The Peter Zeihan Podcast Series - Peter Zeihan || Russia Targets the Ukraine Grain Deal

Episode Date: March 23, 2023

Due to the war, Ukrainian agricultural exports were reduced to a fraction of their pre-war numbers. The grain deal brokered by the UN was a glimmer of hope that perhaps exports wouldn't entirely fall off the map...until now. Full Newsletter: https://mailchi.mp/zeihan/russia-targets-the-ukraine-grain-deal

Everybody, Peter Zeyn here coming to you from Ruby Bay, the Dorkland and Kuzelin. The big news that I've noticed is that the Russians are throwing a bit of a fit about the great important they have with the Ukrainians. Now, Ukraine, until very recently, was one of the world's five biggest agricultural exporters for wheat and number four in corn, and it's number one in sunflower, you know, all important things that help prevent a lot of countries from starving to death. Well, the problem is that most of the stuff that comes out of Ukraine is shipped by water. It's far easier to chip things by water than it is by land.

In terms of rail versus water, about a three to one cost difference. And Ukraine is perfectly set up for that because they've got the Nipur River that cuts right south to north through the middle of the country. And so everything just gets on the part, goes out, eventually hits the city cities of Kirsten and Odessa, are put on the big bultures that then take it through the Black Sea. the Turkish straits in the rest of the world. What has happened, however, is with the Russians first capturing Pearson and then putting

Odessa under assault, this has all been disrupted. So the only way to move things out of Ukraine at present is by rail. And not only does Ukraine not have a well-developed rail system, it doesn't use the same gauge as the European ports. So it's been very, very difficult to get out. really less than about one out of six bushels that they use to ship they can ship now. Now, the Turks in league with the United Nations have convinced the Russians to sign onto a grain deal. And this grain deal allows ships to come into Odessa,

get searched by the Russians on the way in to make sure they're not carrying weapons, and then load up with grain, and then get searched on the way out to make sure that they're not carrying anything that the Russians don't want to get out. This has increased the volume to about 20 to 25% of the volume that the Ukrainians could do before the war. So still not great. Now, if you've been following the war, you know that throughout the winter, the Russians have been bombing the power grid with drones and missiles to try to kill as many Ukrainians as possible. They've been doing this in the winter thinking that if you can freeze the country to death,

many tens of thousands of thousands of people will be injured and killed. And that might weaken the war effort. Once we get to summer, that's going to change. So what the Russians are facing here is that the grain deals normally renegotiated every 120 days. They're now insisting that they've only wanted a 60-day renewal. Well, if you fast forward from late March, 60 days, we're getting into the beginning of summer. In the beginning of summer, the Russians will have a vested interest in destroying the power grid because no one's going to freeze today.

So they're going to go after the agricultural system, everything from fertilizer on the front end to the silos and the rail stations on the back end to try to kill as many people as possible that way. So last year was probably the last year that Ukraine will be a significant agricultural exporter at Paul, and we should not expect to see the Green Deal renewed Cullate May.

That's just a situation we're in. And if you throw in the problems with natural gas nitrogen processing in Europe hitting the fertilizer market, the problem's getting potash out of Belarus hitting the fertilizer market, the problem's getting phosphate out of China hitting the fertilizer market. Later this year is going to be really rough for a lot of places. All right, that's it for me. I'll see you guys at the next spot.

Take care.