The Two-Speed EU of the Future

A map of Europe with lines going from different countries and showing connection points

The EU struggles to take any decisive action on foreign and security policy because it has to wait for all 29 member states to agree. Whereas the US can make and enforce security decisions at the drop of a hat.

The Europeans have long debated whether they should become bigger or closer. Bigger = more members for weight. Closer = deeper integration. Both cause more problems. So, a compromise has been proposed for a two-speed Europe.

There would be a loosely integrated EU for everyone, alongside a much tighter inner core that coordinates on economic, political, and security matters without vetoes. It’s still messy, and it would require a new treaty, but most importantly, powers like Germany and France would have to relinquish their treasured veto power, which likely won’t happen.

Unless a truly catastrophic war breaks out, the Europeans aren’t going to be on board for true political-military integration. So, we’re probably going to see the EU structure and institutions snap before actual reform takes place.

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Transcript

Hey all Peter Zeihan here. Coming to you from Colorado. Today we’re going to talk about Europe. Specifically, the Europeans are being faced with what is not a new problem. The idea is that the United States, on a whim, in this case with the Trump administration, can make a decision and enforce security realities across the continent, in a matter of hours or days. 

Whereas the Europeans have to sit down and have a meeting among their 29 member states and hash things out over days, over hours, over weeks, over months, over a year. And then maybe, maybe, maybe there needs to be a new treaty that has to be ratified by everybody. And so it’s a decade or two decades or three decades from now when action finally starts happening. 

The problem is an age old debate in Europe that goes back to the late 80s. The debate is over whether we should be bigger or closer. So the idea, step one is that the more members, the European Union has, the more geopolitical and economic heft it will have, and the more powerful it will be on the larger stage. 

And, you know, it doesn’t take a lot of genius to see the logic behind that. The United States is, in part, very powerful because it controls the best part of an entire continent, and that allows it to be a huge force economically, politically, culturally in Project Power, where I say Swaziland, not so much. And so when you take a country or a union of the EU that has as many people as the United States, you would think, at least on the surface, that it should be able to punch at its weight. 

The problem with that is, if you’ve got 29 members, you’ve got 29 opinions. And for the big issues, which most foreign affairs issues are big issues and I’m all security issues are big issues. Everyone has to agree. Every single member has a veto. So if only one country disagrees with the path, that plan falls apart, which is one of the reasons why four years into the war with Europeans having explosions on their territory, a hot war on their border, and the Russians specifically threatening each and every country individually, you still haven’t seen the Europeans be able to take a really firm stance that has really tipped the balance, because they have one member, Hungary, who is basically in the Russians pocket. And it’s galling. So being big is great, but that’s not enough. The second path is called getting closer or getting deeper. And the idea is that you change the treaty structure of the European Union so that these national vetoes don’t exist or that they’re harder to use. And if you do that, if you allow fewer of voices to derail whatever the common goal happens to be, well, then you can act faster. 

The thing is, countries then have to give up their vetoes before the issue comes up, knowing that when an issue that is of importance to them surfaces, they might not be able to stop it. Now the EU has edged this direction with something called qualified majority voting, where a certain percentage of the states representing a certain percentage of the population can force something over the others. 

But this really has to do with economic issues that are really not all that important, as opposed to foreign policy, and especially security issues, which everyone thinks are part of the reason why the United Kingdom ultimately left the EU. 

what’s being debated now also not a new idea, is something called a two speed Europe, where you get a cluster of European countries that want to go the deeper route, who integrate more and more tightly and give it away their vetoes for core decisions. 

So basically you’d have an EU light that is everybody, and then an EU deep, which is a cluster of six, seven, ten, 15, 20, whatever the number happens to be who agree to coordinate on not just economic and financial issues, but political and security issues as well. Without those national vetoes, or at least with them watered down, it’s an intriguing idea. 

Organizationally, it would be horrible because at every meeting you have to decide what is in what bucket and what not, and then those other people just leave the room because they’ve got vetoes and they’re not invited. But there’s a couple other obstacles that are going to prevent this from probably moving forward. Step one this requires yet another treaty. 

And every time the Europeans start a treaty process, it’s at least a decade long. So whatever they do now is not for the Ukraine war. It’s for the world on the other side of Ukraine. On the other side of Trump. And based how things go, there may be a hot war in Europe when that is happening. And so this will all be tossed to the side based on current circumstances. 

The second problem is that the two countries that matter the most in these discussions are Germany, because it’s the largest population and largest economy, and the biggest industrial base by far. And France better has a nuclear deterrent as the most powerful military by far, and is also, you know, second largest in the Union by every other measure. 

These countries don’t want to give up their vetoes. Think of it this way. Let’s say the United States and Canada merge into a super state. And let’s say the next president just happened to be from Ontario. And all of a sudden you have a Canadian commander in chief commanding American forces. Can you can you see how that would be really awkward? So in the case of a deeper union where the Germans and the French and a lot of other countries are involved, let’s say we have a, I don’t know, a Latvian president, and the Latvian president is now commanding the French nuclear force. 

This sort of integration culturally for everyone to really, truly, deeply agree that they’re on the same side to the point they’re willing to bleed because someone else made a decision that is not something that happens, or 2 or 5 or 10 or 20 years. That is something that has to start at the beginning or require a devastating conflict that is so extreme that everyone was already fighting and dying on the same side. 

Anyway, that just hasn’t happened in Europe yet, and it’s probably not going to happen even with the Ukraine war. Or more to the point, any sort of merger would happen after. So all the countries who want to maintain their vetoes could veto this plan. And then once you get to the other side, you have to decide what sorts of sovereignty to pull and whether that actually makes a difference at all. 

Because when you’re talking about the Trump administration specifically, or the United States in general, all of this is already done. All of this was done over 200 years ago. You could even argue that since, the Civil War, it’s been locked in hard when someone from Virginia or New York or California is president. It’s not like you have a half a dozen states that refuse to pay taxes and actually go through with it, or pull their troops. 

There’s no legal structure, there’s no cultural structures, no support in these societies for things like that. In Europe. All of that is still there. These are nation states talking about pulling power. They are not component states of a larger political entity. So I find this very unlikely that this just like the last couple times it’s gone down, it’s going to lead anywhere. 

The question is whether or not the legal structures of the EU are going to fracture under the pressures that they’re in. And if once that happens, a new form ultimately emerges from the other side. And I’m down on paper going back 20 years, seeing that some version of that is far more likely than the negotiating incrementally into a more federal Europe, because the systems we have right now in Europe are designed for globalism. 

They’re designed for multi-party democracy. They are designed for not having a hard war, and those worlds are going away. And I really doubt the Europeans are going to be able to adapt their institutions before they snap. Now, what happens on the other side of that? That’s a different conversation. But we have to have that breaking event first. Brexit didn’t do it so far. 

The Ukraine war hasn’t done it. And it doesn’t look at the Trump administration to be doing it. So it’s gonna have to be something a lot more dramatic. And that’s just not in the cards today.

Is Venezuela Ready to Move On?

A person walking draped in a Venezuelan flag against a desaturated background

Venezuela has been dragged through the mud thanks to Chávez and Maduro, but it might be seeing its first genuinely positive development in decades. Former VP and now President Delcy Rodríguez has announced a sweeping amnesty covering all crimes since ’99.

That’s three decades of corruption, repression, and institutional collapse that is getting wiped clean. This offers Venezuela an alternative ending; rather than ending up as a failed state due to anarchy or civil war, it can head down a brighter path. But simply granting amnesty won’t cut it; they’ll need an open truth-and-reconciliation process similar to what South Africa did.

This development could give Venezuela a real fresh start. With Rodríguez already shutting down political prisons, I’m cautiously optimistic and hope that she continues to surprise me.

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Transcript

Hey everybody, Peter Zeihan here coming to you from Colorado. And today we’re trying to talk a little bit about Venezuela because we’ve had some interesting developments. The sitting president, woman by the name of Desi Rodriguez, has announced an asylum for everyone, going back to 1999, 1999 is when Hugo Chavez, became president and started the country down on its. 

The civilizational spiral gutted the energy company. Everyone started to basically lose the educational attainments they had had. Venezuela used to be the third most advanced country in the Western Hemisphere, after the United States and Canada. And under Chavez, you drove into the ground. And then his successor, Nicolas Maduro, who used to be Chavez’s bus driver, proved to be quite a thug. 

Stole even more from the place than Chavez did and continue to drive it into the ground. And his VP is Delsey Rodriguez. now that the U.S. has removed Nicolas Maduro from the stage, Rodriguez is now in charge and she’s offered this amnesty. So basically, any crimes were committed by anyone from 1999 until present, wiped clean. 

This is probably I don’t want to play this because there’s a lot that still needs to happen. This is probably the best news. It has come out of Venezuela in 20 years. 30 years, almost 30 years. Okay, so when you have an authoritarian government, rather it’s a dictatorship like the Maduro Chavez system or a colonial rule or communists or whatever it happens to be. 

Usually when the system ends and ends one of two ways. Number one, a key personality dies and there is no clear successor. And the place just kind of dissolves into anarchy. Or number two, other groups form and you get a more ossified opposition, and the two start fighting, and eventually that fighting becomes very literal, and you eventually get a civil war. 

And neither of these options are great, because in the first one, the institutions were destroyed by the authoritarian. And so there’s nothing to carry on after the authoritarian is gone. And civil war, I would like most people to understand is generally not good for much of anything. This is potentially a third way that has been tried by very, very few places, and even fewer successfully. 

But I think the best example I can give you of how a general amnesty works can work is South Africa. Everybody knew that the apartheid government was a little off. And when the apartheid government fell at the end of the Cold War, there was something very similar, an amnesty program where all of the whites who everyone knew were torturing the blacks were given blanket pardons. 

And all of the blacks, especially the more militant groups who had basically been killing people for decades, in their resistance against the apartheid government were also given pardons. And what we have to remember is that is step one. starting with a blank slate. Very important, deciding to bury the past and move on. Very important. 

But even if everyone is in agreement that this is the right path, the step two is very important. And the way the South Africans did that was was something called a truth and reconciliation committee, where basically everybody got together and shared with everyone else what they had done. So the Zulu nationalists talked about their their murder brigades, and the white nationalists talked about their torture techniques. 

And it was raw and it was awful. It was jarring. But by being honest with one another, they set the stage for a pluralistic society. And while South Africa has many, many, many, many, many problems, democracy is not one of them. If Venezuela is going to turn the page, something like that is going to happen. And if something like that happens, it is going to be awful. 

There are political prisons that are in the process now have been shut down as part of this asylum program. And kudos to Marco Rubio, who is US Secretary of state, who has basically pushed Rodriguez in this direction. But it’s not just enough to wipe the slate. You also have to have an open, honest conversation among yourselves about why it happened, how it happened, what happened, who did what. 

And with that, you can then potentially move forward with a new constitution, a new political system, and have a true fresh start. That is now what’s in front of Venezuela. But I gotta say, when this all started, I looked at Dulce Rodriguez, who was one of the most famous thugs and one of the most famous looters of the country, and I did not expect this step. 

So for one rare moment, I’m actually a little bit optimistic about how this could go. Don’t fuck it up.

The Real Winners After a Chinese Collapse

A man holding a Chinese Yuan in the middle of Tinannamen Square

First order of business: No, this isn’t financial advice. Second order of business: taking a loan out in Yuan to profit from a Chinese collapse is a very bad idea.

Practically all yuan is locked inside mainland China, so you probably couldn’t get it out anyway. If you managed to, you would have to convert it before the collapse. The smarter move would be investing in the physical infrastructure and industrial capacity that will fill China’s shoes.

In all likelihood, a Chinese collapse will be more Venezuela-esque than Soviet…so anyone with yuan claims would be SOL.

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Transcript

Hey, everybody. Peter Zeihan here, coming from Colorado. Taking a question from the Patreon page specifically, and this sounds a lot like seeking financial advice, so I’m not giving it in that way. But if the Chinese system collapses, wouldn’t it be a great idea to take out a big loan in yuan and then convert it to dollars or some other currency? 

I wouldn’t recommend that. A couple things to keep in mind. Number one, over 99% of the yuan is locked within mainland China, and most of what is traded abroad is done through currency markets in Hong Kong specifically. So if you take out a yuan loan, you’re probably taking out the yuan loan in China, and the money cannot be transferred out. 

The Chinese do it this way to maintain full control over the Chinese financial system, which they see as a political tool more than anything else. 

So you wouldn’t be able to get the money out most likely in the first place. But, you know, if you could, then what? Well, you would definitely need to convert it out of yuan before the collapse. 

One of the things that we have learned over the last 40 years from a number of countries that have collapsed is when their system breaks, their currency becomes not just soft, but nearly worthless. So in the post-Soviet system, for example, there were a fair amount of rubles out there because the, Russians, Soviets sold a lot of hydrocarbons and other materials to the wider world, some of that manifested as ruble circulating in the international system. 

But it basically became worthless the next day. So you need to look at maybe not the Soviet collapse as a guide, but maybe the Venezuelan collapse. Venezuela used to be one of the richest countries in the Western Hemisphere, before Hugo Chavez took it over in the late 1990s. That was driven into the ground by the current bus driver, Nicolas Maduro. When you have a petroleum economy, you generate a lot of hard capital in hard currencies that are not your own. You can use that currency either to bring home and subsidize things to achieve whatever it is you want. You know, more roads, better education, happier people by just handing out cash. 

In the case of Venezuela, AK 47 is for everybody. Or you can take some of that money that is already outside of your country and invest it outside of your country in longer term assets, whether they be financial or real estate or some sort of productive capacity. So, for example, Venezuela used a lot of their money to improve their educational system. 

Preach those again. And they also built up their own oil industry at home. So they became, at the time, one of the most sophisticated energy companies in the world. And they invested in hardware in the United States that would further entrench their relationship with America, specifically buying or building refineries that were designed to process their crude oil. Well, as Chavez came in and started mismanaging everything, and eventually we had fiscal and eventually nutritional collapse in Venezuela, these assets all of a sudden were there. 

And Venezuela lacked the financial capacity to service them and operate them. So eventually they kind of fell into a degree of receivership that was eventually brokered by the US government. And they either got spun off into independent firms or bought by third parties. I think some version of that is what the Chinese collapse would look like. Now. China is a lot bigger than Venezuela. 

They have $10 trillion of investment in the wider world, about one third of which are foreign direct investment. So hard assets like a, say, a refinery or a farm, and so when these things go, you basically have the owning entity and the Chinese Communist Party and all their affiliated companies back in Beijing, cease to exist in some form or be denied functional ownership by the governments where the assets were held. 

And at that point, typically what happens is the government nationalize it, and then auctions it off or sells it off in some way to their own domestic entities. Which means if you have a yuan loan, you would still get nothing, because your deal was with Beijing and Beijing is now gone. So if you’re looking to profit from the disintegration of the Chinese system, I know this is going to sound really boring, but it’s like just invest in the physical infrastructure and the industrial plant that will have to replace what the Chinese are doing now. 

And to be perfectly blunt, doing that earlier rather than later is a lot cheaper because then you can have it up and running when the Chinese break, and then you can really rake in the cash. But it is a long term play and it is not a financial one.

India: Overhyped or Global Player

Flag of India

Is India overhyped or genuinely important moving forward? Well, you could make a case for both.

India struggles with national unity due to diverse groups spread across a fragmented geography. This, and a difficult list of neighbors, limits power projection and forces largely self-contained growth. But India has something that most other countries lack, a relatively young population; this cohort will extend India’s consumption-driven economy into the 21st century. India also sits along the path of major energy flows, giving it influence and power in the region.

So, India might not look like a classic global superpower, but its demographics and geography outweigh the internal struggles it will face.

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Transcript

Peter Zeihan here, coming to you from Arizona and back by popular demand. It’s biscuit. Hey, there you go, buddy. Today we’re going to talk about India. One of the things that people really get wrong about India is it either matters or completely doesn’t matter based on your point of view. And it can be both at the same time. So first let’s talk about why a lot of India is overhyped. 

Let’s start with the geography. So in most countries, you have some sort of geographic feature. Usually a river valley that the ethnicity has risen up around, and then they expand from there into other zones. and then there’s, some sort of geographic barrier separating them from other countries. So, for example, the Po Valley in Italy or the greater Mississippi in the United States. 

Gets something or, the various rivers of Europe because you’ve got, you know, Dutch rivers and German rivers and Russian rivers and all that kind of stuff. Well, part of the problem you have in India is you got a lot of river valleys, most notably the Ganges, but there aren’t any clear geographic points of separation among them. So everybody gets their chocolate and everybody else’s peanut butter. 

And, it’s very difficult to achieve just the basics of national unity. So even today, only about half the population of India actually speaks Hindi. And you’ve got large minorities, of which Muslims are the single largest at about 15% of the population. And that makes, national unity almost impossible. It’s more like the Roman Empire than, modern. I’m sorry, not the Roman Empire or the Holy Roman Empire rather than a modern nation state. And it’s actually the third largest country in the world for Muslim populations, after only Pakistan and Indonesia. And he’s just ignoring me now. That’s just rude, buddy. Anyway, getting everybody to agree on anything is kind of crazy. And it takes five weeks to do national elections because the place is so large and so varied. 

Geographically, it’s got a problem with its neighborhood as well. It is surrounded by countries that it does not like and countries that do not like them, not just Pakistan, but Myanmar and Nepal and Sri Lanka and Bangladesh and India believes that none of these things should matter. And you should just look at the fact that it’s 1.5 billion people and it’s a large country. 

So it should be a global power, but it doesn’t have the ability to project power within its own neighborhood, much less out of the Indian Ocean basin. And you keep looking. And the Indian Ocean basin is kind of disconnected from the rest of the planet. Anyone who has the power to get there can easily dominate economic trade in the area, but the countries that are in the region have to go a long way to get to anything, because you get the Middle East with all its sand. 

You hit the jungles and mountains of, Southeast Asia. You hit the Tibetan Plateau in the Himalayas. It’s just really hard for India to be a player in any meaningful way. But any country that can project past those barriers into South Asia, they do pretty well for themselves. And that’s why the Brits were able to control the area for so long. 

Okay, so that’s why, the cards are kind of stacked against. Chomp chomp chomp chomp chomp. That’s why the deck is kind of stacked against, the country. But why does it matter anyway? Well, you know, 1.5 million people and, well. Or is most of the advanced world started industrializing back in the 1920s to 1950s. 

And so their populations urbanized and people started having fewer kids. And you play that for today, and we’ve got population bombs going off. India didn’t start the process until the 1990s. And while their birth rate has dropped by almost three quarters since then, it is nowhere near as demographically age as most of the rest of the world. 

So if they keep aging at the current rate, they’re still going to have a strong consumption LED system for their pretty much the remainder of the century minimum 2070, maybe even a little bit longer. You’re you can’t eat my thumb. That helps a great deal. Especially considering that India more or less needs to do the same thing that the United States does. 

As the Chinese fail, and that’s double the size of their industrial plant. So the problem that the unions are going to face is that because they don’t like anyone and because no one likes them, and because they are very anti-free trade and any for any number of reasons, strategic, economic, political, ideological. Anyone that you on my jacket? 

You are just weird this morning. Where was I? Oh, yeah. No trade. So all of their manufacturing supply chains have to be done in India. For India. They don’t have partners like the United States does. I mean, we’ve got trade deals, of course, with Mexico and Canada, but also with a number of other countries, including Israel and Colombia and Chile and others, and so we can participate in economic links with other places and we can all focus on, you know, you can’t eat my shoe. 

No, not the shoe, not the shoe. back up here. Come on, come on, come on. 

Here we go. Where was I? Oh, yeah. And so they’re not going to be linking with anyone else. Which means it’s going to be a longer store. It’s going to be a slower store. It’s going to be a dirtier and more expensive story. But it’s going to be an Indian story. And that is absolutely. Theres, one other thing to think about from a strategic point of view here goes back to the shoes. 

Is that, in any version of the world where the United States steps back from maintaining their global naval structure and allowing trade to continue? There’s going to be a problem for some sectors more than others. And the one that matters the most to the Indians, of course, is energy, because the Persian Gulf is right there. In fact, if you stay out of the Persian Gulf, you’re on your way to anyplace important. 

Your first stop is going to be India. So India doesn’t need a navy that is capable of projecting power on a global basis to be very significant, because ultimately you like that. That’s what you’re after. Your head is heavy. The, because India has the ability to protect or interfere with the supertanker energy shipments coming out of the Persian Gulf. 

So if you happen to be downstream from a shipment point of view, whether that’s in Northeast Asia or Southeast Asia or even the American West from seaboard, if you don’t have good relations with the Indians, you’re going to have some problems reliably accessing the Persian Gulf for energy. And since this is where today, half of all globally traded energy is sourced, that is going to be a real problem for everyone except India, because India will ultimately be the broker. 

So it matters just not necessarily in the way that a lot of people are thinking. And the way it matters is evolving very, very rapidly. And I look forward to seeing what they do with all of it. And now you’re chewing on my calf. Okay, I’m going to go and change clothes, bye.

Electronic Warfare Innovations and Exports

Laptop with green coding and a server

Let’s talk about the current state of electronic warfare in the Ukraine War and how Iran is fitting into all this.

Drones are all the rage. You’ve got fancy autonomous systems, short-range with remote pilots, and fiber-optic tethered. The next logical step to countering drones is to beef up jamming capabilities; Ukraine has done just that. However, the Russians have taken this logic one step further. They’ve created a tool called the Kalinka. The Kalinka is a mobile detection system that listens for signals. This gives them an early warning for drone strikes and other signal-based attacks.

Electronic warfare innovations are spreading quickly, and this tech is already appearing in other regions. For instance, Iran used the Russian Kalinka tech to locate Starlink users during the protests, allowing them to shut down comms and suppress dissent.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado, I hope everybody who is east of the Rockies is enjoying the cold front because, Canada worst. Anyway, today we’re talking about what’s going on in Ukraine and Russia and Iran from a technical point of view, specifically electronic warfare. Drones basically fall into three general categories. Number one, you got autonomous ones that can make decisions on their own. Those are incredibly rare and incredibly difficult to maintain because the chips themselves are unstable when there’s vibration or heat or cold or humidity or anything. So really, aside from a few here and there that are very expensive, not a lot of play. The second are those that you fly first person, and for that you have to have a connection to them somehow so that the telemetry can come back and forth and you can control them. 

Now, the United States does that with things like Reapers through satellite connections. The Ukrainians primarily do it on a shorter range, and the Russians also on a shorter range, typically no more than, 20km. And the problem with that is they can be jammed. And so both the Ukrainians and the Russians have gotten very, very good at here. 

I mean, I would argue that right now, today, Ukraine’s jammers are by far the best in the world, probably an order of magnitude better than America’s. Once you consider in cost. And then the third type is to do, fiber drones, which have a thin fiber optic cable that they drag behind. Now, these don’t have nearly as much range as a rule, but they can’t be jammed because there’s a hard line. 

And these, as a rule, are five kilometers or less. Although there are now some models where the fiber optic cable is light enough. You can go more than ten. Anyway, so those are kind of what’s going on there. But there’s another aspect to countering drones or any sort of electronic battle platform, that doesn’t involve jamming, but it’s still electronic warfare. 

And in this, the Russians have definitely, cracked the code on a new tech that is really interesting and has a lot of applications. So they call it the clinker. It’s basically a electronic warfare detection system that is mounted onto a truck or an armored vehicle. You basically drive around, find a place to park, and then you just listen and you pick up signals whether this is a cell phone or a drone connection or more importantly, in recent terms, as we’ve discovered, a, Starlink terminal. 

So one of the things that the Ukrainians have been doing is taking mobile Starlink terminals and putting them on things like drones, and then they go out into the Black Sea and blow up something that’s Russian. And the Russians don’t like that. But if you’re having a constant link in from a Starlink terminal and you can detect that, then the Russians finally have a way of knowing that it’s coming. 

I’m not saying it works perfectly. The range is only about 15km, and one of the CBP drones, they’re pretty quick. It’s not a lot of time to react, and it doesn’t jam the connection. It just detects it. So the Ukrainians have learned to turn things on and off every couple of minutes so that the Clinkers can’t, link up. 

But one of the things you have to keep in mind is that we’re in a fundamentally new type of warfare here, and when drones first appeared on the battlefield in a meaningful way that was not American. It wasn’t in Ukraine. It was in Armenia. We had a war back in 2020 between Armenia and Azerbaijan. And the as a region has had, Turkish drones that they basically used to completely obliterate the entire armed forces of Armenia in the disputed territories and would go on a crowbar. 

The Armenians weren’t ready for it. And so what we’re now starting to see is Ukrainian and Russian technology coming into other theaters and just completely wiping the board. So, for example, in the last couple of weeks, we have we’ve had those big protests in Iran, and people were wondering how the Iranians were able to shut down communication so effectively. 

Well, it now looks like the Russians gave the Iranians a few clinkers, and they basically just drove them around town, identified where all of Starlink’s were kicked in the door, shut the people involved, or brought them in for beating or imprisonment or whatever it happened to be. And lo and behold, the, situation from the Iranian point of view was diffused. 

So we now have a technology that has very, very strong implications for use in a civilian management system. We’re going to be seeing more and more things like this of technologies from a hot zone where they’re iterating every day and every week suddenly pop up in a theater that you wouldn’t expect, where it completely outwits maneuvers outclasses the preexisting systems. Iran is just a taste of what is to come on a global basis.

What’s Wrong with the EU-India Trade Deal?

Made in India. Cardboard boxes with text made in India and indian flag on the roller conveyor. Licensed by Envato Elements: https://elements.envato.com/made-in-india-cardboard-boxes-with-text-made-in-in-8X3N3JR

The EU and India have struck a trade deal, but it’s not the breakthrough it’s being made out to be. Just because you sign a trade deal doesn’t mean that integration magically appears.

Both sides of this deal are highly protectionist and have no interest in introducing new competition to their markets. This deal is fairly modest; some tariffs get lowered, but there are enough barriers in place for either side to block trade wherever they see fit.

One of the problems with global trade deals is that it only works if the oceans are free and the global rule of law is intact. The EU would be better off spending its time strengthening relations among regional nations, rather than looking far and wide.

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Transcript

Hey all, Peter Zeihan here. Coming to you from the Caribbean. A little breezy today, so apologies about the sound quality. I remember well, shielded spine. I could anyway, today we are talking about the new trade deal that was just signed between India and the European Union. People are talking about, oh, it’s one third of world trade and it’s a big deal. 

It’s all about the Trump administration, blah, blah, blah, blah. Let’s not get ahead of ourselves. A couple things to keep in mind. First, on size one third world trade, considering that one quarter of world trade is the European Union, and you’re just attaching India to that, keep your numbers straight. Second, there’s a bigger problem here among the first world economies. 

The European Union is by far the most protectionist. It does things to basically encourage mass industrial production. And because they don’t have the demographics to consume what they produce, a lot of that has to be exported. And in terms of agriculture, their agricultural lobbies are incredibly powerful. So the single largest line item in the budget of the European Union going back decades has been to subsidize farmers and producers. 

And at times that’s been half the entire budget. And that really hasn’t changed. So whenever the European Union tries to sign a treaty with anyone, they want to shove manufactured agricultural products down the throat of whoever it is, and it makes it very hard for the European Union to do that in a meaningful way, unless the country in question has no interest in agricultural products or no interest in manufactured products, of which there are a few. 

So the European Union has a real hard time signing deals, because if anyone wants agricultural or industrial access to the European space, they immediately come up against a series of entrenched interests. So, for example, the America’s order deal that’s been in the news recently, they started negotiations on that in the 90s, and they finally got the final ratification. 

The European Parliament is like, nah, let’s shove this off to the court to see if it’s actually legal. So we’re pushing 30 years since they started talks there, and it still hasn’t happened because on the other side, Murphy’s Law is very protective of their industries. So if this deal were to go through the Mercosur, one, the South American countries, most notably Brazil and Argentina, would be able to shove agricultural products into the EU, which is something that is wildly unpopular. 

And the Europeans would be able to shove industrial products into South America, which would be wildly unpopular locally. So this doesn’t happen. India, if anything, is even more protectionist. Almost every industrial sector that they have is wildly subsidizing every farmer, basically riots, every year when they try to liberalize their agricultural system. So the nature of the deal that has been negotiated is actually very, very calm. 

There’s not a lot involved in it. And while it does reduce tariff levels, it does nothing to address non-tariff barriers. So for example, if in the European Union, that decide that the trade coming in from India market the sorting, they can easily put up a non-tariff barriers that doesn’t require approval of the member States or their regions, which is one of the things that the Canadian free trade deal with the Europeans. 

A few years ago. Secondly, that same applies on the Indian side. There they have a cart blocked, national security exemption that they can use for any reason that they want. So yes, everyone is looking for a non-American alternative for trade. No, it’s not something that’s easy to do because there are so many entrenched interests and systems across anyone who wants to do anything meaningful. 

The fact that the European Union internally is a trade union has taken 60 years to build, and those are countries that are so close together that a degree of integration is almost unavoidable. You start talking about places on the other side of the planet. It gets almost insurmountable. Finally, and this is the issue that everyone ignores when they’re talking about free trade. 

There is no free trade on a transcontinental or trans oceanic basis, unless there’s freedom of the seas and global rule of law, and the only country that has ever been able to impose that is the United States. Now, I would argue decisions that we made back in the 80s, in the 1990s have changed the nature of the US Navy to the point that can no longer patrol globally at all. 

And all of the countries of the world combined, if they put all of the navies into a single force and agreed on every single deployment decision, all of that combined is still nowhere near as powerful as the US Navy. So we’re leaving the World war deals like this. Conversations like this among the EU and the Indians or the EU and the South Americans mean anything because there’s no capacity to enforce safety. 

And even if that could somehow exist, I have no doubt that French farmers or Belgian fascists or Indian manufacturers would get in the way of all of the details that would matter. So it’s a nice talk, but ultimately what countries need to do is something like what the European Union has done and develop an internal, a regional structure that can support as much of that trade as possible. 

And you only deal with countries beyond your region when you have absolutely no other choice.

Purging China’s Central Military Commission

Chinese soldier outside of a building

Xi Jinping has removed yet another senior official from China’s Central Military Commission (CMC). After 14 years of eliminating officials, prioritizing loyalty over competence, China’s institutions are hollow.

The seven-member CMC only has two people left, Xi and a loyalist (neither of which have any military experience). This leaves China’s armed forces leaderless and unable to operate effectively. Sure, Xi Jinping may have achieved personal control, but he’s destroyed China’s institutional capacity.

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Transcript

Hey all, Peter Zeihan here, coming to you from the Denver airport. Today’s news is the Chinese premier, XI Jinping, has just dismissed a member of the Central Military Commission by the name of Zang, Russia. Very, very, very short version. The Chinese premier has been launching the most intense purge in human history. Something that really even dwarfs Mao or Hitler. 

And it’s basically spent the last 14 years removing anyone competent from any position so that all that is left is personal loyalty to himself. For those of you who really like Trump, take note. It’s gotten to the point that China has become functionally ungovernable if your goal is to actually achieve meaningful change. And now, in the case of the military, that the CMC is functionally like the American Joint Chiefs of Staff. 

But now of the seven man commission, you’ve got G. You’ve got a political crony who is basically an inquisitor, and everyone else has been suspended or is under investigation and is no longer sitting. So the entire military leadership of China is now two people, neither of which had any meaningful military experience. So I’m not going to tell the U.S. military not prepare for a fight, but we now have a completely decapitated structure in China that is completely incapable of instituting reforms or making strategy that is worth a damn. 

So political purges might make you feel better about yourself, but they are guaranteed to absolutely collapse the institutions that you’re trying to reform. If your goal is really just political control. And that’s what we’re dealing with here. So, if you’re anyone but China, this is amazing news because it means that today, functionally, their military doesn’t work. That’s kind of fun.

The End of the Shadow Fleet? – French Edition

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France has seized a shadow fleet tanker suspected of carrying sanctioned oil under a false flag and has taken it to Marseille. Should this ship be formally impounded, the entirety of the shadow fleet would fall.

If a precedent is set here, everyone could begin detaining similar vessels. And it wouldn’t be hard to rapidly clear the waters of these vessels via major maritime choke points. A maritime services firm has kindly offered to legally take possession of seized shadow fleet ships and dismantle them (most of these floating rust-buckets should have been scrapped years ago, but instead were used to evade sanctions).

So, the shadow fleet could fall within months, but that creates a new series of problems. That’s 5 million barrels per day of crude going offline very quickly, making global energy markets quite volatile.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Colorado. Today we’re looking at the Russian shadow fleet, specifically non-U.S. countries going after the fleet. What was really interesting from my point of view is, on the 22nd of January. So last Thursday, the French grabbed a ship called The Grinch, for suspicion of flying an inaccurate flag and carrying sanctioned oil which would define every ship that the Russians, the Iranians, and until recently, the Venezuelans have been using to transport their oil. 

The reason why this really matters is, with the exception of the Venezuelan enforcement actions that the U.S. is engaged in, right now, no country has pulled over any shadow fleet vessel for those reasons. Maybe they think that there’s a drone launch system on board and they see it as a security issue. Maybe the ship is having engine trouble. 

They need to tow it to port. Those things have happened, but never one has ever tried to use military force to enforce the sanctions on Russia, or to try to break the shadow fleet. This would be the very first instance of that. And the French have grabbed the shift and towed it to Marseilles for investigation. And obviously it’s false flags and obviously it doesn’t have an insurance policy. 

And obviously it’s part of the shuttle fleet. So we are watching this very closely because if this actually results in the ship being impounded and its cargo seized and distributed, however the French decide to handle it. We will then see every NATO country and probably quite a few non-NATO countries basically going through and gobbling up the entire shadow fleet in a matter of weeks, because it is very easy to do so now. 

The French are a competent naval power. They grab the ship in the Mediterranean, but, you know, most of them is not going to be that complicated because you’ve got places like the English Channel or the Sky around, or the Turkish Straits, where the ships have to pass through a narrow choke point in an area where local labor powers are more than capable of grabbing civilian traffic that isn’t supposed to be there. 

The second piece is that a company called GM’s Global Maritime Services has applied for permission to o. Fact, that’s the Office of Foreign Assets, or works with Treasury in the U.S. departments to basically manage foreign assets. Has basically said, hey, we are here. We are ready to take possession of these shuttle fleets, will bid on it, will pay for them, and then we’ll break them down and remove them from service completely. 

None of these ships are new. Most of them are just floating rusted buckets. They’re accidents waiting to happen. And if it hadn’t been for the existence of, the Russians needing to create the shadow fleet, the Iranians needed to create the Shadow Fleet. All of these ships would have been decommissioned years ago. So let us do our job and help you do your job. 

And we can easily take more than 100 of these things in the next six months. There’s probably about a thousand shadow vessels out there anyway. GM’s is the largest company that has expressed an interest in playing a role in this. They’ve applied directly to the U.S. government. And so we’re seeing the institutions now starting to move to grab the shuttle fleet, remove it from contention, and then permanently dismantle it so that it can never be rebuilt. 

If this goes the direction it seems to be going, this next six months is going to be wild in energy markets, because these tankers are collectively carrying something like 5 million barrels of crude a day. Removing all of that in a short period of time is going to cause a lot of pain in a lot of places, but nowhere more than the countries that will no longer be able to sell their crude. 

Most notably Iran and the Russian Federation. So you’re is off to a rolling start and here we go.

U.S. Trade Talks with the UK

US and UK flags with a selective focus on diplomats shaking hands. Licensed by Envato Elements

We haven’t seen any real negotiations over the past year because the Trade Representative’s office wasn’t staffed. All that’s been discussed are tariff levels, not full agreements, and nothing has been ratified. However, the Mother Country is the main exception to this lack of trade talks.

Since Brexit, the UK has been on the hunt for a major export market. With the US as the only viable option, the Americans aren’t afraid to demand regulatory alignment and force the UK out of the European trade orbit. AKA – the UK might not have to switch to the imperial system, but they would have to accept just about everything else.

The UK doesn’t have much leverage either, as going it alone isn’t viable. So, the Brits will have to bunk up with Brussels or Washington, and it’s a painful path forward regardless.

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Transcript

Hey, everybody. Peter Zeihan here, coming from a snowy Colorado. Today we’re talking about trade talks. Most of what has been going on this last year is not what I would consider to be an actual trade discussion. If you remember back to April of 2025, Donald Trump announced tariffs on really everybody and then said he was starting trade talks with all of them, 200 different countries at the same time. 

But at the same time, the US Trade Representative’s office, which is the office that handles trade talks, was never staffed out. So from the point of view of how we negotiated every trade deal to this point, no real talks had begun. Trump did not personally oversee any of them. He subbed them out to say the Treasury secretary, the Commerce Secretary, who were usually not involved in trade talks. 

And so basically all it was was a negotiation about that specific number that was announced back in April of what the overarching tariff would be, and a couple of side things patched on to it. And at this point, none of those deals have been ratified by anyone. So we really haven’t really started. There is one exception, and that’s the United Kingdom now, the United Kingdom, ever since Brexit, which is almost a decade ago, has been desperate to get some sort of trade relationship with the United States that is more formalized. 

The reason is pretty simple. The demographics are aged. They’re losing consumption based. They need an export market. And they used to have the European Union, but they don’t have it anymore. The question then, is if it’s going to be the United States, because it’s really the only large economy that’s close enough to matter. What does the United States want from the United Kingdom in order to get that? 

And as the Brexiteers have discovered, the United States takes a very hard line in meaningful trade talks, especially if you’re like the United Kingdom and you really don’t have any other options. So the news that has come out in just the last few days is something that the Brits are really cheesed off about, and that the United States is striking an uncompromising position under Donald Trump on regulation. 

And this isn’t new. The Trump administration did this the first time around. The Biden administration held at that position the idea is that if you have regular regulatory unity, you basically achieve market capture, because all of a sudden your country is now measuring everything and regulating everything in the same way as the country you’re trying to partner with. 

And that makes it harder for other countries to have trade deals with you. So this is about pulling the United Kingdom out of the European Alliance of Trading Countries and locking them into the NAFTA system. The Brits are resisting this, particularly around things like food safety, because they realize that once you go down that path, you’re pretty much locked in. 

And the Brits would prefer to keep their options open. But at the end of the day, the Brits are a mid-sized economy trapped between two major blocs, one of which has long range consumption options because it’s the younger population in Mexico and the United States, and one of which doesn’t because the European Union is much further along in the aging process demographically. 

So if there is going to be a meaningful US UK trade deal or a NAFTA UK trade deal, this is part of it. Now there are other things the United States is going to insist on. For example, in aerospace, the United Kingdom is going to have to leave the Airbus family and join Boeing on agriculture. They’re going to have to accept US agricultural exports in volume, which will probably drive most farmers and producers in the United Kingdom out of business. 

On automotive, they’re going to have to go with American emission standards instead of European and so on and on and on and on. And then, of course, on finance. London, just goes away and New York absorbs it all with maybe a little bit for Toronto. So there’s a lot to swallow here. But the United Kingdom has come to this negotiating table with very little on offer. 

I mean, yes, it’s a market of 60 million people. Yes, that is significant. But at the end of the day, the Brits are going to have to bend to either Brussels or Washington and it’s not going to be comfortable. But their alternative is to try to go it alone. And that is something that is just not going to fly.

France Hits the Demographic Point of No Return

A French flag ribbon with an axe on a chopping block

The Americans and Kiwis are the last of the developed countries still holding onto growing populations. France is the most recent victim to have fallen into demographic decline, so let’s see what the future has in store.

France has a sizeable working-age population to help ward off any serious economic strain for two to four decades. Germany, on the other hand, has been in decline for 50 years and is running out of workers, meaning the Germans must reinvent their economic model.

The US isn’t far behind France, though. And China is a whole other topic. The broader issue is that as more and more countries reach the demographic point of no return, the world still hasn’t found a sustainable economic path forward.

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Transcript

Hey, all Peter Zeihan here coming to you from a snowy Colorado. Got a fresh inch overnight. Today we’re talking about, demographics, specifically in France. French statistics were released in the last couple of days, indicating that France is the latest country in the world to now have more deaths than births. France has long been the country Europe with the highest birth rate, with the most prone policies. 

And now they have slipped into, population decline as well. This means that every country in the first world, with the exception of the United States and New Zealand, are now in this position where they are in demographic decline. The Germans are among those that are furthest along. They actually hit this point back in 1972 or 1973. 

So short version. This isn’t the end for France, but it is the beginning of the end. Germany’s great example. They’ve been in this situation for about 50 years now, but from the point that you have more deaths than births, you then have to wait for everybody to kind of leak through the system. That literally takes an entire human lifetime. 

In the case of Germany, what this means is for the last 30 years, they really haven’t had many people under age 20. And so most of the economic growth comes from high productivity, workforce and exports. You can only have a consumption led economy if you have a lot of people aged 20 to 50. Those are the people who do most of the spending. 

France still has a lot of those. It’ll be another 20 years before those numbers start to decline. So France, in whatever the world evolves into next, still has at least two, three, four decades. But in the case of the Germans, this next ten year period is when they simply run out of working aged adults they have to invent a new, economic model, for the United States. We’re going to hit that point, where France is today in about five years, is the estimate. We’ve seen smaller and smaller generations for the last, 30 years. And now with the Trump administration turning so gung ho against migration, which is the one thing that can buy you time, we’re looking at probably the United States being a net zero growth population last calendar year. Full statistics aren’t in yet, but, we will hit that more deaths than births, by natural causes, by 2030. And then we will start that decline till now, as again with the German example. That doesn’t mean it the end is nigh. But something to keep in mind is. Whereas the Germans aged out during a time that there was a lot of young people on a global basis, and there was someone to export to the United States, and France will be aging out in a period where that is no longer true, because we already have a large number of developing countries, ranging from Chile to Colombia to oh, Thailand, that have already crossed this Rubicon. And so you can’t export to the world if the world is not young enough and rich enough to buy from you. So while we still do literally have decades left, it’s going to be a more compressed experience. And what happened in, say, Italy or Germany or Korea or Japan? One other note. 

China officially, according to their own statistics, hit this point about five years ago, the statistics aren’t very good. They probably hit it more like 15 years ago. Also, the, Chinese birthrate, just this last calendar year dropped by 17% in one year in a time where there wasn’t an economic crisis. So just because you have more deaths than births doesn’t mean that you’re gone already. 

But it also means that countries age at different paces and the Chinese don’t have nearly as much time. So we really are looking at an economic dissolution in the German situation within a decade, because they’ve been moving this way for a half century, and also with from the Chinese system in this decade, because they are aging so much more quickly. 

All right. That’s it for this one. Talk to you guys later.