Former German Chancellor Angela Merkel was wildly successful at maintaining a German–and European–status quo nearly two decades. While her tenure will almost assuredly be remembered as the Golden Age of a unified, post-war Germany, the deeper structural issues Merkel failed to address risk undermining the stability and success she sought to preserve.
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The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.
Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.
Feeding America is a great way to help in difficult times.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
All anyone can talk about in Europe these days is Russia. Russia is constricting natural gas flows to Europe in order to drive energy prices higher and extract geopolitical concessions. Russia is using irregular state tools — think cyber — to manipulate European politics and exacerbate the COVID epidemic by planting misinformation about vaccines. Russia is threatening war in Ukraine, up to moving over one hundred thousand troops to the Ukrainian border region, and tapping the global mercenary community to recruit thousands of fighters to throw at Kiev. Russia is demanding the right to fundamentally rewrite the security policies of not only Ukraine, but Estonia, Latvia, Lithuania, Poland, Hungary, Slovakia, the Czech Republic, Romania, Bulgaria, Slovenia, Croatia, Albania, Turkey and Germany in exchange for a de-escalation in Ukraine.
I’m down on paper and video saying that Russia’s impending doom (more on that in a minute) will force it to take a more aggressive security posture, specifically on Ukraine. Today much of Russia’s border regions are indefensible. There are few geographic barriers to block potential invasion, forcing the Russians with their dwindling numbers to attempt to defend massive stretches of territory. What barriers the Russians do have — Crimea and the Caucasus come to mind — are only because of the sort of strategic adventurism that Putin is now threatening to Ukraine as a whole. There is a method to the madness. To paraphrase Catherine the Great, Russia can expand, or Russia can die.
But a few things have changed since I laid out my position in The Accidental Superpower back in 2014 and sketched out the general outlines of the hypothetical Twilight War in The Absent Superpower in 2017.
First big change: Ukrainian politics and identity.
Back in the 2000s, Ukraine could be very charitably called “messy.” It was an oligarch playground, sharply divided into three competing regions. The biggest region in the east was populated by either Ukrainians who spoke Russian as their first language, or actual Russians who due to the quirks of history happened to live on the Ukrainian side of the dotted line on the map. Ukraine has always been home to the greatest concentration and number of ethnic Russians outside of Russia’s borders. And these groups — both the ethnic Russians and the Russian-speaking Ukrainians — were unapologetically pro-Moscow.
It was the mix of this pro-Russian sentiment with the Kremlin’s view that large-scale political violence is often useful, that set us onto the path to where we are today. In early 2014 then-Ukrainian president Victor Yanukovych — one of those pro-Russian Ukrainians — dealt with pro-Western “Euromaidan” protesters by using Ukrainian special forces to shoot up a couple thousand people. He was driven out of office and ultimately out of country and now he is living in exile in, you guessed it, Russia.
Yanukovych’s actions against his own people — actions publicly supported by none other than Vladimir Putin — started Ukraine down the road to something I had once dismissed out of hand: political consolidation and the formation of a strong Ukrainian identity. Putin didn’t — hasn’t — figured that out. Later Russian actions — starving the Ukrainians of fuel, annexing Crimea, invading the southeastern Ukrainian provinces of Donetsk and Luhansk in the Donbas War — only deepened the Ukrainian political consolidation that Yanukovych inadvertently started.
Far from capitalizing on strong and legitimate pro-Russian sentiment, Russia’s policies towards Ukraine these past seven years have turned even the most pro-Moscow Russian citizens of Ukraine into Ukrainian nationalists.
In 2010, Ukraine was not a country. It was simply a buffer territory between Russia and the European Union with no real identity, and it would have been ridiculous to admit such a non-entity into either the EU or NATO. Today Ukraine is a country, and the idea of EU or NATO membership isn’t nearly so crazy. And that evolution is all because of Putin’s ongoing miscalculations.
Second big point: military reality.
Back in 2014 when the Russians launched the Donbas War, Putin boasted that should he choose, Russian forces could easily invade Ukraine. He noted Russian troops could be in Kiev in under a month.
It may have been a brag, but it most definitely was neither a bluff nor an exaggeration. The Russian military may be a pale shadow of its Soviet forebearer, but it is far better than the war machine which ground to humiliation in Chechnya in the 1990s. Ukraine’s military in comparison? Phbbbbt. Wracked by corruption, enervated by a lack of motivation, armed with nothing more than the pre-1992 equipment that the Russians chose to leave behind when the Soviet Union fell? There’s a reason Yanukovych used the special forces to suppress the Euromaidan protestors. The military wasn’t even up to that job. Fighting a hundred thousand or so Russian troops? That’s funny.
Since 2014, some things have gotten better. Western assistance has helped professionalize the forces. The Russian invasion has charged Ukrainian commanders some high tuition at the school of Real-Life War. Strengthening national identity has improved force cohesion. But the biggest shift is in weaponry.
Arming a country the size of Ukraine with sufficient military equipment to fight the Russians solider-to-solider would be a Heraclean effort. So that’s not what the United States has done. The Americans have provided the Ukrainians with Javelin anti-tank missiles. Javelins are man-portable and shoulder-launched, weighing in at under 50 pounds. They shoot high and plunge down, striking tanks on the top where armor is weakest. And above all, they are sooooo eeeasy to operate. If you can make it to level 3 on Candy Crush, you can use a Javelin.
Considering any drive to Kiev will be a tank operation, giving Javelins to the Ukrainians is like giving water to firefighters. It’s the perfect tool for the job. The Javelins made their wartime debut on the front lines in Donbas only in November 2021…about when the Kremlin started getting all screechy and demanding wholesale changes to European security alignments. Coincidence? I think not.
Now don’t get carried away. I’ve little doubt that Javelins would be enough should the Russians get truly serious. Any Russian invasion force would massively outnumber and outgun the defenders. But that’s not the point. Unlike in the 2000s or in the Donbas War, the Ukrainians can now slip a knife through the chinks in the Russians’ armor and make them bleed. A lot. And unlike in the 2000s, the Ukrainians now have a national identity to rally around and fight for. The Ukrainians now have the means and motive. It’s up to the Russians to decide if they’d like to provide the opportunity.
If war comes, the Russians could still reach Kiev. But it would likely take three months instead of one. The Russians could still conquer all of Ukraine. But it would likely take over year rather than less than three months. The toll on the invaders would be high and most of all the war would only be the beginning. After “victory” the Russians would have to occupy a country of 45 million people.
Which brings us to the final bit of this story: demographics.
Russia’s had a rough time of…everything. The purges of Lenin and Stalin. The World Wars. The post-Soviet collapse. Horrific mismanagement under Khrushchev and Brezhnev and Yeltsin. Sometimes in endless waves, sometimes in searing moments, the Russian birthrate has taken hit after hit after hit to the point that the Russian ethnicity itself is no longer in danger of dying out, it is dying out. And for this particular moment in time, there just aren’t many teens today to fill out the ranks of the Russian military tomorrow.
The implications of that fact are legion.
Least importantly, if somewhat amusingly, is the Russians are now flat-out falsifying their demographic data so the situation does not look so…doomed. Check out the bottom two age categories in the above graphic; the section for children 10 and under. A few years ago the Russians started inflating this data. Best guess is there are probably one-quarter to one-third fewer children in Russian than this data suggests. That’s roughly a four million child exaggeration.
Most importantly are the implications for a potential Russian-Ukrainian War. Any Russian solider lost anywhere cannot be replaced. If Putin commits to an invasion of Ukraine, Russia will win. But the cost will not be minor. The war and occupation will be expensive and bloody and most importantly for the world writ large, it will expend what’s left of the Russian youth.
Will Putin order an attack? Dunno. There was a demographic and strategic moment a few years ago when the Russians could have conquered Ukraine easily. That moment is gone and will not return. But the strategic argument that a Russia that cannot consolidate its borders is one that dies faster remains.
Perhaps the biggest change in recent years is this: the United States now has an interest in a Russian assault because it would be Russia’s last war.
Demographics have told us for 30 years that the United States will not only outlive Russia, but do so easily. The question has always been how to manage Russia’s decline with an eye towards avoiding gross destruction. A Russian-Ukrainian war would keep the bulk of the Russian army bottled up in an occupation that would be equal parts desperate and narcissistic and protracted until such time that Russia’s terminal demography transforms that army into a powerless husk. And all that would transpire on a patch of territory in which the United States has minimal strategic interests.
That’s rough for the Ukrainians, but from the American point of view, it is difficult to imagine a better, more thorough, and above all safer way for Russia to commit suicide.
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The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.
Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.
Feeding America is a great way to help in difficult times.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Like their parents, the American Millennial cohort is defined by their size. Making up a larger share of the US population than either the preceding (and dare I say, cooler?) Gen X and younger Gen Z, they are having their own outsized impact on American society.
Millennials and Zoomers are the future of the American workforce, and could not be more different. Where Millennials are touchy-feely, willing to work within teams and have a tendency toward leadership and collaborative work, most Gen Z wants to be left alone. Think Harry Potter vs the Hunger Games. This will have profound impacts on the evolution of the US labor market, especially as we enter the greatest era of industrialization in American society.
If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.
The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.
Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.
Feeding America is a great way to help in difficult times.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Demographics are at the core of what we do here at Zeihan on Geopolitics. More than just a count of population, demographic data–often expressed as a pyramid-shaped graph–can deliver a wealth of information about a society. Is the country in question rapidly aging? Are they going to experience a labor or tax revenue shortage, or a windfall? Coupled with other information, a firm grasp of a demographic profile can help you easily start to put together a country’s geopolitical reality.
Here in the United States, our demographic realities have long been dominated by the Baby Boomers. The largest generation in American history, they have had an outsized impact on the rapid social and economic transformation of the American post-War era. And as the Boomers enter mass retirement, their exit from the labor force is going to have a similar impact on the American economy.
But these impacts won’t be felt equally across the board. Cultural and generational differences mean that in certain fields–such as the trades–American Boomers occupy an outsized percentage of jobs. Society pushed Gen X and millennials toward higher education and away from things like blue-collar work. The United States was able to lean on immigrant labor, chiefly from Mexico, to fill gaps. But it was still mainly Mexican Boomers coming to do the work.
With the Baby Boomers aging out of the labor pool en masse, and with immigrant flows from Mexico unlikely to ever reach their heyday of the late 1990s and early aughts, significant pressures on the US labor market are here to stay. One of the industries most impacted? Trucking. And the reverberations of that reality are being felt across the entire US supply chain.
If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.
The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.
Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.
Feeding America is a great way to help in difficult times.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
As we now enter the third year of the ongoing COVID pandemic, we have had an evolution in how countries–especially in East Asia–react to outbreaks. Gone are the days of national lockdowns, and instead provincial, city, and even facility specific lockdowns are the norm. While it might sound like an improvement for supply chain security, it’s not: instead of a wide-spread lockdown that could carve out exemptions for certain classes of workers or strategic manufacturing needs, entire facilities are shut down and no goods can get out.
But there’s a much more significant shift underway than the changing minutiae of how countries react to rising infection levels and new variants. It’s China. The Chinese Communist Party once based its legitimacy on guaranteeing full employment and economic prosperity for its people. Now, the Chinese population looks to Beijing to guarantee its health. Zero-tolerance lockdowns, like the one currently underway in Zhejiang and the globally significant port of Ningbo, reflect a Chinese strategy geared toward proving to its citizens that it takes their concerns regarding COVID seriously. Not keeping jobs at a factory or port facility filled. Not reaching artificial production quotas. Not making sure foreign supply demand is met.
After decades of orienting national policy toward making China the largest and most important part of as many global supply chains as possible, Beijing’s decision-making rationale has shifted. And with it, China’s ability to be a reliable link in global supply chains.
If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.
The economic lockdowns in the wake of COVID-19 left many without jobs and additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.
Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.
Feeding America is a great way to help in difficult times.
The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.
Join Peter Zeihan today, December 1, for the third in a three-part series on the here, now, and soon-to-be of the American and global economies. In Part III: The Face of Inflation we’ll be diving into not simply the inflation of the now, but also bringing together the wildly disparate inflationary trends that will entangle the American and global economies for the next four years. Everything from manufactured products to industrial commodities to energy to money itself.
Scheduling conflicts? Not to worry. Everyone who registers for The Face of Inflation will be provided with a recording of today’s webinar to watch at their leisure.
A lot of people are talking about how we’re currently facing the highest inflation levels in decades. Few are talking about how inflation–a bugbear that stalked the US economy for decades until the 90s–has been kept so low for so long.
As with so much else in the era of globalization, most have mistaken the growth and development and stability of The Order as humanity’s default. Few things could be further from the truth.
Interested in more? This Wednesday we are hosting the final installment of our exploration of economic trends inInterested in more? We are hosting the final installment of our exploration of economic trends in an era of globalization tomorrow, Wednesday 12/1: Part III: The Face of Inflation. We’ll be diving into not simply the inflation of the now, but also bringing together the wildly disparate inflationary trends that will entangle the American and global economies for the next four years. Everything from manufactured products to industrial commodities to energy to money itself.
Gasoline costs. Housing costs. Food costs. Consumer goods costs. They are all going up. The inflation is real and it is only “transitory” if by “transitory” you are measuring time in years.
The real nut of the issue, however, is that few of the current price pressures have anything to do with government policy. Higher energy costs are the result of years of financial mismanagement. Higher housing costs are an outcome of large-scale internal migration decisions. Food costs largely boil down to transport issues. Consumer goods costs are an outcome of COVID-related demand whiplashes.
This might sound odd, but I don’t worry so much about these short-term inflationary pressures we’re currently experiencing. They are the outcomes of our current economic evolutions. That makes them uncomfortable, but ultimately, heh, transitory.
I’m far more concerned with the waves of inflationary pressures occurring just past the horizon:
The American economy is in the midst of the greatest rewiring in the history of the Republic, while the global system faces systemic breakdown. Those pressures are not simply inflationary, they will have a far greater impact upon prices than anything we’ve seen so far in 2021.
Here’s a more homegrown inflation source that will be — at least in part — an outcome of internal political and government decision-making.
Over the course of the past sixty years, we’ve become somewhat accustomed to the geopolitics of oil. Interrupt oil flows from the former Soviet or Persian Gulf regions, and we see energy inflation wash over us all. It forced us to pay attention to the ins-and-outs of politics in as calm, measured places as Gaza and Tehran and Riyadh and Caracas and Moscow and Kiev.
One of the (many) benefits of the American shale revolution is that America just doesn’t care very much about any of these places any longer. It’s a big piece of why energy prices are chronically lower in North America compared to the rest of the world, and why U.S. troop deployments abroad are now at their lowest levels in 120 years.
But the path to deglobalization isn’t a smooth one, wrapped up as it is in a variety of technological evolutions, some of which may force the United States to become more involved in managing the world. For as difficult as the geopolitics of oil has proven to be, it is nothing compared to the geopolitics of green energy. Yes, green electricity is generated at home, but the supply chain for constructing wind and solar facilities makes getting oil out of the Middle East look like a game of checkers.
For oil we needed to interface with Saudi Arabia and Iran and Venezuela and Russia, but greentech requires us to interface with Chile and Argentina and Bolivia and China and Australia and Congo and Gabon and Brazil and South Africa and Peru and Mexico and Kazakhstan and Turkey and India and Mozambique and oh yeah still Russia.
If the Green dream of 100% non-carbon energy is to take form, we will need to replace our one energy input supply chain with over a dozen more.
Interested in more? This Wednesday we are hosting the final installment of our exploration of economic trends in an era of globalization: Part III: The Face of Inflation. We’ll be diving into not simply the inflation of the now, but also bringing together the wildly disparate inflationary trends that will entangle the American and global economies for the next four years. Everything from manufactured products to industrial commodities to energy to money itself.
On November 18 news leaked out of Taiwan, Japan, South Korea, China and India that the Americans have approached pretty much every country that matters about a joint, simultaneous release of oil from each country that maintains emergency reserves. The goal being to tamp down rising oil prices. The subtext is that the Biden administration’s efforts to get OPEC and its oil-exporting partners to produce more crude have proven unsuccessful.
Normally, I’d just dismiss this as media banter and rumor mongering. Stuff like this drops out of the ether every time oil prices rise. This time is probably different; Simultaneous indications from multiple countries that lack a track record of energy-related drama suggests the news is for real.
I guess the primary reason I would have normally dismissed the idea of oil releases is because…it is a really, really stupid idea.
First off, oil demand is inelastic. When prices go up or down by 10%, 20%, 50% it is rare for demand to budge at all. Only when prices go up (or down) by an extreme amount and stay there for months do we get fundamental shifts to demand. Which means any short-term price drop won’t impact the underlying market fundamentals one whit.
Second, even if every country on the planet with oil sitting in tanks or salt caverns agreed to follow Biden’s lead, they could not maintain the effort for nearly long enough to shift the demand picture. Most countries don’t have more than two months of import cover. Turns out that most find storing something like crude oil — a material that’s corrosive and toxic — to be difficult and expensive.
Third, what makes oil prices go down isn’t so much increases in flow but increases in production and above all storage. It is having extra oil on hand that weakens prices. Releasing crude from storage isn’t production. Releasing crude from storage reduces storage. It actually makes the market tighter.
Which means, fourth, as soon any releases end, demand fundamentals will not simply take prices right back to where they were, they will take prices higher because there is now less storage as a buffer.
And so, reserves are not tapped lightly. Historically speaking, the United States has only released oil from its reserves to impact pricing when there has been an actual production disruption. For example, in 1991 when Iraq invaded Kuwait, or in 2005 when Iraq descended into civil war and Venezuela got serious about its journey to self-destruction. Nothing like that is happening currently.
These aren’t particularly sophisticated economic talking points. “Oil 201” if you will. And that is what has me concerned. Transport Secretary Pete Buttigieg knows this. Energy Secretary Jennifer Granholm knows this. Commerce Secretary Gina Raimondo knows this. National Security Advisor Jake Sullivan knows this. The chances of this quartet of the smartest people on TeamBiden not advising the president of such a basic economic function are zero.
Which tells me that one of two things has happened.
Option1: There’s some sort of massive misunderstanding going on here and the information that’s leaking out of Asia is in some way wrong. If so, this’ll blow over very quickly and we’ll all go back to our lives.
Option2: Biden’s instinctive populism has overwhelmed his willingness to listen to basic facts, and he is pursuing a populist, Trumpesque economic policy in the belief that his diktats can direct the markets.
If it is Option2 then, well, crap. If the goal is to decrease oil prices, there’s an easier, faster, diplomatically cheaper, more economically viable and more environmentally friendly way to do it: The United States is the world’s largest oil producer because of the shale revolution. Using a mix of new production techniques developed in the past two decades, U.S. oil producers can bring new production to market in just six weeks. Even Saudi Arabia’s reserve capacity takes a minimum of three months to bring on-line. Shale output has far lower carbon output as part of its production than the global average, and because U.S. shale is produced in the United States rather than a different hemisphere, the shipping footprint is similarly lower. (Also, production taxes!) Politically, it would indeed be awkward for green-friendly Biden to approach the U.S. oil sector about producing more oil, but IMO not nearly as awkward as it has been for him to approach de facto Saudi Arabian leader Muhammad “Hacksaw” bin Salman…which he has already done. (Only to be turned down flat.)
I have been nursing some concerns about the Biden administration’s economic policies for some time. I’ve reserved judgement because most of his plans require Congressional action, and until Congress actually passes something of substance it is all just political theater. The oil-release action is in a different category because it can be done by executive order.
As a rule, I like to give presidents plenty of time before I declare them lost causes, and therefore part of the problem rather than part of the solution. With Obama it took until year five, with the specific straw being when Obama started barring people who brought him news he ideologically disagreed with from even entering the Oval Office. That action turned the entire Executive Branch into a tone-deaf echo chamber. With Trump it happened in year three when he decided he was “done” with coronavirus. That action is largely responsible for the death of a half million Americans. After seeing the quality of the people in Biden’s cabinet, it never occurred to me that it might happen before year two.
But here we may be. Arguing that Option2 is what is truly in play, is another energy-related action from Biden administration this week: an order that the Federal Trade Commission investigate American oil producers, refiners and gasoline distributors for price fixing. Fixing in the wildly unconcentrated American oil complex is functionally impossible. Leaving aside the hundreds of differently motivated oil producers and hundreds of regionalized gasoline distributors and tens of thousands of gasoline retailers, there are 135 operating oil refineries in the United States, and they tend towards cutthroat competition. Collusion among them would be hilariously unwieldy and only one tattletale hold-out would result in billions in fines for the other 134. Biden should know this too. Buttigieg and Granholm and Raimondo and Sullivan certainly do. This isn’t policymaking. This is populist blamestorming in the Trumpian style, using the tools of the state to target your political opponents.
But I digress.
What’s happening with the oil markets, what is driving prices higher, what is apparently prompting Biden to push for a mass release, are symptoms of an issue far larger and more substantive than mere presidential mismanagement. What’s happening is financial mismanagement on a global scale. Its effects are magnifying with time and will be with us long after Biden is gone. What we are seeing now, with oil prices well on their way to $90 a barrel, is just the tip of the iceberg.
But it will not be felt everywhere.
Interested in more? Energy inflation — deep, chronic, and above all varied — is a big piece of the broader, long-term inflation picture that we’ll be exploring in our final seminar on the evolutions in the American and global economies in the age of deglobalization. Join us December 1 for Part III: The Face of Inflation.
Join Peter Zeihan today, November 19 for the second in a three-part series on the here, now, and soon-to-be of the American and global economies. Part II: Supply Chains No More will focus exclusively on global supply chains, providing insight to the current status of delays and disarray, and identify which sectors will have no choice but to fundamentally restructure in the months and years to come.
Scheduling conflicts? Not to worry. Everyone who registers for Supply Chains No More will be provided with a recording of today’s webinar to watch at their leisure.
