So You Want to Take Iran’s Oil…

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Taking Iran’s Oil is far more complicated and dangerous than Trump has made it out to be. We’re talking about a humanitarian crisis and a full-blown ground invasion to actually control Iranian production.

Iran’s main energy resources are split between the South Pars gas field and Khuzestan. Seizing South Pars is the easier of the two, but the fallout would be horrendous. Controlling Khuzestan would require a ground invasion, fighting both local resistance and the broader Iranian military, forcing the U.S. to stay in the region…sound familiar?

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Donald Trump is going on about taking in other countries oil again, specifically Iran. And, there’s no good way to do it. Let’s just start with that. But it is important, I think, to understand where the stuff is and what that would mean for a potential military occupation. 

So there are basically two large concentrations of petroleum in Iran. The first is kind of in the middle part of the Persian Gulf, directly opposite the country of gutter. That’s one of a kind of like a thumb sticking up on the south side of the Gulf. This is what the Iran’s call the South Pars field and the surrounding fields. It’s majority offshore. It is operated by a lot of foreign companies because the Iranians don’t know how to do it themselves. But this is responsible for somewhere between 70 and 80% of the country’s natural gas production. Now, Iran doesn’t really export natural gas in the conventional sense, and almost everything that come from South Pars is fed into the local pipeline network in order to be burned to generate electricity. 

So if the United States wanted to take over this zone, it would basically be shutting off the natural gas production because there’s no export capacity. The nearest country would be Turkey. There is a little pipeline there, but you’d have to go through a lot of Iran to get to it. And second, there’s no liquefied natural gas facility like exists on the south side of the Gulf. 

So if you take this thing, you’re just shutting it down and triggering, war crimes level of humanitarian disaster as you turn off the power in a country with roughly 90 million people, that’d be bad. The other one is easier in simply because it’s, you know, possible again, not an endorsement here. It’s in the province of Khuzestan, which is in the country’s southwest, hard up against the Iraq border, directly opposite from Basra. 

If you remember your war in Iraq days, Khuzestan has 70 to 80% of the country’s oil production. Generates a little bit of waste natural gas here and there, but it’s mostly about the oil. And this is the stuff that basically powers the Iranian economy. Oil from Khuzestan is consumed locally. It’s consumed throughout the rest of the country. It is sent to refineries, the country over, and a lot of it is exported through Kharg Island. Kharg Island is an island off the coast of the northern Gulf. It’s Iranian. And people have been talking about that a lot recently. Donald Trump even knows where it is. And he seems to think that if you take a car, you control the oil industry, too. 

No, no, no, you take Kharg, you can shut off Iran’s ability to export, but that doesn’t give you control over production. So if your goal is to take the oil, you have to basically capture all of Khuzestan Province in a little chunks of territory that are adjacent to it. Now, Kazakhstan is interesting for a number of reasons besides the oil. 

If you remember back to your, political geography days, Iran is a series of mountain nations, different ethnicities that bit by bit were amalgamated into the whole that we now call Iran or Persia, if you want to use the older term, Khuzestan is an outlier. There because it’s flat, it’s not mountainous. 

and the vast bulk of the population are Arabs instead of mountain peoples, or is Aries or Persians. So they are an oppressed minority living in the country, and they live on top of the oil, and they get so little of the money that comes from the oil that this is one of the few parts of Iran that’s actually experiencing population decline, because basically the Iranian government, Tehran, siphons off all the oil leaves, nothing for the Arabs, and they’re just kind of like wallowing in their own poverty. 

Before you think, oh, this is a great fifth column to, launch a rebellion against Tehran, keep in mind that the United States has tried that trick specifically before, just on the other side of the river in southern Iraq, where you have a Shia majority that used to be ruled by a Sunni government in Baghdad. And after 20 years. But the only thing that the Shia of Iraq could agree on is that they hated the United States more than everybody else. So I can guarantee you, in the time that the United States has been resting and recouping in the aftermath of the war on terror, we have not gotten any better at nation building. And when we were trying to occupy southern Iraq, which supposedly hit a restive political group that hated the central government that we had overthrown, it didn’t go nearly as well as we had hoped. 

And this time, if you do that in Khuzestan, there’s a lot more Iranians with a lot more weaponry and equipment that can be brought to bear, because in the case of Iraq, we overthrew the entire government, were the authority. In the case of Iran, we’d have tens of thousands of American troops on the ground, occupying the local population and then resisting the general forces of the rest of the country. 

Anyway, bottom line of all of this. It’s not that I think we can or should take Iran’s oil. Just to give you an idea of what is in play, it’s pretty clear that Donald Trump is planning some sort of ground offensive. He has never deployed troops to an area and not used them. And in this case, we’ve got two loads Marines with, the Marine Expeditionary units on their way. One of them with the Tripoli, is practically local now. They were in Diego Garcia last week. And the other group, the boxer, is approaching Southeast Asia and is expected to be in the Persian Gulf in 2 to 3 weeks. 

And of course, the, the airborne forces can be wherever they need to be. So we’re definitely moving forces in the Trump administration is definitely planning on using them. It will definitely be a disaster. And if the Trump administration decides to go after this target specifically, we’re going to be an occupation in the Middle East, just like we were for the bulk of the last 25 years. And we all remember how that went.

Russia Draws American Blood in Iran

Photo of American flag with blood on it and Russian flag next to it

Iran was able to successfully strike Prince Sultan Air Base, which is a U.S. base in Saudi Arabia. And guess who supplied Iran with the targeting data necessary to carry out the strike? The Russians.

The strikes hit an E-3G Sentry, which is one of a limited number of AWACS the U.S. has in operation. These planes are used in drone and missile detection, so losing one of them is devastating. However, the more troubling aspect of this strike is Russia’s involvement.

While Russia has a long-standing tradition of aiding any adversary of America, directly assisting attacks on U.S. forces is a major escalation. Oh, and still no response from the Trump administration on any of this.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado, not a particularly good update from what’s going on in the Iran war. Last Friday, you may remember that there was an attack on Prince Sultan Air Base in Saudi Arabia, which is a U.S. military facility. And in it, several ballistic missiles and drones were able to get through defenses. 

Bad for the obvious reasons, is that if there’s any place that should be defendable, from Iranian weapons systems, it should be a U.S. air base. And clearly, the United States is now running out of interceptors itself. Second, even worse is one of the targets that was hit was in, E3G, which is an Awacs through the large jets that have the big radar dome on the back of them. 

They basically patrol provide information real time information on enemy aircraft, whether it’s a drone or a jet or whatever else. And they can cover about 120,000mi² at a time. The Awacs have been critical for getting early warning on the drones, because you can’t really put a sonar phone out in the water like you can’t see at the edge of Ukraine and then track them for several hundred miles. 

So the Awacs are really the best way we have in order to see these things coming. The United States only has a fleet of 15 of them left, or 14 of them left now, and half of those are down for repairs at any given time. So we’re talking about a significant reduction in the ability of the United States to operate the anti-air operations in anti-missile and anti-drone operations, not just in theater, but on a global basis. 

But the real shitty thing, that came out just yesterday is that we now know conclusively that the Russians are the ones who provided the targeting information. The Russians have a military recon satellite system, and we know that they’ve been providing aid to and Intel to anyone who’s been shooting at the United States for 30 years. But now we have the Russians caught providing real time information on the location of specific aircraft that can then be used by the Iranians to target specific pinpoint within American military facilities in the Middle East. 

It will be interesting to see how the Trump administration chooses to spin this and say, it’s no big deal, because the Russians are our friends or whatever the angle happens to be. But leaving aside for the moment, all of the other angles about this war, about the energy breakdown, not being at the forefront of drone technology anymore, we now have, America’s oldest adversary, deliberately sharing tactical information on American military hardware and personnel and facilities with the Iranians. To the degree that the Iranians are actually able to penetrate and hit things specifically, there there is any number of ways where that’s a very, very negative development. And we have yet to see it being treated seriously by this administration at all.

The Strait of Hormuz Remains Open…For Iran

Despite the ongoing conflict in the Persian Gulf, shipping in the Strait of Hormuz remains open…sort of. The Iranians have taken control, requiring ships to get clearance for safe passage.

Basically, Iran has set up a protection racket. They’re earning more from transit fees and oil exports than before the war, and all the Chinese ships carrying drone parts and components heading to Iran remain untouched. Even with the significant U.S. military presence in the region, nothing is being done to disrupt these flows.

Until that stops, Iran’s military operations and economy will continue to grow stronger.

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Transcript

Hey all, Peter Zeihan here. Still sick. Coming to you from Colorado. This is Loki. You may have heard him or seen him in videos in the past. Anyway, today I wanted to let you know about a little internal investigation that we’ve been running in the ER on war. 

Specifically, we’ve got questions here on our end, about why shipments are still getting through the Persian Gulf at all. 

Now, international insurance has basically been canceled for all ships in the area. Basically, once somebody starts shooting civilian shipping, all bets are off and the captains are on their own and if the ship takes a hit, oftentimes it’s the captain that is legally or financially vulnerable. If not the shipping company. And there’s no way to file a claim in that circumstance. 

So lots of ships are trapped inside the Gulf, and there’s a couple hundred waiting outside for things to clear, which isn’t going to happen anytime soon. And yet, there are still some ships coming and going, but all of them have gotten clearance from Iran. So under normal circumstances, there’s a six mile navigable channel that’s roughly in the middle of the Strait of Hormuz. 

Most of it is actually in Omani territory. Some of it does go into Iranian territory, and there’s a two mile channel for going one way, a two mile channel for going the other way, and then a two mile gap in the middle. That is not being used by anyone. That’s what’s completely shut down because of the attacks we’ve had so far. 

On the other side of the equation, you’ve got Iran basically processing ships, at the Imam Khomeini port, which is way up in Khuzestan, which is on the northern extreme of the Gulf, actually in the general vicinity of Kharg Island, if you know where that is. So for ships wanting to get passage approval from Iran, they have to sail all the way to the northern end of the port, basically under all the drone and missile attacks that are going back and forth. 

They have to dock at Imam Khomeini port. They have to basically get their papers, pay their bill, which comes out for a large ship to be like $2 million. And then they sail down the Iranian coast as close to the Iranian coast as they can. 

And instead of using that navigable pathway through the middle of the street, they hug the Iranian coast as closely as they can and sail through that way. 

And same for anyone who’s coming in. They have to sail all the way up to Khuzestan to basically get their papers stamped. So what has happened here is a clear example of the United States just being unable to process what’s going on on the front end. 

United States seemed woefully unprepared for anything happening in the Strait of Hormuz, during a war with Iran, which is just beyond ludicrous, because that has been the issue since 1979, and there was no meaningful preparation of all. Second, Iran has managed to set up a basically a protection racket, and cargo is still not just coming to and from Iranian ports, including Chinese, gear that basically is full of drone parts. 

They’re actually able to sail into the Strait of Hormuz all the way up and into the northern Gulf, not be molested at all. Docketed Iranian port, or take on cargo, pay their fees, and then sail all the way back down through the Persian Gulf, through the Strait of Hormuz, and out. And the United States is doing nothing. 

So the idea of that, the Iranian authorities, as they are at the moment, are under pressure is just mind bogglingly stupid because the economy of Iran is largely managed by the IRGC. And we have actually, in these circumstances, seen income for the IRGC go up because the not only are they getting these transit fees, but the core issues of economic smuggling still apply. 

And even though the US military is now more present in this region than it has been at any time in modern history, it is doing nothing to interrupt the commercial flows going to and from Iran, and Iran is able to increase the volumes of its exports to nearly 2 million barrels per day and garner the war surcharge. So they’re earning easily in terms of profits. 

Two and three times what they were earning before the war. And the U.S. military is doing nothing. Now, under normal circumstances, there are analysts at the military and especially at the Department of Energy who would point these things out to their chain of command, and it would go up to the department heads and eventually the president. But President Trump fired all those people last year. 

So it took people like me doing this little project on the side to figure out how everything is flowing. Someone please tell Trump because until this is interrupted in some way too big problems. Number one, the IRGC is giving them more money now than they did before, which reinforces all of the pillars of the Iranian structure that allows it to fight the war and encourages political cohesion. 

Second, they have no problem resourcing parts for missiles, and especially drones from the Chinese, and so they’re able to maintain their current pace of fighting more or less indefinitely. So yeah, someone please pass that along. Maybe it’ll make a difference.

U.S. Ground Troops Coming to Iran

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The U.S. is preparing for a potential ground operation in Iran. Marines from the USS Tripoli and Boxer, as well as elements from the 82nd Airborne, could be looped in. That’s roughly 8,000 troops, which is just a small-scale, fast-response force, but no matter the size, boots on the ground is a scary endeavour.

If Kharg Island is in fact the target, the retaliation from Iran would be massive. This is Iran’s main oil export hub, which means it’s the main revenue source as well; with that gone, Iran would unleash hell. And Kharg Island would be extremely difficult for U.S. forces to defend; they would be under constant threat of drone strikes, and quite exposed.

Another plan would be to use these troops for targeted raids along the Strait of Hormuz, disrupting Iran’s ability to attack shipping.

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Transcript

Hey all, Peter Zeihan here coming to you on March 25th from inside the house in Colorado because, false alarm. I’m not getting better and sicker. Anyway, I’m going to talk about, Iran today, specifically what’s going on? Ground troops, which looks like they’re absolutely going to be used. This is a bad idea from any number of matters, but let me give you an idea of what’s in play and what it might be used for, and we’ll go from there. 

So, as you may remember, the USS Tripoli, that’s one of America’s amphibious assault carriers, carries a clutch of F-35 fighter jets, as well as 2000 to 2500 Marines. Relocated from the Philippine Sea and the ceiling through the Indian Ocean. Now, it will probably arrive in the vicinity of the Persian Gulf in the next day or two. 

We also have the USS boxer, which is another EU marine expeditionary unit. That’s basically what the Tripoli is, which has left San Diego. It will not be an area for probably close to three weeks, but the news from yesterday is that the 82nd airborne, which is kind of America’s rapid reaction force, troops that are run by the army, that are mated with permanent transport aircraft that can deploy to anywhere in the world in less than 48 hours. 

They were given the marching orders to move to the Middle East, last night. And we’ll probably. Well, they could be moving right now. You know, all hush hush classified. But when the, orders are given, it’s usually not too long until they’re on their way. Collectively, in three weeks. This means we have about 8000 troops in the region. 

And they’re really heavy hitters. Basically, unless you’re going to move into special operations, the Marines and the airborne are about as good as they get without having armor. And that’s something else that’s important to note. So this is not a traditional ground invasion where we’re driving tanks and using artillery. This would be a relatively light force that punches above its weight for what it is, but is not designed to take on another major force. 

Keep in mind that if the Iranians don’t have another major force, so that should be fine in that regard, they may have a million man army, but it’s apparently designed to shoot civilians rather than swarm over foreign countries. Now, the news is going on and on and on and on about something called Kharg Island. As someone has highlighted Kharg Island 15 years ago, part of me is like, yeah, you finally, but I really doubt that’s the target. 

Or more to the point, I really doubt that that should be the target. Kharg Island is a small facility off the western coast of southwestern Iran. It’s up in the northern Gulf. It doesn’t have a bridge to it. It was built by foreigners, and it has a subsea pipeline that basically carries all Persian Gulf crude to it, because the Persian Gulf Coast is really, really bad to accept tankers. 

It’s just very shallow and muddy. So they have this island out where they can accept tankers. And it is the point for plus of Iran’s oil exports. And what we’ve seen in the war so far is that the United States came in completely unprepared for the idea that something might happen to the Persian Gulf and really didn’t have the hardware or the positioning in place to protect ships in the Gulf, or make sure that the Iranians couldn’t attack ships in the Gulf. 

So everyone’s now focusing on Kharg. And the logic seems to be that Donald Trump wants to make another fucking deal. And the idea is that if the United States occupies Kharg Island, then Trump will have a negotiating card to play against Iran elsewhere. So we will give you Kharg Island back. If you stop attacking places in the Gulf, specifically if you allow the Strait of Hormuz to be open. 

I will tell you bluntly, in anyone who studies, the Middle East will tell you bluntly and, that that will not work, because that will remove Iran’s oil income and then the gloves will really come off. And as we’ve seen, when the Israelis attacked a natural gas processing facility last week, the Iranians had more than enough, weapons left to open up on infrastructure throughout the Gulf. And they did well over $100 billion of damage in a matter of hours. You would probably get something like that. In addition, Kharg Island, is not going to be easy to defend. 

one of the things the United States has been doing is its carriers haven’t even come in the Gulf. One has been off in the Arabian Sea, the other one has been off in the Red sea. 

They’ve been fighting Iran at a distance. If you’re going to put a few thousand troops in Kharg, you’re going to need close in support. And it is within 30 miles of the coast. And the Iranians will hit it with everything they have, because the ability hit several thousand American troops with limited defenses right up and close. Oh, man, they’ve been waiting for a situation like that the entire war. 

It would basically be putting them in the most vulnerable way you could imagine. And now, like I said, anyone who knows anything about this region or oil politics or how defenses work would have told president that this isn’t how things go. But the president isn’t being told anything. The people in the Department of Energy and the DoD who were responsible for studying things like chokepoints and, the Strait of Hormuz specifically, were all fired last year. 

And the same goes for basically any sort of strategic planning or think work. Pete Hegseth, the secretary of Defense, has been going on a crusade in his, Anything that does not actively support the warfighter is being cut out of the Department of the defense, and that removes all education that would allow people to make educated decisions about, say, what you do in war. 

So when I say that this is a Donald Trump plan, this is a Donald Trump plan. He’s no longer allowing information to reach him, with the possible exception of through Dean Cain, who is Joint Chiefs of Staff. And that’s about the only voice of caution he’s get. And so far, he has overruled Cain on really everything of substance. 

So if this is where we’re going, this is going to end in a bit of a debacle. The only other thing that I can think of were 8000 troops that are heavy on the insidious component might be of use, as in the Strait of Hormuz itself, if you put, Marines and airborne in that area, and enable them to do land strikes, rapid and then retreat land strikes up and down the Strait of Hormuz, you can probably limit the ability of Iran to launch attacks on civilian tankers. 

And since the United States doesn’t have the ships, doesn’t have the hardware to do a meaningful convoy system, this might be the next best plan. It’s not a great one, but I would find it much more viable than, say, going after Kharg. That’s my $0.02. Anyway, that’s where we are right now. The Tripoli will arrive within 48 hours, and the 82nd could be there at the same time. 

So if you only feel you need two thirds of these forces, you get going on it right away. If you decide you need the full 8000, you have to wait for the boxer to arrive. And that will not be until the second week of April. Anyway, pieces are moving so that these options are available. Whether they are used, of course, depends upon, what Trump feels, because that’s all that matters in this war.

The Death of the First-Time Home Buyer

A Caucasian couple staring and pointing at a home

Buying your first home is one of those major milestones that your parents and grandparents probably didn’t even think twice about. Now, that milestone is slipping further out of reach for the average American.

US housing prices have trapped those reaching home-buying age in the rent-cycle. Sure, demographic shifts could help, but that relief wouldn’t hit for quite a while. The quickest solution would be ramping up home building, but that hasn’t happened at scale. And demand hasn’t dropped since the boomers are aging in place. Oh, and lending costs are getting higher, too.

It’s the perfect storm to lock out first-time home buyers, and there’s no relief in sight…especially not within this decade.

Marines, Uranium, and a Symbolic Win?

Claims that the U.S. will end the war by seizing Iranian assets make no strategic sense. Targeting Kharg Island or removing the uranium from Isfahan with ground operations is just too risky.

These narratives are likely just a reflection of the U.S. searching for a symbolic win, rather than a practical military plan. But this conflict could be pushing Iran closer to nuclear armament. Iran’s ability to quickly build a bomb wasn’t enough deterrence, so building a bomb appears to be the only option left.

As the war escalates and moderates are sidelined (or killed), the Iran war will grow less coherent and much more dangerous.

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Transcript

Hey, everybody. Peter Zeihan here coming to you from the San Antonio airport. Today it’s the 17th of March, and there’s a lot of stuff going on in the news related to the Iran war that I find a little concerning. So I wanted to lay out what a few things are and are not, and hopefully some clarity will come out of this. 

So there’s a lot of talk in US media, especially, being leaked out of the administration deliberately, like straight from the white House, that, in order to conclude the war, they need to remove the enriched uranium from the equation. And the idea is that this meu that’s a marine expeditionary unit with the USS Tripoli that is currently enroute from East Asia to the Persian Gulf, is doing so in order to participate with that. 

So the two dominant theories are that the United States wants to put boots on the ground in a place called Kharg Island, which serves as the destination point for about 90% of the crude that Iran produces. It’s the sole loading facility that they have for super tankers. 

It’s on the northern part of the Gulf, about 30km off the coast. The second theory is that they want to remove they being the United States government, wants to remove the enriched uranium that Iran has from contention. That stuff is in a place called Isfahan, which is about 40 miles inland. Neither of these really match the facts. In the case of Kharg Island, there’s a single pipeline. 

There’s no bridge. So actually, if you wanted to take this out of the equation, you dropped one bomb on one pumping station on shore, and you cut it down with minimal damage, and it would be easy repair later. So there’s no need to put boots on the ground and car gets off. All that would do would be to open you up to potential counterattacks from the shore. 

Now, the Iranians couldn’t, like, surge across the street then with ground troops, but they could continually attack any American forces there with drones, for example. And if you were going to have a ship supporting Marines on card, all of a sudden you’ve given them a big, fat, easy to shoot target. That was stupid, just monumentally stupid. But so would going after for harm because it’s behind one is one of the first places that we hit during the war. 

We also hit them in July or sorry, June of last year. Sorry. It’s angry that time. I guess it is. You have been, This farm is under hundreds of tons of rubble, and it’s 400 miles inland. So the 2500 Marines that are with the Tripoli, there’s no way that they could land moved to his farm, somehow, magically excavate hundreds of tons of debris and then move the canisters of enriched uranium back to the coast. 

That’s assuming that the canisters are over 90% purified already, which is highly unlikely. so the hardware that is now moving in, the conversations that are being deliberately had publicly just don’t match the facts on the ground. I wish I had a clearer idea of what was going on here, but it’s pretty obvious that the administration is looking for a way out and looking for a way to manufacture a success. 

Just keep in mind that the position of this administration, and by this I mean the Iranian administration going back 35 years, has always been that if we get a new goal, we will be attacked. So we want a nuclear program that can create a nuke in a short period of time. You know, six months, but we don’t actually want to get the bomb. 

So the idea is that the deterrent is the program, not an actual weapon, or at least that’s what they believed. Until June of last year and in June of last year, Israel, the United States attacked anyway. And so the conversation then was basically, do we now need to have the bomb? So we have an actual turn? 

And regardless of how that conversation worked out over the last several months, this month with the new attack that killed, among other people, the Supreme leader and the conversation has changed. And now it’s like, of course we need a nuke. And everyone that the United States has are so far coming. I as assistance most recently Larijani all of these people by Iranian standards were moderates who favored negotiation with the United States as opposed to nuke. 

So pieces in motion, not a lot of it makes a huge amount of sense strategically right now, but not a lot of how God makes a lot of strategic sense either.

Trump Gets Introduced to Section 301

US Supreme Court Building

The Supreme Court ruled Trump’s tariffs were illegal, forcing the administration to do things…the right way. Welcome to Section 301 investigations.

This is the slower and more legally structured process of issuing tariffs run by the Office of the United States Trade Representative. Reminder that the USTR has been gutted, so they lack the staff to juggle multiple investigations. Especially since NAFTA renegotiations are just kicking off.

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Transcript

Hey all. Peter Zeihan here, coming to you from Tulsa. It’s way too windy outside to record there, so we’re into it right here by the coffee machine, which is keeping me alive today. All right. Today we’re talking about the next step of Donald Trump’s trade policy. As I’m sure you guys all knew, the Supreme Court recently ruled, six three that Trump’s tariffs, which he labeled as an emergency situation, putting tariffs on literally every country in the world were a gross abuse of the law that he cited that it was illegal and unconstitutional for him to do so, that, tariffs are the province of the Congress, unless the Congress has expressly granted authority to the executive. Now, there are laws where that has happened, and that is what brings us to today. There’s something called 301 tariffs where the president can say, hey, this country is not being fair. It’s violating American trade laws and any agreements that we have. Therefore, we will investigate this violation. We will open up the situation to public comment. 

So any consumers or American businesses can testify, will put it on record. We will pull all the information together, we will make a finding, and then we will use that as ammo in negotiations with the country on the other side. And if those negotiations do not go the way that we like, we will then impose some sort of punitive system that might include tariffs. 

That’s just one of many options. It’s very adult, it’s very constitutional, follows the letter of the law. Now that he has been unable to convince the courts that what he was doing before was legal, it also takes time. There are two problems that Donald Trump is going to face with the 301 approach. The first one is that it can’t be arbitrary. 

So something that Trump did over and over and over again last year is whatever happened in the international system that annoyed him. He threw a tariff on it. You’re trading with the country. I don’t like tariff. I don’t like you personally. Tariff. You say something about the military. I don’t like tariff. You seem to really like steel tariff. 

It didn’t matter what it was. You throw a tariff on anything and that is now been proven shockingly so. To be unconstitutional. Not what Congress intended. 

The problem, however, with this new approach is that there is a process and you have to start it and there’s negotiations and there’s a comment period. And you actually have to build your case. 

Now, I have no doubt that at the end of the day, the Trump administration will just say, oh yeah, of course we’ve now proven our case and we tariff, but that takes months. Second problem, all of this, all of it, every little bit of it is handled up by the US Trade Representative Office. Now the USTR run by a guy by the name of Jamison Greer, who knows what he’s doing. 

He was trained by one of the best in the industry, Bob Lighthizer. 

The problem with USTR is it can only do so many things at a time. And under Joe Biden, who did not push a single free trade deal, it was kind of hollowed out of its staff. And then when Trump came in and Dogecoin, Elon Musk and all that, it lost some more of its stuff. 

And that was never been rebuilt. So Greer and the USTR office in general, simply doesn’t have the capacity to really do more than one of these 3 or 1 investigations at a time. And Trump has already initiated 301 investigations on Canada, Japan, Korea, the European Union, Mexico, and, of course, China. And I’m sure there’s going to be many, many, many, many more. 

And because this is a process and you have to document and get comments and make findings, you can’t just wave a pen and make it happen. The US simply doesn’t have the staffing. That’s necessary to do that. And then third, on top of all of that, USTR is responsible for negotiating or renegotiating every other trade deal. 

Remember that when this all started in April of last year, tariff day, Liberation day, based on your politics, we put tariffs on every country on the planet. And Trump feels that that is necessary for every country on the planet. And now we’re doing 300 ones for all the big ones and probably many of the small ones in the weeks and months to come. 

But that ignores what else is going on, because the U.S. does have trade deals separate from all this. 301 stuff. So, for example, over the weekend, the United States, Canada and Mexico formally started the process of negotiating for what NAFTA is supposed to look like a year to five years from now, that until this moment was the US primary job, because Mexico and Canada or the United States is top and second largest trading partners. 

And whatever the future of American manufacturing happens to look like, or American agriculture, American energy or American population workforce, it’s going to be bound up and with whatever happens with NAFTA. But now the USTR has to do at least a dozen, three, oh ones, probably several 301 negotiations and investigations at the same time. Bottom line, this is like the hard, frustrating way to do it. 

Yes, but it should have started this way a year ago. The only alternative would have been to go to Congress and say that I need some sort of trade negotiation authority. Now, this is something that presidents in the past used to do. You’d have to go back to George W Bush for the last time this was done. It was called trade Acceleration or Trade Promotion Authority, where Congress grants the president the ability to do negotiations outside of the normal back and forth. 

Of the legalities. If you want to do that, you have to get congressional approval. The thing is, Trump really hates going to Congress because then he actually has to say out loud what he wants to do and put it up for a vote. Yay or nay. That was hard enough last year when he had a meaningful majority in the House and the Senate. 

But since then, Donald Trump has had a hard time staffing his government with people from the private sector, because there aren’t a lot of them that believe what he believes. And so he’s had to reach into his ideological allies, people who owe their political careers to him in Congress and in doing so, has whittled down the majority he has in the House, in the Senate to work with. 

And there are enough remaining trade based, business based, Republicans in the party that it’s unclear that he would get the sort of support that he would need in order to make the changes he wants to make. So that kind of leaves us in this stall where Trump is kind of forced to let the system be the system, but he’s unwilling to challenge the system legally. 

And so far in this administration, where that has ended has been with a Supreme Court case that tells him the thing that he never wants to hear. No.

The U.S. and Mexico Kick Off NAFTA Talks

US, Mexico, and Canada flags with a hole in the Canadian flag

The U.S. has kicked off renegotiating NAFTA, but Canada was left out of the first round between Mexico and the U.S.

The U.S. is likely prioritizing a relationship with Mexico because of its healthier demographics and growing consumer base; therefore, Mexico is a more strategic long-term economic partner. Canada, however, has been getting the cold shoulder from this administration.

Leaving Canada high and dry could backfire, as the U.S. benefits greatly from Canadian manufacturing. We’ll see how the strategy changes throughout these negotiations.

Prefer to read the transcript? Click here

Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. You’re going to see this on the 16th of March. Meaning that formal trade talks on the relaunching of the North American Free Trade Agreement have begun. And the first round is specifically between the Americans and the Mexicans, and the Canadians have not been invited. Quite on purpose. 

We’ve got three things going on here. First of all, in the long term, the more important trading partner is Mexico. They’ve got a younger population. On a worker productivity basis, it’s actually a more productive and efficient workforce than what the Canadians have. And when the two countries come head to head in competition, the Mexicans typically win. 

But most importantly, it’s a larger population, over 100 million people. And they are at the stage of their life, under age 45, 20 to 45, where they’re buying a lot of things. So it’s a consumption base that has a lot of upside growth potential. So from a purely macroeconomic point of view, it does make sense for the United States to prioritize Mexico over Canada. 

That’s piece one. That makes some sense. Piece two makes less sense. Trump personally and the advisors around him and the MAGA movement in general have a real bone to pick with Canada for any number of reasons, which I’m not going to go into because a lot of them are made up. But the degree of almost hatred that this branch of the American political system feels towards our northern neighbor really is robust, and it is definitely affecting policy. 

To that end, not only is Canada being denigrated at any number of opportunities, but there’s actually a significant move within this move it to break up Canada as a country. Specifically. MAGA is doing a lot to reach out to separatists in the province of Alberta. Now, for those of you who have been following me for a while, you know that she’s 13 years ago now. 

Yeah, 13 years ago. I wrote a book called The Accidental Superpower. And in it, I listed five major international crises that Americans would be aware of and participate in. And one of them was called the Alberta Question. The idea is that Alberta has a fundamentally different culture, economy, infrastructure and approach to all things in the world that is very, very different from the rest of Canada. 

It’s younger, it’s more highly skilled. It’s an energy, an agricultural economy, and most importantly, all of their major economic links go south to the United States rather than laterally to the rest of Canada. So the idea, that Alberta will eventually seek something else makes a lot of sense to me. But a lot of things have changed in the last 13 years. 

For the most part, we’ve seen the Canadian system through immigration actually kind of get past some of their more urban demographics or at least mitigate them a little bit. So the risk that I had seen 13 years ago, basically Alberta paying for the entirety of the existence of Canada is no longer the case. 

They’re still the biggest contributor in per capita terms by far. It’s the richest province by a significant margin. But Ontario is no longer aging into obsolescence at the pace that it was because of the influx of immigrants that has generated its own set of problems. But that specific problem has been mitigated somewhat. 

The problem is, is that if Alberta were to achieve independence, it would very rapidly become a failed state. It would be a one trick pony with its energy economy. The currency would probably go through the roof because of it, and the place would become vastly unaffordable. The only real long term solution would then be for Alberta to join the United States. 

Now, no one in MAGA is talking about that. Very few people in Alberta are talking about that. But that’s really the only long term solution here from an economic inflation, a population of skills and an infrastructure point of view. There’s just that little cultural issue about whether you want to actually join the United States. So we have MAGA, basically stirring the pot to see the kind of problems they can generate in Alberta, specifically in Canada in general. 

But no one’s really thought about what’s the next step, should they actually win? That’s a problem anyway. Third piece impact on the United States for not having Canada in NAFTA. One of the beautiful things, from my point of view about NAFTA is we get access to the workers in the industrial plant of our neighbors, but we don’t have to pay for their education or their social welfare system, or their health care or the law enforcement. 

We just get all the benefits. So when I look at Canada, I basically see a country of 35, 38 million people, whatever the number is now, but it’s actually more tightly. Each of the provinces is more tightly integrated in the United States than ever with one another. And we get the benefit of that in our industrial base to serve our domestic needs, to serve our export markets, whatever it happens to be. 

And we don’t have to pay for any of it. So we know that the Trump administration is deeply hostile to, Canada’s presence in specifically aerospace and automotive, which are two big, big ticket items when it comes to manufacturing and trade. And it’s been very, very blunt and saying that Canada, you’re going to lose all of that. It’s all going to come back to the United States. 

But that would mean then that we need to train up a replacement workforce and build replacement infrastructure for stuff that already exists north of the border. And considering we’re just a few years from the Chinese breakdown and the breakdown in global trade in general, I would honestly say we don’t have the time to mess around with something like that. 

And even more importantly, we need to take the energy that we would have to build out that industrial plant to build up other industrial plant that we need even more. We’re already an environment of a labor market that is going to be shrinking for the next decade for demographic reasons, two decades, actually, and we just don’t have the labor or the capital, to be perfectly honest. 

That the green space in the industrial parks right now and do all of this at the same time. And so if the Canadians want to continue paying for their health care and their infrastructure and their training in order to help our industrial plant, I say let them, well, go that way. You know, we’ll see. 

NAFTA is the most complicated trade deal on the planet because it deals with all the technical details of 10,000 different product steps. The person who is handling the negotiations is the US TR who is Jamison Greer? He’s seen this before. This is not the first time that Donald Trump has pushed trade negotiations into a different direction. 

If you go back to Trump won the US, TR was a guy by the name of Robert Lighthizer famous for playing hardball. Very good negotiator. Jamison Greer is his protege. So Greer has seen the inside of this process already, even if his name wasn’t on it. And last time around, Lighthizer talked with the Mexicans quite a bit before forcing a deal on the Canadians. 

So whatever deal comes out of this is one that the Canadians, while very, very little leverage and independently of the fact that the current administration really doesn’t like Canada, that’s just the nature of the beast. It’s the nature of the people. It’s the nature of the future of Mexico. And while there are certainly things that we absolutely can do more easily with Canada as part of the process, that doesn’t necessarily mean that’s the way it’s going to go, because if there’s one thing you know about Americans in general and this administration specifically, we don’t always do the obvious thing.

The U.S. Dollar: Short vs. Long Term

Photo of US dollar

Before anybody asks, no, the following is NOT financial advice. The U.S. dollar is constantly in the spotlight, so where is it heading?

Over the long term, the U.S. dollar is well-positioned to rise. Four main factors are driving this: U.S. naval dominance to secure global trade, favorable demographics, abundant food and energy resources, and the need to expand manufacturing. Each of these suggests durable economic strength.

But in the short term, current policy is driving the dollar downward. Before the Iran war, things like immigration limits, tariffs, regulatory uncertainty, and eroding business confidence all weakened the dollar. The Iran war has brought a temporary lift, albeit a marginal one, as investors seek safety.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here coming to you from Colorado. Today we’re going to talk about the US dollar and where it’s going to go short and long term. Again this is not not not investment advice. This is just where the geopolitics say that we’re going. First let’s talk long term because it’s a really simple story. As a rule, a country’s currency tracks its economic strength and its durability. 

And by that measure, the United States dollar really has nowhere to go but up for the next several decades. The big factor is, number one, the US military is the one that rules the seas. And even if everybody else were to put their militaries together, their navies together, and sail them against the United States, we’d probably only need two, maybe three aircraft carrier battle groups to take the whole thing down. 

Also, with very, very, very few exceptions, single digit exceptions, there are no ships, frigate navies, ships out there that have the capacity to even reach the United States. So the United States can go there, do whatever it wants, but nobody can come here. And that allows us to be the arbiter of really whatever it wants to be. Number two, demographics. 

As much as we are facing a demographic crunch at the moment, specifically is the baby boomers, which are the largest generation we’ve ever had, are now almost entirely retired. Our boomers had kids. We call them millennials, and they are now in the height of their consumption years. And then for the next 20 years, they’ll be at the height of their production years. 

And so we know we still have a relatively strong, stable and balanced economy moving forward that doesn’t exist in very many places elsewhere in the world. So whether you’re in Germany or China or Japan or Korea or Spain or Italy or Poland, we’re looking at a country where they basically already aged out. 

And there aren’t a lot of people under 50 relative to those over 50. So you know that the United States is really the only first world country of size, with the possible exception of New Zealand, where there really is a demographic story for normal economics going forward for the next several decades. Number three, resources. The United States is the only first world country with the exceptions of Australia and Norway and Canada, that are massive, not just producers, but exporters of food and energy products, which without those you can’t have a modern system. 

That doesn’t simply mean that cash is constantly flowing into the American network. It means that the United States never really has to worry about the building blocks of what it takes to make a modern economy functional. All right, what else? 

the last item is kind of, strength from weakness. Because of globalization, the United States is hollowed out a little bit when it comes to manufacturing. We still produce the most value out of manufacturing of any country in the world. But as the Chinese are facing demographic and geopolitical pressures and eventually will fade away, the United States needs to expand its manufacturing footprint massively, at least double it in order to prepare for that circumstance. 

That’s an inflationary story, but it’s also a massive growth story. So those four things together, the need to expand the manufacturing plant, the commodities position, the military position, the demographic position. This tells me that the US dollar has nowhere to go but up for decades. But that’s then, we all live in the now, and we have a lot of problems in the short term that are taking us absolutely the opposite direction. 

And all of those are caused by policy. So first up, the Trump administration’s decision to basically make immigration into the United States impossible. We have gone in the last 12 months from the first world country with the fastest growing population to something near the bottom. And for the first time in American history, 2025, we actually saw the US population drop. 

That is putting huge pressure on labor markets, especially when it comes to things like construction and health care that are slowing American growth, raising costs and pushing the dollar down. Second, the tariff policy, despite what it claims, it’s actually making manufacturing a lot more difficult in the United States. You see, there’s kind of two broad categories of manufacturing. 

Your relatively simple value add, like things like, say, furniture or making glue where there are only a half a dozen steps. And if you have a high flat tariff, you try to then move those steps into your country and consolidate. But then you have more complex manufacturing, like cars and computers and airplanes that have hundreds, if not thousands, if not tens of thousands of steps. 

And there is no country in the world where those are all under one roof. So if you put a high tariff in, then every intermediate good has to pay the tariff and it just makes more sense to move as many of those steps outside of the tariff umbrella as you possibly can, and then just import the finished product at the end, because then you only have to pay the tariff once. 

So what we’ve been seeing over the last year is industrial construction spending in the United States. Drop drop drop drop drop drop drop drop drop. And the only reason it hasn’t plunge is people are hoping, praying against all odds, that the Trump administration will eventually back down and these tariffs will go away. We’re now coming up on a year since they were put in place. 

We’ll hit that anniversary in the first week of April and we’ll probably see the drop off accelerate. So that boom, I was talking about where we needed to double our industrial plant. We’re actually going in the opposite direction right now, and that is forcing the United States to import to cover everything. And so we see the dollar going down. 

The third issue is how easy is it to do business in your country? The Republicans have traditionally been the pro-business, low regulation crowd, and the Trump administration has said that it’s not going to enforce the regulations that are on the book. It’s basically asking companies to lie on their tax forms and ignore the government’s policies as they currently stand. 

You see, there’s a big difference between Trump two and Trump one. In Trump one, they brought in people who knew about deregulation, and they had this idea that for every new regulation that came in, five had to be removed. And so we actually saw meaningful deregulation. But with this new administration, they haven’t brought in those people. 

They’re just not allowing new regulations to go in. So the old regulations from previous administrations are still there. And the people who would go through and winnow them out are not there. And we no longer have the capacity to implement new ones. So the regulatory structure is becoming slowly ever more divorced from the economic realities of the country. 

And there’s no one in place to fix that. So companies are being asked to just ignore the whole thing and saying that there won’t be any legal repercussions for that. At the same time as the, the legal structure becomes almost irrelevant to where we are now. On top of that, with the tariffs, we’ve now had over 5000 tariff changes since April 2nd of last year. 

The the game board is changing every day and companies literally don’t know what to do. And the collective decision is to try to do as little as possible. So while the rhetoric may say one thing, this is actually the most anti-business administration that the United States has had in my life. And business confidence and business activity and business expansion are all dropping instead of rising. All of those are bad for the dollar. 

And finally, there is a rule of law problem. The Republican Party is not what it once was. Donald Trump has exercised a number of factions national security securities, fiscal conservatives, business conservatives from the coalition and has actively campaigned against their champions in Congress. And what’s going on with Immigration and Customs Enforcement is a real big issue. 

Seeing Ice in places like Minneapolis has really jarred the business community, because they’ve always counted on the US government to enforce rule of law. We don’t have that anymore. In fact, Ice is operating in a way that every police chief has always told his or her officers to never do. You know, you’re never supposed to argue with the judge. 

You’re never supposed to argue with the prosecutors. You’re never supposed to recruit from gangs. You’re never supposed to wear a mask. You’re never supposed to draw a gun first. And no one really knows where federal law enforcement is going to be unless you’re looking at the FBI under a guy by the name of Cash Patel, who’s basically a conspiracy theorist. 

So the idea that there’s this stable structure undergirding everything that the federal government does is now gone, and businesses just don’t know how to react at all. You add in record deficit spending and the implications for the dollar are down, down, down, down, down. So we kind of have this perfect storm in the short run that is pushing the U.S. dollar down, even against the overarching long term trends that are pushing the dollar up. 

So I have no doubt that over decades, the dollar will rise and continue to. But I also have no doubt that over months the dollar will drop because the federal government is now actively, loudly declaring that that is their express goal. Now, the idea behind what the Trump administration is saying about dollar policy is their idea is that if the dollar gets weaker, then U.S. exports will increase. 

And ultimately, that’s one of the metrics that Donald Trump is obsessed with. But that also means for a country that imports manufactured products, it also means that we are looking at significantly higher inflation as a result of that policy in the short run. So short run, if you’re a dollar bull, it’s going to be a really rough ride if you’re a consumer. 

Things look a little rough because we’re seeing fewer products produced in the United States, and we’re seeing a hollowing out of the high end employment base that does the high end manufacturing that we’ve always excelled at. That might make good for exporters a little bit, but in the long run, we’re looking at a very different economic structure. And of course, as with everything, the challenge of getting from here to there is where we all live. 

And now an update. We’ve recorded this video before the Iran war started, and if you want to talk about something that threw a shock into the system to underline that there really wasn’t an option out there for financial investment. Outside the United States, this is what did it. And so we’ve seen the United States dollar rise over the last couple of weeks versus every major currency except for, I think, one, I think Canada is holding in there because it’s basically integrated with the U.S. system. 

However, I will underline that, markets are behaving grudgingly in this regard. They really don’t want to put their money in the U.S. dollar because of some of the policies that we have out of the Trump administration right now. So while, yes, the US dollar is rising versus pretty much everybody, only at a moderate pace, in most countries it’s 2% or less over two weeks of war. 

And now the Persian Gulf being shut for the entire time, it should be double digits. But there’s really only three markets where you’re seeing more than this 2% change. You’ve got Korea, which is uniquely exposed, South Africa, whose economy has always been really, wild and, erratic. And Indonesia, where the markets are relatively illiquid for a market of its size. 

So, yes, we are definitely looking at the long term effect here of the US dollar having nowhere to go but up. But also we’re seeing the damaging effects of the short term of no one really trusting to put their money in the United States system and showing that it has nowhere to go but down. The result is, at the moment, in a moment of global crisis, surprisingly small gains for the US dollar. 

I would love to say that the surprises me. It does not.

The U.S. LUCAS Rivals Iran’s Shahed

A photo of LUCAS drones courtesy of US Central Command: https://www.centcom.mil/MEDIA/PRESS-RELEASES/Press-Release-View/Article/4347030/us-launches-one-way-attack-drone-force-in-the-middle-east/

The U.S. has a drone that punches in the same (financial) weight class as the Iranian Shahed. Everybody, meet LUCAS.

With a range of ~500 miles, a price tag around $45,000, and modular capabilities, this is the U.S. military’s first step towards scalable and affordable drone warfare. This is still in early phases of production, but plans are in place to ramp that up by 2027.

These systems have already been used to strike Iranian targets, but the extent of the damage is unclear. LUCAS might not shift the trajectory of this war, but with widespread deployment over the next few years, the math of modern warfare could shift drastically.

Prefer to read the transcript? Click here

Transcript

Hey, everybody. Peter Zeihan here. Hello from Dallas. Today we’re going to talk about drone warfare, specifically, a new weapon that the United States has introduced in the Iran war. It’s called the LUCAS, which is short for a very long item. That basically means really, really cheap drone. In fact, it’s modeled off of the Iranian Shahed, which has a cost probably in the 30 to $55,000 range. 

Right now, what has been released indicates that it’s in the middle of that range, right around 40, 45,000. It’s a modular drone, so you can decide whether you want a warhead, a jamming pod control, a variety of other things. Anyway, this is the United States first entrance into low cost drone warfare. The idea is you’ve got a drone with a decent range 500 miles, which for an autonomous system is pretty good. 

And because it’s made by the United States and not a country like Iran that doesn’t have much of an industrial base, things are being produced at scale. Or at least that’s the intent. And the modularity means that you can mix and match while you’re in deployment mode. So either on an aircraft carrier or by some Marines who happen to be on a beach somewhere. 

You plug in what you want and then send it off. We know that they have been used already in the Iran war to ironically, target drone manufacturing capacity. The Shaheds, it’s unclear whether or not, the targeting just went after the barracks or the depots or the actual manufacturing floor. We just don’t know that. And Centcom has talked a lot about the targets they’ve taken out, but they haven’t yet to mention the manufacturing capacity at all. 

So far, the estimate is that 1500 of these things have been built. And the intent is by at some point in calendar year 2027 for annual production to exceed 10,000 units. Compare that to how many patriots, the anti-missile systems that the United States is known for, can be made that comes out to about 600, maybe 700 a year right now. 

They’re hoping to get that up to over a thousand over the next five years. Here’s the thing about drones. You have a couple of options. You can either have a fiber line, which means you can’t be too far away because you basically have it on a cord, or you have to realize that there’s going to be jamming. And if there’s jamming, you lose control of it, or you program in a decision tree imprinted onto something like a Nand chip, that’s, the memory in your computer that holds when your computer is off, and then it just kind of goes to that specific location, looks around for something that matches its targeting priority, and then drops. 

That’s basically what the Shaheds are with the United States, though, you have a different option because the United States typically has air superiority where it operates and a satellite network. So you can put something like, say, a Starlink transceiver on it, and you can micro adjust it the entire way. And since these things have a range of 500 miles and a lot later in time, about six hours, that really expands your options. 

Now, in this specific war with Iran, there just aren’t enough of them at the moment to make a difference. 1500 total. Not a big deal. The United States hit over 1200 targets in the first 48 hours of the war. But if you fast forward this 2 or 3 years, when a typical American naval asset can have a few hundred of these bad boys on station in any given time, then you’re talking about a very, very different sort of math. 

One of the weapon systems that I was a big fan of that ultimately did not get built was the Arsenal ship. The idea you have something that’s smaller than a destroyer that basically carries a bunch of cruise missiles, 5000 of them, and you just send it out there and blah, blah, blah, blah, blah, blah, blah. This achieves that basic concept at a fraction of the cost, assuming it works. 

Right now we know they’ve been used. We don’t know how well they’ve done, but these are exactly the sort of weapons that we need in this transition phase from going from an old, very, very high cost system to whatever the future of drone warfare happens to look like. And as soon as I find out more, I’ll let you know.