will once again become a no go zone that will also hit energy prices, because a lot of stuff is currently being exported through the Red sea and then up through Suez. That’s going to not work anymore. 

You’re going to have to go all the way around Africa. And for shuttle tankers that are coming in from, say, the Russian space and the Baltic or the black, they originally would go through Suez and the Red sea. Now, if they can’t arrange some sort of ransom system or a prepayment system to Somali pirates, which don’t exactly have crypto accounts like the Yemenis or the Iranians do, those ships simply can’t sail the distances necessary to get them all the way around to. So this is going from bad to worse in a very short period of time. Everybody enjoy your 2026.

Why U.S. Deployments in Germany Matter

German military doing exercises in the field

Relations between the U.S. and Germany are quickly deteriorating. German Chancellor Merz has criticized the U.S. for lacking a coherent negotiation strategy. President Trump responded by floating the idea of reducing U.S. troop deployments in Germany. It’s one big mess.

The issue with Trump’s proposal is that it assumes the only reason for the bases is to defend Germany. These bases aren’t just some peace offering; they are the backbone of U.S. global power projection.

Without key facilities like Ramstein Air Base and Landstuhl Regional Medical Center, U.S. operations in the European theater (and beyond) would cease.

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Transcript

Hey all. Peter Zeihan here. We recorded this video on German relations with the United States and the future of U.S. military power. Back on the 1st of May. That was Friday for release today on May 4th. But events have kind of accelerated. So we need this little topper. Very, very short version is Donald Trump announced the imminent withdrawal of 5000 US troops from Germany. So it’s not a threat to more. It’s actually happening. This is the beginning of the end of the alliance with Germany specifically, which has huge implications for everything the United States does. But we’ll get to that in the video. 

Hey all, Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about the most recent leg of the American alliance system that looks to be breaking. That is the relationship between the Americans and the Germans. The key issue is that last week, Mertz said  Mertz is the chancellor of Germany, said the quiet part out loud that the United States doesn’t have a negotiating strategy and doesn’t even really have negotiators. 

And it’s just kind of embarrassing to watch how the Iranians, who have both are humiliating the Americans at every turn. It’s an assessment that is not particularly controversial outside of manga circles. The State Department has been gutted. The prime point person for American negotiations is Jared Kushner. Not that he’s incompetent, but his assistant is Steve Wyckoff, who is incompetent. 

And the only other person who’s been involved at this point is JD Vance, who has never negotiated anything. So, yeah, it’s going really badly for the United States in these talks. And in the meantime, the global economy is starting to sag. Something impressive. Anyway, Donald Trump being a little sensitive, a little sensitive snowflake decided that now is the time to talk about cutting the American troop deployment into Germany. 

So I thought it would be useful for everyone to understand what the United States gets out of that. There’s this feeling in some parts of Washington, the American political spectrum, that the American deployments to Germany are about protecting Germany. And there is a degree of truth to that. But keep in mind that Germany has not been a front line state since the expansion of NATO in the early 2000. 

And now there’s this whole Poland thing between them and the Russians. So the two main facilities that the United States has are an air base in the hospital. Ramstein is one of the largest air bases in the world and allows the United States to project power throughout the European, the former Soviet spheres, directly and then indirectly into the Middle East. 

We basically ferry troops and equipment through there. And then there’s Landstuhl, which is the military hospital that over the course of the war on terror, serves as the primary evacuation destination for any forces operating throughout the broader Middle East who were injured and in the end, probably saved 100,000 lives. If you’re going to slim down the American position to either of those facilities, and collectively they are, one of America’s top three deployments, kind of moves around with Korea and Japan. 

That is it for American power projection in Europe, in the former Soviet Union and in the Middle East. If we were to try to project power to any of those three regions, without those German facilities, we would have no logistics support and no backup should something go wrong. And as we’ve seen in every single military conflict the United States has ever been involved in any of those three regions, something always goes wrong. 

That’s just the nature of war. We would also, and perhaps this is the one that will resonate more with some people. We will also have significantly higher death rates. Landstuhl is a crisis center for medical needs. And so if you get hit by an IED or shrapnel at the time it takes to fly you back to the American mainland, you’re probably not going to make it. 

But if you only have to make the Germany, that’s a different question. Anyway, bottom line is, with the possible exception of American military forces in Okinawa, in Japan. This is arguably the most important footprint the United States has anywhere in the world for power projection. And if a real effort is made to slim that down, you honestly can’t slim it down too far before it simply becomes nonfunctional. 

It takes 30,000 American forces to keep these things open to the degree that’s necessary to facilitate American military power. Now, if you just want to abandon the entire Eastern Hemisphere to its own devices, then yeah, by all means, close it down. Just be prepared for spending a lot more than $2 trillion a year on the defense budget, because at that point, doing everything alone means having to have the equivalent of carrier stationed around the world at all times simply for logistical support. 

That is by far the most expensive way to do.

Markets Flash Back to the Past

Stock market candlesticks trending upwards

Before you get too excited, NO, I’m not giving away any financial advice. However, whatever the global markets are doing right now doesn’t match the physical reality of the Iran war.

We’re seeing major disruptions, yet prices and trading patterns reflect high confidence that everything is fine. That’s far from the truth. A quarter of globally traded oil is gone. Key industrial inputs are gone. Refineries in Europe and Asia are stuttering due to supply issues. Commercial and strategic inventories have been tapped.

The discrepancy comes from the way markets are designed; they’re meant to respond to marginal changes, not a catastrophic loss in production capacity. Markets just don’t know how to factor that in and price it appropriately. And sooner or later, reality is going to catch up to everyone…

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Transcript

Hey, all Peter Zeihan here, coming to you from Colorado. Today we’re going to do something a little different and talk about markets. Don’t worry, there’s no trading advice in this. I don’t do that. But markets have been very, very strange since the Iran wars started. They’ve been gyrating but really have not shown any understanding of the threat that we have been facing. 

We have roughly one quarter of all internationally traded oil that floats on the water that has not simply been disrupted, but is gone. Even if the war were to end the second, most of that’s not going to come back on before the end of the year. Some of it will be gone for a couple of years. That’s before you consider natural gas or alumina or aluminum or fertilizer or the various products that come out of gutters, natural gas processing facilities, these things, these things are gone. 

We now have a weapon system in place that has a reliable range of 600 miles, which is triple what they need in order to disrupt things on the other side of the Gulf. They are difficult to jam, they are difficult to intercept. And with the technologies in place and in existence at the time, it can’t be done at cost in any sort of reasonable cost. 

The markets are pretending to themselves that we are simply hours away from peace and going back to things as they were before, and with every Trump troop social post, we get gyrations up and then something like, say, the United States hijacking a supertanker comes along and we barely get a response. This degree of retardation in the markets makes very little sense to me. 

And then I thought about it a little bit more. It is because the markets are being presented with something they’ve never been presented with before. You see, since 1945, we’ve had a globalized system where the United States upholds what makes it all work. And I remember that whenever I walk into a room full of finance people explaining that the world after 1945 is based on American security guarantee, this is something that surprises them. 

In the United States, the idea that economics for the US is a subset of security is something that really never gets processed, and the financial crowd is arguably either the top or the second most globalized of America’s industries. So for them, the idea that the entire underpinning of their sector is now gone is something that really takes a while to get their mind around. 

And so the money keeps flowing. So stock markets are stable to up all prices despite the gyrations have been trading within a reasonable band. And we haven’t seen anything like the disruptions in oil markets like that we saw back in 2007 at the dawn of that financial crisis, and those disruptions were largely non-existent. The ones now are permanent. 

So what is going on here for real, and what should we expect? Well, let me give you a few items. Just kind of file away in the back of your head. Number one, we are seeing reduced refinery runs across Europe and across East and southern Asia. This is not demand destruction. Demand destruction is when prices reach a certain point that people change their economic activity because they can’t afford the energy or what product, whatever it happens to be, that’s not what we’re seeing. 

We’re nowhere near those 2007 highs that triggered real demand destruction. And that’s before you consider inflation index terms were barely half of that level. No, the refineries aren’t slowing down operations because there’s no demand. They’re slowing down operations because there’s no feedstock. We’ve had such a deep and ongoing disruption to energy outflows from the Gulf that over half a trillion barrels of crude now have not been produced, have not been shipped to port, have not been loaded on tankers, have not sailed out of the Strait of Hormuz, have not gone to their end destinations. 

Which means that if we’re seeing refinery runs reduced, it’s not just that there’s not enough crude making it out of the Gulf, it’s that the crude oil reserves of the various companies and countries are being depleted to the point that it’s affecting refinery operations. We’re also seeing already reductions in things in shipping, most notably diesel. In the case of trucks in places like Australia or China or Europe, and jet fuel pretty much everywhere except for the United States. 

That means that these shortages aren’t just a throughput issue. They’re not just a reserve issue. It’s a commercial inventory of refined product issue. And that sort of breakdown is something we have never seen in the post-World War II environment, not once. And markets don’t know how to price that, because how do you price a barrel of crude that is never produced in the first place? 

What modern markets do is they look for price signals, slight changes in supply or demand from this market or that market or that subsector, whatever it happens to be. And then the price of crude adjusts around that, and that provides forward price signaling for things like producers. We are not seeing that because that is not happening. We have seen a gross dislocation of the structure of production and transport, and they don’t know how to price that. 

Under normal circumstances, higher prices would stimulate more production. But most fields take somewhere between 4 and 11 years to come online. In the United States, that has shrunk down because of the shell revolution to weeks to months. But that just is at the wellhead. If you want to export crude to a world that can’t get enough of it. 

Well, then you need export infrastructure. And you don’t do that in a day or in a month or in a year. Which means at some point in this year, we have a fundamental break between the reality of what’s going on in the ground with energy and this facsimile that exists in the financial markets. What we’ll look on the other side of that break, don’t know. 

But two things. Number one, it’s coming soon because we’re reaching the point. There just isn’t enough product to carry out normal activity. And number two, I can guarantee you it’s going to involve rationing. And rationing is not something the market does well. That’s something that requires government intervention. And when that happens the question is what our markets what is their purpose then it’s supposed to be about the efficient allocation of capital. 

But that’s not the world we’re about to be in. We’re going to be in a world of absolute energy scarcity and the financial markets arguably not going to be a player in that. Now, whether that’s a buy or sell trade, I will leave up to you. I don’t think it really matters at this point. One of the things that most people forget is over the long run of global history and the period before World War two, it was the nature of almost every market in existence to ultimately go to zero, as the foundations that allowed it to exist broke. Well, get ready return to the past later this year.

El Jardinero Gets Trimmed by Mexican Authorities

A Mexican solider leans against a military truck

Mexican authorities have arrested Audias Flores Silva (aka El Jardinero…not the scariest nickname I’ve heard), a senior figure in the Jalisco New Generation Cartel.

El Jardinero had been trying to forge cooperation with the Sinaloa Cartel and utilize their distribution network, but his arrest will likely kill that effort. The removal of El Jardinero will further destabilize the cartel, as a fight for power breaks out and factions begin to splinter off.

While this arrest is a positive overall, Mexico’s near-term outlook will likely be much more unstable. Oh, and drugs flow to the U.S. won’t stop until all of y’all cool it with the white stuff.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about an arrest in Mexico. A guy by the name of Audias Flores Silva, also known as El Jardinero. The gardener was a high up leader in the New Generation Cartel. He was arrested on the 28th of April. And barring surprises, we will never hear from him again. 

If you remember back a few months ago, El Mencho, who was the leader of the New Generation cartel, was killed in a raid by the Mexican authorities with some Intel provided by the United States. And so the question has been who, if anyone, is going to be able to take over. So quick backstory, then we’ll look forward. Historically speaking, in the last decade, we’ve had two big cartel alliances form and dominate the organized crime space in Mexico. 

First, Jalisco New Generation which was run as a corporate entity by a guy by the name of El Chapo that became the largest organized crime group on the planet, as well as the largest one in the United States in New Mexico. Basically, he had this idea that drug smuggling is our primary business, so we’re not going to muck with anything else. 

That is not that. And in doing so, he basically bought the loyalty of a lot of local governments throughout the system. Eventually, that became a massive corporate empire, and the Obama administration made him public enemy number one. Eventually we got him. He’s serving a permanent sentence in the United States. Now, that meant that the Sinaloa cartel started to break down from the inside, and El Mencho’s Kids Los Torpedoes started running their own little factions, as well as other regional leaders and even their accountant. 

That led to a break that allowed New Generation to rise to become the most powerful organized crime group on the planet and in the United States and in Mexico, run by a guy named El Mencho. Jalisco new generation who had a very different corporate philosophy. It’s more of a franchise model, but everyone was basically told, you know, when you go into a new town, you shoot the police chief and maybe a bunch of random people just to make it very clear who’s in charge. 

And in doing so, they generate a lot more fear. Their income isn’t as strong. They are not as diversified, and they’re more likely to come up against resistance from the state, especially in the United States, because of that. But that doesn’t mean it’s model that doesn’t work. Anyway, when I fell because it’s kind of a franchise model, everyone started going the wrong direction. 

El Jardinero is one of the guys who basically tried to come up with a new path. And what made him particularly interesting is while he is a regional leader, specifically in the northwestern part of Mexico, he reached out to Los to basically cut a deal. See, new generation is more powerful militarily within Mexico, no doubt there. 

But the remnants of the Sinaloa cartel have a better distribution system within the United States. So if you put the two together just in that tactical manner, you could really produce not necessarily a super cartel, but you could shove a lot more cocaine through the system. With El Jardinero gone and with half the Chupitos either dead or in jail, that’s probably not going to happen now, and that’s probably a good thing. 

Just keep in mind when you have an organization, whether it is Sinaloa or that doesn’t have a clear leader, you tend to get a lot of competition within the factions, and eventually that turns into a shooting war. So El Jardinero was in charge a lot of the militant aspects. And now that he’s gone, he isn’t there to kind of hold a lid on everything else. 

So this would suggest a lot more violence as generation breaks down. And so, yes, the US and Mexico isn’t particular are getting some of the kingpins. And that feels really good. But it does change the personnel leadership, the personal structure of these things. And without that top layer, it becomes a lot more violent and doesn’t necessarily stop the flow of cocaine. 

So Mexico’s near-term future is probably more fighting as the most violent cartel they have ever had now falls into infighting as well. The only real solution to this is actually pretty simple one don’t do cocaine. And if everyone would abide by those three words, this would all just go away.

Russia Tucks Tail in Mali

National Flag of Mali

The Russians are getting the boot from the Sahel, and it’s all thanks to an unusual alliance between Tuareg separatists and a local branch of Al-Qaeda. These rivals have teamed up in Mali to drive back the Africa Corps, Russia’s paramilitary force.

When the French withdrew from the region, the Russians stepped in and picked up operations. However, maintaining control in the region is no easy feat, and the Russians are figuring that out. The Sahel’s harsh geography, the war in Ukraine, and now, jihadist groups partnering with Tuareg separatists, are all weakening Russia’s position

Without reinforcements or easy extraction points, this could turn into an embarrassing retreat from the region for Russia.

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Transcript

Hey all. Peter Zeihan here. Coming to you from Colorado. Today we’re talking about Africa, specifically the central African country of Mali, which is in the transitional zone where the tropics bleeds into the desert and an area called the Sahel. What we’ve had is over this past weekend, Tuareg forces, their local ethnic separatists and a branch of Al-Qaeda which operates in this area. 

Both of these have been militant forces operating in the area for quite some time, decided to coordinate their attacks, their normally quite robust rivals, and attack the city of Kadal in the northern part of the country, in the Sahara, as well as a number of other places throughout the country. And in doing so, they forced Russia’s Afrika Korps into full retreat. 

The Afrika Korps is the successor to what used to be called Wagner, basically, a group of people who have had the ethical part of their brain. Mellon scooped out and basically sent to kill people for the power of Russia. In the case of the in general in Mali, in specific, they cut security agreements with local governments that are not particularly nice to their people, and in exchange, they get mining concessions, most notably. 

And for them, definitely, what they’re after is gold, because it allows the Russians to evade sanctions more effectively. They just fly gold for payment instead of having to worry about, say, the US dollar system. Anyway, the quick back story is as Ukraine war got going really, really hard in the last couple of years, Wagner became more a group of paramilitaries. 

With the ethical center scooped out, Ragnar became more and more important to the Russians in manipulating not just events in Ukraine, but throughout the world, because they were basically soldiers for higher that would carry out the interests of the Russian state, which in general is to cause as much trouble in as many places as possible to cause problems for Western governments. 

So in the case of the Sahel, the target was always France, where in French former colonial territories here and the French had troops throughout the countries in order to fight the jihadist remnants of al-Qaida. And in that they were doing, I would argue, a relatively decent job. 

For the French, Al-Qaeda was the target, and they would cooperate with anyone who had helped them against al-Qaida in this case, including the Tories. And the government of Mali was like, well, you’re cooperating with one of our secessionists against the militants. We don’t like that. It’s a sovereignty issue. And then the Russians came in and the French were booted out. 

And some version of that has happened throughout what is once known as French West Africa. And the French footprint in the region now is basically zero. And we have Russians now across the entire band. But as as I said, what happened when this went down is the cell is not a particularly great place for anybody. There’s not a lot of water. 

So you don’t have population density, which means you have these isolated populations, posts like Cadle that have a few tens of thousands of people. And that’s it, which means that any sort of rebel group or militant group can run fast and free through the rest of the country, just like we saw in Iraq or Afghanistan and the war on terror, just like we see sometimes in northern Mexico with the cartels, just like we see in Syria with ISIS. 

You can’t really impose any sort of control over this region long term, because you can’t have the civilizational tools that are necessary to do it. And so now it’s the Russians turn to get their asses kicked. And so the issue here for the Russians is unlike France, which is not involved in any sort of broader military conflict, and unlike France, which actually has some expeditionary capacity, the Russians don’t. 

They’re involved in a large war. So only so many forces can be dedicated to the Afrika Korps or Wagner or whatever you want to call it. And in addition, there’s no chance of backup, which is a real problem. So the Russians only have about 2500 troops in region, and that includes their logistical tail. So most of what they have been focused on is destabilization and wealth extraction. 

And now that the actual fight has been joined, they are not doing very well. I always assume that by this point, countries be working to remove the Russians for any other reasons, because they are really a trouble. But when it comes to the countries of the Sahel, where state capacity is so low, getting any sort of assistance is good, especially once you’ve kicked out the French. 

So the the Russians are still fighting these groups in other parts of the country. They’ve only evacuated Cadle. But if the Tuareg, Al-Qaeda, it’s not an alliance that’s too strong. But if their truce holds, they can keep up the attacks. The Russians really have nowhere to go. You’re looking at a potentially a particularly embarrassing retreat they can’t count on the Russian state airlifting them out because the capacity isn’t there. 

And it’s just way far, too far away. Whether or not this will be the beginning of the end of the Russian presence across the cell. We’ll see. But there is a relatively embarrassing retreat in store now that will probably continue from north to south across the entire country.

Japanese Weapons Are Open for Export

Japan tanks and military parade

Japan has lifted its long-standing restriction on exporting weapons. This will bring some fresh dynamism to the global defense industry, specifically in naval manufacturing and drones.

While the impact will likely be gradual, Japan is already fleshing out plans to supply ships to Australia. The real impact will be seen when Japan’s decades of investment in automation are on display, which positions it to become a major drone producer. Collaborations with Ukraine are just the first glimpse of what could evolve from this.

As Japan leans into defense exports, it could very well reshape modern warfare and emerge as a leading global drone power.

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Transcript

Hey all. Peter Zeihan here. Coming to you from Nashville. Today we’re going to talk about something actually happened about a week ago. The Japanese changed their legal structures so they can now, for the first time since World War two, export weapons. So the question is, how big of an impact that this have? In what sectors over what sort of time? 

Japan has the world’s second largest navy, but they have always, by design, not had a particularly large military because of the whole World War II thing. And in all operational terms, the United States more or less operates their military on a tactical level whenever we decide what we want to. So that is, encourage the Japanese to not do a whole lot. 

And so in terms of percent of GDP, which is a threshold that most people use for defense spending, the Japanese have actually dipped down to as low as about 1% as of ten years ago. Now, as China has become more of a threat, that has risen and they’re now spending just under 2%. And, you know, if you double the size of your defense budget, you would think that your military industrial complex would expand. 

And it has, but not by as much as you might think. The Japanese are working from the theory that before we get all the hardware, we should make sure that we have the right people and the training regimen works hard to argue, and that means that the defense expansion hasn’t really kept up. So a sudden change and the ability to export weapons doesn’t immediately translate into those weapons being available. 

But this is still Japan, one of the most technologically advanced cultures with the fastest rate of change in technology, in manufacturing, in human history. And now that they can access the market, they’re going to. So kind of phase one is there are 20 countries that they consider allies, which can includes most of NATO where weapons are now legal to sell to. 

And the question is what are they going to do? The obvious one is ships, especially small ships. And they’ve already cut a number of deals, including with, say, Australia, to turn more ships out of their shipyards and get them out there. And since the Japanese Navy is one of the three most powerful on the planet at the moment the Brits, the Japanese and the Americans, I don’t doubt that they can do that in number in a relatively short period of time, but it’s the second phase that I’m really interested in. 

Japan is a partially robotic society. This is a country that has been aging very, very quickly and as the world’s oldest average population. And so 15 or 20 years ago, they established a national robot strategy to basically automate and robotics, whatever part of their economy that they could, because they knew they weren’t going to have the people and they knew that the people were going to need the obsessed. 

You mate that with what is going on in this second phase of the revolution in military affairs, and all of a sudden some really interesting things can come out of the drone world, because when it comes to actuators and things like that, the Japanese have been doing it for decades. So we now have a deal in place already between the Japanese and the Ukrainians to bring Japanese production capacity to Ukrainian drone tech. 

You put those two things together a fast adapting, automated workforce with a very quick turnaround on things like prototyping. And you’re talking about Japan becoming a massive drone power in probably less than two years. And now they have export capacity. So I don’t know what they’re going to look like, but we’re going to have Japanese built drones produced in mass and exported in mass in the not too distant future. 

And we’re only at the very beginning of understanding what drone warfare means in general. We are utterly unprepared for what it means when the Japanese take lead in that sector.

The Iran War Approaches a Tipping Point

Missiles with Iranian flags on them

The Iran war is approaching a painful tipping point this week. Global energy flows remain in a chokehold, and economic conditions are worsening worldwide.

This week’s shift will be caused by Iran’s oil storage reaching capacity. Once that happens, Iran will have to shut in wells, which will cause long-term damage to production capacity. The fallout from that will be sure to get the IRGC riled up.

Now that the real decision-makers will feel the pressure, there will be an opening for policy change. The outcome, however, remains uncertain.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here coming to you from Nashville. You are going to see this video on Monday the 27th. And this week is going to be a big week in the Iran war. We’re in this painful economic state where both the Iranians and the United States are blockading traffic in and out of the Strait of Hormuz, which has caused any number of problems downstream, whether it’s jet fuel shortages or just general economic dislocation, it’s bad. 

It’s getting worse. It will continue to get worse for months. This is not something we’re going to fix this year or probably even next year. But for the first time, by the end of this week, the people in Iran who matter will finally feel some pain. One of the aspects of the American blockade is to make sure that the Iranians cannot get crude out. 

Now, normally, Iran only exports about a million barrels a day, but based on buffers in their storage system at a place called Kharg Island, they can surge out if they have stuff that’s already on site. What that does mean, however, is that once the blockade is in, that storage starts to fill up. Most people estimate that they have between 30 and 35 million barrels of storage and Kharg. 

And that’s really all the storage they have in the country for crude. And now that we’ve had the blockade in place for quite a bit, we’re probably going to see that storage hit full capacity this week, probably on Thursday or Friday, which means for the first time, it’s not an issue of short term income disruption. It’s a question of the Iranians then having to forcibly shut in their wells. 

You see, it’s one thing to cut off their day to day income for a few days, a few weeks, a few months, a few years, whatever happens to be if they know they can ultimately still get it out. But if you clog up the system and prevent exports completely, then they have to shut in wells, and those wells will never come back on in the same way. 

And they might have to do some redrawing, which means a long term degradation of their capacity to generate income at all over the years to come. Now, the people who are calling most of the shots right now are with the IRGC. That’s the paramilitary organization that enforces security, that controls the missile force that has been doing most of the drone attacks, and they make their money by a combination of smuggling and oil sales. 

So for the first time in this war, they actually have a reason to change policy. Is that something that is going to happen? You know, who knows. But this is the first time they will actually feel pain. And if there is going to be something that the Trump administration is going to do to take advantage of that, we get the beginnings of that strategy by the end of this week. 

Way too soon to suggest that there’s going to be success or failure in any particular direction. But this is the first thing that the United States has done for long enough that matters to the people who are actually making the decisions.

Underwater Drones and the Future of Naval Warfare

An unmanned Underwater vehicle drone about to be dropped into the ocean | Courtesy of Wikimedia Commons: https://en.wikipedia.org/wiki/Unmanned_underwater_vehicle#/media/File:Unmanned_Underwater_Vehicle_operations_130605-N-AZ907-046.jpg

Drones have been all the rage in the Ukraine War, and they will continue to be one of the primary topics of warfare in the near future, but do underwater drones have any place in this conversation?

Underwater drones just don’t have the same use case that airborne drones have. Torpedoes have been around since the 19th century, so these underwater drones aren’t doing anything groundbreaking. Surface maritime drones are a different story. These remote-controlled jet skis strapped with explosives have been wreaking havoc on Russian vessels.

So, forget the underwater drones and focus on the surface-drone tech, especially if you’re in places like the Taiwan Strait or the Japan Strait. As these innovations roll in, we’re looking at a full restructuring of the global maritime shipping sector.

Note: This video was recorded last year during one of Peter’s backpacking trips.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here. Coming to you from Lost canyon. Got a little interesting stuff. I’m gonna have to climb through tomorrow, but you know, that’s tomorrow’s problem. Today we are taking a question from the Patreon page, and it’s specifically about drones, specifically underwater drones. And the question is, as did globalization really kicks in, do I expect underwater drones to play a role in some of the major things that are coming, like the just incorporation of China or perhaps Korean unification? 

Probably not. Unlike airborne drones, underwater drones are missing a couple key factors and its range and detection radius. The technologies that have allowed airborne drones to do their thing better optics, better power management, lighter materials really don’t change the math for an underwater, weapons platform, but can’t see any further than they did before. 

The range is limited by the fuel type. It’s having a little bit bigger Battery isn’t going to do all that much of a difference. And being able to get things to where they need to go, probably not a very big play. The only way that underwater drones might make, might see bigger plays are, is if they were dropped off by submarines closer to their targets. 

But, you know, we would call those normally torpedoes. We already have that technology, so we’re not really, doing much here. We’re just kind of reinventing the wheel. Now, that’s under water. Drone. So does it mean that maritime drones aren’t moving forward and don’t have a role to play? But it’ll probably be surface drones. One of the things that the Ukrainians have shown us is they can take a jet ski or a small motorboat packed with an explosives, basically strap a control system to the steering column and off it goes with five, six, 700 pounds of Boom-boom. And when it hits a ship, that ship has a big problem. And using water, drones, maritime drones, surface drones, Ukrainians have done an immense amount of damage to the Russian Navy because pretty much all of the weapon systems that are on traditional naval vessels are designed to shoot up at things like planes. They’re not designed to shoot down at things that are in the water. 

And so we’ve seen the Russians basically have to defend their vessels with dudes on the deck with machine guns and RPGs, and it’s not a very effective thing. So if you take maritime drones and introduce them into constrained waters like, say, the Taiwan Strait or the Japan Strait, all of a sudden you do have a very different sort of system because these sorts of drones do have ranges of a few hundred miles, already. 

And that’s just by retrofitting, platforms like jet skis that already exist. As soon as you start taking, the technologies that the Ukrainians have built and use them on a completely new chassis, you can have a lot more range. And then we’re talking about a fundamentally different system. And if you’re talking about defending a civilian vessel in that sort of environment, that’s going to get a lot harder. 

At least naval vessels have the possibilities of having jamming and having things like a ready supply of RPGs. Now, this does bring us to another topic that we’re going to have to find out the hard way. And that’s the general militarization of cargo ships. Because it’s coming soon. There are not not not not enough military vessels on the planet, to be able to patrol the sea lanes to a degree that would be necessary for the type of security breakdown that we’re facing. 

So the only way we’re going to be able to maintain even a modicum of globalized trade is if cargo ships, whether they’re container ships or, bulk ERS or tankers themselves, are able to mount their own weapons systems, and that will also most likely be airborne drones, because that’s the only thing that can get the radius and maybe the strike capacity to take out something like a surface drone before it gets to you.

America’s Leg Up on Petrochemicals

Petrochemical plant

The Iran War has caused a massive disruption in global petrochemical production. Since most of the world relies on oil-derived naptha, the ~12 million barrels/day shortage is taking a toll.

Many countries in Asia and Europe are beginning to feel the pressure, but the U.S. has a leg up on everyone else. Thanks to the shale revolution, America’s cheap and abundant natural gas is used to produce its petrochemicals. This has enabled the U.S. to avoid shortages and become a dominant global supplier of key petrochemical inputs.

Nearly every industry, from plastics to fertilizers, is impacted by these materials. So, the global industrial landscape is getting shaken up once again.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from Walla Walla, Washington. Today we’re talking about the Iran war and the impact that it is having on petrochemicals. 

The way most of the world decides to make petrochemicals is they start with crude oil and then refine it into an intermediate product called naphtha and then naphtha. 

Then it goes on and is processed into tens of thousands of things that we all use every day. That’s not how it operates in the United States. In the United States, because of the shale revolution, we have basically a bottomless supply of natural gas. Based on whose math you’re using, roughly one third of the natural gas that is produced in the United States, it’s produced is a waste product, or at least as an associated production of oil, which means that in the United States, natural gas is significantly cheaper compared to the cost of oil. 

So in the rest of the world pre-war, the ratio between oil and natural gas on a point of view was about 5 to 1. In the United States, it’s closer to 2 to 1. So we use natural gas to produce products that, everyone else would use naphtha for. Well, what has happened? Two things. Number one, all that natural gas means that the United States can produce most petrochemicals at a significant cost advantage versus everyone else. 

Second, with the Iran war going on now, there’s a global shortage of oil to the tune of about 10 to 12 million barrels a day. So everyone else is hardware is designed to turn oil into naphtha, into petrochemical products. But all of a sudden, the price of oil on the availability of oil means that basically everyone in the East Asian rim, and very soon, everyone in Europe, simply can’t access the product they need at all, and they don’t have access to enough natural gas in the first place to switch over. 

And even if they did, they’d have to change their hardware to be able to do it. So the United States is becoming, from an economic point of view, the only real functional, large scale supplier of the butadiene and methyl groups, which is where we already had, huge advantage. And that’s things like, particleboard and silicones and octane for gasoline and nitrogen fertilizers and melamine, plastics, a lot of things like that. 

Whereas everybody else is now discovering that they don’t have the price structure that’s necessary to maintain competitive production of really any of this. Third problem, because the United States, is able to have an advantage now in all of the product sets. We’re seeing a significant shift in production quantities as well as qualities. So let me show you this chart here. 

If you start at the bottom left, that gray bars oil, you turn into naphtha, which goes on to make all the water products go to the right side. At the bottom you start with natural gas. You crack it to get ethylene, and then you turn that into products. But this whole set can be made with natural gas. 

And so the United States has not just a price advantage now, but just a huge advantage in the quantity, the type of products that can be made in mass. You play this forward for six months, two years, which is easily going to happen because of the Iran war. And we’re looking at a shattering of the petrochemical supply chains on a global basis outside of North America, and that’s going to have massive impacts downstream on pretty much every industrial sector.