The Energy Crisis: Downstream Impacts

Globe shot of energy hubs

The global energy crisis has moved from theoretical to very real. As the last shipments sent before the war begin to arrive, we are now hitting a turning point in the energy crisis.

Rationing and black markets have already sprung up in Asia. Some countries have found ways around the shortage (for now), but that has created new issues for others. The Europeans will feel the heat in the coming weeks, as oil from both the Gulf and Russia disappears.

The U.S. has also lifted sanctions on Russian and Iranian oil that is already in transit, temporarily easing shortages, but undoing years of work to limit export income for these countries.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. Yesterday we talked about what was going on with energy markets, primarily in the upstream, dealing with disruptions out of Russia and Iran. Short version. It’s pretty bad. It’s getting worse. Now, I wanted to deal with things that are close to the consumer where it’s pretty bad and getting worse. 

It has now been five weeks, which means that there’s a half a billion barrels of crude oil that hasn’t made it to market 

The final tankers from pre-war shipments from the Persian Gulf arrived in all of Asia last week. The final tankers will arrive in Europe this week and starting next week, the disruptions to from what the Ukrainians are doing to Russian oil exports will start to affect Europe as well. 

A mix of things here. Let’s start with who’s feeling what. Because of the shortages in Asia, we already have widespread rationing and the development of black markets. It’s affecting different countries in different ways. So for example, India has gorged on the thin stream of Iranian crude that’s coming out, and the legalization by the Americans of Russian crude that is out and about. 

And that has allowed them to avoid any sort of direct energy crisis as regards to oil and oil derivatives. However, almost all of their cooking, I should say all. But for about half the population, their cooking is done with propane liquefied petroleum gas that is exclusively produced for them in the Persian Gulf. That has gone to zero. And so now they’re seeing an energy shortage in that regard. 

Places like New Zealand and Thailand and Taiwan and the Philippines and Vietnam are all experiencing degree of energy shortages and rationing. And already the country that is most panic and should be is Korea, because their options are very, very limited and they’re a major industrial player in Japan at the moment, is avoiding this largely because they have access to sources from the Western Hemisphere and a navy that can protect them if it comes to that. 

And at the moment, the Chinese are okay, not because they’re not experiencing energy shortage. They absolutely are. But China has an overbuild of refineries. And so part of their economic model was to build refineries, absorb crude from abroad, refined into fuel, and then export that fuel. And so the way the Chinese have avoided an energy crisis is by stop exporting fuel. 

So at the moment China is okay, but those fuel exports now have stopped arriving in various places and countries like Australia, New Zealand, which used to get their fuel from China, their refined fuel suddenly aren’t. So we have a different sort of rationing and energy crisis. In Europe it’s going to hit them from multiple angles, but they do have a little bit more time. 

Like I said, the last tankers from pre-war Persian Gulf exports arrived this week. So it’s only now that the crunch really begins. The problem will be in 2 or 3 weeks, because they have this weird little setup where Russian crude can’t be bought in Europe, but it’s exported somewhere else, refined a product and shipped back. So we’re now starting the fuze on that, and in three weeks the Russians, will basically be a non-factor in European energy. 

At the same time, the Persian Gulf becomes a non-factor in energy. And it’s going to be a mess all around. A couple other things. Number one, there are more ships leaving the Persian Gulf. We saw 20 to 30 on both Saturday and Sunday, which brings up us to about one fifth of pre-war levels. The difference is Oman, which is the country that controls the southern side of the strait. 

Last week we talked about how the Iranians had set up a tollbooth system and were charging about $2 million per vessel and then kind of sort of escorting, ships through the northern part of the Strait of Hormuz in their territory. Oman is now doing the same thing in the south, basically to tankers, ships, whatever they happen to be are either re flagging or changing the trans front doors to say, Omani owned. 

And Oman has always been kind of the neutral power in the Persian Gulf. The Iranians have always kind of considered it in a different basket compared to Kuwait, Bahrain, Gutter and Saudi Arabia. In the UAE, which are more of the American camp. So far, the Iranians have not targeted these Omani vessels. I’m not saying that they this is a safe path. 

It’s not. But it has allowed some ships to get out. I will underline, however, that almost all of the ships that are using this route are leaving. Very, very, very few are coming in. Those that are typically Iranian flagged using the northern route. So of the two 300 ships that were stuck in the Gulf before, some of them are getting out. 

Nobody’s going back in. And that means that the oil production, even if it continued, even if it wasn’t damaged, still has no place to go. Let’s see. Finally, the big achievement of the Trump administration in this war so far in energy markets has been ending. the sanction system on places like Russia and Iran. They have now lifted fully the sanctions on purchasing what’s already on the water. 

And that has allowed basically the last 4 or 5 years of attempts to isolate the Russians in the last 10 to 15 years of attempting to isolate the Iranians economically, to vanish into the ether. If there’s going to be an effort by the United States or any other country to limit the legal access to these crudes, they’re going to have to start completely over. 

So the last 5 to 15 years of efforts to kind of squeeze these economies is now broken. Now there’s plenty of other things, physical damage, for example, that are drastically affecting both of these markets, primarily the Russians. But it is interesting to say that it took a war launched by Donald Trump on Iran in order to make Iranian oil legal again.

Winners and Losers of the Iran War: Ukraine and Russia

Toy soldiers advance across a map with an Iranian flag in the foreground

The Iran war has slashed oil exports from the Persian Gulf, creating a global supply shortage that’s just starting to hit markets. As prices are driven up and broader economic impacts unfold, winners and losers will begin to emerge.

Russia was enjoying the boost in oil revenues until Ukraine took out a chunk of its energy infrastructure with drone strikes. And those strikes don’t look like they’ll stop anytime soon. Russia’s support for Iran is also garnering political backlash that will weaken Putin’s long-term position. Ukraine is emerging as a winner, as its low-cost drone tech has secured deals with Gulf states to scale production and secure Ukraine’s position as a leader in military tech.

The Iran war is reshaping global alliances in ways nobody could have predicted, so we’ll continue to explore the winners and losers of this conflict in this new series.

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado. So today we’re going to dive into our open ended series on the impacts of the Iran war on everybody else. We’ve talked about the United States at length and the Persian Gulf countries, of course, but what about everyone else? The region used to export 22 million barrels of crude a day. It is now down to probably something between 10 and 12. So we’re already looking at a shortage of 400 to 450 million barrels that haven’t gotten out, and a lot of that shut in is going to remain shut in for assuming no additional damage. It’ll remain shut in for a minimum of another nine months after the guns stop firing. 

And in the case of some of the Iraqi production, probably well over two years. These aren’t shale wells where you can just turn them on and off. Anyway, that has a lot of, in fact, a lot of people. We are only in the preliminary days of seeing oil prices go up. It was only last week that the last of the oil tankers pre-war from the Persian Gulf made it to Northeast Asia. 

And it’ll be this week that the last make it to Western Europe. So what it was a failure in throughput is now becoming a failure in supply. And we’re going to see that impact all kinds of things. So let’s start with the former Soviet Union, specifically Russia and Ukraine. In the opening days of the war. The conventional wisdom was twofold. 

Number one, there’s no way that Ukraine comes out of this in a better position. The Western world, the whole world is going to be distracted by what’s going on in the Persian Gulf, which for most countries is more significant than what happens in the Russian near abroad. The United States is going to be diverting its weapons system, most notably its missile interceptors, to its own needs in theater, rather than sending them to Ukraine. 

And on the flip side, Russia is going to make mat bank. Oil prices had been moderate until the war started, and now they’re regularly over $100 a barrel. And if you consider that the break even cost for a lot of Russian fields are between 30 and $50 a barrel. And they went from selling hit 60 to 100. 

You know, you’ve seen the profit for Russian oil sales increased by a factor of five or more almost overnight. And that cash coming in is obviously going to remake what Russia can do with the war. Most of their equipment is comes from China, but the China insist on hard currency payments and that requires oil sales. That was the conventional wisdom, and there’s nothing wrong with that. 

But now that we’re five weeks in, we’re seeing a much more nuanced picture with a lot of unexpected upsides and downsides for both sides. Let’s start with the Russians. The Russians have been actively providing intelligence and techniques and hardware to the Iranian government to target the United States’s forces in region. While Donald Trump remains firmly in Putin’s pocket, that is drastically adjusting things in the Defense Department and on Capitol Hill, where we’re seeing significant unrest in the United States with Donald Trump’s policies, in a way that can’t help, the Russians long term. 

More importantly, the Russians and the Iranians are not the only ones with drones. And during the war, the Ukrainians have showcased a new set of hardware with a little bit longer range and have used it to completely destroy the export capacity of Russian oil exports from the Baltic Sea. 

It’s conservative, removing a million and a half barrels a day of exports, maybe up to 2 million, because the Russians can’t really redirect. They don’t have a backup pipeline system. And so what was originally this big windfall has turned into a structural loss for them in terms of oil exports. They’re still earning more money overall. 

But once the Ukrainians are done with the Saint Petersburg region, they’re just going to turn those drones onto the next oil producing and transiting system. And we may not have any meaningful Russian exports from either the Baltic or the Black Sea within three months, or that close second Ukraine itself. The year that the Ukrainians have had to basically operate without American assistance, they’ve used to great effect and innovating into the drone space, specifically encounter, drone technology. They’ve got something called the Brave One, which can fit into a duffel bag. It has limited range. Not a great success rate, maybe 50%, but it only cost 2 to $3000 to make, versus 30 to 50,000 for a Shahed versus 4 million for pack three. 

So Zelenskyy in the last couple of weeks has been all over the Persian Gulf, signing deals specifically with Kuwait and Qatar and United Arab Emirates and Saudi Arabia, each multibillion dollar deals to invest in drone production. The Ukrainian problem this last year hasn’t been innovation. It’s having the cash necessary to buy all the materials to make it. 

Probably half of the industrial plant that they’ve expanded in Ukraine in the last year is not being used because they don’t have the money. Well, say what you will about the gold farmers money is not the limiting factor. So we’re going to be seeing money pouring into these facilities in Ukraine, which is going to drastically increase the defense of Ukraine from the Russians. 

At the same time, they’ll be exporting drones to the Gulf states and the Gulf states will be building their own counter drone factories. So we’re talking about a whole number of countries that five years ago, no one really considered to be at the forefront of military tech. All of a sudden at the forefront of military tech in a way that the United States can’t participate in and isn’t benefiting from. 

So we’ve seen Ukraine and Russia get weird ups and downs in ways that were completely unexpected just a few weeks ago. But perhaps the biggest impact of this is because the Russians are so actively assisting Iranians, is that all of the Arabs of the Persian Gulf are noodling over what’s next for them, vis-a-vis the Russians and the United States. 

And if you remember back to roughly 1985, when Reagan really started pushing hard on the Soviet Union, that was the year that the Saudis decided to drastically open up oil production in order to flood the market and bankrupt what was then the Soviet Union. We now have the beginnings of a second generation of some sort of alliance like that. 

But instead of the United States, it’s the Europeans, instead of NATO, it’s Ukraine. And so we’ve got a number of pieces moving here, building new geopolitical alignments that really look very, very bad long term for Russia. None of this I probably would have guessed two months ago, but here we are.

Russia Draws American Blood in Iran

Photo of American flag with blood on it and Russian flag next to it

Iran was able to successfully strike Prince Sultan Air Base, which is a U.S. base in Saudi Arabia. And guess who supplied Iran with the targeting data necessary to carry out the strike? The Russians.

The strikes hit an E-3G Sentry, which is one of a limited number of AWACS the U.S. has in operation. These planes are used in drone and missile detection, so losing one of them is devastating. However, the more troubling aspect of this strike is Russia’s involvement.

While Russia has a long-standing tradition of aiding any adversary of America, directly assisting attacks on U.S. forces is a major escalation. Oh, and still no response from the Trump administration on any of this.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado, not a particularly good update from what’s going on in the Iran war. Last Friday, you may remember that there was an attack on Prince Sultan Air Base in Saudi Arabia, which is a U.S. military facility. And in it, several ballistic missiles and drones were able to get through defenses. 

Bad for the obvious reasons, is that if there’s any place that should be defendable, from Iranian weapons systems, it should be a U.S. air base. And clearly, the United States is now running out of interceptors itself. Second, even worse is one of the targets that was hit was in, E3G, which is an Awacs through the large jets that have the big radar dome on the back of them. 

They basically patrol provide information real time information on enemy aircraft, whether it’s a drone or a jet or whatever else. And they can cover about 120,000mi² at a time. The Awacs have been critical for getting early warning on the drones, because you can’t really put a sonar phone out in the water like you can’t see at the edge of Ukraine and then track them for several hundred miles. 

So the Awacs are really the best way we have in order to see these things coming. The United States only has a fleet of 15 of them left, or 14 of them left now, and half of those are down for repairs at any given time. So we’re talking about a significant reduction in the ability of the United States to operate the anti-air operations in anti-missile and anti-drone operations, not just in theater, but on a global basis. 

But the real shitty thing, that came out just yesterday is that we now know conclusively that the Russians are the ones who provided the targeting information. The Russians have a military recon satellite system, and we know that they’ve been providing aid to and Intel to anyone who’s been shooting at the United States for 30 years. But now we have the Russians caught providing real time information on the location of specific aircraft that can then be used by the Iranians to target specific pinpoint within American military facilities in the Middle East. 

It will be interesting to see how the Trump administration chooses to spin this and say, it’s no big deal, because the Russians are our friends or whatever the angle happens to be. But leaving aside for the moment, all of the other angles about this war, about the energy breakdown, not being at the forefront of drone technology anymore, we now have, America’s oldest adversary, deliberately sharing tactical information on American military hardware and personnel and facilities with the Iranians. To the degree that the Iranians are actually able to penetrate and hit things specifically, there there is any number of ways where that’s a very, very negative development. And we have yet to see it being treated seriously by this administration at all.

Ukraine Strikes Hit Baltic Export Facilities

Drone firing a missile

The global energy trade has been taking hit after hit, and things might be getting worse. Ukraine launched a large drone attack on oil export facilities in the Baltic, proving they can disrupt Russian exports.

With the Persian Gulf effectively offline, losing Russian oil would be devastating to the global markets. Drone warfare continues to evolve and reshape the way these conflicts unfold, especially when targeting energy infrastructure.

I would expect Ukraine to continue these strikes, knocking out a large portion of Russian export capacity. Which means the global energy crisis could get much worse, very soon.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. More news, not Iran related from Sunday, the Ukrainians launched a fleet of drones into Leningrad province. That’s where Saint Petersburg is targeting. Specifically the pro-Morsi and the use Luga oil loading facilities. Now, combined, those two facilities can handle about 1.7 million barrels of crude a day of exports and another 300,000 barrels per day of refined oil products, primarily diesel. There are multiple reports of fires throughout the loading and tanker areas on the port specifically, and at this point, about 24 hours after the attacks happened, that port remains offline. Now, this is significant for two very, very, very big reasons. Number one, the Persian Gulf is offline. It’s probably not coming back. That’s 20 million barrels per day that we’re probably just not going to see again. 

And the world has yet to accept that is where this is ultimately going to lead. Second, there are really only three major sources of crude for the global economy. One is the Persian Gulf. One is North America, specifically the American shale sector, primarily in Texas. New Mexico, Colorado, Oklahoma and North Dakota. That one’s fine. And the third one is the former Soviet Union. 

Most notably Russia. Now, Russia has three major ways to ship its crude out. One goes to the Black Sea. And those have been under persistent attacks by the Ukrainians for a couple of years now. One goes out to the Far East, near the city of Vladivostok. Those are well out of range of anything the Ukrainians can do. 

And the third one is this one here in the Baltic Sea with Paramores can use luga. The thing is, these have typically been just out of range for Ukrainian attacks as a rule. And there’s this is a rule made to be broken. Any infrastructure that is within about 600 miles of a hostile actor is now completely vulnerable to ongoing cheap drone attacks like the shitheads at the Iranians are using against the United States in the Gulf right now. 

Like the Russians have been using against Ukraine since the beginning of the war, and now the Ukrainians have joined the club and they’re threatening, the Leningrad region. But the Leningrad region is about 700 miles away. So not only have the Ukrainians developed a new battle platform with better range, they’ve been able to generate enough drones to throw a volley of 60 of them at these two ports. 

To the point that they are able to shut down one of the largest facilities that the Russians have. So we now need to pencil in, in the not too distant future that, not only are we going to use the Gulf, not only are we going to use the Black Sea, we are also going to lose the crude that’s coming out of the Saint Petersburg region as well. 

And from the Russian point of view, that adds up to about another 4 million barrels a day, probably. There’s a limited degree for the Russians to shift crude around, but really not all that much. The Ukrainians have now demonstrated that this is, if not easy for them, well within their capabilities. And we should see attack after attack after attack in the days and weeks to come. 

Russia’s Ukraine War Lessons Are Hitting the Gulf

Qatar and Persian Gulf Region on a Map | Photo licensed by Envato Elements

Russia is taking what they’ve learned on the battlefield in the Ukraine War and sharing that with Iran. This is not a new strategy for the Russians, but it is already spelling trouble for the US.

Iran’s Shahed deployment and targeting are improving, thanks to tactics like launching swarms of drones with varying flight paths. These strategies are rapidly exhausting missile defenses in the Persian Gulf.

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Transcript

Okay. Today we’re going to talk about drone targeting specifically in the context of Iran. And there Shaheed. So last week we learned, you know, shocked anyone who’s been paying attention that the Russians have been providing the Iranians with targeting information since the beginning of the war. The Russians have been providing all of America’s foes with targeting information, going back to the early days of the war on terror. 

That’s not a surprise. But what’s come out in the last 24 hours, roughly, is the degree to which the Russians are sharing their war lessons that they’ve learned at the expense of the Ukrainians in the Ukraine war. So the weapons system in play is an Iranian shaheed. It’s a really stupid drone where you have a small Nand chip that’s a slow memory chip that doesn’t necessarily require power to hold on to its memory. 

You program in a preset parameter preset flight route and it flies from A to B following the course you’ve identified. And then if it’s a really advanced shithead and most of them are at it, then can execute a very limited decision tree. Like is this a car or is that a boat? Is that a tree or do I want to hit and it’ll try to hit one of those things. 

Otherwise it just kind of angles down and crashes into something. Well, what the Russians have learned is that if they take their heads and fly them in groups in batches, that, not only ensures that one of them will get through air defense, it makes it actually harder for the air defense to pick out an individual target. So oftentimes you have to fire more interceptors than you would if they just came at you one at a time. 

The additional thing that the Russians are sharing is kind of a weave strategy, because you can preprogram in the route. What you do is you preprogram in a slightly different route for each head. So they kind of weave in and out of formation up, down, left, right, whatever it happens to be. That makes it much harder for air defense to kind of get a lock. 

And you have to use even more interceptors. And we now know that that specific strategy that they developed for dealing with Ukrainians has now been applied to Iranian showerheads that are being used against American and allied targets in the Persian Gulf. The issue here, of course, is pretty straightforward and short term. The western Gulf is running out of interceptors, and anything that forces the defenders to use more and more of them while the shitheads just keep coming, means that the time where they actually run out of Anti-drone weaponry is coming upon us very, very quickly, perhaps as little as a week or two. 

We don’t know the specific number because the Western Gulf is are consider the number of interceptors they have used and the number they have left to be national security secrets. So it’s kind of a just a guessing game. But there were only about 2000 of them total at the beginning of the war. Or it’s been going on for two weeks. 

And we know that the Iranians have fired at least 2000 shitheads at this point, probably closer to 3000. And they just keep coming. So we’re very close to the point where the Western Gulf is going to run out of defensive firepower and courtesy of the Russians, they’re going to have pretty good targeting information. Just come on in and hit whatever they want.

The U.S. Helps India and Russia Helps Iran

An oil tanker in the ocean sailing

There have been two major developments involving India, Russia, and the Iran war being conflated. These are two separate issues altogether.

The first involves Trump granting India a temporary waiver to import Russian oil. This was done to prevent a severe energy or economic shock in India. This is a pragmatic move, rather than a pro-Russia policy shift. The second revolves around Russia helping Iran with targeting information. This is a longstanding Russian strategy of undermining the U.S. globally.

Although some U.S. policies toward India appear to be improving, a major shift is unlikely unless and until some of the Russian sympathizers in the current administration are removed.

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Transcript

Hey, everybody. Peter Zeihan here, coming from a snowy Colorado, finally got a big storm. Oh. Anyway, today we’re going to talk about something that a lot of people are conflating that deals with Iran and the oil trade and Russia and India and sanctions and terrorism, blah, blah, blah. A lot of people are tying this all together with a nice big bow. 

It’s not quite that neat. So the two big things, number one, the Trump administration has granted India, a series of waivers, right now, courtesy of the Trump administration. We have sanctions on a few Russian oil companies and, Donald Trump managed to cut a deal with the Indians, about how six weeks ago, I think it’s been now, where the Indians would stop, importing Russian crude. 

I definitely had my doubts about that at the beginning, but it seems like it’s actually sticking because, there’s now this waiver, the issue is that the Indians had been grabbing oil in excess of a million barrels a day. Really? Since the Ukraine war got going, and it was one of the big financial lifelines. 

And now that the Trump administration has put sanctions on Russian companies, they have slowed, not stopped, but slowed. But now, with the Persian Gulf being closed for I believe we are in day ten now, the Indians only other source of crude was from the Persian Gulf, and that has functionally gone to zero. So in order to keep the Indians on board, the Trump administration has granted this waiver, allowing the Indians to bring in, temporarily, at least for a month. 

Russian crude. That’s piece one. Piece two is we’ve had a number of leaks from the international community, especially from the American intelligence services and also from Congress, that the Russians are actively assisting the Iranian government with, targeting of American troops. Which is definitely true. The people that are deeply anti-Trump are, conflating the two saying that, Trump is basically Putin’s, sex toy. 

And so therefore, Trump has been looking for any opportunity to, cut the Russians a deal and absolutely anything. While there may be a little bit of truth behind the thrust of that, linking these two events is not correct. Let’s start with the Indians. If you’re going to split the Indians off from the Russians, if you’re going to have a better relationship between American India, causing an economic depression is not a good way to do that. 

So once the United States started the war in Iran and the Persian Gulf got shut off, your choices were either to try to somehow force India to have, an energy induced depression and then still be pro-American, which would have been a very, very tall order or issue these temporary waivers. So the temporary waivers make a lot of sense. 

I’m not a big fan of the Russians having any market, but if you took the Russians out of the equation at the same time you took the Persian Gulf out the equation, you’re talking like 25 million barrels a day of global oil production that has nowhere to go and can’t get anywhere. And that would have been disastrous if it was all focused on India. 

If you want to focus on China, it’s different conversation, different video. Okay. So that makes sense. The second one, the Russians have maintained links to basically any group that has ever targeted the United States, whether that is various derivatives, Al-Qaeda, Iran, or more specifically, the group in Iran that is calling most of the security shots, which is the IRGC. 

And of course, they’re continuing to provide targeting information just like they did for the 20 years of the war on terror. Anything that keeps the Americans bottled down anywhere else in the world gives the Russians the free rein to do whatever they want in their neighborhood. That is a time honored Russian tradition, going back all the way to the czars. 

So of course, of course, of course they’re doing this, which puts, the Trump administration and Donald Trump personally and kind of an awkward spot. The information is coming from so many sources, international domestic, military intelligence, congressional that, there’s a lot of texture and detail to the accusation. Specific cases have been noted. So of course it’s true. 

And that puts Trump in that position because he is basically giving Putin the benefit of the doubt in everything regarding global affairs and the Ukraine war, and specifically. And now we have his most recent, crown jewel in his foreign policy, Iran, that has been actively undermined by the Kremlin and Putin personally. Does this mean that we’re about to see Donald Trump turn over a new leaf? 

That’s a lot more realistic when it comes to the Russians? Let’s not get ahead of ourselves. Remember, that surrounding him, you’ve got Wyckoff, who was maybe the dumbest person Western civilization, who was the prime interface between Putin and Trump. And all he does is regurgitate Putin’s propaganda in Trump’s presence. 

Number two, you’ve got the vice president, JD Vance, who is a not so closeted white supremacist who thinks that the Russians are the great hope for the white race. And third, you’ve got, the director of national security or national intelligence, Tulsi Gabbard, who basically has stood against the United States on any meaningful foreign policy position for the last 15 years and has been very, very pro-Russian from the very, very beginning. 

The key thing about Tulsi Gabbard is that she controls the daily presidential brief that the intelligence community puts together for the president. So I would be shocked if details about what the Russians are doing even made it into the document in the first place. So this basically has to grind on. We’ve already had a half a dozen Republican senators, and a number of Republican House members go public in the last 72 hours screaming at Trump to finally, finally, finally fix this and get rid of people like Tulsi Gabbard and Steve Woodcock and actually have a foreign policy that is worthy of the United States. 

But as we all know, Trump, really doesn’t care what anyone else thinks. And he’s really not even concerned about the midterm elections because, he’s already a lame duck. And even when he controlled both the Senate and the House, he’s really never bothered going to Congress for anything. So why would he care what Congress looks like? 

Anyway, things are slipping. Bit by bit in the right direction for more realistic foreign policy versus the Russians. And things are kudos to Donald Trump slipping in the right direction for more productive relations with the Indians, as well. I was very doubtful that the Indians would abide by any sort of ban of Russian products. But yet here we are, and the market is proving it. 

Russian Urals crude sold on the Indian market has actually now risen above the Brant benchmark. That is kind of the global standard. And the only way that would be happening is if we had a sudden surge in purchases because of the waiver. And that’s exactly what’s going down. So a lot of moving pieces here, and I’m not trying to convince anyone that we’re about to have a dramatic change in foreign policy. 

That would be more realistic. But we do finally have multiple vectors moving in the same direction at the same time. You will not see a meaningful change in policy, however, until Wyckoff and, Gabbard are gone. I don’t see that as imminent. But then again, Kristi Noem finally got let go after six months of horrible mismanagement at DHS. 

And again, the Republicans in Congress are not so quietly celebrating, in media. So, you know, there is hope here. Let’s just not get overexcited until we actually see the backsides of some of these people who functionally work for the Russians.

Ukraine Goes on the Offensive

A ukraine soldiers patch/flag on their uniform

Starlink cut service to Russian forces along the front line, leaving these troops largely isolated. Ukraine has taken advantage of the situation by launching localized offensives and reclaiming a nice chunk of land.

The Ukrainians remain outnumbered. However, since Russian units are scattered, isolated, and unable to communicate, they are left vulnerable. So, organized Ukrainian offensives are finding success…for now.

The Russians will likely adapt, or the Ukrainians will come face-to-face with entrenched units and minefields, but Ukraine has regained the offensive momentum for the time being.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today is the 18th of February, and the news is a significant change in the battlefield in Ukraine. We did a video talking about how Starlink had been unofficially siding with the Russians in many ways until they got caught out and basically accused of several dozen counts of second degree murder. 

And so they have cut off, connections to their Starlink receivers throughout the front region, this time emphasizing the Russian side of the operation. And what we’ve discovered in the last 96 hours is that the Russian forces in the area were completely dependent upon Starlink for communication among themselves, and that communication is functionally stopped. Now, keep in mind that drones today are either first person drones that can be jammed or on a, tether, a fiber optic tether that has a limited range. 

And so the best way to jam is to have an electronic warfare unit in Ukraine needs to become the best in the world. That by far, far better than the United States. Which means that normal types of radio communications simply don’t work if you’re relatively close to the front. And now the Russians have been cut off completely. 

And even though the Ukrainians are outmanned and outgunned, they have gone on the offensive and captured about 50mi² over the course of the last several days. I doubt it’ll last. It’s only a matter of time before the Russians come up with backup plans, or the Ukrainians hit those massive minefields that stopped their assaults a couple of years ago. 

But it does allow, in the short term at least, the Ukrainians could, to completely liquidate Russian positions while on the offensive. Normally, you only attack and location if you enjoy about a 3 to 1 ratio. In vantage in troop numbers. The Ukrainians are doing it with far less than that, sometimes even being outnumbered. But because they’re able to isolate the Russian forces in detail, they’re able to completely wipe them out. 

Keep in mind that over the course of the last year, we’ve seen the Russian tactics change considerably. So instead of big massed assaults, assaulting, Russian positions, they sneak in 2 or 3 at a time and pepper the area through until a few of them survive. And then reinforcements can come in. That means you’ve got lots, dozens, hundreds, maybe thousands of little spots where there’s two, three, 4 or 5, ten Russians holding the position and against a coordinated Ukrainian attack that still enjoys drones and communications. 

They don’t have much of a chance at all. So I doubt this will last very long. But for the moment, the Ukrainians are pushing forward in a way that they haven’t been able to for a couple of years, and their critics said was never possible again. But here we are.

Electronic Warfare Innovations and Exports

Laptop with green coding and a server

Let’s talk about the current state of electronic warfare in the Ukraine War and how Iran is fitting into all this.

Drones are all the rage. You’ve got fancy autonomous systems, short-range with remote pilots, and fiber-optic tethered. The next logical step to countering drones is to beef up jamming capabilities; Ukraine has done just that. However, the Russians have taken this logic one step further. They’ve created a tool called the Kalinka. The Kalinka is a mobile detection system that listens for signals. This gives them an early warning for drone strikes and other signal-based attacks.

Electronic warfare innovations are spreading quickly, and this tech is already appearing in other regions. For instance, Iran used the Russian Kalinka tech to locate Starlink users during the protests, allowing them to shut down comms and suppress dissent.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado, I hope everybody who is east of the Rockies is enjoying the cold front because, Canada worst. Anyway, today we’re talking about what’s going on in Ukraine and Russia and Iran from a technical point of view, specifically electronic warfare. Drones basically fall into three general categories. Number one, you got autonomous ones that can make decisions on their own. Those are incredibly rare and incredibly difficult to maintain because the chips themselves are unstable when there’s vibration or heat or cold or humidity or anything. So really, aside from a few here and there that are very expensive, not a lot of play. The second are those that you fly first person, and for that you have to have a connection to them somehow so that the telemetry can come back and forth and you can control them. 

Now, the United States does that with things like Reapers through satellite connections. The Ukrainians primarily do it on a shorter range, and the Russians also on a shorter range, typically no more than, 20km. And the problem with that is they can be jammed. And so both the Ukrainians and the Russians have gotten very, very good at here. 

I mean, I would argue that right now, today, Ukraine’s jammers are by far the best in the world, probably an order of magnitude better than America’s. Once you consider in cost. And then the third type is to do, fiber drones, which have a thin fiber optic cable that they drag behind. Now, these don’t have nearly as much range as a rule, but they can’t be jammed because there’s a hard line. 

And these, as a rule, are five kilometers or less. Although there are now some models where the fiber optic cable is light enough. You can go more than ten. Anyway, so those are kind of what’s going on there. But there’s another aspect to countering drones or any sort of electronic battle platform, that doesn’t involve jamming, but it’s still electronic warfare. 

And in this, the Russians have definitely, cracked the code on a new tech that is really interesting and has a lot of applications. So they call it the clinker. It’s basically a electronic warfare detection system that is mounted onto a truck or an armored vehicle. You basically drive around, find a place to park, and then you just listen and you pick up signals whether this is a cell phone or a drone connection or more importantly, in recent terms, as we’ve discovered, a, Starlink terminal. 

So one of the things that the Ukrainians have been doing is taking mobile Starlink terminals and putting them on things like drones, and then they go out into the Black Sea and blow up something that’s Russian. And the Russians don’t like that. But if you’re having a constant link in from a Starlink terminal and you can detect that, then the Russians finally have a way of knowing that it’s coming. 

I’m not saying it works perfectly. The range is only about 15km, and one of the CBP drones, they’re pretty quick. It’s not a lot of time to react, and it doesn’t jam the connection. It just detects it. So the Ukrainians have learned to turn things on and off every couple of minutes so that the Clinkers can’t, link up. 

But one of the things you have to keep in mind is that we’re in a fundamentally new type of warfare here, and when drones first appeared on the battlefield in a meaningful way that was not American. It wasn’t in Ukraine. It was in Armenia. We had a war back in 2020 between Armenia and Azerbaijan. And the as a region has had, Turkish drones that they basically used to completely obliterate the entire armed forces of Armenia in the disputed territories and would go on a crowbar. 

The Armenians weren’t ready for it. And so what we’re now starting to see is Ukrainian and Russian technology coming into other theaters and just completely wiping the board. So, for example, in the last couple of weeks, we have we’ve had those big protests in Iran, and people were wondering how the Iranians were able to shut down communication so effectively. 

Well, it now looks like the Russians gave the Iranians a few clinkers, and they basically just drove them around town, identified where all of Starlink’s were kicked in the door, shut the people involved, or brought them in for beating or imprisonment or whatever it happened to be. And lo and behold, the, situation from the Iranian point of view was diffused. 

So we now have a technology that has very, very strong implications for use in a civilian management system. We’re going to be seeing more and more things like this of technologies from a hot zone where they’re iterating every day and every week suddenly pop up in a theater that you wouldn’t expect, where it completely outwits maneuvers outclasses the preexisting systems. Iran is just a taste of what is to come on a global basis.

The New Ukraine Proxy War

Russia is rapidly depleting its stock of prewar vehicles and losing soldiers faster than population growth can replace them, thrusting it closer and closer to military exhaustion.

Ukraine has its own set of problems, but at least it has stronger nationalism and a growing European military-industrial base behind it. As Europe steps up as the primary aid provider for Ukraine, we’re entering a new era of proxy wars. We have Europe backing Ukraine and China backing Russia.

This is reshaping global military technology. Europe vis-à-vis Ukraine is now leading drone and counter-drone innovation. China is advancing alongside Russia. And guess who is getting left in the dust…

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Transcript

Hey, all, Peter Zeihan here coming to you from Colorado early in the new year. We’ve had a lot of information drop out of the Russian Ministry of Defense. Ukrainians. A lot of folks on both sides of the conflict in Ukraine that study the war. And we’ve seen a few interesting patterns emerge in just the last four months that I think it’s worth spending a little time talking about. 

The short version is we’re, to a degree, seen a deindustrialization of the war effort, specifically on the Russian side of the equation. The Russians started this conflict with a massive advantage in armored vehicles and tanks, something like 20,000 or so that they had left over from the Soviet period. The Ukrainians had a lot left over as well, but not even a quarter. 

The amount probably closer to a 10th, actually, by most measures. But the Russians go through equipment like they go through men. They run it hard, and they put it into situations that are perhaps not the best. And their doctrine isn’t very good. And everything gets shot up. And that’s before you consider the climactic and, geographic situation in Ukraine, where for large, portions of the year, the area is just really muddy. 

And if you put a tank into mud, it doesn’t move very well. And it’s really easy prey for a drone. And so bit by bit over the war, vehicles have become less important and drones have become more important. But for the Russians, who actually have to bring equipment to the front, vehicles are always going to be more important for them than it is for the Ukrainians. 

Well, it seems that they’ve run out, pretty much all of their pre-war battle tanks are now gone and their ability to replenish them, it is something like 2 to 3% of what they had before. They’re only able to make a few tanks a month. In addition, things like APCs and armored vehicles, they’ve pretty much run out of. 

And now they’re even running out of civilian vehicles and things like golf carts to the point that we’re actually seeing horse charges starting to pop up on the front again. Because horses are available and cars are not, this is really led to a change in Russian tactics, obviously, because if you don’t have the equipment to move your men, you have to move your men differently. 

And so some of the new strategies that we’re seeing on the front is instead of sending a thousand men or 100 men or ten men, it’s sending 2 or 3 men to try to infiltrate a zone. And you do that with 2 to 3000 men over the course of a month. And eventually, hopefully, you have enough people that have infiltrated the zone that they can make it untenable for the Ukrainians to maintain their positions. 

Can this work? Yeah. And it’s probably was used, in places like Cuba and areas, in the Donbas. But the pace is incredibly slow. And the casualties are incredibly high. And more importantly, you have a much higher percentage of casualties that turn into actual fatalities. So best guess is that at this point in the conflict, the Russians have lost between 1 million and 1.4 million men, with somewhere between 200,000 and 400,000 of those being dead. 

And the casualty rates have increased from the 750 to 1000 people per day in calendar year 2024, to probably something closer to 1500 to 1600 people by the time we get to the new years of 2025, 2026. I said about I think it’s two years ago now, that if the Russians keep losing men at the rate they are, they’re not going to be able to mount a military force of any size in 6 to 8 years, which, when I said that would have put us at somewhere around 2030, it now appears that that date has been moved forward because the Russians are suffering casualties faster than Russian boys can be born. 

On the Ukrainian side, the situation isn’t exactly great either. Keep in mind that any battle in which the Ukrainians do not inflict at least a 4 to 1 casualty ratio is a battle that probably, in the long run, the Russians have won just because there’s so many more Russians. But the Russians are now getting to a situation where they are running out of people who are not ethnically Russian. 

All of the various ethnicities that make up the Russian Federation, that are not that ethnically Russian, they’re basically running them dry. And the Chechens are almost tapped out at this point, which is something I never thought I would see. Ukraine doesn’t have that kind of problem. Everyone pretty much who’s fighting in the Ukrainian side of the war is Ukrainian. 

So there’s a much stronger nationalism factor going in. And we are seeing the, weapons systems, in the military industrial complexes of the Europeans spinning up, in order to continue providing arms for, the Ukrainians. Keep in mind that the Ukrainians have given, excuse me, keep in mind that the Europeans have given the Ukrainians significantly more military aid, than the United States has. 

And and we’re almost a factor of three more economic aid. So if the Trump administration changes its minds on a few things, obviously, that will affect the war effort one way or another. But the bottom line is that the European military complex is becoming more capable of supporting the war. As the Russian military complex is becoming less capable. 

So we really are seeing this turn into a proper proxy war with the Europeans on one side and the Chinese on the other side. Most of the hardware that is coming into the Russian system now is originated in Chinese factories. And we’re getting this weird little proxy fight between two countries that are two regions that haven’t really been involved in a direct geopolitical conflict. 

That has a lot of impacts in a lot of ways. Number one, the Europeans are much more amenable to talking to the Trump administration about trade sanctions on the Chinese, because their leaderships are now recognizing that they’re in a direct head to head with Beijing. But it’s also leading to a reorganization of how global military technology works. 

The United States, by stepping back, has seen its pace of technological innovation slow considerably because you have a technical revolution happening in Ukraine that the United States, for the most part, is not participating in. But the Europeans are rearming at a pace that is forcing these sorts of changes into their everyday structure, how that will play out in the years ahead. 

Way too soon to tell. But the United States is no longer clearly at the forefront of either drone technology or drone jamming technology. Those are European concerns. Mostly Ukrainian and the Chinese are now getting it on the back side of this, moving from first person drones to something else, things that are getting incrementally more sophisticated. 

How this will play out. So many of the rules of war have changed in the last 24 months. It’s really hard to tell. But the one country that seems to be going out of its way now to not keep pace is the United States.

Sub-Sea Drone Strike on Russian Sub

A submarine rising out of the water

Ukraine claims to have damaged or destroyed a Russian Kilo-class submarine while in the port of Novorossiysk using a subsea drone.

If confirmed, Russia’s last major naval base would be vulnerable to air, surface, and now subsea attacks…not a great look. Russia’s Black Sea naval operations would likely collapse within a year.

But let’s not overstate the power of the subsea drones. While they may be effective for anti-port applications like this one, they won’t be replacing traditional naval warfare tools like torpedoes anytime soon.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. Quick one today. The news is that in the last couple of weeks, the Ukrainian government has announced that they have used a new type of drone, a subsea drone, to attack and destroy a Russian submarine, a kilo class in the Russian port of Novorossiysk. the reason I’ve waited so long to comment on this is because the details were vague. 

The Russians have denied that the Russians deny everything and the Ukrainians haven’t provided a lot of evidence. We do have satellite photos now that indicate there was damage on the inside of the port. Whether or not a submarine was hit or sunk is unclear. I would note that if you put a reasonably sized bomb on the outside of a submarine, that submarine is not going to go underwater. 

Or if it does go under water, it will never come back up again. So it doesn’t take much damage to take one of these out for the long term. And the Russians no longer have the capacity to refit them, because that equipment is in Crimea, and Crimea is under regular air drone assault. So if this kilo class sub was even mildly damaged, it’s it’s out. 

A couple things to keep in mind, however. Number one, on the Ukrainian side. The fact that a sea attack happened in November is extraordinarily bad for the Russians. It was one thing when they lost the ability to base their navy out of the Crimea. So they moved back to overseas because it was out of range of air attacks. Then air attacks started, happened regularly earlier this year. Now we not just have a sea attack, but a sub sea attack. 

There are any number of ways that that might have happened. Maybe there was a mothership involved. Maybe it was smuggled into Russia proper, and then the thing was dropped in the water and sent on. But the bottom line is, is that the targeting suite of these drones is very limited. And if it goes underwater, it’s not receiving signals from anyone else unless it’s on a tether. 

And if it’s on a fiber optic tether, you’d have to have another ship nearby, which it’s really stretches the imagination to think that the Russians would be that unaware of things going on in their own immediate waters. Which means that if this is true, what happened was that the sub was at dock when it happened. We do see damage to the dock. 

We do see damage to the booms. And if this is a fundamentally new weapon from the Ukrainians, they’re calling it a sub sea baby. The sea baby is there. Surface drones, then overseas has become completely untenable for any sort of Russian naval or maritime activity. Remember that this is the Russians largest port in the area. It’s their primary oil export point. 

It’s already been hit a couple of times, and it is now the headquarters for the Black Sea Fleet, which means they’ll have to move down the coast to a place called Tusa, which doesn’t have nearly the, cap capability. So we really are talking about the functional end of the entire Russian Sea Fleet within the next 12 months, if this is true. 

Second, other side of the equation, I wouldn’t get too excited about subsea drones, because we don’t have meaningful guidance or decision trees on naval drones at this point. This is much less useful than a modern day torpedo. It would have to be dropped off relatively close to where it’s going. It can’t track an active signature. It can only go to a preprogramed fixed point. 

That doesn’t mean it’s a nothing burger, because anything that can get around detection is something that Ukrainians or really anyone who’s involved in a naval conflict is going to want. But it is not an at sea weapon. It is an anti port weapon. So that is of significance. But in modern naval warfare, it is certainly not a game changer in its current form.