Middle East Archives - Zeihan on Geopolitics

What’s Up with the Middle East: Syrian Dysfunction

Next up in the Middle East series is Syria. They’re enjoying a calm period right now, but the new President, Ahmed al-Sharaa, is walking on eggshells to avoid the deep-rooted problems that have plagued Syria for ages.

Those problems run the gamut, from ethnic to religious to geographic divisions. Think of Syria as a patchwork of groups that love fighting with each other. And maintaining stability in a place like that is hard, especially now that backing from Russia and Iran no longer exists.

Unfortunately for the Syrians, nobody is all that interested in helping them out. Western powers aren’t willing to step in, regional powers benefit more from Syrian dysfunction, and the Gulf states can’t figure out how to proceed. All that to say, Syria should enjoy this period of calm, because the storm is undoubtedly coming back.

Hey, all. Peter Zeihan here coming to you from Zion National Park, going down the old Conservation Corps path that they blew out of the side of a mountain, because that’s how we did things in the 30s. Anyway, we’re continuing our Middle East week, and today we’re gonna talk about Syria. We have a new government that controls most of the territory and has incorporated most of the factions.

But, don’t expect this to last. We’re at a kind of the calm before the storm. Basically the new leader whose name escapes me. Yeah, that looks right. Isn’t going to last. I mean, I wish him the best, but he basically has inherited all of Syria’s core problems without any of its advantages. Syria is made up of a half a dozen completely different regions, different sectarian groups, ethnic groups, different religions in different geographies, and they don’t pull together.

So you have your Druze on the mountain down in the South. You’ve got the Arabs and what we would consider the Fertile Crescent, the three big cities of harm Ham, Aleppo, and then the fortress city of Damascus. You’ve got the Alawites and the Christians in the mountains and the coastal enclave in the northwest. And then you have the Kurds and the kind of step back territory along the Euphrates to the northeast.

And then, of course, ISIS is running around like mad in the desert in the middle, in the war before now, all of these factions were at one another’s throats to some degree. There were limited alliances, at least within specific geographies, but there was really no way for the single government in Damascus to exercise the writ over the entire territory.

That doesn’t change. What has changed is that two of the powers on the outside, the Russians and the Iranians, are no longer providing a and I say this tongue in cheek, a little bit a stabilizing influence. You see, the Iranians and the Russians were backing the, Damascus government of Bashar al-Assad. To the hilt with equipment, with men, whether it was, Russian fighter pilots or Hezbollah fighters from Lebanon that were controlled by Iran didn’t really matter.

All of it, was funneling in to help the central government hold the line in the Civil War. Well, that’s obviously stopped because the central government fell. And this new guy is now in charge. But it’s not like anyone else is stepping up to help him. The big news recently is that the European Union and the United States have decided to drop sanctions on the Syrian government to kind of give them a chance, but they need a lot more than that if they’re going to go anywhere.

Also, we’ve had so let’s just say, some weird political bedfellows in the last couple of weeks, Donald Trump actually met the new Syrian leaders and shook his hand. This is a guy who was executing civilians under Sharia law less than a year ago. So, you know, apparently we’re doing that now. But the United States and the European Union made it very clear that any aid, was far in the future and would be contingent on a large number of factors that are mostly out of side of the central government’s control.

So the Civil War is kind of at a pause, but don’t expect that to last. Oh, that’s kind of steep. We might hug the side a little bit more. The other players that would matter. You got two local and then two further abroad. The two that are local are the Turks and the Israelis. And they’re okay having Syria as a more or less failed state right on the doorstep, because it means that they can go in there and do whatever they want, bomb whoever they want, go after whatever surgeons they don’t like.

Which in the case of the Turks, in the case of the Turks, it’s the Kurds who are America’s best friends in the region. And in the case of the Israelis, it’s pretty much anyone but the Druze. So if Syria was to consolidate into a functional state, they’d be able to resist these sort of punches. And the Israelis and the Turks are just fine the way things are right now.

So having a semi failed government and a semi anarchic system that spins up its own internal violence for its own reasons, this is fine. Further abroad, the two big players. Well, this is called a cluster of players. The Gulf states of the Persian Gulf. Since most notably, the three most heavily involved are Saudi Arabia, which tends to support the Sunnis, Qatar and the United Arab Emirates, who are a little bit more freeform with their assistance.

The three powers do not see things the same way. They backed different factions at different times for different reasons. And now that everything’s kind of in flux, they’re kind of sitting on their hands. Funny thing, when Donald Trump was going on his, make up of terrorists, campaign in the Middle East, he stopped in Saudi Arabia and basically asked for cash to invest into the American economy because the American economy is slipping into a recession that Donald Trump’s tariff policies have cost.

And the Saudis basically said, yeah, you know, you’ll make up whatever number you want in your PR campaign. We’re not going to give you even a third of that. And we’re not giving anything to, Syria that is not specifically backing our interests until such time that you come up with the security plan for the place. So everyone’s just kind of sitting on their hands and waiting for the other shoe to drop.

And in Syria, you probably will not have to wait soon. Just keep in mind that should this new government actually start to consolidate the two countries that are closest with the most military forces available and the most to lose, Turkey and Israel are certain to take actions. So anarchy. So I formed anarchy is probably the best. We’re going to get.

And if it lasts through the summer, I would be very, very, very surprised.

What’s Up with the Middle East: Turkish Dominance

Image of a line of Turkey Flags with kids riding on the back of a tram in Istanbul

We’re moving onto the region’s most dominant country – Turkey. Sitting at the crossroads of Europe, the Middle East, and the Caucasus, Turkey’s military, economy, and political identity have all been shaped by this unique identity.

As deglobalization sets in, Turkey (and more specifically, President Erdoğan) is keen on seizing an opportunity at climbing the regional ladder. Thanks to solid geography, good demographics, and a long history of outlasting regional upheaval, the Turks have the perfect foundation. All Erdoğan feels he must do is continue consolidating power, amend the constitution, and his seat at the table will be cemented for the remainder of his life. And then he can project his ‘image’ of society onto the wider region.

It’s not all butterflies and rainbows for Turkey though. They’ll need to continue growing the industrial base to be globally competitive. And some of those outdated economic views could harm Turkey’s long-term prospects, despite the deglobalized world we’re heading towards.

Hey all Peter Zeihan here we are continuing this week series on the Middle East. And we’re going to now talk about the most powerful country in the region by far. And that is Turkey. Turkey is an industrial base that produces every other country in the region combined. It has a GDP roughly the same size as every other country in the region combined.

It has a military that’s more powerful than every other country in the region combined. In fact, it’s the second most powerful army within the NATO structure. Second only to the United States. And the first thing to remember about Turkey is that Turkey is Turkey. It is not Middle Eastern in the traditional sense. It is not European in the traditional sense.

It’s part of the Caucasus. It’s part of the Eurasian sphere. It’s part of the Balkans, it’s part of the Levant, it’s part of Mesopotamia, it’s part of all of this. But it is of none of them. It is its own thing. And if you start your understanding of Turkey by thinking it falls neatly into one or the other, you’re thinking about it wrong, which is one of the many, many, oh, so many reasons why the Europeans never understand the Turks.

Anyway, what the Turks are thinking right now at the top of the government is thinking right now is that they are at an interesting moment in history. There are two massive trends going on to the north that are colliding with one another, and both of them have limited time. The first one, of course, is the Ukraine war, because never forget the Crimea specifically and broader parts of the Russian and Ukrainian spheres at various times in history, have been part of the control of what today’s Turkey considers to be its normal birthright.

There are plenty of ethnic Turks throughout the Caucasus, in the southwestern Eurasian region. Of course, in Crimea itself. And so there’s no version of any future of the Ukraine war matter. Who wins, who loses where? The Turks are not going to be indelibly involved. And whatever that looks like. The second piece, of course, is the European resurgence and semi military unification that is happening both because of the Ukraine war, because of withdrawal.

The United States under the Trump administration, the Europeans are having to fight against decades of low birth rates and an industry that is designed around global exports, which is no longer functioning. And they’re having to find a new way of doing it. And part of the way they’re doing it is by converting some of their civilian industrial capacity to military production.

And for those of, you know, your European and especially your German history, you know where that can lead. But both of these trends are temporary. The demographic situation for both the Russians, Ukrainians and the Europeans is terminal. There is no version of a globalized world where Europe is still a single entity. There is no version of a globalized world where the Russians have the income that’s necessary to hold their own structures together.

As the United States leaves, both of these systems are doomed. And even if the U.S. stuck around the demographics are so bad, they’d be doomed anyway. The question is time frame. Is this five years? Is it 15 years? Is a 25 years? We really don’t know. History’s never been at this sort of turning point before unless you’re in Turkey.

The Turks have seen this all before. They’ve seen demographic decay on their borders. Going back to Roman times. They’ve seen a situation where wars on the periphery have flared as two forces fight off against each other and then both flare out. They saw this with the Persians, what is today the Persians against the Arabs. They are used to seeing other powers in the periphery rise and fall, because their demographics have always been good, their geography has always been good, and there’s always been a degree of insulation.

Doesn’t mean that it’s always perfect. Turkey has had its share of imperial rises. This falls as well. But the essence of what makes Turkey Turkey has always been there. And that brings us down to the personalities that are hoping to shape whatever’s next, because we have this many historical and geopolitical forces coming together at once, anyone who’s left standing on the other side is going to be able to kind of write their own ticket.

So that guy is the president, who goes by the name of Erdogan. Now at Iran has been at the top of the Turkish political heap since he kind of returned from an internal semi exile in 2000. Basically, the old government of Turkey tried to get rid of him, didn’t stick to being prime minister and now president.

And he’s now in the process of trying to amend the Constitution so he can be president forever. He refers to his enemies as traitors of the state. He lambast the educational system and the media and the financial sector is all being against him and against the will the people sound familiar to anyone at all? Anyway, Erdogan is hoping that he will be the dominant personality in all of your age.

In the not too distant future. And that he, as leader of Turkey, the most stable of the countries throughout this broader region, is going to be able to leave the Turkish imprint, the other one imprint on human history, from now on. And it’s not narcissistic egoism. That’s right. Well, it’s not it’s not just narcissistic egoism, because he too has done this before.

If you go back to the foundation of modern Turkey in the aftermath of World War One, we had a guy named Ataturk, who is generally considered the father of the modern incarnation of the state, which is something history hasn’t gotten around to amending yet. I’ll get to that in a minute. Anyway, Ataturk tried to drag the Turks out of the Ottoman Empire, which was semi religious.

The caliphate was headquartered in Istanbul. The Europeans saw the Turks as technologically backwards and neo hominids who had invaded from the plains Eurasia, descendants of the Mongols. All that good barbarous stuff, about half of which is true. Anyway, they were definitely more technologically backwards and say the European states were, as the Europeans were industrializing.

The Turks relate to that game out of Turk dragged Turkey by the ear, kicking and screaming into the modern age, introduced things like democracy and industrialization, took away their hats, changed the culture, and in doing so, he put the military as a secular force in charge of the country for the next couple of generations, ebbed and flowed when Ataturk was dying, he gifted, if that’s the right term, democracy to the country.

And a lot of the people in Turkey thought that they shouldn’t have given up their religion or their culture. And so we got this back and forth and back and forth and back and forth. It lasted until about oh, 2002 when, at Iran came in and basically grabbed both sides of that political argument by the ear and forced them into a single mishmash time.

He, I mean, sort of singular system that he now rules. So the secular military that used to throw coups, that has been completely brought under civilian control, all of the religious figures that used to issue, directives against the government, all those have been brought to heel and are under everyone’s control. So we have now one turkey.

That is a combination of the best and the worst of both sides of that old political argument. So from veteran’s point of view, he’s already the guy who’s been remaking Turkish history for a couple of decades. And the next logical step is to remake the entire region. So from his point of view and he’s got a point that if there’s anyone who knows how to navigate these particular waters, it’s him, because he’s already done it.

All he has to do is continue to shove all of Turkish society into a box of his shape, design and size. So he’s trying to force his political allies in the Parliament to allow him to run for president again. I think it’ll be like his 14th term or something. I mean, it’s not like fourth term. And if that’s successful, he will basically be president for life.

He’s already, I believe, 71. He’s not rumored to be in ill health. Doesn’t mean he’s a great modern manager in many ways. He’s like like Donald Trump. His idea of what industry should be is what it was 50 years ago when he was a kid. So technology is not something he understands. Modern society is not something he understands.

People who are young, you know, under 50 are not people that he understands. Again, it’s unfamiliar. And so he’s introducing what may well be some of the very problems that are going to plague Turkey for the rest of the century. For example, the Turks have a very solid industrial base, but it’s kind of middle tier for quality.

Anyone in the Middle East who can afford it doesn’t want Turkish goods. They want German goods. And anyone in the Middle East who can’t afford Turkish goods wants Asian goods because they’re cheaper. So Turkey has yet to define what it’s going to be in this new era. All we know for sure is Erdogan is committed to being the big man when everything breaks.

What’s Up In the Middle East: Israel’s Future

Photo of Israeli flag in from of some buildings

We’re kicking off a short new series on the Middle East. Of course, we must begin with the country on everyone’s mind – Israel.

The Israeli government is a fragile conglomerate of coalitions that have been led (and weakened) by Benjamin Netanyahu over the past decades. Netanyahu has managed to piss off Trump in recent times as well, with his requests for freedom to operate in Gaza, removal of US tariffs, and US strikes on Iran; Trump was quick to reject all three. But Netanyahu did get something from Trump – a nice seat at the top of his s**t list.

The situation in Gaza remains unsolved and is as complicated as ever. The US is disengaging from the Middle East, which means Israel is going to have to find someone else who carries a big stick and can help ensure its strategic future. Given Israeli reliance on imports food, energy, and tech, Turkey is the best option…despite the hoops and hurdles they’ll need to jump through and around to make it happen.

Hey, all Peter Zeihan here come to you from Zion National Park. We’re launching off a week in the Middle East today. And, as seems appropriate, when I. You’re in Zion, we’ll start by talking about what some people call the Zionist state, Israel. Israel is a multi-party democracy, that hasn’t had a majority government in years.

This is not an electoral system like the United States, where if you get one more vote than the other guy, you get the seat. And and you knew if you get a certain percentage of the votes, you get a certain percentage of the seats. So we’ve got like 11 parties in the Israeli, parliament right now. And as a result, for the last 30 years, their governments have been, very weak because they have to, make all of their coalition partners happy.

Because if a coalition partner leaves odds are you’re going to have a fresh election and you get started all over again. So, it’s a lot like how Italy used to be in the 60s, 70s and 80s and 90s and 90s. Now, in Israel, where governments very, very rarely last out their whole term. The guy in charge is Benjamin Netanyahu, who has been near or at the top of the Israeli political heap now for pushing almost 30 years, almost 40, not a long time, anyway.

He is a populist conservative who has no problem throwing other people under the bus or sacrificing some of his, political, preferences in order to maintain power. And I don’t necessarily mean that in a condescending or condemning way. When you’ve got multiple parties in Parliament and multiple parties in your government, you have to make a lot of horse trades on a tactical basis day by day.

And that means that a lot of the things you do care about get pushed to the side. And that’s part of his problem right now. Donald Trump, entertained Netanyahu at the white House a few weeks ago, and it went horrible, really. The only world leader who’s been to the white House since Trump has been in that had a worse time was Zelenskyy of Ukraine.

If you remember, that ambush. Anyway, Netanyahu came asking for three things. Number one, he wanted a completely a free hand in Gaza to do whatever he wanted. Reminder that Gaza is that little strip of territory, that until recently was ruled by a militant political group called Hamas, kidnaped hundreds of Israelis still are holding a couple hundred of them.

And the Israelis have now been spending about a year and a half trying to beat that and into some sort of shape that they actually think they can deal with in the long run. The second thing that Israel wanted was an end to tariffs. Trump put tariffs on pretty much everybody who wasn’t Russia And the Israeli project in many ways has been American subsidized since the beginning, back in 1948. And so the idea that the United States is now going to charge a pretty hefty, tariff, you can see Israeli’s really caught everyone of all political stripes and Israel off guard because they thought that Trump, being a populist conservative, was one of theirs.

Apparently not to the degree that they thought. And then third, Netanyahu really wanted to get, Trump to bomb Iran into the Stone age and do Israel’s work for it. It didn’t go well. He basically got a firm, loud Trumpian no. One, all three. And, you know, there’s a lot of speculation on a lot of sides as to how this is going to shake out.

But what it feels like to me is that, Trump has just done, what, the entire alliance structure. It’s not just the Germans or the Brits or the Australians. It’s everybody. And that includes Israel. And so the Israelis are learning that even when they have the most populist conservative government in decades, and the Americans have the most populist conservative government in literally centuries, they do not see eye to eye.

And from Trump’s point of view, the problem appears to be Netanyahu. The way Trump sees the world, which is through a very specific lens that I would argue needs to be replaced, Netanyahu represents everything that Trump looks down on, came to the white House and he asked for things. That’s not what winners do. That’s what losers do.

He hasn’t been able to clean up Gaza. And it’s been a year and a half. Why is this still going on? It’s entirely unfair. You’ve got over 2 million people basically living on a postage stamp. The idea that’s going to be anything other than a breeding ground for insurgency is silly, and there is no good solution for Gaza.

You want to ship the Gazans somewhere else where apparently people are starting to talk about sending them into the middle of the desert in Libya. Now, whatever. There’s no infrastructure to move them. There’s no place that can take 2 million people in the Middle East anywhere, even including in the rich places. But Israel wants them gone.

And Trump wonders why this hasn’t been settled on the tariff situation. You know, the Trump view that the world has been ripping off the United States economically. I have no respect for that. That’s just flat out wrong. We basically paid people to be on our sides for the Cold War. So we got something in return. We got security control.

Israel, Israel’s different, Israel has basically occupied a soft spot in the American strategic formula. Since foundation. And when they say come after our IP, like the Chinese or the French do, we really don’t do a lot about it because we’re trying to make sure that Israel can exist as an island of democracy in a sea of problems.

Anyway, so there was no change on the tariff situation. Third up is Iran. And while the Trump administration and Trump personally talks a big talk on Iran, Trump has made it very clear over and over and over again in both this administration in his first one, that he has no intention of getting involved in a meaningful war.

I mean, he picked a fight with the Yemeni recently and then stopped after 30 days. And now the idea that the United States is going to get involved in a knock them out fight with a country that can influence militants across the entire region seems a bit of a stretch to me. Also, the Israelis very clearly have been pushing for the United States to do this long before Trump going back, five presidents.

And it hasn’t really gone the way that the Israelis would like. And so when Netanyahu made his direct, almost arrogant plea to Trump, he was turned down flat. That doesn’t mean that the Americans and the Iranians are about to, like, kiss and make up. But Trump really does want a nominal deal that would allow him to say that he made a deal.

And so those talks are continuing to grind forward. The bottom line is that Netanyahu can’t give Trump anything that he wants. Number one, there’s not a lot in the Middle East that the United States does want, especially now that the withdrawal after Iraq has been completed. And then second, anything that might produce movement of, for example, peace in Gaza, which is one of the things that, Trump campaigned on can only happen by rupturing Netanyahu, whose domestic political coalition because by the tenor of the right wing in Israel, Donald Trump is a hippie

commie. And there’s just no version of any deal, in Gaza that would work. For who? This is nice. Let’s take a look at that. That would work for all of the factions. In fact, there are some members of Netanyahu’s coalition who are wondering why they haven’t kicked up the crematoria and just gotten rid of the Gazans directly.

Anyway, so that’s where Israel is. That’s where Netanyahu is. He’s kind of stuck in a lurch. There’s no real good move for him. And Trump is tuning out. And that means the Israelis are going to have to figure out how to function in a world where the United States just really doesn’t care about the Middle East.

So, obviously this has happened under Team Trump, but I would have argued that we’ve been edging this direction for a good 15 years already, and we’re always going to get to some version of this where the Israelis have to figure out that they can’t look after the security themselves. They’re too small, they’re too dependent on energy imports, the two independent food imports, the two dependent on technology imports.

But there are partners out there that might work. They just have to figure out which one they can stomach. And the one that is most obvious, the one that is closest to one that could be a threat if it wasn’t a partner would be Turkey. And we’ll talk about them tomorrow.

The Future of Tourism: Part 2

We’re continuing our discussion on the future of tourism with a few new regions. Today we’ll be looking at some at-risk European countries, an unstable Middle East, and an uneven Southeast Asia.

Okay. Next is Europe. Europe faces two situations as well. The first is clearly demographic, with countries like Germany and Italy just aging into obsolescence. You’re looking at the complete collapse of their industrial model over the next decade, which will take the entire social model with it, because without people to pay for the welfare state, oh, angry Germans, who are willing to protest and get sketchy, of course they’re going to be really old.

So it’s not going to have the same connotations that it might have, say, 50 years ago. The other piece of the equation. Yes. So, you know, got steep wobbling, financial collapse, industrial collapse, employment collapse. And on the other side, you’ve got the Russians who are going to push until the day that they can’t, obviously, unless you are into adventure tourism.

Russia and Ukraine are already out of the tourist list. And if the Russians are successful in Ukraine, they will push further west. The whole line of states, going roughly from Estonia down to Bulgaria are in some degree of danger, which means that all of them, all of a sudden become only the type of tourist locations that very specific types of tourists go to.

So if there’s anywhere in Central Europe that you are interested in now is absolutely the time.

All right, let’s see. Next up, the Middle East. Who? Everyone in the Middle East basically falls into one of three categories. Either they rely on oil income directly. Number two, they rely on oil income indirectly from another state, or they are Israel. All three of these categories look kind of sketchy. Oil requires a significant trans national trans oceanic transport system.

In any system where globalization is no longer a thing and no one is providing security on the water that is in danger. So the only oil producers that will continue to be oil producers are those that both can maintain control at home. Short list there, as well as cut a deal with a local or regional security guarantor in order to keep everything running from the oil point of view.

To get to an end user that eliminates sales to places like Japan or Korea, Taiwan or China, which is kind of the bread and butter for most of the Persian Gulf countries right now. So this gets really dicey really fast. The North African say Algeria have a much better position because they just have to get over to Europe.

But for the countries that are on the dole, you know, whether you are Morocco or Jordan or Yemen, the money’s just going to stop coming. So you should really count on that going away. And that just leaves Israel. Now, Israel imports three quarters of food, imports 90% of its energy, and there is no version of economic transformation that Israel is capable of where those two things go away.

So the only way Israel continues to be a viable state, especially if it’s going to be a tourism destination, is if it manages to cut a deal with a new regional security guarantor. That will not be the United States. The U.S. won’t have the reach of the interest that will be Turkey. So watch Turkey very closely for the next decade.

It’s probably going to be one of the fastest growing, most successful, most powerful countries, not just in the region, but in the world for decades to come. And how Israel makes its bed with the Turks will determine everything about the sustainability of the Jewish state.

And finally, Southeast Asia. Southeast Asia is the part of the world that I expect to do the best. Is the world to globalize after, of course, a little adjustment period, because it can pick up anything that the Chinese drop and has the perfect mix of demographic structure, geographic accessibility, a history of basically not going to war with itself.

It’s going to be a manufacturing powerhouse and kind of a globalization in miniature that the ten countries that are in the area, but not everything is the same for everybody. Some countries are going to do better than others. And kind of like with India, when you change the economic profile of a country really dramatically, you have people who win more than others.

And that will be nowhere more extreme in terms of differences than in Southeast Asia. So what will be true for Luzon and Java and Bangkok and ho Chi Minh City and, Hanoi will not be true for Mindanao or Sumatra or Lao or other places that are a lot poorer. Basically, you have this huge split within the region, and then among the region between the countries and the locations that can do very, very well in this sort of environment.

And those it can’t. And so, you know, this is going to sound really strange, of course, but when you want to go to another country, you need to do your homework first. And in the future, Southeast Asia is going to offer both the best and the worst.

Trump Takes on the Middle East

Israeli successes across the Levant have transformed the broader Middle East, wrecking the countries and militant groups that have long scourged the region. The moment is ripe for a complete reordering of regional norms. To capitalize upon this rare moment, Donald Trump wants to invest blood and treasure in the region’s most worthless and historically fraught chunk of land in order to build…hotels?

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Alright. We’re now going to do the third in our opening series on what Trump is doing in his new administrative term. And today we’re talking about the Middle East. Now, the Middle East is ripe for change. We’ve had, wow. We’ve had a lot of shifts in just the last six months, but really in the last two years.

So quick review. After attacks a little over a year and a half ago, now you’re gonna have to go. Wow. Has been that long? By Hamas. That’s the political group. The terror group that rules the Gaza Strip, which is an extreme southern Israel after the launch of terror attack. And Israel killed over a thousand people and took a couple hundred people hostage.

Israel’s been on a tear. It started with a borderline incompetent, invasion and occupation of Gaza. No matter how much went back and forth and how much it smashed and how much it bombed, and how many people were arrested, it just couldn’t root out Hamas. Because everybody who lives in Hamas is basically living in an open air prison.

And the people were given an opportunity to leave. What little they had was destroyed. And it was very, very easy for Hamas to replace any of its war losses with new recruits, because we got 2.2 million people with absolutely no options anyway. Well, that was all going on. And I’m just like, this is looking really bad. Israel was doing other things, and then it launched a decapitation strike using exploding pagers and of course, a lot of airdrop bombs on a military group, a terror group called Hezbollah in southern Lebanon.

And in doing so took out the entire leadership. But shortly after that, the Turks managed to maneuver things over in Syria so that the Syrian government collapsed. And all of a sudden, if you’re Israel, you’re looking around and things have gotten pretty good. Hamas is in a box. We haven’t been destroyed, but they haven’t been able to strengthen, and all of the regional allies are gone.

Hezbollah has been decapitated, and the only way that you would resurrect Hezbollah is with a lot of additional support and training and personnel, which, ironically, would come to or through Syria, which is now gone. And that left Iran, which was the ultimate sponsor for Hezbollah and Syria on the wrong side of Iraq and really unable to do anything meaningful.

And so they were reduced to using diplomatic attachés to shovel cash into the country, one envelope at a time. And it’s just not doing what they needed to do. Even if Iran is able to regenerate Hezbollah, it took them 30 years to do it the last time. It’s not going to turn on a dime here. So there’s a real opportunity, not just for Israel, but for everyone in the Middle East, to turn the page and move on to something new.

It helps that no one in the Middle East likes the Palestinians at all. And specifically Hamas. So there’s a possibility here with a little bit of leadership and a little bit of creativity of the United States, that we really could open a new book. Now, just don’t turn a page, open a new book on what the Middle East is.

So Donald Trump wants to build a hotel. Donald Trump’s idea is that all of the Palestinians of Gaza will be relocated to another country. Keep in mind, all the countries hate them. And the United States will take ownership of Gaza, which is a little chunk of land sandwiched between Israel and Egypt, making it the least strategically valuable chunk of territory in the entire region.

And it will develop it into a resort area. And oh my God, opportunities like this don’t happen. But once a century or so. And this is not how you cement the future of a new region. Let’s just let’s just go down the reasons why this is a horrible idea. Number one, moving 2.2 million people. Let’s leave aside the whole genocide human rights thing.

I’ll let other people tackle that topic. Let’s talk mechanics. The last couple of times that we saw people relocated against their will, governments were participating in the relocation. Specifically, you had the partition of India, where a newfound India and Pakistan were basically agreeing to swap Hindus and Muslims so that they weren’t living among one another, and they had a better chance at having a peaceful coexistence.

The one before that is called the Beninese decree. In the aftermath of World War Two, when newly Soviet satellites like Poland and Czechoslovakia uprooted Germans and shipped them off to, the new German boundaries, specifically East Germany. When that happened, you had states that had agency and capacity and, gravitas to make it happen. So the new East Germany did a massive building program in order to accept its own people, back its own ethnic ethnics.

And the Soviets helped with transport and food. Also, you’re talking about northern Europe, which even in the aftermath of World War Two, had some of the densest transport arteries on the planet, including roads and trains. You had the same thing in India. This is part of the old British colonial mandate or the Raj. And as a result, you had the parts of Pakistan and India that are viable, economically viable, climatically livable, were attached to one another.

And so you could basically just run people on the roads, on the rail, back and forth until you achieve what you wanted. Also, in both cases, they were moving. People had housing to move into in the case of Germany, we’d had a population drop in the war. In the case of India and Pakistan, people were moving in each other’s homes.

It was ugly. It took years. There were definitely lots of complications, but it kind of sort of worked. That’s not what we’re looking at here. Number one, the Palestinians don’t want to move. Number two, there’s no infrastructure at all linking them to anywhere else. You either cross through the unpopulated part of Israel, that is the Negev, in order to get the unpopulated part of Jordan before you eventually get into a place that has already 70%.

How a Palestinian. But the leadership of Jordan is Hashemite Arab, and they hit the Palestinians, and they basically oppress the people, so they have a chance of retaining their throne. You throw 2 million pissed off Palestinians in that mix and Jordan goes from being a quasi failed state and a satellite of Israel to a chaos cannon in no time flat.

And all of a sudden, you’ve taken the problem of the Gaza Strip and turned it into a formal state called Jordan. Alternatively, you could go through exodus in reverse and cross a scenario where there’s almost no roads and certainly no rail. Then you get to the, Suez Canal where there is a bridge, thank God, and you can get over to populated Egypt, literally Exodus and verse, where the Egyptians say to the Palestinians and find a place in a country that is failing because it is now unpopulated, the ability of the country to grow its food itself.

And that’s before you consider global climate change or global trade breakdowns, which means that very soon the Egyptians won’t even be able to sell cotton and citrus on international markets to buy wheat to feed their own people. So you’re basically pre-judging the Palestinians for starvation and then we get a new access the other direction with Palestinians instead of Jews.

Those are the only option. So the only places you could walk from Gaza, we’re talking 2.2 million people. You cannot relocate them any other way. And when you’re done assuming all of that works, somehow you now have a chunk of land that is nothing but rubble abutting unpopulated Egypt and lightly populated southern Israel that you’re going to turn into.

What of Las Vegas, of the Middle East? No. And for that, you’re going to burn American blood and treasure, which is going to take way more than what we used in Iraq in order to get something in a place that nobody wants to be anyway. I’ve heard dumber ideas. Not often.

Yeah, I’m done with this one. Tomorrow we’ll talk about China.

No, I’m not done. I forgot to give you the forecast. So if Trump proceeds in trying to get the Arab states of the Middle East who don’t have the capacity to come and get the Palestinians to uproot the Palestinians, who don’t have the infrastructure to move the Palestinians or house or feed or water the Palestinians, if he tries to get them to do it anyway, talk about pressure on the relationship.

We’re at this wild moment where both Russian and Iranian power and the bulk of the Middle East has been broken in a short period of time. At the same time, if Trump does what he says he wants to, he will provide a years long window of opportunity for both of those countries to reestablish their old position, and then some, because Trump will do what Trump does and he’ll put pressure on everyone.

He started with Jordan. He moved to Egypt. He’s now working on Saudi Arabia, by the way. There’s even less infrastructure connecting Saudi Arabia to the zone in question. And he’s going to keep pushing and pushing and pushing. And if he does that, all relations with all Arab countries are going to freeze. And it will be very, very easy for the Russians and the Iranians to reestablish their position, however, and wherever they want.

Now I’m done. Tomorrow’s China.

Can Venezuela Help Out with a Middle East Oil Shortage?

With the increasing possibility of disruptions to the Middle East oil supply, I was asked an ~interesting~ question on how to solve it. Could foreign intervention in Venezuela open its oil supply as an alternative to Middle Eastern oil.

Before we look at Venezuela, we need to know who might be interested first. The US has its oil needs figured out, so it’s really only the Europeans that would consider this. There’s plenty of crude in Venezuela, but years of mismanagement have left infrastructure and fields in poor condition. Couple that with a host of security issues, political instability, and a heavily armed civilian population…and it’s definitely not a cakewalk.

Even if the Europeans were willing to make the massive investment to revamp the oil industry in Venezuela and put forth a substantial military presence to establish the order needed to make this possible, they would still need the sign off from the US…and that’s probably not going to happen without some major incentives.

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Hey everybody, Peter Zeihan here coming to you from the Golden Horn above Denver and it’s probably my last snow free day of the season. Anyway, We are. Oh.

Oh, deer.

Today we’re taking a question from the Patreon crowd. Specifically with everything in the Middle East starting to look very Middle Eastern again, would it be worth considering some sort of operation in operation?

To remove the government of Nicolas Maduro of Venezuela so that the world has another source of crude available for when the Persian Gulf becomes a place you really don’t want to be? Might sound a little neo imperialist, but that’s a pretty good question. You got 20 million barrels a day of crude that comes out of the, the Persian Gulf states.

And any meaningful conflict that involves Iran or Saudi Arabia, clearly is going to take a substantial percentage of that off line. And even if the oil fields in the United Arab Emirates and Saudi Arabia take no damage, and even if those two countries stand, and even if the bypass pipelines that get around Hormuz or go to the Red sea, operate at full capacity, you’re still talking about roughly how 12, 12 to 13 million barrels per day that’s under severe threat.

So the idea of being able to get some more crude out of Venezuela is a solid idea from a supply point of view. In addition, if you look back at history, the original oil embargoes that OPEC did, were Arab. They were not they didn’t involve all oil producers. And back in the day, Venezuela was not a participant in them.

So we saw more production out of Venezuela, which didn’t simply, cushion the blow.

But I would argue that over the period of several weeks to months, it actually broke the back of the embargo. So having Venezuela in play is obviously great. That said, the country that would do something like that is 100% not the United States.

While the United States does prefer heavy crude, Venezuela has been such an a sneaky producer for so many years, more than a decade now that, with the exception of a few incidental cargoes, U.S. refiners just don’t even want to take delivery of the stuff because they can’t plan on it. You tool your refineries step by day, week by week, by month, by month, year by year, based on what you anticipate, the blend of crudes coming in going to be.

And so if you can’t rely on a particular supplier, it’s better for you simply not to use it at all. And ever since the early days of Hugo Chavez, maybe going back to 2007, there have been very, very few refineries in the United States who have chosen to use Venezuelan crude. I know that doesn’t match the rhetoric.

It’s always about, oh, we’re not going to ship to the Americans anymore. Well, the Americans weren’t buying anymore. So if Venezuela were somehow magically to come back into the mix, its specific grade, a very heavy, very sour crude would have a hard time finding a local buyer. That’s problem one. Problem two. The middle row government is well, it’s like Zimbabwe levels of incompetent, Zimbabwe being a country that was one of the world’s great breadbasket until the government of Mugabe and his successor just drove it into the ground and made it a food importer, under first Hugo Chavez.

No, Nicolas Maduro, we’ve basically seen the, cronies of the government literally rip up everything, even if it was nailed down, and sell it oftentimes for scrap. So the country now imports 80% of its food. It used to be a food exporter. And, its total oil output is kind of bouncing back and forth between 500,000 million barrels per day based on what happens with, Chevron, the American company, which is really the only one that’s still operating there.

Most of the reservoirs have suffered extreme damage. The infrastructure hasn’t been maintained. And don’t get me started on the refineries. Oh, there’s like chunks in their gasoline now. But just for the record, chunks of gasoline is a bad thing. So, if you could wave a magic wand and change the government and change the investment strategy and, make them not klepto those.

Oh, yeah. Important detail. The Venezuelan government is not socialist. It is not communist. It’s a kleptocracy. And of course, we should be scared of that anyway,

If everything was perfect, it would still take probably an investment of 40 to $50 billion upfront just to get back to where they were five years ago when they were exporting, like, a million barrels a day, maybe producing something close to a million and a half.

Keep in mind that the fields that Venezuela has are old, they’re technically challenging, and they produce a very sludgy type of crude. So you really to know what you’re doing. And today, there’s only a handful of companies that have any experience working with that. One of the Chevron, the other ones, Conoco. And then there are some companies that say in Canada that work with the oil sands, which is probably the closest analog, but it’s even not a very good one.

And as a rule, the Canadian oil sands operators don’t operate anywhere except for the oil sands. So simply building up the skill set that would be necessary to attempt this would be huge. Third, most of the oil is in one of two places in the western part of the country. You’ve got a region called Maracaibo, which is about as anti Maduro and anti-trade as you can get, but the government’s efforts to basically destroy their own state have had a big impact there.

And Maracaibo itself is lawless, complete with pirates operating offshore. And in Maracaibo a lot of the crude is produced from offshore wells, most of which are in the process of going down to zero. So you have a split politically in the country that you’d have to deal with. The second part of the crude comes from the southern belt, the Orinoco Belt, which is super heavy, far more technically challenging, and a lot of that is just vanished from the market completely.

So if you want to bring either of these in, you don’t simply need to change the government. You need to restore basic security to the country. And then you’re talking minimum, bare minimum. Something like 50,000 troops. Remember, one of the things that Hugo Chavez did is he paid people to be on his side. And he didn’t just pay them with food and with fuel and with cash.

He paid them with AK 47. So arguably, of the countries in the world that are not actual war zones, the densest footprint of assault rifles in the population is in Venezuela now. So anyone who’s going to come in for any reason, even if the locals in general are welcoming the stability and they be able to get food, they’re going to be dealing with the significant population that is armed to the teeth and not with little pop guns.

Okay, you put all that together and the US is like, no, sir. The United States is now not just a net exporter of crude oil, but by the end of this calendar year, probably is going to be exporting 5 million barrels of refined product. That’s a greater volume of refined product exports than all but three countries in human history have ever produced as raw, crude.

So the idea that the United States is going to launch a war for oil is just silly. It’s going to happen. It’s going to be because countries in Europe realize that the Russians aren’t coming back to the table, not in the way that matters in the Middle East is as unstable as ever. Ergo, this conversation that means that we are left with the Europeans basically thinking, well, where else can we go?

And one of the very few options that is not West Africa or North Africa is going to be Venezuela. So they’re going to have a choice. Do they go into Libya, which is basically a stateless zone now on its own. Can’t even call it a civil war. Civil war requires a state. You can go into Nigeria where with over 100 million people, the chances of imposing a security environment on Nigeria that the Nigerians don’t want is silly.

So we’d have to be even done with partnership with them. So even with a lot of cash, you’re going to be dealing with a very corrupt system and slow growth of output, or you’re talking about a military occupation and enforceable reconstruction of Venezuela. Leaving aside the little issue that the Europeans are a little bit out of practice at that, they would have to get American permission as well.

Monroe Doctrine and all that. And for the United States to give the Italians, the Brits and the French and the Germans approval to invade, basically a country in the Western Hemisphere, let’s just say that whatever was being offered in exchange would have to be really nice. And I’m not sure there’s anything in Europe that we want that badly at the moment.

So interesting idea. The crude is there, but the country that would have the capacity to do something but the United States really doesn’t care. And the countries that do really care would have to build up a whole fresh set of tools and then bribe Washington in order to make it happen. So it’s an interesting exercise, but nothing that I think is going to go down this decade, next decade though, everything’s game.

The UAE and India Look to Localize Semiconductor Manufacturing

A couple more countries have joined the campaign trail to buildout their semiconductor industries: the United Arab Emirates and India. Let’s break down the different approaches to this buildout and how they might turn out.

The UAE is attempting to sweet-talk Samsung and Taiwan’s TSMC to build a semiconductor fab facility in places like Dubai and Abu Dhabi. In case you didn’t know, these places aren’t exactly known for their engineering expertise or labor forces capable of carrying out these complex operations; meaning these facilities would likely be filled with labor imported from South Asia. Basically they’re paying for the facility to be closer to home, but not actually doing any of the work.

India, on the other hand, is working on a more sustainable model. Bringing together Powerchip and Tata, the Indians are focusing on producing less advanced chips. Don’t be fooled though, these chips and the fab facility where they are made would be vital for the growing tech sector in India. By using local labor and addressing the infrastructure issues associated, India’s approach leans towards functionality over prestige.

While both are attempting to localize semiconductor manufacturing, the UAE and India have different approaches that will likely have very different results.

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Hey, everybody. Peter Zeihan here. Coming to you from a hotel room where I’ve been laid low by a 24-hour flu problem. It’s like, hope it’s only 24 hours. Today we’re going to talk about semiconductors and something interesting that’s happening in the world of fabs. Dubai and Abu Dhabi, which are the two main cities in the United Arab Emirates and the Persian Gulf, are holding talks with Korea’s Samsung and Taiwan’s TSMC about building a fab facility in the Persian Gulf in the United Arab Emirates.

Normally, I would just wave this away because semiconductor fabs are one of the more, if not one of the most, complex manufacturing systems in the world. And there aren’t a lot of people in the Persian Gulf that can do basic math, much less, you know, high-end engineering. But I thought it might be worth exploring why it still might happen and what it would look like.

TSMC and Samsung are not the same. TSMC is what’s called a fab fabricator, and Samsung is more of a conglomerate, right? And so TSMC is part of an ecosystem that involves several thousand companies that come together to provide the materials and the designs, and TSMC simply puts it together. In fact, they don’t even design the managerial process.

What usually happens is a foreigner, typically someone who’s from Japan or the United States, designs a chip in league with the end user. And then that design is given to TSMC. And then that designer typically goes out and sources all of the materials that are necessary to make the chip, ensures that they’re high quality, and then brings them to TSMC themselves.

It’s a little bit oversimplification, but think of TSMC as the world’s best direction followers. They don’t have a lot of intellectual capital in terms of interpreting the designs. That’s all managed by the American or the Japanese guy. Instead, they have an ecosystem of hundreds of companies within Taiwan who then take individual pieces of the design and figure out how to make it most effectively.

And then all of that information is combined under the American or Japanese person’s tutelage in order to provide a very, very specific series of instructions for TSMC, which they then follow. I’m not saying this to suggest that TSMC isn’t good at what they do. Oh my God, they’re the world’s best. But the really high value-added isn’t done in the fab; it’s done outside the fab by others. Samsung in Korea is a little bit different. They’re more of a conglomerate. They have a design house, and they handle more of the instruction-building themselves. But still, these two companies, Samsung and TSMC, are two of only three companies on the planet that can make the high-end chips that are smaller than five nanometers.

The third one is Intel in the United States, which is a little bit more similar to Samsung than TSMC. Anyway, the point of all of this is it’s really, really complicated, requires a lot of really, really smart people who are really, really good at math and engineering. And the Persian Gulf is not known for having any of that.

UAE is basically a financial center because things, concepts like interest, are illegal under Islamic law. So UAE has found a way to kind of do an end run around Sharia laws and the such. And basically, if you’re in the Middle East and you want your money to actually earn something, you bring it to Dubai. And then Dubai does the investing, usually via third-party nationals.

So the idea that you could have a high-end fab in UAE using local labor is hilarious. So it wouldn’t use local labor. The UAE is basically a slave state, and they bring in people from other countries to do all of their work, most notably South Asians. And so if, if, if you get a fab facility operating in the UAE, it’s going to be manned almost exclusively by Indians.

And which brings me to the next point that India’s getting the fab. But they’re not doing what the Emiratis are doing and trying to get the world’s best, so it’s kind of a feather in the cap. No, they’re just going for functionality. So the company Powerchip is partnering with Tata, which is an Indian industrial conglomerate, to build a fab facility that will not make the high-end chips.

The best chips they will make will be 28 nanometers, which is what you are going to see in your typical car, going down to 110 nanometers, which is Internet of Things sort of quality. Nothing particularly sexy. But India, to this point, has not had a single fab operating in the country. It’s a problem of not labor or labor quality.

It’s a problem of infrastructure. So if we have something in Dubai or Abu Dhabi, it’ll be the Emirates with their rock-solid power system, paying for everything and importing all of the labor and all the technology. And the only thing about it that will be Emirati will be the address. And then in India, we’ll have a system where the state will try to set up a better power grid locally to where this facility is going to be.

And then the local labor will be right there. So two very different models to get to two very different places, bringing different assets into play.

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.

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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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.

Libyan Oil Gets Shut Down Over Government Duel

An oil refinery positioned in the desert

As a result of the power struggle between the two governments in Libya, roughly 70% oil production in the country has been shut down. This could significantly impact global oil supplies and is a glimpse at the instability within Libya.

The Libyan National Oil Company halted production at the major fields, which takes ~700,000 barrels of oil offline every day. The western government in Tripoli and eastern government in Benghazi are both vying for control of the country’s oil revenues, but no one is getting much of anything right now.

This shutdown could carry implications for European countries like Italy, which refine much of Libya’s crude. It could also ramp up demand for US crude, which the Americans won’t be mad about. The fallout of all this shouldn’t be too large, but could spell trouble for the future of Libya and its energy sector.

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

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

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

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey, everybody. Peter Zeihan here, coming to you from a bright Colorado day. Today, we’re going to talk about a country that I haven’t brought up in over a year—Libya. Basically, the Libyan National Oil Company announced that it’s shutting down production at a couple of major fields. Collectively, Libya produces about a million barrels a day.

The announcements were going to affect over 70% of that. Whether or not there’s going to be more, we don’t know. This is a crazy story. If you remember back to the 2000s, in the early days after the Iraq war, a number of governments were led by tinpot dictators who were so arrogant that they were convinced that the Iraq war was actually about them. It was a warning for them, and so they rushed to cut deals with various powers to make sure that they weren’t the target of the already planned invasion. In the case of Turkmenistan, you had a guy basically rush into the Russians’ arms. In the case of Libya, you had Gaddafi appealing to the United States and voluntarily turning over his proto-WMD program to try to make sure that he wouldn’t be knocked off like Saddam was.

Well, that was the beginning of a series of processes that led to a little bit of a political opening in Libya, which ultimately culminated in a bit of a civil war with NATO special forces. After six months of just waiting for somebody to take off, Gaddafi basically led these militant forces to the presidential palace, and the government collapsed.

Since then, a new government has been put in place, internationally recognized and based in Tripoli. But they were supposed to have elections over ten years ago, and they never did, so they lack legitimacy. That’s in the western part of the country, where most of the people are. In the eastern part of the country, you’ve got another government based in Benghazi, which is a mix of Russian-backed groups, mercenaries, Islamists, and a guy named Haftar, who’s a real asshat.

What has been going on in the last 12 years is that all of the oil—most of which is produced by the eastern government—is processed through the central bank, which is the only institution in the country that has access to foreign currency and can do forex transactions. It is headquartered in the western part of the country, where the legitimate government is.

Both sides have been mucking with the equivalent of the Federal Reserve in this country in order to get a bigger cut of the money for themselves and to deny any money to the other side. The most recent development is that the Tripoli government in the West has kidnapped a couple of senior staffers and tried to push out the chairman of the central bank to get their way.

So the folks on the Benghazi side, where the oil is, have said, “You know, screw you guys. We control most of the oil, so we’re just not going to produce it. No money comes in anyway.” As a result, we have 700,000 barrels a day that are going offline. It might actually increase in the days and weeks to come.

It could be offline longer than just this political dispute because Libyan oil, especially the stuff in the eastern part of the country, is very waxy. If it’s not kept warm, it basically turns everything into a soft candle, including the pipelines, which will take a lot of maintenance to clear out. This has a lot of implications for a lot of people.

The Russians are going to be pissed off because they have managed to get themselves a cut of the energy revenues. The Italians are both on the pro and the con side of this—pro in that they are the ones that end up taking and refining most of the crude that comes out of Libya just because of proximity.

But they also have refining capacity that can handle over twice what the country actually uses. They are a refining hub for southern Europe. So you’d actually have more pain in places like Spain and France and throughout southeastern Europe in the Balkans because they’re going to make money regardless. Part of the problem here is that with Russian crude no longer part of the European diet, Libyan crude was one of the substitutes.

Another big winner is going to be the United States because while the Libyan crude is waxy, it’s also pretty light and sweet and has a fairly similar chemical makeup, minus the wax, to U.S. shale crude. The U.S. exports 3 to 4 million barrels of that a day, and having another half a million to a million barrels of demand out of southern Europe is something that would make American producers quite happy.

This is just what Libya is going to look like until one side or the other wins, or the two sides come together and form a unity government, which is definitely not going to happen. The only other reason that there might be any hope is that there might be someone in Europe—France or Italy most notably—who decides to go in, knock heads together, and basically just take over the fields and run the country themselves as a colony.

We’re not there yet. We don’t have energy shortages in Europe at the moment, and they’ve managed to find a lot of ways to adapt to Russian stuff going offline. Libya’s million barrels a day is not insignificant, but it’s not enough of a shock to cause a political or military reaction out of the European countries. But it is a little bit more pressure.

So if something were to happen to, say, the Persian Gulf—which, thank God, has been one of the most stable parts of the world these last couple of years—then we’re in a different world. So it’s another thing to keep an eye on. It’s more amusing than problematic at the moment, which I can’t believe I’m saying about the loss of nearly a million barrels of crude.

But this is the world we live in today. Watch the European PMs; they’re the ones that have the agency to do something about this if stuff gets real.

The Houthis Are Still Attacking Ships in the Red Sea

A photo of an oil tanker set against a red orange sunset

The Houthis attacked an oil tanker that had been previously abandoned in the Red Sea. They denotated charges, but only managed to start some fires (as of now). This lackluster attack isn’t the scariest thing, but it does highlight the growing dangers of commercial shipping in the region.

This attack is a decent example of the incompetency of the Houthis. It also highlights the problems with addressing these attacks, because there is no real power that could put an end to it. This is just one of several incidents carried out by the Houthis in the Red Sea and insurance costs are skyrocketing as a result.

As this region grows increasingly stateless, alternative insurance methods are emerging to support shipping. These come at a significant cost and they are likely to worsen as these attacks continue and escalate.

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

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

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

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Hey, everybody. Peter Zeihan here, coming to you from sunny Colorado. We’ve had a few things go down in the Red Sea that I thought were worthy of pointing out, just so everybody knows what’s what. The big issue that I’ve seen is back on the 21st of August, so about a week ago, a tanker by the name of Sow Union was hit.

The Houthis, a militant terrorist group operating in Yemen, are the ones behind it. They’ve been launching missiles pretty regularly over the last few months, targeting commercial shipping. They started by going after anything associated with Israel in some way, and then branched out to anyone who doesn’t pay them. The Chinese started paying protection money, and the Houthis started hitting Chinese vessels anyway. So, basically, if you’re sailing in the region, you need to get a really good insurance program, which is hard to get these days, or sail at your own risk. The Sow Union was a Greek-flagged tanker carrying crude. It’s a Suezmax tanker, which can carry about a million barrels.

The tanker was disabled and abandoned, and it’s just been floating there full of crude. A few days later, the Houthis sent out a motorboat, placed explosive charges throughout the vessel, and started a series of fires. Now, I’ve long said that the Houthis are among the world’s most incompetent terrorists—certainly the most incompetent in the Middle East. They’re not very good at what they do, but they operate from an area that’s basically stateless, so there’s no authority that can root them out.

I have no doubt that if a “real” military went in there, they could be destroyed really quickly, but then you’d be left ruling Yemen the next day, which is a thankless task—nobody wants to do it. The only country that might theoretically try would be Saudi Arabia, but they are arguably the most incompetent military in the world, and certainly in the Middle East. So, you shouldn’t expect a military solution to this anytime soon.

One of the reasons I point out that the Houthis are incompetent is that despite having full control of the ship and placing charges, they failed to breach the hull. The ship isn’t sinking. In fact, they didn’t even cause an oil spill; they just caused a bunch of fires. So it’s out there burning—a potential environmental catastrophe because the Red Sea doesn’t circulate like, say, the North Sea. But it hasn’t happened yet.

The point is that if you want to stop this, you either need to impose a Wisconsin-like physical order on Yemen, which would suck for whoever was involved, or you need to remember that the Houthis are incompetent. You need to go after the people sponsoring the Houthis—namely, Iran and Tehran. But no one is going to attempt a regime change in a place like Iran, which is basically a mountain fortress, in order to solve the Houthi problem. So, it would have to be a political deal.

Now, no one seems chomping at the bit to do that. Even if there was a broad-spectrum deal where, say, the United States and Iran could look past their differences and kiss and make up—and to be clear, that deal is not on the table at the moment—it’s not going to happen in an election year. The Iranians just got a new president, and while he’s not crazy—he’s actually fairly moderate—one of his first actions isn’t going to be cutting a deal with the “Great Satan.”

So, what we’re seeing in the meantime is that the Red Sea has basically become a stateless region where anyone who sails through does so at their own risk. We’re pushing the boundaries of what is possible with maritime insurance. As of three years ago, just before the Ukraine war, if you had an insurance policy and you sailed into an area where there were gun exchanges, the cost of your policy would go up by a factor of ten immediately. And if someone was actually targeting civilian shipping, your insurance policy would be null and void. But then the Ukraine war happened, and you now have major countries—most notably India, China, and Russia—setting up these alternative insurance programs for their ghost fleets in order to get crude out of Russia on the cheap and get it anywhere else.

This has provided a weird constellation of coverage options that include things like getting shot at or taken over by a government. So, we do have stuff still trickling through there. It’s not container shipping because container ships are really expensive, whereas an oil tanker is basically just a bottle with an engine.

We’re finding out what’s possible in this brave new world, and from a weird point of view, the Russians and the Houthis are doing us a solid here because they’re providing some alternative methods to ship things in a world where globalization and rule of law are breaking down. But there are side effects—the most obvious one being much, much, much higher insurance rates for everything. Keep in mind that every insurance company has its own insurance company, called a reinsurance company. All of this ultimately percolates up to the top, and the reinsurance companies have to charge higher premiums, which they pass on to insurance companies, which pass on to you for your house and your car.

So, yes, we are finding ways to keep maritime shipping afloat as globalization kicks in and we enter a more violent world, but it’s going to cost you a higher car premium.

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

The End of the World is Just The Beginning

Disunited NAtions

The Absent Superpower

The accidental superpower

The End of the World is Just The Beginning

Disunited Nations

The Absent Superpower

The Absent Superpower

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