Russian Oil Thrives Despite European Sanctions

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.

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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.

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Transcript

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.

European Sanctions Cause Russian Natural Gas Collapse

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…

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are 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.

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Transcript

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 European Union: Will It Adapt or Die?

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.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are 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.

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Transcript

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.

China Bans Greentech Metal Exports to the US

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.

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China Bans Greentech Metal Exports to the US || Peter Ziehan

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.

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TRANSCIPT

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.

Alright. That’s it. Take care.

China Cancels Summit with EU’s Foreign Affairs Minister Borrell

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

China Cancels Summit with EU's Foreign Affairs Minister Borrell || Peter Zeihan

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

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.

5 EU Countries BAN Ukrainian Agriculture Exports

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

5 EU Countries BAN Ukrainian Agriculture Exports || Peter Zeihan

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

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..

Talking China, Apple, and Europe w/ Motley Fool’s Bill Mann

If I had a nickel for every time I’ve been asked for investment advice, I could probably retire. Since I’m not going to give out investment advice (or retire), I present the next best thing…a convo with Bill Mann from The Motley Fool.

In this interview, we discussed some guiding principles behind my investment thought process. Specifically, we looked at China’s issues, Apple, de-dollarization, and the demographic problem that the FED is keeping an eye on.

I encourage you to give the following video a listen…

Peter Zeihan on China, Apple, and Europe

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Dire Straits: Energy in Europe

Horrible views today up on the Isthmus Peak Trail in New Zealand.

Europe’s energy situation looked pretty dire last year as concerns began to mount over the impending winter season. Thankfully they dodged a bullet this year, but how many more bullets can the Europeans dodge?

The issue with Europe’s lucky streak is that none of what saved them can be replicated. Industrial demand has already plummeted, and maintaining these levels would have detrimental effects. Paying through their teeth for liquified natural gas isn’t sustainable. And unless the Europeans have Mother Nature on speed dial, they can’t expect another moderate winter like this year.

Unfortunately for all of us, current global energy supplies are likely the best they’ll be for years to come. So the Europeans need to say thanks for the extra time and head back to the drawing board to get out of this pickle.

Prefer to read the transcript of the video? Click here

Dire Straits: Energy in Europe || Peter Zeihan

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey everyone. Peter Zeihan here coming to you from New Zealand on the Isthmus Peak Trail just came down off the summit where it was a breezy, negative five degrees centigrade, complete with. What was that called again – grapple – grappling. And when that was no fun at all. Anyway, we found a nice spot with a backdrop here. I want to talk to you about what’s going on with energy in Europe now in the aftermath of the Ukraine war.

We all know that between damage to pipelines and boycotts and shut offs on the Russian side and war damage that the Europeans are using, a lot less natural gas from Russia. And Russia was their primary supplier providing the continent with about a quarter of the total natural gas. And in the case of Germany, specifically, over 40% coming from a single pipeline.

Now, for those of you who’ve been following me for a year, you know that I was really concerned that over the winter, natural gas was going to just not be available. Because if you look at historical trends when it comes to storage and pricing and usage…it looked pretty dire? And in fact, in the aftermath of Nord Stream being blown off back in September, we saw natural gas prices go up by a factor of five, six, seven. And at one point they were about $70 per thousand cubic feet. Apologies for those of you who speak metric. Most of my audience is American, blah blah blah. Anyway, but over the winter, prices have plummeted to historic lows.

Now three things have happened that have enabled that to occur and to prevent just a complete meltdown in Europe or freeze up, I guess.

Number one, the Europeans, especially the Germans, shut down most industrial demand. So they just stopped smelting aluminum and steel and stopped fabricating petrochemicals and fertilizers. That is something you can sustain, but only at the cost of absolutely massive damage to your economic system. This is more of a problem for Germany than the rest. I mean, it’s a problem for everybody. But for the Germans, the petrochemical systems that they use are fueled by natural gas and those petrochemical outputs then go to the base materials for their manufacturing sector. So by shutting this stuff down, they are now dependent upon intermediate products that come from a continent away which are not nearly as reliable and are much higher cost. So the capacity, the profitability, the sustainability of the entire German industrial model is now in severe doubt. And in the best case scenario, the Germans probably only have about two years left that they can operate like this, assuming nothing else goes wrong.

Second, the Europeans paid five, six, seven, eight, nine times the prices that they were paying before in order to tap natural gas and liquefied form. Now, natural gas is kind of hard to move. It’s a gas. You have to have a pipeline system that links production to transport, to distribution, to usage all at the same time, because storage is relatively expensive. And the Europeans were obviously dependent on the Russians for that. But if you have a lot of extra infrastructure here, you can at a point of export near a point of production. You can chill the stuff down, basically with a giant freezer tied -300 odd degrees and make natural gas an actual liquid and then ship the liquid like you would any other liquid, although specialized tanker. And then once you get it to the end destination and you can warm it back up, gassify and pump into your system per normal. And Europeans tapped the global market for that at a scale we have never seen the Europeans do before, and they paid through the teeth to do that. LNG on average costs about triple what the gas cost because of the costs of cooling and in transport and regasification. Excuse me, but it was either that or not have power. So the Europeans generally did that and that triggered a series of energy problems all around the world, especially in countries like Japan and Korea and Taiwan, who normally rely on LNG as their primary source of energy. So that was the second thing.

The third thing is they got really lucky. Temperatures for the last nine, ten weeks across all of Europe have been 20 to 30 degrees above historical average. It has been the warmest winter on record. And in that sort of environment, demand for natural gas, for heating just hasn’t been as robust as it normally is.

Now, the problem for the Europeans is none of these things are really replicable. I mean, you can’t count on Mother Nature being that nice. More than one year in a row. The Russian supplies that are piped aren’t coming back this summer, which is normally when the Europeans would refill their stocks. So the only way that they can refill them is to go back to the international market and tap even more LNG. But it takes 5 to 7 years to build an LNG liquefaction facility. So global supplies are as good as they’re going to get for the appreciable future and they could keep all of their industry offline in order to reduce demand. That might be their only option, but that comes as a critical economic cost over the long term, not just in terms of competitiveness, but the very existence of some of these heavy manufacturing sectors.

So no good solutions. The Europeans dodged several bullets this year, and they should consider themselves very, very lucky. But we are only at the beginning of a multi-year transition to what is next. And the Europeans were simply fortunate that they have a little bit more time to work on other things.

Oh, yeah. One more thing that helped the Europeans out. If you remember back to November, December and January, that’s when the Chinese were imploding over COVID. We still don’t have good numbers, but assuming that the COVID strain that the Chinese were dealing with matches what the anti-vaxxers in the United States suggested was the actual authority rate for COVID. They lost a million people. And in that period, economic activity basically crashed. So for roughly three months, the Chinese were not importing a lot of liquefied natural gas themselves. At the same time, the Europeans desperately needed whatever molecules they could get. So we had a three month period where natural gas prices globally in the liquefied market was just weird and it benefited the Europeans the most you could possibly imagine…DONE.

Building the Anti-Russian Alliance

NATO flag with a Russian pin and ammunition

Today’s video comes to you from Doubtful Sound in Fiordland National Park.

The European space has historically been disconnected. Between geographical barriers, neutral countries, and bloody history, that shouldn’t come as a surprise. Now that central and western Europe is forming a coalition against the Russians…Putin should be shaking in his boots.

Much of core Europe has already made its stance clear, with German, Portuguese, and Spanish tanks arriving throughout the month. With NATO votes coming up, historically neutral countries like Finland and Sweden are making their alliances clear. And even Turkey can no longer straddle the line and play both sides of this ordeal.

The real kicker here is that the Americans aren’t steering the ship. This is the Europeans doing what’s best for the Europeans. We haven’t seen a coalition this large united against a single power for centuries, and the Russians are in for a rude awakening.

*At 3:50 in the video, Peter mentions that the “French are contributing (to the Ukraine War effort) in a way they haven’t done since WWII” – it’s important to note that the French had boots on the ground in both Desert Storm and Desert Shield

*At the time of posting Finland has already been added to NATO

Prefer to read the transcript of the video? Click here

Building the Anti-Russian Alliance || Peter Zeihan

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.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey Everyone. Peter Zeihan here coming to you from Doubtful Sound in New Zealand’s Fiordland National Park. Anyway, a lot of things have gone down in the Ukraine space politically, not so much militarily. And I thought it was worth kind of looking at what the big picture is and to understand where we’re going forward, we have to go back. If you go to the world before 1945, the age of European competition, you had shifting alliances because the geography really prevented the area from coalescing into a single entity. So your northern plane, you’ve got the French, the Dutch, the Belgians, the Poles and the Germans who if you know, if there was ever going to be a zone where someone controlled everything, would be them. And so most chapters of history have been one of those powers trying to assert control over the others. You’ve got Scandinavian in the north with fjords and peninsulas and islands, so always fiercely independent and very naval oriented compared to everyone else. In the south you’ve got a more occluded coastline with very few navigable rivers of any type. And so you get regional powers who were relatively isolated from the others, but who could really punch above their weight economically because they’re all trade oriented, whether that’s in Spain or Portugal or Italy or the Balkans. It makes for a bit of a mess. And so for most of the half millennia leading up to 1945, it was kind of a war of all against all with shifting alliances here and there. Always changing texture, always changing sides. Then the Americans came in, in World War Two, and the Soviets rose during World War Two become major powers who injected themselves into this competition, encroaching into the rules of the game, because suddenly you had these two outside-ish powers who were determining all the major decisions. And we kind of forgot that Europe was the most blood soaked part of the planet until that point.

Now, with 1990 and the end of the Cold War, the Europeans have been living in a vacation from history where the security paradigms of the Cold War exist without the security threat of the Cold War. You combine that with the late globalization period and the time when pretty much all of the world was open for business and you got a very different sort of environment economically and especially politically. Well, the Russians now are kind of climbing back, clawing out of their post-Soviet hole and attempting to reassert themselves as a major regional power. Whether you believe they’re doing this out of stupid reasons or sane security reasons doesn’t really matter. They’re trying to change the nature of the system for their own long term benefit, and that is forcing countries to do something that they haven’t had to do for decades. Take a side, take a position and form an alliance to counter the Russians.

Now, from the Russian point of view, it’s all about the Americans all the time. And everything that’s going wrong for the Russian can be laid at the Americans feet. But that is to completely ignore the history of Europe, which is that of a series of independent and semi-independent primary secondary powers.

So what is kind of shaking out this week? Well, first and most importantly, the German leopard tanks, mainline battle tanks, have finally reached the war. And so now the Germans have fallen into this position of – we don’t want to be in a leadership position. We know what that has looked like in the past. We understand why everyone was nervous about it. Well, we don’t have a choice. We are the largest economic power in the northern European plain, the largest economic power in Europe. And historically speaking, we have also been the most powerful military force. We have to take a leadership position because if we don’t, this is all going to fall apart and we will be facing the Russians on the plains of Poland. And we know exactly where that leads. And we don’t want that.

This has a lot of depth because the Dutch also on the northern European plain are into the hilt. So are the Poles. The French are contributing in a way we haven’t seen the French contribute to multinational operations since World War Two and even further back technically off the plain in places like Spain and Portugal. Portugal tanks arrive with the German ones and the Spanish ones will be there within a month. So everyone in that kind of strip of what you think of as core Europe is already fully committed and back in the game. Scandinavia is a little bit different here. You’ve got mostly independent cities, states that masquerade as countries, and then Sweden, which has kind of been out of the game for three centuries. By the end of next week, Turkey will have voted on whether or not to let the Finns into NATO’s, and a vote on Sweden will probably go within a couple of months of that. And that means that these two traditionally neutral powers are going to be taking a leadership position in security policy in Europe. And the only issue they care about are the Russians. Now, the Swedes have been out of the game for three centuries after a massive military defeat in what is today’s Ukraine and in the aftermath of World War Two, the Finns were forced into a degree of neutrality where they could chart their own economic course. But on any sort of security decision making, the Soviets had full veto power. Well, that is now gone. And these two countries that have very strong militaries, relative to their size, economically or in terms of population, all of a sudden are the harbingers of the apocalypse when it comes to the Russian point of view of how European security should go, because they are extraordinarily anti-Russian. Every security question that they have ever faced has been framed in the context of what do we do the day the Russians invade? Everything else is around that, and now they’re about to be part of the decision making architecture. That also means that the Turks are coming in from the cold. They’ve been trying to kind of have their cake and eat it, too. But in the last few weeks, they’ve joined the sanctions regime relatively forthrightly and are now no longer an avenue that the Russians can use to evade the sanctions regime, especially when it comes to materials import things like semiconductors. And then finally, of course, there’s the United Kingdom. The United Kingdom was always going to be anti-Russian because it’s a naval power on an island. And any time it looks like a land power in Europe is going to become more potent. They get a little nervous and they want to make sure that the land powers are busy with land issues so they can’t float navies that can challenge London. Well, King Charles was just coronated in his first full state visit to Germany. If there are two countries in the European space that tend to be on opposite sides of all economic and security questions, it’s the United Kingdom and it’s Germany. And the fact that they’re, you know, within sight of one another is something that should turn anyone on the opposite side of that axis to turn the blood cold.

So what we’re seeing here for the first time, not in decades, but in centuries, is everyone in Central and Western Europe at the same time coming together to form a broad coalition against a single power. We haven’t had that since Napoleon, if you want to get technical, we haven’t had that since the Treaty of Westphalia. And the Americans, while they are a part of all of this, are not steering this part of the equation. This is the Europeans doing what makes sense to the Europeans. And if I were the Russians, I’d be very concerned about that.

Demographics Part 6: The Orthodox Predicament

It’s time we talk about a region that has long held the title of “worst demographics”…The Orthodox Christian countries.

The big dog of the region – Russia – has entered a point of no return for its demographic situation. Ukrainians are even worse off. Regardless of the outcome of this war – they’ll end up with a s*** stew of demographics. 

Other countries like Bulgaria and Romania aren’t any better off. They’ve basically sent out all of their youth to other countries for economic opportunities…and even if they do return, they’re not adding to the population once they reach their 40s and 50s.

Serbia had the opportunity to flourish into the most rapidly growing economy in the region. Still, they’ve made every wrong policy decision in the book…so no dice for them either.

Each of these countries will likely come face-to-face with its inevitable demise within the next 20 years, and there’s not much they can do about it. 

Prefer to read the transcript of the video? Click here

Demographics Part 6: The Orthodox Predicament

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TRANSCIPT

Hey Everyone, Peter Zeihan here coming to you from snowy Colorado, where, as promised, we’re going to be talking about the next chunk of our demographic series, specifically talking about the Orthodox Christian world, which is a huge swath of territory stretching from Russia to Belarus and Ukraine and Moldova, Bulgaria, Romania and Serbia. Now, these countries have three characteristics in common that have really shaped their demographic destinies, and none of them have been great.

The first is broad scale economic dislocation. These were the parts of the former communist world that didn’t do well, even at the height of communism. They weren’t very advanced. And especially when the post-Cold War system erupted, they didn’t have anything really to contribute aside from raw commodities. Their industry was outdated. They weren’t producing steel like the Czech Republic or I.T., stuff like the Latvians. They were only doing grains and raw materials and energy. And you can get growth from that. You can get wealth from that, you can get infrastructure and development from that. But unless it is really, really well-managed, the population just doesn’t see a whole lot of it. So these countries were in and out of horrible recessions for really 30 years.

It’s less bad in places like Romania and Bulgaria because they did ultimately get into the EU in the late 2000s, but they were the last ones in line. Serbia took a kind of a double hit because they don’t have a lot of raw materials that they can export to the world. And in the aftermath of the NATO bombings in the Yugoslav wars in the early 1990s, Serbia never moved on. So even with the Russians under Putin going from win to win, in terms of global policy and generating a lot of income from oil in Serbia, there was a whole lot of nothing. And politics basically became locked down in the aftermath of the Yugoslav wars, and the country really was never able to advance to whatever is next. And that holds true even today.

Okay. What’s second because of the economic dislocation, because so many people didn’t see a lot of opportunity. You had huge immigration from all of these states, mostly to Western Europe, some to the United States and Canada in the cases of Romania and Bulgaria once they got into the EU. If anything, the outmigration accelerated because there were then fewer restrictions.

The Russians easily lost 10 million people in the 1990 and early 2000s to the wider world. And in the case of Moldova, perhaps as much as one quarter of the female population under age 50 left never to return, some of them going, a lot of them going into the sex trade because there really wasn’t a lot of an option because education in Moldova during the Soviet periods was even very low.

Serbia is probably the country that has suffered the most from this outmigration because again, the government just has never moved on and there’s never been a plan economically for what’s next. 

The third one kind of flies under the radar and is probably going to piss a few people off. But here we are. Birth control in this region. The primary method is abortion.

So on average, more than seven out of ten pregnancies across this space are terminated. And if you have one abortion, I know I’m a dude. I really have no right to say this, but, you know, I’m going to go out on a limb and guess that it’s not critical to your health. But if you have ten, you’re probably endangering your future fertility.

So between a very low death rate, a very high abortion rate and very high infertility rates because of the weird intersection of health care and birth control and economic collapse, it’s arguable that a lot of these countries, probably Russia, right at the very top of that list, simply could not repopulate, even if the economic conditions were to turn around. So this is the part of the world that is duking it out with Northeast Asia for the lowest birth rates and the fastest national mortality, if that’s the right term in the world. So that’s kind of the overview.

Those are the three big issues that shape the region as a whole. But we do need to give additional attention to the Russians and the Ukrainians.

Now, the Russians have had a series of stacked geopolitical disasters World War One, World War Two, Stalin’s famines, Brezhnev’s mismanagement, Khrushchev’s mismanagement, and then the post-Cold War collapse. All these kind of stacked on each other. And so that the current generation that is now in their twenties is the smallest one they’ve ever had.

The Russians say they’ve got a metric ton of teenagers and that the demographic turn has been made and they’re going to be fine if they are telling the truth about that. That would be the only of their data that they’re telling the truth. More likely that we actually have fewer teenagers than 20 somethings. And you’ll see that in the demographic graphic that we’ve patched into the show.

More likely, their data is more similar to the situation in Ukraine. One more thing about the Russian demographics. They’re not equal. Just as in the United States, where places like Utah, Texas have higher birth rates in places like New York or Connecticut because they’re less urbanized or have different cultural norms. The same is true in Russia. Russia is not just Russian. The Russian state was originally founded in the area in Moscow, and they discovered that they really had no borders that were secure. So the way they decided to deal with that was to expand, conquer all their neighbors, consolidate and expand again, conquer all of those neighbors and so on and so on and so on until they get to the Russia that we more or less know today and during the Soviet period.

That means that there are dozens of conquered peoples living within the Russian system. Some of them have demographic stats that are just as bad as the Russians, but not all of them. A lot of the Turkic minorities, most notably the Chechens, the Dagestanis, the Basqueirs, and the Tatars actually have very robust demographic structures and are doing very well from a health and a growth point of view.

Well, the last decent number that we’ve got from the Russians was done by the 1989 Soviet Census. And at that point, the best guess – Soviet numbers, after all, was that 20% of the Russian population within the Russian Federation was non Russian. So 80% Russian, 20% non-Russian. Well folks, that was over 30 years ago. It’s probably closer to 25 to 30% today.

That’s non Russian. And if you fast forward another 20 years, you’re talking about probably 30 to 35%. Now these are all guesstimates upon guesstimates because this is Russia and getting good data is next to impossible even before there was a war. But we do know for sure that even if you include all of the minorities, the Russians, only have 8 million men aged 20 to 36 months from now.

At least a million of those are going to be committed to the war in Ukraine. We already have over 100,000 dead. We already have about a million who have fled the country. So one way or another, the Ukraine war is the last conventional war that the Russians are ever going to be able to fight because they simply won’t have enough people.

Now, the Ukrainians have no reason to lie about their demographic data, aside from the fact that it’s absolutely atrocious. And if you look at it and you look at just the collapse from the fifties to the forties to the thirties to the twenties, to the teens to kids, you’ll notice that this isn’t just a demographically spent country. This is a demographically dissolving country.

So unfortunately, even if the Ukrainians achieve runaway success in this war this year, it’s already too late. Even before the Russians started kidnaping children in the thousand, perhaps hundreds of thousands from Ukraine, this was a country that simply didn’t have enough people under age 40 to even theoretically repopulate themselves. So within 20 or 30 years, we are looking at the Ukrainian ethnicity vanishing from this world and probably the Russian ethnicity, no more than 20 or 30 years behind that.

Like I said, they are duking it out with Northeast Asia to see who vanishes faster, which means we have to turn to Northeast Asia next, because that is going to be the part of the world where from an economic point of view, these demographic turnings have the greatest impact. Okay, take care. Until next time.