WEBINAR – Peter Zeihan’s Risk List: What Keeps a Geopolitical Strategist Up at Night

Please join Peter Zeihan for a webinar on June 5th at 12:00 PM EST on a topic that is near and dear to the hearts of the Zeihan on Geopolitics team: geopolitical risk. This webinar will feature Peter’s reasonable-fear list, focused on issues that in his opinion have the most potential to impact market outcomes.

We’ve got some more interview style questions for you today! We’ll be focusing on China, specifically looking at the potential for Chinese energy independence and if any countries surrounding China should be worried about an invasion/resource grab.

While it may appear that the Chinese have access to significant shale oil deposits, the reality of their energy outlook isn’t so pretty. Most of the Chinese lake bed shales are waxy and produce only a fraction of the energy that American deposits produce. In addition, the location of these deposits just so happens to be in a historically secessionist region, so that helps limit development.

On the Chinese expansion front, the prospects aren’t looking too hot. With limited military capabilities and geographical constraints, expansion towards resource-rich neighbors isn’t feasible. My bigger concern is what happens after Chinese demand for these resources falls off and the countries sending this stuff to China lose that stream of income…

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On paper, China has considerable, shale oil deposits. One of the Chinese, especially given their history of, massive state expenditure, doing more of their shale deposits, especially contrasted with their massive energy import dependance. Technically, China has the world’s second largest shale deposits. so potentially it’s very, very cool. And that’s certainly the failure hasn’t been from a lack of trying. 

The problem is it’s not very shale. Sovereign shale is shale that comes out, former ocean beds. so saltwater pressure, that sort of thing. Most of China’s shales are, I can’t pronounce word of some, like, extremely stringent. Thank you. Lake bed shells. so a lot more debris in them, if you will. And as a result, are kind of waxy. 

Well, when you frack a maritime shale, it’s hard and it cracks and you get the energy out. If you frack wax, it just kind of sloshes around a little bit and nothing happens. So it turns out that even if the petroleum density and China shales are the same as American shales, they can only get about 5% the energy out for every dollar that they put into the effort, even assuming that they were really good at the technology and they’re at best so-so. 

So only about 5% of the wells that the Chinese have drilled at this point even remotely approach break even. And all of those shales are in Sichuan and Sichuan. It has in the past been a secessionist region in China. So the last thing that the hyper centralized Communist Party is China is going to do is to exploit a new type of energy in a part of the country that might one day go the wrong way. 

and even within that, the volume that they’ve been able to get just warrant does not seem to justify a large scale expenditure. So they’ve steadily revised down their estimates. I think they’re now down to less than 2% of what they thought they were to get 15 years ago. I think for most people who follow you regularly, or read the news, it’s no surprise that China, mainland China has its sights on, if one day possible, securing the island of Taiwan, bringing one of these, an errant province back under the influence of the central government. 

Taiwan by itself, though, is a relatively resource poor place. And we look at China’s import needs, economic development plans. There are neighboring regions closer to home Mongolia, parts of Central Asia, parts of southern Russia that have a lot of the resources that they’re importing. Anyways. Is there a risk to these areas of a future Chinese land grab occupation, cross-border, conflict, kind of like you see between, India and China, the Himalayas. 

But obviously without a mountain range in between them. I think there’s a lot of risk, but not necessarily China. China can’t go north. Will get the Russians have made that very clear. They don’t have the Navy to conquer a place like Japan or the Philippines or Indonesia. Taiwan is theoretically a possibility. But if they pick a fight over that, the chances of another naval power interrupting their energy and their food inflows and the merchandise exports would destroy China’s industrial estate. 

it can’t go meaningfully southwest because of the Himalayas. And if they go south, you know, they tried that in 79 with Vietnam. They got their ass handed to them just as much as we did it. So there’s nowhere really for China to go and break a country in a meaningful way. I mean, there’s Mongolia, but special case, there’s not enough people there for really the matter. 

And they’re not a huge player in international markets. but I’m more concerned that if you remove China from the equation and Chinese demand for a lot of these minerals crash, you get two things going on at once. Number one, you got the gutting of the income that a lot of these mid-tier countries rely and on to do everything that they do. 

And then number two, it’s unclear where the United States was going to be a lot more narcissistic and focused on its own industrialization. We’ll need all of them. And we’re certainly going to preference specific partners like the Philippines, like Canada, like Mexico, like Australia, like Chile. And so if you’re not on that short list where you kind of get under the American security, your at worst economic umbrella, you need to find a new, for lack of a better word, daddy. 

And if it can’t be China, it’s not going to be the United States. Your list of other options have baggage. Japan might be related to the business. And if you’re an East Asia, you remember how that went last time. It’s not that I think that the Japanese are looking to go bonzai on everybody again, but it’s going to be lingering there in the back of your mind. 

As for the other countries that have projection power, Turkey for it. France. You know, these are all countries with a lot of baggage when it comes to former colonial relationships. Now, I wouldn’t expect it’s to be a neo colonial conquering because the power difference between these states and their former colonies, it’s not nearly as lopsided as it used to be. 

I think it would be more of a partnership, but everyone is going to have to find a friend, and you’re going to have to keep the friend interested. And you don’t have to negotiate every step of that process. Go. It’s a much more complex world than what we had during the Cold War. Even during the colonial era. It’s it’s going to be messy, and not everyone is going to be able to pull it off. 

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