The End of Black Sea Shipping

A cargo ship in the water

With attacks throughout the Black Sea raining down from the Ukrainians and Russians, we’re seeing the collapse of Black Sea shipping unfold.

The latest attack was on a tanker just off the coast of Sochi. When attacks like this begin, it’s no longer viable to put ships in the region. This is the end of shipping in the Black Sea, and that has huge implications for both sides of this war.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado. It is the 7th of October, and the news is that we’re very close to a collapse in shipping in the Black Sea. The Ukrainians and the Russians have been targeting each other’s shipping and ports since the beginning of this war. But in the last year, we’ve seen a huge amount of activity increase as the drones have gotten better telemetry. One side will do an innovation, the other side will copy it. So in this case, it’s the Russians that are doing the copying. Starting a few months ago, the Ukrainians started using open source satellite information to track Russian ships. Basically, you go from a port, say, Novorossiysk, and there’s only one way out of the Black Sea, which is the Turkish Straits as Istanbul. And so it’s more or less a straight line. And if you have a transponder, you’re obviously a legitimate ship. If you don’t have a transponder on, that means you’re part of the shadow fleet. And so basically, the Ukrainians have cross-referenced everything and just attacked anything that didn’t have a transponder on. The Russians are now basically doing the reverse, attacking things that do have transponders, but only if they’re in the economic zone of other countries, specifically Romania and Bulgaria. So we’ve had three hits in just the last, I think, 36 hours. 

In addition, the Ukrainians were the ones who basically invented naval drones, which is either a jet ski or a small motorboat packed with explosives. Now, the Russians are doing that as well, and the Black Sea is small enough, and Russian and Ukrainian technological skills are high enough that there is no safe part in the Black Sea that is out of range. So we’re getting attacks all over the place. And the newest one, it looks like the Ukrainians hit an oil tanker off the coast of Sochi, which is Vladimir Putin’s favorite vacation spot, and the whole thing is on fire. We’ll show you some footage here, and there’s really no way to put that out. Even if the Russians had the mitigation equipment, which they don’t in the Black Sea, this is simply too big of a fire. What this basically means is, unless ship captains are willing to risk life and limb every moment that they’re in the scene, unless insurance companies are willing to basically write off their insurance policies, it’s difficult to see any shipping persisting as long as these attacks are happening, and we should expect the Black Sea to be shut down in days at this point. This is one of Russia’s primary export routes, about a million and a half barrels per day. This is Russia’s primary oil and of course, grains export point. This is Ukraine’s primary wheat, steel, coal and sunflower and food oil export points. This is kind of a big deal. And this is really only step one, because the Ukrainians have already shown they can hit most Russian targets in the Baltic Sea as well. And if the Black Sea is now shut down, that is the next target. 

I’m a little surprised that it’s taken this long for the Black Sea to be shut down. But this is not just the beginning of the end of the Shadow Fleet. This is the end of the Ukrainian ability to earn hard currency as well. Everything else has to go out by rail. And because a lot of the things that Ukrainians export are also exported by the countries they border, like Poland and Romania and Hungary, those countries have basically said, you can send stuff through our system, but you can’t export it through our ports because that’s already claimed. So you have to take it another country further and get it to Germany and Belgium and in Greece, which of course just means you need more cars and more time and then ultimately less cargo. So this is a big hit economically to both sides. And we are just getting started.

How Diesel Could Shape the Ukraine War

Photo of diesel nozzles at a gas station | Licensed by Envato Elements

A U.S. diesel ban could have reverberating consequences for the Russian energy sector, following the sustained attacks by Ukraine. Russia is now relying on places like Kazakhstan, Belarus, and India to supplement its fuel supplies.

The Russians rely on diesel to transport damn near everything, so shortages will directly impact their military capabilities. Should the U.S. move forward with removing its diesel from the global market, the Russians won’t have long to come up with a solution.

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Transcript

Hey all, Peter Zeihan here, coming to you from Toronto, specifically Queen’s Harbor. Anyhow, I wanted to put my $0.02 on a discussion that’s been happening for the last few days, and that’s a diesel export ban here in the United States. Now, we’ve already done a core video. We’ll link to it here about the economics of that and why it would work or not. But there’s another consideration, because the country that used to be the world’s largest exporter of diesel fuel, Russia, is now an importer because of all the damage the Ukrainians have been inflicting upon the Russian refining complex. It’s part of the reason why Donald Trump at the moment doesn’t like Ukraine. He goes back and forth. Anyway, they have been forced to import diesel from Kazakhstan, Belarus and India, which, while they are exporters, are not huge exporters. Right now, the shortage in Russia is probably in excess of about 1.5 million barrels a day of oil equivalent, and that number has probably gone up in the last two weeks, because the Ukrainians really have been doubling down on the attacks. Diesel is a big deal in the United States because we transport everything by truck, but the Russians aren’t too far behind. Primary transport in Russia is really two ways rail or truck. And the further away you get from Moscow and Saint Petersburg, the more likely you are to move from an electric train to a diesel train, and the more like you are to move to truck, because the road network is basically local, clustered around population centers. In addition, most jets, whether they’re civilian or military, use a similar cut from the refining stack. So while we might not have an official shortage of jet fuel, something to consider in the Russian context. But more importantly, most of the military hardware that the Russians are using in the Ukraine war, especially tanks and the supply trucks are going to be using diesel as well. 

Remember that since March, we have a new type of drone category that the Ukrainians are using memory drones, where basically the drone gets over an area, looks around it, looks into a decision tree that you’ve loaded into it, maybe some silhouettes, maybe a map and picks its own targets, which means that anything within about two, maybe even 300km of the front is getting hit by these drones all the time. And as you take out the fuel trucks, you basically snarl every aspect of the Russian attack. So anything that the Russians have been doing now has been done with low amounts of fuel, and with the United States possibly about to remove the last remaining large supply and the global standards, that leaves the Russians completely high and dry. 

I’m not suggesting that this is the point where the war turns. There’s just too many moving parts. But if we actually go a six month period or more where the Russians don’t have enough fuel to keep their system operational from a military point of view, then we really have entered a new phase in this conflict.

Will Putin Join the Miami G20 Summit?

Putin and Trump shaking hands on the red carpet. Photo by Wikimedia Commons: http://www.kremlin.ru/events/president/news/77790/photos/82627

The Trump administration has extended an invitation to Putin to attend the G20 summit in Miami. There are several things to watch for, so let’s break it down.

First, Putin has to decide if attending the summit will result in his arrest based on outstanding warrants. Should he attend, we should keep a close eye on how the G20 members and U.S. allies respond. Last, Putin could use this opportunity to create a foreign-policy crisis to test NATO and Trump. Should make for an exciting time down in Miami.

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Transcript

Hey all, Peter Zeihan here, coming to you from the home office because it’s crappy outside today. Anyway, today we’re talking about something that went down last week. On September 23rd, Secretary of State Rubio confirmed that Donald Trump had invited Vladimir Putin, the president of Russia, to Miami for the G-20 summit this fall. Oh my God. Right now, there are multiple international arrest warrants out for Vladimir Putin for his role in initiating and maintaining the war in Ukraine over these last several years. The Trump family has publicly disclosed that they own lots of property in Russia. And Trump’s son specifically have said one of the reasons why Donald Trump is so pro Russia when it comes to the Ukraine war, isn’t so much that he doesn’t like Zelensky, who is the president of Ukraine, although that is true, but because of that property. So this is a flat up, corruption play by the Trump administration 

Anyway, there’s three things to watch for here. Number one, Putin would have to accept the offer. There’s no guarantee he’s going to do that because he wants to make sure that he doesn’t get arrested. Putin has been agitating against the United States online, in person, using the tools of Russian power for the last 25 years. And that’s one of the reasons why he has never gotten along with, really, any of the presidents that we’ve had in the modern era until Trump and his personal interests get involved. And Putin has been working to try to ingratiate himself with Trump deeper and deeper. So, for example, one of Putin’s allies recently paid for one of Trump’s sons weddings because, you know, that’s apparently what you do when you’re corrupt to that level. And it’s worked. But that’s not the same as knowing that Trump, who has a reputation for being a little erratic and mercurial, isn’t going to flip the table on him based on something that happens in the moment. Now, arresting a foreign leader who is in country for a summit would be wild. We’ve never had anything like that happen, but we’ve had a lot of things that have never happened before this administration. So who knows. 

So number one, Putin has to be 100% convinced that he’s not going to be arrested at some point during a Florida trip. That’s piece one. Piece two is the effect that this would have on the Alliance. As I mentioned, there are multiple arrest warrants out for Putin. Those include, but are not limited to several of the countries who are going to be at the G20 summit, including the leaders of the United Kingdom and Germany and France and the EU structures as a whole. 

So if Putin comes, there’s the open question of whether or not these other leaders will come. Now, from a international structure point of view, I’m not really concerned about this as much. The G20 has its uses from time to time because it brings together the richest countries of the world and the largest countries in the world. So while you do have Canada and the U.K. and Japan and Germany, you also have Brazil and India and China. Anyway, point being is that these countries really don’t have a lot of common, and the last time they did anything that really mattered was during the 2007 to 2009 financial crisis. And since then, when they meet, it’s really just a talk shop. And the question is whether anything can happen beside meetings. Which brings us to the third person, one of those Senate meetings. 

If Putin does attend, it is going to be really interesting. Putin is really good at making really bold announcements quietly to a world leader, especially the American president, while Russian forces are doing something else elsewhere. So if you go back to, say, the 2004 Winter Olympics. George W Bush was in town. Putin hosted him in Sochi. And while the Olympics were going on during the opening ceremonies, Russian forces invaded the former Soviet Republic of Georgia. And there’s some wonderful footage of one of W Bush’s aides whispering the news to him. As W is sitting next to Putin in the box. If Putin does come to Florida, he would absolutely engineer a moment like that and wouldn’t be about Ukraine because Trump doesn’t care about Ukraine. It would probably be about Estonia or Latvia who are NATO members. 

There’s been plenty of evidence over the course of the last several months that the Russians are putting in some forces together that would have the option of crossing the border into these two places. And seizing control of territories that might be ethnically majority Russian but are still in the Western camp. Keep in mind that the Russian population in these two states don’t want anything to do with Russia. They haven’t for a long time. Anyway, announcing the invasion of a NATO country, while he’s sitting next to Trump and then forcing Trump to decide right then what to do about Russia, what about to do about NATO? What about to do about the allies. When Trump very clearly doesn’t have any meaningful advisors in any of those capacities? That would be a coup, but it would come with risk because you never know what Trump is going to decide anyway. 

Those are the three things to watch, whether Putin actually comes, whether the allies then basically walk away. Because at that point, the United States has basically said that we really don’t care about your defense at all. And then, number three, whether or not the Putin government would use that as an opportunity to just completely shatter the alliance completely. That’s what I’m watching for. And we will know over the next couple of months.

Why a Russian-Chinese Pipeline Won’t Happen

An oil pipeline closeup

If China and Russia are so buddy-buddy now, why don’t they build pipelines across Siberia to bypass the Persian Gulf?

There are more issues than I can cover in this video, but here are a couple. Their recent cooperation is less of a friendship and more of a “the-enemy-of-my-enemy-is-my-friend” situation. Geography is the bigger problem, though, with thousands of miles separating Russian energy sources and Chinese population centers.

Even if a pipeline plan was put in place, neither side would want to pay for it, and Russia wouldn’t have the technical expertise to develop it. So, unless maritime shipping goes completely offline, this pipeline isn’t happening.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from Middle Chain Lake in southeastern Yosemite. This is one of my favorite places in the national park system. We’re just going to pan around from time to time as I’m doing this video. Have it all to myself. Anyway. 

Today we’re taking a question from the Patreon crowd. Specifically, if China and Russia love each other so much, why don’t they just build a pipeline or cluster of pipelines connecting them to one another and not have to worry about the Persian Gulf at all? 

Great question. Let’s start by saying that the Chinese and the Russians do not love each other very much. They are arguably two of the most racist cultures in the world, and the culture that they’re most racist against is one another. The Chinese see the Russians as backwards barbarians, and the Russians see the Chinese as peasants. So any sort of collaboration they have is in reaction to other things, not because they actually like one another. That’s part one. 

Part two. It’s simple geography. It’s a distance issue. The population of Russia, for the most part, is hard up on the European boundary, and the bulk of the Chinese population is within spitting distance of the Pacific coast, which leaves something like 7 to 8000 miles of great wide open empty in between. Now, if you want to have a pipe, you’re going to have pumping stations, and that’s already a very long way to go. So if you go in from European Russia to Asiatic China, you’re already talking about pumping costs that are well over $80 a gallon. Most likely, that’s on top of the tens of billions of dollars that it would take to actually build the pipeline. That’s number two. 

Number three, the oil and natural gas that the Russians have is, for the most part, in the wrong place. It’s almost all in northwestern Siberia, which is actually further from China than European Russia. So it’s easier to do, say, a rail line going to China than it is a pipeline. And so the eastern and Western networks for the Russian energy distribution system just don’t connect. There’s like one spot and it’s pretty small. So whenever the Russians go, oh, we’re just going to send our oil and gas somewhere else and not to Europe, it’s mostly bullshit because they just don’t have the capacity to do so in large volumes. 

That brings us to the final point, is that there are a few fields going out into Asiatic Siberia, places like Kovykta which is just to the northeast of Kazakhstan, and places like Sakhalin Island, which is just to the north of Japan. These are places where the conversation isn’t silly. The distance is only, you know, a thousand miles or so, as opposed to going all the way across the continent.   

The problem here is that the Russians don’t have the technical skill that’s necessary to tap these fields. And so in the case of Kovykta, that was a BP project. And when BP was basically shown the door a few years ago, it stalled. And in the case of Sakhalin, not only did the Japanese kind of call dibs on that output, but it takes super majors like Exxon or BP or Japanese firms, most of which are now gone because of the war, in order to keep the output going. So it just doesn’t justify anything. 

Whenever Putin and Xi get together, the conversation always is, hey, let’s do a pipeline. And they both always say, yeah, hey, that sounds great. And then they both point at the other one, say, and you pay for it. The Chinese see no reason to pay for infrastructure that is going to cost so much to operate. And the Russians see no point in paying for infrastructure that will benefit the Chinese. So we just get these stalled statements and no real motion. And this is how it’s been going for the better part of the last 30 years now.  

Now, if you change the circumstances, if you remove maritime transport altogether, then all of a sudden we’re having a different conversation. But that doesn’t make the project any cheaper. So you’re still talking about tens of billions of dollars to get the infrastructure in the ground, and then a transit costs that is about the same as prices are right now. So you’re talking about a very nasty change in circumstances if that’s how you want to go. All right. That’s it for me for today. Take care.

Russia Is Struggling to Defend Its Own Capital

Image of St. Basils Cathedral and the Kremlin in Moscow, Russia

A leaked Moscow memo stated that Russian air defenses are being concentrated around the Kremlin. This leaves the broader Moscow region, including refineries and key infrastructure, vulnerable to Ukrainian attacks. And if Moscow is this vulnerable, it gives you an idea of just how bad things are throughout the rest of Russia.

In addition, the Russians are looking to kick off a peripheral mobilization of ~300,000 people. However, all of the recruitment sources carry political risks for the Kremlin. If they depopulate the Far East, it weakens the border with China; if they take non-ethnic Russians and could fuel unrest; or you target immigrant workers and worsen the labor shortage.

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from Colorado. Today we’re talking about the combination of things that have come out of Russia. We’ve got two things. The first one is that a memo that was being circulated among the Moscow mayor’s senior staff has leaked. And basically they are admitting that even with the government, the national government, the Kremlin, redirecting the bulk of the country’s air defense to the Moscow region, the defenses are so concentrated around the Kremlin itself that they’re not providing enough anti-air defense for the broader metro region, which is the economic and political and cultural hub of the country, which means that refineries which are on the outskirts can’t really be protected at all. And they are expecting the refining system to not simply continue to come under attack. But they’re expecting the city to run out of fuel before the end of the year, and perhaps a lot sooner than that. So they are spitballing ideas of what to do about that. And the leading candidate right now is to break up Russia’s refining complex instead of the 100 odd refineries it has right now, and build a thousand plus that are just much, much, much smaller. 

Now, it isn’t so much that this is a good idea because it’s not. You’d lose economies of scale. You’d still have to cluster the refineries around pipelines. So you have like five refineries, smaller refineries, where a bigger one used to be. That doesn’t really solve the problem, but more importantly, it would take years to build out and require lots and lots of equipment that the Russians can’t build and would have to import. So all of a sudden the sanctions come into place. So it’s really not feasible. But the point that the smartest people in the largest and most successful city in Russia are now desperate for options simply to keep the fuel flowing, tells you everything you need to know about the stability of the Russian economy right now. Because this is the capital, this isn’t some far flung province out on the edge. That’s piece one. 

Piece two came out of Kyiv with the Ukrainian President Zelensky sharing some intel that they’ve been garnering on the Russian military system. Apparently, according to Zelensky, the Russians are preparing a fresh what they call peripheral mobilization for this coming September immediately after elections. And when they say peripheral in Russia, what they mean is non-ethnic Russians. Ethnic Russians, according to Russian statistics, are probably about 75% of the population and of course make up the super majority in the major cities, most notably Moscow. But when you move out of the Moscow region, out of the Saint Petersburg region, you’re going to be hitting higher and higher ethnic minority concentrations. And there are several republics, several dozen republics across Russia where non-Russian are either the full majority or the near majority. So far in the war, the Russian government has done everything it can to not pull ethnic Russians into the fight, favoring the forced recruitment of non-Russian ethnics whenever they possibly can, because they’re feeling is if those people rebel, you can just kill them. But if Russians, ethnic Russians rebel and you put them down like the Russians like to, that might spawn more protests in other Russian regions. And if you don’t have the buy in of the Russian population, or at least it’s apathy, then that is how the Kremlin falls, because that’s happened before. Reasonable, reasonable political analysis. The problem, of course, is that this is not the first time the Russian government has done this. It’s done this in three rounds so far in the war to date. And with the Russian government losing somewhere between 25 and 45,000 people a month in this war, the question is, how long can this hold the line before things break? 

According to Zelensky’s Intel? And so far, when the Ukrainians have shared things like this on the development of the Russian military, they tend to be right, I’d say 90% of the time. But, you know, some of the details might be fuzzy. The Russians are talking about this peripheral mobilization, about 300,000 people, which would be enough to supply troops to maintain what the Russians have been doing at the last years burn rates for another 6 to 9 months. So it doesn’t really change the math in the long term. It simply allows the Russians to continue to plot on with what they’re doing as to where the people would come from. The greatest hits, where the greatest percentage of the local population would be drawn out, would probably be from the Far East. These are areas that are relatively lightly populated, relatively low urbanization, penetration. And basically the Russian state just goes through and rounds people up when they’re going about their daily business. The second big concentration would be recent passport holders. So there are a lot of people who have moved from Central Asia to Russia because as bad as the economy is in Russia, it’s worse in Central Asia. So especially in places like Tajikistan or Kyrgyzstan, you’ve got several million people over the last 20 years who have moved north. And because they’ve had to get passports, they are in the system. And so basically what the Russians are doing is saying, hey, you’re in the system, we know where you are. Come work in the war because you don’t have a choice anymore. Getting Russian citizenship, the price is dying in Ukraine. The biggest concentration, the biggest numbers are going to be from ethnic republics that are closer to Moscow, that are more densely populated. So you’re talking here about places like Chechnya, Tatarstan, and Bashkortostan, densely populated provinces with reasonably high birth rates, especially compared to the ethnic Russians, where you do have a presence of the Russian state that can basically force people in. 

All of these come at certain risks. When you start taking out people from the Far East, you’re depopulating them to the point that there’s an open question about relations vis a vis the Chinese, who have 100 million people just on the other side of the border. When you start going after the people who are recent passport holders, you disincentivize people to come into Russia where there’s a demographic bomb going off in real time even before the war, and you’re losing the workforce, you need to keep the system going. And when you go after groups like Chechnya, Tatarstan, and Bashkortostan, you’re talking about big population centers that if they ever did rebel, it’s not clear whether the Russian state could resist them. A new Chechen war would be as bad for the Russians as what’s going on in Ukraine right now. And if the Tartars or the Bashkirs rebel in any meaningful way, the Russians lose all the infrastructure connections they have to Siberia and Siberia, at the moment, is the only part of the oil complex that is likely to still be exporting a year or two from now. So none of these are good decisions, but it’s not like there’s a better one on offer, and we’re now seeing the entire system start to seize. 

Russia, though, is capable of maintaining an incredibly high tolerance for pain, basically suffering as the Russian equivalent of baseball. And none of these by themselves are enough to break the system. But we’re seeing the weight increase at the same time as we’re seeing the Russians start to not just stall on the front, but be turned back. And every major Russian revolution in the past 300 years has been because the Kremlin has lost a military conflict. So you take the social pressures that this mobilization are likely to generate, play that against the battlefield situation. And yeah, this is looking pretty bad for the Kremlin.

Ukraine’s Flamingos Crush Russia’s Space Program

A cruise missile launching into a starry night sky | Licensed by Envato Elements

Ukraine sent a flamboyance of Flamingos (cruise missiles, not those pink things) and struck a Russian space complex in Samara. This complex was responsible for assembling Soyuz-2 rockets, as well as electronics and precision testing.

The missiles used, the Flamingos, are Ukraine’s version of the U.S. Tomahawk; dumber than the Tomahawk, but cheaper and easier to produce. These strikes and Ukraine’s growing large-scale strike capability are crushing Russia’s industrial and technological base.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado. It is the 15th of August. And the news is that Ukraine, using a modified weapon system, has just attacked the city of Samara in Russia and severely damaged one of the space complexes, specifically the place where the Russians assemble the Soyuz-2 rockets. This is the primary Russian launch vehicle to get satellites up into space. Damage levels at this point are questionable, but we know there have been hard hits on the major buildings that actually do the work, especially for things like electronics and precision testing. So for the moment, Russia’s space program is now offline, and the idea that the Ukrainians won’t hit again is kind of silly. 

Right now, Russia has kind of a hybridized space program. They’re still participating with the United States on the ISS, although I wouldn’t expect that to last a whole lot longer. ISS is the International Space Station, and they do have some legacy satellites up there, but they were hoping to build their own network of a couple hundred satellites. That to be kind of a local Starlink equivalent, so that they have independent military observation and independent communications, that is at a minimum on hold now. 

They were really only planning on launching ten, maybe, if they’re really lucky, 20 satellites a year. And now that’s completely at zero. In addition to that, there’s the question of how the Ukrainians did this. It’s something called a flamingo missile. Now, if you remember back a year or two ago, there were some conversations about the United States sending some of its new truck mounted Tomahawk missiles, which is the United States premier mid strike cruise missile. Anyway, sending them to Ukraine. Ukraine lobbied very, very hard for that. But ultimately the United States decided no. So the Ukrainians, for all intents and purposes, built their own. The Flamingo has a warhead that is significantly more powerful than the Tomahawk. It’s modular, but it can be up to 1000kg, which is well over twice what the typical tomahawk carries. It has a slightly better range with a lighter warhead. It’s not quite as fast. Probably the biggest weakness of the Flamingo versus the Tomahawk is that the United States can use, off course, it’s satellite network to retask it on the fly, where the Ukrainians cannot yet do that. Although, considering, what they’re doing with drones, some version of that is probably going to be possible in the not too distant future anyway. 

It, in essence, is a flying truck bomb. It’s not as accurate as the Tomahawk, but because it hits so much harder, it is almost as good. And the really important thing is it’s because it’s a simpler piece of equipment. Fiberglass instead of titanium. The Ukrainians can crank out three of them a day where as the tomahawk, they can only produce about 60 a year. So that’s what, five a month? Yeah, five a month. So a half a dozen of these things were used in the attack on Samara. Most of them were shot down, but with three a day being the production rate, it’s very, very simple to see this being a major industrial factor in the weeks and months to come. 

So in summary, the Russians probably won’t have a space program by the end of the year that makes them completely dependent upon third party reconnaissance, primarily from China. The Ukrainians are being able to throw so much tonnage into the air that there’s really no industrial facility in Russia within a thousand miles of the border now that is safe at all, because if you’re not going to defend your space program as Russia, there’s really not much left that is more important aside from Moscow itself. And we’ve seen a contraction of Russian air defense around critical sites in Moscow and very little else. What we’re seeing is the disembowelment of Russia’s capability of being a technological power, and all that’s left is for it to be a resource power, exporting raw materials such as crude oil, in order to get the currency it needs in order to purchase Chinese product. But as the Ukrainians basically march with drones through the entire industrial plant, that capacity is disappearing. And we’ll probably see an end of Russia’s ability to be a large scale resource exporter before the end of the year as well, at least as regards the Black Sea and the Baltic Sea. And that’s going to be over two thirds of the total. So we really are seeing the industrial destruction and removal of Russia from the global space. 

That has thousands of downstream impacts. And that is a topic we will revisit at length in the days and weeks to come.

Russia Loses Its Foothold in Syria

Russian flag at dusk with a moon in the background

Russia’s strongest military foothold and gateway in the Middle East is now gone. Russia has agreed to end its presence at the Latakia airport and Tartous port, as it hands over the reins to Syria’s transitional government.

Tartous was Russia’s primary hub for projecting power into the Middle East and Africa, and without it, Moscow will struggle to do much in the region. This is part of a broader trend of Russia scaling back positions and focusing its military capacity on the Ukraine War.

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Transcript

Hey, all, Peter Zeihan here, coming to you from Colorado. And the news is that on August 9th, that was this past Sunday. We have a new agreement between the transitional Syrian government, which is led by Sunni jihadist, formerly allied with Al-Qaeda and the Russian government, to basically end Russia’s military position in Syria. For the last 15 years, the Russians have maintained a strong military presence in two locations in Syria: the Latakia airport and the Tartous port, both of which have been under direct Russian military control the entire time, and the Russians have used both positions, both to intervene forcefully in the Syrian war, which ultimately ended up on the losing side, and then second, to protect naval and air power throughout the Mediterranean. That now comes to a close. The day that the agreement was signed, the 9th of August, the civilian administration in Syria took formal control of the airport again, and within three months they will take control of the Tartous port as well. Technically, there’s a face saving measure here that these will be joint training centers, but there’s really not a lot that the Russians bring to the table here. In addition to the fact that there are well among 90% of the Syrian population that used to be the target of Russian attacks, the idea of joint training with the Russians is a little, let’s just call it galling. So I expect the Russian position to be nominal. They might maintain a bit of an intelligence outpost, maybe a little observation, but that’s it. 

So we’re talking in excess of a 90% reduction in what the Russians used to get out of these bases within a very short period of time. And this marks the end of the Russian high water mark in the Middle East in the post-Soviet era. It’s not that they don’t have ties. They work with the Houthis, they work with the Iranians. They even have decent relations with the Israelis most days. But these were the only two military facilities that Russia has outside of the former Soviet Union, and it was the only way that they could reliably project power into the Mediterranean. And because the Turks control the straits that connect the Black Sea to the Mediterranean, and now that these ships that the Russians used to keep at Tartous have to go home or go somewhere. The ability of the Russians to even have the range that is necessary to protect power doesn’t exist. So we’re looking at the entire southwestern arc of the former Soviet space, basically becoming a no go zone for Russia. We’re seeing some color of this in many other operations around the world, as the Ukraine war basically sucks up more and more Russian military bandwidth. 

They still have things like the Russian Legion that are running around in Africa, causing coups or preventing them based on the day, but without the ability to reliably resupply their forces through Tartous, the ability of the Russians to even maintain those positions is going to be shriveling. So it’s a good day if you’re anybody but Russian, and if you’re Russian, you now have to focus almost exclusively on the Ukraine war, which I would argue was always how it was going to go. 

We’ll save the Ukraine war itself and the long term prospects there for another day.

Ukraine Closes the Sea of Azov

NASA satellite image of the Sea of Azov | Photo by NASA and creative commons licsense

Ukrainian drone attacks have effectively shut down Russia’s use of the Sea of Azov, which is a critical export route for southern Russia.

The sea connects the Volga River canal system to the Black Sea, allowing agricultural goods, coal, iron, and more to reach global markets. And with Russia’s rail network already overburdened, losing this waterway is devastating.

If Ukraine expands these drone attacks into the eastern Black Sea, the shadow fleet will face even further disruptions. With no quick solutions on the table, the Russian economy and war effort will be on its back foot for quite some time.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from just below Cupid Peak, above Loveland Pass. And over here we have Grays and Tories and Grizzly Mountain. Not going to be able to do those today because we got lightning moving in. Boo. But I’m still going to do a video for you guys. I just got back from Yosemite and still catching up on everything that happened. 

But one of the big things that happened in the Ukraine war is that the Sea of Azov is now offline. The Sea of Azov is a body of water to the east of the Crimean peninsula, that’s Russian occupied Crimean peninsula, and to the south of Russian occupied lands in southeastern Ukraine. It’s a waterway that freezes sometimes in the winter. 

But the real important thing is that is the outlet for a huge amount of cargo. The Russian system is not well set up for shipping cargo. A lot of stuff has to go by rail, but the Russians are literally running out of ball bearings, so they’re hitting the max of what they can do, and they can’t replace the cars and the speed that they need to. 

So they’re seeing reductions in throughput. That makes it much more important to ship things by water. The problem is, is that the Russian coast of the Black Sea doesn’t have any navigable river outlets. It’s somewhat rough and mountainous. And so what happens is you’ve got an inland waterway, the Volga, that goes near Moscow and snakes through Russia and empties into the Caspian Sea. 

The problem is the Caspian Sea is a landlocked body of water. So what the Soviets did is they engineered a series of canals and locks that go from the lower Volga near the Caspian over some low ridges, and get into the Don River system. And the Don empties into the Sea of Azov. So, in essence, if you’re shipping coal or iron or especially agricultural products, you get it onto the Volga. 

You go through a series of locks until you get to that connection. You take the canal over to the Don, to Rostov on Don, and then you get into the Sea of Azov, and from there you get into the Black Sea in the wider world. Well, while I was gone, the Ukrainians hit over 200 ships in like a week in their first big push and basically shut off the sea of his off completely. 

So any of the cargo that used to use this waterborne export, which was one of Russia’s main ones, the primary one for southern Russia, suddenly has nowhere to go. They go onto the rails, but the rail system already overloaded and honestly starting to fall back. So a couple of things from this. Number one, we’ve got a lot of Russian cargo that is now just trapped. 

It has nowhere to go and there’s really no quick fix here. The Russians have withdrawn a lot of their air defenses from places even like Crimea, to put it around Moscow, because Ukrainians have shown that any target that’s within roughly a thousand miles of the front is something they can in force. And that’s forcing the Russians to the air defenses that they have in places where they will serve political purposes. 

Because of Moscow, came under heavy drone attack every single night for a month that might shatter the political coalition that holds the Russian system together. Right now. That’s one. Number two, Rostov on Don. This is one of the city’s one of the two cities in Belgorod that serves as nodes for transporting military gear to the front, and it has now lost all of its economic wherewithal. 

It’s now just a military outpost, in effect. This is something that’s going to have a huge impact on the Russian economy and ultimately crimp Russia’s ability to get stuff to the front, because if that river is no longer available, if the canal system is no longer available, if the receipt of is of is no longer available, then one of the more wealthy cities in Russia just lost everything that made it work except for being a military depot. 

And you should expect more tax there over and over and over again in the not too distant future. Third, now that the Sea of Azov is offline, next up is the Black Sea. It’s not that much further. The Ukrainians have loads of drones that are capable of taking the war now just across the Crimean Peninsula and into the ocean, and we’ve already seen dozens of attacks on things like tankers and Borchers, everything that’s in the shadow fleet. 

So look for the Ukrainians over the next couple of months to repeat what they did in the Sea of Azov in the eastern side of the Black Sea, because no ships go there, really, unless they’re part of the Shadow Fleet. No one else wants to dock directly. And it’s not like they haven’t been warned if they decide they want to try. 

The only real solution here that the Russians have, because air defense isn’t going to cut it, is to up their attacks on the Ukrainians to the point that it attracts the Ukrainians ability to do this. But since it’s from mobile launch sites with ever evolving drones and drones at the moment, the Russians haven’t figured out sorry about the wind drones. 

At the moment, the Russians haven’t figured out how to replicate. That’s something that undoubtedly can’t happen this summer. This is going to be a problem for a year from now, or a potential solution for a year from now. And now we’re getting to India and I’ve got to stop so by.

Russian Sleeper Cells Don’t Scare Me

A man in sunglasses with Russian glyphs behind him on a red cyber background

The idea of sleeper agents being embedded in the U.S. is largely unrealistic. In contrast, the far more realistic threats that should concern you are short-term operatives carrying out intelligence-gathering or financial activities.

The Hollywood special “sleeper cells” are only worth the investment for major assassinations or mass-casualty events, not routine sabotage or espionage. Whereas, planting foreign intelligence operatives through legal means and for shorter periods makes much more sense. However, the U.S. can typically detect this kind of thing through its vast and interconnected signal detection network.

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Transcript

Hey all. Peter Zeihan here coming to you from Colorado. Today we’re taking a question from the Patreon page. Specifically, what with everything that’s going on in the world today, with all the changes the United States involved in the Middle East, the Russians literally on the warpath, the Iranians now having ample reason to hate the United States for fresh reasons. And the Chinese, of course, always pushing, pushing, pushing. 

Do I worry at all about things like sleeper agents? Let’s clarify what most people mean by sleeper agents before I answer that. So the idea is you have some highly trained operatives that go into an enemy state, establish themselves as locals, get jobs, raise families, buy homes, and live among the target population for years while they do research towards a specific end tax to justify the investment. 

The reason I don’t worry about sleeper cells is that specific thing towards an end task to justify the investment. Having somebody with a deep skill set in Intel is one of the most expensive things that you can do. It’s like astronauts, F-35 pilots and then the high end spies. So if you’re going to put them somewhere where for years you’re not going to get a payback, you’re talking about having to have a payback on the backside. 

That is on the scale of assassinating somebody like the president or causing mass casualties, simply getting in and stealing a piece of technology or blowing up a pipeline or something is not going to cut it. So no, this is not something I worry about. Does that mean I’m not worried about us, the United States being penetrated by foreign intelligence? 

Totally different topic. The United States is a free society. The United States allows people to fly in with limited background checks. And if you’re going to have an Intel system that wants to flood your country with foreign operatives, you know, student visas, for example, is a very easy to get way to get in. That’s how some of the nine over 11 attackers got in, for example. 

But that’s a very different sort of operation. Those are operators that would be in the United States, people who are operational who have specific tasks. So, for example, in the past, the Russians, both during the Cold War and more recently in the post-Cold War era, have sent dozens of people into the United States to gather information from wherever they can. 

It’s not a sleeper unit. That’s somebody who’s actively reporting. And it’s that sort of act of reporting that U.S. Intel signals intelligence in particular, is very, very good at rooting out. And ultimately, we did Hezbollah. You know, the group in Lebanon has sent people here primarily to love this, buy cigarettes. They bought them in one state. They sold them in another state, set up a little smuggling system within the United States to take advantage of the difference excise taxes. then sent the money home. They also accrued equipment that they were going to send home. But that sort of activity do it in bulk enough to generate money. That is the sort of thing that also tends to pop up on the radar of law enforcement, right down to the local level. The bottom line is, while we may have a free society, we’re still an information society. 

And because we have local law enforcement, state law enforcement, federal law enforcement, and then regulators at every level for everything means it’s really hard to establish some sort of like deep root into the American system to carry out some hypothetical attack. So while we have a lot of operational folks and there are spies in the United States and have been spies, we’ve never had anything that kind of fits the generic term of sleeper cell. 

So for sleeper cells is really tends to be restricted to to low end and really not particularly realistic fiction. This is not something I lose any sleep about. Which isn’t to say that I don’t lose sleep.

Russia Gets Knocked Off Its Horse

Iconic photo of shirtless Putin riding a horse in Russia | Creative Commons license from Flickr: https://www.flickr.com/photos/jedimentat/6230779369

Ukraine has struck a key semiconductor facility in Voronezh that could significantly weaken the Russians’ ability to produce advanced military equipment.

Russia is already struggling to replace military hardware lost in the war, and damage to this facility (and the other major chip plant near Moscow) would force it to depend heavily on Chinese components. These would be less compatible with Russian military systems and would reduce the quantity and quality of Russia’s weapons.

As Ukraine continues to expand its drone capabilities with foreign support, we’re entering a new phase of this war where Russian tech limitations play a bigger role on the battlefield.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Colorado. It is the 22nd of June. And today we’re going to talk the military industrial complex of Russia, specifically as regards information technology, specifically as regards semiconductors. The reason we’re talking about that today is that the Ukrainians sent a large bevy of cruise missiles into a military facility in Vienna, which is a city in south central Russia, just north of the Caucasus. 

Verna is an industrial plant that dates back to 1959 that is primarily servicing military needs. So they make semiconductors there. They are cut from the wafers, they’re tested their package, and then they’re prepared for incorporation into various military technologies like fighter jets and tanks and especially missiles. Anyway, we don’t have good damage reports from it because it’s the Russians and they’re not going to tell us, but the whole thing appears to be on fire. 

And that’s usually really bad for semiconductors, which every stage of the process requires. Clean room conditions, aside from the Russians, only have one other place that makes semiconductors at all. It’s called Zilina Grad. It’s just to the northwest of Moscow. It’s three facilities that are quite a bit smaller and therefore easier to target for. ResNet has extensive anti-air defense because of the Ukrainian drones. 

Zilina grad not so much. And I would bet your ass that the Ukrainians are going to be targeting Zilina grad very, very soon. Now let’s talk about what’s at stake here for the Russians, the type of chips that are used in military equipment writ large are actually pretty basic because, for example, for missiles you only do one thing once. 

You might need chips for guidance systems, you might need chips for things like IR goggles, whatever. But those are not cutting edge nodes of seven nanometers or below, or even cutting edge direct all nodes of like 28 nanometers to seven nanometers. These are really dumb chips. And the Russian military complex reflects that. So with a few specific exceptions, that they can make it very, very, very, very low run rates. 

The most advanced semiconductors that both of these facilities, the Leningrad and can make is about 90 nanometers. And then scaling back to 150. And even that uses extensive imported foreign equipment. The only chips that the Russians can make without any help is about 350 nanometer, which I could probably bash together in my kitchen if I was willing to watch a lot of YouTube tutorials, which I am not. 

Anyway, where does this leave the Russians? Well, with virescens offline for an indeterminate period, probably permanently, Ukrainians will hit it again. And with the Leningrad not long for this world, the Russians now have to find another way to make their gear. And they were already having a significant problem. They were only manufacturing new gear writ large at one fifth to 1/20. 

The weight that they were burning through it in the war. Part of that is the Russian industrial complex. Part of that is just the nature of this conflict, where the Russians just throw scads and scads and scads of things against everyone to see what it sticks. But the biggest part of the strategy that the Russians depend upon is using fighter jets to drop glide bombs from, say, 20 miles from the front line so they never even get in risk range. 

And then using long range weapons in order to target things like the Ukrainian power grid. All of that requires these chips. And yes, you can pull a chip out of something like a massager unit or a smart margarita machine or a washing machine and plug it into your military gear. But military hardware is hardened. It needs to be able to handle things like vibration and heat and maneuvers. 

And washing machines are not designed to the same specs, which means you’re going to have much, much, much slower performance and much, much higher failure rates. And when you’re talking about like a hypersonic missile, you might as well not even try. The Chinese can or export to the Russians chips of the appropriate technological level. But just as with the washing machine chip, the chip wasn’t designed for the hardware. 

The hardware wasn’t designed for the chip. So the failure rates are going to go through the roof, which means that probably in just a few days, the only hardware that the Russians are going to have that is advanced is stuff that’s in the warehouses, is currently being assembled, or is on its way to the front already. They will not be able to replace them with additional hardware at the same rate or with the same quality levels. 

And the Russians were never really known for high quality levels. So for conventional weaponry, helicopters, jets, tanks, missiles the Russians now are probably facing down a qualitative collapse in what they can do. At the same time, they’re looking at a quantitative limit at what they can produce, even with extensive Chinese help. Ukrainians, on the other hand, when it comes to drones, are already the numerical and technological leaders in this conflict, producing more drones and better drones than the Russians have for several weeks now. 

That’s still spinning up, especially with the infusions that have come in from the Europeans. Now that the Trump administration has dropped, kicked them, and they’re desperate to develop new technologies. And from the Arabs of the Persian Gulf who are furious with the Trump administration for the Iran war, all of them are basically underwriting the Ukrainian defense industrial base now. 

And the only people who are underwriting the Russians are the Chinese, and they insist on getting paid. Anyway, you fast forward just a few weeks and this is going to start to impact the front line, because without this higher end equipment, all of a sudden the Ukrainians are punching at the same weight that the Russians are. That doesn’t mean the war is over by any stretch of the imagination. God, no. Russia is still the largest country on earth. They still have a significant holdover equipment list from the Soviet times. They still outnumber the Ukrainians 4 to 1 in any battle that matters. Outnumbering the Ukrainians 3 to 1. They still have a lot going for them. But if they can’t replenish their weapons, if they can’t replenish their tech, then it all becomes whether or not the Chinese make a political decision or not. 

So what we’re probably going to see over the summer is significant change in how this war is fought. We’ve gotten a glimpse of that in the last couple of months with the new Ukrainian drones targeting things like logistics, but now the Russians are going to either have to a figure out a way to counter that without microchips, unlikely, they’re going to have to be dust off weapon systems that to this point they’ve been unwilling to use, like, say, nukes, which have, let’s just say complications or three. 

The Chinese are going to have to put their shoulder into the conflict in a way they just haven’t yet. Either way, this long, slow grind of the last three years is over, and this is about to become a lot more dynamic very, very soon.