Status Update on the Persian Gulf

Aerial View of Persian Gulf with Digital Paths | Licensed by Envato Elements: https://app.envato.com/search/all/photos/07ea8bb2-6848-46ea-8372-ec4f58d701a6?term=persian+gulf+satellite+

All right, time for a status update on Persian Gulf shipping. Tanker traffic is slowly resuming, and Gulf producers are gradually restarting exports…but let’s not go counting chickens quite yet.

Global energy flows remain constrained, and exports won’t fully recover for some time. Most of the traffic is the previously stranded cargo flowing out, rather than new tankers entering. And Iran has emerged from this new arrangement with greater influence over the Strait.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. It is the 29th of June, and let’s chat about the status of the Persian Gulf, because so much depends upon it. We’ve had on again, off again violations of the steel by both the Iranians and the United States. One of them hit something and the other one hit something or retaliation. At the moment, they’ve both agreed to disagree and not shoot at each other. 

So technically, the Strait of Hormuz is open if you’re the Americans and it is closed if you are the Iranians. As a result, cargo movements have been very, very slow to pick up. We’ve probably had about 20 tankers a day on average this past week leave, and that is starting to finally drain the stranded ships that are within the Persian Gulf. 

Keep in mind, there were over 1000 that were stranded when the war began and had been there for three months, and that has meant that a fair amount of crude, maybe 35 million barrels, has gotten out. In addition, a number of the Gulf states are incrementally restarting oil exports. The most progress has been made in Saudi Arabia, where there are at least four tankers as of the weekend that were loading successfully. 

Gutter is more of a question mark, and in the case of the United Arab Emirates continuing to use their report, which is actually outside of the Strait of Hormuz on the Gulf of Oman, Kuwait influx, no real information and Iraq doesn’t look like its movement at all. Some people are saying that, okay, look, we’re getting back to normal, but but not really. 

You see, the the Saudis have a bypass pipeline that they cranked up well above design specifications, and it made up for over 90% of their previous exports. And so they were shipping things out through the Red sea. So shipping things now from Ross Tonnerre on the Persian Gulf is just taking some of the stress the off of that transit line. Is that not actually adding any new crude? 

The same more or less is going for the United Arab Emirates. We are getting this one shot deal from the stuff that was locked up that can get out, but very, very few tankers are coming in for what I’ve been able to sell over the weekend. You’re talking about less than 15 ships transited into the Persian Gulf, and only about half of those were tankers. 

Keep in mind that before the war, somewhere between 100 and 150 ships transited each way each day, which means, as a result of the peace deal, the only country that is currently sending ships back and forth through the Strait without restriction is Iran. And I can’t underline enough about how this deal so lopsided serves Iran’s purposes. The Iranians are talking openly now about the regimen, about how they’re going to charge fees or tolls or whatever you want to call it to what’s going on. 

And even Oman, which is, you know, technically not. Iran is talking about how they’re looking forward to coordinating with the Iranians to make that happen. So the most important waterway in the world for energy flows is right now only fully open for business. If you’re Iranian. And the Iranians and others now are working on how to charge everyone else for the pleasure of using it, with that deal supposedly being enforced by the US Navy. 

So this is an ongoing, catastrophic economic and strategic event for the world as a whole, for the United States specifically. 

And we still don’t have a good read on when the fields in the region are going to be getting back up to full production. Probably not this year. All right. That’s everything for me. See you tomorrow.

U.S. Oil Export Restrictions Coming Soon

An oil tanker in the ocean sailing

If global energy supplies remain constrained, the U.S. government will prioritize U.S. consumers over international markets. This would take the form of export restrictions.

These restrictions could take several forms. The first would be halting U.S. crude exports, which would keep more oil at home, but would also strain storage capacity and hurt shale producers and refiners in the process. The more likely option would be taxing exports of refined products, which would lower domestic prices and push the burden onto global markets.

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Transcript

Hey, everybody. Peter Zeihan here coming to you from above the valve at all in New Mexico. We’re coming up on golden hour, so I’m just going to sit here for a little bit. Anywho, today I am taking a question from the Patreon page. Specifically, do I think that the United States government is going to restrict energy exports in order to keep prices under control, as the international system basically loses energy?

And absolutely, absolutely, absolutely. The question is how there are a few options. None of them are great and all of them have side effects. But let’s start with the basics. As of the third week of June, we have somewhere between 1 and 1.3 billion barrels of crude that were never produced and delivered. That has drained global inventories to record lows.

And even if the strait were to open tomorrow, it’s going to be years before Persian Gulf producers can be producing again. So we’re going to have to have some demand destruction. That will probably involve a protracted, sharp price spike. And there is no way that a president is populist, as Donald Trump is going to let that pass without doing something.

So two options. The first one, the legal option is probably the least clean back under the Obama administration, Congress granted the president the right to end all oil exports just by saying so. That would trap the crude in the United States and probably send crude prices in the United States. Negative, because there’s just not enough storage. Well, Let me back up and take that back a little bit. Storage is running really low in the United States because of what’s going on in Iran. So step one would be to fill up all of that storage. And the question would be whether or not the shale wells, which fall off pretty quick, would fall off before the storage was filled.

You see a shale well, it can be brought online in just a few weeks, but half its lifetime production is produced in the first year. So if it takes, say, three months for the storage to fill up and nobody drills at all during that time, things might work out kind of kind of. I don’t want to. I don’t want to ever play that.

If not, prices are going to go negative because there’s just no where to put it. We had the negative price situation for a while in Covid, if you remember. That was all kinds of fun. If you were an oil producer. Anyway, what that does is it floods the system with crude. And if you are a US refiner, you now have basically a bottomless supply of light, sweet crude to shove through your refinery and make product.

However, US refineries don’t like light, sweet crude. They were designed for a different world where we imported a lot of cheap, heavy, sulfur laden crude. Ever since the shale revolution really got going back and say 2010. I mean, we got our first production back in

2007, 2008, and then it just exploded after that. US refineries have been changing their refineries.

Bit by bit by bit. But it’s been very slow. They’ve been fighting it at every step of the way. And in this circumstance, the ones that have basically been dragging their feet would be hosed, because you can damage your refinery if you run the wrong crude through it. And at a minimum, you’re going to have a really high refinery loss anyway.

That’ll go for a few weeks and then we’ll see basically an implosion in the shale fields, because nobody is going to want to produce if they can’t export. A lot of infrastructure is added, especially in Corpus Christi in the last decade to facilitate those exports. And if they go to zero, they go to zero. So probably you’re looking at at another one, maybe one and a half, maybe, if we’re really lucky, 2 million barrels per day of product, of which they will try to make more gasoline and diesel and jet fuel.

So that might, might be half of it, but that’s it. And everything else that’s in the surplus basically gets shut down because there’s nowhere to send it. So it would give a moderate boost to consumers over the mid and long term. Refiners would just be besides themselves with the damage to the refineries and producers would go out of business.

That’s option one. That’s the legal option. Option two is to do something to restrict fuel product exports. Right now, the United States exports about 5 million barrels per day of refined product, which is more than any other country on the planet has ever even exported of crude. And if you were to do something that it would strike that and trap that in the country, that would have an immediate effect on prices and an immediate effect on supplies to the global system, just like shutting off all exports would.

The problem here is that Congress has granted the presidency that power. And there’s a lot of questions as to how you would do it. Probably the most effective would be to just put a really fat export tax on it. I think that would play to Trump’s preferences. It would still result in higher prices in the United States, but nothing compared to everywhere else.

And we wouldn’t have a supply shortage anyway. Those are the two options. Probably find out within a couple of months which one the Trump administration is considering, because we’re getting really close.

We Have a Peace Deal! Sort of…

Flags of the United States and Iran blending. Licensed by Envato Elements

It looks like we finally have a peace deal between Iran and the U.S. (and maybe Israel). Neither side can agree on the terms, so it’s really more of a tentative agreement to stop shooting at each other…at least for now.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from the San Luis Valley in southern Colorado. I’m on my way to New Mexico, and I just heard on the radio that we have a peace deal between the United States and Iran. So I went till I get a blip of data and. Yeah, no we don’t. Okay, let me outline the five big things that supposedly there’s agreement not agreement on. 

Number one, the Strait of Hormuz itself, the idea both sides say that it’s going to be open. The Americans say there’s going to be no charge whatsoever for anyone passing through. Iran is confirmed that there will not be tolls. There will be a service fee that is higher than the tolls they’ve been charging. So air. Number two, Israel’s included, according to the Iranians, and not included according to the United States. 

In fact, in the time it took me to get my blip, the Israelis have carried out several strikes throughout the country. 

number three, the nuclear program. The United States has said that the Iranians will close the entire thing down, and that all the enriched uranium in the country will be removed and spun down to what you would use for power, fuel. 

The Iranians have said no, not even remotely. It’s never leaving the country. We might spin it down to 30% enrichment. By the way, you need 95% for a bomb and only 3.5% for nuclear power. But that’s it, then. Sanctions. Iran says that they’re all lifted immediately in the United States. This says they’ll be lifted in stages, with the first phase being lifted maybe in 60 days, assuming the Iranians behave. 

And then, number five, restitution. The Iranians say that the Americans have agreed to $300 billion of investment to compensate for launching the war. The Americans made no mention of that. The Iranians also said that $25 billion of frozen assets will be freed immediately. And the United States has said, you know, in bits and pieces over the next decade, maybe. 

Why so far apart? I mean, actually, these positions are further apart than we were back in February, the day before the war started. The key thing to remember about all of this is number one. The Iranians are always bastards when it comes to negotiating. Everyone has been trying to hold talks with them in some form for over 40 years. 

And so the idea that this time it was going to be quick, please. Second, there’s not a single American involved in these talks. It’s not just that we have a Pakistani field marshal doing the negotiating. It’s being moderated by Qatar and Saudis. However, the United States does not have an ambassador in Pakistan or Saudi Arabia or gutter or Kuwait for that matter. 

So everything is happening like a game of telephone, three steps removed from any American. And then the State Department isn’t involved because there are no ambassadors. So it’s not a surprise to me that this isn’t going anywhere. What’s the surprise to me is that anyone else thinks it might be going somewhere. Markets, of course, have exploded and all is down, but there’s no reason to think that this is going to be any different. 

If you just need something to underline that, the documents will be signed in Switzerland on Friday remotely, the Americans and the Iranians can’t be bothered to show up. So no, this is not the end. All they’ve agreed is they would prefer to stop shooting at one another. We’ll see how long that lasts.

DHS Gets Funding… A Lot of Funding

DHS building in Washington DC | Photo by Wikimedia COmmons: https://en.wikipedia.org/wiki/United_States_Department_of_Homeland_Security#/media/File:DHS_St_Elizabeth's_Building_1.jpg

ICE and DHS just got approved for a new funding package that expands resources for immigration enforcement and border security. My primary concern is the economic impact of this new funding, rather than the politics of it all.

The U.S. workforce is already under immense demographic pressure, and introducing stricter immigration policies will only worsen labor shortages (especially in sectors that are heavily reliant on immigrant workers). This means higher costs, reduced service levels, and baked-in inflation for the remainder of the decade.

The political side is concerning as well, but Trump’s attempts to limit congressional leverage are nothing new. Just another signal that U.S. power dynamics and party structures are in flux, as more decision-making power is falling into the hands of the executive branch.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today is the 11th of June, and the news is that the US House of Representatives has given final approval to the new Department of Homeland Security budget. What can I say about this? It will go to the president’s desk. Now. He’s expected to sign it. It includes within it a rough quadrupling of funding for immigration, Customs Enforcement and border control. 

That’s on top of the $75 billion that was part of the big, beautiful bill from last year. And this is for an agency that normally has a total budget of about $10 billion. So over the four year term, this is about a quadrupling of the budget. Now, lots of people are going to say lots of things about immigration and human rights and thuggery in general. 

I’m going to leave those topics to them. Not that they’re pointless, but they’re just not mine. I want to hit this from the point of view where everyone is going to feel it. The United States now is seeing more of its population dying than being born, and the largest generation in American history. The baby boomers are mostly retired, and by the end of this decade, they will all be retired. 

Which means that if you want a growing labor market and the growing economy that goes with it, you need to get the people from somewhere other than natural birth. And the only option until we have cloning, like really good cloning, is immigration. And with this sort of system, at least for the rest of this decade, that’s functionally impossible. 

So that means that every pressure you’re feeling in the economy on the affordability question is about to get significantly worse, because there just isn’t going to be enough people to make everything function. Industries that’ll be hurt hardest. Our agriculture services and health care and construction. Those are the places where people who are not born in the United States tend to carry a disproportionate load. 

So for those of you who are older, look forward to spending lots of long hours and hospitals in a bedpan that hasn’t been changed. For those of you who like to move into new homes, get used to those being significantly more expensive because we won’t have the labor to build them. And for those of you who are used to going to things like restaurants, expect those tables to not turn around because there’s nobody cleaning the dishes. 

And in agriculture, we’ll still be able to do row crop pretty well. But as you get into, say, meats where people are, the animals have to be herded. That’s usually done by immigrant later. And when you’re dealing with fruits and vegetables, where that has to be handpicked immigrant labor as well. So everything gets more expensive on a secular basis now. 

And even if the day Donald Trump leaves office or this term ends and Ice is more reformed, if that’s the right term, and all of a sudden immigration picks back up to something that’s closer to the half century average, it will take another ten years for that to feed into the system. So we are guaranteed now to have significantly higher inflation than we needed to. 

That’s piece one. Piece two is that this is not an annual budget. This is a budget that is designed to fund these agencies through the remainder of Trump’s term, outside of the normal budgeting process. Now, under normal circumstances, Congress would never agree to this because that takes all of the power away from Congress. Congress has the power of the purse, the House specifically, and transfers it to the executive for the remainder of the term by the time Trump signs this, it’ll be codified into law. A couple things from that. Number one, the executive now has full authority to use this however he wants. Congressional check is gone. We’ve been talking on and off for the last few years about how the United States is going through a political transition, with both the Republican and the Democratic Party basically breaking down. 

This basically completes that process for the Republican Party. Trump has ejected a number of high ranking senators and House members via primaries. They’ll be gone in November, and the number that remain are going to be so isolated that they really can’t do anything. They’ve had this last stand, this last two weeks, where they’ve stood up to Trump on a number of issues, and now that is effectively over because they’ve lost their leverage. 

That means that the Republican Party is gone. It’s no longer the party of business or national security or rule of law, certainly not a fiscal conservatism. And this will accelerate what’s next, because we’re not going to have several years of the political right in the United States being completely nonfunctional outside of the person of Donald Trump personally, from a Democratic point of view, from an organizational point of view, this is generally pretty bad. 

It also means that whatever his whim is, is now state policy. And there are really no checks in the congressional branch of government. And so we’ve been seeing these cavalcade and compounding mistakes by Trump, whether it’s in negotiations with Iran or with Russia or domestic regulation or with the tariff policies. All of that is going to accelerate now, because the last of the folks who might have provided some ballast are gone now. 

And this law means that he doesn’t even have to consult anybody. Which means it really doesn’t matter to me what happens in the midterms. Because Trump has barely gone to Congress at all in his first year and a half in office. And now that he’s gutted what’s left of the Republican Party, and even if the Democrats managed to retake both houses of Congress, why would he go to Congress again when the priorities he has have already been funded for the rest of this term? The only way you could change that is if Congress decided to rescind this funding. But that would have to overcome a presidential veto, which requires a two thirds majority. 

So that’s just not going to happen. So all hail the King. He’s got what he needs to do, whatever he wants on the issues that he cares about as long as he’s alive or in office. And yes, there is some gray area between those two.

Insulating the President with Loyalists

Bill Pulte, New Director of National Intelligence official portrait

It looks like we have a new acting Director of National Intelligence, Bill Pulte. You may know his name as he’s both a housing executive and the current head of the Federal Housing Finance Agency.

So, we’ve got a new Director with at least two full-time jobs and no meaningful experience in intelligence…yeah, that sounds about par for the Trump Administration’s nominations. But at least Gabbard is out of the office.

Anyways, this move will likely result in the intelligence agencies losing influence in presidential decision-making and reinforces the trend of Trump isolating himself from anyone smarter than him.

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Transcript

Hey everybody, Peter Zeihan here, coming to you from Vegas. Had to find a quiet corner for this one was a little hard with all the people running around anyhow. Today we’re talking about the new acting Director of National Intelligence. Guy by the name of Bill Pulte. If you’re familiar with homebuilding, Pulte homes that Bill Pulte. He already has a position in the government. 

He’s a Trump loyalist. And he’s appointed to the civic of this right FH for the Federal Housing and Financing Agency, which is responsible for, among other things, back stopping about 70% of American mortgages. So big job. And most of the insurance agencies under FHFA, most notably Fannie Mae and Freddie Mac, are in conservatorship and have been since the financial crisis. 

So it’s a big, important full time job. The fact that he comes from housing and is now managing the mortgaging system suggests a conflict of interest. When he was going through confirmation hearing year, several senators piped up about that, most notably Elizabeth Warren. But you know, she hates everybody, so it’s hard to take that too seriously. 

Anyway, he has now been deputized as the acting head of national intelligence, and his job there is to coordinate the dozen plus federal agencies that have intelligence arms, everybody from the NSA and the CIA to law enforcement. Anyway, that is a full time job as well. And what it really tells us is President Trump, doesn’t really care about the national security agencies at all, and he certainly doesn’t want them talking to him about what’s going on in the world. 

Trump feels the need to be the smartest person in the room. And if somebody from the intelligence agency is there talking about Moldova or Kyrgyzstan or Bolivia, they will obviously know them more than the president about that topic. And so they’re just not allowed into the room. Now, the outgoing director of national intelligence was Tulsi Gabbard, who had some foreign leanings and so seen her gone as great, but now replacing her with somebody who is completely unskilled and there’s no background in intelligence or military affairs or project management is really not great either. 

About the only good news I can say is at least this guy is not beholden to foreign interests like Tulsi Gabbard was. He’s a loyalist, so he’s unlikely to tell Trump anything that he doesn’t want to hear. Which probably means that all of the intelligence’s basically now have a ceiling above them, between them and the president. So Trump is continuing to go down this path of being the least informed leader that we have had in modern history. 

The only other one that is even remotely in the same bucket would be Barack Obama, who was famous for not wanting anyone in the room at all. This is just the other side of that coin. So good news. Not really. But considering that Donald Trump doesn’t have anyone in his circle with real foreign policy experience except for Marco Rubio, who has similarly been banished and now heads two agencies State Department, for the similar purposes of keeping him in arm’s length from the president, keeping those institutions away from the president. It’s kind of par for the course.

Ebola Outbreak and Delayed Detection by the U.S.

Doctors in biohazard suits

At least 50 are dead due to a new Ebola outbreak in Central Africa, and the U.S. was the last to hear about it. This is a glaring example of the breakdown in the U.S. public health and monitoring system.

Three programs have traditionally acted as layers of defense: the Agency for International Development, the Centers for Disease Control and Prevention, and the Biomedical Advanced Research and Development Authority. All three have been gutted under the Trump administration, so early detection, disease tracking, and vaccine development have all been sidelined.

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Transcript

Hey all, Peter Zeihan here, coming to you from Roccascalegna, totally butchered the pronunciation of that one. Anyway, it’s Castle and there’s a more castle and mountains. Anywho, today I want to talk about something that hasn’t really made the news in the United States, but probably should. There’s a new Ebola outbreak in Central Africa. At least 50 people dead at this point. 

The numbers keep rising by the day, and the topic is why we really haven’t heard of it. There’s kind of a three line system of defense when it comes to new infectious diseases in the United States. The first of all things is USAID, the agency for International Development. That was basically it does development work in countries to help them get on their feet, deal with disaster relief, that sort of thing. 

Recovery in conflict zones. All that good stuff. Normally, this means that we’ve got thousands of American citizens working for the government all around the world, and they notice things. And so while, yes, economic development by far is their credo and their job, they actually serve as kind of a first line of defense for the intelligence community because they see things in the communities that they’re in. 

Well, USAID was dismantled and closed by the Trump administration last year, so we didn’t get any advance warning of this outbreak. Second, you’ve got the center for Disease Control, which does all the genetic testing and mapping of diseases and the epidemiology and all that fun stuff. Well, it’s been gutted and under new leadership, including RFK Jr, who’s in charge of the overall health approach in the United States. 

It’s basically not present in most parts of the world. So normally when an outbreak like this happens, the CDC is the first or the second call that is made to try to figure out what the disease is, how it’s communicated, how lethal it is, all that good stuff that has basically stopped. And it wasn’t until last week that the CDC got the call. 

And that’s well after three weeks after it was discovered locally. The third thing is something called Barda, which is kind of like DARPA, the defense operation that explores new technologies. Bart does the same thing, but it maintains a pipeline for new vaccines. Well, Bart has basically been gutted and funding as well, because RFK has basically decided that vaccines are bad. 

So we’re finding out about this late. Definitely on the back foot. And only now is the sequencing process starting. For those of you who don’t know what a bola is, it’s pretty nasty. It’s a hemorrhagic fever, which is a technical term of saying that you bleed from everywhere eyes, nose, ears, but fingernails, everything. And basically your body falls apart from the inside out. 

It’s a particularly nasty way to go. And at the moment, we’re barely looking for it. So political decisions have consequences. And one of these means that Ebola may be coming to a town here, you. Which is nasty, but the only bright spot I have is from the information that has been reported through the W.H.O., World Health Organization, which the US is no longer cooperating with. 

So this is something they told us out of the goodness of their heart rather than out of any sort of contractual obligation. It does appear at the moment that this new strain, I believe, is how it’s pronounced. Probably butchered. That too is no different from normal Ebola, and that it is spread by bodily fluid contact rather than by respiration. 

Just keep in mind that diseases change all the time. As we learned with Covid, and we’re now in a situation basically where if it does change, we won’t know until it’s here. So food for thought.

The U.S. Gets a Taste of Corruption

Photo of a bronze trump doll on stacks of 0 bills

Trump is no stranger to helping out his cronies, but this new settlement that creates a $1.8 billion fund to compensate conservatives allegedly targeted by past Justice Department actions is a bit on the nose, even for him.

This slush fund is a reminder of the legal and regulatory erosion that the Trump administration is responsible for. The rule-of-law system that has supported the U.S. economy and government is now on some very shaky ground.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Vasto, Italy. Today is the 18th of May. You’ll see this later in the week. Short version is. We’ve probably had the single biggest step backward in rule of law in the United States of the second Trump term, which is, you know, saying it’s saying something in of itself. And the fact that I’m telling you this from Italy is a little concerning. 

The short version is today, the Trump administration settled a lawsuit that had brought against the US government while Trump was president. So basically Trump suing Trump and then settling with Trump to establish a slush fund of about 1.8 billion USD. Technically, it’s $1,000,000,776 million to compensate conservatives who have been prosecuted by the Justice Department in the past. Everyone who has been shortlisted to get a payout, as somebody who is one of Trump’s close political allies and in essence, this is a slush fund. 

This is the sort of operation that people in Italy have been telling you, like even the most crooked of our politicians would have never dreamed of doing something so obvious and brazen. This has a lot more in common with how Nigerian governments in recent decades have handled slush funds, basically suing yourself, controlling both sides of the negotiation, and then handing out the money to whoever you wanted to in the first place. 

Although even Nigeria has moved away from that model in the last 20 years, the most recent governments to do things like this were Nicolas Maduro of Venezuela and Hugo Chavez. This is hardly the first time the Trump administration in round two has done this. I really doubt it’ll be the last. The judge that oversaw the settlement basically said in legal terms, what the actual fuck? 

But here we are. This is what happens when you have an executive who sees the rule of law as part of the problem, rather than part of the solution. We should expect significantly more things like this. And this kind of dovetails with what has functionally happened with the tariff situation. Whereas the tariffs policies have changed so often that the only way that you can stay ahead of them is to have a really good relationship with the regulator, which is another way to say bribery. 

What was the other comparison I wanted to make? Give me a minute. It’ll come to me. Oh yeah. On the regulatory question, the Trump administration has gutted several of the regulatory bodies so that enforcement of the regulations that are on the books, even some of them from Trump, one can’t really be done in a timely manner, but they’re not bothering to staff these agencies with people who could strip out regulations from, say, the Obama or the Biden years. 

They’re just telling companies to not abide by them and put themselves in deep legal jeopardy that that a future administration might come after the before. But the Trump administration is saying, you know, all you have to do is not follow the law in its current form, and we’re not going to prosecute you. So it’s breaking down the rule of law that allows us business to be the most dynamic in the world. 

And basically following a model that the Russians had during the 1990s and the 2000, where you deliberately have conflicting guidance from the Kremlin and from law and from regulation, and the only way to stay on the positive side of that is to bribe everyone in sight. So mazel tov from Italy, a country that used to be run this way but found a different way.

Using U.S. Energy as Leverage

Two LNG tankers at port

Trade relations between the U.S. and Europe are on the fritz. The latest in all the noise is the suggestion that the U.S. could restrict LNG exports to the EU if trade negotiations break down.

This is a low blow, as Europe imports most of its gas. And if you haven’t noticed…the world is in a bit of a shortage at the moment. Cutting off exports would be legally and practically difficult, but a distressing notion nonetheless.

While the idea of using U.S. energy dominance as a negotiating tool isn’t surprising, I had originally pictured this strategy as being reserved for rivals, not allies. But there’s the Trump administration for you.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Pozza Della Cava caves in Ovierto, Italy. Today we’re looking at some of the strange things that are happening in US European relations. As you may or may not remember, the Trump administration is carrying out 200 simultaneous trade talks and none of them are really going anywhere, which means it’s really up to secondary officials that normally wouldn’t have much power in negotiations to kind of set terms. 

And one of them, Andrew Pozner, the US ambassador to Europe, has said that if talks between the Trump administration in Europe don’t go well on things like, well, this is neat on things like auto tariff levels that the United States is going to stop sending liquefied natural gas to the continent. Now, that’s it’s a total dick move, but that doesn’t mean it won’t work. 

Two things. Number one, Europe imports nearly 90% of their natural gas. And before the Ukraine war, it was more or less an even split between stuff from North Africa liquefied natural gas. It was imported from multiple countries, stuff from the former Soviet Union and then Norway. What’s happened now is that two of those got away because of the Ukraine war. The flows from Russia have stopped and because of the Iran worshiping strait, a former flows from Qatar, which is the largest LNG supplier to Europe pre-war, have also stopped. That means US natural gas is one of the few sources of energy that the Europeans can still access, and if that is to go away for any reason, then the Europeans are kind of screwed. 

So that’s kind of piece one. Piece two is how this would happen. It’s kind of difficult to imagine. That doesn’t mean it can’t happen, though. The issue is private enterprise. The United States doesn’t have a state or company. It just has private companies that are buying natural gas on the American market, cooling other facilities, typically on the Texas or Louisiana coast, and then shipping it out. So if the United States was going to bar those companies from selling to Europe as part of negotiations, there were definitely a bevy of lawsuits. But if there’s one thing about this administration that we really do understand is it’s deeply disinterested in general business conditions or the role the government plays in business, and it’s really not constrained by legal norms at all. 

So while from a clear, clean legal point of view, I don’t see how this would happen, I don’t think that would really dissuade the federal government under this administration at all. So will this work? This is one of the things that in my projects, in my books in the past, pre Trump, I said we should probably expect that the United States will try to leverage its energy, security and economic strength in order to get whatever it wants out of anyone. It’s just a little frustrating from my point of view, to see this used against allies as opposed to potential foes, but, you know, bygones.

Impacts on the U.S. Power Grid from the Iran War

Satellite view of north american lights and energy

The U.S. is relatively insulated from the conflict in Iran and the closure of the Strait of Hormuz, since it’s a net exporter of nearly every major energy source. Most other countries aren’t so lucky…

However, there are plenty of indirect risks for the U.S. Global energy shortages could spike commodity prices (like coal) and disrupt supply chains; this would affect key U.S. imports like aluminum, copper, and transformers.

So, the U.S. power grid is likely safe in the near-term, but secondary effects on infrastructure and manufacturing could complicate things down the line.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado. Today, we’re taking a question from the Patreon page. Specifically, it’s whether or not I think that there are any parts of the US power grid that are particularly vulnerable to what’s going on in Iran right now, because of the closure of the Strait of Hormuz, for example, 20% of global liquefied natural gas is locked in. 

And if you happen to be an importer of that, that’s a bit of a problem in any number of ways, because you can’t keep the lights on. Nothing else really matters. This is something where I’ve got some good Not only is the United States insulated because it’s in a different hemisphere, but the United States is a net exporter of every type of energy, whether that is raw electricity that’s already been generated, natural gas or jet fuel, naphtha, coal, all of it. 

Which means that unless there is a direct price link back to the United States through something that is used to make electricity, you’re kind of in the clear. The only fuel out there that really has that sort of link is liquefied natural gas. And the United States is the world’s largest exporter of that now. So there’s at the moment, no direct link. 

Now there’s plenty of indirect links. So for example, if you use coal in the United States and the United States is a coal exporter and the price of coal goes up on a global basis because of energy shortages related to other countries having power problems, and you might feel indirectly, or if you want to take a longer step in something, we’re all going to feel probably by the end of the year, the sort of rolling energy crisis that we’re starting to see in East Asia and to a lesser degree in is absolutely going to hit manufacturers markets. 

And the United States imports. A lot of the things that we use to stabilize our own power grid, whether that’s aluminum cabling for things like power lines, copper for anything that goes into electronics, and more advanced pieces of equipment like transformers, which take over a year to build. Because of the complexity, we will be feeling that in our power grid, but that is very indirect. 

That is not this month. That is a problem for probably the fourth quarter of this year. So for what it’s worth. I do have a little bit of good news from time to time.

Iran Diplomacy Has Yet to Begin

Two diplomats shaking hands in front of flags. Licensed by Envato Elements

The administration’s centralized and personalized approach to foreign relations has collapsed U.S. diplomacy across multiple fronts, including stalled Iran talks, poor relations with allies, and uncertainty ahead of future negotiations with China.

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Transcript

Hey all. Peter Zeihan here, coming to you from Colorado. Today we’re taking a whole batch of questions from the Patreon page and kind of lumping them together. And the general topic is diplomacy in the Iran war. Now, a lot of folks have been wanting me to comment on every ebb and flow in every Trump administration initiative or Truth Social post. And, you know, number one, that would be exhausting. 

Number two, to the bigger point, most of these things don’t matter. The way diplomacy normally works is you have a cadre of people in the State Department and the CIA and the Defense Department in the national security apparatus, whatever it happens to be. And they all have their own contacts that they maintain on behalf of the government on the other side. 

And you have back and forth communications that all of these people at lower levels, medium levels, higher levels, and those people are used to shape the conversation so that when the president comes in, all the groundwork has done been done already. The issue we have with the Trump administration is most of those people have been fired, and the ones that haven’t have basically been barred from carrying out any sort of diplomacy because Trump sees this as his personal purview. 

So, for example, when you look at the Chinese summit that’s supposedly is about to happen, it wasn’t until last Friday and Thursday and Friday when, for the first time, major CEOs were starting to get approached about whether they could join the president’s delegation. All of the groundwork that is normally done to make sure that the president isn’t wasting his time, none of it is being done. 

And so the president will go. It will either be a completely pointless summit, or chairman G will probably be able to convince Donald Trump to do things that the United States really, really, really, really would not want him to do. Basically, Trump has become the biggest dove in the administration in relationships with almost every country, because he sees himself as the only one who can make a decision, which is true. 

But he also sees himself as the only one who’s even worthy to talking him to, which is not. So you play this toward the Iran war, when the State Department is out of it, when the national security is out of it and the Defense Department is out of it. You basically have what’s left is just the president and whatever individuals who chooses to appoint. 

What we’ve seen so far are three people that have been appointed JD Vance, the vice president, who was sent once and it was such a disaster, he was removed from the team completely. We have Steve Wycoff, who is in competition for being the dumbest man in America and has never come back to the white House with anything that is useful except for the propaganda of the other side. 

And so relations, when Whitcomb is involved, are generally stalled with everybody. And then Jared Kushner, who is the son in law of the president, who is not an idiot but always is coming at things from the point of view of I want to walk away from this with a real deal. And so you get these New York Jewish real estate folks who are going to places like negotiations with Iran. 

And shockingly, not a lot of us happened. So what happened at the end of last week is probably the best example I can give you. There was a one page, one page memorandum that the United States sent the Iranians, which wasn’t rejected out of hand, but is already being stretched onto a two week process to evaluate one page, because that’s about all the attention span Donald Trump has. 

Like you could resolve everything in Israeli-Arab-Persian relations in one page. So while that was going on, Donald Trump also pushed forward this other idea called Project Freedom, where the US Navy would start escorting vessels in and out of the Persian Gulf. Now, there’s a lot of tactical reasons that won’t work. 

I think I’ve dealt with that already, but let’s talk about the diplomatic reasons why it didn’t work with the whole Iran war. Donald Trump refused to consult with any of the allies in Europe, in Asia, in the Middle East, with the exception of Israel. Of course, that was party to the war, which means that when the war did not resolve in the way Donald Trump wanted to, none of these countries felt that they could or should get involved, because they had no say in how it was carried out in the first place. 

That also carried forward with Project Freedom. After one day, the Saudis said, you can’t use our airbases for this anymore because you’re not taking negotiations seriously. So unless and until you cancel Project Freedom and start talking to the Pakistanis, who are the interlocutors again, you can’t use Saudi air bases to enforce Project freedom. So the thing was canceled after two days after a grand total of two ships were escorted. 

Unless and until Donald Trump realizes that the US doesn’t have the military force to break open the Persian Gulf until he realizes that only a political deal with Iran is going to end the situation. We’re just in this holding pattern with the entire region is offline. Now, I would argue that Trump aside, a lot of the stuff is never coming back anyway. 

But as long as Donald Trump is the president, until he changes his negotiating tactics. We haven’t even begun meaningful negotiations at any level on this topic, because he doesn’t allow the lower level people to do their jobs. He thinks it has to be him. And so he’s established himself as a single point of failure throughout the entire bureaucracy of diplomacy that we have with absolutely everyone on every topic. 

And lo and behold, we don’t have a meaningful trade deal with anyone. After a year and a half, Iran talks are stalled and relations with all of the allies are at the worst that they have been in decades. It’s going to be really interesting to see how this China summit goes, because the same lack of preparation and consultation that has happened with everything else, with the administration, applies to the second most powerful country in the world as well. 

So it’s going to be some good watching. But don’t expect anything to be a meaningful deal in the way that most people mean the term.