The Peter Zeihan Podcast Series - It’s time for an update on the war in Ukraine || Peter Zeihan

Episode Date: January 28, 2025

There are two primary trends that continue from this past summer: the Ukrainians are maintaining their offensive in the Russian region of Kursk, while Russian troops are continuing their slow slog toward the Ukrainian city of Pokrovsk.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/its-time-for-an-update-on-the-war-in-ukraine

Everyone, Peter Zine here, coming to you from the Kepler track in New Zealand's Fjordland National Park. That is Lake Tejano behind me. There is the sunrise. Today I'm going to do something I haven't done for a while and give you an idea of what's going on in the Ukraine war. We've had some evolutions of late that are definitely noteworthy. From over this past summer, the two big things still hold true. The Russians are still advancing inch by inch on the city of Pokrovsk in the southeast. of the Donbos region, where if they can capture, they can kind of shatter the Ukrainian front lines

because Pukrosk is a rail nexus that supplies seven parts of the fronts all at once, and if we were to fall, the Ukrainians would have to go three, four, five times as far to get troops from point A to point B, which would be a crippling blow. And in the north, in Kursk province, which is technically in Russia, the Ukrainians are still on the offensive. They've lost some ground. But this is where the Russians are using human wave tactics, specifically using North Koreans. Specifically, we've seen evidence that the North Koreans have been instructed by their dear leader back home for one guy to go out and stand in a field to attract

drones and then for everyone to be out on the edges in the forest shooting at the drones. Needless to say, casualties and fatalities among the North Koreans have been horrific, even by Russian standards. But the 12,000 North Koreans that were deployed are, I mean, the best word is suicidal. From the people who have been captured, the equipment that's been captured, it's pretty clear that the North Korean soldiers were told that if they defected or didn't fight according to instructions that their families would be killed back home. Now, 12,000 troops are not going to make the difference in a war where the Russians are losing that many in a couple of weeks. The question is whether more North Korean troops are coming, and so far that we haven't seen that. Okay. Other big things that are going on from the week of January 14. first and kind of splashy. The United States and the European Union have announced a new set of

sanctions targeting the shadow fleet based on whose numbers you're using somewhere between three and four and a half million barrels a day of Russian oil exports are in the shadow fleet. This is a fleet of very old decrepit tankers that are often uninsured or underinsured that are operating without their transponders so that they don't have to get Western insurance or anything like that. By tightening up the sanctions, basically what the West is attempting to do is convince countries like India and China, that they should not take Russian crude at all. And at the moment it is working, but I wouldn't get bet too much on this,

because what has happened with every other time sanctions on the Shadow Fleet has tightened is that they find another way around it. It lasts for a couple of months, and unless you actually start grabbing the ships, I really doubt it's going to make a long-term difference. So it does do a hit to Russian oil flows in the meantime. It does allow U.S. shale producers and OPEC producers to displace a little bit of Russian crude,

but it probably won't have legs, unless it's paired with something else. Number two, we might be getting that something else pretty soon. Also the week of the 14th, the NATO alliance announced a new task force for the Baltic specifically to monitor and intercept, if necessary, the shadow fleet. Now, this is important for a couple of reasons. Number one, NATO to this point,

largely due to the Biden administration's insistence, has not gone after the shadow fleet. The goal has been to keep Russian oil, flowing to the world, but to find a way to deny the Russians some of the income for doing so. So part of the reason the Shadow Fleet exists is to bypass the system. According to the NATO and European sanctions, if you buy crude from the Russians that is priced less than $60 a barrel, then it's okay, and you can use Western ports, and you can use Western facilities.

It's only if it's over $60 that you have to use the Shadow Fleet. Anyway, this task force is important because it now has a man. mandate to go after the Shadowfleet in certain specific circumstances. It's not a blanket interdiction policy or anything like that. But from my point of view, more importantly, it is the first naval task force that NATO has ever formed in the Baltic and the first one that has ever involved Finland or Sweden, who are new members in the last couple of years since the Ukraine war got going. And these two countries are the masters of the Baltic and have been for the last half millennia. So they're involved.

is pushing the Russians into a new position because they haven't had to deal with Finland as an offensive power since World War II and Sweden for three centuries. So there's a lot of history here that is coming back to the fore that is going to unspool a lot of the expectations and of a lot of players in a lot of places. But third and far more importantly is what's going on in the war in Ukraine itself. Now for several months, the Ukrainians have been launching a acts on things like Russian refineries. And that has been something that the Biden administration has tried to convince them to do less of with some success. Because according to the Biden administration's math, which I would argue is dumb, interrupting Russian oil flows is going to drive up

the price of oil globally, is going to drive up the price of gasoline in the United States, is going to trigger inflation in the United States, and that's a political issue. Now, I have a number of reasons why I think that is wrong. Number one, the United States doesn't use much Russian oil, or hardly any. Number two, anything that is displaced out of Russia is easily replaced by, say, U.S. shale producers who do supply the U.S. consumer. And third, the U.S. gasoline market is in a completely different market dynamic than the global market. So you might see a little bit of price pressure in the short term, but nothing that is durable and nothing that's sustainable. Anyway, that was the Biden administration's logic. It had an impact on the war effort. Well,

a couple things have changed. Number one, a lot more global oil supplies have come online in the last year. So the Biden team is not nearly as concerned about that inflation pulse one way or the other. Number two, Joe Biden really isn't worried about re-election at this point. And so it's okay for the gloves to come off. And so the Ukrainians are hitting a lot more targets. And we saw our biggest aerial drone assault of the war so far by the Ukrainians hitting targets that were almost 1,000 kilometers inside Russia, going after 15 different facilities on the same day. Now, their specific target are things called fractionating columns, which are pieces of equipment that the Russians lack the capacity to build themselves, and the Chinese ones suck. Even the Chinese ones use a lot of

Western components. So anything that ties up the Russians doing repairs, where the repair work starts on a supply chain that has to go through a third country to get around sanctions, is something that definitely slows the Russian economy and the Russian war machine. But the much bigger impact of this is going after high-end chemicals. You use a fractionating, column to split oil into different product sets, everything from the bitumen that you would use to make a road to the high-end LPGs that you use for things like propane and butane. But some of the stuff in the middle you're going to be using to make things like hydrazine and other advanced compounds that are the core for things like rocket propellant and explosives.

So by going after this stuff at scale, it's not just that the Ukrainians are attempting to disrupt the flows of equipment that are coming to the front by going after the fuel manufacturer. They're actually going after some of the more advanced components that allow the Russian war machine to be the Russian war machine and things like explosives in artillery. Now, the Russians obviously can import this stuff from elsewhere if they need to. However, traditionally, the Russians have been a major exporter of this stuff, and while the Chinese can produce it, they produce it all the way on the southeast coast of China, so as far away from Russia as you can possibly get,

and the Chinese are typically an importer of this stuff from Russia. So if enough of this stuff goes offline in a short period of time, you won't see the impact immediately, but a few months from now, when the Russian war machine is running out of the components they need to make their weapons, you would actually see a pretty big impact. But a lot of things can go down between now and then.

For example, by the time you see this video, Donald Trump will be the new president, we might have a new policy on Ukraine. I have no idea what that's going to look like. I can just point out that the Russians have already basically told Donald Trump to fuck off with his peace proposals. And that is undoubtedly going to generate a relatively difficult to predict specific outcome. So we're all kind of in a waiting mode on that one, which obviously matters. Okay, that's it for me. Y'all take care.