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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Peter Zeihan here coming to you from Colorado. And today we’re going to take a question from the Patreon page, a bit of a what if, if the Russians lose the war in Ukraine or what does that mean for national stability within Russia proper? Are we looking at an immediate disintegration or what? Great question. 

Now, there are a lot of examples in Russian history of where the center has broken. And a loss in Ukraine doesn’t necessarily mean that the Kremlin loses power, but there’s really two big pillars of power in Russia. One is the military and the other one is the internal security services. And the important thing to remember about Russia is, unlike a country like Iran, where the country is actually half non Persian, and so the military is primarily responsible for occupying itself in order to keep all the minorities, under control in Russia. 

That’s not the case in Russia, even if, the Russian census data is completely fabricated, which it probably is, we probably have at least 70% of the Russian population actually being ethnic Russian. So among those populations with the possibility of Saint Petersburg, where there might be an economic push for independence, most of the Russians are going to stay put. They’ve been conditioned. They’ve eaten nothing but propaganda for quite some time. And most importantly, most of the young people are gone. Not only is the birthrate in Russia been dropping since before World War two, it plummeted under Khrushchev. Fell even more to Gorbachev and particularly nosedived in the 1990s. You add in a million casualties in the Ukraine war, in another million people under age 30 fleeing. And there really isn’t that youth generation that generally generates, revolutionary activity. And the Russian population will be concerned about losing what little they have left. So the chances of them being really rebellious are pretty low. The other 30%, of course, is a different question. You’ve got a number of minorities, mostly Turkic, of some flavor or Bashkors, Tatars, Chechens, English. This is where things would get really interesting. So, the military’s primary goal is to be on the borders in the Russian sphere and prevent any sort of invasion. And in a post Ukraine scenario where the Russians lost their borders are very, very, very long. And so they really won’t be available for any sort of domestic suppression of rebellion that will fall to the intelligence services, which are just as strong now as they were three years ago. 

So you can have an open rebellion in places like Tatarstan or Bashkortostan and the Russian government remains relatively capable of dealing with those. Now, they can’t deal with it everywhere, as we saw in the Soviet system, when the internal services were much stronger than they are today. If you’ve got two dozen places going into some degree of rebellion at the same time, then you’re kind of screwed. 

But when those two dozen places went into rebellion at the same time last time around, they were Kazakhs and Uzbek and Georgians and Latvians and Estonians and Armenians, and as a Rajani, none of them were ethnic Russians. And when the Soviet system fell, 14 of the 15 constituent republics of the Soviet Union were not majority Russian, and they are now independent states. 

What was left with rump Russia is much smaller, much more difficult to defend, but is actually more ethnically homogenous. So the Russian state, the Kremlin, would have a much better chance of suppressing internal dissent. 

Now, this is all pretty much a starvation diet because they post Ukraine. Russia loses a lot of its income. Its security situation is much worse. 

Its financial position is considerably worse, and there would probably be pressure on it from the entire western and southwestern periphery, because once Ukraine wins, you’re going to have any number of European countries that include, but are not limited to two Finland, the Baltics, Poland and Romania, who are going to be pushing at the Russians to try to make sure they stay off balance. 

The Turks will probably get on that to the EU’s backs down south will probably get into that. And based on the circumstances in East Asia, Japan or China could get in that as well. So I wouldn’t say that a post Ukraine. Russia is long for this world, but it’s not probably going to fall from within without a lot of help. Russia is in a relatively slow motion decline. It’ll probably still be there regardless of what happens in the Ukraine war by 2040. But once you fast forward past 2050, that’s when the demographic shift really starts to shift. And most of those Turkic minorities have strong birthrates. You combine that with what happened in the war, in gutting the younger generation and very, very, very low birth rates and high death rates among the Russian population. 

By the time you get to 2060, you’re in a very different environment and then you can start thinking about an internal disintegration, but it’s going to be from the outside first. And, the end of all of this really does depend on what happens to Ukraine. Because if Ukraine falls, then the Russians have a more secure external border. 

It’ll buy them 20, 30 years. That’s not a rounding error. That’s why they’re doing it in the first place. But we are still looking at the end of the Federation before the end of the century. That’s pretty much just a question, whether it’s front loaded or not. 

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.