New Strategies in the Ukraine War

Photos of military vehicles in Ukraine at night

The strategies implemented by Russia and Ukraine are shifting once again.

Russia has shifted away from targeting Ukraine’s power grid and is now striking rail infrastructure instead. These mobile targets are harder to defend, and the fallout is much worse for Ukraine’s energy and logistics networks. The Russians are also closing in on Pokrovsk; this city has been a key transport hub for Ukraine, and losing it will be a major setback.

The Ukrainians are strategizing as well. Strikes are penetrating deeper into Russian territory, hitting oil infrastructure and ports. The shadow fleet tankers are included in the target list, which could open a new can of worms for the Russians and countries backing their oil trade.

These shifts have the potential to reshape not only the war in Ukraine but also global energy markets.

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Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado, today we’re taking a look at some of the new things that are happening on the Ukraine front. Three big. Number one. The Russians have changed their strategy when it comes to bombing civilian targets across Ukraine. For the last three years, they’ve been going after power plants, capacitors, transformers, that sort of thing. 

Natural gas transport infrastructure, substations, all all that. What they’ve discovered is that when you’re willing to do things that are not OSHA approved, there’s only so much you can do. So yes, they can knock off the power over and over and over and over again. But the Ukrainians get a little cheap equipment. It’s been imported. 

They, tie some wires together, and the power comes back on. So I don’t mean to suggest for a second that the Russians have. It inflicted a great deal of pain on the Ukrainian population, but it hasn’t had nearly the impact. I thought that it was going to have. And while, the Ukrainians have power that’s off every day, it hasn’t been able to shut the country down in the way that the Russians thought they were going to be able to. 

Also, whenever you go after a power plant, it’s a known location. And while that means it can’t dodge, it also means you can in place, anti-missile and anti-drone defenses and the Ukrainians have gotten incrementally better at that. Bit by bit by bit over the last four years as well. So they’re changing strategy. The Russians are now going after the rail network and specifically the rolling stock, because you can’t have a fixed offense on a train that’s moving. 

So the Russians basically figure out what the train schedules are and then send a fleet of drones and specifically go after, the engines. These are a lot harder to replace. They’re a lot more expensive. And a lot of Ukraine’s power grid now, because of damage to the natural gas transport system, has been coming from coal, the coal shipped by rail. 

And so it’s having actually probably a bigger impact in a shorter time period of time, than anything that the Russians have done in the last 3 or 4 years. So having a much bigger impacts, much harder to defend against. Once you have enough drones that you can expend them on moving targets, that’s one. Number two, we seem to be nearing the end for the city of Procrustes. 

Procrustes is a rail and road hub in southeastern Ukraine that the Russians have had under assault for over a year, and now they’re actually Russian forces in the city. They’re nowhere near to have clearing it and securing it, but it is no longer able to be used by the Ukrainians for transport at all. So they’re having to fall back through eight major transport arteries that combined and Procrustes, where the Russians have been after it for so long because as long as the crossing was in Ukrainian hands, the Ukrainians have been able to shuttle troops to wherever the hotspots happen to be. 

You move across, even if it’s just destroyed, it doesn’t become a Russian rail hub. The Ukrainians have to fall back quite a bit and then deal with much longer routes, in order to get at things wherever they need to go. The Russians have surged more and more troops into the area, and they are on the offensive pretty much across the entire front. 

They’re only making incremental gains. Like I said, they’ve been after Procrustes for over a year. But this is going to slow the Ukrainians reaction time significantly. Whether that will spell more advances for the Russians in the future remains to be seen of course, because the rules of this war change every six months. Which brings us to the third point. 

The Ukrainians are targeting differently as well. They’ve been using their rocket drones and the longer range drones to go deeper and deeper into Russian territory, going after more and more sensitive energy infrastructure. And we’re now in a situation where roughly 60% of the Russian transport system for oil that matters is under the gun in some way. 

The Russians, are taking hits not just in the refineries anymore, but also their ports. And on the first and 2nd of November, overnight, we had a number of Ukrainian drone strike out at a place called Tusa, which is one of the two major ports on the Black Sea. To ops is important because it serves as an outlet not just for Russian, but Kazakh crude. 

And the Ukrainians didn’t simply hit the pipe control system, didn’t simply hit the loading burst. They also hit at least two, perhaps as many as four of the tankers that were there. Now, we don’t have damage reports because the Russians don’t talk. And the tankers that carry Black Sea crude at this point are pretty much all shadow vessels. 

So they’re not registered with normal, law enforcement internationally. So they’re not talking either. But a couple things to keep in mind. Number one, to observe one of the four largest offloading facilities in the Russian system, even partially offline. That’s kind of a big economic hit. And it’s a lot closer than some of the targets in, say bus Korea Center. 

Tatar said that the Ukrainians have already proven that they can hit. So they actually have the possibility of taking this one off line if they hit it hard enough and repeatedly enough. And the Ukrainians are showing a penchant for hitting the same target over and over and over until it’s just not in the equation anymore. This would be the first major port that the Russians would have lost to, and more importantly, is the shadow fleet vessels. 

Now, part of what makes them a shadow fleet is that they are under insured or not insured at all. And in that sort of scenario, the financial risk is not borne by the international community. So if you dial back to the beginning of this war, one of the things I was really concerned about was that if a single ship went down, because it was targeted by a sovereign state like Ukraine, that we would see an unraveling of global maritime law. 

The way it works is companies purchase insurance for their vessels. And if something happens to that vessel, the payout is massive. Well, part of the way the sanctions work, especially as designed by the Europeans, is that they’re no longer providing maritime insurance for the vessels that dock at Russian ports. So they have to be off the ledger. They get insurance from, say, the Russian government, the Chinese government, the Indian government, instead of normal things like, say, Lloyd’s or Swiss wheat or whatever else. 

And that means that the financial risk is not assumed by the international community, but instead by these specific governments. Now, we have not had a shadow tanker sunk yet. We’ve had some confiscated. That was exciting. That happened in the Baltic Sea a few weeks ago. But we not actually had one sunk. But now we have the Ukrainians deliberately targeting multiple shadow tankers. 

And sooner or later, one of them is going to go down. And when that happens, it’s going to be really interesting to see how the payout happens, because if, the Russians or the Indians or the Chinese don’t pay up and all this insurance is null and void, and then the shadow tankers are basically a free for all. 

If you happen to be anyone else who doesn’t like the Russians and will probably see mass confiscations if the Ukrainians, the Indians or the Russians do payout, then the Ukrainians have every interest in hitting as many tankers as possible, because as large as a financial loss to the supporters of the Russian system, as possible. So one way or another, we have just kind of passed an interesting Rubicon, and we’re going to know in the next month or two how this is going to play out, because for the Ukrainians, there’s absolutely no downside to hitting the tanker. 

There may have been a year or two ago because back then the concern of the white House was that high oil prices were going to impact the Democrats chances of elections. I thought that was really bad math. From an economic point of view, you draw your own conclusions politically. But now two things have changed. Number one, Trump really doesn’t care about economic damage with any of his policies. 

So why would this one be any different? Second, and arguably a lot more importantly, we’re now in a massive oversupply situation for crude on a global basis. We’re probably somewhere in the realms of 2 to 4 million barrels a day. Too much crude. Which means that if it wasn’t for all the risk premiums out there, political, geopolitical, military or otherwise, we’d probably already have an oil price crash, which means that the world can get by with substantially less Russian crude than it thinks that it needs. It’s all adding up for a lot more direct action from the Ukrainians on all Russian energy targets. And I think the shadow fleet is where we need to watch the most closely.

Bonus Video – Russia: Trump Pulls the Trigger

A Russia and Ukraine button on top of a Ukraine flag

After months of being played by the Russians, it seems US President Donald Trump has had enough. On 23 October the United States has fully sanctioned Russia’s largest oil firms, barring interactions with US firms and corporations. Here’s what it means, what’s at stake, and what’s next.

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Transcript

Hey all. Peter Zeihan here coming to you from Winona Terrace in Madison, Wisconsin. Just had some fried cheese curds for breakfast because, duh. Today, it’s the 23rd of October, and we have to talk about what just went down between the Trump administration and the Russians. Trump has been trying to force the Russians into a peace deal. 

It’s not going to happen. The Russians, see the war in Ukraine as the start of a broader geopolitical offensive that they need in order to survive through the century. The right, basically, it’s a border issue and a demographic issue. They didn’t do the Ukraine war on a whim. They didn’t do it to satisfy someone’s ego. 

They did it because they think they need it to survive. Anyway. 

Trump is attempting to put a stop to the conflict. And so the Russians have been stringing him along, making him look like a fool and then going back on everything they agree on. Anyway, Trump has had enough of it, apparently. 

And today Trump put sanctions on the two largest oil companies in the country. One of them is Rosneft, which is the state owned monopoly or near monopoly. And the other one is Lukoil, which is technically a private firm but takes its cues from the government. 

Full sanctions, which basically means that any American national cannot do business with any of these companies. The impact on the United States is going to be limited to Lukoil at the moment. Lukoil has a number of gas stations, service stations throughout the country, about 150, and supplies crude and gasoline to the U.S. market in a limited way. Rosneft is different. Rosneft is does all of its business in Russia. It’s not particularly sophisticated company. 

It just happens to be large and it’s absorbed pretty much all of the activity in the former Soviet Union that it could, So direct impacts on, Rosneft are somewhat limited. There are some projects that Rosneft and Lukoil have with American firms in the former Soviet Union, however, not Russia proper, primarily in Kazakhstan. There’s a super field called Crouch Cannot that does natural gas, oil and condensate. 

And then there’s the super field of Tengiz, which is on the shore of the Caspian that ExxonMobil is very involved in. If these actually get shut down, you’re talking about multiple billions of dollars of loss for American companies. In the case of Lukoil, they’ve put over $20 billion of investment in this thing over the last 30 years. Now, I would argue that all of this was going to go down anyway sooner or later. the Kazakh crude that was coming out of Kazakhstan was always going to go away. The route is just to secure this, you have to go through, not just difficult parts of Kazakhstan, but then through Russia to get to the Black Sea, to load on a shuttle tanker, to get out to sea, Istanbul. 

Eventually you get to the Mediterranean, we can get on a bigger tanker and eventually go around Africa or through Suez and eventually get around India. You know, it’s just it’s a crazy route. It only works in a fully globalized, safe world, and that’s not where we are anymore. So this was all going to fail anyway. But at some point you rip off the scab and it looks like we might be there now. 

This is not enough to even remotely make the Russians consider changing their point of view. The only thing that might, might, might get their attention is a full embargo by the United States and the Europeans that prevents any crude and any natural gas from leaving Russia whatsoever. That’s going to require a lot more than just this. But it is the first time that the Trump administration has done anything that isn’t even marginally inconvenient for the Putin government, and it’s going to be interesting to see how the Russians respond to that the next stage, because I don’t think this is going to generate the effect that Trump wants is to look at something called secondary sanctions, which is something that the United States kind of has a bad rap of with the wider world. Basically, we don’t like you, so we’re going to sanction anyone who does anything with you. Iran has always been the key target of that. And secondary sanctions have often targeted a few, European companies here and there. Well, the Europeans really don’t like the Russians right now. 

So if we get secondary sanctions, they’re probably going to go against countries like India and China. And then we’re in a very different environment. We’re not there yet. But this result is, from the Russian point of view, relatively minor. And it’s not enough to seriously get their attention. And so if Trump is serious about pressuring the Putin government, that is the next step. 

The question, of course, is whether Trump’s cabinet and institutions can handle that. We still haven’t seen Trump build out the government. It’s still be cleared out. The entire government. When he came in, he still hasn’t replaced most of those positions. And implementing the secondary sanctions requires a lot of legwork in a lot of places. Unless you just want to say, I’m sanctioning everything in China, which would be, you know, notable. 

So he’s probably gonna have to find some sort of hybrid approach, and he’s probably gonna have to create it from scratch with minimal input from a team that largely doesn’t exist. So we’re seeing in real time some of the weaknesses of the Trump administration’s ability to implement policy. But again, we’re not there yet. That’s probably a challenge for next week.

A Break for Ukraine

Ukraine solider on a armored vehicle with a split screen of Donald Trump

President Trump might finally be throwing the Ukrainians a bone, as the US may begin providing the precision targeting intelligence for strikes deep inside Russia. This marks a major shift in US policy on Ukraine.

Let’s zoom out first. For decades, US presidents would avoid actions that could spike global energy prices. Well, that held true through Trump’s first term and until Biden left office, but Trump 2 has shaken things up.

The erratic policy implemented by the Trump administration has been hard to follow, but the Russians have gotten more favorable treatment so far.

Things now seem to be shifting. Trump realized that Putin had been playing him this whole time, so Trump may finally be switching up policy. Couple this pivot with Ukraine’s recent strikes on Russian energy infrastructure and we could see Russian oil exports crippled very soon. This means Russia’s main source of funding for the war would quickly dry up. Places like China and Iran will have to decide if they want to bankroll Moscow without any incentives…

Prefer to read the transcript? Click here

Transcript

Good morning, everybody. Peter Zeihan here coming to you from Colorado. Today we’re talking about what’s going on in Ukraine and with the Trump administration. The new news is that the Trump administration. Well, let me rephrase that. Donald Trump personally, says that fairly soon the United States is going to be providing the Ukrainians with precision, targeting information. 

For the Russian energy system deep within the Russian Federation itself. Now, there’s a lot of back story that got us to this point. So let’s handle that before we move forward. The US administration, not just this one, all of them going back at least until the 70s. I’ve always been a little paranoid about energy prices as result of just the nature of economics. 

Energy demand tends to be inelastic. If you need a gallon of gas to get to work, and the price of gas goes up by 100%, you still need a gallon of gas to get to work. So it tends to be something that is very politically sensitive. And as a rule, political leaders, presidents are unwilling to do things that they know. 

We’re going to drive up energy prices. Now that relationship has loosened quite a bit in the last 20 years, largely because of the shale revolution in the United States, which has taken the United States from the world’s largest oil importer to the world’s largest oil exporter, which has some interesting effects on lots of things. But that general feeling remains. 

Now, back during the Biden administration, the Ukrainians started targeting Russian energy assets, most notably refineries, in an attempt to disrupt gasoline and diesel deliveries. The military tends to use diesel. The civilians tend to use gasoline. The idea was if we can stop the fuel flows, the Russians will be able to prosecute the war as much. In addition, the Russians don’t have a lot of storage, so if they can’t process fuel, they have a limited export capacity. 

And that means that they will have to shut in some production. Well, the Biden administration shut that down because they were afraid of the impact that it was going to have on global energy prices, which is not a ridiculous point of view, but I still think it was wrong because the shale revolution has changed of that. But the previous administration really didn’t understand petroleum energy economics, so I can’t say I’m shocked. 

That was the conclusion that they came to enter the Trump administration. The Biden administration was pretty pro Ukraine there just a few things they didn’t want him to do, like targeting energy. The Trump administration has been very erratic. In the early days, they were pathologically hostile to the Ukrainian government, up to and including inviting Zelensky to the white House just so they could yell at him. 

And relations. I don’t want to say they’re in the deep freeze, but they have not been great. Trump, as part of his reelection campaign, tried to convince everybody that he and Putin were best bros, and all it would take was one conversation between Trump and Putin for the war to end. Which, of course, was always really incredibly stupid because the war is happening for geopolitical reasons. 

And the only people think that the Russians invaded because Biden was president are Trump the people around him and some MAGA hardcore folks is the Russians think it’s hilarious that they’re actually Americans believe this. It’s a strategic issue. It’s a demographic issue. The Russians have been pushing towards the Carpathian since the 17th century. It didn’t change because of who was in the white House anyway. 

The Russians have gone out of their way to denigrate the American president, to make fun of them, to call them stupid. In the Kremlin, behind closed doors in European venues with the Chinese. But that information, as a rule, doesn’t make it back to Donald Trump, because Donald Trump has this really weird quirk. He feels that he has to be the smartest person in the room, and he likes to talk a lot. 

So what that means is he has gutted the top of the national security and foreign policy staff to make sure there’s no one ever in the room with him that could tell him something that he doesn’t want to hear, or would make him not appear to be the smartest person in the room, which means he’s basically gutted it completely. 

He’s not using the State Department. He’s not using the National Security Council. He has, however, installed a woman by the name of Tulsi Gabbard as the director of National intelligence, and she has gone through the CIA and the other intelligence bureaus and basically gutted them of the Russian experts, top to bottom. And she’s also the person who has the final say in what goes into the Presidential Daily Brief. 

So she makes sure that anything that makes the Russians look bad doesn’t actually make it into the brief. For example, Putin laughing openly on TV about Donald Trump’s stupidity. Anyway. 

Will this time be different? Because we’ve had lots of periods where Trump has got an inkling that something is wrong, and then Tulsi Gabbard has talked him down, or Putin has talked him down. Maybe, and the reason is because there’s another personality involved and this person is absent or his name is Steve Wyckoff. Now, if you remember back to Trump one, Jared Kushner was all the big deal, smart guy, basically served as a presidential envoy and actually got a few things done. 

For example, the Abraham Accords, which is the sum of the total peace deals between the Israelis and some of the Arab states. Kushner wanted nothing to do with Trump, too. he saw how the sausage was made from the inside. And Trump won. And he and his wife, who is Trump’s daughter, just bugged out. 

And so it’s the dumb sons that are actually in the white House now. Anyway, I’m getting I’m getting off track here. Where was I going with this? Oh, yeah. Wait, wait. Cough. So, what? Cough has no foreign policy experience. And Trump basically entrusted him with the entire portfolio for all negotiations all over the world, all of which have gone really badly. 

So when Wyckoff shows up at the Kremlin, the Russians sit him down. They tilt his head back and they pour gallons of Russian propaganda down his throat. He goes Ben back to the white House and vomits that up in front of, the president of the United States. And that becomes gospel. And that is the primary reason, combined with Tulsi Gabbard, as to why we’ve really seen no movement. 

But things have changed recently because a couple months ago, if you remember there was a summit directly between Donald Trump and Vladimir Putin, and it was supposed to last for several hours, and it was over very, very quickly. Putin thought he had Trump completely wrapped around his little finger. And if you look at policy from the last six months, that’s not exactly a shock. 

But Trump finally realized that this guy had been laughing at him for the whole time. And we started to get Trump looking at other bits of information like, I don’t know, media or talking to his wife. And he started to realize that he had been played the fool and that he was acting like a fool, and that perhaps the only way to change things was to change policy with a wild idea, I know. 

So we now have this, potential change in policy. The Ukrainians have started targeting Russian energy infrastructure again. Again, mostly going after refineries, but going after some pipeline places. And they’ve probably now reduced Russian refining capacity by 25%, which is the most it’s been offline since the Russian collapse back in the 1990s. The post-Soviet collapse. If if the Trump administration actually does what it’s talking about doing US satellite guidance combined with the weapons the Ukrainians already have, would be capable of targeting individual pumping stations anywhere in western Russia. 

And the Russians export about 5 million barrels a day through their various methods, about two thirds of that going out through the Baltic Sea, in the Black Sea, which are all within range of Ukrainian weapons. If you take out just a couple of the 

pumping stations per pipe, those exports go to zero. Now the Ukrainian thinking is if you do that, you basically destroy what has been Russia’s number one income source for the last 30 years. 

Oil exports. And then countries like Iran and China, which have been taking money from Russia and sending them drones and drone parts, will have to decide whether they want to directly subsidize the Russian government’s war in Ukraine. I find that unlikely. Iran is really in some dire straits right now. They need the currency. 

They don’t want to treat Russia as a charity case. And the Chinese, that’s probably a bridge too far, no matter how bad relations with the United States happened to be. So if that happens and the Russians have to fight on their own, it doesn’t mean that the war is over. But it means you have a catastrophic shift in fortunes on both sides. Will this happen? That’s entirely up to Donald Trump. 

He has changed his mind by my math, 77 times since January 20th. Who knows? But once the Intel is provided, for every day that it is there, the Ukrainians will definitely be striking. Both the Russians and the Ukrainians over the last year have been building up their drone capabilities, and we’re now regularly seeing attacks that use hundreds of drones on each side. 

You combine that with the precision targeting information, much less Western weaponry, and you can have a really dramatic change in the course of the war in literally a matter of days, and we may about be there.

Testing NATO

Flag of NATO

Putin just took things one step too far. After sending Russian drones and jets into NATO countries’ airspace (and denying responsibility of course), President Trump has said to shoot them down; several European leaders from NATO and the EU are standing by.

We’ve known all along that Russia was never going to stop in Ukraine. They need to secure more defensible borders, which means pushing into places like Poland and the Baltics. Russia has been testing the patience of Western leaders throughout the war, and it seems he’s finally found the limit.

While the US isn’t certain that allies can back them up in terms of force projection, many European powers are on the cusp of a massive military buildout…so we’ll find out soon enough what NATO’s capabilities look like. One way or another, there is a larger war on the horizon.

Prefer to read the transcript? Click here

Transcript

Hello, Peter Zeihan here, coming to you from Colorado. And today we’re going to talk about what’s going on in Europe militarily. The Russians have sent several dozen drones into a number of of the eastern tier of nation states, including Estonia, Poland, Denmark and Romania. Just disavowing, of course, if it’s any of theirs. But they’ve also sent, monitoring aircraft and fighter jets into almost all of these places and more. 

And the discussion now is whether or not the NATO states should actually meet them with lethal force and shoot them down when they make airspace violations. Donald Trump is now publicly on record as saying, yep, do it. And normally when Trump says something, I just kind of wait for the action. But on this issue, it is a clear and present, danger to NATO because the Russians have always, always made it clear that when they’re done with Ukraine, they’re coming for Poland and Latvia and Romania and several others. 

And we’re now getting to the point in the war entering the fourth year now where it’s time to start taking things like that a little bit more seriously. But let’s understand what the Russians are up to, and then we can all judge about whether or not this is the right thing to do. I don’t have an answer here. 

All I can do is lay it out for you. The Russians see that the only way that they can secure their interior territory is to re anchor their borders in things that are more defensible, like the Carpathian Mountains. 

Or the Baltic Sea. Strategically, that’s a very sound argument, especially when you consider that demographically the country is dying and very soon having a broad, wide open front that’s over a thousand miles long, 2000 miles long, 3000. 

It’s a long front. It’s simply not going to be viable for them. So the idea of their doing this isn’t crazy. But, a few dozen drones is not going to move the border. That triggers a few hundred thousand troops. And first they have to destroy and then digest Ukraine. So what are they looking at here? 

Well, they’re trying to see what NATO is capable of. And to be perfectly honest, I kind of want to know what NATO is capable of as well. You’d think with the 20 year war on terror, that the United States would have a really good idea of what NATO countries were capable of, but we really don’t. Part of the deal that we struck with all of the allies after World War Two is we’ll take care of the big stuff, and we get to write your security policies. 

And because of that, no one developed long range projection based militaries. Except for maybe the French, who are always one step in, one step out. And the Brits, who were basically a very loyal ally. But we’re not in that world anymore. And we saw in the war on terror that the United States basically drove the carpool for everybody when everyone decided to provide forces. 

So we know that the Dutch and the Brits, not to mention the Australians, have pretty good special forces, if small. And we know that the Danes, with the handful of ships that they have, have actually surprisingly good long range deployment capability. And then the Turks have no problem throwing 10,000 troops into a country that they border, whether it’s Syria or Iraq. 

But beyond that, we really don’t have a good idea of what these countries are militarily capable of. There’s some promising things going on. The Germans are going through a big rearmament. The poles beat them to the punch and have been working on it for 3 or 4 years, but they haven’t necessarily recruited the people they need to man the equipment. 

And so we really just don’t know. And what the Russians are attempting to find out is what can be known. So if you get NATO countries to engage Russian forces, how do they do it? Do they do it with overwhelming force? Do they do it with tech? Do they fail to do it? Is it just an issue of political will, or is there no technical competence? 

We don’t know. And the only way that you can find out how is to poke the bear, or in this case, have the bear poke you. So, there’s not a lot of secret here. The Americans don’t know what their allies are capable of. So showing your cards to the Russians. It’s unclear if that is a good or a bad idea. 

What I can tell you is that at least the political will seems to be shaping up because within hours of Trump saying, yeah, go ahead and shoot them down. We got the NATO secretary general who’s Dutch saying, yep, we’re going to do that. We got the EU policy chief, Ursula von der Leyen, who is not in charge of any military. 

So yeah, we’re going to go do that. The EU is not a military institution, but Wonderland used to be the German defense minister, and she has some concept of what she’s talking about. And as the United States has become less involved in European defense, the Europeans are trying to find ways to pick up the slack. And the EU is probably one of the institutions that’s going to be repurposed with that in mind. 

We even have countries like Austria and Ireland starting to talk about military cooperation now, countries that have been neutral for quite some time. And now we’ve got politicians in both Sweden and Germany also saying that now is the time for us to actually do something. So, for those of you who are historically minded like me, the idea of the Europeans arming up to fight a major war is a terrifying prospect, because it always goes horribly, horribly wrong. 

Especially if the United States is not involved in a very big way. But one way or another, it looks in the next few weeks to months, we’re going to have some concept of the capabilities of the NATO states. And regardless of what we learn, good, bad or indifferent, it is going to start the process of a massive rearmament across the continent as everyone gets ready for the war that they know was coming.

The Pressure Is Dialing Up on Russia’s Oil Network

A russian oil refinery

I’ve been discussing the potential for Russian crude supply shortages and a broader collapse of the Russian oil system since the Ukraine War started…so, is it finally happening?

Ukraine’s recent attacks on Russian energy infrastructure have brought a potential oil crisis within arm’s reach. The Ukrainians are getting smarter, striking critical nexus points and ports; refining capacity is dropping, crude is backing up, and storage capacity is running out. These bottlenecks create pressure in the pipelines and wells, and you can imagine what happens next. Should this extend into the winter, frozen wells could add onto the crisis.

Since much of the energy infrastructure in Russia relies upon Western-tech and labor, that leaves them with few options at resolving these issues in a timely manner (if at all). And then you factor in Ukraine’s strikes on the shadow fleet and things begin to get really spicy.

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come to you from Colorado. And today we’re going to talk about the net effect of all of these recent waves of attacks by drones and by the Ukrainians on energy infrastructure in Russia. Now, this is following up to a video I did a couple of weeks ago talking about how we were starting to see some really very real damage in the energy complex of Russia, with somewhere between 15 and 20% of the refining capacity going offline. 

Since then, the Ukrainians have massively upped their target set, going in and hitting things that are further away. Now, some of these attacks are more political and mine the ones that places like Moscow, where the political elite lives, or Sochi down in the Black Sea, where the political elite vacations. But the far more important attacks, from the two general categories. 

The first one is the Ukrainians are showing that they can hit targets more than a thousand miles away from their borders. Specifically a place called Bashkortostan. It’s a province in western Siberia, eastern European Russia, populated by ethnic Bashkuri, who are, a Turkic minority. Pretty large one in the Russian space. 

But the fun thing about Bashkortostan is it sits at a pipeline nexus that links pretty much all of the southern Siberian energy fields into the European pipeline network. And so if there’s meaningful damage in Bashkortostan and you’re not just looking at problems with refining their production, you’re talking about upwards of 3 million barrels a day that could get locked in. 

And the Ukrainians have figured out that going after a pumping station is a really good idea if you want to disable some of the pumping infrastructure. That’s part one. Part two. Primorsk. Primorsk is a port on the Gulf of Finland, very close to Saint Petersburg. Gulf of Finland an arm of the Baltic Sea. 

It is arguably, Russia’s top export destination. That the Gulf of Finland writ large. Not only is there Primorsk, there’s a place called Ust-Luga. Both of them have been hit recently, and both of them now are operating below half effectiveness. So Primorsk used to export about a million barrels a day. Now it’s about half that Ust-Luga. 

It used to be about 700,000 barrels a day. Now it’s about half that. You put all this together, and the Russians are facing a crisis point in their energy sector that honestly, I’m a little surprised it hasn’t happened to this point. You see, the Russian energy sector has limited export points that are not well linked together. They’ve got a single spot out on the Far East that kind of has its own network and then out on the western side, they’ve got a few ports on the Baltic Sea and the Black Sea, and the rest are piped exports that go through Ukraine or Belarus into Europe proper. 

Those pipelines have now been shut down. That just leaves the maritime ports. And if something happens, that would prevent crude from, say, reaching for some might be able to go to the Black Sea, but none of it could go out to the Far East. So the Russians are losing flexibility within their system. And now that we’ve got roughly three quarters of a million barrels per day of throughput on the Baltic Sea that can’t flow, and now that we have 20% of refining off line, all of a sudden there’s somewhere in the vicinity of about 2 million barrels a day of crude produced that can’t go anywhere. 

Unlike the American system, where there’s massive tank farms in every major city, the Russians don’t have that. They’re used to producing crude, sending it to refineries, having it turned into fuel and consumed locally or exported. And the rest goes to an export point and is exported. If you have friction in that system where the fuel can’t be produced, then the crude has to go somewhere else. 

It has to go to a port, and if the ports can’t take it, pressure builds up back in the pipeline system all the way back to the wellhead, which means if something doesn’t change in just the next 2 or 3 weeks, there’s going to be so much pressure in the system that either we’re going to have a rupture in the pipeline, which would be really, really bad for any number of reasons, or the Russians are going to have to shut down their production sites back at the wellhead and lock in a million barrels a day or more. 

The problem is, it’s already late September. Winter is almost upon us. And if these pipes are shut down, or if those wells are shut in in the winter, the crude will freeze in the wellhead. And if they want to turn it back on, they can’t just flip a switch. They have to re drill the well. And a lot of these wells are either old or were produced with Western technology, which means it has to be done from scratch with what the Russians can do with themselves or import from the Chinese, which isn’t sufficient for the technology required in order to make it all work. 

So we could be three years into this war, finally on the verge of a crude shortage, because the Russians just can’t play. Well, no. Real soon, repairing things like refineries takes time. Especially if you’re talking about this distillation columns that the Ukrainians have been hitting, the pressure testing that is required to make sure the thing doesn’t explode is something the Russians and the Chinese cannot do themselves. 

They import all of that from the West. It’s going to be a problem getting the parts. And in the case of Primorsk, not only did the Ukrainians hit a pumping station, they also had a couple of ghost fleet tankers. So all of a sudden, whatever insurance the Russian government or the Indian government or the Chinese government has been providing to these ships all of a sudden has to be paid out. 

And that hasn’t happened yet. And so, lo and behold, tankers aren’t going to risk in the volume that they need to be going if the pipeline system is going to stay online. We’ve been waiting for all of these things to happen, either one or the other, for three years, and all of a sudden they’re all happening at the same time. 

It’s kind of exciting.

Ukraine (And Everyone Else) Develops Glide Bombs

A Russian FAB-3000 with a UMPK guidance kit attached, converting the unguided bomb into a glide bomb | Wikimedia: https://en.wikipedia.org/wiki/Glide_bomb#/media/File:FAB-3000_with_UMPK_kit.png

Ukraine has added glide bombs to its list of military ordnance, enabling Ukraine to send modified dumb bombs up to 100km away. This likely won’t alter the outcome of the war in Ukraine, but the democratization of this technology is setting off alarm bells in the US.

Joint Direct Attack Munitions were the bread-and-butter for the US military, maintaining a multi-decade monopoly on the precision strike technology…but all of that is changing. Now that Ukraine and Russia both have this tech in their hands, it’s only a matter of time before it appears everywhere else.

This is yet another sign of the US stepping back from its role as global protector; meaning American strategic primacy is coming to an end.

You can find more info about glide bomb technology appearing in Russia’s arsenal and the beginning of the proliferation of this tech in the linked video released on March 12, 2024:

Russian Bombs Get an Upgrade
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Transcript

Hey, all Peter Zeihan here coming to you from Colorado. And today we’re going to talk about a change in military tech that just happened in Ukraine. Specifically, there are factions of the Ukrainian military industrial complex that are now putting together glide bombs. Glide bomb is basically when you’ve got an old dumb bomb that you put a guidance kit on. 

It has kind of wings on it. And so instead of dropping it, it kind of glides to the target and the Ukrainian prototypes that are being tested right now indicate that they can go upwards of 100km, about 60 miles, which is well beyond the front lines. 

Why this matters, the Ukrainians have been on the receiving end of glide bombs these last couple of years. The Russians have converted several of their old Soviet bombs, which are typically a much larger than the ones the US uses. We use, 500 pound bombs. Sometimes they use either kilo bombs. Sometimes there’s even a thousand kilo bombs. 

Anyway, they drop them from outside of air defense capability. They drop them from within their air superiority envelope. So they just have basically modified dump bombs coming in that can’t be intercepted. And some of the bigger ones, when they hit, have a blast radius that’s more than a quarter of a mile. 

And so you drop a dozen or so of these in the general vicinity of a fortification, and then Russian forces can then move in. That’s how they’ve been used to this point. The Ukrainians probably won’t be using them the same way because they don’t have the manpower. That’s necessary to penetrate the Russian lines. And there’s multiple layers of minefields as well, making that more difficult. 

So we use it against things like supply depots and, convoys. But the Ukrainians are already doing that with first person drones. So the ability to change the battlefield in Ukraine, by Ukraine, having some of these is probably pretty limited. The targeting sequences are probably just not going to be as robust as it might be for the other side. 

For a country that is more likely to be on the attack, the Ukrainians are typically on the defense. So it’s not that there’s no utility. It’s not. It’s just not a game changer. Also, there’s just the amount of effort that it takes to build one and test it because every prototype is destroyed as opposed to like a first person drone, where you can fly it back and forth without actually having it blow up to make sure it works. 

And you can get new iterations every month. This one will probably take a little bit longer, but it still has a huge impact, just not in Ukraine and everywhere else. The issue here is that the United States has had a de facto monopoly on this sort of technology for decades. We hear we call them Jay Dams, Joint Direct Attack Munitions. 

We took our old Cold War bombs. We put a kit and some things on it and do precision targeting. And through the 1990s, the US had a total monopoly. These were first debuted during the first Iraq War. 

Desert Storm back in 1982 and then have been incrementally upgraded since then. But really, it wasn’t until as recently as five years ago that any other country in the world had their own. 

Well, the Russians developed their own last year, and now Ukraine, a country that is much smaller, with a much smaller technical base and industrial base, has them as well. And if Russia and Ukraine can have them, you know that it’s just a matter of choice before countries like Korea, both of them, Japan, Taiwan, China, Thailand, Vietnam, Singapore, Malaysia, Australia, Canada, pretty much every country in NATO, Brazil, Argentina, Algeria, Israel, obviously, I don’t know if Iran could do it, but the United Arab Emirates could. 

Anyway. The point is, there is a long list of countries where this is no longer a technical barrier. And the technology that the United States has had a complete monopoly on this last generation, which has allowed it to shape strategic environments around the world, is now gone. And it’s only a matter of time, probably months, not even years, before we see copycat versions of the Russian and other Ukrainian versions popping up in a half a dozen different countries, and within five years they will be everywhere. 

Which means if the United States is going to maintain its military posture of having a global position without really any meaningful pushback, it’s going to need new technological tricks to do that. Most likely, combined with the Trump administration’s backing away from every alliance we have, this means that the United States is going to vacate militarily large portions of the planet and just let the chips fall where they may. 

Now, for those of you who’ve been following my work for the last decade, you will know that this was in some version probably going to happen because of American political considerations anyway. But we’re now set up a technological U.S. cannot just leave because it wants to. It’s going to be technologically pushed out from certain areas. And the question now is where first. 

And we just it’s too soon to have an answer to that question. There’s too many decisions that have to be made up at the white House, that color where the map is going to go blue and where it’s going to go red. But bottom line, the era of American strategic primacy with global reach that is now over. 

And it’s now a question about managing the withdrawal and dealing with the consequences of that.

REPOST: Jets, Drones & Refineries: Europe Remembers Geopolitics

Based on our discussion yesterday, we’re looking back at this post from April of last year to see how things have evolved.

It looks like the Europeans may have figured out that Russia’s war plans don’t end in Ukraine, so more and more countries are beginning to send aid to the Ukrainians. The Americans, however, are still working through flawed economics and political considerations.

The Norwegian government has decided to send some F-16s to Ukraine, joining Denmark, the Netherlands, and others in providing military support. The most important shift we’re seeing in aid sent to Ukraine is that it is intended to be used on Russian infrastructure and military units…within the Russian border.

The Biden administration’s caution regarding Ukrainian targeting is based on flawed economic analysis and pointless political considerations. This has led us to a strange intersection of this war, where Europe is done limiting Ukraine’s actions in fighting, but the more commonly aggressive American stance is still lagging behind.

Click to enlarge the image
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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from a very windy Colorado. It is the 16th of April, and the news today is that the Norwegian government has announced that they are joining the coalition of growing countries that is setting F-16 jets to Ukraine, specifically the foreign minister, a guy by the name of Aspen Barth, I’d, probably has said specifically he hopes and encourages the Ukrainians to use the jets that at the moment are being provided by a coalition of Norway, Denmark and the Netherlands, to stark to target infrastructure and military units actually in Russia proper.

In fact, his phrase was the deeper the better lot going on here to impact. So number one, to this point, the NATO countries have tried to limit the direct attacks by the Ukrainians with their equipment or with equipment that is donated, in order to prevent an escalation. But a few people’s minds have been tripped in recent days because the Ukrainians are now using one and two tonne bombs to completely obliterate civilian infrastructure and are going after aid workers, including, things like E-m-s services.

And this is really tripped the minds of a lot of people in northern Europe in particular, that this war is now gotten way too serious to have any sort of guardrails on what the Ukrainians can target. The French. Well, they have not weighed in on this topic specifically. They’re now openly discussing when, not whether when French troops are going to be deployed to Ukraine to assist the Ukrainians in a rearguard action.

And we have a number of other countries, especially in the Baltics and in Central Europe, that are also wanting to amp up the European commitment to the war. In part, this is just the recognition that if Ukraine falls, they’re all next, and in part is that the United States has abdicated a degree of leadership, both because of targeting restrictions and because there’s a faction within the House of Representatives that is preventing aid from flowing to Ukraine.

So the Europeans are stepping up. In fact, they’ve been stepping up now for nine months. They provided more military and financial aid to the Ukrainians each and every month for nine months now. And this is just kind of the next logical step in that process, which puts the United States in this weird position of being the large country that is arguing the most vociferously for a dialing back of targeting, by Ukraine, of Russian assets in Russia.

If you guys remember, back about three weeks ago, there was a report from the Financial Times that the Biden administration had alerted the Ukrainians that they did not want the Ukrainians to target, for example, oil refineries in Russia because of the impact that could have on global energy prices. And I refrained from commenting at that time because it wasn’t clear to me from how far up the chain it has come.

That warning. But in the last week we have heard national Security adviser Jake Sullivan and the vice president, Kamala Harris, both specifically on and on record, warn the Ukrainians that the United States did not want them targeting this sort of infrastructure because of the impact it would have on policy, and on inflation. Now that we know it’s coming from the White House itself, I feel kind of released to comment.

And I don’t really have a very positive comment here. There’s two things going on. Number one, it’s based on some really, really faulty logic and some bad economic analysis. So step one is the concern in the United States that higher energy prices are going to restrict the ability of the Europeans to rally to the cause and support Ukraine.

Nothing could be further from the truth. Most of the Europeans realize that if Ukraine falls they’re next and most of the countries with an activist foreign policy are already firmly on the side of an expanded targeting regime. The biggest holdout would be Germany, where we have an unstable and unconfident leader and coalition that wants to lead from the back, not the front, which I can understand, but most of the Europeans have realized that if we’re actually getting ready for an actual war between Europe and Russia, that’s not going to be free.

And higher energy costs are just kind of baked into that pie. So almost all of the Europeans have basically cut almost all Russian energy out of their fuel mixes already in anticipation for that fight. So argument number one, gone. number two, the idea that this is going to cause the war to expand in a way that will damage Ukraine more.

Well, one of the first things that the Russians did back in 2022, in the war, was target all Ukrainian oil processing facilities. They don’t have much left. So, yes, there’s more things that the Russians can do, but this is basically turned into a semi genocidal war. So it’s really hard to restrain the Ukrainians and doing things that are going to hurt the Russian bottom line that allows them to fund the war.

So that kind of falls apart. specifically, the Ukrainians have proven with home grown weaponry they don’t even need Western weapons for this. They can do precision attacks on Russian refineries, going after some of the really sensitive bits. Now, refineries are huge facilities with a lot of internal distance and a lot of standoff distance. So if you have an explosion in one section, it doesn’t make the whole thing go up like it might in Hollywood.

As a result, there are very specific places that you have to hit, and that requires a degree of precision and accuracy that most countries can’t demonstrate. But the Ukrainians have a specifically go after something called a distillation tower, which is where you basically take heated crude and you put into a giant fractionated column, if you remember high school chemistry, and if you can poke a hole in that, it’s hot and it’s pressurized.

So you get something that spurts out and based where on the verticality you hit. The products that hit are either flammable or explosive. So we’re including a nice little graphic here to show you what that looks like. the Ukrainians have shown that they can hit this in a dozen different facilities, and the Russians have proven that it’s difficult for them to get this stuff back online, because most of the equipment, especially for his distillation tower, is not produced in Russia.

And a lot of it’s not even produced in China. It’s mostly Western tech. So as of April 2nd, which was the last day we had an attack on energy infrastructure in Russia, about 15% of Russian refining capacity had been taken offline. In the two weeks since then, they’ve gotten about a third of that back on using parts they were able to cobble together.

But it gives you an idea that this is a real drain, because we’re talking about 600,000 barrels a day of refined product that just isn’t being made right now. That affects domestic stability in Russia, that affects the capacity of the Russians to operate in the front. And yes, it does impact global energy prices, but that leads me to the third thing that I have a problem with the Biden administration here, and that the impact on the United States is pretty limited.

the United States is not simply the world’s largest producer of crude oil. It’s also the world’s largest producer of refined product to the degree that it is also the world’s largest exporter of refined product. So not only will the United States feel the least pinch in terms of energy inflation from anything in Russia going offline, we also have the issue that the US president, without having to go through Congress, can put restrictions of whatever form he wants on United States export of product.

Doesn’t require a lot of regulatory creativity to come up with a plan that would allow to a limiting of the impact to prices, for energy products in the United States. And I got to say, it is weird to see the United States playing the role of dove when it comes to NATO issues with Ukraine. Usually the U.S. is the hawk.

Now, I don’t think this is going to last. the Biden administration’s logic and analysis on this is just flat out wrong. geopolitically, there’s already a coalition of European countries that wants to take the fight across the border into Russia proper, because they know that now, that’s really the only way that the Ukrainians can win this war.

Second, economically, you take let’s say you take half of Russia’s refined product exports offline. Will that have an impact? Yeah, but it will be relatively moderate because most countries have been moving away from that already. And the Russian product is going to over halfway around the world before it makes it to an end client. So it’s already been stretched.

Removing it will have an impact. But we’ve had two years to adapt, so it’s going to be moderate, though not to mention in the United States, as the world’s largest refined product exporter, we’re already in a glut here, and it doesn’t take much bureaucratic minutia in order to keep some of that glut from going abroad. So mitigating any price impact here for political reasons.

And third, the political context is wrong to the Biden administration is thinking about inflation and how that can be a voter issue, and it is a voter issue. But if you keep the gasoline and the refined product bottle up in the United States, the only people are going to be pissed off are the refiners. And I don’t think any of those people are going to ever vote for the Biden administration in the first place.

There is no need to restrict Ukrainians room to maneuver in order to fight this war. in order to get everything that the Biden administration says that it wants to be.

Ukraine Hammers Russian Oil Infrastructure

photo of oil barrels

The Ukrainians have ramped up strikes on Russian energy infrastructure, sending ripples through Russia’s refining capacity and triggering fuel shortages. But what changes enabled this to occur?

Three big things have shifted, giving Ukraine political cover and better tools to disrupt Russian oil flows. These include opposition from the US diminishing, Europe cutting off Russian oil and gas (besides Hungary and Slovakia), and longer-range weapons to strike deeper into Russia.

This is allowing Kyiv to strike Russia’s most critical oil hubs; think the pipeline nexus Samara, or pumping stations that will force Novorossiysk to collapse, or even northern hubs serving the Baltic. Since oil remains the largest revenue source for the Russians, sustained attacks on this infrastructure threatens Moscow’s ability to fight this war.

Prefer to read the transcript? Click here

Transcript

Hey all Peter Zeihan here coming from Colorado on a foggy day. Today we’re gonna talk about what’s going on in Russia, specifically. Ukraine has severely ramped up its attacks on Russian energy infrastructure. This is something that the Ukrainians have been doing in bits and pieces for about a year and a half now, but it’s now taken on a whole new level, and we have somewhere between 15 and 20% of Russia’s oil processing capacity offline. 

And it’s generating localized gasoline shortages throughout the Russian system, including in the capital, and certainly in the provinces that are closer to the actual front in the Ukraine war. So what has changed? Three things. First of all, Biden’s gone. Biden had this idea that attacks on energy infrastructure in, the Russian space would raise energy prices globally to a point that would be politically unpalatable for Americans. 

Now, I was always on the other side of that equation, as a rule, gasoline markets, not to be confused with oil markets, trade differently. And so a disruption in one hemisphere does not automatically trigger a broad scale energy price increase in the other. But regardless, Biden has now gone. That argument is no longer being made in Washington. 

And from Ukraine’s point of view, the gloves are off a little bit. Number two Europe, the Europeans are no longer taking any piped oil or natural gas from the Russians at all, aside from a small volumes that come into places like Hungary, which are basically operating as Russian parties. Which means that from Ukraine’s point of view, there’s no longer diplomatic or economic complication in Europe. 

The deals to transit oil and natural gas across Ukrainian space expired at the beginning of the year. Everyone who was smart and saw the writing on the wall, moved away from the Russian sources completely again, Hungary being the standout exception. And now going after the infrastructure in any way, shape or form basically has the unofficial blessing of the European Union. 

So the Hungarians and to the lesser degree the Slovaks, are screaming bloody murder. But Ukraine isn’t giving transit fees. They’re not taking any Russian energy. No one else in the EU is taking any of it either. So it’s okay to go after the infrastructure. We’ve actually seen a couple pumping stations get hit already. Third, the Ukrainians are much better at this. 

They’ve been developing bit by bit heavier payloads and longer range weaponry that can strike further and further and harder and harder at Russian targets. And so now reliably, it’s to a range of about 1200 kilometers. The Ukrainians can be striking, and that’s about 700 miles. And that puts a lot in range of these potential weapons, including the entire Moscow region. 

But Moscow is not the most important zone here when you’re talking about oil. There are a few pipeline hubs in the Russian system where several pipeline networks from different zones come together for focusing and refining, and then go on to export points. And in my opinion, the single most important of them is the city of Samara in southwestern Russia. 

It’s basically roughly north of the Caspian Sea, maybe northwest a little bit. Anyway, something around 3 million barrels a day flows through there at any given time. Pipelines, of course, can be redirected to a degree. But we now have the Ukrainians targeting refineries in the Samara area. And when they do that, the crude can’t be refined. It needs to be kept in the pipeline and sent on, and the pipelines flow on can only take so much traffic. 

So it’s put a real crimp in what the Russians can produce. And we’re already starting to see some reports, a few reports of shut in production because the pipelines can’t handle the flows to the volumes that are necessary because the refineries are offline. If and when the Ukrainians decide to go after the pumping stations on the pipelines themselves, then this whole part of the network breaks, and that will probably be the end of meaningful exports from Russian crude to the Black Sea port of Novorossiysk. 

And as the Ukrainians continue to get better and better weapons, some of the distribution systems of the hubs in northern Russia will probably start getting hit as well. And that could really impinge upon the Baltic Pipeline system, which is where the Russians export crude from the Baltic Sea, from, near Saint Petersburg. The specific port escapes me at the moment. 

Anyway, so with the politics changed and the economic dependencies shifted, and the Ukrainians all of a sudden a lot better at what they were doing, we should expect a lot more Russian crude going offline. So regardless of what happens with the Trump administration and sanctions and its effort to peel, say, the Indians and or the Chinese away from the Russians, if the crude can’t flow, the crude can’t flow, and the Russian economic situation with then become a lot more difficult because oil sales remain what they have always been for Moscow, their single biggest source of income, going all the way back to Soviet times.

Ukraine Strikes Russia’s Druzhba Oil Pipeline

Surface of the Druzba oil pipeline from Wikimedia Commons: https://en.wikipedia.org/wiki/Druzhba_pipeline#/media/File:Wp_nefteprovod_druzhba.jpg

The Russians have been funding their war effort in Ukraine with oil exports, but some new Ukrainian tactics are disrupting that flow.

Ukraine has begun striking pumping stations along the Druzhba pipeline. Since the majority of Europe no longer relies on Russian crude, these attacks mainly pressure those few holdouts…like Hungary. This is Kyiv’s way of dipping its toes in the water; if Europe and Washington tolerate it, expect to see an escalation in strikes.

Should that happen, Russia’s ability to fund the war effort would quickly diminish and we could see the most dramatic economic shift in the war so far.

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Transcript

Hey all. Peter Zeihan here. Coming to you from Colorado. And today we’re going to talk about oil exports from Russia and a new wrinkle in the Ukraine war. As I’m sure most of you know, there are a number of sanctions against all things Russian at all levels. And energy is one of the most important ones. Oil has has long been Russia’s number one source of financing. 

And until the Ukraine war began, the vast majority of that crude flowed west through what’s called the Druse, but pipeline network to Western Europe and Central Europe. But bit by bit, the Europeans have weaned themselves off. And aside from a few exceptions for Hungary, Slovakia and Czech Republic, who are all landlocked countries, and so I’ve limited options, everyone else in Europe is stopped using Russian crude directly. 

You can make the argument that the crude is being exported somewhere, refined in the finished product and sent back to Europe, and that’s fair. But in terms of raw crude, it’s no longer going to the Europeans really much at all. The Drupal pipeline maintains a capacity of well over a couple million barrels per day and is now only taking shipments of about 400,000. 

So we’re looking at a significant reduction already. And some of those flow through is aren’t even Russian crude. They’re Kazakh crude, which is not affected by the sanctions anyway, the newest development is that over the course of the last 18 months, the Ukrainians have gotten better at better at striking economic targets within the Russian Federation, specifically going after the energy complex. 

Now, until now, most of those attacks have focused on things like refineries, where the value add it generates some more income for the Russians and generates the fuel that they need for the war machine. But what we’ve seen in the last couple of weeks is our first meaningful attacks against Russian oil transit, specifically pumping stations on the Druze. 

But network now, if you’re French or British or German or Italian, this doesn’t matter because you don’t use that crude. But if you’re Hungarian and you’ve been opposing European actions to assist the Ukrainians for a while now, all of a sudden you’re getting a little apple uptick. And so the Hungarian government has been very accusatory towards the Ukrainians. 

And you should expect more of this. What this basically is, is a test case to see what Europe’s collective response will be, to see what Trump’s response will be and if they are muted. You should expect the Ukrainians to go after those pumping stations in volume. Now that the Europeans have pretty much weaned themselves off completely, we’ve had a flip of the political considerations. 

Had this happened earlier in the war, the Europeans probably would have backed away from support in Ukraine for economic reasons. But now that they’ve moved on, the Ukrainians are seeing an opportunity belatedly to take out the entirety of the Russian oil export income. And if they can do that, then all of a sudden the Russians can’t pay the Iranians for imported drones, they can’t pay the Koreans, the North Koreans for imported artillery shells, and they can’t pay for all the drone parts that come in from China. 

If this works, it is potentially the most dramatic economic shift we’ll have seen in the war to this point. And the Russians are going to have to find a new way to fund everything. But this early days, this is just step one. The Ukrainians are now in wait and see mode to see how everyone reacts.

Russian Evolutions in the Ukraine War

A Ukrainian soldier in the trenches

We’re beginning to see a notable shift in the Russians war strategy in Ukraine. Those large-scale meat assaults are being swapped for small infantry advances and widespread air strikes via drones and missiles to overwhelm Ukrainian air defenses.

This pivot in the Russian war efforts has been brought on by increased Western military aid, expanded European defense production, and Russia reverting to a WWII-esque military production style of moving things deep into Russian territory. The Russians have also spun-up more domestic drone assembly, giving them more independence and resilience in their supply chains.

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Transcript

Hey everybody. Peter Zeihan here coming to you from a humid Colorado afternoon, which almost never happens. Anyway, today we’re going to talk about the Ukraine war and where we are at the moment. We’ve had a significant shift in the approach to the conflict by the Russians. Too soon to say it’s going to be successful, but it’s different enough that it is worth exploring. 

Instead of doing what they call mass meet assaults where you basically have to throw wave after wave after wave of humans into a mix, not really caring how many people get injured or killed trying to grab specific positions incrementally. We now have a position where the Russians are doing small scale infantry, and sometimes as few as two people at a time, just moving forward a few yards at a time. 

Parking for an hour and then continuing doing this all across the frontline while up above we have a change in the air war where the Russians will not launch just a bunch of drones, but dozens, maybe even a couple hundred at the same time, along with some missiles to saturate the air defense of an area and then strike local urban centers, specifically going for power systems. 

But really, any sort of logistics support? It’s a very different approach. It is generating results. Oil, very, very, very incremental. I don’t want to overplay it. But what is driven the change are a couple of things. Number one, the Trump administration is now starting to, at least in increments, provide more military assistance. The European defense industries have been spinning up for the last three years. 

They’re getting more artillery shells in the Ukrainian hands, which is preventing the meat assault from having any impact. But third, and most importantly, we’re seeing the Russians dust off an industrial strategy that we have not seen out of the Russians since the 1940s. 

For those of you who remember your World War Two history, you will remember that one of the turning points in the Second World War was when the Russians developed enough industrial plant out of reach of the Luftwaffe, the German strategic bombers, so they could build up all the industrial infrastructure and military capacity that they needed without having to worry about it getting blown up from the sky. 

This was called the Urals strategy. Basically, the Russians under Stalin built a series of industrial cities out east of the Urals, well out of range of German aircraft, and built their military capacity there and then shipped it into the front. There were obviously other things come into play. Lend-Lease. The, the invasion of Normandy, the invasion of Sicily, and ultimately mainland Italy. 

All of these combined to defeat the Nazis. But on the Russian front, it was the Russians getting the ability to build their own equipment that really made the difference. We’re seeing some version of that now, in the war to this point. Most of the drones that the Russians have used have either come from Iran or for China, largely already assembled. 

Maybe the Russians have plugged in a warhead in the front, but really, that was about it. the Russians were relying on industrial capacity on the other side of an international border to keep the flow coming. And so they were using primarily their old Soviet stockpile of equipment, of jeeps, of tanks, of ABC’s of artillery and so on. 

Well, three years on, the Russians are running out of their old Soviet largesse. All of the stuff that was easily deployed, things that were built in, say, the late 70s and the 80s were long ago destroyed. They never built enough of the more advanced things that have been built since 1992 to make a strategic difference, and most of that’s been destroyed. 

And then they started going back into their older stocks, weapon systems from, say, the 1940s, 1950s, early 1960s that were just wildly out of date, didn’t even have things like optics, but that meant that putting optics in them was relatively straightforward. So all of a sudden, we saw these 1950s air tanks coming out with like 1990s optics. 

All of that has been destroyed. That has left them with equipment that was built in the 70s and early 80s that had optics. But it’s crappy Soviet optics, and it all has to be ripped out and then replaced. That takes more time per tank, and the end result is just a trickle of equipment that comes in, and they’re now burning through that to basically 70 years of Soviet stockpile is almost gone. 

And now they’re reliant on equipment that is either come in from elsewhere, like say, artillery shells from North Korea or this new stuff. The new stuff is very different. The Russian military is an artillery force, and now that they’ve lost a lot of their artillery, they’re having to reinvent on the fly. And what they’re doing is taking that old girl strategy of building industrial plant behind the Urals and marrying it to the drone tech. 

So we now have multiple facilities in Russia proper that are manufactured in Iranian Shaheed drones. Now, Shaheed drones are pretty dumb. They’re basically dumb, slow moving, low warhead cruise missiles. And the original ones and the ones that make up even today, the bulk of the Russian effort don’t even have GPUs, they’re incapable of making decisions in any meaningful way. 

You basically just plug in where you want them to go. Maybe you give them the route to get there, and then off they go. Which incidentally, means that anytime they strike a school, it’s automatically a war crime because they had to program that in anyway. We’re now starting to see a second generation starting produced also get produced in Russia. 

That has some GPUs, Jetson chips from Nvidia specifically that probably run 6 to $900 a pop. So these are larger drones with bigger warheads, but they also have some primitive decision making capability. These like eight nanometer chips, far from cutting edge but order of magnitude better than what they’ve been using at this point. But the bottom line is these things are not being built in Iran and shipped into Russia for use. 

They’re being built in Russia. And That adds a step of complication to anyone who wants to interrupt the supply chain because it’s no longer foreign. The same thing is happening with Chinese equipment. It used to be that the Chinese would ship in more or less fully assembled drones, and then the Russians might make a couple modifications before deploying them. 

Now the Chinese are shipping in lots of components still, but the Russians are doing most of the assembly in Russia proper, again, outside of the reach of any sort of Ukrainian strike capability. And that means that the Russians are not simply getting more autonomy in their military industrial complex. They’re also getting a bigger feed through because they’re still buying the finished stuff from both China and Iran. 

So instead of using a few drones a day or a few dozen drones a day, there have been a number of attacks where they’re using a few hundred drones a day. And one of the things that they’ve gotten really good at is not even putting a warhead in some of these things and not putting any advanced chips in some of them. 

So maybe, maybe as many as two thirds of the drones that the Russians are firing at targets are actually just decoys that are very, very, very cheap. And so if Ukraine is using their limited air defense to try to clear the skies and they have to deal with literally hundreds of spoofed signals and false targets, more and more of the real things will get through. 

And the Russians are now starting to coordinate the timing of these drone assaults with their missile attacks. And the result has been a lot more damage to infrastructure, in Ukraine, including civilian infrastructure and urban zones. You can buy in these with things like, say, glide bombs with the Russians have no shortage of. And you’re talking about the Russians being able to completely obliterate what we would traditionally think of as a front 

line and just make this mess of shifting no man’s lands where those incremental one and two guys at a time can move 50ft at a time, and from time to time find a soft spot and get enough numbers forward that they can actually make a more traditional assault. It is way too soon to say that this is going to work. And of course, the Ukrainians will have to adapt to it by making their own changes. But we have seen a significant shift in the way that the Russians are prosecuting the war. And with the Technol involved changing day by day, week by week, month by month, that is absolutely worth noting.