The Iran War: Interceptors and a Costly Mistake

A Shahed Saeqeh-2 variant drone | Wikimedia Comons: https://en.wikipedia.org/wiki/Shahed_drones#/media/File:Saegheh_(4).jpg

Attacks have intensified, with Iranian drone and missile strikes heading towards the Arab Gulf states. Many of these states rely on costly U.S. interceptors, and with stockpiles dwindling, energy infrastructure could become exposed. Marco Rubio told Congress that the conflict could intensify over the next 5 weeks, so stay tuned.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado at home. I’m about to head to the airport just a little early anyway, overnight, day four of the war, we’ve had significantly more attacks. A lot of drones, a lot of drones, and quite a few missiles as well. The pattern that has erupted now, makes maybe me think that the Trump administration hadn’t thought this all the way through when they launched their attack a few days ago. 

The issues targeting, the Iranians can’t really go after U.S. vessels because they don’t have the guidance that’s necessary. And the Israelis are a long way away. So there’s plenty of times to detect and shoot down drones and missiles, especially drones. But for the Arab side of the Persian Gulf, the story is different. So, what we’ve got going on is instead of going after the Israelis or the Americans, the Iranians are going after the Bahrainis and the Kuwaitis and the Emiratis and the Saudis. 

And all of these countries have purchased us Patriot missile systems and even some fads. But those interceptors are expensive. And the hundreds of thousands of dollars and the showerheads that are being thrown against them are less than 50,000. So in order to reliably shoot down a projectile, you often have to shoot more than one, interceptor. 

And best guess, and it is a guess, is that the beginning of the conflict, the collective Arab side of the Gulf probably had over 2000 interceptors, but they’ve already intercepted over 1000 things coming at them. So we’re already getting to a point where the, cupboard is getting a little bare. And it seems that the Americans are not replenishing any of those stocks in order to pressure the Arabs to join the war more directly. 

But honestly, there’s not a lot they could bring to the table. Only the United Arab Emirates and Saudi Arabia even have an air force. It’s worthy of the name. And the pilots are inexperienced and few. And honestly, they would probably get in the way, as we saw yesterday when the Kuwaitis accidentally shot down a trio of American jets. 

What this means is very soon, probably within a week, the Gulf eyes are going to have to decide to just not shoot down the heads at all and focus on the ballistic missiles that can cause more damage and have more accuracy. And in doing that, you will see waves of Shaheds be able to start targeting energy assets, whether it’s loading platforms or refineries or even the fields themselves, pumping stations. 

And that’s, you know, that’s going to be more than 10 million barrels a day in the direct crosshairs, perhaps as much as 20, based on how things are going at the time. And in the meantime, Strait of Hormuz is closed, insurance companies and sold all insurance. So nobody’s coming or going. So we may be getting that energy crisis sooner than we thought. 

The easy way around this of course, is develop cheaper interceptors. And there’s only one country in the world it has that, that’s Ukraine. And we are seeing very clearly that the United States’s decision a year ago to cut off military connections, has a big price, the Brits who still have relations with Ukrainians that are good in the military sphere, have repositioned several Ukrainian assets, including Ukrainian staff, into the Gulf to help shoot down some of these projectiles, but give you an idea of how little, the United States has invested in this technology. 

Fifth fleet headquarters in Bahrain, got hit in the second day of the war on the radar dome. Got blown up, which kind of surprised me that something got through to an actual military base. And then I realized that there was no point defense at the base, something that the Ukrainians have been doing around their cities as a matter of course. 

So, the American decision to not engage the Ukrainians, where they have been defending themselves against Russian launched Iranian showerhead drones now for three years. This is where the knowledge base sits in the world to defeat this technology, as having a real price, because that technology, those tactics, that experience hasn’t filtered up to the US military and then down to US military deployments. 

And now the United States is facing the source of the Shaheds head on, and all it has is expensive interceptors that exist in a limited number, which makes it very, very strange that the Shahed facilities that are building the drones in Iran still haven’t been targeted. But more on that as we move forward with the war. 

Okay, finishing this one up from the airport lounge in Denver. The other big news is that yesterday morning, the secretary of State Rubio, testified to Congress to comply with the War Powers resolution, notifying Congress of what was going on. biggest thing that has come out of that is that, he said that the United States actually went significantly heavier attacks in the days and weeks to come, and that he expected the entire conflict to last 4 to 5 weeks. 

Now, this is not vacation Congress. This is not battle plans. So there is absolutely no reason to expect the Trump administration and the Defense Department to follow that to the letter by any stretch of the imagination, which is kind of interesting. The story that’s being told to Congress. We’ve got a number of senators and reps on both sides of the aisle who are pretty angry at the idea that this conflict has happened at all, and we’re expecting a bipartisan war. 

Powers Act resolution which aims to restrict, the American military’s ability to prosecute the operation moving forward. The chances of that passing are pretty good, but the chances of it being a veto proof majority are almost zero at this point, barring something significantly, jarring happen in the next 48 hours. All right, that’s it for today. 

Bye.

U.S. Boots on the Ground in Nigeria

Silhouetted soldier against a black background

Following the Christmas Day U.S. airstrike on a jihadist target in northern Nigeria, the U.S. has deployed 100 troops, more so advisors, to train local counterterrorism forces in Nigeria.

This is important for several reasons. Nigeria is Africa’s most populous country and a dominant power in West Africa. Russian influence has stretched across Africa and into Nigeria, so U.S. involvement could help counteract that. And this marks a significant shift for the Trump administration, as the U.S. will get firsthand insight into Nigeria rather than relying upon speculation.

We’ll see what Washington does with the information gleaned from the boots on the ground, but U.S. policy in West Africa could be reshaped in the coming months.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today is the 17th of February, and the news is that 100 U.S. troops have just arrived in Nigeria to help train local forces in anti-terror operations. It’s the first batch. Another hundred or 200 is expected to come in the next several days to weeks. Why Nigeria? Why now? What matters? So if you go back to Christmas season, December, the big story that was making the rounds in MAGA was that Nigeria was massacring Christians and oh my God, we got to stop them. 

And so on Christmas Day, Donald Trump bombed a, jihadi, stronghold in northern Nigeria. First time we’ve done military operations in Nigeria. The Nigerian government internally was kind of pissed off because this is a country of 230 million people. It has dozens of ethnicities. The northern part of the country is more Islamic and drier than the South, which is more Christian and tropical. 

But, the militants that have been operating in the north, they don’t care who they, kidnap, they kidnap anybody, so most of this was just a collective MAGA, fabrication, which, you know, we’ve seen a few of those before. But this time it resulted in the United States actually bombing someone, which is generally not a good reason to do it. 

Anyway, the Nigerian government was really pissed off. But rather than be pissed off in public, they said, you know, you’re right. We do have a militancy problem. Why don’t you come help? And Trump did. Now these are not combat troops. These are advisers, but they are now getting enmeshed into, this situation in Abuja. And further north, and we’ll see what happens. 

This matters for three reasons. Number one, Nigeria, 230 million people. Significant energy producer, based on the day, exporting somewhere between 1 and 3 million barrels a day, although it’s pretty chaotic. So it’s usually on the lower end of that. 

It is the clear superpower of West Africa. It is the most populous nation on the continent. It matters in a great many ways, and in times when Nigeria is able to hold itself together, it projects power to an entire neighborhood. And in areas when it’s not able to hold it together, it falls into civil war. So anything that helps Nigeria hold itself together is generally good for the region and US power production regardless. 

Number two, we are seeing some of the outcomes of the Ukraine war on another continent here. So one of the things that the Russians did right when the Ukraine war was getting going is they tried to stir the pot everywhere they could to cause as much chaos. And civil conflict as they possibly could. And in the Sahelian region, that’s the dry area that’s south of the Sahara Desert, but north of the tropical belt. 

They targeted the French position and they basically went in under the guise of counter terrorism, counter Islamic terrorism. They encouraged Islamic terrorism to continue. And cut deals with regimes that were in the process of having coups. We called it the coup belt for a while, to push the French out. The French have now left all of French West Africa, Burkina Fastow, Mali, countries like that. 

And so we now have these, arrangements of pro-Russian tinpot dictators that are basically raping their country and running mining interests for the Russians, whereas the militant groups have been able to spread beyond those countries into places like northern Nigeria. So anything that pushes back of that tide is generally a good thing too. And again, consolidation Nigeria is probably the best bet at this point because the first line of defense, the French forces in the region are now gone. 

Sorry, U.S. forces for that matter. So that’s number two. Number three. 

The Trump administration just put it into a position where it has now has sent forces into an area specifically with the goal of finding out what’s going on. That’s the first time that’s happened in this administration. Usually they just rely upon rhetoric and whatever circling through the conspiracy sphere. Now we actually are going to have a couple hundred troops interfacing with the Nigerians on a daily basis, getting a feel for what is a very, very complex country and a very, very complex security environment that doesn’t match the story that you hear on the web. 

What they do with that information is going to be really, really interesting. I don’t mean to suggest the United States has, like, immense interest in this region, but as a rule, anything that holds Islamic terror at bay and keeps them in worthless territories is a good thing. If this is able to penetrate into central or, God forbid, southern Nigeria, then we’ve got a very different situation where the entire region would become unmoored. 

So, you know, kudos if this works out. But right now the government of the United States is still very, very, very early in a fact finding stage. And once they have the information in front of them, they will then have to make a decision and balance against what we are hearing in the MAGA sphere, which is largely the opposite of what is actually happening. 

That’s going to be an interesting conversation that will happen a few months from now.

The U.S. Navy Goes Down Under

A US Navy battleship

The U.S. is turning to the Aussies for some help with stationing four American submarines at Stirling in a hedge against potential future conflicts with China.

This is done in an effort to help the U.S. reduce reliance on Guam should the Chinese strike, giving the U.S. options other than Hawaii. This move has some pros and cons. Stirling is outside China’s striking range, but it’s incredibly isolated. So, the U.S. couldn’t project power directly against China from there, but China’s trade routes in the Indian Ocean and Strait of Malacca would be vulnerable. The forces based at Stirling would also be on their own if anything boils up, which isn’t ideal.

Beyond this plan being good or bad, its just outright unsettling. This move signals the U.S. is preparing for a world where our current global trading system will be irreparably broken.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Colorado. And today we’re going to talk about the U.S. Navy deployment plans for the Pacific. Specifically, the U.S. Navy has announced that it’s going to be working with the Australians to expand their naval facility at the Stirling base, which is on an island just outside of Perth. For those of you who don’t read or know Australian geography, almost everybody in Australia lives in the southeastern kind of crescent, but all the way in the far west all by itself is Perth. 

So it’s kind of in the middle of nowhere, both the city and the base. And that’s from the Navy’s point of view, kind of the point. If, if, if there is a meaningful military conflict with the Chinese, the Navy’s concern is, is its current forward military base at Guam could come under missile attack. And if the Chinese get a few shots through the missile defense at the island, then the ability of using Guam in order to project power in the direction of the Asian mainland would be destroyed, and they would have to fall back to Pearl Harbor. 

So the idea is, if you permanently station four of America’s submarines out in the Indian Ocean near Perth, then that is well beyond any range possibility that the Chinese have. So this is both very smart and perhaps a little dumb. First, the smart anytime you can disperse your forces and maintain a reach would be really a robust idea. 

So the overall concept of having a second facility in that corner of the world makes perfect sense. The Australians are about the best allies and most loyal allies. We have hard to come up with a better spot if your goal is to have it beyond the range. Second, the dumb part. It’s really beyond the range. Perth is near nothing, and there is no way you could use naval forces in that area to project power to strike at China directly. 

What it could do is you could strike Chinese shipping in the Indian Ocean and up into Southeast Asia to the Strait of Malacca. And so one of the things that I’ve been saying for a very long time is that any war with the Chinese, I’m really not overly concerned because they’re dependent on international trade. We’re not we have a global navy. 

They don’t. You put those two together in any hot war. The easiest way to destroy China. Not not not the military of China, China, the country. Let’s just stop the shipping of the stuff that doesn’t go to the United States, which obviously would be shut down. About 80% of their energy flows come through the Indian Ocean basins from the Persian Gulf. 

About half of their food flows and about 80% of their manufacturing good flows goes through the same route. So if you put some naval assets in sterling in case of a hot war, we now have a Ford missile base. It could shut it all down in a matter of days and weeks. Just keep in mind that this is a different sort of conflict. 

If you’re going to put subs to do it, you are not taking over the oil tankers or the cargo ships. You’re just sinking them. That would be really, really colorful anyway. The other other problem is that, if Guam is taken out, then there really isn’t. A series of stepping stones to get to Perth. So whatever is operating there is going to be more or less on their own unless they decide to go quiet and cross the Pacific the long way. 

So any assets there will be exposed. It’s not that this is a bad plan. It’s just it’s laying the groundwork for a very specific sort of action that assumes the global system is broken beyond repair. I would argue we’re getting there anyway, but starting to put teeth in a place where it would force that to happen gets my attention in a way that I’m not entirely excited about.

Trump Announces $12B Rare Earth Stockpile

Photo of rare earth minerals: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Photo by Wikimedia: https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

The Trump administration has announced a plan to create a $12 billion stockpile of rare earths. The goal is to create a buffer against any supply disruptions, but this is just a band-aid.

Depending on the metal and use case, this stockpile might give the US a five-month supply. But the core problem still exists: the US doesn’t have any domestic refining or processing. It’s not all that hard or expensive to extract and process this stuff; the US just hasn’t invested in the infrastructure to do so.

If the goal was to establish real supply security, this stockpile isn’t the way to go about it. But hey, at least we’ve got an extra five months.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. And today we’re looking at a new initiative from the Trump administration to solve the critical materials issues. Short version. The United States doesn’t refine most of its materials these days. It relies on countries that have much lower pollution concerns, like, say, China or India, to do the processing. And then we buy the process material and do whatever with us. 

What that means is, well, while you save a lot of money and you certainly clean up your own local environment, you subcontract all of this out to countries that, in the case of China, might not be the most friendly and then might cut off supplies at a later time, as the Chinese have done to a number of countries from time to time, including the United States. 

Anyway, the idea is you establish a $12 billion stockpile. The U.S. government is going to be tapping the import export bank. And so the idea of using one government agency to finance the development of another, I personally find that delicious, but bygones. And the idea is you buy these processed metals, primarily rare earth metals, and then they are in the United States. 

So you have a buffer. I don’t want overstate this. It’s a good step. It’s in the right direction, but it’s going to get crazy. $12 billion of critical materials for a country that is a $25 trillion economy is not going to last a long time, probably somewhere between 1 and 5 months, based on the specific material, because there are over 30 different materials that they’re talking about here. 

It’s a step in the right direction. But if your goal is to really achieve a national security issue and economic self-sufficiency, you need to make these things yourself. Right now they’d just be buying them from China on the open market a little bit more than what we need, and put them into basically a safe. What you need to do is build up the processing. 

The problem here is that there is no such thing on the planet as a rare Earth element mine or rare Earth element production line. Rare earth metals exist as small, small impurities in other mineral extraction, primarily things like silver, but also copper and zinc and a lot of other things, uranium, for example. And so what happens is you have your mine that produces X mineral. 

You process that to get X refined mineral and then the waste material you then go through a separate set of steps that involves several hundred vats of acid. Basically with every step you concentrate the mineral that you’re after, whatever it happens to be. And after six months to a year of such processing through acid, you eventually get some refined metal rare earth metal that you can use, but it takes several tons of raw material to generate one ounce of the finished metal over months of steps, and hundreds of vats us and until the United States builds that infrastructure, which isn’t technically difficult. It’s chemically very tricky. Until you do that, you are never going to have independence from international suppliers. Now, there’s nothing about this technology that is new. It was developed back in the 19 tens and 1920s. The U.S. obviously can do it. It’s not even particularly expensive even if it is environmentally dirty. 

But it does require space, and it does require capital and does require planning. It does require infrastructure. And at the moment, the Trump administration has not put a dime into that effort. If and when that changes, I will be there with bells on to sing and dance. That is not what is happening today. Today we are building the equivalent of a piggy bank that we still have to fill up.

U.S. Trade Talks with the UK

US and UK flags with a selective focus on diplomats shaking hands. Licensed by Envato Elements

We haven’t seen any real negotiations over the past year because the Trade Representative’s office wasn’t staffed. All that’s been discussed are tariff levels, not full agreements, and nothing has been ratified. However, the Mother Country is the main exception to this lack of trade talks.

Since Brexit, the UK has been on the hunt for a major export market. With the US as the only viable option, the Americans aren’t afraid to demand regulatory alignment and force the UK out of the European trade orbit. AKA – the UK might not have to switch to the imperial system, but they would have to accept just about everything else.

The UK doesn’t have much leverage either, as going it alone isn’t viable. So, the Brits will have to bunk up with Brussels or Washington, and it’s a painful path forward regardless.

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Transcript

Hey, everybody. Peter Zeihan here, coming from a snowy Colorado. Today we’re talking about trade talks. Most of what has been going on this last year is not what I would consider to be an actual trade discussion. If you remember back to April of 2025, Donald Trump announced tariffs on really everybody and then said he was starting trade talks with all of them, 200 different countries at the same time. 

But at the same time, the US Trade Representative’s office, which is the office that handles trade talks, was never staffed out. So from the point of view of how we negotiated every trade deal to this point, no real talks had begun. Trump did not personally oversee any of them. He subbed them out to say the Treasury secretary, the Commerce Secretary, who were usually not involved in trade talks. 

And so basically all it was was a negotiation about that specific number that was announced back in April of what the overarching tariff would be, and a couple of side things patched on to it. And at this point, none of those deals have been ratified by anyone. So we really haven’t really started. There is one exception, and that’s the United Kingdom now, the United Kingdom, ever since Brexit, which is almost a decade ago, has been desperate to get some sort of trade relationship with the United States that is more formalized. 

The reason is pretty simple. The demographics are aged. They’re losing consumption based. They need an export market. And they used to have the European Union, but they don’t have it anymore. The question then, is if it’s going to be the United States, because it’s really the only large economy that’s close enough to matter. What does the United States want from the United Kingdom in order to get that? 

And as the Brexiteers have discovered, the United States takes a very hard line in meaningful trade talks, especially if you’re like the United Kingdom and you really don’t have any other options. So the news that has come out in just the last few days is something that the Brits are really cheesed off about, and that the United States is striking an uncompromising position under Donald Trump on regulation. 

And this isn’t new. The Trump administration did this the first time around. The Biden administration held at that position the idea is that if you have regular regulatory unity, you basically achieve market capture, because all of a sudden your country is now measuring everything and regulating everything in the same way as the country you’re trying to partner with. 

And that makes it harder for other countries to have trade deals with you. So this is about pulling the United Kingdom out of the European Alliance of Trading Countries and locking them into the NAFTA system. The Brits are resisting this, particularly around things like food safety, because they realize that once you go down that path, you’re pretty much locked in. 

And the Brits would prefer to keep their options open. But at the end of the day, the Brits are a mid-sized economy trapped between two major blocs, one of which has long range consumption options because it’s the younger population in Mexico and the United States, and one of which doesn’t because the European Union is much further along in the aging process demographically. 

So if there is going to be a meaningful US UK trade deal or a NAFTA UK trade deal, this is part of it. Now there are other things the United States is going to insist on. For example, in aerospace, the United Kingdom is going to have to leave the Airbus family and join Boeing on agriculture. They’re going to have to accept US agricultural exports in volume, which will probably drive most farmers and producers in the United Kingdom out of business. 

On automotive, they’re going to have to go with American emission standards instead of European and so on and on and on and on. And then, of course, on finance. London, just goes away and New York absorbs it all with maybe a little bit for Toronto. So there’s a lot to swallow here. But the United Kingdom has come to this negotiating table with very little on offer. 

I mean, yes, it’s a market of 60 million people. Yes, that is significant. But at the end of the day, the Brits are going to have to bend to either Brussels or Washington and it’s not going to be comfortable. But their alternative is to try to go it alone. And that is something that is just not going to fly.

Rolling Back Regulations in the U.S.

A gavel and law book on a desk

Trump’s pledge to roll back regulations isn’t inherently bad, but the way he’s going about it is problematic in just about every way.

Trump’s second term has brought about a new level of bureaucratic hollowing, leaving no capacity to manage regulations already in place. So, we’re left with a backlog of outdated policies, with an admistration who has no intention of enforcing them. Imagine the nightmare this creates for anyone trying to operate under those circumstances.

What we need is a functioning government with experienced staff who can regulate these systems and give clear guidance to those who need it. The bar is low, but the current administration is still trying to play limbo.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Taking a question from the Patreon page today, specifically about regulation in the United States. Donald Trump says that he’s going to strip out ten words of regulation for every word that gets put in. This is up from his first term when he said the ratio was going to be 5 to 1. 

And will this have a meaningful impact? The person was asking the question, was quite circumspect about this. And he realizes that some regulations are good. So it’s just a question of whether this is a pro or con at large. Overall it’s con, but probably not for the reasons that you’re thinking, the two most regulatory heavy administrations that we have had in modern history are the Biden administration and the Obama administration, and by far the most administrations we’ve ever had are Trump one and Trump two. 

But they’re very different beasts. The Obama administration stacked itself with people with no real world experience. There was only like five years total of people who’ve had a real job. Most of them came from academia and ideologues and think tanks and people who had never actually participated in the real economy. So a lot of their regulatory structures existed because the president hated to take meetings. 

And so he never went to Congress for anything. And so they made up what they thought the ideology would demand and try to force that on corporate America. And needless to say, it made a lot of mess. The Biden administration was kind of the opposite, and that most of the people who were in the administration had real world experience, either as mayors or governors or corporate titans. 

And so while there were still a lot of regulation that went in, it wasn’t nearly as crazy. 

Trump very different beast. In Trump one, the Trump administration, we’re all going to be right back that up. President Trump didn’t think he was going to win in his election with Hillary Clinton. And so when he became president, he tapped the Republican brain trust very heavily in order to build out his cabinet. 

And all the senior positions in the bureaucracy. And in doing so, a lot of people with corporate experience became bureaucrats. And in doing so, when they came across regulations that they knew from personal experience were stupid, they stripped them out or modified them to make it less onerous for the business community. And so, as a rule, the business community was broadly pro-Trump throughout the bulk of his first administration. 

That’s not where we are with Trump. Two, President Trump spent his time out of power during the Biden administration, purging the Republican Party of anyone who might ever come across as knowing anything, because he wanted to make sure that everybody knew he was the smartest person in the room. And the easiest way to do that was to dumb down the room. 

So he comes in to president the second time around. There’s no longer a brain trust and the Republican establishment, for him to tap. And then he goes into the bureaucracy and fire the top 1500 or so people, but doesn’t necessarily replace them. So what we have is this weird dichotomy. And yes, the regulatory frameworks, the the system that builds out new regulations that has been frozen in very, very, very, very, very few new regulations have gone into place under Trump. 

Two, however, these institutions are not staffed out, so they’re also not going through the old regulations and purging them or trimming them or amending them or getting rid of them or whatever it happened to be. So in some ways, we now have the worst both worlds. We have this massive regulatory hangover that dates back to the first Obama term, a lot of stuff that still hasn’t been cleared out. 

At the same time, we now have an administration that isn’t putting any brain power whatsoever into cleaning up that system. So yes, we’re not getting new regulations. And broadly speaking, for the business community, that’s a plus. But then we’ve got this massive overhang of stuff that is outdated or ill conceived, or never went through Congress or never went out for review. 

That is still on the books, and you’re legally required to still follow them. The Trump administration is telling people just don’t follow them then, which puts business in the worst of all positions. They’re legally liable if they violate the corporate codes. But this federal government is saying that they won’t enforce the corporate codes. So we get this rule of law problem. 

At the same time, we have an outdated and overburdened regulatory structure, and corporate America is left in the middle trying to decide which specific legal risk they want to deal with. Not a pretty situation to be in. The solution is for the government to be the government, but the government can’t be the government without people.

The Semiconductor Tariff Nightmare

A semiconductor chip

A poorly designed and destined to backfire tariff has just been announced; this time, the Trump administration has turned its focus to high-end semiconductors.

Putting tariffs on semiconductors is nearly impossible to do cleanly. There are thousands of types, production stages, and end uses. So, the Trump admin thought it would be a good idea to tariff them based on the end use, rather than where they’re made. The only problem is that most importers don’t even know the final use of the chips upon import, creating a legally and financially risky situation for everyone involved.

This tariff will likely freeze access to advanced semiconductors and choke the US tech and manufacturing sectors. There are a few ways around the tariffs, but those offer little relief to existing manufacturers. But hey, let’s just keep trying to jam this square peg into that round hole.rough strong alliances will struggle to survive. And the next generation of kids (however small that cohort might be) will be studying those countries in the history books.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Iowa. Today is the 15th of January, and the Trump administration has at long last announced the first wave of semiconductor tariffs, specifically targeting high end semiconductors. There was always going to be a question as to how this was done and whether it was going to be a disaster. 

It really matters because semiconductors are, for most intents and purposes, a commodity. They come in in thousands of forms and at thousands of different stages of production. There’s over 100,000 steps for high end semiconductor fabs creation. And they can come in as raw chips still attached to the disk. They can come in separated from those disk. 

They can be put into intermediate products like motherboards or charging stations. They can be included into intermediate products. They can be incorporated into final products. And so whatever type of tariff regime you’re going to put in there is obviously going to be full of flaws, even if it’s very, very, very well designed. And commerce was never set up to manage this sort of system, much less, Customs and Border Patrol. 

And that was before we had the personnel purges of last calendar year. So the questions were always, you know, how are you going to do this? Are you going to look like at a car? And the 1500 types of semiconductors that are installed within it have a different tariff rate for each one. Do you tariff the entire car tariff the chips independently? 

You do it based on the intermediate products. Based on where the value added happens. Basically, you could get more paperwork for one tariff on one vehicle than all of the rest of the 30,000 pieces in a car combined. What the Trump administration has done with this round is instead of going by sourcing, which would make a degree of national security sense, even, it would be, logistically almost impossible. 

They’ve decided to go on end use, which is, if anything, even more confusing, because now anyone who is importing these products has to decide what each individual chip is going to be used for. Declare that on the tariff form and the way that Customs and Border Protection enforces the tariff regime is to not check it on the front end, but to randomly check it on the back end and then really bring down a hammer in terms of fines and penalties. 

The problem is if if somebody is important to, say, 10,000 of a specific type of chip, they’re not the ones who are probably going to use the chip. The chip is going to go on and get put into computers or cell phones or pacemakers or whatever it happens to be. And so who is responsible for it? So the person who is doing the importing has to go and gets a customer affidavit and assign them to each individual box, each individual chip that Customs and Border Protection can then go into later a year from now, three years from now, and attempt enforcement. So what we’ve gotten is something that will freeze the use of semiconductors at the high end, because no one is going to know how to do the paperwork on the front end. It’s difficult to come up with something that is going to chill American manufacturing more, because now simply accessing the pieces in the first place is not going to happen cleanly. 

And you could open yourself up to legal liability simply from plugging a piece of typical technology into something that you’re working on, because you’re not the one who did the actual importing, but you’re probably legally liable. So we’re probably going to see a seizing up across not just the tech space, but the advanced manufacturing space in the United States, especially in places like heavy machinery, automotive and aviation, where these chips are used in the thousands in every single vehicle. 

It’s going to be very interesting to see how this goes. The Trump administration says it’s going to do a review after 90 days where if progress has not been made and expanding the supply chain within the United States, then, more tariffs will be coming. One of the many exceptions, because there are a bunch is that if you’re using these chips to expand the construction of a supply chain, you get a pass. 

But if you’re already have a supply chain, you do not. So this is a horribly designed tariff, absolutely the wrong tool for the job. And it’s going to become very obvious as this year rolls on, that it is actually going to poison most of what progress the US has made in its industrialization effort over the last decade.

Good Luck, Texas

Texas cattle in an ice storm

A major cold front is sweeping across America, and I’d like to point out that our neighbors to the North are the ones who sent it down. But some areas are going to feel this more than others.

Texas is exposed due to its isolated power grid. Cold weather strains the system and essentially shuts everything down. This is a shorter storm cycle than the 2021 freeze, and thankfully, Texas has winterized since then, so the fallout shouldn’t be as devastating.

Outages are still possible, but statewide blackouts are less likely than last time.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. As everybody knows, there’s a cold front that’s pushing down from Canada that’s affecting basically the entire Midwest down to Texas and over into the South and the eastern seaboard. 

For those of you who are in Texas, this is for you. You see, the power grid in the eastern part of the United States is interconnected. 

So if you’re east of the Rockies, everybody’s on the same grid, and people can pump power from one zone to another without a problem. Texas, however, is on its own. Texas does not like regulation at the federal level at all, in case you didn’t know. And, sometimes this works for them and sometimes it doesn’t. And this weekend we’re going to find out what it is. 

The issue is, kind of 2 or 3 fold. Number one, if you get ice, ice lands on the power lines. The power lines weigh more. Sometimes they snap. Number two, in times of extreme temperature variation, like a high cold front, people are going to be using a lot more energy than they would normally. 

So there’s a lot more stress on the system in general. And then third and freezing temperatures, natural gas production can be interrupted. A lot of natural gas fields bring up a little bit of water as a side effect and ends up in the pipes. And if the temperature drops enough, that will turn into ice, and eventually they’ll clog and freeze. 

So if you remember to a winter storm we had a few years ago, I think was 2021. The area around Dallas got so bad that the pipelines were frozen solid, and they basically had to deliberately ignore all safety regulations and go out there with blowtorches and heat up the ice so that the energy would flow. This cold front is both better and worse than that one. 

Better in that it is not going to last as long. We’re probably only going to have subfreezing temperatures in Texas for 2 or 3, maybe at most four days. Number two, Texas has made a lot of advances since then in making their system more stable, both at the grid level and at the production level. More pipelines are buried, for example, because if you just put your pipe under six inches of dirt, that insulation is probably going to be enough. 

Not a real crazy thing here. Almost everywhere in the United States that produces petroleum puts them underground. Texas was really unique because it just never really got cold enough for them to care. Now they do. Third, there are three different production regions in Texas, and it’s really going to depend upon what happens with the ice line here. the biggest one around the Dallas Fort Worth area is called the Barnett Shale. It’s almost exclusively natural gas. It is the primary source of energy for most of the region’s natural gas power plants. If we get ice in the Dallas area, but not lots of subfreezing temperatures along it, as long as it stays above, like 2025, we’ll be okay. 

That’ll probably be fine. Further south is Eagle Ford. Now, usually Eagle Ford, because it’s East of San Antonio stays warm enough that there. No, this is an issue. It’s unclear if that’s how it’s going to be this time. Probably they’ll get a lot of ice. Ice is not a big problem for pipelines, because it’s not cold enough to freeze the inside, and it just makes things very uncomfortable. So you could have high traffic incidents in San Antonio. While this is going on. Don’t drive in Texas if there’s ice because oh my God, they don’t know how to drive anything that’s not dry. 

Third one is the Permian that’s out west, Odessa, Midland, getting into New Mexico. That one’s probably going to be fine. 

A quirk of this particular storm is it’s blowing down from Alberta on the east side of the Rockies. And when you get down towards that part of Texas in New Mexico. Yes, you’re still to the east of the Rockies, but the Gulf Stream starts pushing everything further east. So it’s kind of like a hurricane in reverse, if you will. 

So while those areas are expected to be cold, they’re not as expected to get as cold or for as long, which would suggest that the largest oil natural gas producing basin in the country, the Permian Basin, is probably going to be able to maintain operations. So none of this is risk free. We’re probably going to have some sporadic power outages, but between the improvements and the dynamics of this specific storm, it looks like we’re not going to be looking at mass blackout events. 

And that’s a good day.

Latin American Militaries Can’t Stop the U.S.

Two Chilean soldiers standing in front of a mountain

Sure, the US could probably overthrow just about any Latin American government with ease, but what happens after that?

Conventional warfare isn’t the issue at hand. The real problem lies in the geographic makeup of Latin America. We’re talking jungles, mountains, and fragmented population centers. Doesn’t take a genius to figure out what evolves from that…paramilitaries, insurgency, and a big pain in the ass for anyone trying to project power.

This has kept LatAm relatively peaceful since it’s hard to fight eachother. However, this also means that when toppling a government, most of the institutional capacity falls with it. So, the US would need a real, solid cleanup plan, or it risks a repeat of Iraq.

We’re heading towards a modern version of dollar diplomacy, where the US uses power to enforce US economic interests in Latin America. This is a messy and morally fraught endeavor that should not be taken lightly.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. We’re going to continue what we talked about yesterday with the shape of military and the reality of deployment and apply it to Latin America. Now, obviously, the United States is far and away the most powerful military force, not just in the world, not just in the hemisphere, but in human history. And a big part of why that is true is because of the deployment capability. The United States has spent the last century building up the logistics that allows it to push troops, ships, and power anywhere in the world. And when you’re talking about places like Venezuela, which are just across the Caribbean, it’s not too hard to get there. 

The problem is not often the governments the United States could probably, if it wanted to, up every Latin American government in a matter of a few weeks. The question is, what happens the next day? 

Latin American militaries have zero deployment capabilities beyond their own shores. Part of this is economic. You takes a strong trade base, technically advanced economy, in order to attract power somewhere else. 

Part of it is a bit of a gap. One of the things we learned from the British Empire is that when you have industrial technologies and no one else does, you can literally bring a gun to a knife fight and rule the world for a century or two until the technology finally catches up. And the Anglos, which include the Americans, have held that kind of technological advance over the rest of the world for the better part of the last 300 years at this point. 

And it’s only in the last 50 years that the rest of the world has kind of caught up. And that is the rise of Russia and China and the rest. Of course, there’s also a digital divide. When you throw in revolution in military affairs, which the United States really started kicking in in the late 80s and really manifested for the first time on the battlefield in Desert Storm back in 1991, and then eventually Iraqi Freedom in 2002, 2003. Details for what’s fuzzy, the United States demonstrate that it had precision as well as reach. None of the Latin American countries have anything like that. So if you were to throw the United States against all of the Latin American countries, individually or together, the battle would be over in a few days, with the United States taking very few casualties and the Americans completely disemboweling the command and control of everybody on the other side. 

It would not be a contest. The problem, of course, is again, what happens the next day. And that is a geographic problem. You see, Latin America isn’t like Europe or the United States, where we’ve got these large chunks of flat land. Crisscrossed by rivers that you can transport goods and people and troops on. It’s mostly highland or jungle. 

And in doing so, the population centers get broken up from one another. So you really don’t have something like you’d have in the Midwest or on the East Coast or in northern Europe, where you can shuttle resources and people and troops and goods back and forth and back and forth and back and forth. And that’s what makes a modern economy super successful, is having very low resistance within your system. 

There really isn’t anyone in, Latin America that benefits from that. The mountains and the jungles cut the population centers off from one another. People have to move upland in many cases to get above the humidity and disease belts, which means all of a sudden you’re having population centers at five, six, seven, eight, 9000ft with all of the problems that come from that. 

But it’s better to not get disease and have those expensive so than to have diseases and maybe have slaughter land and means that the countries of Latin America cannot wage war in the way that we normally think of it in, say, Russia or China or Europe or North America. Instead, it’s a problem of fractional ization with different regions and identities and economic loyalties boiling up, not just between the countries, but within them. 

So while the Latin American countries don’t have much when it comes to conventional military forces, their paramilitary forces are an order of magnitude larger in relative terms, and they are elsewhere in the world, because that’s how you fight. You see the problem with countries like Colombia or Mexico or Venezuela or Brazil isn’t so much a conventional military threat. 

It’s a paramilitary threat that is caused by guerrilla groups and rebel groups that boil up throughout these territories, because they can’t project traditional power and cultural monolithic ness with their own, their own systems. And so Colombia has had the longest running civil war in the world. Really, it was only ended a few years ago because you had the population living on the sides of mountains at elevation, and kind of this V in the Andes and everywhere else, if you go too high, it’s too cold. 

If you go too low, it’s too humid. And too rugged. And so if you go too low, you’re all of a sudden and cocaine lands and you can have groups that can generate capital by selling illicit narcotics wherever it happens to be. Same thing in Brazil. The vast tracts of the Amazon might be romantic, but they’re impossible for Brazil to project power through. 

In fact, the last time that this wasn’t true fruit cheese, you’d have to go back. So the last war in Latin America was the send up, conflict between Peru and Ecuador in the highlands and the jungles where 300 people died at last, like a month. And that was it before that, man. It’s. You have to go back to the earlier century. 

There were two conflicts in the 1800s that were what Americans would probably consider a real war. You’re the war of the Pacific in the later part of the century, among, Peru and Bolivia on one side and the other side. That was largely a naval conflict with some desert fighting, where the Chileans wiped the floor with the other two. 

And northern Chile, they had a comma, became Chilean territory, and the only other one happened just, at the tail end of the Civil War in the United States. So 1864 to 1870, something like that. And that was a four way conflict with Argentina, Uruguay and Brazil on one side. And Paraguay on the other. And it was basically a fight over the laterals of the Rio de Plata region. 

If Paraguay had won, it would have controlled all of the rivers of those zones and, access to everything that mattered. But they lost, and Paraguay became the pathetic rump state that it is today. 

Since then, there’s been nothing worth fighting over because the countries can’t get at one another. So we’re entering this phase where the United States is far more interested in managing and dictating what happens throughout Latin America, and there is no doubt that it can kick over the anthill whenever and however, once. 

But if it wants anything productive to come out of the other side, it has to find a strategy for managing what happens after. The problem is that most of the people in the US government who have some degree of experience in that, and I’m not saying they’re great at it because these are the people who managed Afghanistan and Iraq didn’t go great, but they’ve all been fired. 

So the Trump administration is trying to do it from the top by Dick Tartt when they have no one to handle the administration. And on the other side, the very nature of the military attack means that you topple the governance structure that happens to be there already. So in many ways, it’s it’s taking the worst lessons of what we did in Iraq, where we root it out, not just Saddam, but the entire Baath party, and then tried to put on our own people over a society that didn’t have the ability to generate its own elites at first. 

And it took us been there for 15 years for them to generate the militant culture that was necessary to generate the elites. We discovered we didn’t like that at all. This time, the Latin Americans have gutted their own societies in places like Venezuela, and so the elites are already gone and we don’t have a management system. So you get two very brutal systems interfacing. 

Now that story will be different country by country. Colombia has a much more robust, elite system. The Brazilian system has a lot of oligarchs who can manage economically. And there is an opportunity for an interface there in a post intervention scenario. But if you think it’s going to be simple, it is not, at the moment, the path that we seem to be on is a little bit reminiscent of American strategies during the Cold War, where we indirectly or directly propped up authoritarian governments who would do what we wanted. 

Vis-a-vis the Soviet Union. The difference this time around is motivation. It’s much more similar to the late 1800s strategies where the United States would go and militarily knock off the government or make a fuss in order to enforce contractual norms that were not established by the US government. But there were established by U.S. corporations. And we called that dollar diplomacy back in the day. 

And some version of that seems to be where we’re headed right now. It’s going to be a very rocky road, because for the dollar diplomacy to work, the United States has to both build up institutions here to manage it and knock down institutions there to enforce it. It is kind of an ugly system, but if it works, and I’m trying to say this and as a moral point of view, as possible, it does allow the United States to treat Latin America like what it is, its strategic backyard, but then also make it its economic backyard. 

But I will warn you, where we are today, the U.S. government is unprepared for this, and U.S. corporations are unprepared for this because for the last 80 years, we have drilled into every American company that rule of law on a global basis is the first issue. And dollar diplomacy by default says it’s not.

The End of U.S. Military Deployments?

A group of Marines loading into the back of a C-130 aircraft

Just because the US intervened in Venezuela doesn’t mean that America will be abandoning its global military posture.

The US maintains military deployments in Japan, Germany, and South Korea. Don’t think of this as imperial overreach; think of it as a low-cost force multiplier that prevents bloodier conflicts down the road. Should the US withdraw from these positions, things would likely get ugly…and quick.

The US is the only country with the ability to project power globally, and these optimally-sized deployments help extend that reach.

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Transcript

Hey everybody. Peter Zeihan here. Coming to you from Colorado, avoiding the crazy winds out there. Through with you inside. We’re taking questions from the Patreon crowd about the Venezuelan intervention and the rest of Nicolas Maduro, the former current. I’m not sure how that works out now. Venezuelan president. Anyway, he’s going to go in jail. We’ll never hear from him again. 

The question is, is, is this a prelude to a general disengagement from the Eastern Hemisphere and closing down all the bases we have there? He’s like, oh, let’s let’s not get ahead of ourselves. First things first. The United States currently has fewer troops stationed abroad than at any time since the since World War two. We had a surge with the war on terror. 

We’re back down to a pre, like the lows that we had in the early 2000. And it’s important to understand that the United States footprint globally is actually quite limited. Right now we have about, let’s called 100,000 troops abroad. Most of those are concentrated in three areas. You’ve got the largest contingent, which is in Japan. The second largest. which is in Germany and the third largest, which is in Korea, especially closer to the DMZ. All of these serve as force multipliers for the United States. Everything else is a very small contingent, maybe a naval base here and there that has a few hundred to a couple thousand people that are basically there to help the carriers operate. 

But the way World War Two ended, we already have places like midway, for example, which is U.S. territory or access to the United Kingdom, which has their own naval bases that we just kind of rent. And so the, the need for the United States to maintain a far flung Imperial style military deployment just doesn’t exist. If you see the United States back away from the deployments we do have, it means that we have made a very clear strategic decision as a country to foment a war and so that we can participate in the next one. 

And lose a few tens to hundreds, thousands of troops. So, for example, if we walk away from Japan, Japan is the anchor. And because of the way that the islands in the Pacific are position, it means that we basically give up the ability to influence the Asian mainland and the western third of the Pacific, which includes Japan and Korea and Taiwan and China and Singapore and Indonesia and Australia. 

And if we decide to walk away from that, we’re basically saying that this whole area can evolve on its own, maybe generate a new hegemon, that we will then have to come back and deal with decades from now, basically setting up something similar to the rise of Japan in World War two. If we walk away from Germany. 

Oh my God. Oh, God. Okay, so every time the Germans are responsible for making their own decisions, they start acting like a country or something. And as a large country, the largest of the European states by population, economy set in the middle of the continent, it will naturally try to influence the areas around it. And that is exactly what set everybody on the course to World War One and World War Two. 

And so to do that deliberately, to set up a repeat of the world wars in Europe, strikes me as something that would not be in American interest. And that’s before you consider the fact that the Russians have been pointing nukes at US my entire life, and I’m now 50, 52 birthday coming up. That strikes me as immensely unwise. 

One for the low, low cost of 30,000 troops stationed in bases that are nowhere near a front line. You can basically control the strategic destiny of a continent that’s cheap. Third, Korea, you draw those troops back. Forget about the likelihood of a war in the peninsula, which is would be very likely at that point. North Korea has nukes pointing at us, with the range to reach us. 

So your permanently now putting Minneapolis, Denver, San Francisco, Los Angeles under a nuclear threat and defending against that would require an order of magnitude more cost, than simply maintaining 20 to 25,000 troops on the Korean Peninsula. So really, the three big deployments we have right now are there for very good reasons, mostly in terms of controlling the strategic environment, and because not having them there would require us to take a defensive position in our hemisphere, which would be extraordinarily more expensive and set up the situation for war down the road. 

Okay, so that’s the United States. Now let’s talk about everybody else’s deployments. 

Okay. That’s all of them. Here’s the thing that most people forget. Deploying troops in the thousands, much less tens of thousands a continent away, is very difficult, requires specialized logistics and decades of practice and infrastructure development. And so we are the only ones in the modern era that does that. The last time any countries did it at scale, it was before World War Two when we had the Japanese Empire, which we, to be perfectly honest, modeled some of our stuff, and the British Empire, which of course we modeled some of our stuff off besides that in the modern era, and nobody does it now. 

Part of this is policy. The whole idea of the Cold War globalized system was that we will pay to create a world that keeps you safe is an exchange. You allow us to write your security policies. And that has been the basis of the American alliance going back to 1946. But the other part is just the sheer expense. 

By creating a globalized system, we gave everyone access to the globe and all the economic goodies that come from that. And trade and access to commodities and markets the world over. And they didn’t have to have the military for it. So most of them never even bothered to try. And so the world’s second and third largest navies are the Japanese and the Brits, both of which work hand in glove with the United States. 

And if we decided to withdraw from the Eastern Hemisphere, those two countries, as well as a number of others, would have no choice but to develop that capacity. Now, they wouldn’t do it in two years or five years. This is a generational thing, but eventually we’d have a half a dozen navies that had regional, maybe even global reach, and it would look a lot like 1929. 

I would argue that’s something that we don’t want to do, because doing it the first time was really expensive in men and lives in the United States honestly got off cheap because it was most of the fighting was over there rather than over here. Okay, let’s talk about the the big countries, more specifically China. People keep pointing to the fact that they’ve got a large Navy unit, and they do and they do have about, 50 ships that are capable of operating more than 600km from the shore. 

But even if you ignore the first island chain, which really hems them in, that doesn’t give them very much, because the Chinese don’t have basing rights in places that are useful to them. So when you look at the United States, we’ve got Japan’s second most powerful naval power on the world. Where we stage ships, we have midway, we have places that are allied in the North Atlantic basin, whether it happens to be Italy or Spain or the United Kingdom or Iceland. 

We have global power projection, in part because of our territories and in part because of our allies. The Chinese have no allies, so they’ve gone out trying to build what they call a string of pearls model, where they develop friendly ports along the route that they want. And so they get along okay with Malaysia. They basically bought Cambodia. 

And even though it has a coastline, they’re trying to build port there. They’ve got some friendly relations with Bangladesh and Myanmar, Sri Lanka and Pakistan. And so the idea is they can use their short haul ships to hop from base to base to get all the way to the Persian Gulf, where they, where the oil is. 

And of course, everybody, because of pirate reasons, has a small base in Djibouti. But here’s the thing. If one of those gets broken in a hot war, every ship west of that is lost. The Chinese have tried to do it on the cheap, and that means it’s really easy to unravel. And so even if the United States were to find its vessels, say, stuck in the Indian Ocean, they have enough range to get out. 

The Chinese don’t. And so I’ve never really been worried about the Chinese naval build out. Let’s talk about the Russians. The Russians aren’t a naval power. They’re not an air power. They’re losing their space capability. Within a decade. Pretty much everything that they have that’s not ground base is going to be gone. They just lost the manufacturing base to maintain it, much less expand it. 

But they still have a large army, over a million men under arms. And every month, they’re bringing them another 20 to 40,000 men into the fight. That’s awful. If you’re on Russia’s border. And that’s the situation that the Ukrainians are struggling with right now. But if you’re not on Russia’s border, it’s actually not all that bad because you have standoff distance where you can use drones and air power. 

If you’re another country back, you know, you really don’t have to worry about the tanks coming either. By the way, the Russians have almost run out of tanks, which is crazy. They started this war with 20,000 armored vehicles. They’re down to probably less than a quarter of that now anyway. Bottom line is that their their exposure is huge, but their ability to push back that exposure is very, very limited. 

And their ability to use naval forces to protect power is basically zero. Now, they still have a handful of ships, but they’re split into four different bodies of water the Black Sea, where they can’t get past Istanbul unless the Turks allow them, and everything that does get passes. Relations with the Turks go south. That’s lost. They’ve got the Baltic Sea, but that is now completely a NATO lake. 

At this point they’ve got the Arctic Sea, which is their their most powerful fleet is up there. But the problem is it’s a long way from anywhere. And they have to get by Norway and Iceland and Scotland and the United Kingdom, the United States, all of which are superior naval powers on that, but one that Iceland doesn’t have a military. 

But everybody else could probably do it by themselves at this point, even without the United States. And then they have the Pacific Fleet that is based off of, Petrobras, which is basically a city you can only fly to on the peninsula. And of course, the Japanese are there. They could potentially be some things in the code Vladivostok, but that is literally surrounded by Japan, world’s second most powerful navy. 

And even if all of the Russian ships were in the same place, the Japanese could still easily take them out because they’ve done that before. So the ability of the United States to project power is huge, in part because of its geography, but also because of its allies. The Chinese are blocked in by geography, the Russians are blocked in by geography, and neither of them have allies. 

So we’re in this weird situation where the United States is considering a full scale withdrawal from everything, which will guarantee higher defense costs and longer, long term security challenges. This is one of the things that the people who are really pro isolation tend to miss the the footprint that we have right now is almost perfectly optimized to not have to spend money or lives. 

As an added benefit, you also get to control the security architecture a huge part of the planet. You pull back all that goes away.