Peter Zeihan, Author at Zeihan on Geopolitics

Why EVs Aren’t The GreenTech Panacea

When the major auto manufacturers start changing their EV plans, it’s probably a sign something’s not quite right. For all those who think they’re better than everyone else because they drive a Tesla, this video is for you…

Most people see electric vehicles and think it’s good, but remember to read that fine print. Given an increased reliance on Chinese manufacturing and issues with the energy mix and materials, those “planet-haters” driving internal combustion vehicles likely have a smaller carbon footprint than EV drivers.

Transitioning the world’s fleet of cars to EVs is just plain impractical unless we uncover a bottomless supply of materials and invent a new battery chemistry. Until that happens, we’ll continue to see EV sales fall and auto manufacturers lean away from EV plans.

In an ideal world, we would prioritize more practical green technologies instead of pissing away capital and resources on Elon’s new Model XYZ123.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from Colorado, where we’ve just had our first big winter storm and probably get a little bit more on top of the nine inches we got last night. Anyhow, the news of the moment is that a lot of major auto manufacturers are scaling down their plans to make the electric vehicles. Ford and GM have both suspended or canceled plans to build a couple of new facilities for Battery TV assembly.

No changes to their internal combustion engine vehicle plans. Tesla has indicated a significant drawdown in their global production capacity. And in fact, they’re saying they’re going to suspend and maybe even cancel the plans for the Gigafactory that they were going to be building in Mexico, although that’s very TBD. There are a lot of issues in play here. But let’s start with told yourselves, this is something that was never going to work.

From an environmental point of view, most EVs are best questionable. The data that says they’re slam dunk successes assumes that you’re building the EVs with a relatively clean energy mix and the recharging it with 100% green energy. And that happens exactly nowhere in the United States. The cleanest state is California. They are still 50% fossil fuel energy. And they lie about their statistics because they say they don’t know what the mix is for the power that they’re importing from the rest of the country, which is something like a third of their total demand.

And the stuff that comes from the Phenix area in Arizona to the L.A. Basin, which is something like ten gigawatts a day, which is more than most small countries, is 100% fossil fuel. But California claims to not know. More importantly, on the fabrication side, because there are so many more exotic materials and because energy process to make those materials is so much more energy intensive, all of this work is done in China and in most places it’s done with either soft coal or lignite.

So you’re talking about an order of magnitude more carbon generated just to make these things in the first place compared to an ice sheet. And that means that these things don’t break even on the carbon scale within a year. For most, you’re talking about approaching ten years or more. And that assumes you buy the Chinese data, which is right.

Okay. So that’s kind of number one. Number two is materials. These vehicles require an order of magnitude more stuff, more copper, more molybdenum, more more lithium. Obviously, graphite and the energy content required to put those in a process is where most of the energy cost comes from. But the more important thing is, is if we’re going to convert the world’s vehicle fleets to these things, there’s just not enough of the stuff on the planet.

I’m not saying that we can’t build a time, but that time is measured. In decades, humanity has never doubled the production of any industrial material at any time in history. Within a ten year period, if it was something we were using before and supposedly we need, you know, ten times as much nickel and all the rest, so the stuff just isn’t there.

So even if this was an environmental panacea, which it’s not, we would never be able to do it in a very short timeframe. You’re talking the century plus most likely third cost your typical even if you want to compare it to something that’s an internal combustion, it really depends upon the model. The cheapest ones are going to still cost about 10,000 more than their equivalent.

The more expensive ones can be upwards of 70,000. And so this is not a vehicle whose for most people and that’s before you consider little things like range anxiety and I’ve rented I think if it’s real is that there just aren’t enough charging stations. So in order to build out the electrical system that we need, in order to have a nationwide EV program, we need to basically increase low end the amount of electricity generation and throughput of our system by about half.

Now, there’s only been one year since the 1960s where the United States is ever increased the amount of electricity generated by more than 3%. And that was the year we came back from COVID. And so we didn’t have to install any new infrastructure for that. We would have to generate the sort of build up that we did back in the fifties when the country was electrifying for the first time.

And that’s going to require an order of magnitude more, almost two orders of make well, let’s call it 20 times more equipment when it comes to things like transformers and cables than we have done in 75 years. And if we started building out the facilities necessary to build those things today, they will not be ready at scale within four years.

And then you can begin the build out in four years and it’ll still take another decade. So no, no, no. But finally, I mean, the EV manufacturers really don’t pay any attention to any of this. The real issue is that sales are down for these reasons and more people just aren’t interested in EVs at the current time. They’re not as reliable.

They don’t have the range. People are a little nervous about the technology in general, and perhaps most importantly, if you’ve got a new style of EV that comes out, these are new technologies. Not a lot of people want to play today’s prices for yesterday’s EV. And so what we’re seeing is cars building up on the lots, not internal combustion cars.

Those lots are empty but EVs are building up on the lots and people just aren’t buying them without absolutely massive discounts. And the discounts are now to the point that the whole industry is no longer profitable, even with the subsidies that came in from the Inflation Reduction Act. Ultimately, if people don’t want them, these are not going to be sold.

And so we have now converted 1% of the American vehicle fleet to EVs, and it looks like we may be very close to the peak, but for me, a green who can do math, this couldn’t come soon enough. We have limited capital, we have limited resources, we have limited material inputs and we have limited labor. And we really need to focus on the technologies of the green transition that work.

And this isn’t one of them.

The Ukraine War and MedShare Donation Match

We’ve been talking about the Ukraine War for quite a while now, but I still get questions asking why. So, we’re looking at the historical significance of this region and what this conflict means for all of us.

Before we dive in, I’m pleased to announce our donation matching drive for the month of November. We will be matching up to $40,000 in donations this month to our chosen charity partner, MedShare International.

MedShare is a non-profit humanitarian organization committed to delivering life-saving medical supplies to areas in need around the world. We have been particularly proud to support their mission of supplying medical supplies and equipment to care for the victims of the ongoing conflict in Ukraine. Your donations help deliver surgical kits, life-saving equipment and other urgently needed medical supplies – and in November, your impact will be doubled through our matching donation.

Please click the link below to donate, and all of us at Zeihan on Geopolitics, thank you for your generosity.

Russia’s invasion of Ukraine is not an isolated incident; the Russians have been carrying out similar attacks to secure their borders for decades now. So if Russia isn’t stopped in Ukraine, they will continue until all of those critical access points are taken.

As long as Russia is committing war crimes, targeting food and agriculture infrastructure, and attacking the power grid, we must support Ukraine. So, I urge you once again to support MedShare and donate at the link below.

Reviving Water Transport in the United States

The US is blessed with one of the most prolific water networks in the world, yet it operates at sub-optimal levels. You’ve all heard my thoughts on the Jones Act, so you can probably guess where the blame falls once again.

Something will have to change as the US reshores its industry and attempts to build out its manufacturing footprint. Thankfully, reviving water transport in the US is a low-hanging fruit. All it requires is some amendments to the Jones Act and its regulations on waterborne commerce.

If we can manage that, we’ll all enjoy some nice economic growth thanks to reduced product transport costs and a boost to US manufacturing.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here. Coming to you from Milwaukee, where I’m doing a little street hiking along the Kinnickinnic river, which is, you know, say that five times fast. This used to be one of the great industrial heartlands of the United States. Big into steel. Big into heavy manufacturing. And the reason was because of what’s right here next to me.

Moving things on water is about 1/12. The cost of moving them by land and courtesy of in the Air and the nearby Lake Michigan. Milwaukee, just like Chicago, just like Oshkosh and Green Bay, were part of a broader transport network that included the entirety of the Upper Midwest, of the United States and the New England States and the Mid Atlantic states.

Basically from here in Chicago. You can take your local rivers and canals out to the Great Lakes, go through the Great Lakes until you get to Erie, and then you’ve got two choices. You can either take the Mohawk River, Erie Canal and Hudson to New York direct, or you can go the long way, which goes through Quebec and Ontario in order to reach the Atlantic Ocean.

That’ll loop back around. From New York, you go south through the barrier islands system all the way to Miami from Miami. You can go through the barrier island systems all the way to Matamoros or you can hit New Orleans and go up the Mississippi River and go all the way back up to Chicago via canal that links into the Illinois River.

It’s the great circle of North America and it has long been one of the great manufacturing zones of the world until about 1920. And then in 1920 as part of it, discretionary, protectionist system, the United States put in place a law called the Jones Act, which says that any cargo transported on any vessel that goes between any two American ports has to be on a vessel that is American owned, captain, crewed and built.

And over the course of the next century, we saw cargo transport on America’s waterways drop by 97, 98%, something like that. Anyway, so we basically taken what has been the world’s most beneficial old natural geographic feature from an economic point of view and crushed it into irrelevance. Now that we are entering an environment where the United States wants to double the size of its industrial plant in the aftermath or the soon to be aftermath of the European and especially Chinese failures, we need to start thinking a little bit differently, and that means we need to start looking for things that are very, very, very low hanging fruit.

In this case, that means getting the waterways back up and running again. Because when you think about the sort of manufacturing that the United States traditionally is not good at things like electronics, it’s largely because you have different price points for different types of work. The person who does injection molding is not the same as the person who does the coding for the wires and not the same who does the software work.

You need multiple skill sets in different places, and if you can drop the transport costs for getting those intermediate products among those places, well then you’re looking at something pretty special. And we actually have that built into the American heartland itself just requires changing one law, not abolishing change. Part of the Jones Act, the Interstate Commerce Act, if you will, is about regulating commerce among the states on the water.

And some of that we still need we clearly need a national regulator. But the rest of it really, honestly can go away. And if you think that this is a nationalist issue, that, you know, we should have this all in American hands, consider that we don’t do that for truck and we don’t do that for rail and we don’t do that for air only for water, only for the thing where we have a massive geographic advantage.

So if you’re looking for a quick and easy way to stimulate economic growth in Wisconsin, in Illinois, in New York, anywhere in New England, anywhere in the South, anywhere in the Midwest, this is the low hanging fruit. All we have to do is get out of our own way.

Venezuelan Oil Sector: Biden Lifts Sanctions

The Biden administration has suspended some sanctions on the Venezuelan oil industry thanks to Maduro’s (ever-so) slight easing of political restrictions. While this may pump some air back into the lungs of the oil sector, it will take a lot more to get Venezuela back to significant levels.

The history of Venezuelan crude is about as thick and complex as its dino juice. Back in the day, the US built infrastructure to accommodate the viscous crude coming from the south. Once that crude became unreliable (in more than one way), the US closed the door on those imports.

Now that some sanctions have been lifted, we’ll likely see some more steady flows of Venezuelan crude into the system…but it will take much more foreign investment and reestablishing of trust and reliability to revive the Venezuelan oil sector.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from Seattle, Washington. It is the 20th of October, although you’re probably not going to see this one for a while because there’s a lot going on. We have a bit of a stack in front of us. Today, the Biden administration in Washington announced the suspension of some of the sanctions that are in place on the Venezuelan oil industry, which will allow a number of companies in the United States to increase their investments legally, as well as a number of refineries in the United States to increase their imports of crude from the country.

Things have been yo-yoing, but in general going down over the course of the last decade. Venezuela today is exporting significantly less than a million barrels a day. In fact, there have been some times where it’s almost dropped to zero, and American imports of that crude have also been dropping proportionately. And in fact, at some point, there have been several months where we didn’t import any at all.

I don’t think it’s ever gotten above a half a million the last two years anyway. It’s not a lot anymore for an economy that uses or processes over 20 million barrels a day. Okay. What’s going on? Okay. Number one, the Venezuelan system is run by a guy by the name of Nicolas Maduro, who is a former bus driver with no executive experience until he took over from Hugo Chavez, who was a kleptomaniac who basically stole the country into the ground.

And so under Chavez and especially under Maduro, the mismanagement has been extreme. And they and their allies have basically stolen everything that wasn’t nailed down, including the lot of stuff that was nailed down. A lot of this stuff was really dumb. So like, you know, you’d have a a power plant, so they’d steal the generators. I mean, it’s like the degree to which we had a kleptocracy here is pretty extreme.

This is not socialism. Let’s be clear. Socialism is where the government plays a directing role in the government. This was just flat out theft, a very different sort of system. We should be afraid of this sort of system. Anyway, what Maduro has done, he’s loosened up some of his restrictions when it comes to political pluralism in the country and basically allowing the opposition to participate in a series of elections.

And the United States, as sanctions are related to those elections. So by basically being a little bit less of a prick, the United States has decided to lessen some of the sanctions. We’ve got three things going on here. First of all, the one that’s closest to home and probably the least significant is the Biden administration’s official mantra is that high gasoline prices in the United States are largely a product of decisions that are made in the various OPEC producing countries rather than his own policies at home.

Which is a little weird because the United States is the world’s largest producer of crude and arguably now the second largest exporter in gross terms. So, I mean, the solution to our gasoline issue is to build up refining capacity in the United States. So we’re not dependent on crudes that come from abroad. Which brings us to the second issue, which is the crude that comes from abroad.

American refiners knew, knew, and they were right back in the seventies and eighties that the global supply of crude, the chemistry of that crude was changing. And we had used up most of the conventional crude that was light and sweet, which is another way of saying that it has very few impurities, whether it’s sulfur and mercury. And that light sweet stuff tends to be very, very easy to refine.

So what we did is we invested hundreds of billions of dollars in retooling our entire industrial base in the refining sector so that we could take heavy, sour crudes which were thick, maybe even solid at room temperature, and may have been like three, even 4% sulfur by weight and process that into finished fuels. The idea is we can use our technical acumen and our better capital position to take the world’s crappiest crudes and refine them into the world’s highest value add products.

And so the margin buy low, sell high. You know how that works has worked very, very well for them over the last 30 years. And Venezuela is one of the sources of the heaviest crude in the world. And there are very, very, very few refineries in the world that can process this stuff except for the United States. And so when Chavez basically led his country on to a anti-American jihad and Maduro moved R0 excuse me, stuck with the ideology, American refiners became less and less interested because the Venezuelans were simultaneously driving their own industry to the ground.

So the crude quality became very erratic and the delivery volumes became erratic, and then delivery reliability became very erratic. So even though they liked the chemistry of the crude, it became too wily for them to depend upon it. So they’ve shifted primarily to other sources. With Canadian oil sands now being the preferred input. This raises the possibility in the midterm that we might be seeing some more Venezuelan crude come in because honestly, there aren’t a lot of other places for it to go.

There are a couple of refineries in India, in China that can take it in limited volumes. But then you have to ship it either around the Americas or through Panama and recombine into a larger tanker on the other side of Panama and send it across the Pacific. It’s literally more than halfway around the world, if you want to do by supertanker, because you have to go all the way around the southern tip of South America and then cross the Pacific the long way in order to get it to a destination.

So the economics of that are questionable at best. And the only reason shipments have gone that direction is because the Venezuelans have taken huge hits. So what usually happens now is Indian or Chinese or Russian traders buy the crude in Venezuela and then ships ship to the north and to the United States and pocket the difference, leaving it to the Venezuelan government to hold the bag.

It’s a delightful little trade that is only possible because of really stupid ideologies, but it happens. Okay. The third the future of the industry. Venezuelan crude is thick, it’s viscous. And some of the stuff in Orinoco, you have to basically inject steam that several hundred degrees into the formation just to make it liquid in the first place. That means it has very high development costs, basically for every barrel of production you’re going to get, you’re going to have to sink 4 to $8000 into the well, giving up one of the world’s higher development costs.

It’s not clear that the foreigners are going to be that interested in investing when you’ve got political issues, you’ve got technical issues, you’ve got infrastructure issues. And that’s even before you consider that the United States could always slap sanctions on again. So a small to moderate increase out of Venezuela, I think makes a certain amount of sense. But I would be really shocked if over the next year that amounts to more than maybe 300,000 barrels a day.

I mean, that’s that’s not nothing. And considering what’s starting to bubble up in the Middle East with Iran, that might be really necessary. But if there is going to be a game changer in the industry, it’s not going to be Venezuela. That makes the difference. Now, I understand there’s a lot of people that thinking it might and because it has in the past, if you remember back to the oil shocks of 73 to 79, it was Venezuela that broke with OPEC and turned open the taps and expanded their production footprint in order to break the Arab oil embargo.

And that had very long lasting implications for the market and for geopolitics. But you had a very different political system in Venezuela at the time. Back then, it was the most advanced of the Latin American countries with a very technical government, with high education standards and pretty good infrastructure. Now, after 25 years of slide, it’s at the bottom of most of those measures, and it just can’t do hardly any of the work itself.

It has to come from abroad. And the Venezuelans are going have to rebuild a degree of trust and reliability before the investment will flow in in the billions. And that is exactly what it would require. Okay. I’m.

Dollarizing Argentina: Run-Off Elections Between Massa and Milei

Today, we’re turning our attention to Argentina’s upcoming run-off presidential election between current economic minister Sergio Massa and libertarian candidate Javier Milei. I could do a whole series on the effects of Peronism, but this time, I’ll be focusing on Milei’s proposed dollarization program.

Argentina has defaulted on its national debt nine times, and the government can manipulate events (and people) by hitting the peso printing button. Switching to the American dollar would institute some financial responsibility, but is it feasible?

Milei would need to come up with a metric-shit-ton of US dollars for this to work, but we’re still ignoring the impact on banking stability and the risk of hyperinflation. I’m not quite sold on the idea just yet, but let’s see who gets put in office before we go further down that rabbit hole.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from Boston Harbor. The news over the weekend was that in Argentina, we had our first round presidential contest and the two finalists who will compete in the first weekend of November are a guy from the ruling party, the protest. He’s the economy minister and a guy from the libertarian field, which is Javier Malay.

And apologies if I got that name right. If you win, I’ll learn to pronounce your name. Just ask Birdie Mohammed off of Turkmenistan. Okay, let’s see what to say. Malays. Big thing is that he wants to do away with the Argentinean peso and institute a dollarization program. Three big things for us. Number one, this is more than just some financial chicanery.

This has really real implications for the Argentineans, as well as everybody else in the neighborhood, because the financial strategies of the protests are a little wackadoo. Peronism is a very nonstandard, political and economic ideology, and it combines things the worst aspects of Venezuelan socialism with corporate Nazi ism. So basically under a cult of personality on top of that.

So if you can imagine AOC of the squad and of the American Congress, you know, one of those really, really, really left wing weirdos having a lovechild with Donald Trump. I mean, it would be an ugly, ugly, ugly, hideous child. But that’s basically what Peronism is. And among other things, it’s heavily unionized. But the government represents the unions, and it believes that the government should be able to print currency and any volume to pay for everything so long as you’re a political ally.

Needless to say, this has gotten Argentina into a lot of financial trouble over the last century. They’ve defaulted on their debt, I think nine times, and it should be a very successful country based on their demographics and the geography. But policy keeps getting in the way. So if you’re an American who thinks that you can do no wrong.

Bear in mind that if you wake up every day for decades, just try to wreck everything you can eventually become Argentina. So there is a limit to what we can get away with now with that kind of in your back pocket. Let’s talk about the impacts here. If dollarization worked, it would destroy the ability of the proneness or really any government in Argentina to use their central bank and their currency in order to manipulate events.

And that is honestly the idea here that Melaye has is this if we can wreck their ability to do what they’ve been doing these last 90 years, then that entire political ideology will die on the vine because they’ll actually have to then balance the books and do things like have petitions, responsibility. And in that sort of environment, people who can do math are going to do better than people who cannot do math.

So this is there’s more at stake here than simply having a balanced budget is about eliminating what has been the dominant ideology of the country has been very, very damaging for generations. But to number two, it’s not easy. The first step to erasing the economy is to remove all the pesos from circulation. And that means that the Argentine government under Melaye would have to go out and get a lot of U.S. dollars to buy back all the currency.

And the government is completely broke. One of the reasons why the Peruvians are printing currency like mad. So the first thing they would have to do is come up with billions and billions and billions of dollars in order to buy up all the old currency. Now, doing that is beyond the government’s capacity right now, unless they do a mass devaluation and if they devalue the peso by at least, say, three quarters.

So make it worth at most 20 to 25% of what it’s worth. Now. Then the number of dollars that you need would be significantly less. So in order to stop the budget largesse and the hyper inflation that comes from that, the first step would be to trigger hyperinflation. Needless to say, that would have not just economic but political outcomes.

So not something that could be done easily, lightly or without consequences. Which brings us to the third thing, whether or not it would even work. The whole idea of dollarization in the handful of countries that have done it is they believe that their institutions are not sufficiently responsible to be granted independent monetary policy and control over printing press.

So by doing away with that completely, basically ending the central bank, you then have a system where everyone is beholden to a much more responsible monetary regimen that of the United States. You know, you can cue the laughter for those of you who are gold bugs out there. The issue with this is that there’s more things that the central bank does and just regulate the currency.

There are also the lender of last resort. They’re also the regulator for the banking sector. And if you have a central bank that does not have the capacity to step in and help the banks in a system that is as fiscally wobbly as Argentina, you’re also going to have a bank run, a bank collapse and nothing behind it to stabilize it.

So for this plan to work, not only do a lot of things have to go right that are beyond Argentina’s control, but Argentina would have to enter through a series of banking and fiscal reforms in a matter of days that most countries take a generation to do. There’s a reason why dollarization, as a rule, is not something that states do, and it’s certainly not a quick fix.

It requires years of reforms, and it’s not clear that the political and economic system in Argentina has that sort of durability or attention to detail. So honestly, dollarization, as a rule, reminds me a lot of Boston’s participation in the Revolutionary War or modern sports. They hit hard right out of the gate. They pick a lot of fights, and then they largely sit out for the rest of the season.

Armenia – Azerbaijan War: Turkey and Iran at Risk

After Azerbaijan’s lightning assault on Nagorno-Karabakh caused ethnic Armenians to flee the region, there’s potential that Azerbaijan will continue to invade Armenia proper.

The motivation for this second phase of the invasion would be to control a land corridor connecting different parts of Azerbaijan. Thanks to Stalin’s chaotic cartography, this region’s power dynamics are just a tad messy. Now mix in some complex geography and bippity-boppity-boo; welcome to the Caucasus.

There is a more significant issue playing out behind the scenes, though. If Azerbaijan is successful in this second invasion, it would place Turkish and Iranian powers within spitting distance of one another. And I can assure you that no one wants to see how that plays out.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from an exciting hotel room. The news I wanted to talk today is about something that has to do with caucuses again. For those of you who remember a few weeks ago, the Azerbaijanis launched a fair bit of a lightning assault on a place called Nagorno-Karabakh, which is an area that was populated with ethnic Armenians.

And the war was over in less than three days. And pretty much all of the Armenians who were living there have since absconded and left for Armenia proper, where there’s now going to be, it looks like a second phase of that conflict where the Azerbaijanis are likely to invade Armenia proper. What’s going on here is that the Azerbaijanis are looking for a land corridor to connect to parts of the country in order to explain the significance of that and have to do a little bit of screen sharing here to Google Zoom, which was Earth, which is one of my favorite programs ever.

Anyway, here we are looking at where the former Soviet space in the north meets with the Middle East in the South and the Caucasus is this mountainous land bridge in between. And let’s just go through a little bit more, okay. So the northern caucuses or the greater caucuses is this line here very rugged, very steep, home to a lot of ethnic minorities like you would expect in any number of mountainous zone.

This is an area where the Russians have always had a problem. The Chechens, if you remember them, live right here. And then you’ve got these two little enclaves in the north, Abkhazia here in South Ossetia here, where the Russians have sent in troops and basically occupy them and make them de facto Russian territory. And some people would say that the Russians are basically trying to do this in Ukraine as well.

But it’s I think it’s important to understand that for the Russians, it’s all about controlling the access point. So that’s Ukraine, where that’s the worst that they’ve watched here in Abkhazia and South Ossetia. The Russians know that their population is dying out. So they believe that they came forward, positioned troops in the access points that they will have an easier time defending themselves.

So there is a coastal road here in Kasia. There’s a path that links the northeast Russian province, which is part of the Russian Federation with the South Ossetian province, which is part of Georgia. And they’re trying to plug those access points. So you’re going to see a lot of this, whether it’s in Central Asia or the western periphery that is near Europe.

And that actually is kind of relevant to the discussion about what’s going on in this region and where media. Now, here we’ve got the former Soviet Republic of Azerbaijan, the capital here is Baku. It’s got about half the population, the entire place, the former Soviet Republic of Europe, an independent Armenia, is right here. You have the Turks over here and the Iranians to the south know Egypt a little bit more.

And Yerevan, capital of Armenia, Mt. Ararat, is a zone that supposedly Noah’s Ark crashed into as the floods receded. It is the national symbol of Yerevan, of the Armenians, and it is not in their territory, it’s in Turkey, but they can see it. A dominates the skyline from the capital. Nagorno-Karabakh is this mountainous zone over here. This is the area that the Azerbaijanis recently liberated from Armenian control and the caravan, which is right here, is that chunk of Azerbaijani territory that the Azerbaijani would like to physically connect to the country.

And if all of this seems like just cartographic spaghetti, it is. And you can think Joe Stalin for that, because at the time that the Soviet Union was gaining control of this area in the twenties, he went through and modified all the borders to make sure that if any of these areas ever got independence again, that it would immediately be at one another’s throats.

And he wielded his pen with extreme levels of skill so that the people a little bit closer. The dominant issue in this area actually isn’t the Russians. The Russians had a defense agreement with the Armenians until very recently, and I guess technically it’s still in force. But the Russians have moved most of their troops out, moved them to Ukraine because they need every pair of hands and every gun.

And yet and that’s kind of held this area frozen. But once you get into the lesser Caucasus, remember greater Caucasus, which are the North less your Caucasus or this kind of broad zone in the south, the mountains are nearly as onerous. It’s still mountainous, it’s still difficult. But there are a lot more corridors that access this area. And in this zone, it’s traditionally not been the Russians that have been the major power.

It’s been either the Turks or the Iranians. Well, let’s see here on that. The local powers have always had those Turks and Armenians is accessing one another’s land. The Turks and the Iranians have always had a bit of a problem rubbing up against each other. There are a number of mountain passes and access points and corridors that allow access, but they’re all seasonal and limited, with one exception.

And that is this right here. This is the Cross River, and this is the best point of access between Anatolia or Turkey or the Turks in Persia or Iran in the Arabians. The thing is, Stalin, again, it’s split. So in the north, the northeast section of that corridor is controlled by Armenian. It’s home to the Armenian, the capital of Europe in the northwest chunk is controlled by the Turks and is home to Mount Ararat.

The Southeast Choke is Nikitin and it is controlled by the Azerbaijani and in the southwest Choke is Iranian, right here in Iranian Azerbaijan. So goes the thinking. The Iranians are really happy with the current state of affairs because if this corridor is split into four different chunks, then no one can really use it to pour Turkish power down into northern region.

However, what’s going on with the Azerbaijanis is they want a corridor that crosses this zone of southern Armenia and directly links Azerbaijan to Nikitin. And then there’s a road and rail system here that goes into Turkey proper. If that happens and you have Turkish power controlling over half of the corridor and the Turks can directly reinforce Baku by road and by rail.

And from the Iranian point of view, this would be a disaster, a disaster from Armenian point of view as well. Not only would they lose control of some of their southern territories, but then they would be completely locked off and surrounded by Turkish power. And if you’re familiar with your history, the Armenian genocide carried out by the Turks in World War One was pretty brutal.

And so the Armenians are looking for anything, anything to kind of grab on to a degree of independence. They need a security gear, a security guarantor. And if they can’t have the Russians and the Iranians or the all the other player in town in Azerbaijan getting control of southern Armenia would basically end that forever. And then it would just be a matter of time before Armenia itself becomes a state repeating of the Turkish system, rather than the Iranian or the Russian system, something that the Armenians would rather avoid.

But for the Iranians, this is also a national issue, because this corridor, if you continue following the south, eventually reaches the city of Tabriz, which is the capital of the northern region. Excuse me, if Iran and northern Iran is primarily populated by ethnic Azeris who are basically the same ethnic stock as the folks who run as a region.

So they have always been the group in Iran that the Iranians have been most nervous about exercising a degree of independence, that the Turks get de facto control of this area, all of a sudden that is very much in play. So we have a situation here where maybe the Russian are only being stage left because of the situation in Ukraine.

They can only focus on the things that are core to them. And since they control Abkhazia and South Ossetia, they control the access points to the Northern Caucuses, and they’re kind of declaring that good enough. But with the Turks now rising, we’re going to have a second level of contest in this region between the Turks and the Iranians, with the Azerbaijanis being a very, very, very willing ally.

So what we’re going to see over the next several weeks or months, something that the United States is concerned about, is this point becoming in play, because if that becomes in play, then this whole or all of a sudden becomes in play. And we need to start thinking about what it means to have Turkish troops in the cave in hard on another part of the Iranian border.

That’s where it is. Okay. I think that’s everything. You guys take care.

The US Credit Rating, Budget Deficits and Debt

We’ve all heard about the drop in the US credit rating, but what does it mean? Given the United States’ size and global standing, the resulting impact on financing costs is nominal. Think of this like your personal credit rating – sure, life’s easier with an 850 credit score, but a 700 isn’t the end of the world.

The bigger concern lies in the worsening fiscal conditions caused by growing budget deficits. With successive administrations exacerbating this issue and the Boomers transitioning from taxpayers to tax beneficiaries, the US has its hands full. And that’s before you mix in threats of the US not fulfilling its debt obligations…

The mounting uncertainty around this issue could impact credit costs and everyday financial transactions. So, unless there’s a massive shift in political responsibility and involvement, this budget deficit issue will remain hardwired into our system.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from Austin, Texas, at the 360 Bridge. A lot of you have written in with the same question. U.S. is credit rating has been dropped. What does it mean? Is this something we should be worried about? The very short version is ish. Whenever your credit rating gets dropped, it generally means that you get put into a different category in terms of reliability, of repayment, and that means you might have to pay a different amount to service your debt.

So imagine if you will, that you’re trying to buy a house and on your last house you just walked away and left the keys in the mailbox. That’s a hit to your credit rating. The next time you try to get a loan or that loan is going to cost you more. And since the United States government is issuing bonds, debt every single day, there’s an incremental increase in what we have to pay because of reliability.

Now, in the case of something like a country, the wobble, especially for a country the size of the United States, tends to be pretty minor. In addition, the United States is the global superpower. It is the sole global currency that is not going to change in my lifetime. And as long as that is the case, the United States kind of is the is the marker of 100% on what you can get.

And anyone who is above that kind of gets extra credit and even below that has to compare themselves to the United States. So we’re talking at most a couple tenths of a percent in the difference in what financing costs are now in a country the size the United States that comes out to something in the tens of billions of dollars a year.

So it’s not insignificant. The bigger impact is what you’re going to be feeling if you happen to be downstream of that, where your debt is indexed to what the U.S. government does. And in that sort of environment, you’re talking about your mortgage, your credit card, everything is going to get a little bit more expensive again from a very low base, but still adds up to tens, if not hundreds of billions of dollars.

A year in additional credit costs. That’s not what I see is the big concern. So let me give you two one relatively minor one that’s really big. First, a minor one. This is only going to get worse. When George W Bush was president, he issued the most debt did the most deficit spending of any president in modern history.

And then Obama came in, was like, hold my beer. And he doubled it. And then Trump was like, well, I’m the best. I’m going to make the deficit huge. And he did so. And now Biden’s and he’s trying to top Trump. So this isn’t a Democrat thing. This isn’t a Republican thing. This is just a bad math thing.

All the fiscal people who have voted based on what the federal government will do with budgets have basically been purged from the political system on both sides. And so we should expect a budget deficit to get larger and larger and larger and larger, especially as the baby boomers go from being the largest tax payers in American history to the largest tax takers as they go from people earning income and paying taxes, to people who are drawing on social Security, Medicare and Medicaid and the like.

So this is going to get a lot worse before it might start to get better in, say, the late 2013, when the boomers are mostly all gone. So bad news, but we’ll live with it. The worse thing, the concern that most folks in the markets have today isn’t that the U.S. can’t pay. After all, the U.S. Federal Reserve has the ability to control the money supply with the click of a button and can basically print enough currency to buy all the government debt.

And that’s exactly what we’ve done in the last four presidents. However, the concern now is that the U.S. won’t pay. Donald Trump said we could renegotiate or abrogate some of the debt, which is the sort of thing you hear out of Greece or Argentina or Cuba. And in the current environment, we’ve had a number of people across the political spectrum heavier on the right, but not exclusively, who have tried to use the ability in Congress to shut things down.

Maybe it’s a program. Maybe it’s debt repayment. Maybe it’s the government itself. But basically saying that we abrogate responsibility for taking care of any of this anyway. And if the U.S. were to just walk away from any of its debt, whether it’s because we apply something like Monod, monetary theory or we just simply shut down the Treasury Department, then all of a sudden you’re talking about the biggest financial asset class on the planet being thrown into question.

And in that sort of environment, if just the fact that this is even a minor risk, just the point that this is a point of discussion, is sending up American credit costs of ECB, the rest of the world, and that very rapidly turns into $1,000,000,000,000 question. Now, if for an economy the size the United States military, the size of the United States, the reach of the United States, the U.S. dollars, complete domination of the financial space, $1,000,000,000,000 question is almost a rounding error.

But you will feel it each and every time you make your credit card payment. Get a mortgage, get a car loan. This is now hardwired into the system until such time that we have a twist in our political system that injects a little bit more responsibility. That’s not going to be this presidential cycle.

Unifor Strikes: Issues with the Canadian Industrial System

Unifor – a Candian public service union – has declared a strike on the St. Lawrence Seaway (a crucial maritime transport route). This has essentially cut off the direct delivery of seaborne goods from the Canadian interior and will disrupt the entire industrial base.

Strikes like this shouldn’t come as a surprise. With the population in decline, labor shortages will become the status quo. That’s before we mix in policies like the Jones Act, which places added stress on the Canadian system.

As bad as this strike may seem, we’re only looking at the tip of the iceberg. And if employers don’t begin fostering healthier relationships with their workforces…

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everybody. Peter Zeihan here coming to you from Grand Rapids, Michigan. And the story today on the 23rd of October is that yesterday a Canadian public service union by the name of Unifor announced a strike on the Saint Lawrence Seaway. And there’s a bunch of things that come from this. Number one, what the Seaway is. It is a system of locks, I think 14, that connect the western Great Lakes to the St Lawrence Seaway itself, which goes out to the Atlantic Ocean.

It is the primary artery for getting cargo from the interior of the continent as well as from all of Ontario and Quebec out to the Atlantic Ocean. A Basically without the Seaway, you can’t go up river beyond Quebec City. And so you’re talking about the bulk of the industrial base of Canada being affected by this. In addition, the Seaway is part of what allows the Erie Canal to work, which allows the New York area to access the interior of the continent as well.

So as long as it’s off line, what is traditionally the primary and cheapest method of moving cargo in and out of interior? Canada is off line. And it complicates things for the United States as well. We’re going to see a lot more stuff like this coming forward. One of the things that’s going on right now in North America is that we are experiencing protracted population decline because we’ve had low birth rates for 40 years.

Now it’s not nearly as advanced as it is in places like Northeast Asia or Europe, but it’s still a factor. And in the United States, specifically in calendar year 2022, the difference between the retirees who are 18 to 65 and the people coming into the workforce who are aged into 18 was just under a half a million workers shortage just in this calendar year.

And that number is going to continue to be negative for a minimum of the next 20. In fact, it’s just going to go up and up and up for at least the next 11 because the people already been born. We know exactly what the inflow into the labor market is for the next decade or two. Two decades. Yeah.

Anyway, so that’s kind of the first problem. The second problem is there’s not a good alternative for the Canadians, courtesy of something called the Jones Act. You really can’t use the American Waterway Network. It prevents any cargo from being transported through the American system unless it’s using a ship that is American built, owned, captained and crewed, which by definition eliminates pretty much everything that comes from Canada.

So we’re going to be seeing a lot of stress in the Canadian system and a lot of stress, especially in greens, a lot of interior Canada. Their only way to get to the wider world is to use the Seaway. Their only alternative is to use rail now to a place like the Quad Cities in Iowa or all the way to New Orleans, which is, you know, technically possible, but a lot more expensive anyway because of the worker shortage.

We’re going to be seeing activities like this over and over and over again in the United States. We’re having issues with the United Auto Workers in places like Detroit right now, where they’re on strike. And the folks up in Canada are thinking they should be able to get at least as much out of their operators as the strikers are aiming for.

And so the is a 30 to a 40% wage increase to be phased in over three years, but not say that they’re not worth it. I don’t know what I am saying. That is in an environment where labor is ever more scarce in North America, you should expect to see more and more and more industrial labor action at all levels.

And this is just part of the environment now, so you best get used to it. And if you’re an employer, you’re best built as positive a relationship with your workers as you possibly can because they have become something that we’re not used to thinking of workers in North America as a scarce resource, and they’re going to be priced accordingly.

All right.

The Third Shale Revolution: Reshoring Manufacturing

The third piece of the shale revolution is all about timing. As the world shifts from globalized supply chains to more localized and secure means of production, utilizing cheaper energy sources and products will be essential.

The US has become the lowest-cost-highest-quality producer of intermediate materials, meaning much of the leg work to reshore supply chains and manufacturing has already been done. So what do we have to show for it?

Between agriculture, wiring, textiles and refined products, the US has shaken up dozens of industries and ramped up reshoring efforts. While industrial construction spending has grown significantly, we must maintain that growth to retain this newly added competitive advantage.

Reshaping the US manufacturing landscape is no easy feat, but access to cheap power and materials surely doesn’t hurt. With the foundation already laid, the US has a considerable leg up on other potential sources like China and the Persian Gulf.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everyone. Peter Zeihan coming to you from Colorado where fall has firmly set in. Today we’re into the third part of a three part series on the shale revolution. The third shale revolution. Phase one was the production side. Phase two is processing and turning things into fuels and intermediate materials that we use in pretty much everything. And the third revolution is everything.

One of the truisms of the last 70 years of globalization has been that material production and manufacturing moves to wherever the competitive advantage happens to be, regardless of national identity. And that means that a lot of energy intensive industries moved out of the United States, particularly after 1973, because oil prices were cheaper or electricity high prices were cheaper, natural gas prices were were cheaper.

Or the processing process was less expensive, usually due to things like labor and environmental restrictions that we might have here that we don’t have in places like, say, China or Egypt that is in the process of unwinding that between globalization and a new appreciation for national security as a component of economic activity. More and more things are being reassured, and the shale revolution has gotten us a jump on this because the shale revolution has provided the United States with cheaper oil, cheaper natural gas, cheaper electricity and cheaper chemical products than anywhere else on the planet.

In part, that’s because natural gas is largely a byproduct here, but mostly it’s because the break even price and a lot of shale fields is now very, very low. And in fact, in the Permian Basin, which is the largest one in the United States, which is responsible for over a third of our overall energy production, it’s less than $11 a barrel on average compared to, say, places like Saudi Arabia, where it’s really cheap but still more than 20, or places like Russia, where with all of their Siberian work, you’re talking 30, 40 and even $50 a barrel.

So huge price advantage. In addition to the changing understandings of security. And what that means is the United States already this isn’t something that’s in the future, already is the lowest cost, highest quality, lowest pollution index producer of every one of the intermediate industrial materials that can come from energy products. And what we’re seeing now in this third phase of the shale revolution is those are being turned into manufactured goods.

And it’s really difficult to find a manufacturing subsector where this is not a game changer. Let me just hit a few of the highlights. First of all, agriculture, natural gas is turned into nitrogen based fertilizers. So where the U.S. is now the world’s largest producer and we’re seeing more and more of that value add chain come back. Even when the United States became the largest producer of natural gas and ethane, we were still shipping the intermediate products abroad, primarily to places like the Middle East or China for processing to finish fertilizer.

That is changing day by day for those who you think we should go organic help god. You are so bad at math. Organic fertilizers require multiple applications over the course of the year, which requires a lot more carbon input. In addition, they require about an order of magnitude more energy to produce in the first place. And if you’re going to be moving six, seven, eight, ten times as much of the stuff, you can imagine what the carbon footprint is for transport.

The same goes for pesticides. Most pesticides in the United States now are a once or twice and done for the season, as opposed to something you have to put on every few weeks in case you want to go organic. Another industry that’s seen a lightning change is wiring, which I know doesn’t sound very sexy until you realize you just go through your life and look at everything that uses electricity that includes your car.

Even if it’s not a an electric car. Anything with a wire has to have a protein. And those coatings are almost exclusively if you produce with some sort of petroleum derivative. Normally the wires are pulled from the metal close to the point of manufacture. So every industry that reassures is going to do more and more of that at home.

And since the coatings come from a petroleum derivative, the United States now has a huge economic advantage in addition to the security advantage over almost every other player. This means that whether it is automotive or electronics or semiconductor, there’s there’s a fairly large petroleum footprint that has nothing to do with energy. One of the things that folks forget is that we use petroleum for a lot more things than just burning.

And before 2015, about one fifth of the oil that the United States used was used in refined products that were not fuels. As we double the size of the industrial plant over the next several years, that number is probably going to at least double, especially if we continue down this path of ever more fuel efficient vehicles. More and more of the petroleum we use will be used for things where it’s not burned, which means that the carbon footprint is an order of magnitude less than it is for, say, gasoline.

Okay, what’s another one? Textiles. Not everything is cotton anymore. Any type of synthetic fabric. Like, you know, what I’m like or what I’m wearing right here. That is 100% of natural gas and petroleum derivative. And as such, that is the frontier in low carbon clothes making, because you don’t have to grow this. It’s just a byproduct of a natural form, of a natural, but of an industrial process where very little is actually emitted.

Polymers are all like that. Let’s see what semiconductors. I mean, obviously, the silicon is important and obviously you need dopey materials. But those dopey materials, as a rule, involve a lot of petroleum materials and there’s wiring throughout the entire process. In fact, it’s difficult to find a manufacturing sector where a petroleum derivative is not one of the top three or four components in it.

That’s true for automotive. That’s true for aerospace. That’s true for white goods. That’s true for heavy equipment. And now that all all of these materials are already being produced here, it’s really easing the pace at which the United States is reshoring industry from the rest of the world. So we have seen industrial construction spending, spending in the United States expand by roughly a factor of eight since just five years ago, and it’s almost tripled in just the last 18 months.

This is a good start. We need to do a lot more because we need to expand what we’ve done in these last five years by at least a factor of four and hold it there for at least another five years. And that will be inflationary and that will lead to labor disputes. And there’s a fierce competition among the American states as to where this stuff is going to go.

But the fact that the shale revolution has given us cheap power and cheap materials to do it at whatever scale we want. From a certain point of view, a lot of the hard stuff is already done. Everything else is a known quantity. Anyone else who wants to do this ultimately is going to have to import those materials, and there are only three real sources for them at scale.

China. The Persian Gulf. And here.

Gaza and Israel: The Start of WWIII or an Isolated Conflict?

We’ve all been following the events unfolding in Israel and Gaza, and questions of this triggering a larger conflict are starting to bubble up. To be blunt, this isn’t the start of WWIII, but let me explain why.

Of the countries in this region, there are no powers that (a) have the capacity or (b) have any interest in throwing themselves into the mix of things. The more significant concern for many is the possibility of a bigger player getting drawn into this.

The US has one thing on its mind – get our people out – everything is second to that. China might entertain the idea of involvement, but it simply doesn’t have the military capacity in this region. And Russia, let’s be honest…they have nothing to spare right now.

This region lacks a broad geopolitical significance that may otherwise entice external involvement, which means this conflict will remain an isolated issue for Hamas, Gaza and Israel.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey everyone. Peter Zeihan here coming to you from No Lucky Milwaukee. Milwaukee. Okay. There has been a lot of discussion on social media in the media writ large about what’s going on with the Israelis in the Gaza operation and the term World War Three. And concerns of a broader regional conflict are everywhere. No. Just. No, no, no. There’s not a single third country that is likely to get involved in this, much less a real country like China or Russia.

So let’s start close to the situation. Explain what’s going on and then build out. So when Hamas launched their operation almost two weeks ago now. Well, no. Two weeks ago. Yeah. They caught the Israelis with their with the pants down. Looking at Gaza should have been be primary goal of an Israeli intelligence and it has been for 20 years.

The only real security threat that they face and they share a border with it and every text message and cell phone call that is made in Gaza goes through an Israeli cell tower. So they should have all the tools that we know about the people on the ground. We know that they’ve embedded within the system and they failed utterly.

So the only solution they have for rooting out Hamas is to go into the Gaza Strip and go house to house through an area twice the size of the District of Columbia with a population of 2.3 million and physically rebuilt everything from the roots. And that is a process that won’t take weeks or months. That will take years.

And when they’re done, they will then have to decide if they want to stay in occupy it or right of themselves, which they really don’t want to, or they leave and just let the next generation of whatever the replacement is for Hamas grow up. It’s an ugly situation, but it is a tempest in a teapot. It’s good for the region.

The only country aside from Israel that Gaza borders is Egypt. And people forget that the Egyptians control all the territory from 1949 to 1973 and hated it. I’d say that the only people that the Palestinians are more disliked by than, say, the Israelis are the Egyptians. And there’s absolutely no love lost. And it took Biden personally interceding to get the Egyptians to agree to allow aid into the southern crossings into Gaza.

The Egyptians would be thrilled if everyone in Gaza just dies. Jordan is a non-factor. Jordan It doesn’t really have a military worthy of the name anymore. Anyway, it’s a satellite state of Israel, so no problem there. Syria is in civil war and most of the fighting is going on in the northwest, in the northeast, parts of the country, which leaves the south.

Now, the south is primarily populated by Druze who don’t really care for the central government at all, but have sat out the war. And then you’ve got the Golan, which is unpopulated. So any effort by the central government or by the Iranian proxies in Syria would have to relocate forces from a hot front to open up a new hot front where there’s a buffer zone anyway.

And their chances of doing anything are very, very slim. I mean, this is not the Syria of 1972 when it had a military that’s been ravaged by the war and everything’s locked down. So they’re a non-factor. Then you’ve got Lebanon. Lebanon is a borderline failed state. Hezbollah is the militant group that is there. And they certainly don’t care for the Israelis at all.

But there’s two things that hold them back. Number one, they’re part of the national government. So there are other factions in Lebanon that would politically restrain them if they get too uppity, because they know that in the Israelis current state of mind, the Israelis would not think twice of sending in some assassins and just wiping out the entire government.

And that is a very focusing factor for the non Hezbollah faction factions within Lebanon. And then second, while Lebanon could definitely send Hezbollah could definitely set a lot of rockets into northern Israel, that doesn’t change what’s going on in Gaza. We’re honestly overtly shift the military disposition of the Israeli army. And Hezbollah doesn’t have an army. If they were to launch a ground invasion, they would be massacred.

So they are definitely the faction to watch, but the chances of them doing anything meaningful are very, very low. All right. Next, let the countries of Iran. The Iranians don’t have anything they can really do directly. They could launch some long range missiles. All that would do would be generates a huge amount of international condemnation. And get this, all the sanctions slammed back in in a matter of seconds might even get the United States through some slow boat trips by all of the oil platforms.

It just blow them to hell. We did that back in the 1980s. The target to watch there was a place called Kharg Island, which is their only, only oil offloading facility. You take that alone, that’s the end of the entire export industry for Iran. So it’s a question about whether they would risk that in order to do something symbolic that would have absolutely no impact on the ground.

They also have militants in Syria, but again, they’re on the wrong side of the country and they’re already engaged and if they crossed into Druse territory. The interesting because the truth about us look, they have always considered Hamas to be disposable. Hamas is Sunni and Arab, whereas the Iranians are Persian and Shia. And so it would be official position of the Iranian government is that Hamas, like all Sunni Arabs, are apostates and therefore should be wiped out and their alliance with them is purely tactical and they have played that card and now it will be destroyed and we’ll have to find a new card.

That’s Iran. That’s Iran’s entire position here. The only country that really matters. And it’s not military when it is Saudi Arabia, because the Saudi Arabians were carrying out talks with the Israelis on normalization. The idea would be that if you can get the major Arab states to recognize the existence of Israel, then eventually you’ll have this Arab wall versus the Iranians.

And it doesn’t matter what the Americans think anymore is, it’s all taken care of. The debate here is whether to continue those talks. There’s a generational split in Saudi Arabia. The older generation, the King. King Solomon likes the idea of China being the Palestinian cause and would think that if we’re going to normalize, we should get something of real substance for the Palestinians.

Maybe it’s more control of the West Bank, maybe it’s more self-governance, maybe it’s more money, maybe it’s official statehood. They’re flexible in what that thing is as long as it’s real. And then you’ve got the younger generation. Crown Prince Mohammed bin Sultan, he’s the guy who likes to dismember and barbecue journalists who couldn’t care less about the Palestinians.

He just wants them to all go away so he can get on with reshaping the region under his leadership. But think of King Solomon as the CEO who spends a lot of time fishing, and Mohammed bin Salman, the crown prince, as the CEO who actually runs the shop and we’re going to find out in the next month who actually is the major decision maker based on how this decision base of Israel goes.

But no one in Saudi Arabia is talking about resurrecting the sort of policies that Saudi Arabia enacted back in the 1970s when they created OPEC and basically shut down global oil markets until Israel was punished. That’s not even on the docket right now. So their discussion is relevant, but not from a war point of view. And that’s everybody in the region.

Let’s go out again. Start with the United States. We are not not not going to be putting boots on the ground in Gaza or Israel in order to fight this conflict or help the Israelis with the cleansing operation. So there’s never been something the U.S. has ever considered in any age, at any war in this region or anywhere else.

Israel in this region, sorry. Very important detail. What we will do is help them with intelligence and equipment and munition and what we will do is attempt to locate our own people. The Israelis have at least a hundred of their citizens have been kidnaped and take back into Gaza. There’s at least a dozen American Jews and the Israelis and the Americans have very, very different views when it comes to hostages.

The Israelis treat it as a non-factor because they don’t have they have limited resources. And if they allow their citizens to be kidnaped, allow that to dictate policy, they’re always going to be on the back foot. But the United States, number one, has a lot more resources to throw at this if it wants to. And number two, there’s a social contract between the American citizenry and its population.

Whoever you are, wherever you are, whatever you’ve done, whoever has you, we will come for you. But first we have to find you. And so the reason that we’ve got an amphibious assault group and MCU streaming to the area so that the Marines and the Special Forces have a platform to operate from. And there’s already very credible information that some special forces are already on the ground in Israel, liaising with the Israelis intelligence issues.

Hopefully, they’ll be found. Getting them out will be hideous because they’ve undoubtedly been split up and relocated to places of military significance to a loss, which means you have to go in on the ground with small forces and physically retrieve them. And that will not be pretty. All right. What else? Okay. So that’s the United States. Let’s talk China.

China can’t deploy forces past Singapore. I mean, there may be just doesn’t have a range. And in a question of Gaza, it’s just a political issue of what makes the United States look bad. And what we’re seeing here is an outcome of the catastrophic decisions that the Chinese have made over the last five, ten years in managing their own political system.

Chairman Ji is executed the messenger so many times that no one will bring him information and he’s making decisions in the dark and the bureaucracy is kind of run wild, trying to make the cult of personality happy. So they’ve sided firmly with the Palestinians so far, which is making a lot of people take note. Under normal circumstances, I would say that the Chinese have no interest in partnering with Iran because they’re the world’s largest oil importer and the Saudis are the world’s largest oil exporter.

And so they would sell out the Iranians in a heartbeat if it meant they could get a better deal with the Saudis over the long run. The concern with saying that firmly today is the decision making. The Forbidden City has collapsed so completely that it’s not even clear what degree to which JI is personally aware of what’s going on in the Middle East at all.

I’m guessing he knows more they normally would because Putin was just in town as part of the Belt and Road Summit and he probably got an earful and probably requested some more information for himself. But the capacity of China to play in this field is ridiculous. And I’m siding with the Palestinians when they’re more dependent upon the Arab states for their energy.

Security is something that has been noted in Riyadh and Abu Dhabi and in Kuwait City and all the others. The Chinese are dramatically out of touch, but regardless, they don’t have the capacity to put boots on the ground in this region. And then finally, you’ve got Russia. I don’t know if he has noticed that the Russians are in a war in Ukraine that is using all of their military bandwidth and are having a hard time operating in the Black Sea.

And they can’t get forces out of the Black Sea at wartime under a treaty called the Treaty of Montreal. So they can’t be could fly them commercially. Where would you fly into. Can’t go to Jordan. Can’t go to Israel. Can’t go to Egypt. Okay. Yeah, there’s absolutely you’d have to fly a commercial jet over the area and a parachute out the emergency exit.

I mean, just ask. Okay. So there is no one not no one. No one who is going to be sending troops or in into any sort of meaningful military operations. This is between Hamas and the Gazans and Israel, and that’s it. Economically, there’s nothing in play here. This region, Israel, Palestine, produces nothing, transits, nothing and consumes very little.

There’s not an oil story here. There’s not a lithium story or agricultural story here. There’s a horrible cleansing operation that’s about to begin, and that’s enough. But that doesn’t mean escalation is going to happen at all.

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

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Transcript

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Transcript

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