Israel Attacks Iran, Again – Part 1 & 2

An Israeli F-35I "Adir", the model of aircraft reported to have taken part in the strikes.

Part 1

Recently, Iran attacked Israel, again. And so last night Israel attacked Iran, again. Believe it or not, this is normal AND good news! At least until the Russians come to the party.

Part 2

Now that we’ve had a bit more time to see what happened in Israel’s latest attack on Iran, let’s dive a bit deeper. Israel struck military facilities like missile storage and production sites, but avoided nuclear and oil infrastructure.

This damage will set Iran’s missile capabilities back for a while, but these defenses were lackluster to begin with. A more significant takeaway from this attack was the absence of any meaningful resistance for the Israeli aircraft, which pokes some serious holes in the Russian-made S-300s and similar Chinese models.

Israel’s attack not only diminishes Iran’s military power, but also gave the world some insight as to shifting regional power dynamics.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Austin, Texas. It is the 27th of October, and we’re going to do a follow-on to yesterday’s video about the Israeli retaliatory strike on Iran. Now that we know a little bit more about what was hit, the Israelis were able to target military facilities. They didn’t go after the nuclear program and they did not go after oil facilities.

Instead, their primary targets were facilities that stored missiles and were a critical component in the construction of the missiles that the Iranians like to use. Basically, there’s two types of fuel that you can put in a ballistic missile. The first is liquid fuel. This is cheaper and technically easier, but it’s very dangerous because you can’t store the rocket fuel in the rocket.

If you’re not going to launch in the next couple of days, you generally leave them empty. So, it’s easy to know when the bad guys are going to launch a bunch of missiles because satellite images can show the trucks pumping in the somewhat toxic, very explosive, very dangerous fuel.

Now, the Iranians have moved on from liquid fuel to solid fuel, which is much more stable. You can store the fuel in the rocket indefinitely, but it’s more technically involved, and the Iranians don’t know how to do it themselves. They bought the facilities to make this fuel from China, and now those are mostly smoking holes in the ground after the Israeli raid.

Until these facilities are rebuilt, and given Iran is now under much stricter sanctions than when it acquired these originally, the Iranians will have a hard time running their missile fleets as they have been, which is clearly what the Israelis were aiming for. They may have one or two operational fuel fabrication facilities left, but certainly not at a scale that poses a real threat to Israel.

So, you know, strike one, Iran. The second point to keep in mind is that wherever Israeli fighter bombers went—whether over Iraq, Lebanon, or Iran itself—they took out all the air defenses along the way. Most of the air defenses the Iranians use are called S-300s, which are the second from top-of-the-line system that the Russians produce and export.

The top model is the S-400. The Iranians knew this strike was coming, had plenty of notice, and still couldn’t shoot down a single Israeli jet. Between this raid and the war in Ukraine, where many of these S-300s are in use, we’ve been getting a bit of an awakening for people who have relied on Russian equipment all these years—it simply couldn’t do the job.

All of these air defenses are now smoking holes in the ground. On a larger stage, this has made the Israelis quite confident that whenever they feel the need to establish air superiority, they don’t even need jets—they just need to take out the air defenses since no one in the region has competitive air power.

Looking at the broader strategic picture, the Russians do have some S-400s, but not enough to provide full coverage, and they’ve already lost several in the Ukraine war. Yes, the S-400 is the most advanced air defense system the Russians have, but it’s not that much more advanced than the S-300. More importantly, the Chinese have their local air defenses, the HQ-9 and HQ-22, which are essentially knockoffs of the S-300 floor model, though upgraded in some ways with Chinese technology. We’ve never seen them in actual combat, but now we know the Israelis, who don’t even have a first-rate air force, were able to take out every S-300 they encountered. This suggests that the U.S., with its superior air force, would likely have no trouble operating in a similar environment if push came to shove with China.

Surely this isn’t what the Iranians planned when they conducted their raid on the 1st of October, but they’ve given strategic thinkers a lot to chew on, indicating that air defenses on the other side might not be nearly as interesting or capable as we’ve long assumed. So, you know, as

**Photo of an Israeli F-35I “Adir”, the model of aircraft reported to have taken part in the strikes by Wikimedia Commons.

The (Next) Gulf War Is Coming

Photo of a destroyed building in the middle east

If you’ve read my book The Absent Superpower, then today’s video shouldn’t come as a surprise to you (yes, I wrote it nearly ten years ago!). If you’ve been stuck under a rock and haven’t gotten the chance to read it -OR- you want a refresher, you can purchase a copy below.

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You can even purchase an autographed copy as well here

Given the recent conflict in the Middle East, I’m worried that an oil crisis could be brewing. The main players that might kick off the (next) Gulf War are Iran, Israel and Saudi Arabia.

Israel was recently attacked by Iran and their retaliation could be devastating for Iran. Should they choose to target critical Iranian oil infrastructure – most of which is conveniently located near Kharg Island – Iran’s exports would plummet. Should that happen, an Iranian attack on Saudi oil fields wouldn’t be out of the question, and then we could be talking about 20 million barrels per day being under threat.

That means a global oil price of $300 per barrel is in the cards…but not for everyone. The US has the domestic supply to maintain a price closer to $60 per barrel (outside of California, because they still rely heavily on Persian Gulf imports). China would get the snot knocked out of ’em if it does play out like this. The UAE and Saudi Arabia would keep some exports alive thanks to pipelines that bypass the Strait.

Before you go buy a few drums of oil to throw in the basement, let’s wait for Israel to decide what their retaliation plan looks like.

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If you sign up for our Patreon page in the month of October, the proceeds from your subscription for the remainder of 2024 will be donated directly to MedShare. So, you can get our all of the perks of joining the Patreon AND support a good cause while you’re doing it.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the gloomy California coast. Got a nice little inversion layer going on out there. Anyway, today we’re going to talk about something that I haven’t really talked about in my professional career because I never thought it was going to happen until we had a change in circumstance. Well, we’ve had a change in circumstance, and now it’s time to talk about it.

And that is the possibility of a severe oil crisis because of a conflict in the Middle East. Now, back at my old job at Stratfor, they were always beating this drum. The idea that Iran was about to close the Strait of Hormuz and oil prices go to $500 and blah, blah, blah. And I was always the dissident voice because unless and until Iran feels it has no other choice, that doesn’t work because all of Iran’s crude goes out through the Strait of Hormuz.

Now, when I left, I went on my own. My second book, written about ten years—ten years ago, how did that happen?—mentions the three wars of the globalization period, conflicts that will boil up because the U.S. has stepped back, and whether the countries feel they have an opportunity or because they’re desperate, they take matters into their own hands.

Now, one of these I called the Twilight War, which is now in the opening act with the Ukraine conflict as the Russians try to reshape their neighborhood. But the second one, I called the Next Gulf War. And it’s about a conflict in which Iran and Saudi Arabia fight each other at each other’s throats because they can’t reliably get energy out.

So they try to take out each other. In that scenario, you basically have potentially 10 to 12 million barrels of crude that is at risk. Now, I haven’t brought this conflict up very much since I wrote the book because the circumstances haven’t warranted it. Especially in the last three years, it’s all been about Ukraine and Russia in their Twilight War.

But in recent days, I am reassessing. And specifically, the concern is after Iran launched a couple hundred missiles at Israel a couple weeks back, the Israelis have made it very clear that they intend to retaliate in the time and place of their own choosing. And they’ve specifically shortlisted Iran’s oil sector as potential targets. There is a very obvious target point.

It’s called Kharg Island. There is subsea infrastructure that links via pipe the mainland to the island. And then all, all, all of Iran’s offshore loading platforms are just off the island. This is the only meaningful export point for Iranian crude. And as the Israelis have proven, back in April when we had the previous Iranian assault on Israel, they can take out any air defense system in the country.

If you remember back then in Isfahan, which is where the Iranians have the nuclear program headquartered, the Israelis took out the air defense around the nuclear program specifically to prove that they could if they wanted to. So any sort of air defense and Kharg is almost a rounding error in the Israeli calculus. And there’s no bridge here. It was not built by the Iranians.

It was built by Westerners in the days before the Shah fell. So if Israel decides to move, it’ll just take a couple of sorties. They’ll be done in an hour. And Iran’s entire oil export capacity would be devastated. And in that scenario, suddenly Iran doesn’t have much to lose and, out of desperation, would probably make a push to take out Saudi Arabia.

The scenario specifically outlined in the book involves a military invasion that crosses into Iraq and Kuwait, heads south, making a beeline for the oil fields. Keep in mind that the southern half of Iraq is Shia-populated and has generally had a very pro-Iranian slant ever since the war against Saddam Hussein back in the 2000s. Whether or not it would be an easy invasion is open for debate based on how or whether other countries, such as the United States, get involved.

But even if that is not an option, all of those missiles that the Iranians launched recently against Israel, they have more than enough to take out oil export and processing facilities on the western side of the Persian Gulf, notably Saudi Arabia. Most of Saudi Arabia’s crude comes from the Ghawar region, which is hard up against the coast, and all of the loading platforms are also on the Gulf Coast.

Well, most of them. So you’re talking between the two of them, a significant reduction in what is globally available. If it was just Iran, not a big deal. You’re talking about a million barrels a day. They’ve been under sanction for a while. They’ve mismanaged their own system. But if you bring in Gulf states, most notably Saudi Arabia, all of a sudden that 1 million turns to 10 million or more, and that doesn’t count what comes out of, say, Iraq or the UAE or Kuwait, all of which would be in the way of a potential conflict.

So now you’re talking potentially 20 million barrels a day. You want oil prices above $300? That’s how you get there. Now, not everything is equal for all players. Yes, currently we have a single global oil price. But in that scenario, that system would shatter because in the United States we have a populist president, and the people running for president are populist.

And back in 2015, U.S. Congress granted the American presidency the authority to summarily end all American crude oil exports, which have been several million barrels a day for a while now. The shale revolution really is rocking and rolling. And so if we have oil prices shoot up, you would have the president, whoever it happened to be, end exports. That would create a super-saturated market within the United States while denying the rest of the world another few million barrels per day, sending prices up even higher.

So you’d have a functional ceiling in the United States of $60 to $70 a barrel, and you’d have a functional floor in the rest of the world, probably around $200 to $300 a barrel. So you get a global depression. At the same time, the United States just kind of skates right on. Second, the country that would suffer the most by far would be China.

It is the largest consumer of crude from Saudi Arabia, from the UAE, from Kuwait, from Iran. And all of those sources would be in danger in some way, if not going completely. Third, on the producer side, not everyone in the Persian Gulf would suffer equally because the Saudis and the Emiratis have seen some version of this problem coming.

And so both of them have built bypass pipelines that avoid the Strait of Hormuz completely. So roughly 5 million barrels a day, maybe as much as six and a half, could still get out. That’s enough to take a lot of the sting out from a budgetary point of view. And if you’re Saudi Arabia and oil prices triple but your exports halve, you’re actually in a net financial superior position.

Assuming the Iranians don’t conquer you. And then finally, in the United States, there is one state that would be in a different situation, and that would be here in California. California doesn’t have any pipes that connect it to the oil fields of Ohio or North Dakota or Texas. And it is the one oil producer in the country that has not benefited from the shale revolution because of regulation out of Sacramento, which means that in this scenario, they’d be kind of hosed because they actually import most of their crude from the same place the Chinese do—the Persian Gulf.

So in the rest of the country, you’ve got a ceiling on energy prices. But out here on the West Coast, you’re looking at $10 a gallon for gasoline, triggering a significant schism in the economic outcomes, even within one country. So this has gone from something that was just kind of out there in the future, if and when de-globalization really gets going, to all of a sudden it’s a meteor.

And now the chances it’s going to happen? Well, I mean, really that’s up to Israel. And then, of course, the Iranian reaction. But I would say it’s somewhere between 1 in 4 and 1 in 3 to happen over the course of the next few months. And considering the depth of this disruption, I hope everyone sleeps well.

The Downward Spiral of the Chinese Economy

A man holding a Chinese Yuan in the middle of Tinannamen Square

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If you ever need to make an online dating profile, be sure to add “long walks on the beach discussing the economic challenges facing China” to the list…I promise you’ll double the dates in no time.

The Chinese have been struggling with economic growth since the beginning of COVID, missing their growth rate target repeatedly and on the verge of a recession. Attempts to bail themselves out continue to fall short, likely because these stimulus measures do not address the core problems (that the population is aging and private consumption is plummeting).

That’s not even an exhaustive list either. The Chinese banking system is severely strained as well. With the government pushing for more lending at low/negative rates, the banking sector is in dire straits. Until major reform hits China, the spiral down will continue…and a larger financial crisis will continue to creep closer and closer.

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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.

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Our newsletters and videologues are free and we will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from the South Carolina coast. And today, we’re going to talk about the normal things I talk about when I’m walking on the beach, and that’s Chinese finance. Okayyy? Let’s get that out with a straight face. Okay. For those of you who have been watching the Chinese markets and the economic recovery—or lack thereof—over the last year, you’ll notice it’s been kind of a rough year for them.

By their own statistics, they’re not going to hit their 5% GDP growth target for the year. And if you talk to private folks who have a more realistic understanding of what’s going on, the China that is what’s left of the Chinese bureaucratic system has basically gutted its own statistics to the point where they’re becoming literally useless. We are talking about a borderline recession.

We’re not in China, and this isn’t new. The Chinese economy stumbled in the fourth quarter of 2019 with the onset of Covid. And aside from a couple of blips here and there, it’s kind of been down in the dumps ever since. It wouldn’t surprise me if we had an actual forensic audit done on Chinese books and found that the Chinese economy writ large over that entire period was actually roughly the same size it was before.

The data isn’t out of malfeasance. It’s just the system is outdated. It’s a flag, so you don’t get accurate data at the local level, much less at the national level.

Anyway, in the last couple of weeks, we’ve seen a huge number of measures—not huge stimulus, two different things. They’ve tweaked the mortgage rate a little bit and reduced something called the reserve requirement, which is the percentage of bank deposits that have to be held back at the bank in order to make loans.

All of these things are mildly stimulatory, but they don’t get to the core issue that China now faces: it has so few people under 50 that there just isn’t much of a consumption base to be boosted. And that’s before you consider that the government of Chairman Xi Jinping really doesn’t see private consumption as a meaningful driver of economic growth.

From an ideological point of view, the idea that people would spend on themselves as opposed to spending on the state is something that seems to be a little alien to him based on his rhetoric and speeches. Anyhow, that also kind of ignores the point. We’ve talked a lot about consumption, investment, and trade.

But something we don’t talk about very often are Chinese banks, which are the method by which capital makes its way into the Chinese economy—like in most economies. And that is also completely broken. The Chinese method of encouraging economic activity is to lean on the banks so they lend to everyone for everything, often at zero to negative rates once you adjust for inflation. And when you put a bottomless supply of capital in front of anyone, they will gorge on it, and you will get economic growth.

But whether that growth is stable or sustainable is, of course, questionable. Basically, for those of you in the United States, I’ve just described subprime, Enron, or the savings and loan crisis. It’s all fine until someone actually has to start valuing the loans that are on the books. And when you flood the market with credit, a lot of these loans just don’t work out.

In the U.S., we call these “non-performing loans” (NPLs). If 1.5% by value of a bank’s loans go into that NPL category, then a government regulator will knock on your door and force you to change your policies to bring that number down. Once you get over 2%, that’s when banks start snapping like matchsticks because there isn’t enough margin on those loans to grow out of them.

Well, in China, the margin is sometimes zero or even negative. And because the concept of fiduciary responsibility doesn’t exactly translate well into Mandarin, many of these loans that should have never been made have gone bad. By most internal estimates, China’s total NPL ratio for the entire banking sector is somewhere between 5.5% and 6%, which would basically mean their entire banking sector is, well, out of luck.

This doesn’t mean every bank is there, but for every bank that is below that number, there’s at least one or two above it. As a rule, the least stable banks are the ones that aren’t on the coast. Investment inflows, export activity, and foreign money mean coastal banks tend to run tighter ships.

But as you move inland, especially to poorer, more agricultural areas, it’s all about Chinese state banks, whether they’re the big four national banks or smaller regional ones. So, if you want to talk about the future of Chinese economic growth, it’s not going to be boosted by changing the reserve requirement.

It’s going to be improved by getting the banks into a position where they can actually function a bit more normally. But that can’t happen until they deal with the NPLs. In the U.S., every time we’ve dealt with NPLs, it’s only been because we had a recession linked to the financial sector, like the subprime crisis of 2007–2009 or the savings and loan crisis in the 1980s. China will need to go through something similar.

But you’re talking about something at least an order of magnitude worse. And in relative terms, because the U.S. economy is much stronger than China’s, you’re talking about something even worse than that. So, it’s nice that the Chinese stock market is having a little bit of a pop, but none of the underlying issues have been addressed. Trying to make credit easier when credit is already overextended will simply make the inevitable crash that much harder.

How Effective Are the Israeli Defense Systems?

Photo of Iron Dome missile defense system firing

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Israeli defense systems are getting put through the ringer as of late, so let’s talk through each of these systems, how they’re doing, and what the US involvement looks like.

The Iron Dome is what we hear about most often; this is what intercepted the rockets from Hezbollah. This system is designed to counter unsophisticated rockets, and thanks to Israel’s small size, it does this quite well.

When the bigger stuff starts to fly, like ballistic missiles, that’s when the Arrow system comes into play. While its been successful against the recent attacks from Iran, the US was helping out on the tracking/targeting side of things, so we don’t have a true measure for how good this system is on its own.

That helping hand from the US is key, not only because its helping the Israelis defend themselves, but the US is also getting some valuable, real-world testing for tech that can be used back at home. So, its a bit of a win-win here.

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

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

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

And then there’s you.

Our newsletters and videologues are free and we will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the South Carolina coast. And we’re going to talk about technology that’s been in the news a little bit, and that’s missile defense, specifically the Israeli system that has proven to be remarkably successful in recent years, both at shooting down Hezbollah rockets coming in from Lebanon and, more recently, ballistic missiles coming in from Iran.

A couple of things to keep in mind—three things to keep in mind. Number one, there is more than one system here. The first system is called Iron Dome, and that is the anti-rocket system deployed in northern Israel that’s been intercepting the rockets coming in from Lebanon. Now, it’s not that this isn’t an impressive system in its own way, but the rockets being fired by Hezbollah are oftentimes garage projects.

And as such, you’re not talking about something that is particularly sophisticated or moving particularly quickly. Basically, what happens is the Israelis launch a lot of interceptors when a barrage is coming in, and they kind of loiter until they can lock onto a rocket, and then they zip down and hit it. But even if they miss, a lot of times these things have a very high dud rate.

Over a third of them probably don’t even explode when they do hit, and they have next to no guidance. In fact, most have had no guidance at all. So it’s good for what it is, but let’s not overplay it. Also, keep in mind that Israel is the size of New Jersey, and the northern border with Lebanon is very, very short.

So, from a technical point of view, it’s relatively easy to guard that sort of territory. The second system, second thing to know, is the ballistic defense system called the Arrow system. And it is significantly more sophisticated than what’s going on with Iron Dome. This was pulled into play to defend Israel against the ballistic attacks that came in from Iran last week.

Now, the problem here is in assessing how successful it is. We really don’t know, not because it hasn’t shot missiles down, but because it hasn’t done so alone. In the recent attacks from Iran, the United States has been there, present, shooting things down too, and linking the radars together. And we just don’t know how well the Israelis could do if it weren’t for American involvement in the defense.

It probably still is among the best in the world, but everything that has been thrown at it has already had to deal with the United States. Everything has basically been designed before the year 2000. You’re talking about missiles that are at least 20 years old, off of designs that are at least 30 years old. Calling it cutting-edge is probably the wrong phrase.

Again, this is a country the size of New Jersey. You don’t need a lot of arc of coverage in order to shield the whole thing. And even with those factors in play, a lot of the missiles still made it through. They didn’t cause any substantial damage, but that is a fault of the missiles, and maybe, perhaps deliberate targeting, avoiding civilian areas more than anything else.

And then the third and final thing to keep in mind is that, for the United States, this is a perfect layout. U.S. assistance with both of these defense systems, with the intent of then taking them, modifying them for our uses—whether in terms of deployment, theaters, or the homeland—and then scaling them up. And so, believe it or not, all of the ongoing agony and violence of the Middle East, in many ways, is providing the perfect testbed for missile defense for U.S. defense systems.

Okay, I’ve got to hit the beach today, but anyway, until that, bye.

Impacts of an Israeli Strike on Iran’s Oil Sector

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Following my video on Iran’s attacks from the other day, I feel it necessary to explore the possibility of an Israeli strike on Iran’s oil sector and the affect it would have on global markets.

Iran’s oil exports hover around 1 million barrels per day. Thanks to sanctions, mismanagement, and maturing fields, production has taken a hit over the years. Regardless, that’s a million barrels per day that could vanish from the markets, which means a $10-15 increase per barrel on top of the “war premium”. Not a global catastrophe, but it will still hurt.

The US is fairly insulated from shocks to the global oil markets (like this one), so I’m not worried about the US. Should this get really bad, the US president can authorize a suspension of crude exports which would create a glut of oil in North America…similar to what we’ve seen with natural gas prices.

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

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

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

And then there’s you.

Our newsletters and videologues are free and we will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from the beautiful chaos that is Dallas Love Airport, headquarters of Southwest Airlines. In the aftermath of a video I recently did on the Israelis and their potential strike on Iran — specifically targeting the oil sector — I thought it would be worth noting how that could affect a few things, most notably here in the United States.

So, Iran’s oil production has been suffering for years. Part of it is due to sanctions, but mostly it’s because their regulatory regime is really punishing for would-be foreign investors. They basically require that the state take a leading role in everything, and the state company is not very good. Most of the oil fields in Khuzestan are mature and require a lot of technology that the Iranians don’t have and don’t understand in order to make them produce meaningfully.

Everything else worth having is offshore, but the Iranians have absolutely no ability to operate offshore by themselves. So while the numbers that officially hit the market ebb and flow because of the sanctions regime — and whether or not the Iranians are attempting to sneak around sanctions — the actual flow is about a million barrels per day of exports. Sometimes it’s as low as 400,000, sometimes it feels a little bit higher, but about a million. Now, if you remove a million barrels a day from the market, we’re going to feel it. But that’s only 1%, so you would expect, in a purely market-driven environment, for that to kick up prices by ten, maybe fifteen dollars a barrel. Of course, since it would be due to someone dropping a bomb on something, there would be a war premium on top of that.

The impact globally is going to be felt, it’s going to be real, but it’s not going to be huge. As for the United States, I’m really not concerned. The U.S. is no longer an energy importer. We’ve come a long way since 2007, when we were importing something like 14–15 million barrels a day, thanks to the shale revolution.

The United States is now arguably one of the lowest-cost producers in the world, and our production is well over 20 million barrels a day. Moreover, the U.S. has diversified its economic strength and is now absorbing far fewer barrels. Now, if you look at the headline numbers, you’re not going to see that, but that’s because the U.S. Energy Department calculates things differently from everyone else.

We look at the amount of crude we actually consume in total, including what goes into our refineries for products that are then exported. That’s not how most countries do it. The argument here is that nobody consumes raw crude; it has to be turned into something. So, it’s not a stupid way to look at the data, but it does make it seem like we are more dependent on international trade than we actually are.

In fact, if you consider all the types of crude that the U.S. produces — raw crude, natural gas liquids, condensates — we now have such a huge surplus that by the end of this year, the U.S. will be exporting 5 million barrels a day of roughly defined product. In the history of the petroleum era, there are only three countries that have ever produced more than 5 million barrels per day of raw crude, and we’re exporting that much in refined product.

So, the degree to which the United States is insulated from this is robust. Now, do keep in mind that oil is an internationally traded product, and so there is more or less a single global oil price point because it is an easily exchanged commodity. But if we ever get to the point that there is an oil shock — I don’t think that will happen with Iran — but if we do, and prices get to a point that the American president finds untenable, the U.S. president, courtesy of powers granted back in 2015, has the authority to summarily suspend all exports of raw crude. And we do a lot of that too. If that happens, the crude gets trapped within North America.

We get a supersaturated energy market, and then North American energy prices separate from global energy prices in a manner very similar to what has already happened with natural gas prices. U.S. natural gas prices, because of a similar glut in natural gas, are as a rule one-fourth to one-eighth what they are in Europe or Asia. So if we ever do get into a situation where crude prices get sketchy, you can count on the American president — whoever it happens to be — to enact that power.

Then, all of a sudden, we’ve got energy prices here that rarely go above $60, because every shale oil field we have is cost-competitive at that price, while everyone else screams past $100 on their way to $200 and more.

Okay, that’s it for me. Of course, the biggest downside of being here is that, because Southwest is a hub and it’s open seating, you have to check in 24 hours online in order to get a decent seat. And because I was launching this new thing called Patreon 24 hours ago, I forgot. So I am C-51. I will be the sad person up against the bathroom, trying to squeeze this lengthy, 6-foot-5 frame into a middle seat that does not recline. Pray for me.

Iran’s President-Elect Sparks Change, But How Much?

Next up on our list of important elections around the globe is the Iranian presidential elections. We’ll be looking at Iran’s new President-elect, Masoud Pezeshkian, and what his victory might mean for the country.

Pezeshkian triumphed over a number of slightly nutty, ultra-conservative, fire-breathing candidates sponsored by the clerical regime (which officially oversees the entire country). This presidential election has also highlighted some of the ongoing issues Iran has faced, especially the economic difficulties caused by US sanctions.

Pezeshkian’s platform follows a more moderate approach than his opponents and predecessors, and suggests a possible shift in domestic policies. As of now, these conversations are focused on smaller issues like the strict enforcement of a dress code for women, but when the majority of the Iranian populace rallies behind something like that…it could mean that something bigger is brewing. It’s far too early to make a call like that, but this is something that I’ll be keeping an eye on.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from a rental car in Kansas City. Today, we are going to take a crack at the second piece in our elections series for the week. We had a number of important elections recently. Today, we’re going to cover Iran, where there was a runaway victory for the now president-elect Masoud Pezeshkian. And I apologize for the name. Anyway, he came in with a strong first place. There’s a two-round voting system in Iran, and it’s not really a surprise that he won.

There were any number of candidates in the first round, but five of them were sponsored by the clerical regime of Iran. You know, the slightly nutty, very ultra-conservative, hate-everyone group that runs the country.

Anyway, there were five candidates from that faction, and they were all fire-breathers. So having one moderate ensured that he made it to the second round, where he easily defeated his opponent, who was honestly a complete nutbag. So no surprise there.

But moving away from the tactical political stuff, the situation Iran is in is uncomfortable.

Dial back a little bit. If you remember back to the war in Iraq, the United States was very good at overthrowing the Saddam regime but not very good at making Iraq look like Wisconsin. So Iranian agents were able to step into the void and agitate the Shia population of Iraq. Shia is a denomination within Islam, and the Iranians are predominantly Shia. It’s also the single largest denomination in Iraq.

Saddam’s government was Sunni. So when the United States basically ripped out the apparatus of the old government and wasn’t quick enough in putting something else in its place, Iran was able to partially take over and still remains very influential there today.

During this period, while the United States was going after militants throughout the region, the Shia Iranians were able to step in, displace a lot of groups, cause a lot of trouble, and become very powerful throughout the region. But it wasn’t free. Iran has a financial restriction in that most of its income comes from oil.

So if you can target the oil, you can target Iran. Over the long term—not just days, weeks, or months, but decades—that really cripples them. Over the past 20 years, yes, Iran made a lot of forays, but it generated a lot of expenses.

When Saudi Arabia was roused to combat Iran, Iran was never going to win a game of checkbook diplomacy with a country that exports a fifth as much oil. Then under Obama, the United States put some of the strictest sanctions ever developed against Iran to pressure them into a nuclear deal to curb their nuclear ambitions. Under Donald Trump, who did away with the deal but kept the sanctions in place, these sanctions have now been in place for the better part of the last decade. We are seeing very real impacts on the standard of living in Iran because they haven’t been able to export the volume of oil necessary to sustain a meaningful standard of living within Iran, much less cause trouble throughout the region.

I don’t mean to suggest that Iran’s been curtailed or castrated, but they’re having a hard time doing everything they thought they would be able to do. When you have this sort of economic blindness, you can follow one of two paths. A few years ago, they tried electing a hardliner named Raisi, who everybody hated. He was a mean dude, and even within the clerical establishment, people thought he was too tough. Then he died in a plane crash a few weeks ago.

The new guy, Masoud Pezeshkian, is basically trying the other approach—maybe a little bit of compromise, maybe a more constructive relationship with the West. Now, I don’t want anyone to get too overexcited here. Yes, elections matter in Iran, but only within a certain framework. The most powerful person in Iran is not the president; it is the supreme leader, who remains a bag of snakes and is responsible for all the things you think of when you think of Iran: the clerical theocracy, the oppression of minorities and women, and the general seeding of militant groups throughout the Middle East. None of that has changed.

The new guy is not challenging much of that at all. In foreign policy, he has stated that he still supports Iran having a nuclear program and a hard line in negotiations with the West. He still supports the Houthis in their on-again, off-again conflict with Israel and Hamas against Israel. He still supports militancy throughout the region, but he’s doing it with a much different tone that suggests there might be a little room for compromise here or there. Don’t count your chickens before they hatch, but there’s at least a change in mood.

If there is going to be a meaningful difference, it will happen at home. Pezeshkian has been very clear that he thinks the clerical authorities’ law enforcement arm shouldn’t beat women if they show their hair. From a geopolitical point of view, that’s kind of a nothing burger under normal circumstances. But now you have the majority of the population of Iran siding with the president against the people with the guns. That can go in a lot of interesting directions. Keep in mind that you’ve got 10,000 clerics, 10,000 mullahs, that basically rule Iran. It’s a deep bench. I’m not suggesting we’re going to have a revolution, but if the guy who’s nominally at the top, chosen by the people, wants a different approach to living your life in the country, and the people who have been calling the shots up to this point are on the opposite side of that, well, things can get very interesting.

So I don’t want to overplay this. I’m not suggesting a revolution, but for the first time in 40 years, there seems to be a split within the leadership of Iran on what Iran should be at home. And that’s how change starts.

Okay, that’s it for Iran. Tomorrow we’ll deal with France.

An Accident, Not Assassination, Takes Down the Iranian President

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Iranian State media has confirmed the death of Iranian President Ebrahim Raisi May 19th, following the crash of his helicopter over Iranian Azerbaijan. Raisi was returning from a ceremony inaugurating the joint Iranian-Azerbaijani Qiz Qalasi dam project. Iran’s Foreign Minister Hossein Amir-Abdollahian has also reportedly died in the crash—but Iran has no shortage of capable diplomats, and his death certainly doesn’t rise to the level of global geopolitical significance.

Iranian media initially held out some hope for a rescue, but the region’s rugged terrain, dense fog and cold temperatures stymied efforts to locate the crash site in a timely manner. Whether or not Raisi died on impact holds little geopolitical importance. Likewise, I’d argue, his death by itself does not present a significant loss of capability or capacity for the Iranian regime.

But this is Iran we’re talking about. Iranians’ flair for the dramatic and gold chandeliers aside, Iran and its bad behavior are a favorite topic for the world’s politicians and media outlets. Recent tensions between Israel and Iran have only exacerbated what would be the normal run of rumors at a time like this. So, we’re left with two big questions:

  • Did someone kill the Iranian president?
  • What’s next for the corridors of power in Iran?

Raisi, a hardline clerical figure, gained significant notoriety for overseeing the harsh crackdown of Iran’s 2022 protest movement. He is one in a line of presidents who have been at the helm of the Iranian government since the founding leader of the Islamic Republic, Ayatollah Ruhollah Khomeini died in 1989.

Plenty of people within the country and especially outside of Iran’s borders are likely toasting his demise. Wanting him dead and having the capability to do so are two entirely different things, however. Iran’s various separatist movements are highly unlikely to have the sophistication and technology to correctly identify and shoot down Raisi’s helicopter, especially given weather conditions. (Raisi was travelling with other officials and at least three other helicopters at the time of the crash.) So too are regional terror groups, like ISIS-Khorasan, unlikely culprits.

Tensions between Iran and Azerbaijan have only risen in recent years as the Aliyev regime has grown closer to Israel (as well as Turkey and the West). But despite Baku’s recent military successes against Armenia, I really doubt Azerbaijan would shoot down the Iranian president.

Which brings us to the question everyone really has on their mind: Did the Israelis do it?

The short answer? I don’t know. And likely neither does anyone else. I might be wrong here, but I also don’t think the Israelis have a lot to gain right now by shooting down the sitting president of a regional adversary. The aftermath would be incredibly ugly and would do little to change Israel’s current risk profile: love him or hate him (most people probably hated him), Raisi is not the center of power inside Iran.

Since 1989, current Supreme Leader Ayatollah Khamenei has managed the convoluted and often-times competing factions of the various religious, political, and economic centers of Iranian power. He is old and, if we believe well-sourced Israeli and American intelligence figures who leak to the media, been dying for the past 20 years. (He’s 85 and we’re more likely to get there sooner than not…)

Did the Ayatollah get rid of Raisi? Probably not. Many Iran watchers would argue that Raisi was on the short list of clerics likely to eventually replace the current Supreme Leader. Was it someone within the Islamic Revolutionary Guard Corps? Another political rival? Not likely. While Raisi was often mentioned as a significant obstacle to nuclear talks with the rest, no one figure in Iran has enough veto power over a policy point (and perhaps not even the Supreme Leader) to stymie a nuclear détente with the West. And Iran was scheduled to have presidential elections in a year. There are certainly less… fraught ways to get rid of a president in Iran.

The simplest explanation would be that the president’s plane simply had an unfortunate accident at a very inconvenient time. Most of Iran’s aircraft are Franken-zombie constructs, a product of successful Western sanctions limiting Iran’s ability to get new technology and parts. Pre-1979 Western equipment is kept alive with a mix of indigenous knock-off components and whatever schlock can get in from Russia and China. Russian and Chinese aircraft and parts are often second-or-third-hand purchases from intermediaries looking to avoid sanctions. And then there’s Brazil: Embraer is no slouch when it comes to small and medium-sized planes, to be sure. And Iran and former/current Brazilian President Lula da Silva are old friends. But not even the President of Brazil can bend US sanctions to his will; Iran has seen its plans to buy a fleet of second-hand jets stall for years as Washington’s most formidable lawyers and accountants work tirelessly to keep the planes grounded.

Bad weather, bad fog, and bad parts make for good chances for an accident. We might learn that more nefarious things were afoot, but there’s certainly not a lot of reason now to jump to that conclusion.

Which brings us to our second question: what comes next for Iran?

Per the constitution, Iran’s First Vice President Mohammad Mokhber becomes acting president. If you haven’t heard of him, don’t worry: neither have any of the pundits and media figures who will become overnight experts on the guy. While Mokhber has ties both numerous and deep to several institutions within the Islamic Republic, he is the definition of a loyalist benchwarmer. By design.

The Iranian constitution lays out that Acting President Mokhber, the Speaker of the Iranian Parliament and the head of the judiciary must arrange for a new election in 50 days. (Contrast this with the US, where VP Kamala Harris would simply serve the rest of President Joe Biden’s term). This is where things might get tricky.

Raisi joins a growing line of Iranian presidents who have overseen brutal crackdowns on Iranian protests. Many within Iran will cheer his passing. Will his death and upcoming elections trigger fresh protests?

This is certainly possible and, if I was a betting man, I’d say probably likely. If for no other reason, protests are no longer a rare or unlikely occurrence within Iranian society. I don’t expect them to fundamentally hasten the end of the regime, though it could distract Tehran from its current regional adventures (Iran, Syria, Hezbollah, and to the extent they have influence, Hamas). But history also shows us that when Iran is more insecure about domestic security, it is more likely to remind regional adversaries of just how hard it can hit beyond its borders.

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TranscripT

Hey everyone. Peter Zeihan here coming to you from the Mediterranean coast. It is the morning of May 20th, and the news at the moment is that late last night, local time, helicopter went down and Iranian Azerbaijan in the north of the country and on board was Iranian President Gracey. And he perished. the Iranians don’t use GPS like we do in the United States, because they think that is an end for American intelligence. 

Of course, they don’t use the Russian system either. so it took them many, many hours to find him. And it was bad weather and it was cold. It was foggy. And by the time they found the crash site, he was gone. for a country with Iran that is so, desperate for this dramatic, this is obviously not a great thing to happen, and it’s obviously not a great time for anything to happen, because there’s a lot of movement in a lot of places in the Middle East. 

We have the Israelis trying to box the Iranians in strategically by getting a peace deal with the United States and Israel. We have a number of other Arab states looking to follow their lead. we’ve got the Gaza war. We have the Ukraine war. We’ve got the Chinese starting to put out feelers in the Middle East to see if they can become a regional power there as well. 

a lot is going on. So of course, everyone, everyone, everyone is talking about how he died, how he could have died, how he could have been assassinated. And I don’t want to rule out any particular theory right now, but, it probably doesn’t matter. Raisi is like any other Iranian president before him getting more and more and more involved in violence in the region and more and more involved with the violence at home. 

so it’s not that nobody wants the guy dead. It’s there’s very few people out there who don’t want the guy dead. But at the current moment, killing it doesn’t really achieve anything. Because first and foremost, the Iranian president is nowhere near the most powerful person in Iran. That would be Ayatollah Khamenei, the supreme leader. in fact, we were going to have elections later this year, so somebody in the regime wanted him gone. 

There’s much simpler ways to do so. I also don’t think that we’re in a situation in the Middle East right now where violence is naturally just going to explode. The Iranians and the Israelis have actually figured out how to step back from mutual confrontation to a degree. I mean, I don’t want to overplay this. It’s still the Middle East. 

And so there is no immediate reason for the Israelis wanting to be gone. And if risk is replaced by just another ultra-Orthodox hardliner, you know, it’s like, what changes, you were talking about variations on the theme. There’s always personal reasons. He’s, contributed to the death of a lot of people. And there is a lot of families out there who would like to see him gone. 

  

But again, there’s nothing new here, and there’s nothing that really moves the needle for me. everybody has their own pet theory. I’m not going to bother lining them up and knocking them down. I will just underline that Iran has been under sanctions as regarding its air force and its aviation, civilian and military for 40 years at this point. 

So you’re talking old vehicles being maintained by second, third and fourth hand parts that can sneak through the sanctions airframes that were designed to be pulled from service in the mid to late 80s. And this is what he was flying because this is all they have. And so the idea that this is simply a mechanical failure in bad weather remains the dominant. 

Theory. But that’s the likelihood here as to what happens next. There is a caretaker vice president who will take over. He said do that. No one has heard of before. He has no ambition and no talent, so he’ll be sidelined. I mean, this isn’t like the United States, where the vice president just steps in and serves the remainder of the term. 

And it’s certainly about like Europe, where the Parliament gets together and chooses a new prime minister. he wasn’t that important. And he’s going to be replaced by someone who is even less important. And then we will have elections to decide who will take the spot. at the moment that the only risk here is that the natural drama of the Persians, boil up or someone on the outside chooses. 

This is the opportunity to attempt to destabilize a country that actually hasn’t been destabilized. And then we would be reminded that Iran has a lot of paramilitary operations well beyond its borders. So I kind of find myself, as in this situation, is when Iran launched their deliberately botched attack on Israel a few weeks ago. this is a chance, an opportunity to calm things down. 

And normally in the Middle East, I would say no, grab it. But we’ve had several incidences like that in the last few months. So maybe, just maybe, Rossi leaving this Earth will be an opportunity for a little bit more calm in a region that is unexpectedly become the calmest in the world. Take your good news where you can. 

Does Iran Actually Have a Nuclear Weapon?

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Everyone is talking about Iran’s potential development of an active nuclear weapon. Before anyone gets too frightened at the prospect of this announcement, let me give you some food for thought.

Before we even touch on the technical stuff, we have to look the source of these announcements; which just so happens to be coming from ultranationalist members of parliament (you know, the MTGs of Iran). Now onto the real stuff. Building a functional uranium explosive device is no easy feat. It requires some seriously complex implosion tech, and don’t get me started on ensuring an accurate delivery of a nuclear explosion.

And even if Iran magically developed nuclear capacity, they would be placing a massive target on their backs. However, there are some other players that you might want to keep an eye on. As geopolitical dynamics shift and security commitments change, there are a handful of countries that would be strong candidates for nuclear development or acquisition.

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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 Poland in downtown parsnip. a lot of you have written in about some of the news that’s coming about, you know, from Iran, about the potential of them actually having an active nuclear weapon at this point. I need to take some air out of that argument. 

first of all, these announcements are coming from members of parliament in Iran that are ultranationalist. So it’s kind of like having Cori Bush or Marjorie Taylor Greene announce policies for the government. So, you know, don’t take that too seriously. but more importantly, the technology just in question here, it’s not clear. It’s something that the Iranians can do. 

Now, I know that sounds a little weird. We’ve been hearing intelligence agencies across the West warning about the emergence of an Iranian nuclear program or a nuclear weapon for quite some time. But, you know, that’s kind of the point. Supposedly, Iran has been six months away from having an active nuke for 25 years now. And at some point, it’s not just an issue of putting up or shutting up. 

It’s an issue of dissecting the technology that’s in question and what is actually necessary. So to have a uranium explosive device, you have to do something that’s called implosion, which is basically having a series of very precision milled explosive plates that surround a plutonium or uranium core and all explode in at the same time in order to compress the sphere of enriched material, which then triggers a runaway chain reaction that triggers the actual mushroom cloud. 

this is harder than it sounds, because if you have any flaw in that, or if one of the plates doesn’t go off at exactly the right time, then you don’t get that implosion and the explosion. Instead of funneling in, goes out through one of those spots. And then the nuclei never collide and you never actually get the nuclear reaction. 

So getting this all right is very difficult. And it’s something that yes, yes, yes, the United States figured out in the 40s and other countries have cracked the code since. But that doesn’t mean it’s easy. And there is no sign at this point that the Iranians have figured out how to do that. Because if you didn’t do it, not only would you get a nuclear explosion, but you would be able to detect that with, say, earthquake monitors. 

So from the point that that happens, you then enter into this really weird spot where you’ve demonstrated the ability to crack the atom, but you haven’t demonstrated the ability to actually deliver that explosion where you want it. So you the thing is this, this device that can do this is going to be fairly large, fairly heavy and difficult to hurl at someone. 

So if you’ve demonstrated that you can capture the power of the atom but not deliver it, that is the time when anyone who doesn’t like you is going to hit you very, very, very, very hard to prevent you from getting a deliverable weapon. and Iran knows this. Iran knows that if they managed to demonstrate that they can crack the atom but not deliver it, then everyone will be after them. 

So the question is whether they can do it in that or not. I would say they can’t because they haven’t. And even if they did, all that would do is open up a whole Pandora’s box of security problems for them. So am I concerned about Iran for any number of reasons? Sure. This doesn’t make my list. Now, that does raise the question of the broader question of who might want a nuke. 

As we’ve seen over the last 80 years, the countries that develop the nuclear arsenal are the ones who don’t think that they can win a conventional conflict. So Israel has nukes because they were worried that we’re going to be overwhelmed by the Arabs. India has nukes because it was concerned about a war with Pakistan and vice versa. China has nukes because they were concerned about Japan and the United States and so on and so on. 

And so the countries that the United States has traditionally been concerned about are the ones who might find themselves at a conventional war with the United States. Iran obviously falls into that category. But if you’re looking forward, it’s probably going to be a different list of countries that are on the proliferation list. Because if, if, if the United States backs away from some of its security commitments, the math change during the Cold War and since, the United States has a series of alliances that basically underwrite the security of any number of countries and some American nationalists see that as a problem, see these countries as freeloaders. 

But should the United States no longer provide the nuclear umbrella, a lot of these countries are going to feel that they have to take care of themselves. And for many of them who don’t think they can win a conventional fight against a superior conventional force, that means nukes. So during the Cold War, China had nukes to fend us off. 

But the Koreans, the Taiwanese and the Japanese felt they didn’t need one. You remove the United States from that strategic competition, and all of a sudden they do. And all three of those countries Japan, South Korea, Taiwan, have civilian nuclear programs and could easily build a bomb in a matter of days or weeks. In the Middle Eastern theory, it’s not so much Iran that I worry about as, say, Saudi Arabia, who may not have the technical expertise to build a bomb, but they certainly have the cash to buy one. 

And in the European theater, if the Americans, for whatever reason, are a wall and you’re dealing with the Russians, you have a whole list of countries that are going to want nukes Kazakhstan, Finland, Sweden, Germany and above all else, Poland. So for people who are arguing that nuclear proliferation is an issue, I say, yeah, it is, but the suspects are not the usual ones. 

 

Adventures in Gun Running: Iran

We’ve got some new players in the global weapons trade, and let’s just say that I prefer the old gun runners.

Traditional suppliers like France and the UK are still providing weapons to their allies, but Russia is now seeking out weapons for its conflict in Ukraine. This has enabled countries like Iran to emerge as sellers of advanced drones and leverage test data from a real war.

The impact of weapons like this on weaker states could be devastating. From destroying infrastructure to disrupting government functions, we could very well see the dynamics of low-level conflicts completely shift.

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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.

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TranscripT

Hey everybody. Peter Zeihan here coming to you from Colorado. And today we’re going to talk about recent changes to the global weapons trade. Now, there are some usual suspects that are still in play. Notwithstanding this, France, United Kingdom, still providing weapons to their allies as well as their, actually, we call quasi allies. And most of this stuff tends to be pretty standoff weapons free.

that links you into a supply chain network that is much political and strategic as it is technical. So, for example, when the United Arab Emirates buys things like F-16s, it’s not because they’re necessarily planning on flying them. They buy the best available because they want to make a big splash in the checkbook of American arms manufacturers for political reasons.

They’re they’re purchasing a relationship with the United States. And so the more advanced stuff like, say, the F-35, they will probably never fly. Anyway, that is continuing apace. and the Chinese, of course, are involved too. The problem with the Chinese is nobody trusts the supply chain in times of conflict. because the Chinese have proven that they’re willing to extend or withdraw technical support based on other concerns.

And so if you want some cheap stuff, that’s unlikely to, be too useful in the long run. The Chinese are definitely there for you. But the more advanced stuff, the Chinese really don’t like to share the good stuff. So, you know, I would suggest they’re not a player, but not a huge one. when you consider the size of their manufacturing base, the two, the three countries, however, who have really changed in the last couple of years.

the first one, of course, is Russia, who is now involved in its own hot war. And instead of selling weapons to the wider world, it’s buying weapons from the wider world, specifically from the countries that it once sold to its opponents all the equipment back because they know they can’t absorb too much technology, and they know they need more bullets and artillery rounds and everything else.

the other two players who have changed, the first one has also slipped down the rankings, and that’s North Korea. I hear it’s a technical issue. North Korea is many, many things, but a technological superpower does not. And while it in the past has produced a large number of weapons for export, the quality of them hasn’t really improved over the last 20, 25 years.

So they are seen in the face of more advanced systems, a little bit of competition. I don’t mean to suggest they’re not a proliferation risk. things like intercontinental ballistic missiles or nuclear programs. Those are still things where they are in the top ten in the world. but it’s not like they’re this gaping source like they used to be.

And one more thing about the North Korean military, you know, it’s huge. And they spend a lot of their efforts simply keeping up with what they’ve already built, just keeping it updated. So you miss the Ukraine war has been a godsend because the Russians came in and bought something like 10 million artillery shells from them that were half century old.

And so the North Koreans are spinning up their industrial process to keep their own system supplied. They don’t have a lot of spare capacity for mass exports. and that leaves the new kid on the block country that usually we think of as a weapons purchaser rather than a seller. And that is Iran. Iran, starting about seven years ago, started to get into the world of drones when it launched an attack across, Iraqi airspace to target, the Gwadar oil fields in Saudi Arabia.

And since then, they’ve been using the Yemen war as cover to basically test out all their new kit. And now, with the Ukraine war, they are selling stuff for the Russians. And the Russians are replying with a, a lot of real time weapons information and are starting to mesh it into their satellite network. So the Iranians are getting much better test data than they’ve ever had before.

And this is allowing the Iranians to produce these things at scale, knowing there is a long term consumer in the Russian space, and it’s also allowing them to expand their industrial plant that’s necessary to sell these things on a wider market. So we’re seeing things like the shaheed drones that have become famous in Ukraine for attacking power systems, popping up in wars throughout the Middle East and in Africa.

And in this, we’re seeing kind of the curl of the wave of a new wave of weapons technology that it’s not so much that it’s super accurate, although compared to, say, the ballistic missiles of a too long ago, it is it’s you can attack a specific target with precision at a significant standoff distance. the shaheed can easily go 1000km, and some of the better versions can even go further.

And while the warheads may not be massive against an unarmored target, it’s pretty much a guaranteed kill. And you use them to target buildings rather than, say, moving cars or something like that. As we are discovering throughout the Ukraine war, it is much cheaper to launch these attacks than it is to defend against them. And when you look at places that have limited infrastructure where the power of the state isn’t great, those are the places where these sorts of weapon systems are going to have an outsized impact.

So, for example, just to pick one out of the box, the Civil War that’s currently going down in Sudan, there aren’t a lot of fixed places that are worth something. And those that are in existence can get hit by drones very, very easily. So for weaker states, this evolution and technology is almost the kiss of death. If you get into an armed conflict, because there’s no way you can afford to defend your fixed sites.

So the only solution is to buy a bunch of these weapons and hit the other guy first. So the conflicts that we’ve been seeing that have been steadily more involved and bloodier since about 1990. In this part of the world, sub-Saharan Africa, North Africa and the Middle East, and maybe to a lesser degree, Central Asia, you should expect to see a lot more activity like this, and you should expect it to do some real damage, not necessarily in a military sense, but to the ability of a government to function.

Because if you can start taking out things like power centers, and every once in a while, drop a drone on the presidential palace, the disruption that’s going to have to a system that is already pretty weak is fairly extreme. Today, Iran is the primary purveyor of things like this. But, you know, no offense to the Persian scientists.

They’re not top notch. And it’s not going to be too long before other countries get in on that particular action. As these weapons become the new normal for low level conflicts around the world.