Waking Up to Reality in the Middle East

Thursday, August 13 the Trump administration released a series of breathless communiques proclaiming the onset of formal peace and diplomatic recognition between Israel and the United Arab Emirates. Shortly thereafter the Israeli government of Prime Minister Benjamin Netanyahu echoed the American releases in both substance and theme. The Emirati leader, Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, was far less…gushy in his own announcement, but critically contradicted nothing stated by Trump or Netanyahu.
 
Waitaminute! Don’t the Arabs hate Israel? Why in the world would a rich Arab statelet on the far side of the Arabian Peninsula want to exchange ambassadors with the Zionists??
 
It isn’t so much that the Emiratis don’t care about the Palestinians any longer (although they really, really don’t), and instead it is bound up with the rapidly simplifying American position in the Middle East. The Americans have nearly completed their pullout from the overall region, and the Emiratis are hoping to get ahead of their rapidly disintegrating geopolitical environment.
 
In the aftermath of World War II, the Americans crafted the global Order to bribe up an alliance to fight the Soviets. Part of that was funding rebuilding, financing the construction of industrial plant, and enabling the Europeans and East Asians to access the American consumer market. All that required oil, and that oil for the most part came from the Middle East. And so, the Americans went to the Middle East.
 
We are now thirty years after the Soviet collapse. Americans are done managing the world, and the Americans are especially done managing the Middle East. They’re going home. Troop rotations have outnumbered permanent deployments in-region for years. The Iraqi deployment is quickly approaching zero. The Syrian deployment is no longer more than a rounding error. Only Afghanistan remains as a meaningful deployment, and it is a deployment few Americans want to continue. The naval base in Bahrain and CENTCOM’s operations center in Qatar only continue existing to service the Afghan deployment. And that’s…all of it.
 
From the United Arab Emirates’ point of view this is an unmitigated disaster. The UAE (and  their fellow Gulf states of Kuwait, Saudi Arabia, Oman, Bahrain and Qatar) don’t care what US troops do in the Middle East or how many locals they kill or how many US troops die at the locals’ hands. They simply want the Americans present – both regionally and around the world. So long as the global superpower is active, the Gulfies don’t have to worry about guarding the production, processing, and exporting infrastructure for their oil and natural gas. So long as the Americans are globally engaged and guaranteeing freedom of the seas for all, the Gulfies know their hydrocarbon exports will safely arrive at their customers’ ports. National safety and national bank. For them, it’s that simple.
 
Those heady days are over. America’s withdrawal from the wider world has been a longer running development than its Middle Eastern wrap-ups. It, too, is now multiple presidential administrations underway. Total US force deployments globally are at the lowest level since before the Great Depression, and still trending down.
 
For the Emiratis in specific and the Gulfies in general, the Americans’ past-the-point-of-no-return departure conjures up multiple, reinforcing disasters.
 
1: Iran
 
Unlike many who have a finger in the world of national security, I’ve never found Iran to be strategically threatening.
 
Iran’s army is designed to oppress its own population, not march on its neighbors. Its air force hasn’t been updated since the fall of the shah in 1979, and the Iranians are running out of jets to fall out of the sky. It’s navy…well, it doesn’t have a navy. It has a bunch of speedboats. Should Iran march on the Gulf states, it would face four challenges:
 
First, its army would have to march. It isn’t motorized. Second, it would have to first march through its own region of Khuzestan – a region populated by restive minorities. Third, it would have to cross a pontoon bridge into Basra, Iraq’s second-largest city. A high-school science experiment could take out the bridge, while needing to pacify Basra’s two-million-strong population at the beginning of an invasion’s supply line would about as much fun for the Iranians as it was for the Americans when they conquered/liberated Iraq in 2003. Finally, there’s a blistering six hundred miles of completely empty desert between the Kuwaiti border and any meaningful infrastructure in Saudi Arabia. That’s a loooooong walk.
 
Yet as unimpressed as I am by the Iranian military, it is the freakin’ Roman Legion compared to the militaries of the Gulf states. The Gulfies are beyond military incompetent because they’ve never had to be competent. Sure, the Emiratis and Saudis are getting some good target practice for their air forces in Yemen, but their armies are largely paperweights and none of them have a navy that’s more than a coast guard. Not only have all depended upon the Americans to do their fighting for them, most consider a functional domestic military a potential threat to the ruling dynasties.
 
2: Their own populations
 
All the Gulfies ship in vast swathes of workers, to the point that over 70% of the “populations” of Kuwait, Qatar and the UAE are imported labor. This isn’t like Western Europe or the United States where the migrants do jobs the locals don’t want. In the Gulf states, the migrants do everything. The migrants are not allowed to bring their families or own property, and as soon as the migrant men lose the ability to carry their own weight or the women lose their looks, they are rooted out and sent packing. They are regularly the target of every assault imaginable, including sexual assault.
 
In the United states, we have a word for that: slavery.
 
Treat this many people this badly, and only the existence of a wildly intrusive and brutal and unfettered internal security service can maintain domestic control for the ruling dynasties. As much of a threat as Iran is, the day-to-day internal pressures of the Gulf states are far more likely to end them.
 
Many make light of the fact that the actual citizens of the Gulf states could be a risk as well. After all, they are used to cradle-to-grave support for everything from food to rent to hookah bars. The idea being, that should social spending falter, the locals might rise up against their rulers.
 
While I don’t quite dismiss this concern out of hand, I’m not all that worried. The Gulf states in general – and the UAE in particular – have addressed this problem by helping their peoples consume as many saturated fats as possible to make them as unhealthy as possible. The idea being that overweight people laden with heart disease who can only get around on scooters aren’t the type to leave their air-conditioned compounds to riot in the desert sun. Pampered corpulence as a national security strategy might sound odd, but it works for the most part. Therefore, I am – and the local governments are – more watchful of the larger, younger, healthier, angrier and institutionally abused slave class.
 
The only way this system is sustainable is if the money from hydrocarbon sales keeps flowing in and whoever guarantees Gulf state security turns a blind eye. The Americans are leaving, endangering both the income flows and the political cover.
 
3: Outside expeditionary powers
 
Key thing to keep in mind when considering the United States in the Middle East: the US was primarily interested in Middle East oil for its alliance network, not for itself. Historically, the United States has gotten nearly all its crude from its own territories or its North American neighbors, plus Venezuela. With America’s shale revolution now mid-way through its second decade, technically, it is already independent. Its need for Middle Eastern oil has gone from minor to nearly nonexistent.
 
Not so for…pretty much anyone else. Despite all the Green rhetoric on wind, solar and the like, combined they still generate only about 2% of the world’s total energy needs. Oil and natural gas clock in at more than half. And for most of the world, it must be imported. From the Persian Gulf.
 
Outside powers who have been dependent upon the Americans to maintain energy flows can do the math. Outside powers who have navies can do it faster. The first time there’s a real energy crisis anywhere in the world after the Americans have left the Middle East, we’re going to see some records broken for sailing times from the United Kingdom, France, India and Japan to the Persian Gulf.
 
Note: China can only play in the Persian Gulf if the United States makes the Pacific and Indian Oceans safe operating zones for the Chinese navy. The Chinese navy only has a handful of ships that can sail beyond the First Island Chain. The operative word is “sail”. It is almost certain they cannot fight their way much past the Chain, much less operate five thousand miles beyond it in the Middle East. China simply is not an expeditionary power, and is a non-power in the Persian Gulf.
 
The Gulfies might not like the Americans very much, but the Americans have had a vested interest in the Gulf states remaining independent and making boatloads of money by selling their hydrocarbons. For the locals it was a sweet deal. Any post-American power that comes to the Gulf is unlikely to be nearly as…understanding.

So, what does this all have to do with a normalization of relations deal between the UAE and Israel. Simply put, the Emiratis (really, all the Gulfies) know the Americans are leaving and they are massively – hysterically – unable to look out for their own interests in the world that’s coming. Between the threats of Iran, their own populations and extra-regional powers, none of them are long for this world.

Unless they can get some help. They need someone who can help them resist Iran. They need someone who can help them infiltrate and purge undesirable elements from their own populations. They need someone who can help them stand up to far outsiders.

Banding together is off the table. As much as the Gulf states dislike Iran, they like one another even less. These are not countries. They are dynasties. It is as if each of the Kardashian sisters ran her own kingdom. (The GCC – for those of you who follow the region enough to know what that is – is nothing more than the Saudi attempt to force everyone to do things their way.). The Gulfies trust – they all trust – Israel more than one another.

To call Thursday’s agreement a peace deal is a rhetorical flourish. A bit of PR flim-flamery. The UAE and Israel were not at war. Israeli military planners didn’t lose much sleep thinking about Emirati-backed militant cells in Palestine or Syria or Lebanon targeting their populations, much less a conventional Emirati military attack. Thursday’s announcement was more about a public acknowledgement of cold, hard, geopolitical reality: the issue isn’t an Israel-Arab divide being healed, much less one of Jewish-Islamic ecumenical healing. The difference hasn’t been that broad is decades.

Rather, it is about an American security dependent heeding the writing on the wall. Of wanting to (of having to) protect their interests (their existence) without the promise (or hope) of American intervention. The Emiratis are worried about Tehran. About Tokyo. About Paris. About New Delhi. About London. (About Riyadh.)

They should be.

The real kicker? This diplomatic normalization is only the first step. In time the UAE – indeed, each of the Gulf states – will need to partner with an outside power if they are to survive the predations of the others. Kudos to the Emiratis for the first-mover advantage. They’ve not only gained themselves a diplomatic, political, intelligence and military partner, they’ve broken the ice and made it a bit easier to stomach partnering with a true infidel.

Time will tell if it is enough.

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.

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The Vaccine Struggle

The coronavirus epidemic in the United States continues to accelerate. Much of the recent news has been about ongoing and unprecedented caseload increases in the large states of California, Texas and Florida.

While I pride myself on being a generalist, I do try to stick to my strengths when it comes to highly technical topics. I’m afraid that as regards coronavirus vaccines that isn’t possible. Biotechnology has veered into my lane, leaving me little choice but to return the favor.

The bottom line:

We’re likely to have a functional vaccine in the fourth quarter of 2020. As normally vaccines require a decade or more to develop, that’s truly moving at warp speed. But within this shiny nugget of good news seethes a swarm of complications and caveats.

Let’s start with the human trials. Vaccine testing proceeds in three phases.

Phase 1 is little more than a safety trial of 50 or so people to make sure the vaccine doesn’t make folks horribly ill. Phase 2 uses a few more people, but it is still little more than checking to be sure the vaccine’s components are not broken down in the body before they can do anything useful. (In the accelerated environment of the COVID crisis, many drug manufacturers are running Phases 1 and 2 concurrently.)

Phase 3 is where things get pathologically interesting. Thousands of people are injected and…released into the wild. The goal is for those injected to be confronted by the virus so that we know if A) the inoculated don’t get sick at all, B) they get sick but cannot spread the virus, C) they do not get sick but might still be able to spread the virus, D) if they get sick but suffer less intense symptoms, E) the proto-vaccine it does nothing at all, or God forbid F) the proto-vaccine actually makes people more susceptible to the virus. F sometimes happens. F sucks.

Point being Phase 3 is where the rubber hits the road. Right now, eight of the over 100 vaccines that are under development globally are in Phase 3 trials. The Russians decided they didn’t need Phase 3 and have gone ahead and approved theirs for general use. (I’m not saying this is preordained to end in unfettered horror, but I’m also not saying now would be a bad time to watch Moscow for signs of the zombie apocalypse.)

When I say we’ll have a functional vaccine in the fourth quarter, what I mean specifically is that at least one of these 100 (most likely one of the eight) will have made it through Phase 3 with a result of A, B, C or D. All those outcomes are considered good enough to qualify as “successful”. But even if the vaccine comes in on September 1 with a solid “A”, that hardly means the COVID-19 crisis is over. If anything, that’s only the start of the road back to normal.

The next piece of the process is manufacturing. Some vaccines require live virus which must be grown en masse. That, obviously, requires significant biohazard lab expansions. Some just require snippets of RNA and can be produced in days. Probably. Some of the newer RNA techniques – like that for the Moderna candidate – are only now being used for human vaccines for the first time. Some use a big vat of yeast which can be prepped in hours. Some need an extract from a specific sort of Chilean soapbark tree that can only be harvested in the Southern Hemisphere’s summer. I can’t give you a production timeline because each vaccine uses a different process, the materials and processes are proprietary, and we do not yet know which one will work.

Then there’s distribution. Here I’m not too worried. Every country already has a built-in, tried-and-true system for the mass distribution and application of vaccines. Think biannual flu shots. I’ve always found the logistics that make the flu shot possible to be magical. I’ve not gotten the flu in over a decade. (Go me!)

But that hardly means there cannot be distribution complications. Some vaccines require refrigeration. Some require freezing. Based on components and temperature requirements, each has their own peculiar demands for glass vials and syringes – and even stoppers. Use the wrong packaging or transport method, and you’ve just wasted months of work and millions of doses.

Finally, there’s the far-from-minor issues of efficacy and longevity of protection. Not all vaccines for the same bug are created equal. Some might require a higher dose or even multiple doses to achieve some semblance of protection. For example, that biannual flu shot I’m so fond of requires a higher concentration for the elderly in order to stimulate an immune response. The CanSino candidate might not work in the elderly at all. If two doses are required – which is currently the best guess for the Jenna/Oxford candidate – we’ll need twice the production capacity.

If the vaccine triggers a strong immune response – like the BioNTech/Pfizer candidate appears to – that’s great! But if protection only lasts a few months, we’ll need to mass produce the vaccine for global use forever…or at least until we grind the virus out of the population. (Keep in mind humanity has only actually eliminated one virus – smallpox – to the point we could stop immunizations.)

While things can and will change week by week, at present the Jenna/Oxford candidate seems to be on track to be deemed “successful” first, while the Moderna candidate faces the fewest manufacturing challenges, while the BioNTech/Pfizer candidate appears to be the most effective. China’s CanSino is a bit of a black box, but it will likely be significantly delayed. Determining a vaccine candidate’s effectiveness requires exposing the inoculated to the virus, and the virus really isn’t in circulation in China any longer. That forces the Chinese to convince other nations to be their guinea pigs. *wince*

The dream vaccine would be a one-shot vaccine delivered via nasal inhalant (no syringe required!), be made from yeast, safe to store at room temperature, grant 100% immunity, and last a lifetime. Assuming for the moment such is possible, we’re not very likely to hit the bull’s eye on the first try.

Instead it’s more than merely possible the first “successful” vaccine to market will be one that requires two shots given two months apart, is fabricated using the pancreatic fluids of a llama, only lessens the impact of COVID rather than outright preventing it, must be frozen for transport, and must be re-administered every six months. If that’s the one that wins the race, you can bet we’ll keep developing alternatives until we find something better.

But while we develop better alternatives, we’ll hit another trough. Manufacturers of glass and syringes and stoppers are holding their breath, planning to surge output to whichever candidate proves successful first. Should the first across the finish line not be the ideal vaccine, we will then need to retool everything to supply the manufacturing process for a better vaccine once it proves that it is indeed better. Based on the product requirements, there will be a delay of weeks to months.

Which vaccine is deemed “successful” first matters. No matter which candidate proves successful, global vaccine manufacturing for a fundamentally new cocktail is unlikely to be able to generate more than 100 million doses in calendar year 2020, with an additional one billion to two billion in 2021. If the “winning” mix requires two doses or biannual injections, cut the number of people who can be immunized in half. If it requires two doses and biannual injections, then by the end of 2021 there might not even be enough doses for all American citizens. To maximize their chances of getting what they need, the Americans have thrown $1 billion plus at each of the three lead candidates, complete with pending orders for at least 100 million doses.

That’s smart, but it hardly guarantees success – and the stakes are high. For one, the United States has not only failed to eradicate the novel coronavirus, it has largely failed at even the most basic of mitigation measures. We’ve collectively placed all our chips on securing a vaccine.

For two, not all doses of the “winning” formula will be produced in the United States, and other countries will want doses for their own people. The United Kingdom is a biotech leader who isn’t faring much better than the United States. The Germans are biotech leaders…and health nuts. Should doses be produced in India or China or Brazil, do you really think New Delhi or Beijing or Brasilia will prioritize shipments to the United States? Would you want them to??

So yes, we’ll likely identify something “successful” at some point in the fourth quarter of 2020, but add in the time lags for manufacturing and distribution, and the almost-certainty that Americans will have to share some doses with other nations, and the absolute most optimistic schedule possible for achieving mass inoculation of the American population won’t be until at least April 2021.

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.

DONATE TO FEEDING AMERICA

COVID-19 and The State of Global Agriculture

The coronavirus epidemic in the United States continues to accelerate. Much of the recent news has been about ongoing and unprecedented caseload increases in the large states of California, Texas and Florida, which indeed have been racking up record case numbers. Yet in terms of infection rate increases South Carolina, Alabama, Arkansas, Louisiana, Mississippi, Kansas, Idaho and Nevada have all left the larger states behind.
 
The graphic below highlights where new case loads have reached dangerous levels. Red indicates over 500 new cases daily per million population. The threshold for yellow is 200. New York state, home to America’s highest death counts thus far, currently has a rating of 50. Iran – one of the countries that has suffered the highest fatality rates – this week has a rating of 30.
 
The implications for such a runaway infection rate are many and varied. Political. Cultural. Strategic. Structural. Economic. Here at Zeihan on Geopolitics we’ll get to as many as we can as time and circumstances permit.
 
For today, however, we’re going to focus on the basics: food. Coronavirus has thrown the American and global agricultural systems for a loop. Today at 2p Eastern / 1p Central / noon Mountain / 11a Pacific Peter Zeihan will host a video conference on The State of Global Agriculture. Join us to get an update on food safety, food supply and to understand where agriculture falls in America’s ongoing trade conflicts.

REGISTER FOR THE STATE OF GLOBAL AGRICULTURE

A Look Under the Hood: Oil and COVID

Getting reliable oil data on any country outside the United States is very nearly an exercise in futility. Even a country with “good” data like the United States sources that data from a half dozen separate bureaus and 50 different states which tend to generate their data either by county or company or a hybridization of both. Muddled data and miscounts are more the norm than accurate collection.
 
Moreover, any firm that is not publicly traded tends to consider production and sales data a corporate secret, while most countries consider such information flat out state secrets. This proves doubly true for information relating to storage. After all, the core rationale of state-operated oil storage facilities is to enable a country to outlast a crisis like a war.
 
The result is that we only have decent data at the very low end (when looking at a specific firm or field) or at the very high end (when we’re evaluating something global in scope). Today’s graphic looks at the high: total oil demand broken down by major usage.
 
There’s a few nuggets to tease out, both about the coronavirus crisis and the future of the sector in general.

First, coronavirus has kept much of the world’s population cooped up, especially in the more energy-intensive developing and developed economies. That’s hit both energy demand for personal use, as well as in industries that support private consumption. Cars, aviation, marine transport and industry have all seen massive drops in oil demand, that at the trough collectively added up to nearly one-fifth of total global demand. (This, of course, is a best guess – remember, the data isn’t great.)

While all these categories have experienced significant rebounds as parts of the world have reopened, they are nowhere near pre-COVID levels.

  1. Even in places with low virus levels, people remain skittish and have cut back their activities.
  2. The pandemic is hardly over. Globally we have far more cases now than two months ago, with the bulk of the (non-China) developing world only now starting its epidemic.
  3. The United States – the world’s largest oil consumer – has backslid and is likely to experience an extended period of subpar economic activity.
  4. Europe and East Asia may be mostly virus free, but their rapidly aging demographics means they are more suppliers than consumers. Full recovery there first requires full recovery in the more consumption-driven United States and (non-China) developing world.

Collectively, these categories comprise 45% of “normal” oil demand. All of them will remain depressed for at least the rest of 2020. In the case of the aviation category, don’t expect a meaningful recovery until after 2023.

Second, one surprisingly resilient category has been trucking, a sector whose oil demand is linked to both local goods distribution and long-haul transport. Oil demand for this sector has proven stubbornly resilient for the simple reason that goods don’t magically transport themselves from farms or ports to people. Trucking is how most people get their stuff, whether that stuff is delivered to stores or their homes. If this sector’s oil demand drops, it means economic catastrophe is in full swing. It has not. So far, so good.

Finally, I’d like to highlight a category for you Greens out there: buildings.

Greens the world over have a reputation for going for big, splashy, high-tech, high-dollar, PR-friendly topics: Electronic vehicles, fields of solar panels, forests of wind turbines. That’s all well and good, but some 10% of global oil supply is burned in boilers to make heat and power for buildings. It is wildly inefficient, wildly expensive and not particularly safe. Better, cleaner, cheaper and safer methods of delivering heat and power have existed for decades. Updating the internal infrastructure of buildings block-by-block has so far been perceived by the Green community as insufficiently macro or sexy to pursue, yet addressing the boiler problem is the ultimate low-hanging fruit in any deep decarbonization effort. Food for thought.

These topics are just the proverbial iceberg-tip. Global energy patterns are spasming in the wake of the COVID crisis, and now that the initial shock is past we’re able to tease out several trends that will shape global oil for years to come. Shifts in blending patterns and trade flows. Major producers simply collapsing, never to return. And of course, the Russians are being sneaky.

All this and more will be explored in our next videoconference on July 8: Energy in a New Era.

REGISTER FOR “ENERGY IN A NEW ERA” WEBINAR

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.

DONATE TO FEEDING AMERICA

COVID-19: The Breath Before the Plunge

You can also read the State of the Pandemic series’ take on the United States, Latin America, the Persian Gulf, East Asia, Europe, and the BRICS. 

The United States is in for a rough summer.

Unlike most countries in East Asia or Europe, the United States never managed to get its caseload under control. Between the economic re-openings, Memorial Day parties, and ongoing protests against police violence, cases are rapidly ticking up. On June 24th, the U.S detected 38,672 new cases – that is not only double the low of June 8th-9th, it is already more than the United States’ original peak of new cases registered 10 weeks ago.

If it doesn’t feel like there’s an imminent crisis, that’s because back in March and April, the majority of American COVID cases were concentrated in the New York City metro. It wasn’t ridiculous for many Americans to question whether or not the virus was their problem. Not ridiculous, although certainly myopic.

Those days are gone. Today, America’s new COVID wave is truly nationwide.

Fresh – record – outbreaks exist in half the states. While the New York City area has made great strides in lowering case numbers, those gains have become overwhelmed in the national numbers by exploding epidemics in California, Texas, and Florida – three of America’s four largest states by population. Heavily rural states like Montana, Kansas, Oklahoma, Wyoming, Idaho, Oregon, Iowa, and Utah are hitting record high infection levels. Arizona now leads the nation in positive cases on a per capita basis. Within a week, it is likely to surpass even New York City’s peak infection rates, making Phoenix a necessary candidate for a severe lockdown. The American South – the most infected region overall – appears to be no more than three weeks behind Arizona. So much for heat or humidity impeding the virus.

It is worth recalling how the virus progresses. From the point of a mass exposure event (i.e., Spring Break or Mardi Gras), it is typically three to five weeks before the virus spreads sufficiently to show up in the data. At the time of this writing, Memorial Day happened three and a half weeks ago, while mass re-openings around the country average to approximately five weeks ago. From that point, it is another two to four weeks before hospital admissions explode, and then an additional two to three weeks before hospitals start reporting deaths. If this pattern holds true, many hospitals will be pushed to their limits by July, and August will be a very rough period. 

There are some (faint) silver linings. When New Yorkers grappled with the first epidemic, there were no best practices or treatments or warnings. We now know that putting everyone on a ventilator is not the best plan. We have at least one drug treatment program for COVID (Remdesivir) that shows some effectiveness. And most of all, this time, we are certain that a massive epidemic is coming nationwide.

For a country as large and diverse as the United States, making broad projections is always squishy, but there are some pretty clear outcomes here:

The infection levels and timing of the new wave suggests that the fall school semester is a no-go. It suggests what re-openings we’ve seen in travel and restaurants will reverse. It suggests the next flu season, which generally begins in October, will be the worst one on record as COVID and the flu strike simultaneously. It suggests the presidential election season will be…fraught. And it certainly suggests that Americans are stuck with COVID until there’s a vaccine.

Our advice today remains similar as it was at this crisis’ beginning: Wash your hands (with soap). Get the new flu vaccine when it comes out (in September). Limit your outings (skip the bars). Wear masks when you so venture (replace or clean them often). Stay six feet apart (don’t be a dumbass). And if you catch the virus, stay home and try to limit your household’s exposure.

The team at Zeihan on Geopolitics hosts regular webinars on the state of the world and industries from energy to agriculture to manufacturing and beyond.

Our next webinar, scheduled for June 29th, will be on China.

Scheduling and sign-up information can be found here.

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.

DONATE TO FEEDING AMERICA

The State of the Pandemic: the BRICS

You can also read the State of the Pandemic series’ take on the United States, Latin America, the Persian Gulf, East Asia, and Europe. 

Just a decade ago, the financial world was abuzz discussing the future of the BRICS – Brazil, Russia, India, China, and South Africa. This group of largeish developing countries had little to do with one another, and their inclusion with one another made little sense (like optimism for their respective country’s economic development). Their only commonality? These countries have some of the worst global COVID-19 outbreaks, with little reason to believe that they can be contained.

(Once again, big thanks to the FT for making data pulls like this possible. You can make your own comparisons here.)
 
Let’s begin with Brazil, whose coronavirus epidemic is downright bizarre.
 
Every country’s physical and economic geography is different. In the case of Brazil, a sharp escarpment parallels the southeastern coast where most Brazilians live. From a viral communicability point of view, it’s the worst and best of all worlds.
 
The worst: Brazil’s coastal cities are positioned on tiny plots of land, with population densities that exceed even the ant-like living spaces of Japan’s megaplexes. And that’s before one considers the extremely-tightly-packed favelas (slums) that sprawl up city hillsides. Social distancing? HA!
 
The best: because those plots are small, and because Brazilian coastal cities have pathetically thin infrastructure connecting them, locking down various cities suffering from outbreaks – particularly those at the bottom of the Escarpment – would provide a substantial viral firebreak at a minimal cost. All it would take to limit COVID’s spread from city to city is a modicum of responsiveness from the central government.
 
That…has not happened.
 
Brazilian President Jair Bolsonaro initially denied COVID’s existence, then derided it as a “little flu,” then condemned his political opponents for fabricating its existence to discredit him, and now has taken to leading dozens of mass press-the-flesh protests against governors and mayors who would dare COVID-response policies.
 
The data in the graphic undoubtedly understates the depth of Brazil’s pandemic by a massive margin. Initially, this was because Brazil’s near-confederal governing structure hands a great deal of policy authority to the provincial level. This complicates the gathering, collation, and cross-comparisons needed to generate accurate national-level pictures. But as of the first week of June, Bolsonaro has banned the gathering and publishing of any data that exists. The only government we are aware of that has been more militant in denying COVID is Turkmenistan, where the local dictator primly banned the term “coronavirus” from usage and called it a day.
 
Consequently, we don’t even have a guess as to how bad things really are. Even if/when a vaccine becomes available, we have very low expectations that the Bolsonaro government will allow distribution. Bolsonaro’s position flat out ends economic growth opportunities for the country until the central government’s policy shifts. Assuming Bolsonaro doesn’t change his mind and is not impeached, he will remain large and in charge until, at least, the national elections in October 2022.
 
Brazil’s COVID policies are soooo bad that they’ve done something we have long thought impossible: they have made Russia’s health policies look good.
 
It is…difficult…to know where to start.
 
During the post-Soviet Russian collapse in the 1990s, the Russian health system was arguably the sector that degraded the most. Soviet-era central planning treated most maladies with industrial-strength antibiotics. When the health system collapsed, doctors left the country en masse, and state medical guidance evaporated – but the antibiotics remained commercially available (no prescription needed). Russians took antibiotics for pretty much every malady, regardless if they were the correct drug or not, and then stopped taking the drugs as soon as they felt better. The result? Russia became a breeding ground for countless drug-resistant pathogens.
 
Security collapses played a near-matching role in the misery. Following the Soviet withdrawal from Afghanistan, the Afghan warlords turned to growing opium to earn cash. Opium – and heroin – smuggling routes spiderwebbed out from the war-torn country, sowing addiction and crime as they went. One passed through Iran, another through Pakistan, but most ultimately transited Russian territory. Consequence? Russian health professionals and demographers speak of an entire generation lost to heroin abuse. Factor in cultural norms that demand smoking like chimneys, drinking like fish, a national diet that seems entirely made of saturated fats, and the national health picture is downright zombie-esque.
 
With the restoration of central rule in the 2000s under then-and-still-President Vladimir Putin, harsh authoritarianism – complete with violent censorship – entered the mix. Are satirical TV programs using puppets insufficiently slavish to government policy? Force the program off the air and round up the scriptwriters. Are HIV statistics causing national embarrassment? Stop testing for HIV altogether. Are doctors complaining about insufficient supplies to battle COVID? A few doctors “commit suicide” by jumping out of hospital windows.
 
Officially, Russian COVID caseloads have plateaued, but keep a couple of things in mind.
 
First, Russia only has even a basic health care system in Moscow and St. Petersburg. Testing within Russia’s two largest cities is thin. Beyond them, it is nearly nonexistent. It isn’t that the Russian government knows what is happening but is lying this time around, but instead that the Russian government has chosen not to find out what is actually happening.
 
Second, Russia is extremely sparsely populated. Most Russian cities are further apart than even American cities west of the Appalachians. Russia has no national road network; the first paved road linking European Russia to the Pacific Coast was only completed in the 2000s. What Russia does have is a pretty great rail network connecting every population center, excluding the cities clinging to Siberia’s Arctic coast. This would suggest the Russian government would have a very easy time isolating local outbreaks. Stop rail traffic in and out of affected cities and BAM! Viral firebreak.
 
How many Russian rail interruptions have we seen since COVID started? Zero.
 
The situation in India isn’t much better.
 
Prime Minister Narendra Modi’s government initially denied the virus existed in India, and then obliquely supported radical Hindus who claimed drinking cow urine would grant immunity. Government responses were slow and misaligned. Even now, COVID testing in India is criminally rare. The data above represent the results of a testing system, which is the world’s lowest in per capita terms. We can’t even attempt a projection using deaths data since roughly one-quarter of all deaths in India aren’t even recorded. If we had to guess, we’d surmise that India’s actual infection rate is roughly ten times the official figures, but that’s little more than a blind stab. What government action that has occurred broadly falls into the category of “too little, too late.”
 
One exception: the central government executed a clever scheme of stamping new arrivals in prominent locations with indelible ink, encouraging voluntary two-week self-quarantine. Low cost. High impact. Creative. We like it.
 
Anywho, India’s “normal” operations generate massive health challenges – challenges COVID has undoubtedly taken full advantage of: densely populated cities with crowded food markets, cities closely proximate to one another, extensive city slums, and massive population movements between the cities and the countryside.
 
And that’s “just” the demographic and economic geography. Raw economics doesn’t help either. India’s per capita GDP is less than one-fifth of Russia, and Russia’s is less than one-fifth of the United States’. It requires rather haughty expectations to assert India should be able to manage COVID as “well” as the United States.
 
Please don’t read our criticism of India as a condemnation similar to what Brazil and Russia both deserve. It is not. It is more…fatalism. Brazil and Russia boasted geographic factors arguing for significant viral containment, but both countries chose not to act. In contrast, the deck was always stacked against India, both economically and geographically. Once the virus was seeded within the population, a virus as contagious as COVID was always going to put down roots nationwide, regardless of what the government did. In our view, the Indian government’s relative inaction is less a catastrophe, and more a recognition as to how few tools the government had to face such a massive challenge.
 
In contrast to Brazil, Russia, and India, the government of South Africa has not been asleep at the wheel. But that hardly frees the country from an intense epidemic.
 
The South Africans have been ground zero for the HIV/AIDS pandemic for approximately thirty years. While there are many things the South African government did wrong in dealing with that virus, one of the things it got right (belatedly) was an advanced public treatment system that included aggressive contact tracing. The South African government applied that skill set to coronavirus. Unfortunately, contact tracing for a high-communicability respiratory virus is a whole different ballgame compared to listing out ones past sexual partners.
 
Doubly so once one considers the living conditions of South Africa’s Black population. Most Blacks live in ghettoized conditions known as “townships,” and most of the townships have communal toilets and water sources. Somewhat unsurprisingly, the South Africans have yet to devise a functional plan for limiting COVID spread when sheltering at home doesn’t allow for social distancing.
 
Our biggest concern for South Africa is that here, COVID is likely to have one of the highest lethality rates in the world. One of the darkest chapters of the AIDS pandemic is that the Human Immunodeficiency Virus does precisely what it says. It triggers deficiencies in the immune system, which make sufferers far more vulnerable to other pathogens. One of the darkest chapters of the tuberculosis crisis is the TB bacillus often remains dormant until another infection is in play. HIV and TB often play off one another, making co-infections far more deadly than either would have been alone. The South Africans have become bitter experts on the topic. One-fifth of South African adults carry the HIV virus. About four-fifths carry TB bacillus. Now COVID has arrived.
 
The only bright spot in the South African epidemic is that unlike the Brazilian, Russian, or Indian governments, the South African authorities are at least attempting to maintain an accurate internal picture of the virus’ march. Testing is as robust as can be hoped for, considering the country’s myriad health challenges. Out of these four countries, we only find South Africa’s data reasonably accurate (probably more accurate than the United States’), and it raises the hope that once a treatment or vaccine becomes available, the South Africans will at least know where to start.

I’m sure you’ve noticed that we have not dealt with China in this newsletter. In part, it is because the birthplace of COVID is a special case that doesn’t fit well with any other narrative. (We have a bit on that in our East Asian epidemic update.)

To that end, we plan to deal with China in exhaustive detail in our upcoming videoconference on June 29th.

Our next webinar, scheduled for June 29th, will be on China.

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.

DONATE TO FEEDING AMERICA

The State of the Pandemic: Europe

You can also read the State of the Pandemic series’ take on the United States, Latin America, the Persian Gulf, East Asia and the BRICS. 

There is no such thing as “Europe.” Yes, there’s this political-economic grouping called the EU, but two of Europe’s most important countries are not members. Yes, there’s this political-military grouping called NATO, but it is functionally run from a different hemisphere. Recent developments might – emphasis on might – change this, but the Europeans aren’t there yet. 

With over 30 different political and decision-making systems, there is plenty of room to find fault with any broad assessment. But as regards the ongoing coronavirus pandemic, the fact remains that overall, Europe has been moving in the direction of fewer and fewer cases. 

(Many, many thanks to the Financial Times for providing the data interface that makes this graphic possible. You can visualize your own data pulls here.)
 
The early phases of the epidemic were harsh in many places. In large part, it was because the Europeans had, at best incomplete information from which to base their policies. For the Italians and Spanish who suffered through coronavirus’ initial assault, they were simply caught off-guard. The result? Much of Europe enacted lockdowns whose intensity and airtight nature was only surpassed by the 1984-style lockdowns in Wuhan. (In Paris, you had to apply for a government permit to leave your home to shop for food. The permit only lasted for one hour.)
 
There’s also the issue of vectors. The suspected patient zero in Italy was initially misdiagnosed and so went from the hospital almost directly to a massive soccer game, becoming Europe’s first superspreader. Most people came to and left the game via bus, enabling the virus to spread liberally. A few of those buses went to Spain, which is why Spain became the second hardest-hit country in Europe.
 
In contrast, Austria and Germany’s superspreaders were a bunch of 20-somethings at ski parties in the Alps. The Austrians and Germans not only had a bit more warning than the Italians and Spaniards, but their epidemics were also among young millennials – a group that COVID doesn’t impact that harshly. The Austrians and Germans locked down their elderly populations, ran a rigorous testing and tracing program, and more or less nipped the problem in the bud.
 
Of course, despite caseloads moving in the right direction overall, this is not over. The variation of Europe’s COVID policies to date will also define the epidemic’s future:
 
Germany is playing it safe and has retained its de facto ban on all extra-European travelers until at least August 31st. Considering caseloads in the Western Hemisphere and the Middle East show no signs of dropping, expect this date to get pushed back. 
 
In contrast, consider Portugal. Portugal is one of the many European countries suffering from a terminal demography; its birth rate crashed back in the late 1970s, never recovering, and the Portuguese economy is now a moribund mess. Since Portugal lacks the industrial base of a country like Germany, Portugal’s only growth sector is tourism. COVID killed tourism. Portugal recently released all restrictions in a desperate attempt to forestall what threatens to be an unending economic depression…which means Portugal is one of only three EU countries where caseloads are increasing.
 
Nor did everyone in Europe follow even remotely similar lockdown protocols. As mentioned earlier, the Europeans were working with incomplete information as the pandemic started, and not everyone came to the same conclusions. The British and Swedes balked at the economic damage full lockdowns would cause, and reasonably believed any effective vaccine would not be available for years. Add in that coronavirus has the highest infection rate of any public health threat since measles and a fairly low mortality rate, and both governments felt containment was a fools’ errand. They opted for management. Both decided to pursue herd immunity in an attempt to build a firewall against the virus within their populations.
 
Britain ultimately blinked, largely due to the carnage being wrecked in Italy which suggested much higher death counts than initially suspected. The Brits belatedly followed a more traditional lockdown approach. The delay landed the Brits with one of Europe’s highest infection rates as well as a lengthy plateau. It was only in mid-May that the Brits finally got COVID cases bending downward. The Swedes, on the other hand, stuck with the plan. Sweden now faces infection rates among the world’s highest, recently surpassing even the United States. 
 
The real tragedy in Sweden was that knowing what we all knew back in April, the herd immunity strategy wasn’t silly, but instead a calculated risk. The Swedes assumed a functional vaccine would remain unavailable for years, and so concluded that building immunity within the population was the only sustainable route forward. Now it appears a functional vaccine will be available before the end of 2020, with mass distribution beginning (although not being completed) in 2021. The facts as we understand them have changed. Sweden’s sacrifice may have been for nothing.

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.

DONATE TO FEEDING AMERICA

The State of the Pandemic: East Asia

You can also read the State of the Pandemic series’ take on the United States, Latin America, the Persian Gulf, East Asia, and the BRICS. 

Some good news:

Melissa Taylor (ZoG’s Director of Research) has been tracking the coronavirus epidemic – particularly in East Asia, which was COVID ground zero – with her usual precision and attention to detail. She’s brought us some (mostly) good news! In much of East Asia, the numbers have moved firmly in the right direction. Australia, Malaysia, Taiwan, and New Zealand all look great. Even Asia’s more heavily populated states look impressive.
 
The news isn’t all sparkling, of course, but the fact remains that on a region-by-region basis, East Asia is firmly in the best position globally.

(We continue to be huge fans of the Financial Times for providing the data interface that makes this graphic possible. You can visualize your own data pulls here.)
 
Now for the details.
 
Singapore is not a normal place. Roughly five million people are crammed into a single city. It would seem to be the perfect sort of place for the virus to spread. But these are five million highly educated people who appreciate their government’s wildly competent track record for good governance. When the government outlined how to crush the coronavirus, everyone did what they were told.
 
The government did not blindly make its policies. The Singaporean government understands the central position Singapore holds in global finance, manufactures, and energy trade. Part of that understanding is an acknowledgment that every major power spies on Singapore incessantly. As such, the government maintains a track-and-trace program for foreigners as a matter of course. Retooling the country’s standard counterintelligence programs for coronavirus monitoring was an easy switch that generated outsized results.
 
For a while.
 
As mentioned previously, the Singaporean population is highly skilled. But not everybody’s job requires a master’s degree. The country maintains over one million migrant laborers. Sure, some are stockbrokers, but most handle the nuts and bolts of daily urban life: cleaners, drivers, construction workers, and so on. They live in cramped dorms, not corner penthouses.
 
Singapore’s government is very effective, but effective is not the same as perfect. Simply put, the migrants slipped the government’s collective mind. Nearly three months after Singapore thought it had beat coronavirus, the city-state is suffering the world’s worst secondary epidemic as the virus rages through the country’s support workers.
 
For a country that borders the pandemic’s ground zero, Vietnam has suffered shockingly little from coronavirus. The country has two things going for it:
 
First, Vietnam’s fractured geography provides a couple of natural viral firebreaks. The country is shaped like a barbell: Ho Chi Minh is in the far south, Hanoi is in the far north, with a very thin strip of lightly infrastructured land connecting the two. Travel between the two “bells” is thin, so containing any outbreaks within a specific part of the country would be relatively simple.
 
Second, the Vietnamese government does not mess around. Vietnam is not a democracy. It benefits (suffers?) from extensive monitoring of civilians, but unlike the Singaporean techno-state, Vietnam’s system is more akin to an authoritarian neighborhood watch. This system of internal monitoring literally lets state agents go door-to-door demanding answers to invasive questions. 
 
A bit…fascist? Definitely. But this sort of near-total political command enables the government to stop outbreaks in their tracks, enabling rapid re-openings. Vietnam’s (disturbingly) aggressive tactics stopped COVID in its tracks. Now the country is aggressively seeking gaps in the manufacturing supply chains of other, harder-hit countries for Vietnam to fill.
 
South Korea earned plaudits early on for their deep, early tracing and quarantine systems, which enabled the country to beat virus cases down to nearly zero without a system-wide lockdown. But the Koreans aren’t perfect.
 
A singular early case was missed. A woman who went to church triggered a megacluster that took over a month to get under control. While South Korea has mostly reopened, individuals continue to slip through the country’s mesh of testing and tracing. Recently, a bar-hopper triggered dozens of follow-up cases, thus raising concerns of a second wave.
 
For a wildly wealthy first-world country packed with retirees, Japan has generally received poor reviews for its COVID response. The consensus is that Tokyo downplayed all things coronavirus in an attempt to preserve its hosting of the 2020 Summer Olympics. Only when it became clear that no one was going to show up, and the Olympics were postponed, did the government begin basic anti-COVID measures. There has been no lockdown, and businesses like karaoke bars remained open. Testing was, and remains, thin.
 
And yet, Japan’s caseloads never rose to mirror those of other late responders. As always, much in Japan remains a mystery, but we know that three things helped:
 
First, family sizes in Japan are tiny. Most parents have only one child, if that. The interfamily transmission that so characterized outbreaks in Iran and China wasn’t an issue in Japan. Second, while the country normally lives on mass transit, there are small grocery stores in almost every residential building, and everyone has lightspeed internet connections. Self-isolation in Japan is easy, and as regards quarantining, effective.
 
Third, the Japanese are absolutely, positively, the world’s most intense health freaks. Even before the outbreak, there was a culture of wearing face masks in Japan. All it took was a whiff that there might be a virus scare, and everyone immediately put one on. Everyone. They haven’t taken them off yet. They probably won’t until there’s a vaccine.
 
We include Indonesia, not because they have a documented case explosion, but because they don’t. We know cases in the capital and largest city of Jakarta have only been going up, but the city is now officially reopening without any meaningful tracing or testing efforts. Much has been (accurately) made of the United States’ insufficient testing; in per capita terms, Indonesia’s testings are less than one-fifteenth what the Americans are doing.
 
Add in a likely case surge due to Ramadan, and a national government response that can best be described as “in denial.” It’d be a welcome surprise if Indonesia’s infection rate is less than one-tenth of what is officially reported.
 
It might seem a little weird for a COVID update on East Asia to not include data on China. After all, the coronavirus pandemic began in the country’s Hubei province, in the city of Wuhan. However, we are not including too much analysis of China in this piece for three reasons.
 
First, Chinese data is at best unreliable, and often wholly fabricated in an attempt to make China look good. Second, the coronavirus outbreak in China is, undeniably, under control.
 
Yes, we can say the data is unreliable, and also say that China’s outbreak is no longer a big deal. The reason is simple. The Chinese Communist Party now equates COVID cases as being a threat to the CCP’s political power. China treats them with the same panicked fury that they treat the Falun Gong, Hong Kong protestors, or anyone with the audacity to suggest that Taiwan is a country. Reliable data reporting is not part of that fury; anti-viral efforts are. For example, when the Chinese discovered over a hundred cases in a wholesale food market in Beijing this week, they locked down most of the capital metro. Twenty-two million people live there.
 
So, do we trust China’s data? No, and we’re not bothering to publish it here. But, do we trust the Chinese government to act swiftly to suppress the virus? Totally.
 
Which brings us to the third reason we don’t have much China in this newsletter: We’re saving it up.

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 an 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.

DONATE TO FEEDING AMERICA

The State Of The Pandemic: The Persian Gulf

You can also read the State of the Pandemic series’ take on the United States, Latin America, East Asia, Europe, and the BRICS. . 

Outside of China, Iran was the world’s first significant coronavirus epicenter, and it is pretty obvious that tight geopolitical and economic relations among the two – reinforced by American sanctions – served as a vector for COVID’s transmission from Wuhan to Tehran. China has been stingy with accurate COVID data with the entire world, Iran included. Because of this, Iran was not able to properly prepare for the virus. As one might expect, this meant Iranian support of all things Chinese plummeted.
 
Iran is also the first country to show the limitations of quarantine efforts. As a developing country, there is only so much social distancing that a country like Iran can engage in. The Iranian economy cannot provide its workers with extensive, open-ended work from home; grocery delivery is not an option for a society still largely dependent on government-subsidized goods; Iran’s cultural and religious tradition is centered around communal gathering (like in many other countries, religious centers like Qom have been ground zero for super spreader events). Yes, the country’s anti-COVID efforts had an impact, but the surprise and speed with which coronavirus struck the country means the Iranians have no hope of being COVID-free until there is a mass vaccination program. The situation is going to get (much) worse before it gets better.
 
And that’s the good news for the region. For on the other side of the Persian Gulf, the situation is far, far, far worse.
 
As we noted in early April, the question wasn’t so much if the Arab Persian Gulf states would have a coronavirus crisis, but when. Two months later, the region’s epidemic is by far the worst in the world on a per capita basis.

(Many, many thanks to the Financial Times for providing the data interface that makes this graphic possible. You can visualize your own data pulls here.)
 
There are several structural factors at play here:
 
The Arabs of the Persian Gulf aren’t “typical” populations. For the most part, they are maintained and sustained by oil income. Their governments provide hefty subsidies for all aspects of their lives, which means many citizens don’t work. Since the local climate is the part of the world that most resembles the surface of the sun, air conditioning is a must-have. The result? Nearly everyone lives in densely populated cities that boast extensive high-rises, housing blocks, multi-generational homes, and omnipresent indoor social interaction options. Think of these as less cities, and more ginormous cruise ships that just happen to not move.
 
Of course, just because the locals don’t work doesn’t mean that there isn’t work that needs to be done. The entire region depends upon a large, poorly documented pool of foreign workers who are often confined to dormitory-style housing. Think of how workers in American meatpacking plants are brought in from Central America and boarded in bunkhouses. Think of how that makes coronavirus transmission inevitable. Now apply that model to all workers in all industries. Honestly, it is a not-so-small miracle this region’s epidemic isn’t worse.
 
Two other factors are worthy of note:
 
First, the Islamic world recently exited Ramadan. Among the many characteristics of the Muslim holy month are communal prayer, family reconnecting and feasting after sunset. Think Easter, Thanksgiving, and Christmas combined, but lasting for a month. As it typically takes three to five weeks for significant exposure events to impact COVID testing data, and that Ramadan ended May 23, expect regional caseloads to seriously explode in July.
 
Second, and perhaps most problematic, when the state pays you to stay indoors and eat, you don’t get much exercise. The region’s per capita rates of obesity, diabetes, heart, and pulmonary diseases are among the world’s highest (if not for high per capital health spending, they probably would be the highest). These are exactly the sort of pre-existing conditions that make COVID more likely to kill you.

Newsletters from Zeihan on Geopolitics have always been and always will be free of charge. However, if you enjoy them or find them useful, please consider showing your appreciation via a donation to Feeding America.
 
One of the biggest problems the United States faces at present is food dislocation: pre-COVID, nearly 40% of all foods were not consumed at home. Instead, they were destined for places like restaurants and college dorms. Shifting the supply chain to grocery stores takes time and money, but people need food now. Some 23 million students used to be on school lunches, for example. That servicing has evaporated. Feeding America helps bridge the gap between America’s food supply (which remains robust) and its demand (which coronavirus has shifted faster than the supply chains can keep up).
 
A little goes a very long way. For a single dollar, FA can feed one person for three days.

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Mexico: Triumph Over Geography

Let’s rile everyone up with an uncomfortable statement: Mexico should be a failed state. The issue isn’t cultural, political, or policy-driven, but rather, geographical. Most powers of significance share two geographic features: 
 
First, they’re in the temperate climate zones, therefore boasting reliable rainfall, warm seasons for growing crops, cold seasons for deterring pests, recharging the soil, and avoiding extreme heat and cold that wrecks health and infrastructure. 
 
Second, they’re pretty flat. Flatness simplifies the construction and maintenance of infrastructure. It means their cities can spread out, and keep land prices low. It means agriculture and industry alike can establish mass scaled economies, keeping food, power, and manufactured goods’ prices within reach. This not only boosts national power, but it also provides a backstop to help keep economic inequality-related issues under control. 
 
Mexico has none of that. 
 
Its north is a barren desert. That means agriculture is only possible by diverting the region’s few rivers. Its south is a rugged jungle, which reduces the general population to subsistence living. Plus, multiple mountain chains crisscross the country, with the two largest (the Sierra Madres Occidental and Oriental) prominently jutting up from the coast, complicating interior access to the one feature Mexico has going for it: its extensive coastline. All those mountains shatter Mexico’s people into multiple, often competing, zones.

Any of these features would be severely problematic, all sufficient enough to keep Mexico out of the ranks as one of the major powers. But all of them? Together? Across a territory as big as Spain, France, Germany, and Poland combined? With all these points, Mexico, arguably, has the world’s worst geography from an economic-development point of view. Mexico shouldn’t just be a failed state, it should exist in a degree of organizational chaos rivaling Afghanistan. 

Yet not only is Mexico not a failed state, rather it’s the world’s 15th richest country, and among the most industrialized states of the developing world. Does this mean geographical lessons don’t apply to Mexico and its people? Hardly. But it indicates we need to add more layers of information. 

First, Mexicans can read maps and thermometers. They know their country is in the tropics. Rather than staying in the tropics, the majority moved up their omnipresent mountains until they, literally, rose above the oppressive heat and humidity. Over half the Mexican population resides in a series of highland valleys and plateaus in the country’s midsection, with most living above 7000 feet. In doing so, Mexicans, at least in part, addressed some of their issues with agriculture and economies of scale and health. Other Latin American countries have followed similar paths, but none of them have proven as successful as Mexico.

Which brings us to the second layer of information: Mexico shares a 2000-mile-long border with the United States. There are plenty of historical chapters the two countries share that are, shall we say, less than cooperative. The United States defeated Mexico on the battlefield, and in the aftermath, drew the border to their own liking. As such, the United States owns the demographic and especially economic heft of the borderland. Still, the normal economic rules apply:

By imposing American security levels on the northern borderland’s bulk, northern Mexico has found itself somewhat freed of multiple “normal” stresses that plague borderlands in general (mountainous terrains specifically). And since Mexican labor is less expensive than American labor, the propensity for trade and economic integration among the two lobes of the borderland is amongst the strongest globally.

The American cities of San Diego, Los Angeles, Phoenix, Tucson, Albuquerque, El Paso, San Antonio, Austin, Corpus Christi, and Houston all sit less than 300 miles from the border – a border they are linked to by excellent infrastructure. The cities on the southern side of the borderland – the Mexican metro regions of Tijuana, Juarez, Hermosillo, Chihuahua, and Monterrey – might be culturally Mexican, but economically, they function as satellite cities of the United States. 

And because Mexican-American relations have been stable and fruitful these past thirty years, those Mexican cities have painstakingly developed and increased their local educational standards to the American norm. This isn’t simply a relationship that simply works, it works well. Mexico figured out its geography, and northern Mexico in particular decided to get in-bed with its northern neighbor. 

The third layer to Mexican success is more institutional: In the 1980s, Mexico was transitioning from single-party rule to democratic norms, a touchy, fraught process for any country – triply so for a country with as riven geography as Mexico has. Under George HW Bush and Bill Clinton’s leadership, both to expand the American economic footprints and provide Mexican democracy with a more stable footing, the United States negotiated a free trade deal with Mexico City (and invited the Canadians along for the ride). And so, NAFTA was born. 

Access to American capital and consumer markets provided Mexico with the opportunity to shift away from a resource-export-driven system into something more value-added. The results are almost unprecedented. Most developing Latin American countries are relatively closed, with most export income coming from things like crude oil, coal, coffee, fish. In the early 1980s, Mexico was no different. But now, Mexico is the most trade intensive Latin American country by a factor of three, and over 80% of its exports are manufactured goods, with nearly all its products flowing north. Hiccups and exceptions abound, but Mexico has taken maximum advantage of the formation of North America’s trade space. 

Fourth and finally, Mexico got lucky. This one takes a bit of exposition:

Normally, trucks are the dumbest way to move things from points A to B. Dragging stuff around via semi truck-towed container costs approximately twelve times more than floating them via container ship. Courtesy of the Mississippi, Missouri, Arkansas, Red, Tennessee, Ohio, Sacramento, Colombia, Alabama, Tombigbee, and Hudson Rivers (plus about five dozen of their smaller lesser-known brethren) the United States doesn’t just boast an internal, naturally navigable water-network larger than anyone else’s, but instead, a system larger than everyone else’s. 

The United States’ rivers proved a key feature in empowering America’s breakneck growth to world power in the 19th century. Not to mention, the United States’ subsequent maritime acumen proved key to the Americans’ rapid and thorough defeat of the Mexicans in the Mexican-American War of 1846-1848. (Cliff-notes version: American forces baited the Mexican army into a multiweek march across Mexico’s northern deserts, while the Americans simply sailed the Marines to the Mexican port of Veracruz and marched directly onto Mexico City.) 

Mexico lacks a single navigable river, and in moving the bulk of the Mexican population upmountain, most Mexican ports have become wildly underutilized relative to the size of the Mexican economy. In an industrialized and globalized world dominated by massed waterborne shipments, this is a kiss of death. All imports or exports must first deal with a mountain chain. Any goods part of an integrated multi-step manufacturing supply chain where goods come and go via Mexico’s ports would need to navigate such chains at least twice. One of the many reasons East Asia does so well in electronics manufacturing is because the bulk of East Asian cities are either on the Pacific Coast or, at worst, only separated from the coast by a relatively short stretch of (relatively) flat land. Mexico should not be able to play.

But it can, because the United States continues to do something monumentally stupid. 

Back in 1920, the United States adopted the Jones Act (aka the Interstate Commerce Act) which among other things, forces any cargo being transported between any two American ports to use American built, owned, captained and crewed ships – a restriction the United States declined to place on any internal transport method. The result was a century of massive investment in rail and truck infrastructure that dramatically reduced the cost of internal overland shipments and an atrophying of the American waterway system.

The Americans deliberately muffled their sublime geography’s most glorious benefits. 

Within a few years of Jones’ adoption, the Americans lost their coveted spot as having the world’s lowest internal transport costs. Today, instead of internal American shipments using waterways, Americans primarily use trucks to shuttle about over two-thirds of their internal commerce. 

If the Americans utilized their waterways like other countries, Mexico simply couldn’t compete in the American market. But if the Americans insist on doing everything the hard way, and limiting themselves to trucks…well, on that field of competition, the Mexicans are in their element.

And it shows. 

Mexico became America’s largest trade partner in 2019, a position they will not give up in our lifetimes. So to best understand what’s going on south of the border, as well as with American-Mexican economic and diplomatic relations, sign up for our videoconference on June 16 below.

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