Today’s discussion comes to you from Huron Peak. We’ll discuss one of the middle powers that’s been dealt a bad hand: Romania. At first glance, Romania’s geographic situation looks alright – a nice chunk of land near some water bracketed by the Carpathian Mountains – but zoom in, and you’ll find three very troubling access points.
These access points open up to areas that can support enormous powers, and Romania is just stuck in the middle. This means Romania is often first on the chopping block whenever those powers want to expand or branch out. So Romania is no stranger to being a cog in someone else’s empire.
Even if Romania could make peace with its extensive and mighty neighbors, a handful of smaller players are just as problematic…ahem, Hungary. So, the Romanians have been kept busy, to say the least.
Looking forward, Romania has some big decisions to make. They know Europe is in demographic decline, so there will be a power struggle for the region. They’ve seen Russia’s blunder in Ukraine, so there’s a chance they won’t have to roll over for Putin. So, a partnership with Turkey, one of the region’s emerging powers, could help carry Romania to the most significant chapter in its history.
That’s a bold statement, and yes, there are many caveats to it…but the potential to have a partner like Turkey that’s nearby (not directly adjacent) is a pretty good setup.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
With a new “10 years later” epilogue for every chapter, comes an eye-opening assessment of American power and deglobalization in the bestselling tradition of The World is Flat and The Next 100 Years.
Ahhh, Western Europe. A region with no shortage of history, but how will they move forward into a deglobalized world? Let’s just say Germany will soon be replaced as the dominant regional power.
Germany is approaching demographic collapse and major economic challenges, and its role in the EU will be greatly diminishing. So who will replace them? The most viable candidates are France and the United Kingdom, but only time will tell.
The US and Russia both have a heavy hand of influence in this region, so the power dynamics will continue to evolve as deglobalization sets in. Western Europe will continue drawing lots of attention in the coming years, so we’ll be revisiting this conversation soon.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here coming you from the South Island of New Zealand. Today is going to be the latest in our series on regional power in a post-American world. I want to go through Western Europe here. Now, the dominant power in Europe since the industrial revolution has been German. It’s got the largest population, the most land to work with.
It’s got access to a huge chunk of the northern European plain. It’s littered with navigable rivers. And so it’s always been a capital and an industrial power. And dealing with German strength or German weakness has always been the issue that the rest of Europe has turned dogged. And we are now moving into not simply a period of extreme German weakness, but absolute long term national collapse.
And there is no way that Europe can navigate that without substantial changes to the security, economic and political order. We are dealing with one of the most dramatic demographic collapses ever recorded. We’ve got some of the best data on it. We know that they passed the point of no return back in the 1980s. So even if you include one off events like the civil war in Bosnia or the migrant move up from Syria, those collectively only gave the Germans about 5% of the population increases that they needed in order to stave off decline.
It is not politically possible for them to have events like that every single year from now on in order to prevent demographic collapse. So we’ve always know that the 2020s were going to be the final decade that the Germans could exist as the modern economy. And that’s the best case scenario because we’re also moving to a world where international connections are worse.
And the German economy, because it’s so old, because the average age of the population is in the mid fifties already, they can’t consume what they produce. They have to export it. And as international trade becomes more problematic, especially as the Americans and the Chinese both become more nationalistic on economic issues, the entire German model is facing collapse for geopolitical as well as demographic reasons.
So we need to start thinking of the German space differently, not as kind of a self moralizing, hypocritical position like they have for the Russians. The Chinese during the last couple of American administrations, certainly not as a military superpower that requires people, but instead as something that if you wanted to continue to exist, you have to pay for it.
Basically, Germany is devolving into a much larger version of Greece, and the cost is going to be necessary to maintain the German nation in the German state is an order of magnitude bigger than what the Europeans have paid for the Greeks to continue to exist at this point. And since it’s the Germans that have paid for the Greeks to exist, it is unclear who, if anyone, has the interest or most importantly, the capacity to pay Germany to continue to exist.
That is it. A city can only be made at the highest strategic decision points in Paris and London and in Washington. And I can tell you right now, none of them are really grappling with that issue at this moment. The most likely outcome in the short term, next five years, the Germans will no longer have the financial and economic capacity to pay for the European Union.
And they have been the single largest funder of the EU and its predecessors since the very beginning. And as Germany goes from a half country to have not country, the entire fundamental basis of the European Union crumbles in a day. We are in the final decade of not just the German economy, but the European Union as a whole, and that frees up everyone else in Europe to do something else, whether that’s good or bad, bad for them.
There are two powers worth considering in a post European Europe. The first one, of course, is France. It has the healthiest demography. It has the least complicated security issues as the strongest military. Its economy has not been integrated into Europe as a whole, much less the world. And so in a post globalized system, the French could enter a post German post global post U.S. competition with absolutely everything they need to be a very successful regional power.
Their first issue, of course, is going to be the management of the German decline and whatever the post German space looks like. But they’re going to have their fingers throughout the entire periphery of their interests. The second country that matters, of course, is the United Kingdom. The demographics are significantly better than Germany, although not as good as France.
And of course it’s an island. So just like the French, they never really integrated their economy into the European space. And in the post Brexit world, they are bit by bit, by bit by bit, trying to explore what it means to be an independent middle power. The end result for the Brits was always going to be the same.
Doesn’t matter what the politics and let them tell us it’s always going to be a partnership with North America and most notably with the United States. But until the Brits come to that conclusion publicly, they’re kind of in this limbo. And that buys that most precious of commodities for the French time because the Franco British competition for the last 300 years has obviously been intense.
And until such time as the Brits realized that they have to work hand in glove with the Americans from now on, with the Americans being the hand, they are going to be ceding incremental declines and the geopolitical position from now on. Now, one thing that the Brits have always had but allowed them to punch above their weight is their navy.
They’re an island nation. They have to have a Navy. That means they can choose the time and the place of the competition. That’s always served them well. And in the last few governments, because it’s it’s Britain, you can’t say the last two. It’s like the last 90 now would like Italian style government stability the last several governments have finished work on their Queen Elizabeth class aircraft carriers, which are two of the world’s 14 super carriers, are two of two, a 15.
The problem is, in order to get those out of drydock, they had to get the rest of the military. And so the Brits no longer have a strong enough navy to provide an escort ring for the super carriers. So the only way that their super carriers can sail as part of an American combat group and the Americans really don’t see the point and the Brits making a power play in northern Europe that’s going to constrain London’s room for maneuver, not to strategically versus the United States, but versus the French at a time when the French are riding high and are only going to be riding higher in the future.
Then, of course, the two countries on the outside of the matter the most. Russia doesn’t really directly impact the security of this region unless, of course, they win in Ukraine, which is all bets are off. Good as a motivator. That’s about it. And then the United States, which really hasn’t made up its mind yet, I find it unlikely that the Americans are going to try to subsidize the Germans over the long term.
I find it unlikely that the Americans and the French are going to find themselves on opposite sides of any serious discussion of anything other than cheese policy. The question, though, is whether the countries on the French periphery are going to chew moves to deal with someone other than France. In the case of Portugal, they have one of Europe’s longest standing treaties with the Brits in the case of Spain.
There’s already whispering on the edges of Madrid and Mexico City about the Mexicans sponsoring the Spanish for membership in NAFTA. In the case of Italy, you’ve got a fractured polity that has always gotten along very well with the United States. And then, of course, case of the Netherlands. They will every single time on security issues tied up with the Brits and the Americans over the French.
So there is kind of this competition for who will be the dominant regional power. It’s not that the Americans have an interest in dominating this region, but they certainly have an interest in no one else dominating the region. And that is going to make politics between France and the United States. This weird combination of friendly and rivalrous all at the same time.
For those of you who have been following French-American relations for the last two centuries, this could sound really familiar. It’s just the most recent iteration. All right. That’s it for me. Talk to you guys next time.
We all know Mother Nature saved Europe’s behind last year, but that won’t be the story this year. So, let’s break down the potential impacts on energy supplies across Europe.
With cold temps settling in much earlier than last year, those energy stockpiles won’t last too long. Europe has reduced its dependence on Russian energy, but can the continent’s new energy suppliers keep up with demand?
We will see this energy diversification’s effectiveness put to the test very soon, and any disruptions could carry global implications. This will likely serve as an ‘aha’ moment for countries that source energy from far away and poke holes in that vulnerable system.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey, everybody. Peter Zeihan here. Coming to you from Colorado. It is the 5th of December. You’ll be seeing this the following week. And today I want to talk about the weather in Europe and what it’s setting up for us. Unlike last winter, which was one of the warmest winters on record in Europe, winter has come a little bit early across the continent, and it’s a little colder than normal.
We are in roughly the thirties to the forties in Berlin at about ten degrees warmer than that in Paris, about ten degrees colder than that in Kiev. So much more typical, maybe a touch on the colder side. The problem we have, of course, is that the Europeans have gotten most of their energy from the Russian space and they’re in the process of trying to phase that down to zero.
And they’ve had a relative success in doing that. Lots of hiccups, of course, But, you know, it’s a big place.
They’ve done this by doing two things. Number one, they’ve shut down some of their heavier industry, although some of that did come back on this lot online this summer. They’ve also grabbed a lot of natural gas from the United States. The Norwegians have really bellied up to the bar with some new projects and then they’ve gone into kind of what you might consider their near abroad, places like the Middle East and basically and West Africa and just taken everything.
That means that if you are a country that used to get things from those zones and I’m thinking here about Southeast Asia or East Asia or Africa, you’re now getting your crude from further and further away. And this is going to spell some interesting things this this winter. The Europeans lucked out last year because they had such warm weather that they were able to keep energy prices under control and only had to go through a few controlled brown and blackouts if they were to have a really harsh winter.
We’re going to put to the test all the things they put into place over the last year and a half since the Ukraine war. And it’s too early to say that that’s going to be wildly successful or horrible. But what we do know is that because they have reoriented their supplies from further away now and everyone else is now having to get stuff from you and further away.
For example, the anything that the Russians are exporting right now typically goes still out to the western ports on the Black Sea and the Baltic Sea, then goes all the way around Europe and then through Suez or around Africa. But to get to East Asia, for example, which is, you know, a for almost as far actually I think it’s a little further than halfway around the planet.
It is a big place, especially when you throw in Africa anyway. It means that if there is a disruption for any reason, we’re not just looking at the Europeans having problems this time around, it could be much bigger. Something to keep in mind is that there are very, very, very few countries on the planet who have the ability to project maritime power.
The top of the list, of course, is the United States. But the U.S. is in its own energy bubble, so it’s really a non-factor. The second one is Japan. They’ve got the second largest long reach Navy in the world. The United Kingdom is clearly in the third place. The French are clearly in fourth place. And after that, it’s kind of a mix of regional navies.
The Japanese get a lot of credit for having a lot of ships, but most of their ships are these very small 2000 ton Corvettes that really can only sail a few hundred miles. So they may have a lot of vessels, but they don’t have a lot of weight and they certainly don’t have a lot of reach. So in any scenario where there’s not enough energy, either because of a disruption somewhere or a strike or a war, the Europeans are perfectly capable of using their regional navies.
And I’m here thinking like the Spanish navy, the Turkish Navy, the Italian Navy, in addition to the French and the Brits to go into their near abroad and ensure the oil and the natural gas comes to them. And it helps that the United States isn’t going to be a security problem from an energy point of view, and it helps that Norway is hooked up by pipe.
No one else has that. So if you have a disruption, the United States is fine, the Europeans are fine, and the Japanese have the reach and the friendship with the United States to make things happen. No one else does. So we’re now entering a situation where harsh winter anywhere in the world can generate an energy crisis or a military conflict anywhere in the world can generate an energy crisis, or a political spat anywhere in the world can generate a energy crisis, and it makes for a much more vulnerable system because it’s not like you can go next door.
You now have to go several countries away or maybe even a couple of continents. And for most of the world, that has never been an option. And for the countries where it is, they’re the ones that have the military to make sure it works. So it’s not so much that I am worried about Europe this winter, although I’m not not worried.
We haven’t put any of this to the test. I’m worried about everybody else because the Europeans have the capacity to use multiple tools to try to address their problems and they’ve got allies to help. No one else can claim that.
The Netherlands has recently undergone an election of its own, so let’s look at the incoming coalition and how it will impact Dutch politics.
In the Netherlands, voters cast their ballots for a party rather than individuals, giving them a multi-party system with countless coalition possibilities. Geert Wilders will likely lead the incoming coalition, but bringing together at least four parties is no easy task. All that to say, Wilders will have to compromise on some of his more extreme ideas if he wants to build this coalition with any semblance of speed.
The Netherlands has long operated as a broker for Europe. The previous PM, Mark Rutte, played that role perfectly, but I’m not as optimistic about Wilders. The longer it takes to form his coalition, the more the plot will thicken…
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Morning, everybody. Peter Zeihan here coming to you from a chilly New York City in Central Park. We’ve had a fresh election in the Netherlands, which looks like it’s going to generate a couple of interesting effects. So I thought it was worth talking about it. Specifically, the outgoing government of Margaret Ruther is now giving way to an incoming coalition that will be led most likely by a guy by the name of Gert Viel.
There’s who’s got frizzy hair. He’s oftentimes called the Dutch Trump because of his views on immigration and other countries in general. It’s nothing like that. This is still very Dutch, which is to say center, center right. Fairly calm politics. But a lot of people are worried that this is going to break a lot of European issues, perhaps causing complications for Ukraine policy and the short version is we’re just not there yet.
The Netherlands has a very different electoral system for the United States. So in the United States, we have a first past the post single member district system, which is a fancy way of saying that when you go to the ballot box, you vote for a very specific person who’s going to represent a very specific group of people in a delineated geographic area, whether it’s your state or your district.
That’s not how it works in the Netherlands and the Netherlands, you go and you vote for a party. And if a party gets 30% of the vote, as Wilders party did, they then get 30% of the parliamentary seats. This is an interesting system that allows for maybe a little bit more of a pure democracy system, although you don’t know who you’re going to necessarily get because it’s on a party list.
And if they get 30 seats in the top 30 people on their party list, get the seats. But the Netherlands has a weird way of doing things because they really don’t have a floor. There’s 150 seats in the parliament. And if you get 1/150 of the vote, you get a seat, which means you get a lot of parties.
And I think there’s going to be something like 11 in the new parliament. So Wilders isn’t simply going to be prime minister. He first has to cobble together a coalition of a minimum of four parties in order to then establish a government. This is a lengthy process, even when everybody sees everything from the same point of view. So the outgoing government of Ruth, for example, took them nine months to build their government last time, I think eight months the time before that.
So we are not going to see a new Dutch government this year. And it’s entirely possible, considering how actually I say this personality challenge to builders is that we might not even see it next year. Now, you shouldn’t necessarily expect to see huge shifts in policymaking in the near term because some of the builders more from the Dutch point of view, egregious ideas are going to have to go away if he’s going to build a coalition.
In addition, there’s really not a lot of argument anywhere across the political spectrum in the Netherlands about Netherlands place in the world. The Netherlands is pro-American and pro-British and pro-European for reasons that are different from a lot of other countries. Specifically, they’re pro-European because they don’t really like the Germans or the French that much. And the general idea is if you can get the French and the Germans into an institution where other members can kind of dilute their influence, then everybody wins, especially the Dutch, because they handle the trade between the French and the Germans.
They like to keep the Brits close because it’s, again, a hedge against Germany and France and let’s keep the Americans close for the same reason. Keep in mind that the Netherlands is a small chunk of territory, roughly the size of this state here, and as a result, it has a little problem with the fence because it’s completely flat and it’s its borders are completely exposed to its neighbors.
So it’s never going to be a military power. All it can hope is to entangle as many other military powers into its own interests so that the French or the Germans don’t just run roughshod across them. The problem we’re going to see is not with European policy per say. It’s not like things are going to change in the Netherlands, it’s just that for the next several months, maybe up to a year, we’re not going to have a government in the Netherlands that’s capable of playing what has traditionally been the other big role of the Netherlands in Europe, and that is of broker because the Netherlands is either considered the smallest of the large states or
the largest of the small states. They’ve got their fingers on a lot of pots, and it allows the Netherlands to broker deals with parties across the spectrum on economic size and wealth that you wouldn’t expect a middle power like the Netherlands to be able to pull off. And in this, Mark Rutte, that has been key. There’s been a lot that’s happened under his leadership.
He came in at the tail end of the financial crisis when the Greek bailouts were getting really crazy. He helped participate in the solidification of the expansion to include the new members. And now he’s played a central role in the next wave of expansion that is supposed to include a number of countries in the former Soviet sphere of influence up to including Ukraine.
And he’s been doing this while being a relatively reliable spokesman for American and British interests in Europe, as long as it doesn’t hurt Europe. So this sort of balanced, integrated player has been very, very, very important. Everything that’s gone down in Europe for the last decade because he’s been running the place for almost 15 years now, Villiers, regardless of what he says, does have a lot of experience doing this.
Yes, he’s been in the Parliament for the last quarter century, but he’s never been in a government. He reminds me a little bit of Joe Biden and that he’s never really had a big boy job. And so it’s going to take time for him to build the gravitas. It’s necessary to play that broker role within the European Union.
And until then, the French and the Germans don’t have the marriage counselor, and the rest of Europe doesn’t have their advocate of their handbrake. That’s assuming we get a government tomorrow and we’re not going to get a government for months. So the ability of Europe to manage in this environment just went down a very, very big Dutch shaped notch because the Netherlands at the moment can’t play its traditional role.
While sanctions on Russian natural gas have proven highly effective, those imposed upon Russian oil have somewhat backfired. Although oil exports have dropped by 10%, several factors have skyrocketed Russia’s earning potential.
Oil is much easier to transport than natural gas, so getting it to destinations is of less concern. There’s also a global shortage of heavy sour crude – the kind that comes from Russia’s Urals – which has driven up prices significantly. Europe’s sanction strategy targeted financing and insurance, but Russia has circumvented these restrictions via state-sponsored insurance programs and old tanker purchases.
Thanks to Europe’s phased implementation of sanctions, the Russians had ample time to find loopholes and undermine this system. The Europeans may have to come up with some more “direct” tactics to put the hurt on the Russians.
This situation remains unpredictable; we could see Ukrainian strikes on Russian ports or even some insurance claims will stir the pot. But If oil sanctions were as effective as the sanctions on natural gas, the dynamics of this war would be fundamentally changed.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here, coming to you from Colorado. Now, yesterday, we talked about how some of the European sanctions on the Russian energy industry were working much better than expected. So now let’s kind of flip that and talk about some that are not doing nearly as well. That has to do with oil, whereas with natural gas, Russian exports to Europe are down by 85% and Russian production is now the lowest in 40 years.
Oil has dropped off a little bit, about 10%, but the Russian ability to profit from it has skyrocketed senior earning significantly more now than it did before the war. And it’s worth explaining why in the sanctions are out of the reason why the Russians are doing so well in that field. So there’s three things to keep in mind when you’re talking about oil markets.
Number one is the physicality of things. Natural gas is a gas. It’s hard to move from place to place. And you pretty much have to have a dedicated piece of physical infrastructure, typically pipeline, to get it from A to B. You can’t chill it down in a liquefied form, roughly negative three degrees, and move it via specialized tankers that unload in specialized facilities.
But those things are so specialized, they’re not really they don’t allow for a really liquid market. Oil’s different. Oil is a liquid and it is a liquid at room temperature. So you can put it into pretty much any type of container shipping device that you want. And while the Europeans did, for the most part, stop taking oil from the Russians in perfect form, the Russians are able to export over half of their oil by water to be a tanker.
And they were even able to redirect some of the piped crude to their ports. Which brings us to the chemistry problem. Not all crude is the same. In the world of natural gas. Methane is methane is methane in the world of oil. There’s different varieties, light and sweet versus heavy and sour. Light and sweet has very few contaminants and it is very thin, almost clear where the heavy sour is thick and gooey might even be solid at room temperature and is black and viscous.
And different refineries around the world are designed to run on different grades of crude, sometimes even specific crude types from specific fields. And that makes it a little bit more of a mismatch problem that natural gas just doesn’t have to deal with. So, for example, in the markets right now, there is an oversupply of light sweet on a global scale, primarily because of the United States.
U.S. shale crude is different from most crude in that it’s trapped at the moment of geological formation. And so it never migrates through the rock strata. And it’s the migration that picks up the contaminants that makes crude heavier and more sour. Well, American refineries are designed to run on heavier and sour, so that light sweet is kind of stranded in North America.
So it has to be exported by tanker to the wider world. And so light sweet crude is trading at a significant discount to a lot of global crude grades, despite the fact that it’s considered high quality. On the flip side, we’re running out of heavy sour. Venezuela used to be a massive producer, and it’s found ever more creative ways to commit national suicide.
The Mexicans used to be a reasonably large supplier, and they’re keeping their crude at home because their economic development has demanded more energy. And the world’s single largest crude grade of all is none other than Russia’s Urals blend, which is a medium sour, medium heavy blend. And so taking even small amounts of that off the market has had an outsized impact on pricing.
And so even though there’s supposedly a price cap that the Europeans set at $60 a barrel, that anything above that the Russians shouldn’t be able to sell it. Right now, Russian Urals is going for 85. And there’s not much the market can do about it. Which brings us to the third point, which is the legalities and the niceties.
When the Europeans stop taking the piped oil and started to slim down, they’re taking of the tanker, shipped oil from Russia. They used their ability to influence global financing, global insurance, specifically saying that anyone who delivered or participated in the supply chain that took Russian crude and if it was sold above $60, they wouldn’t be able to qualify for any European based insurance or financing, trade, finance included.
And since that is the source of the vast, vast, vast majority of the world’s maritime shipping insurance, the thinking was that that is going to discourage anyone from doing it. Well, they also didn’t want to destroy their own economies when they were doing this. So they phased all this in over the course of the year. And it turns out that that was enough time for everybody who was interested to set up alternative systems.
So India, China and Russia now all offer state sponsored insurance programs for maritime shipping. And the Chinese and the Russians in particular, have gone out and purchased huge numbers of really, really old, decrepit tankers and are running them kind of under the radar, turning off the transponders so they can’t be tracked easily. And those two things together has allowed a huge amount of Russian crude to sail the world’s oceans without any even tangential connection to the European financiers that it was thought would be able to keep all of this stuff off the market altogether.
The very act of providing the market with time to adjust gave the market time to adjust for all players. And so the stuff is still coming out now. If the Europeans and to a wider degree, the West in general is going to take an ax to Russian crude, they’re going to have to get a lot more creative or they’re going to have to act a lot more directly.
Keep in mind that roughly 1 million and a half of barrels of crude every day Russian crude are flowing out of the port of Morse on the Baltic Sea and another million and a half on the port of overseas on the Black Sea. And as long as the Europeans are not willing to take direct action against that, and they definitely have the military capacity to do so, should they so choose this seems like it’s going to keep flowing.
About the only potential fly in the ointment there is on the Black Sea, and that the Ukrainians have now said that they are willing to attack targets in Russian ports. Now, since they made that threat about five weeks ago, now they haven’t acted on that threat, even though their supposed deadline now has expired three weeks in the past.
But it’s probably going to take some sort of military action by someone to remove this from the market or one other possibility, as we have some sort of mishap where those insurance claims get called upon and the Indians and the Chinese and the Russians who have never offered these insurance plans before now will probably find themselves in arbitration almost immediately when they try not to pay.
But that’s a series of if then statements that are impossible to predict at the current moment. Honestly, I’m a little surprised it hasn’t happened by now, considering everything that’s gone down in the Ukraine work. But that is where we are. So Europeans natural gas working better than expected will not working nearly as well as expected.
Most of Europe has been working to reduce dependency on Russian natural gas, and boy, did they deliver. Russia’s natural gas state monopoly, Gazprom, has just reported its lowest output levels since 1978.
Sanctions targeting piped natural gas have effectively cut off supply to Europe, and the exisiting infrastructure cannot be easily redirected. While Russia has alternative natural gas sources and facilities, the limited workforce and technical challenges make these options difficult to maintain.
European sanctions are working well, and these efforts may permanently sever ties to Russian natural gas with little impact on their own systems. The Russian natural gas industry is facing an unprecedented fall from grace, but not all industries have been impacted equally…
Oil, however, is a completely different beast. We will deal with that tomorrow…
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everyone. Peter Zeihan here coming to you from Colorado. And the news today is that Gazprom has announced its full year output levels. Gazprom is the Russian natural gas state monopoly, and it is the lowest that it has been since 1978. So. Well, pre-dating the Soviet collapse. And the reason is pretty straightforward. The Europeans have tried to cut their dependency upon Russian natural gas to zero.
And at least in terms of the piped natural gas, they’ve been pretty successful. Now, this is something that is not exactly a shock to people who are familiar with the industry. There are many aspects of the sanctions that are working better than others. This is one of the ones that definitely working better. And the reason is the nature of natural gas itself.
Natural gas is a gas, and it takes a specialized system to produce it, to transport it, and to export it. And if there is a gap anywhere along the system, whether it’s insurance or the pipes or the pumps or the legalities or whatever it happens to be, the whole thing stops and it can’t easily be redirected. And in the case of the Russian stuff that goes to Europe, almost all of it comes from an area called Uruguay, which has been in production now for a half century, goes down a couple thousand miles of pipes through Ukraine and Belarus, into Poland, Germany, Slovakia, Hungary and the rest.
And since this can’t be redirected. When the Europeans stopped taking deliveries, the Russians had to, bit by bit by bit, shut everything down. There are other natural gas options that the Russians have. There’s some that comes from eastern Siberia, well east of the Urals, that goes south into China. There are a couple liquefied natural gas facilities, one on Sakhalin Island, primarily, which goes to Japan and one of the small peninsula, which primarily gets shipped to Europe.
And those are still working mostly. But we should expect even those to go off line in the not too distant future. The problem is, is that those other facilities, the Yol, Yamal, LNG, Sakhalin, LNG, and it’s called Comvita, which is a field in the general vicinity of Irkutsk out near Lake Baikal. Those are all much more technically challenging, and the Russians didn’t do any of the work to bring them online.
That was almost exclusively done by foreigners with British major BP being the single largest player. But the Japanese Mitsui Mitsubishi are involved in Stockland as well as ExxonMobil, and most of those companies are now gone. The Japanese are still involved in Stockland, but ExxonMobil and BP are just cut their losses and left completely. And the Russians do not have the technical skills necessary to maintain those projects in the long term.
As for whether or not the Russians can come back, you know, that’s an open question. The Russians used to be the best in the world when it came to ice production and tundra production. But that was in the Soviet period. And the Soviet industrial educational system collapsed around 1985 and the Russian birthrate collapsed in a similar timeframe. So not only do they have a significantly fewer people who could theoretically be trained up in engineering the system that trained them is born.
So the youngest people who have the full suite of, say, petroleum engineering and reservoir management experience are now in their early sixties, and there just aren’t that many of them left. And for the last 20 years, most of the meaningful maintenance work that has been done in places like here in Hawaii, most of the worked on improving recovery rates has been done by foreigners with BP and ExxonMobil and to a lesser degree, the Germans and the Dutch being the major players.
That’s all gone. So Uruguay being a mature zone could probably be brought back as a significant production zone if you applied shale technologies in mass. But as the Americans have shown, shale works in areas that are relatively close to population centers because it requires a significant amount of labor. And it doesn’t work very well in places that freeze solid because you need a lot of water.
And Uruguay is a thousand miles from anything that matters. So that will probably never come back online because the Russians can’t do it themselves. And the technologies that might allow it to work simply are inappropriate for the geography in the case of exports to Europe. They are now down by 85% compared to the start of the war. What is left is just a trickle that is going to three countries Czech Republic, Slovakia, Hungary, who really don’t have any alternatives to taking natural gas supplies from the Russians, which is one of the reasons why Hungary, Slovakia and to a lesser degree Czech Republic have been the three countries that have been most opposed to the sanctions
regimes in general, and most of the exceptions that have been carved out of the sanctions regime involve those three countries. That’s not going to change this year. That might start to change next year as the Europeans are building up lots and lots of lots of interconnections so that they can cut their links to Russia. Natural gas for good.
And when that happens, all that will be left of the Russian natural gas industry is what’s going through the domestic markets. And perhaps cyclin LNG because the Japanese are involved there. And that’s completely separate political question. But that is crazy because you’re talking about the world’s largest producer and largest exporter of natural gas vanishing from global markets in less than four years.
And that is absolutely unprecedented. Honestly, it’s more than a mild shock that the price shocks that the Europeans have felt at this point have been so mild. They really have been able to bring in liquefied natural gas from other suppliers, most notably a Persian Gulf in the United States. This has put a lot of price pressure on everyone else who used to get natural gas from those locations.
But to this point, I got to hand it to the Europeans. They have put together a sanctions regime that at least in part, is doing exactly what they hoped. Jeremy. Russia now exports, cutting Russian income without unduly shocking their own system. I honestly did not think they could pull this off, but so far so good.
The fate of the European Union will likely be decided in the coming week; if that doesn’t pique your interest, I’m not sure what will.
The meetings are set, and there’s plenty on the docket; now it’s time for the peaceful EU that has existed since WWII to face the music. To keep up with the times, the EU must rework its rule of law, fix the corruption issues, move away from its focus on agricultural subsidies, and eliminate single-member vetoes.
Once those issues have been addressed, admitting new members – primarily those under Russian threat – will help the EU balance its economic and military strengths.
The EU is a square peg trying to fit in a round hole, and if it can’t round out those edges, its 27 member states are in for a shit-storm.
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey everybody. Peter Zeihan here coming to you from Cape Cod, where we have to talk about the EU, European Union. You use a group of states, 27 of them right now, who have kind of thrown their lot together to form an economic grouping so they can economically be a bigger power on the world stage. And they’re starting to discover that economics without military power have a problem.
So they’re looking to their east, and they see a whole lot of states that are either directly threatened by the Russians are at war with them, like, say, Ukraine, and they’re coming to the conclusion very quickly that if they don’t let these countries into the EU, it’s going to actually cost them more the long run. So on the 5th of October, they are meeting with all of these governments to see what they can do.
And then on the following day, all the Europeans are meeting without the potential new members to figure out what they need to change about the EU in order to let these countries in. The issue is the identity of the European Union has always been a peace project in the aftermath of World War Two. They tried to create a Europe that was United, free and at peace, and it broadly worked.
But that environment is now gone and things need to change. So the biggest problems they have, or there’s two big ones. Number one, a lot of these states have weak rule of law and are fairly corrupt. And number two, a lot of them are heavily agrarian and courtesy of some of the evolutions of the EU early in its development.
Until very recently, over half of all EU funds were given as agricultural subsidies. That’s down to about a third now, but still a huge chunk of the budget. And all of these countries would basically absorb every scrap of cash that the EU would have. In addition, EU decision making is founded on national vetoes for any sort of big issue like enlargement or taxes.
So tiny little Greece can veto, for example, Greek bailout terms that they don’t like, which has led to the organization kind of being an institutional pygmy when anything real is involved and they tend to squabble about the most irrelevant things, such as, say, cheese policy. So if this is going to work, if the EU is going to matter, if the EU is going to survive, a lot of this needs to change and it’s not necessarily the countries that they’re looking to admit that need to do most of the changes.
They need to get rid of a single member vetoes, which means countries like France can’t shape the union to their liking anymore. They probably do get a little bit softer and things like rule of law and corruption, which is going to be of a problem because there are already countries in the EU that are backsliding quite a bit with Poland and Hungary being at the top of that list.
And they have to change the financial system so that it’s not just all going to relatively nonproductive of farmers or to big conglomerate farmers in places like Ukraine. So this is one of those situations where the world that the EU was built for doesn’t exist any longer, and they’ve got to decide if the EU can change in order to adapt to that world and shape it on the other side.
And we’re probably going to have a really good idea about that in less than a week. All right. That’s it for me. See you guys next time.
We’re continuing our conversation on China’s inability to govern itself, and this is the cherry on top of it all…China restricting the export of metals used in greentech and semiconductor tech to the United States.
If you’ve followed along for a while, you know that the US doesn’t have to worry about rare earths, but Germanium and Gallium don’t fall into that category. Spoiler alert – I’m not too worried about these either.
While the Chinese may dominate the production of these metals, it can be attributed to subsidies and no one else wanting to do the ‘dirty’ work. There’s nothing uber challenging about the process; it just requires someone that’s willing to get their hands dirty.
As the bilateral relationship with China grows more hostile by the day, knee-jerk reactions like this material export ban will do nothing but encourage Americans of all political stripes to cut ties. Ironically, China has become the biggest promoter of the US moving as fast and far away from Chinese dependency as possible.
If the Chinese really want to start a material input war, they might as well start the countdown sequence because they would be f****d.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey, everybody. Peter Zaillian here. Coming to you from extremely foggy, Colorado. We are continuing kind of a two part one here and something that’s going on with the Chinese and their inability to govern or enter in negotiations. So the new news from the 5th of July is that the Chinese are restricting exports of a couple of materials to the United States, materials that are used in green technologies and semiconductor industry, specifically germanium and gallium.
Now, for those of you who’ve been following me for a while, you know that when it comes to things like rare earths, I’m really not concerned because all we have to do is kind of turn on the processing, the capacity that we’ve already built. And then within a few months, the Chinese suppliers don’t matter at all. This doesn’t fall into that category. Gallium and germanium are not rare earths. They’re co-produced with other or so. It’s not that the extraction is particularly difficult, but this is something where we would have to build up the processing capacity first before we can get around this being a problem. I still don’t think it’s a major problem for two reasons. Number one, for people who are willing to admit something that’s becoming increasingly obvious, the bilateral relationship between the United States and China is hostile.
It’s becoming more hostile by the second and the incapacity of the Chinese system to even enter into meaningful negotiations means it’s only going to get worse. You know, part of the issue is that Chairman Ji has so purged the system that China is not even capable any longer having good faith negotiations. And even if it was capable of good faith, it couldn’t handle the technical details because Chairman, she would have to do it personally and they would have to implement it personally because he’s purged the system throughout China of anyone who is even marginally competent. So the capacity of China to even act as an actor, much less a good faith actor, is pretty much fallen away. Which leaves us with things like this germanium and gallium band, because this is like knee jerk grade D-minus, not even freshman level economic coercion. The Chinese said flat out that this was a hostile move designed to punish the United States and that more was coming.
But when you look at what’s going on, you’ll see that it’s not something to be all that worried about. Now, Germany and gallium, the Chinese, based on whose numbers you’re using, produce between 50 and 80% of those two materials. And yes, the United States does have a weakness in terms of processing and access, but a few things to keep in mind. First of all, germanium is a byproduct of zinc mining and zinc refining, and zinc production globally is pretty robust. Yes, the Chinese are the biggest player, but they’re also the biggest user. So if you were simply to add some processing capacity at a half a dozen places around the world, maybe a couple of the United States would be nice. That would solve itself. Gallium is a byproduct of aluminum production, specifically the first stop of aluminum production where you turn bauxite into alumina. That is also done in a number of places. The reason that the Chinese dominate the production of these two micro materials is that it’s a little dirty. And so the Chinese have to subsidize the production about specific sets. There’s nothing expensive or technologically competent or even particularly time consuming about building replacement capacity. And so we might have some pressure for a few weeks to a few months as people kind of sink in how serious the Chinese are or not about these bans. But replacing those materials is not particularly hard. Second, I would argue that this is a good thing that the Chinese are using a complete lowball flunky, incompetent measure of intimidation because, you know, Americans are going to blow this out of proportion. Things like the IRA and the CHIPS Act were rare. And for a third one that is specifically about strategic materials production, and this plays right into that political drama. You’ll have Democrats and Republicans falling over each other in order to put the money forward and put in regulations to encourage these productions within the North American system of the Chinese have really proven to be very helpful in that. And third, and most importantly, if the Chinese really are serious about an input war, oh my God, they are fucked because 90% of the world’s semiconductor sector capable silicon comes from North freakin Carolina. And so if we’re really talking about a materials war as part of the struggle for the digital age, they’re not going to have computers because they can’t get access to the raw materials that are necessary in mass to make the most basic technologies that make air run, and that’s semiconductors.
So this is not something where the Chinese have any more than a passing advantage on a couple of micro materials that are easily to produce in other places. And by doing this in this way, in this in-your-face wolf warrior way for something that ultimately is easily replaceable, is probably the most effective way that I can think of, of getting the United States past dependency on the Chinese in general and honestly destroying the tech sector in its entirety.
Now, there’s some political decisions that have to be made in the United States on both sides of the aisle, on Capitol Hill, in the White House, and on and on and on. But the United States is in the mood for this, the competence discussion now that we’re entering political season for the next election cycle, is who can be most anti-Chinese? It’s just a question of whether or not you’re going for hopefully or were derisking or reinforcing. I mean, everyone has their own preferred term, but the bottom line for almost everyone is how to end the dependency. And the Chinese are really being very helpful in encouraging us to move that forward.
The news of the day is that the Chinese have canceled their upcoming summit with EU foreign minister Borrell. You all know I’m less than pessimistic about China’s leadership as of late, and this is just icing on the cake…we’ll talk about the cherry on top tomorrow.
As most countries have discovered over the past few years, reading China is incredibly difficult from the outside. The US got a pulse check on Xi and his government when Secretary Blinken visited a few weeks back. Unfortunately, the EU won’t be getting a behind-the-scenes look.
This summit was an attempt by the Europeans to rework their relationship with the Chinese, but Xi’s cult of personality makes navigating that conversation nearly impossible…especially with how many layers make up the European bureaucratic system.
Regardless of the EU’s goal with this summit, no meaningful conversation would be had. So given a choice between a wall of hostility or canceling the meeting…cancelation was probably the best option.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.
Hey, everybody. Peter Zeihan here. Coming to you from a place in Colorado that it doesn’t really matter where I am because you can’t see the damn thing anyway. Today is the 5th of July, and within the last few hours the Chinese have flat out canceled the upcoming summit with the EU Foreign Minister Borrell. For those of you who have been following me for a while, you know that I’m not very impressed by the quality of China’s leadership of late Chairman Xi Jinping has established such a cult of personality that no one will bring him any information.
He’s shot the messenger so many times and purged the system so thoroughly that anyone across the entire country who is capable of independent thought and is willing to share independent thoughts is dead, imprisoned, exiled or worse. And as a result, the government has become a one man show. If she doesn’t say that it’s going to happen, it doesn’t happen.
And that means whenever there’s any sort of adjustment that is necessary for the ship of state at any level, everything gets frozen, either in a cult of personality where it just becomes this apologetic, scream of blind, idiotic Chinese nationalism or things just don’t happen at all. And that’s exactly what’s happening with the EU summit. And I think the best way to compare this is to what happened to the Blinken summit.
Now Tony Blinken is the American secretary of state and a couple of weeks back he went to China and it was the first meeting of anyone of substance in the United States with anyone of substance in the Chinese system. Since before COVID, the Chinese have been in lockdown for most of that time. And during that time, he completed his cult of personality and his purges and removed everyone who’s capable within the entire system.
So it was really hard for the United States to get any sort of read on what was actually going on in the country, because no one in China would say anything, because no one in China knew anything or had any instructions. So it was worth Blinken going to China just to kind of take the temperature of the regime and reading the tea leaves.
And from what I’ve heard from folks in Washington, what happened was just there’s a complete stall in government policymaking right up to and including the foreign minister. And knowing that is really useful for the United States if China is completely incapable of governance, then you should expect to see a mounting series of ever more serious foreign policy and internal policy disruptions, mistakes and collapses.
We’re seeing some of that. We’ll talk about another one of those with the next video as regards to economic issues. But back to the Europeans, the Europeans are in the process of trying to rejigger the relationship with China and they’re trying to find a third way. The first way is what they’ve been doing so far, where they just kind of roll over, let the Chinese do whatever they want.
The second one is the more American style, which is a little bit more in-your-face and more direct and confrontational, but trying to find something in the middle and it’s not clear that there is a path there. But, you know, the European thing is to try for a third way on everything anyway. Now Borrell, like the European Foreign Minister, doesn’t go anywhere alone.
There is a number of representatives of the Commission, there’s representatives of the national government. There’s a small fleet of bureaucrats. One of the things that most foreign powers find really problematic and frustrated about the Europeans is everything is about the EU bureaucracy and going through layers of approval that involves the French and the Germans and everybody else, and that’s before independent countries put intelligence agents as part of the delegation, especially in the case of Germany and France and Sweden and the Netherlands and Denmark and Romania and Belgium.
And I’m sure forgetting a few of the high points that Europeans are pretty good at this. But mostly you’re talking about a small army of bureaucrats there to renegotiate every possible bit of minutia that makes up the relationship. This is what makes Europe go, the bureaucratic minutia that allows them to kind of act as a sovereign country, like a single country, but mostly is about creating a web work of relationships and inter linking bureaucratic regulations in order to stabilize the relationship.
If you’re not European, this is frustrating as hell. If you are European, this is how we make the system work. And there is nothing about that system that works with a cult of personality where only one person can make the decisions. So regardless of what the goal of the Europeans was here, there was no way that the Chinese system was capable of engaging with Europe competently, because there’s no way that one person could manage this sort of interaction.
And in the case of the Europeans, they were going to bring everything into. The case of the Chinese, they could negotiate nothing, too. So the Chinese were left with a very simple choice face. The Europeans with an American style wall of just hostility or cancel the meeting. And so they canceled the meeting, and that’s probably never going to have another one again, because for the Europeans, this is how they normally operate.
And for the Chinese, they are now completely capable of carrying out complex negotiations of any sort. And as long as that is the case, there’s no point in meeting in the first place. So we’ll be up to the Europeans, either talking with the Americans or other foreign powers or among themselves to figure out what happens to the bilateral relationship with the Chinese when the Chinese are not capable of engaging at all.
That’s going to be a topic for another day. But anyway, next topic we’ll talk about some of the economic things that the Chinese are doing in this mood of a cult of personality. All right. But.
Today’s video comes to you from the Okanagan region of BC – famous for its deep lakes, good wine, and (typically) blue skies.
We’re talking about agriculture today, specifically the ban that five EU countries just placed on Ukrainian exports. With Poland, Hungary, Slovakia, Bulgaria, and Romania dropping this hammer, I would expect Ukraine exports to fall by up to 90%.
Most Ukrainian exports used to go out by sea; now that Russia is cutting these lines off, rail is the next best option. However, these new bans will force exports to travel farther to Western Europe, requiring transfer to new rail cars due to incompatible gauges and adding a few extra “0s” to the bill along the way.
In addition to the cuts in exports, many of the processing capabilities that enabled Ukraine to move up the value-add chain have also been taken offline. With neighboring countries prioritizing local farmers, Ukraine is s*** out of luck.
There isn’t a quick fix for any of this either…unless the Ukrainian counter-offensive can capture all of the Crimean Peninsula…but that’s not going to happen anytime soon. While this is a devastating blow for Ukraine, its effects will be felt far and wide, with Egypt at the top of that list.
Prefer to read the transcript of the video?Click here
Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
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Hey Everybody. Peter Zeihan here. Coming to you from Canada’s famed Okanagan Region, an area famous for its deep lakes, it’s nice wine and its crystal blue skies. But maybe not today because it’s just as smoggy and smoky as the rest of the continent is going to be for the rest of the summer. Anyway, I want to use today as an opportunity to talk about some of the agricultural things that are going on in the Ukrainian space.
Specifically, we now have a coalition of five EU countries that have decided that they’re not going to accept any shipments any longer from Ukraine. They’ll still allow trans-shipments. So it’s not like the stuff’s completely gone now, but they’re not going to take the delivery themselves. You’ve got five countries Poland, Hungary, Slovakia, Bulgaria and Romania, all of whom are relatively significant agricultural producers for a lot of the same products that come out of Ukraine. And what’s been happening is the Ukrainians have lost the ability to do their normal export systems. Normally, they would ship everything out by water, down the Dnieper, get it packaged at a place like Nikolayev or Odessa, and then shipped out to the wider world. Or they would process it and crush it. In the case of Sunflower at home and then ship out the the intermediate product, they can’t do any of that right now. The power grid is not stable enough to do the crushing, and most of the crushing is in ports, several of which are under Russian control. And the Russians have the ability, because they have naval supremacy in the area, to prevent any sort of bulker from coming or going without their express say so.
Now there has been a deal in place that allows the Ukrainians to export somewhat. Basically the Russians insist on inspecting the bulker on the way in and the way out to make sure it’s not being used to smuggle. And that deal has basically fallen apart now. So it’s been going less and less and less over the winter, and now it’s basically defunct. And the Russians are indicating that they really have no intention of re-upping that at all. Now, this used to be 80% or almost 90% of Ukraine’s exports. You can rail stuff out. But now three problems. Number one, there’s a different rail gauge between the European Union and the former Soviet world. So that’s a problem. Know there are only so many carriages that can adjust. Number two, all of the countries that are on the edge, you know, Poland, Romania and the rest, they’re all grain exporters themselves. So when the Ukrainian stuff was coming in, it was getting dumped on the local market. Local farmers were getting quite aggro and now they can’t do that. So you can still export it through these countries to other places. But then you need twice as many rail cars that are capable of that jump, or you need a facility at the border that can shift the grain from one car to another. And those just don’t exist at scale. And now you need twice as many to get the same amount of stuff out. So all told, with these two problems in place, you’re looking at Ukrainian grain exports dropping by roughly 80 to 92%, and there’s really no way around that. The third problem is that processing stage, the Ukrainians, while always being a significant exporter of the raw stuff, also did a lot of crushing specifically for their sunflowers. Well, with that crushing now only accessible, they need to find another facility. There are facilities in all five of these countries, but they process local stuff. So once you process an agricultural commodity into things like oil, it takes up a lot less space. It’s higher value to bulk. Well, not only are the Ukrainians not able to do that now, so they get this higher bulk, lower value product, they have to send it farther. And it just takes too much effort and too much cost and there’s not enough infrastructure to support it. They’ve been trying to build out the rail system. They’ve been trying to bring in more rail cars, carriages, but it just hasn’t been enough to move the needle. And so even without the Russians deliberately attacking the agricultural infrastructure, which they are doing, you’re still looking at that 80 to 90% reduction in the ability of Ukraine to participate in the international market.
The biggest losers, aside from the Ukrainians, of course, are the Egyptians who source the majority of their imported wheat from Ukraine specifically. But there’s a large number of countries in Africa and in South Asia that source ultimately Ukrainian and to a lesser degree, Russian wheat. And we’re going to see all of them get hit to a significant degree. The question will be if we get to a point where the Russians start actually targeting shipments themselves. We’re not there yet. It’s probably just around the corner. The only way that this is going to change is as the Ukrainians get access to the water again. And that means if this counteroffensive that they’ve just launched is successful, it would have to include, at a minimum, the liberation of the entirety of the Crimean Peninsula, because most of the grain goes down the Dnieper River to Odessa. And as long as any part of that route is within range of Russian weaponry, it’s just a no go. So you’re talking about them having the Ukrainians would need to liberate the entirety of southern Ukraine and the entirety of the Crimean peninsula, and that is a very, very tall order, probably won’t happen this year, which means that any of the agriculturalists and farmers in Ukraine who get screwed this year because of a lack of export options won’t have the income that’s necessary to afford to plant next year. And assuming a runaway Ukrainian victory, it still means that Ukraine is not going to be a significant agricultural player in the world for several years. And then, of course, if the counteroffensive fails…a lot longer than that.
Well, crap. I kind of was looking for a happier topic. This is not it. I’ll try harder tomorrow. Bye..
