MedShare Donation + Russia Strikes Three Commercial Ships

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Russia has attacked three civilian ships carrying grain in Ukraine’s southwest maritime corridor. This marks Russia’s first major attack on commercial shipping, and a significant escalation of this war.

Ukraine doesn’t have too many options for getting its grain out, so they rely heavily on sea transport. Since the collapse of a political deal with Russia that allowed grain shipments to get through, the Ukrainians have created a corridor through Romanian and Bulgarian waters; however, the Russians most recent strike might put an end to that.

We will likely see disruptions to global food supplies and further complications with maritime insurance…which makes sense, as the potential loss of three ships is no small setback. This situation is evolving rapidly and I will continue to update as news comes out.

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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 free and we 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.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from Colorado with just a quick update. It’s the 10th of October and we just got confirmation that the Russians are attacking civilian shipping with international flags in a corridor to the southwest of Ukraine, ships primarily carrying grain. We have been very, very fortunate in the conflict so far that we haven’t had a food crisis. 

At the very beginning of the war, when the Russians were blockading the entirety of Ukraine’s Black Sea coast, we basically had 3 or 4% of global food production fall off market overnight with no replacement. And food prices quickly rose to, recent record highs, the highest we’ve had in 15 years. Since then, we had a political deal between Russia and Ukraine to allow ships to come and go in order to pick up foodstuffs. 

And after that deal collapsed a year later, we then last year had the Ukrainians open up their own grain corridor, which went west from Odessa into Romanian Bulgarian waters, where Russian ships wouldn’t dare go. But there was still that thin sliver of territory between Odessa and the maritime border with Romania that was in Ukrainian space, where there was always a concern that the Russians would strike. 

And now they have right now only three ships. Right now only three attacks. Right now, no ships have been sunk. But this would be the first time in the war in a meaningful way that the Russians have actually gone after commercial shipping. They have a couple things to keep in mind. Number one, Ukraine does not really have a very good way to get grain out by rail. 

All the countries that border it to the west are also agricultural exporters. So even if there wasn’t a political complication and there are, these are markets that couldn’t absorb it. So you need to go several hundred miles further in order to get to ports in, say, Germany or Croatia in order to get the grain out. And those ports are already being used by other exporters. 

So, you get snarled in addition to the fact that the rail lines are insufficient to the task, in addition to the fact that they use a different rail gauge. So really it’s by sea or really not at all. Second, while we have had some changes in the insurance regime of maritime shipping in the last several years, the still the bottom line is we haven’t really lost a insured ship in the Ukraine war yet, and we don’t know how insurers are going to adjust policies. 

If you would ask me, before the war started, it would have been pretty dramatic where we had a loss of shipping like 25 years. And so if a ship had been taken down that had a policy, basically no one would be able to offer a policy anymore. And all ships would be completely uninsured in the area. That assumes there’s not a cascade through the financial system. 

Now that they’ve had a couple of years to kind of prepare for this moment, we really don’t know what companies like Lloyd’s of London are going to do, but we’re going to find out really, really fast. So stay tuned. And if this gets bigger than it is right now, I’ll definitely be telling you more.

Longshoreman on Strike: US Ports Get Shut Down

A photo of shipping containers in a port yard

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Back to the picket lines we go…this time with the longshoreman. Ports across the East and Gulf Coasts of the US will impacted by the strike, disrupting nearly two-thirds of the imports and exports by water.

European manufacturers are going to take a hit on this one, along with the US agricultural industry. We’re not just talking a couple days sitting in limbo either, even if the strike ends today, we’re still looking at weeks to clear the backlogs.

The unions’ demands on this one are pretty hefty; we’re talking about a 70% pay increase and a ban on automation at ports. In an industry that’s already plagued by slow advancement and limited automation, this ban would set the US way back. On top of that, the Jones Act has exacerbated the inferences of shipping in the US. So, we’re not talking about a duct tape solution here, its going to be a complex one.

There’s always a way forward, so what does that look like? Manufacturers can brush up on their Spanish and become friends with our neighbors to the South and/or they can build some more warehouses and stop relying on just-in-time supply chains. But that’s costly and inefficient, so expect some economic hurdles along the way.

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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 free and we 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.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Dallas. Oh, humid even in October. Anyway, today we’re going to talk about the longshoremen strike on the East and Gulf Coast of the United States. They’ve been in place for a couple of days already by the time you’ve seen this, and we’re looking at roughly half of America’s ability to import and export.

Close to two thirds by water has been shut down. Basically, every port from Maine to the Texas border with Mexico is in effect, and all the ports are closed. This is going to have an impact far more than the actual time of the strike, which is so far to be determined, because for every day that the strike has shut down the ports, it takes about four days for once they reopen to clear the backlog.

So, if you hear that the port has been cleared while you’re watching this video, it’s still going to be upwards of two weeks before they actually get back to normal. And so, if this lasts through the entire month of October, that will obviously impact the holidays and going into the new year. Now, who gets hurt most by this?

Europe is the short version of all this — Europe and agriculture. So, first Europe. The Asians obviously import and export via the West Coast of the United States, which has a different union structure. Talk about them later. But the European model is different from the Asian model when it comes to interfacing with the United States.

In Asia, they either import finished products. Well, no, that’s the bottom line. They import finished products for the most part. The Europeans bring in all kinds of parts and have them assembled within the United States as much as possible so that they then can get around tariff walls. That means that the parts have to have access.

So most of the automotive industry that is in the East or the West Coast regions that has a European component is doing things that way. And it’s not just automotive. It’s pretty much any sort of manufacturing that the Europeans are looking to source closer to the demographic strike that is the United States. And so without that constant flow of parts, the whole thing gets disrupted.

And that’s going to have a very big impact on employment and economic growth throughout the entire eastern seaboard for the foreseeable future. The second group that gets hit is the United States agricultural system because moving things by water is really the only way you can ship things to the wider world, with the exception of Mexico. And so, everything that comes off of rail, everything that goes down the Mississippi to New Orleans, has to get repackaged onto another vessel — oceangoing vessel — at the port and then sent out, and that has basically stopped.

Now, we are kind of in a lull of seasons, agriculturally speaking, so if this only lasts a couple of weeks, no big deal. But if it lasts a month and we’re talking about all of the grains that are coming out of the Midwest suddenly having very few places to go. All right. How is this able to happen?

Well, the United States has an incredibly stupid law called the Jones Act. And you’ve probably heard me talk about it before because it prevents any cargo being transported by any ship between any two American ports by being transported by anything but a system that is 100% American-owned, captain-crewed, and built. We don’t do this for any other modes of transport.

And if we did, we’d be in a significantly worse economic position than the United States is. But since this law was passed in 1920, we’ve seen the amount of cargo in terms of value per mile that has shipped on our waterways drop by over 99%. There’s also a couple of clauses in the Jones Act regarding port management, which basically makes them all local monopolies.

And unions have taken advantage of this by forming a network of unions. It takes in all of the ports so that when one of them strikes, they can all strike. If this was done in the corporate world, this would obviously be easily illegal. And what the unions are demanding is a 70% pay increase. But the real kicker is they want a guarantee in their contracts that no automation will ever be added.

They want to go with like 1970s, 1980s levels of automation. And already, America’s East Coast ports are among the world’s least functional. There are a number of ports on the African continent that actually are more advanced than ours now. Now, under normal circumstances, what we would do — we, the United States, whatever — is give them everything that they say they want.

And then behind the scenes, work, work, work, work, work to add automation so that this can never happen again. That’s more or less what happened with the Teamsters union on the West Coast. And now, the port of LA has gone from one of the worst in the world in just the last few years to one of, you know, let’s call it above average. Repeating that on the East Coast would be wonderful.

That’s probably not going to happen for political reasons. Not only is this an election year, we are going through our once-every-generation-or-two political realignment in the United States, and the factions that make up our parties are moving around. And one of those factions is organized labor. One of Donald Trump’s political successes was teasing them out of the Democratic coalition, but he has not yet succeeded in folding them into the Republican coalition.

So they’re kind of out there in the wind right now, free agents. And as the Chinese system fails and as the euro system falters, if Americans still want manufactured goods, we have to build them ourselves. Well, that means we need to double the size of the industrial plant. How many of those jobs do you think are going to be?

Blue-collar? Probably 80% or more of them. So we are at the dawn of the golden age of organized labor in the United States, and the Longshoremen’s Union is part of that process. So it’s difficult to see the Biden administration using its executive power — which it does have — to forcibly end the strike before the election. You can’t say it won’t happen, but it’s politically more complicated now than it would have been the last time this went down.

In the 1980s. And so we’ve got a very different situation here, and it’s going to be complicated because neither side really wants to piss off organized labor right now. Now, if you’re a manufacturer, you’ve got two possible solutions here. The first one is the easiest one, and the one that will probably be followed most aggressively: Mexico.

Mexico. Mexico. Mexico. Mexico. Mexico. Mexico. Over 90% of our trade with Mexico is done by truck and rail. It doesn’t touch the ports at all. One of the advantages of having a land border. And so, the Mexican integration with especially Texas, but the United States in general, isn’t being affected by this really much at all. And that’s certainly going to increase the argument that Mexico not only is our number one trade partner but is going to maintain that position for the rest of our lives.

And by “our,” I mean anyone who’s alive today. The second piece is a little uglier, and it’s not ideal. And that’s inventory. We’ve spent the last 40 years in manufacturing going to something called Just in Time. The idea that as you get better with logistics, you can partner with all of your suppliers so every piece arrives at the moment you need it in order to assemble a product.

And by doing it that way, you don’t have to buy rafts of warehouses to keep parts for emergencies. You can just focus on the supply chain. Well, if the supply chain is not reliable because of strikes at ports, you have to go back to something called just in case. And that means stockpiling parts — maybe not at your primary facilities, but along the supply chain route for everything.

And that means probably having four, maybe five times as many parts in circulation at a time. That is expensive. You need to buy the land, you need to maintain the inventory, you need to staff that. You need to have basically twice as much industrial plant dedicated simply to holding things in a box. It is wildly inefficient.

And in the world the United States is finding itself in, it’s very, very expensive because we need to expand our productive capacity, expand our storage capacity. And if just-in-case techniques need to be done, then we have less capital and less labor and less land and less industrial plant available for the things we actually need to build.

But until this is resolved, if you’re a European manufacturer, that’s really your only option.

If You Think Mexico’s New Government Is a Problem, Wait Until You See Its Solutions

Mexican President Claudia Sheinbaum raising hand behind a podium

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Mexico’s newly elected president, Claudia Sheinbaum, is settling into her new digs. Despite her qualifications and experience, will her leadership actually look all that different from former President Andrés Manuel López Obrador (AMLO)?

While AMLO may have been popular, his policies and ideological governance will mark him as one Mexico’s worst leaders. Since Sheinbaum and AMLO are closely aligned, I’m not so sure we should expect anything different from the new president.

To make matters worse, the judiciary system has been weakened thanks to AMLO’s reform merging the National Guard into the military. So, Mexico’s political system is – let’s call it – fluttering.

We also need to touch on the geographic and economic challenges facing Mexico. AMLO attempted to redistribute wealth to help benefit the poor, but the country’s situation hasn’t improved…especially with the rise of the violent cartels. Sheinbaum has her work cut out for her, but let’s wait and see if she decides to follow AMLO’s policies or lead a bit more pragmatically.

Prefer to read the transcript? Click here

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 free and we 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.

Support medshare's ukraine fund
Support medshare's global efforts

Transcript

Hey everyone. Peter Zeihan here. Coming to you from a very damp North Carolina. Today we’re going to talk about changes going on in Mexico. Claudia Shane Bond is the president elect. She took office on October 1st, which is Tuesday. Tuesday? Yeah. You’re seeing this Wednesday? She is of the people who have run for office in North America in recent years, probably the most qualified.

Unlike, Justin Trudeau. She wasn’t a kindergarten teacher. She actually was a mayor of Mexico City. No less. And unlike Trump, she wasn’t a marketer. She had a real boy job. And unlike, folks like Harris or Biden or Obama, she wasn’t a senator. She was actually responsible for people and getting the trains to run on time. So in terms of expertise and managerial skills, she’s clearly the top of the heap.

The question is whether or not she’s going to show any independence. The outgoing president’s, Andres Manuel Lopez Obrador is going to go down in history as one of the worst leaders in Mexico, despite the fact that he’s leaving on relatively a popular point. He was an ideologue who wanted to punish most of the other factions that are responsible for policymaking in Mexico.

And in doing so, he dismantled a lot of the country’s institutions. In fact, in his last couple months in office, he basically gutted the judiciary. So if you’re an American, imagine that your most popular hated presidential candidate wins, and then he or she goes through and changes the way the judges are appointed. So instead of going through Congress, it just goes through party caucuses like that person’s party caucuses.

Some version of that is basically what Mexico has now, which is going to make it very difficult for the country to recover and have any sort of judicial independence in any sort of multi-party system. The question now, of course, is whether Shane is going to be part of the problem or part of the solution. And considering that she considers herself Lopez Obrador’s protege, I can’t say that the prognosis is particularly good here.

We also have another reform that has just been pushed through, the lower house of Congress just approved the folding in of the National Guard into the military writ large. It’s already passed, the upper house or is it the upper house? Just passed it. Anyway, it’s already passed both houses of Congress and now goes to the states where they need 17 states to ratify it.

And considering that Lopez Obrador’s and Shane Bonds party controls 20 of the state legislatures, that should be a pretty straightforward process that then comes back to Mexico City and the president formally stamps, it becomes law. Now, why does that matter? Well, the National Guard was set up a few years ago because the military was so horrendously corrupt and Mexico City needed a new semi military operation that could fight the cartels.

Now it’s just getting folded back in in order to guarantee central control by the president. So we’re looking at the tools of violence of the state being consolidated under one party, and we’re looking at the judiciary being consolidated into one party and using elections. That one party has already dominated most of the political conversations of the country.

Now, this was done without a coup. This was done through the ballot box. One of the downsides of the Mexican economic model is it’s grossly in equal. And because the country’s so difficult to manage, because it’s so difficult to build, it’s a mountainous issue. Most of the country is mountainous in the north. It’s desert, mountainous in the south, it’s jungle mountainous, and in the middle it’s just mountainous.

And so you get a lot of oligarchs who basically take control of their local cities. And this is how it’s been since independence back in the 1800s. And so Lopez Obrador, to his credit, sees this to the degree as a problem. And he wants to wrest power away from these local oligarchs, or could be used, if you want to use the Spanish term and give power to the people.

And so instead of having the most economically unequal state in the world, which is how Mexico was when he came in, he’s been redistributing, resources from the states to the federal government. Then the federal government has been giving them primarily to the poor. And that has one of the reasons, primary reason why Lopez Obrador, despite, wrecking the country, is leaving on a high point, because you have a lot of people who’ve never read and would speak for them.

The challenge moving forward is we’re now looking at a situation where the security situation in Mexico is going to degrade massively. We’ve got a civil war going on among the Sinaloa cartel, which used to be the most powerful one in the country, and we have now. Security in the country is the responsibility of the military, which is corrupt.

And for the last five years, Lopez Obrador has refused to move against the drug cartels. So they’ve basically taken over many, many aspects of everyday life, including in the Mexico City Central region as well. So Shane Bond has her work cut out for her, and we will find out whether this relatively pragmatic governor is going to be able to ditch the ideology and rule like a normal person, or whether she’s going to make it even worse.

China, Navy, Nukes, Tech, and Politics

Photo of a submarine emerging out of the water

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Our focus turns toward China today, specifically at the technological struggles facing the Chinese military and manufacturing industry. And yes, we’re starting with the nuclear submarine that sank in port…

The Chinese have been looking to make some upgrades to their technological capabilities across the board, but they’re not gaining much traction. As evidenced by the nuclear submarine that sank near Wuhan, China’s nuclear deterrent system is one area that could use some love. Unlike the US nuclear triad that provides redundancy and security, the Chinese really only have ICBMs to bail them out of nuclear troubles.

While the sinking of that sub is embarrassing, it’s far from the only area that the Chinese could use some help in. China is a manufacturing hub for low-tech stuff, including less advanced semiconductors. However, China has struggled to make much (if any) progress on the chip front, because they lack the expertise and access to operate the necessary machinery.

And things aren’t likely to improve anytime soon. US-China trade tensions are on the rise, and the coming US election isn’t likely to change that…regardless of who wins. With sanctions, tariffs and technological controls limiting China’s capabilities, it will be difficult for them to achieve technological parity with the US.

Prefer to read the transcript? Click here

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 free and we 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.

Support medshare's ukraine fund
Support medshare's global efforts

Transcript

Hey, everybody. Peter Zeihan here, coming to you from Salt Creek Beach, just outside of L.A., in California. Today, we’re going to talk about beacon policy, technology, China, and the U.S. elections. Yeah, that’s going to get me in trouble pretty much everywhere.

Okay, so the new news that leaked out over the last few days is that back sometime in the spring, the Chinese new nuclear attack submarine sank at a dock via Wuhan. It was a first-in-class ship, and first-in-class ships are notoriously buggy, but they usually don’t just, you know, sink. They had to fish it out of the river with a bunch of floating cranes.

Now, I don’t want to suggest that submarine engineering is easy, especially nuclear submarine engineering, but I gotta say, like, the definition of a submarine is something that doesn’t sink unless there’s a torpedo in it. So getting the basics wrong on this sort of thing is beyond embarrassing. And if you can kind of put this in context, imagine if in San Diego, a nuclear-powered vessel sank in harbor and the government tried to hide it from everyone. That’s basically what’s gone down here.

So, very, very sloppy engineering work, a sloppy propaganda campaign. But from a strategic point of view, I think it’s really important to understand what the Chinese do and do not have when it comes to nuclear deterrence. They have silos—ICBMs that would launch mostly from western China. They don’t have a functional sub arc, and they certainly don’t have a bomber arc.

So we’re talking about one type of deterrence, not the three that the United States has for redundancy. Now, whether that’s good, bad, or indifferent depends on what you care about, but the whole reason the United States maintains the triad is so that no matter what flavor of attack hits the United States, it always has at least one, probably two, backup plans. That sort of deterrence means countries aren’t going to nuke the United States, even before you consider things like missile defense. China is nowhere close to that, not in number of warheads, and certainly not in delivery methods.

This brings us to the general topological issues that the Chinese are trying to crack here. China has a lot of ambitions, and they say they’re planning on going into this, that, or the other thing. But desire is not the same as performance. So, consider, for example, semiconductors. The Chinese have something called deep ultraviolet technology that they’re pretty decent at, and chips that are in the 80-90 nanometer range or dumber, they can make themselves. But when the chips get more advanced—and that’s like what you put into most automotives, for example—they need not just foreign equipment, but foreign staff and foreign software.

Most of the chips being made today—things that are, as a rule, 20 nanometers and smaller—don’t use that technology unless you want to be wildly inefficient with it. Instead, they use something called extreme ultraviolet lithography, which is a technology basically completely controlled by the Dutch company ASML. Even if the Chinese were able to get their hands on some of those more advanced machines, it’s not like they could operate them. There are staffing issues, experience issues, and software issues. Plus, the Dutch have built their machines with remote kill switches, so they have to be involved in the process.

I don’t mean to say this to insult the Chinese. I mean to say this to insult everyone. No country controls enough of the semiconductor supply chain for anything that’s mid- or high-tier chips to do it themselves. You’re talking about a constellation of thousands of companies and dozens of countries, and it really does take a village. So, the Chinese desire to do all of this in-house? It’s just not going to happen, or at least not without a significant shift in how this technology works. It’s more likely to get more complicated in the future rather than less, which means we pretty much know what’s going to happen with U.S. politics and trade relations, because the parameters of what can and cannot be done with the technology are already known.

So, regardless of who wins the American presidential election—and we all have our own ideas on that—we’re looking at a situation where, on the Trump side, we know that tariffs are the plan. But the Biden administration has never repealed any of the tariffs that Trump put into place. On the Harris side of the equation, we know that technological controls are the preferred tool. But I can’t imagine a President Trump ever repealing those.

So, we’re looking at a tightening technological noose as the United States does something that China just can’t call on other countries for. Because, even at the depths of the Trump administration, when relations with allies were at their lowest, you still had countries that needed the United States for this, that, or the other thing. And so the United States was able to do technological sanctions on things like lithography that basically stalled the entire Chinese technological push.

They were able to use older technology like that deep ultraviolet I mentioned in order to brute force through some relatively low-quality chips that hit a couple of technological markers but were huge energy hogs, took up a lot more space, and generated a lot more heat. Not the kind of thing you’re going to use to reset the technological tables, especially when you start talking about some of the newer things ASML is trying to work on, like high numerical aperture, getting down to a one-nanometer chip. The Chinese don’t even have a finger in that world yet.

It takes everyone, played out across the economy, and there’s only so much the Chinese can do. They just don’t do the high-end stuff at all. They do the low end; they do the assembly. And that’s a multi-trillion-dollar operation—that’s not something to be scoffed at. But that’s not the same thing as parity, nuclear or otherwise.

Russia: Threats, Deterrence, and the War of Numbers

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So far in the Ukraine War, the Russians have threatened Finland and Sweden with nuclear annihilation for joining NATO, Germany with nuclear annihilation for providing tanks, Britain with nuclear annihilation for providing missiles, France with nuclear annihilation for merely discussing the possibility of troops, and America with nuclear annihilation because it was a Tuesday. Needless to say, the credibility of Russia’s threats leaves something to be desired…

Russia has struggled to maintain a credible “red line” (referring to the point at which Putin will push the shiny red button) for quite a while now. With the US ready to launch a counter attack should nukes fly, the Russians are already hesitant to pull the trigger, but their recent failed missile test and refusal to enter negotiations means they don’t have a ton of options.

In all likelihood, Russia’s only path to victory in Ukraine relies on sheer manpower. Which means they’ll keep sending wave after wave after wave of their population into the meat grinder until something shifts in their favor…because that’s all they know how to do.

Prefer to read the transcript? Click here

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 free and we 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.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from Kolar, Wisconsin. I love this place, except in the winter when—oh my God. Anyway, back on the 26th. The 26th. The 25th. I can’t remember the exact date. Anyway, sometime in September, the Putin government, Putin himself, announced a new nuclear doctrine for the threshold of when they would actually hit the big candy-like red button.

The Russians are having a problem because they have established all kinds of red lines—dozens of them—over the last two and a half years. Whenever someone has crossed them, whether it’s Ukraine in the war, or weapon supplies from the United States, Germany, Britain, or Turkey, the Russians have ignored their own red line.

So they’re having a credibility problem with their deterrence policy. Putin’s announcement a couple of days ago was about trying to reestablish that. He said that now any non-nuclear country who has an ally who is a nuclear country, should the non-nuclear country use a non-nuclear weapon against Russia, it justifies a nuclear strike on the nuclear country.

This is a stupid, pointless press release—kind of reminds me of the Obama era—because it’s already been violated a few hundred times. The Russians have had a real problem establishing or reestablishing deterrence because they keep saying stupid things like this, which are nonsensical. Immediately, the world goes on, and it’s shown to be a bluff.

Now, the issue is that the Russian conventional military is not all that. By the numbers, Ukraine should have been gone a long time ago, but it’s still punching well above its weight. And that’s before you consider that most of the Western alliance is providing the Ukrainians with ammo and weapons. So, how do you reestablish deterrence?

Well, the first, easiest, most direct, and most reliable way is to have a conversation—to basically call up the United States, establish a summit, and talk about strategic issues, of which nuclear weapons are one.

The Russians have firmly refused that option because if they do that, they have to talk about Ukraine. They have to talk about war crimes. They have to talk about mass kidnappings. They have to talk about the weaponization of sexual violence. They have to talk about encouraging migrants to go to Europe by breaking countries in Africa and the Middle East. They have to talk about all the things they’ve been doing over the last 2 or 3 years that they see as giving them a little bit of leverage.

Of course, the Europeans and the United States have acted, and so the Ukraine war is continuing. Ukraine still exists. For the Russians to establish deterrence by negotiation, they have to put everything else on the table, and they are not willing to do that. As a result, we’ve had no meaningful summits in the last three years with anyone.

What’s the second thing you can do? You can do a demonstration nuclear test. The problem is that the Russian nuclear force has degraded just as much as the Russian conventional force. Less than a week ago, the Russians tried to test out one of the new intercontinental ballistic missiles, and it blew up in the silo.

Now, this is really bad—not just from an embarrassing point of view or a deterrence point of view—but most of the avionics for Russia’s ICBM arsenal were built in Ukraine. This new missile that the Russians were testing was their effort to build a domestic supply chain. It is now apparent that, at least at the moment, that is not possible.

It begs the question of just how reliable the rest of the Russian nuclear arsenal is. If they hit the big candy-red button, will anything happen? If countries aren’t confident that things will launch, deterrence can’t happen.

The third thing you can do is nuke someone. The problem here is, while the Russians have bled away and pissed away their deterrence, the United States has not.

The United States continues to test, fine-tune, and deploy its weapons. It made very clear to the Russians in the early weeks of the Ukraine war that if Russia were to throw a nuke into Ukraine or anywhere else, the first thing the United States would do is use its conventional forces to destroy every Russian military and civilian asset—shipping around the world, every single port within range of conventional force, every single port the Russians have.

If that nuclear weapon were to hit a NATO ally and not just Ukraine, the first few weapons the United States would send back would target Putin personally. So that’s not an option either.

So, what’s left?

What’s left is nothing good. You get Obama-style pointless press releases and Trump-style bluster. That is what passes for strategic policy in the Kremlin these days. Now, whether or not any of that is sustainable over the long run is really not the point. The question, ultimately, is how will the Ukraine war play out?

Remember, Russia is still a large country, and even on its back, it still has a huge amount of resources and manpower to throw at the situation. They’re not bottomless anymore—this is not 1920 or 1980—but the Russians still outnumber the Ukrainians at least 3 to 1. They have an industrial plant that, while atrophied, is still an order of magnitude bigger than anything the Ukrainians have.

They have the Chinese providing huge amounts of components. Probably half of all the weapons systems the Russians have built in the last two years are majority made with Chinese components. Upwards of one-quarter of the artillery shells being used by the Russians on the front are coming from North Korea.

And, of course, all the Shahed drones are coming from Iran. So, there are very real flows here. It’s ultimately a question of whether the Russians can put the numbers to play. To that end, the Putin government, just before that disastrous failed nuclear missile test, announced that they were expanding the military to make it the second-largest standing army in the world.

If Russia is going to win, that’s how—through numbers, by ignoring the casualties, and just steamrolling them. If that sounds inhumane, it’s because this is how Russia has won every single war in its nearly thousand-year history. So far, in this war, they haven’t really put their weight into it. We might be seeing that change now.

If the Russians are going to win, this is how it’s going to go. It’s not going to be because of nukes.

The Civil War of the Sinaloa Cartel

The Sinaloa Cartel, once the dominant organized crime group in Mexico, is turning on itself. This is just another notch along the downward spiral of the Sinaloa Cartel since the arrest of El Chapo years back.

The most recent fighting started after “El Mayo”, a top cartel figure, was betrayed by one of El Chapo’s son and arrested in the US. This newly vacated position caused a power struggle and each of the cartel’s factions is hoping to grab control. The fighting is currently the worst in the Sinaloa state, but is expected to spread throughout Mexico and even spill into the US.

As the fighting ramps up and chaos ensues, we can expect to see disruptions to the distribution network and perhaps the worst news for those who love the white powder…higher prices.

Prefer to read the transcript? Click here

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.

Support medshare's ukraine fund
Support medshare's global efforts

Transcript

Hey everybody, Peter Zeihan here. It is the 22nd of September here in Colorado. Well, I guess not just in Colorado. Anyway, the news today is coming out of Sinaloa state in northern Mexico, where there have been at least 100 murders and a whole bunch of abductions as the Sinaloa Cartel is basically devolving into civil war.

Now, the Sinaloa Cartel is rather unique among organized crime groups in that it’s not simply about power or money. It’s run as a business. There was a guy by the name of El Chapo who used to run the place, and he essentially brought together all his chapter leads to compare best practices and figure out how they could run drugs to the United States with less friction and disruption to local law enforcement and local populations.

The concept was pretty straightforward: “Don’t shit where you sleep.” The goal was to maintain good relations with the people where they operated, so they wouldn’t turn on the cartel or go to the government for help. This strategy allowed Sinaloa to become the largest organized crime group in Mexico by far.

However, they were so successful that the United States made El Chapo public enemy number one. Eventually, the U.S. was able to capture and extradite him. He’s now serving multiple life sentences in the American prison system, where he’ll never see the light of day again.

That left his organization in the hands of others who aren’t as competent as he was. El Chapo was, without a doubt, a murderous thug, but he was a murderous thug with a business degree and some managerial skills. Since his capture, the factions he used to control have started to go their own way.

Things really started to unravel back in July, when Ismael Zambada, also known as El Mayo, who used to be the accountant and has taken over most of the operations, was lured to Texas by one of El Chapo’s sons. The second he landed, American law enforcement arrested him. It appears that El Chapo’s son betrayed El Mayo and turned him over to the authorities.

Now, El Chapo has more than one son, and each of them controls a faction of the organization. With El Mayo out of the picture, they’re now fighting among themselves for his share of the cartel.

Cartels aren’t monolithic, especially in a place like Mexico where internal transportation is difficult. The cartel is made up of several dozen groups, mostly locally defined, where local chapters might even use different names, have different organizational structures, and only give lip service to the central leadership. It’s like Canadian politics, but with a lot less politeness.

As long as there’s a strong leader who’s skilled with words and has a firm hand, this system can work and hold together. But when the leader is in prison, his deputy is in prison, and his kids are fighting over what’s left, things fall apart quickly.

Now we’re seeing the largest organized crime group in Mexico break down, and Sinaloa, the heart of the organization, is where the splits are occurring. Over the next few weeks, we can expect to see this violence expand, not just beyond Sinaloa into the rest of Mexico, but also north of the border.

El Chapo’s business-minded approach didn’t just make Sinaloa the largest drug-running group in Mexico—it made them the largest organized crime group on the planet, including in the United States. As the leadership fights among themselves, we’ll see similar breakdowns in their local distribution and retail operations, especially in the U.S., where many of their operations are carried out by local gangs.

This will likely lead to higher drug prices due to distribution disruptions and more violence as the organization fractures at the regional and local levels. Whether that’s good or bad, I’m not sure.

New Ukrainian Weapons Hit Russia Where It Hurts

Ukraine has successfully attacked several major Russian ammunition depots, with explosions detectable hundreds of miles away. These strikes suggest Ukraine’s war strategy is evolving…

There are a handful of factors contributing to the success of Ukraine’s tactics: vulnerability of Russian ammunition, Ukraine’s new missile-drone hybrid weapon and Russian rail system targeting. Combine all of these and you get a recipe for Ukrainian success.

The strategic shift we’re seeing now could pose some serious challenges for the Russians moving forward.

Prefer to read the transcript? Click here

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.

Support medshare's ukraine fund
Support medshare's global efforts

Transcript

Hello, everybody. It’s Peter Zeihan coming to you from a foggy Colorado. It is the 22nd of September. In the news over the last 4 or 5 days, the Ukrainians have managed to blow up a handful of major arm depots within Russian territory, some of them a couple hundred miles from the border. The three places in question are cross-border, Tow Rope Pets, and two corvettes.

Yeah, pretty sure that’s right. Anyway, one of these explosions was big enough that it was detected by seismic monitoring stations a thousand miles away, which is cool—kind of creepy. Kiloton-range explosion. We’ve got four things going on here, all of which are pretty significant, and when you put them together, it suggests a change in the tempo of the war.

The first thing to understand is that the Russians don’t move and store ammo like normal people. They don’t use forklifts, crates, or pallets; they just have things in boxes moved by hand. So, when something goes wrong—and things often do—it’s very volatile. That’s definitely what happened at all three of these facilities.

The second development is that the Ukrainians have brought a new weapon system into play. The technical term is “drone missile,” which is a bit shy of a cruise missile. The name of this system is a letter, and I’m not going to apologize for mispronouncing it because the Ukrainians chose that name specifically because it’s difficult for the Russians to pronounce—so I’m in the clear. The NSA, anyway. Its range isn’t nearly as good as some of the drones the Ukrainians have been fielding over the course of the summer.

Some of these drones have hit targets a thousand miles from the front, but these probably have a range of no more than 300 miles. However, because it’s a missile instead of a drone, it flies much faster, is much harder to intercept, and can carry a much heavier payload. The bigger Ukrainian drones can carry warheads about 75 pounds, with most of them carrying a third of that. But these new missiles likely have warheads 2 to 5 times as large. I say “likely” because they’re new, and last week was the first time we saw them in action. That said, they’re being used in large numbers—specifically in the attack on Tow Rope Pets, which involved at least 100 of these missiles. This is not just a case of 1 or 2 missiles being launched; entire fleets are now in play. For their debut, that’s pretty impressive from a manufacturing point of view, leaving aside logistics and military planning.

The third issue is that Russia, when it moves cargo more than the final mile, usually relies on rail. Russian territory is vast, and the value of agricultural land in Russia is low. Precipitation is fickle, and the summer season is short, so the amount of income Russian land can generate for the state per square mile is very low. Of the major agricultural zones in the world, Russia’s is by far the lowest in terms of income generated.

This means the Russians can’t afford a normal transport method like having a road network that individual farmers can always access. They simply don’t have the income necessary to build or maintain such a network, so they need something more cost-effective—hence, rail. About 90% of what moves in Russia, whether it’s barrels of oil, bushels of grain, or stacks of ammo canisters, moves by rail. It’s only in the final mile that cargo is moved by hand or maybe by civilian car if it’s a military asset. This system has lots of vulnerabilities, but it’s hard to target trains because rail networks are difficult to disrupt long-term. If a rail line gets blown up, you just lay new track.

In the recent attack, it appears that a train was present, unloading ammo at the time, and it was hit, causing the entire depot to explode. I must emphasize that I’m using local Russian reporting, so take it with a grain of salt. But usually, the Russians don’t celebrate their own trains and ammo dumps getting blown up. “Celebrate” is the wrong word, but you get the point. Unless this was an amazing coincidence, it suggests the Ukrainians have found a way to track Russian rail movements in real-time.

There’s reason to think this is true because a few weeks ago, the Ukrainians attacked Russia to the north and took over large portions of the Kursk province, including a rail depot at a place called Susa. If this allowed the Ukrainians to tap into or hack the Russian rail network, they could now know the schedules and locations of Russian locomotives and what they’re carrying. If they’re carrying ammo and heading to a warehouse full of more ammo, well, that’s a target-rich environment for the Ukrainians. So, we should expect more of these kinds of attacks.

Which brings us to the fourth and final issue: a potential change in targeting. If the Ukrainians do have better intel on the rail system and now have these faster, more lethal, mass-produced missile drones, the logical next step is to target Russia’s power generation and distribution systems. Unlike in the U.S., where half of our cargo by ton-mile is moved by truck, rail is critical in Russia, and two-thirds of Russia’s locomotives are electric. If Ukraine can disrupt the electricity system, the entire Russian transport system could fall apart.

We may already be seeing early stages of this. We know the Ukrainians have used drones to attack power centers in Crimea, though it felt like a test run—there weren’t many drones involved. But if they now have better intel on rail systems and weapons to hit ammo and transport networks, we’ll likely see much more activity within 150 miles of Ukraine’s borders to the north, northeast, and east.

We’ve seen Russian counteroffensives in places like Kursk peter out in the last 72 hours, as well as in the Donbas, where Russian forces were on the verge of capturing a Ukrainian rail network at Borowski. The Russians had been making steady progress toward this goal for months, ever since they captured the fortress city of Avdiivka. They got within 5 or 6 miles of Borowski, and if they had taken it, Ukraine’s ability to move forces along the front would’ve been crippled. But the assault stopped, likely due to the kind of attacks I’ve just described.

This is bad for Russia in the short, mid, and long term. It affects their ability to reach the front, let alone supply it. Remember, the Russian military doesn’t operate on quality—it’s all about throwing huge numbers of troops and shells at the enemy and incrementally advancing. You can’t do that without a robust rail network, and the Ukrainians may have just found a way to strike at its heart.