Everybody Wants to Bomb Qatar

Hands holding the flag of qatar in front of a building in the middle east

Israeli airstrikes on Hamas targets in Qatar mark a significant shift in Israel’s positioning in the region. Israel has made it clear that they are willing to strike anywhere, regardless of alliances or presence of US bases…bad news bears.

Qatar may be filthy, filthy rich, but all that money couldn’t buy military aptitude. These strikes caught Qatar with its pants around its ankles, something that rival Arab states weren’t upset about.

However, the bigger story here is that Qatar hosts america’s regional military headquarters, and Israel only gave the US a ten-minute heads up before the missiles started flying. Whatever influence the United States had over Israel military actions has quite simply dissolved. And THAT will be noticed globally.

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Transcript

Hey all, Peter Zeihan here comes to you from Colorado. And today we’re going to talk about what went down on September 9th in the Middle East. Specifically, the Israelis dropped a few bombs and missiles on sites in the country of Qatar. That’s a little thumb like thing in the Persian Gulf. Small country, less than a million population going after some Hamas targets. 

Hamas, of course, is the military slash political group that used to run Gaza and is now on the receiving end of the Israeli occupation campaign of Gaza. Three big things. Oh my God, so many things, but three big things that come from this. First of all, let’s talk about Israel. Israel has never, ever, ever bombed anyone in the Persian Gulf. 

I mean, they’ve gone after Lebanon because it’s right there. They go after Syria, especially as it’s fallen apart. And, they’ve gone after Iran most recently in a big way. But the last time they bombed anyone else was like in the 1980s, they took out a nuclear reactor in Iraq. And before that, you’re talking about the Arab-Israeli wars of the 1970s and 1960s. And 1950s. 

This is a significant escalation. There’s been an expansion of their capabilities as they’ve gotten the Joint Strike fighter. They’ve gotten better weapons from the United States that have better range. Looks like what happened is they flew down into the Red sea and launched missiles over Saudi Arabia to hit Qatar. They didn’t do a direct overflight. 

Probably. 

And this level of aggression, this willingness to ramp up this newborn policy of taking action wherever and why ever, is immense. Because, you know, Qatar is a U.S. ally. Saudi Arabia is a U.S. ally. And for the Israelis to be so brazen, this is something that is going to continue until and unless a significant series of countries that includes up to in the United, including the United States, levy some sort of massive economic or military penalty on Israel for acting like this way, at the moment doesn’t seem like that is in the cards. 

And honestly, if you’re in the Persian Gulf, the Arab states of the Persian Gulf, like Qatar or the United Arab Emirates or Saudi Arabia or Kuwait, there’s really nothing you can do. So this is the new norm of Israel just dropping bombs wherever in the region it wants to. And that will cause any number of political complications and strategic complications, because at the moment they’re going after Hamas. 

But there are other militant groups that the Israelis are not big fans of. And should a government in the region become more hostile, the Israelis have now demonstrated that really doesn’t matter what your air defense systems are, the Arab states of the Persian Gulf, Kuwait, Saudi Arabia, United Arab Emirates and Qatar, they have some shiny hardware, but it’s clear they don’t know how to use it very well. 

And as the Israelis discovered with Iran, even if you’ve got stuff that you’ve integrated over decades, it really can’t stand up to the technology the Israelis can bring to bear. So all the royal houses of this region are now on notice. And if they do things that the Israelis don’t like, they can expect visits by explosives. 

The one thing that was really holding back the Israelis before, from doing things like this is the idea if you knock off the government, you could have Sunni jihadists boil up and turn the area into a scarred wasteland that would eventually cause problems for Israel. 

Well, some version of that has happened in Syria and Israel looks just fine. So if the nightmare situation is not something to be avoided, then destabilizing the neighborhood is something they don’t have a problem with. So that not all of that is number one. The Israeli side, number two is the Qatari side. Qatar is a small country. 

doesn’t have a lot going forward except for a big natural gas field, a little bit of oil. And in doing so, it’s become one of the richest countries in the world in per capita terms, because there’s very few people, the locals are the fattest humans in history because the national security program has run by Doha, the capital is to get everybody, heart disease and obesity so that they can’t protest. 

So, I mean, these are a whole country of taboos, that basically do nothing but eat all day, and they’re serviced by a couple to maybe 4 million today, expats who basically take care of their every whim. 

As a result, no shock that they don’t know how to use their own military equipment. But they do have, however, is ambition and arrogance and just supreme levels. The ruling government of the of the ruling family, is convinced that they were ordained by Allah himself to be a major power. And since they were late to the game, they basically went out and cut deals with everyone that nobody else would deal with. 

So the deal with the Muslim Brotherhood, they deal with Hamas, they deal with everybody, in order to prove how important they are. And then they throw a lot of cash at whatever the issue happens to be. So they are on the opposite side of a lot of the other Sunni governments in the region. And so while no one in the region is thrilled that the Israelis have gone and basically proven how powerless that they are in the face of a superior military force, there are a lot of countries, most notably, Saudi Arabia, the United Arab Emirates, that are pointing at and kind of going, because they are not loved at all. 

And seeing them taken down by such a big notch and made to look so incompetent and so impotent, is honestly very rewarding to a great number of people. What impact this will have on Qatari foreign policy moving forward is unclear, but certainly Israel is indicating to them that there’s certain lines they just can’t cross or bombs will fall. 

The government was not targeted. This was all targeted against Hamas groups and the Hamas groups were only kind of sort of taken out because they use longer range weaponry. But we now know with refueling that the Israelis could easily get there and back with more precise weapons. So something to watch for the future. In the meantime, Qatars on notice. 

Third, and perhaps most importantly, is how the United States fits into this, Qatar is the location of Centcom headquarters. This is where the United States coordinates everything throughout the entire region, including the recently closed down wars in Iraq and Afghanistan and a lot of countries in the region and up to and including Israel until very recently and until last week, thought that having Centcom headquarters in Qatar made Qatar bulletproof because the Americans offered an express security guarantee to the country. 

Well, that has proven to be wrong. And we now have a really interesting situation shaping up. Yes, the United States is willing to allow countries to bomb places where it has bases and not do anything that makes the United States look toothless. And for Israel, specifically, Donald Trump is now in a position where he can’t get the Israeli government to do or to not do anything. 

The Americans were notified of the attack less than ten minutes before the missiles flew. No. No way, no way. Enough time to get through the chain of command for Trump to say, call up Benjamin Netanyahu is the prime minister of Israel. Say, don’t do this. So the United States is now being actively ignored by the country, in the region that is supposedly its closest religious demographic and strategic ally in the region. 

That is not a good look for an administration who thinks that it’s tough, and that will have consequences here, there, and a lot of places in between.

Syria and the Return of the March

Woman holding a Syrian flag over a vehicle

Syria has been riddled with problems for ages, but will all that chaos boil up and spill over? The short answer is that it’s unlikely, but let’s unpack it.

The reason for this is due to a mostly forgotten concept of a “march” or a stateless zone on the edge of organized states. Given Syria’s fragmented and distinct regions, the country has never been fully cohesive; having marches prevents that chaos from spreading further. These areas would typically remain lawless, getting periodically raided to keep anything from festering up, until a neighboring power intervenes. Since Israel, Turkey, and Iraq are managing Syria’s borders, chaos can’t breakout too far.

On a larger scale, marches might be making a comeback. As deglobalization sets in and demographics become more strained, many regions could begin to resemble these lawless, stateless zones.

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Transcript

Hey, all. Peter Zeihan here coming to you from Yosemite. For the obligatory I’m backpacking video, but I hurt myself, so I’m in the tent for a few hours, but, my feet are messed up. Anyway, we’re going to take a question from the Patreon crowd. And specifically, do I expect the chaos in Syria to spill over to other countries? 

Yes and no. Just not in a traditional sense. Keep in mind that there’s basically seven series. You’ve got the coastal zone, which is the Alawites, a mountain zone, which is Christians. You’ve got the interior cities of harm, Hama and Aleppo, which are, Sunni Muslim. You’ve got Damascus, which is basically a fortress city. You’ve got this thin line of people that live along the Euphrates, and then you’ve got the desert. 

Right now, ISIS or Islamic State, whatever you want to call it, has been banished to the desert. But in the past they have conquered large chunks of the territory. Anyway, the Alawites out on the coast were the ones who ruled Syria until recently. They were pretty much hated by everybody. And now they have been overthrown. 

There is now a Sunni group that is attempting to cobble this country together. But, the Assads, those are the Alawites who were in charge, had the advantage of Hezbollah backing them up and Iran backing them up and Russia backing them up. And this new government doesn’t have any of that. And so it’s already descended into basically the second phase of the Civil War. 

This one will probably in time be much, much, much, much worse than the first one. And remember, the first one generated millions of refugees and hundreds of thousands of dead. 

Okay, what you have to remember about Syria is until we got to the after World War one, decolonization effort, this was never really a country. This was a zone where, because of all the differences in geography, was basically a bunch of mini states at best, or was amalgamated into some other governments, like, say, the Ottoman Empire or one of the caliphates of the past, which means you should never expect Syria to be a stable place, like it was under the Assad dynasty. 

Instead, what we’re seeing is a return of a concept that we in the West have pretty much forgotten about, called marches. A march is a zone outside of civilization. You have your cities, you have your infrastructure, you have your military and economy. But there’s a zone beyond you that is not owned by another country. It’s stateless. 

And in zones like that, chaos reigns unless and until a superior power comes in and imposes their will on it. And if you look at this region back through history, it has been a march for most of history. 

Marchers basically take two forms. First form is this stateless zone. When you can get some crazy group like the Islamic State that comes in. But that only works when no one who has a country who is bordering the march has the ability to interfere. Alternatively, if anyone who is born in the region does have the ability to interfere, they basically come in from time to time, burn everything down, and then go home because they know there’s nothing here that is worth, building up themselves. 

So for serious specifically, you have Israel, you have Turkey, you have Mesopotamia. And if you look back ten years ago, when Israel was occupied with domestic issues and the Turks had taken a vacation from history and Iraq was in civil war, well, then the Islamic State does pretty well. But that’s not the situation we’re in now. The Turks are on the roll. 

The Israelis are being very aggressive against any potential challenger and Iraq has managed to consolidate itself into a new nation state. We should get used to this sort of concept in lots of areas as demographics decline, as globalization really kicks in and wrecks economies, there’s going to be a lot of states that just the center won’t hold, and we’re going to see a lot more of the world looking like Syria, looking like a march than we’ve become used to in the last 75 years.

Should the UAE Invest in a Tech Sector?

Photo of interior of computer chip

The UAE is pouring money into building a tech sector, focusing on semiconductor fabrication plants and data centers.

While semiconductor fabs are central to chipmaking, they require immense technical expertise, specialized labor, and integration across thousands of precise steps; meaning this is a nothing sandwich.

Data centers are more achievable, but that doesn’t mean they’re a good idea either. The UAE would need to subsidize access to scarce high-end chips, figure out the high cooling costs (because desert climate, duh), and even then, the geographic limitations will prevent them from becoming a global hub.

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. Today we are taking a question from the Patreon page and specifically about tech and some of the things that are going on in the Persian Gulf, specifically, a number of the Persian Gulf Arab states, most notably the United Arab Emirates, are splashing around a lot of cash and trying to build a tech industry. 

There are two forms of taking. The first is they’re trying to get kind of like what happened in Arizona, a high end semiconductor fabrication facility. And second, they’re getting a data center. Two very different pieces of technology that have very different requirements. So let’s start with the semiconductor fab facility. 

Semiconductor fabs like the kind that we now have outside of Phoenix, the one that’s being built outside of Columbus, Ohio. 

The ones that are in Taiwan, are incredibly sophisticated. And what people tend to forget is that these are not just like assembly locations. They bring some of the most advanced machining in one place. They bring some of the most advanced materials into one place. They bring some of the most sophisticated designs in one place. And basically, you’ve got something in excess of 10,000 pieces that come together on the floor of the fab. 

It’s not simply an issue of making a semiconductor. You have a high end machine that’s called a extreme ultraviolet machine that does etching, and you have to dope. Well, let me let me back up. Just show you the whole thing. The whole process. Step one. You buy some really, really expensive sand silicon dioxide. That’s just pure, pure, purified. 

Usually only comes from the United States. You melt it down and know that you put in a seed crystal. And over the course of several days, sometimes weeks, you grow it into a crystal that weighs more than a car. You then slice it laterally into wafers, and then you take those wafers into your semiconductor fab facility, because these are all done in different places. 

And then you hit it with lasers that come out of the EV system. You dope it, you bake it again, you dope it, you bake it again, you do that, you know, ten times, 20 times, 90 times, and eventually you get a bunch of semiconductors on your disk. You then break those into pieces and test them and eventually incorporate them into actual hardware, like, say, a motherboard or a flash drive. 

And then goes into the intermediate products trade. So fabs are essential. Absolutely. But they are one step in an entire process that has thousands of steps. They just happen to be where a lot of these steps come together. They are not the high value added part of the process. That’s going to be almost everything else. Does that mean that they’re not important? 

No. Does it mean you can do it with unskilled labor? No. 

the United Arab Emirates have skilled labor? No. So if the UAE were to pay the $2,025 billion it takes to build a top rated facility, then they would have to do exactly the same thing that the Chinese have had to do import the labor to make it run the most exacting work that is done in a high end fab facility is the quality checks at every step. 

And that is something that if the chips are above, say, 20 to 30 nanometers, the Chinese can’t do it at all. And the idea that the UAE could do it is absolutely laughable. So if they did built this, no one would want to probably work in the unless the pay was absolutely immense and you would have basically a white elephant project generating very error prone, high cost items. 

That’s probably going to happen. What is less unlikely would be, say, a data farmer or data center. This doesn’t require nearly. The maintenance work is not nearly as, worker intensive. Basically, you get a bunch of GPUs. You build into something called a module with a bunch of Dram and Nand chips. Now, Dram, our memory chips and Nand are long term memory chips. Flash memory, short term needs power. Nand is, long term memory, not as quick, doesn’t need the power, and the GPU is all the processing. So you basically build a module and then you put a bunch of them in a server, and you put a bunch of server blades in a rack, and you put hundreds of racks in a room with really good cooling, and then you just let it run. 

Data cables coming in, data cables going out. Traffic comes and goes, you can house AI algorithms on it. You can. How’s your AOL account on it? Whatever you want. Two problems. Number one, all of the hardware is really, really expensive. And demand for the high end chips is very, very high. So most server farms do not have the sub seven nanometer chips that are, for example, necessary for most AI applications. 

Second problem latency. As a rule, you want your data center to be as close to your demand as possible. So the United States of various quality sets of about 10,000 data centers. And we try to put them either right outside of a population center or somewhere roughly in the middle of the country for trans coast traffic. So the idea that the UAE, with a couple first world cities is going to need a couple of data centers makes perfect sense. 

The idea that it’s going to be a global information hub, no, because there are no countries near it that generate the volume and quality of data that would want to go all the way to Dubai and Abu Dhabi before then moving on. So if the Emiratis decide to go down this path. This won’t be nearly as much of a white elephant project as, say, building a fab facility, but they would have to subsidize it in order to get the high end chips. 

And it appears that’s exactly what they’re doing. There is one of what’s supposed to be one of the world’s most advanced data centers, under construction in the United Arab Emirates right now, if everything goes to plan really does with these things, if everything goes to plan, it’ll become operational before the end of 2026. But it will be in a very expensive place to operate because the single largest expense for data centers is cooling its electricity. 

And I don’t know if you knew this, but the UAE is in a near equatorial desert. So the operational costs will be massive. And while labor is not a huge component of a data center when it comes to costs, they still don’t have the labor force to do even that. So if they do this, they seem to be doing it. 

It will be very expensive and it’ll just kind of be a feather in their cap. It won’t be actually something that a lot of people want to use.

What’s Up with the Middle East: Syrian Dysfunction

Photo of a plaza and monument in Syria

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.

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Transcript

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.

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Transcript

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.

Prefer to read the transcript? Click here

Transcript

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

Photo of tourists in Europe

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.

Prefer to read the transcript? Click here

Transcript

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?

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

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?

Flag of venezuela over some homes

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.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide 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, so we can be sure that 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.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

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.

Prefer to read the transcript? Click here

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Transcript

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.