I’m Back At It…

After an adventure that included harrowing high altitude crossings, brushes with forest fires, a pulled hamstring, and some really good wine, I have returned from my annual detox trip. But before I start laying down some brainwork, I thought it best to make an introduction. 

We at Zeihan on Geopolitics are happy to share our thoughts with you on global events–in video format and our newsletters–free of cost. We have always done so free of cost, and will continue to do so in the future. But for those of you who are interested and able, we do ask that if you find our content informative and useful to please join us in supporting various charities. 

For the remainder of 2022, we have elected to support MedShare. MedShare is a longstanding charity with global reach, delivering medical supplies and training to communities in need. Their mission addresses both chronic need and crisis response. We have provided links to both their general operations and Ukraine-specific funds below, and you can here their profile on Charity Navigator here.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

The Un-Recession

Photo of man holding empty wallet

The latest jobs report–published August 5–showed that the United States added over half a million new jobs in the month of July. Unemployment is at or a near a 50-year low. Both points add credence to a growing number of economists who are pushing back against the claim that the US economy is official in a recession, despite recording negative economic growth two quarters in a row (the textbook definition of a recession).

Confused? 

You’re not the only one. The economy is contracting, albeit not by much, but consumer spending is near an all-time high. Unemployment is an all-time low. Manufacturing employment is up. The finance sector, less so. And yet inflation remains a persistent bugbear. What is clear, however, is that the old rules about how our economy works no longer apply. 

And finally, a small programming note: I’m spending the next month hiking and backpacking throughout the portions of the American West. We’ll pick up with more content and more regular dispatches the first week of September.

Putting Ukraine’s Grain Export Deal Into Context

Turkish and UN diplomats have spent the last several weeks trying to forge a deal between Ukraine and Russia that would see Kyiv’s embargoed wheat be able to reach ports around the world. There have been several challenges facing Ukraine’s exports, not the least of which is the fact that Kyiv mined many of its own seaways in an attempt to stymie hostile Russian naval activity in the region. 

This week marked the first shipment of grain under a newly forged agreement between Russia and Ukraine, and while many are hopeful the deal will facilitate greater global grain supplies there are a few reasons to remain skeptical. 

Nancy Pelosi Goes to Taiwan

The Speaker of the US House of Representatives, Nancy Pelosi, has arrived in Taiwan. As such, she is the highest-ranking US official to make a visit to the island since her predecessor, Speaker Newt Gingrich, visited in 1997. While there is likely little both would agree on, the former Speaker has been quite supportive of Speaker Pelosi’s decision to visit Taiwan. China has been huffing and puffing about the visit since it was announced, but there’s very little Beijing could do short of shooting down Pelosi’s plane. Which isn’t likely to happen.

Beijing has viewed Taiwan as a breakaway province since the time of Mao, and has worked diligently to erode international recognition of Taipei under its One China Principle. The US since Nixon has held off formally recognizing Taiwan as an independent country, but since the end of the Cold War Washington has moved steadily toward an economic and security relationship with Taiwan that falls just short of official recognition, to Beijing’s dismay.

The US Settles a Score

The United States announced August 1 that it had killed the ideological head of al Qaeda, Ayman al Zawahiri, in a drone strike, over the previous weekend. Reportedly battling a long-time illness, al Zawahiri’s actual level of control over al Qaeda (and its regional affiliates) is debatable. His role in the September 11 attacks against the United States in 2001 and in inspiring campaigns of militancy that killed thousands is decidedly less so.

I do take note of al Zawahiri’s presence in a home inside Kabul. The US–primarily its intelligence agencies–still maintain considerable capabilities in a country with no formal military presence. And they are more than happy to remind any number of bad actors of the fact.

Gazprom Declares Force Majeure: How We Got Here

Gazprom, the Russian state’s gas monopoly notified its European customers that it was declaring force majeure in its supply contracts going back to June 14, citing “extraordinary circumstances” preventing the delivery of natural gas. It’s easy to guess what the circumstances referenced are–the conflict in Ukraine, sanctions, etc. Is this just Russian brinksmanship? A negotiating chip?

Maybe. Probably not. We shouldn’t forget that Nord Stream 1, the direct gas pipeline between Russia and Germany, is currently undergoing routine maintenance until later this week. There’s still no strong indication that Russian gas supplies will resume in whole or in part, and with today’s declaration Moscow has legal cover to halt energy supplies to the economic heart of Europe. As if legal cover is all Russia needs. 

In the links below, we’ve included a series of videos I’ve recorded over the past few months that outline Russia’s strategy, Europe’s rather pitiful few options, and the rather bleak reality that Russia increasingly sees itself not just at war with Ukraine, but in direct conflict with Europe. To expect energy supplies to continue as normal is a fantasy that not even the most optimistic German industrialists can pretend to believe in anymore. The EU–especially Germany–and Russia both saw the increase of energy interconnectivity and pipeline politics (or “diplomacy”) or the past few decades as a game of increasing leverage. The question was always, for whom? Europe always hoped that it could entice Russian good behavior through economic linkages and purchase contracts. We’re likely to see in coming days where the power in this relationship, pun intended, really flows from.

April 30, 2022 – Russia’s Natural Gas Strategy

June 21, 2022 – The Ukraine War, a New Flashpoint, and the End of Europe’s Energy Innocence

July 11, 2022 – The End of Germany’s World

Electricity in Transition

California. Germany. Texas. France.

Not a normal grouping of places or policies or politics. Especially when one wants to talk about energy. All four, however, are in the midst of a transition to renewable or green energy production and find themselves with having to grapple with energy reality, popular expectations, the vagaries of climate and weather, and rising costs. And all are experiencing a mix of successes and failures, both in and out of their control.

A Conversation with Sam Harris and Ian Bremmer

I recently had the pleasure of joining Eurasia Group founder Ian Bremmer on Sam Harris’ podcast, Making Sense. We discussed my new book The End of the World is Just the Beginning and had a wide-ranging conversation on a variety of issues from demography and population collapse to the war in Ukraine, the differing fates of China and the United States, and other topics I think my subscribers would enjoy.

More info on how to listen below.

LISTEN TO MAKING SENSE EPISODE #288 – THE END OF GLOBAL ORDER

Inflation? We Ain’t Seen Nothin’ Yet

Inflation in the United States has reached a four-decade high, according to data released by the U.S. Labor Department July 13th. Gasoline costs are leading the pack of consumer goods facing rising prices, but it’s a good mix of everything. Which makes sense, given how many supply chain dislocations across the globe.

Fuels, fertilizers, foods, industrial inputs–most of these were still in a state of flux even before one factors in China’s Zero Covid lockdowns. And the Russian invasion of Ukraine. And mass Boomer retirement. In fact, as we’ve been telling clients for months now, inflation has few places to go but up. Furthermore, the traditional tools at central banks’ disposal to tackle inflation are unlikely to have the same impact that they might once have had.

So what does that mean for the future? Well, for one: inflation is anything but transitory. And any relief is not going to come in weeks or months for much of the world, but in years. At least the parts of the world that will see any relief. And then there’s the United States. We’re in a tough spot to be sure, but thankfully the fundamentals of the American economic system remain sound. Which is not to diminish the increased costs at the pump or the grocery store, but as Americans have shown for the last several months these are costs that the consumer can keep up with–demand remains strong, especially for non-essentials: flights, restaurants, and screenings of the new Minions movie are all apparently quite full.

The End of Germany’s World

Germany shut down the Nord Stream 1 Pipeline today for a pre-scheduled 10-day maintenance period. Whether or not Russian natural gas will resume westward flows to Germany after repairs are made is anybody’s guess. 

The 55 bcm/yr pipeline is a key component of the energy détente forged between Germany–the economic and manufacturing heart of Europe–and post-Cold War Russia. It has also inculcated a German dependency on Russian gas that has shaped German economic and security policy (and, by extension, Europe’s) since the project first entered the planning phase over 20 years ago.

For more information on the nature of Russian and German energy codependence, and the future of both, I would suggest the agriculture and manufacturing chapters of my newest book The End of the World is Just the Beginning as well as the Russia and Germany chapters of the last one, Disunited Nations.