Transcription
So, Ukraine just signed a massive, massive deal with several different Middle Eastern countries. And this is not just another deal. In fact, I think that when historians look back at this era, they will see this deal as the start of a major geopolitical shift. Not just because this deal in and of itself is so important. It is important, but because it is just the start of something that we've seen coming for a long time.
Over a year ago, I began talking about the fact that the war in Ukraine would have a permanent shift on the geopolitical landscape because it is changing the way that warfare is being fought. It is a shift that is similar in nature to what happened in World War I. Going into World War I, the cavalry charge was basically the predominant tactic. That was how you defeated your enemies. And because the cavalry charge was so important, you needed, for example, strategic resources like pasture land to be an effective country, to be a powerful country. But after World War I, when the tank charge was invented, and also when machine guns made cavalry charges a lot less effective, all of these things combined changed not just the nature of warfare, but also the economics behind warfare and the types of countries that could succeed and the types of countries that would fail. No longer was it just pasture land that was important. It was now people who wanted to capture oil fields. And the more oil fields you had and these strategic resources, those determined not just how economically prosperous you were, but how successful your country would be.
And something similar is happening right now. And just like every other major historical shift, most people aren't noticing it. And even a lot of people who are noticing it are in denial. What's happening in the war in Ukraine, of course, is a technological shift. Drone warfare, a type of warfare where nations with very limited budgets can match the performance of extremely wealthy nations, at least on the battlefield. Because in drone warfare, you can produce drone units that cost between $500 and $1,000 a pop. And they can destroy extremely expensive equipment like tanks and armored vehicles that cost literally millions of dollars per unit. Because it's so much easier to produce the drones even though they're not as advanced and they can't do everything that these armored vehicles and tanks can do. They effectively nullify their unique position on the battlefield and they make it so that the advantages of having a large economy are much reduced.
In the era of drone warfare, what matters is not as much your access to materials like steel or oil or resources that go into building big heavy equipment, but rather what matters more is your access to semiconductors, your access to communications technology, and of course, your access to data. All of these trends are now showing up not just in the war in Ukraine, they're showing up in the war in the Middle East, the war in Iran, but also the war beyond Iran's borders, where it now seems that everybody has paid attention to the lessons of drone warfare. Everybody except for the predominant geopolitical player right now, which is the United States, which is not a surprise. This happens all the time in history. The dominant player does not want to adjust to the new reality because they are so used to sitting at the top of the old system. They don't want to admit that the system is changing. So they exist in a state of denial for a while. But existing in a state of denial doesn't actually change reality. It just means that while everything is adjusting around you, you actually get further left behind. And that's exactly what's happening right now.
The United States has done a very good job in the war in Iran as far as shooting down Iranian missiles, but they've done so at an extremely high cost using, for example, Patriot missiles that cost millions of dollars per unit as opposed to Iranian, for example, Shahad drones that cost maybe $20 to $40,000 per unit. And the problem with this is again the problem of the economies at scale. Just like a $1,000 drone can nullify a multi-million dollar tank, a $20,000 drone can effectively nullify a multi-million dollar missile because it's just so much easier to produce the cheap stuff. The nature of warfare has changed. And that is why everybody now is no longer turning to the United States for help. But the Gulf States, the states who have the most to lose for getting things wrong, are turning instead to Ukraine to buy interceptor technology, not multi-million dollar missiles from the United States, but a couple of thousand interceptor drones from Ukraine.
There is a lot to unpack today, from the details of this deal itself to the long-term implications of this deal for the war in Ukraine, but also for geopolitics as a whole. So, let's unpack it. But first, just a quick word from the sponsor who made today's episode possible.
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So, as we get into this discussion, let's first just talk about this deal itself and why even on the surface it is so significant. Because there's something obvious about this deal that the United States still seems to be missing. Or perhaps we're not missing it. Perhaps we're deliberately suppressing this narrative because it's so unfavorable to us. But the obvious aspect to this deal is this. The Gulf States, all these countries are currently turning to Ukraine for protection because they feel unsafe. And there's two reasons they currently feel unsafe. The first is that the United States started a war against Iran and Iran in retaliation is attacking their countries. That's obvious. But what is really significant about this is that these countries for protection are not just turning to the United States. They're actually turning to Ukraine, a country who is not even directly involved in this conflict. A country that directly does not have all that much at stake. This is a huge deal. The United States, of course, being the most powerful military on the planet right now, is not seen as a sufficient military partner for the problems that these countries are currently facing. And that's probably true both for political reasons, but also primarily for technological reasons, the reasons I talked about a little bit earlier. But it turns out that both of these things factor in.
So what we're seeing right now is obviously significant for Ukraine, but it's also significant for the United States in the opposite direction where countries that should be able to rely on us to protect them because they are suffering for a conflict that we essentially started or at least we decided to fight it at this exact moment. These countries don't feel like the United States is a sufficient protective force. In fact, what we're actually seeing right now is one of these rare moments of clarity where when it comes to politics, people can argue back and forth about what's the best approach or whether something is true or not. But you rarely have a situation so clear as this one where we can debate all we want about the merits of US military equipment, whether or not the United States is able to fully take the Iranian threat offline, all of those things. Then we can do that safely from our homes for example in the United States or Europe or wherever we happen to live but the countries who are directly involved they don't have that luxury the countries that are directly involved are forced to have a lot of clarity and they're forced to make decisions not on what they want to be true but on what the truth actually is as they experience it and the moment of clarity we're having is this the countries who are actually experiencing threats and actually experiencing the protection of the United States are now actively beginning to look in a different direction. And of course, they'll still accept the protection of the United States for what it's worth, for as long as they can. They're not discarding that, but they're making a shift in this case towards Ukraine. And it's a big deal.
Ukraine, of course, is a country that the United States has kind of made fun of, especially the current administration. And they've said that it's a country without any cards. They've said it's a country that is too weak, for example, to even win its own war that it's currently fighting against Russia. And yet we now have other countries looking to Ukraine while Ukraine is already at war. And they're saying, "We want your surplus. We want your extra because we believe you have extra and you we believe your extra is enough to actually fill the holes that the United States can't fill." What we're seeing right now is a huge geopolitical shift and it has implications for the war in Ukraine, but it goes much beyond that.
Now, let's just start with the war in Ukraine because the implications here are pretty drastic. On its surface, what we can already see is that Ukraine has a surplus and they're able to actually contribute to fighting other wars outside of their own territory, which goes directly against the narrative that we're always told about Ukraine, that Ukraine is this country that is on the verge of collapse and that they can't even possibly continue their fight against Russia. In fact, we see the opposite. We see Ukraine growing in strength and they actually feel comfortable, their leadership feels comfortable to start allocating some resources outside of their own borders to other countries. Now, they're not just giving it away. There's strategic reasons for this, but this is super important just on the surface. But now, let's talk about how deals like this also make Ukraine stronger for the rest of this war, but also for the period following the war, which is perhaps even more important because obviously you have to recover as a country. That's a given. But even more important than that, if you as a country see a path to survival once the war is over, that will give you more endurance in the current conflict as well because you don't feel like if I keep fighting, our country has no future. In fact, what we see is that Ukraine has a future beyond the war regardless of how that war ends. And that alone gives them courage and perseverance to keep fighting.
But the significance for this war should not be lost because what Ukraine is going to experience with deals like this is twofold. First, Ukraine is going to get a lot of revenue obviously from selling their drones because that's what countries are doing. They're purchasing it. But Ukraine is also going to gain a lot of strategic partners. Strategic partners who have something to lose if Ukraine loses its war. And that is super important because that is how you get the additional support you need in the things that you cannot produce yourself. And that is how you carve out a space within the world, a position of prominence. Something that the United States used to understand and understand very well, something we used to do very well, but something that we are now actively and intentionally undermining for who knows what reason.
In fact, what we're now seeing between Ukraine and the Middle East in the context of these deals is actually just an extension of something that we were already seeing between Ukraine and Europe. Ukraine is now duplicating an already successful strategy where Ukraine has recently been able to secure some additional support from Europe. Actually, some unprecedented support in the form of a 90 billion euro loan. And I know there's still some complications getting that money to Ukraine, but Europe has said they will find a way to get that money to Ukraine no matter what, even if Hungary continues to block the loan, which is currently what's happening. But the point we need to notice is why Europe was willing to give Ukraine this loan in the first place. And the reason for that is because Europe had become dependent on Ukraine to help Europe carve out its path towards the warfare of the future. And they were doing that through tying their military-industrial complex directly into Ukraine's military-industrial complex, allowing Ukraine to build drone production facilities on European soil so that when they needed that technology, if they needed that technology, they would have access to it. Europe had good reasons for doing this. There were some recent war games, for example, with Ukraine playing the part of the Russians and European countries obviously playing the part of Europe where a couple of Ukrainian soldiers defeated two entire NATO battalions in less than a day in the war game scenario, showing NATO really how unprepared they are for the warfare of the future. And because of that, they've been actively integrating with Ukraine.
The advantages are many. Obviously, Ukraine gets to have protection for its drone production when that production happens outside of its borders. It's something that Russia either can't reach or if they do, it'll start a broader war that they can't win. But it also allows Ukraine to make a lot of money by exporting things at the spot where they're actually produced. Ukraine can basically just produce drones, for example, in the UK, in Germany or France and sell them right away, and they can generate money from that. And both of these things are helping Ukraine in a major way. The revenues shouldn't be overlooked. They're not massive. They're in the single-digit billions currently, but that's a lot for a country like Ukraine, which for example was going to receive this 90 billion euro loan that was going to keep their country running for approximately 2 years. A billion dollars goes a long way in Ukraine. But more importantly is this idea of partners that do not want Ukraine to fail.
What Ukraine is currently doing is they are actually replacing a role that the United States used to play on the world stage. They're not going to completely replace the United States. The United States will always play a role, I think. But they are carving out a niche that used to belong to the United States and they're taking it for themselves. And that is a much bigger deal than a couple of billion dollars in profits today. If we look at the United States in the post-World War II order, a big reason for US prominence is US military dominance. The fact that the US military was seen as the most powerful in the world and also something that you needed on your side if you weren't in the Soviet sphere to protect you from the Soviet sphere. Now Ukraine is increasingly fulfilling that role. And they're doing so not with technology that has been marked up to millions of dollars a unit so that American companies can make massive profits, but they're doing so with technology that costs just a couple thousand bucks. That is going to allow a lot of profits to flow to Ukraine over the long term. And after the war, this could become a massive mechanism by which Ukraine recovers as a country, but also just economically getting money flowing into the hands of their citizens. And this goes far beyond just the direct arm sales. The arm sales are actually just the entry point into the entire system. Again, something the United States used to understand, but they're now intentionally undermining either because they don't understand it or they're being intentionally malicious. I think it's mostly that we just haven't taken the time to understand what made us so prosperous in the first place.
Because the thing is, when countries are dependent on you for arm sales, they're going to want to be on your best graces. Because if you get into a war and you need to buy weapons from somebody, obviously that matters. But also, you're going to be dependent on that country for resources. You're going to be dependent on them for training on systems, for providing ammunition for those systems, and so on and so forth. And so because you want that dependence with that country that sorry the interdependence with that country you are more inclined to provide benefits to your citizens for doing business deals with that country and you become more intertwined with them just overall. This is how the United States has built up so much prosperity while giving so much away on the world stage. We give a lot away to build up interdependencies and then because these countries are so interdependent with us, our companies are US companies and therefore our US citizens can make a lot of money. But a lot of Americans right now have been just focused on the costs of that system and not on the massive benefits that we've gotten from that system. But a portion of this system's benefits is now going to start to flow towards Ukraine.
Now, what makes what's happening right now especially interesting is that what's happening is not just a technological shift, although it very much is, but it's also a political shift, and more specifically, it's a shift of trust. Where the United States, for many decades after World War II, intentionally built up trust with other countries so that we could use this trust for our benefit at a time where we needed it. And right now the war in Iran is showing the breakdown of both systems. Both the technological shift and the system of trust. Both basically because we as the United States dropped the ball. We dropped the ball technologically by being too stubborn to change because we sat at the top of the system as it was. And while we might still have a chance to change, we are no longer the leading player where we could have been the leading player had we chosen to, had we not had so much hubris.
But there's also the political change and this also goes back to the war in Ukraine where we now see the effects playing out in the war in Iran because a lot of countries have already started to look intentionally to shift away from dependence on the United States because of what we did to Ukraine. Ukraine for a moment was getting aid from the United States. They were somewhat dependent on that early on in the war, though they did not get nearly as much as a lot of people say. And then when the Trump administration came in, they kind of pulled the rug out from Ukraine with no notice, with no warning at all. And it wasn't that the United States didn't have the right to choose where its military equipment went. It's not that Ukraine was automatically entitled to our resources just because we had them. But what happened was the United States had resources and services that were allocated towards Ukraine. And Ukraine thought that they could trust that these would continue coming. But the United States just decided to turn those off. There were moments where they turned off intelligence sharing with zero notice to Ukraine and that caused Ukraine to lose some strategic footholds. For example, their Kursk incursion into Russian territory. A lot of people say that they lost that land because the US turned off intelligence sharing. But the US also had weapons deliveries that were supposed to go to Ukraine again already allocated and we decided to turn those off. We're not actually going to deliver those weapon systems that they had become dependent on. And this breaks down that system of trust where people want to know that they can depend on the country that provides them with their weapons that they need to protect themselves. And so the United States broke down that trust. People were looking for alternatives at this exact moment where the nature of the war in Ukraine changed the technological nature of warfare and Ukraine became one of the best alternatives. So it's really a double whammy and we now see that playing out in Iran where Trump has asked for help for example from NATO and nobody really wants to come to his aid because of the belligerent attitude that the United States has had towards these countries.
Now some people will say that some of these grievances were fair and I would say I agree it's always a complicated situation and some of the grievances that Trump was sharing were fair. It's not about the grievances themselves though. It's about the way that we went about addressing the grievances and it's about how quickly we pulled the rug out from under our allies, breaking down the nature of the trust. And we as the United States can say, well, those countries deserved that and this and that. But it doesn't matter how we feel. All of these other countries now feel that they can no longer trust us. And of course, as other countries who are potential partners of the United States, potential purchasers of our weapons, potential participants in our global system are looking on at that, even if they are not the direct recipients of those types of um political attacks from the United States, they recognize as they're happening that if they do get intertwined with the United States, the same thing could happen to them. And so they're more inclined to look for other partners. Again, there is a reason that the Gulf states who should be able to rely on the protection of the United States, who started this war in their region, are intentionally looking elsewhere from the United States for their own protection.
What we see then is that this deal between Ukraine and the Middle East is not just another deal. It is actually a in the armor of the global system, the global system that the United States has carefully built since the end of World War II. And that can have massive repercussions depending on where things go from here, especially if things continue to go in this direction, which currently, of course, under the current administration, it seems likely that they will. What the United States needs to do right now, and what they can do if they want to preserve their global position, is to not just stop the progression in this direction, but we actually need to intentionally reverse course a little bit. We need to intentionally try to restore some of the things that we've broken. And this historically is a very hard thing to do. It's a very hard thing to admit to when you're a nation that sits in power. And it's certainly not something that's going to happen under the current administration or if the same political movement gains power again in the next US presidential election, the MAGA movement. Now, we might see some change, for example, if a different political party comes into power at the next election or if uh it's just a non-MAGA segment of the Republican party, a more classical Republican party that would have a more Reagan style of politics. But either case, it might be too little too late to fully preserve the system.
And what that means for geopolitics potentially going forward if things do continue in the direction that they've been going is that the whole global system could begin to reorient and it would happen slowly. I'm not talking about like an immediate collapse, but it's something we've seen throughout history. History has had several prominent players who were prominent militarily, economically, socially at every type of prominence they had and they fell over time. And the way it could happen is that these chinks start to open in the global system. People are no longer as dependent on US weapons and so they find other suppliers for those. That also makes it not as advantageous for them to continue with economic deals that are beneficial to the United States. For example, trading in US dollars, which has become the reserve currency, largely because of the global system where people were tied to our weapons and our military and things of that sort. If that begins to happen, again, it's a slow burn. It's not an overnight collapse, but it's just like a little bit less dependence from a little bit more countries over time. That becomes a problem for the United States because the reason that we are able to function the way that we we can as a country is because of our reserve currency status. We obviously have a massive national debt as the United States, but it's actually really manageable at the current moment because we sit at the top of the global food chain. And we can continue to print money and we can basically pass off the cost of those inflation to a lot of other people, not just our own citizens. It's more complicated than that, but that's not what this video is about. But if we undermine the global system and we undermine reserve currency status, then we end up hurting ourselves in our position in the long term. And that's the biggest irony of all of this. The reason the global system is changing is because the United States didn't want to keep incurring the costs of the current system, not realizing that when you start to cut the costs, you also start to lose the benefits. And if you're running a business, for every business, you do need some operating costs in place to continue producing a product that your customers will actually pay for. It's much the same in global politics. And right now, Ukraine has the product that countries want to pay for. We'll see what happens. I hope you enjoyed this video. Be sure to like this video and subscribe to the channel if you did.