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- [00:00]
A
I started Ornod in 2013 and we make bike apparel. The best part of Shopify for me is our ability to run the business as essentially non technical people. We're able to admin everything on the back end, front end and sell things online easily. If Shopify were a bike accessory, I think it would actually be the bicycle. It's the thing that you do the thing on. We run the business on Shopify so start your free trial on shopify.com. Hello and welcome to this podcast from Geopolitical Futures. I'm Christian Smith. It's no great insight to say that energy is about as fundamental for the Russian economy as oxygen is for its citizens. Between 2014 and 2024, oil and gas made up anywhere between 30 and 50% of federal budget reven. With the closure of the Strait of Hormuz, fears grew in the west that it could mean a bounce for Russia's economy and its war chest. And while that could still be the case, with Ukraine targeting Russian refineries and energy storage in recent weeks, including massive attacks with hundreds of drones over the weekend, Vladimir Putin has now acknowledged that the country faces fuel shortages. So today on the podcast I am joined by George Friedman, Geopolitical Futures chairman and founder, to discuss where to from here for Russia and whether the country may try to force Belarus or even nuclear weapons into the war. George hello. Before we get to that, let's just set the scene as to how we go got here. Talk us through the details of Ukraine's energy infrastructure attacks. Why is it doing this? Why is it doing it now?
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B
It's clear that the Russians are not prepared to reach understanding via the United States or any other source to end the war. Therefore, the Ukrainians have reached a conclusion that they must strike Russia at one of its central points and they have now the drones technology to strike Russia at a critical point, which is its energy capability, its oil capability. Russia has to obviously have oil. It also exports oil and is at this point doing quite well in the exportation of oil, given the price of oil these days. And he sends it to countries like China, India and many others. By attacking their oil capability, they strike at a fundamental asset that Russia has, both in terms of making its economy more viable by selling it overseas, but more so inside the country, dramatically reducing the amount of oil available, therefore further hurting the economy and production and the citizens as well. So for the Ukrainians, this is a major escalation, a thing designed to bring Russia to the table, and the Russians are obviously not going to want to do that. Under these circumstances,
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A
how big of a deal is this for Russia? Now, Putin said on Monday morning, I believe it was, that he acknowledged that there are these fuel shortages across the country in Crimea for other reasons as well. There are serious shortages as well as somewhat under siege in many ways. Is this, we say this is grave, this is critical. What level of crisis is it?
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B
Well, this isn't the high price of oil. It's a lack of oil, hence the lack of water, mail, fuels, and other things. Now, imagine you're in Britain, I'm in the United States. Imagine if you could not buy gasoline. The consequences would be significant. That this is summer, not winter, is a blessing for the Russians. But if this goes on and they go into the winter, they have serious problems. So what has happened in this war so far has been. It has, in a way, been confined to the battlefields now. And certainly the Russians have attacked facilities inside of Ukraine now they've attacked the center of gravity of the Russian economy, an economy that has not been functioning well, and with the loss of sufficient oil, is not only not going to recover, it'll decline further. So at this point, I would take it that the Ukrainians, understanding there's not going to be any negotiation with or without American approval, with or without European approval, I don't know about that, have chosen to strike at one of the centers of gravity of the Russian system, and they seem to have done well. That Putin acknowledged this was a problem, was usually rare. He brushes these off. But this problem cannot be hidden because the public knows it. An attempt to deny it or say it's minimal doesn't work at this point. So he now is in a significant crisis. His economy is being hurt. Everyday life is being hurt. The Russian public has to decide to some extent whether this is worth Ukraine. Now, this is not a democracy in the proper sense, but all nations at war must have unity or at least willingness of the public to carry on. They have had many losses in terms of lives, in terms of economics in this war. They push it forward. They do not reach a settlement. And now this happens. So the Russians have to respond. How they will respond is a fundamental question.
- [06:46]
A
Well, let's look at that question. I mean, it was a long time ago that we had President Biden in office, and there was the situation where Europe and the US Was worried about it. Too much escalation, such as striking oil facilities in Russia for fear of escalation from Russia. But that's going on now. We haven't seen escalation in that sense from Russia in Many respects, we've seen maybe more strikes on infrastructure that have been going on for years in Ukraine. Do you think we could start to see more escalation in Russia? I mean, there are even rumors that Putin might resort. Rumors again that Putin might resort to tactical nuclear weapons.
- [07:27]
B
Well, the tactical nuclear question is fundamental. He had mentioned in the past early in the war that if the US did this or Europeans did that, he would resort to tactical nuclear weapons. In the past week, there have been massive meetings inside of Russia with leadership in all dimensions. There have been conversations. The Belarusian president spent several days inside of Russia talking. And one of the things that is rumored, I cannot verify it, is that there is a faction inside of Russia that wants to use tactical nuclear weapons. They're down to that. There are two problems. Tactical nuclear weapons may or may not change the war. But also the United States has a long standing view there's no such thing as a tactical nuclear weapon. There are strategic nuclear weapons. There are non strategic nuclear weapons, but any nuclear strike is a nuclear strike. The United States fought any number of wars, frequently losing them, not going to nuclear weapons. Okay, now the fundamental question is if the Russians use what they call tactical nuclear weapons, small nuclear weapons, what is the US Policy that has been in place long before Trump? This has been a fundamental element of American policy. What do we do when we forget the word tactical and decide the Russians have used nuclear weapons? From the American point of view, the usage of nuclear weapons after Nagasaki and Hiroshima, and we found out what nuclear weapons would do, any use of nuclear weapons would be a threat not only to the world, but us. So if they can use that, they can use it elsewhere, perhaps not us. So with this, their play with fire, in the sense that not only is it just that Trump is unpredictable, which is added at risk, it is that the Americans have had a long time policy of not using nuclear weapons and losing wars in them and seeing any use of tactical nuclear weapons in principle as the same as any level of nuclear weapons. There's a faction inside of Russia now that is said to be. I don't know who's there. Advocating their use raises two questions. First, the risks of the United States or even the Europeans panicking and taking action. Secondly, what would they use it on? Tactical nuclear weapons can destroy significant areas, okay, but they have to be delivered by missiles and rockets. And these days there are anti missile rockets. And perhaps they would force Ukraine to capitulate. But I think more likely would be a massive intrusion into the war, not only by Europe. Poland in particular, would be very, very appalled at this, but by the United States as well, that would cross the line. So I think the discussions that are going on, and they're going on deeply, is what to do now. I suspect there is a faction that is arguing to continue the war, as is ultimately the Europeans. The Americans will get tired and stop supporting Ukraine in some way. There's no evidence that this will work, nor that the Ukrainians would capitulate anyway. There's another faction that undoubtedly I've not seen but says make peace, end the war, negotiate. Well, that would be probably the end of Putin's presidency to enter into the war costs. So much for Russia. And I think this is the position Ukraine tried to put him in, to put him into a position where the attacks are so severe it affects Russian life as well as the death of many men. Victory not being achieved going to tactical nuclear weapons, which does not guarantee victory but certainly guarantees the animosity of the world. China itself would be concerned if the Russians went to this usage. No one ever has. So Russia clearly is deep in crisis as to what to do and the Ukrainians impose that crisis. They can carry on the war as they have and not succeed. They can escalate it to a nuclear level where they cannot control what evolves or they can make peace.
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A
Want actionable insight from geopolitical futures Introducing geoeconomic lens Helping you understand not just what is happening but but how global power dynamics shape economic stability, dependency and opportunity. Explore the first issue for free at geopoliticalfutures.com Lens George, just quickly, you mentioned there that there are strategic and non strategic nuclear weapons. What's the difference?
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B
The distinction that the Americans have always made is strategic and not strategic. But it's nuclear. It's a nuclear strike.
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A
Right.
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B
The Russians are making a different linguistic change and whether or not they would do it or not, the question how would they use it even? You know, they would have to have a lot of nuclear strikes on a lot of places to take them out.
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A
So a nuclear weapon's not a strategic weapon, understood in terms of it doesn't annihilate a city.
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B
Yeah, but it's still a nuclear weapon and it's very capable of doing tremendous damage to the city, destroying frameworks, killing a lot of people in small areas. So yes, it's still a nuclear weapon, just not a city killer.
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A
So plainly counterfactual. The other argument I suppose is if Russia were to use a nuclear weapon, you're right, it would bring the animosity of the world and perhaps panic amongst Europeans Particularly say, Poland. But I suppose what the people inside Russia might be saying is, well, what are they going to do about it? Are they really going to enter a war when we've already shown that we're willing to use nuclear weapons? They're already doing as much as they can without entering the war. What would be their response?
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B
This is where the personality of Donald Trump gets valuable. One of the things that Trump has shown is that he is not predictable, he's not averse to risk, and so on and so forth. The question is, would the United States or Europe, Britain and France have nuclear weapons? Would they respond? If you were betting that they wouldn't, would you bet on Trump not doing it? Therefore, the problem here is, okay, obviously we would not want a nuclear war. But the following is also possibly true. If we did not respond, it might convince the Russians that they could use tactical nuclear weapons without danger to themselves, and that would be even more dangerous. A country like Poland, next to Ukraine, which is growing substantially militarily, would now say, okay, would they do this here? Would they do this there? So there is a huge risk in taking a retaliatory action. There's also a substantial risk in not taking nuclear. And this, the Russians know, and these were obviously at least part of the talks that were being held was the idea that a faction wanted to use tac. Nuke is what they called the Russians would indicate that this was on the agenda and the conversation they were having right now. What would the United States do in response would come in. One of the things that they said was that the agreements reached in Anchorage are dead. They're gone. We don't have got them. I have no idea what agreements were reached there.
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A
No, I don't think anyone does.
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B
One agreement that was reached there was to continue negotiations, which the Russians put many times after that, put off negotiations, there were no progress in the negotiations, and so on. So if there was any understanding there, it would have been this would end in a negotiated settlement. And the Russians have shown no desire to end the war on these terms at this time. So I guess what he's talking about is the agreement the United States made not to directly support Ukraine, allow the Europeans to do that in return for a process of ending the war. He's saying now that the agreements in Anchorage are gone, they've been gone a long time.
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A
I mean, it's not unusual historically for Russia to somewhat invent agreements and then complain when they're not carried out. Final question on nuclear weapons, I suppose. Could this just be more saber Rattling as it was at the start of the war. And this faction that we are being told about within Moscow is not really real, it's just again, more saber rattling.
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B
Well, consider England, the United States. Suddenly you're not able to buy gasoline. You're probably not able to fertilize the soil. There are all sorts of things like electricity that runs somewhat on gas. Suppose that were not there, not available fully, what would be the response in these countries? Tremendous unhappiness with the government. In this particular case, likely against the Ukrainians. But what they would really want is to get oil back, and that would be what the banks want too, because selling it overseas is central to the Russian economy. So I think under these circumstances, they're less interested in revenging these attacks than ending them. Now, certainly nuclear strikes would probably stop those attacks for a while, while they regrouped, but they would continue. So it would be satisfying but not necessarily a solution to the problem. So what I would think the Russians are doing now is there has got to be a strong faction in there. That said, this is almost five years. We are in an economic crisis. We have lost endless numbers of men. Nobody quite knows how many, but there are a lot. We've got nothing. This would put Putin in some danger. Coup d' etats occur within dictatorships. The fact that they leaked, the fact that a faction wanted to use nuclear weapons indicates to me that normally you would not advertise a nuclear strike. Okay, you would do it. I think the anti war movement is growing and discussion of nuclear weapons well may have been held, but I don't think that was the fundamental conversation on these points. And Putin has led Russia into a terrible position, not able to, to defeat Ukraine, with Ukraine doing massive damage to Russia. So there must be a group in there that says, look, in almost five years we haven't won this war. Let's end it on some terms. I think that it's not a faction that wants to use nuclear weapons. That's the most powerful fear for Putin. I think there's a faction that's had enough. But understand, Russia in its internal politics is to me a mystery, and I think to many people smarter than I am, a mystery. We don't know how Putin has survived so long. We don't know if forces are there. So this is a fundamental question in the world right now.
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A
And look, while we're on the subject, the role of the US Is now interesting in this. Obviously, the US has been fairly distracted, particularly, particularly Trump and the senior administration with what's going on in Iran lately. But once that ends, if that ends and when it does, they may return to this. Putin was saying this week that he expects more negotiations involving the U.S. once the situation in Iran is over. What role do they play now? I mean, the suggestion in some ways is that Putin has lost Trump by not being more willing to reach a deal and the US Is perhaps more on side with Ukraine. I mean, at the G7 this month, Trump signed up to the support for Ukraine pact that they or statement that they had, which was last year. He walked away from the meeting. So what's the situation there?
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B
Well, firstly, the United States is quite capable of dealing with two wars at one time. We did that in the past during the Cold War. We also did it pretty well in World War II, Japan and Germany. So the bandwidth of the United States is there. Trump came into office saying that he would end the war in Ukraine through negotiations with Putin. He failed to do that. That failure is noted. Okay. He was very confident. So in his mind, I think the Iranian crisis is the more immediate. But there are various talks that are going on in Qatar, in other countries, and that is not an existential problem for him. He can work out of it. The question of Ukraine and putting nuclear weapons on the table in any way certainly diverts his attention. And so given his unpredictability, and again, I say it's interesting, when you're playing poker, much better not to be predictable than predictable. So whether he's by nature that way or by playing that way doesn't matter. The Russians have learned they cannot predict what he will do. And that being the case, it could be do nothing. It could be he do something. At this point, what is the position of Russia's defensive capabilities? Because remember, armies run on oil, armies run on economies and so on and so forth. So I think this is the moment at which the Russians are going to have to decide fundamentally if they go carry on the war, they must do it differently. I don't think there are many different ways other than nukes, they're saying at the same time, I don't think many of those in Russia in leadership want to enter into that cave over this war. So I think now there's a fundamental political crisis in Russia. I am told that Putin is not spending much time in Moscow. He's not the Kremlin. He's in a house he owns to the east of Moscow, and he has several homes. And he seems to be struggling between them. This home he built a railroad connection. So one of the questions is how Secure is Putin at this point? Having reached this point, he may be very secure, he may not. So one of the mysteries, you don't have a mystery in the American economy, in American politics. It is on the front page every day. Okay? You know where it is and where it stands inside of Russia at the highest levels, it's a mystery what's being said, and I'm not able intellectually to penetrate it. I can't make it except to say there has got to be a major anti war group who really doesn't want to get into a nuclear exchange and is actually frightened. They may not even be a pro nuclear group. It's just leaked out as a threat. But the most important question at this point is the Russians, after four years, have suffered a massive attack on their economy, on their lifestyle and everything else. They could either choose to continue the war or and try to do the same to Ukraine, or having tried to do that for four years and not fully succeeding, reach a peace agreement. The next few weeks will be critical.
- [27:23]
A
Take a moment to follow and rate us on your preferred podcast platform. If you're already watching on YouTube, don't forget to like and subscribe. Well, there are other options available to them. As you mentioned earlier, George Lukashenko, President Lukashenko of Belarus, was in Moscow for talks in recent days. There is also a suggestion that Russia might decide to call up hundreds of thousands of reservists who have not yet been used to throw them into the front line. Looking at both those options, I suppose, but I mean, Belarus, they have stayed out of this despite effectively being a puppet state of Russia. Do you think that they could be on call?
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B
Well, if they are on call, it doesn't matter that much. The Belarusian military is minimal and they would have to have supplies going forward. Now, at this point, one of the supplies, the Russians don't have that much of his oil, which is critical. But also they have a logistics system built around supporting their own forces. I don't think the Belarusians have a logistical system that would allow their military to be fighting 500 miles away from home. One thing that they might do is to try to open a new front by sending Russian troops into Belarusia and attacking. Well, the Ukrainians have shown very well that they can resist a Russian attack, assuming that they would not be using tactical nuclear weapons. I think the Russians have thrown everything but the kitchen sink at the Ukrainians and the Ukrainians took it, carried on. So what appears to be a strategic move into Belarus cannot depend on the Belarusian army, which is not functional. Basically, Nor can it really depend on a major rapid evolution of Russian forces into Belarus and then attacking on a different axis because the logistics aren't there yet and they would take quite a time, be a bit of time to put into place as well as the fact that one of the critical elements of military, of combat is fuel. And to have a logistics system you have to have gasoline or material for trains. So I don't see them as having many options. That Lukashenko was so long in the country, it may mean he'll try something. It could also mean they wanted to scare someone into it. But I don't think it was a very frightening scare. If they want to go into Ukraine from Belarus, well, they'd have to have a lot of people called up. You don't immediately throw them into combat, you have to arm them, you have to train them somewhat, you have to organize leadership and so on. You don't just call up the reserves and send them to war. That's a multi month operation to bring those people operational. And they haven't been called up yet. It seems they're just talking about it. So under these circumstances, given the attacks that Ukraine have carried out, it seems to me difficult for them to do it. Now what they can do and that the capability I suspect of doing, I don't know. This is massive non nuclear attacks all through the region of Ukraine. But the Ukrainians have developed some very good anti drone systems and while they'll be hurt they fought this far, would they capitulate at this point? So these are the things I think they're being discussed inside of Russia. From the point of view of Ukraine, they've got their optimal system in place. There's not much more they can do and it's working. From the American point of view, the last thing we want to do is get involved in Ukraine and maybe that's what the Russians are betting on. But if they use nuclear weapons, that would be serious.
- [32:06]
A
But it's interesting at the moment that Trump is being asked by Ukraine and Europeans to license Patriot missiles being produced in Europe, which currently they're not able to do for licensing reasons. Be interesting to see if he allows that and the businesses in the US allow that. But look, just on Lukashenko on one more point, I mean, as you say, it would be hard to do, it would take months. But if Putin's desperate, what's to stop him saying to Lukashenko, you better do this otherwise or else. And then what's to stop Lukashenko then
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B
saying yes, yes is months away from materializing. His army is not prepared for combat. They'd be readily defeated by the Ukrainians. That he might send forces through Belarus, Russian forces to attack another front, well, that would be visible. It would take a long time to achieve. And the Ukrainians could respond to it in many ways, from drone strikes to deploying the aerial forces. So there's no magic wand the Russians can wave other than the nuclear threat, which appears to be being made. And given the fact that they have lost so many troops. Okay, now we're trying to call up the reserves. Reserves in the United States are excellent. I know them well and I know they're going to not be very combat capable in a week. More casualties. So there is nothing rapidly they can do except massive drone strikes. What is interesting is that they have not responded in kind to any certain targets, like devastating Kiev, totally and completely, if they could. So they also have. Ukrainians have facilities where they build drones and everything else. Russian intelligence must know where they are, but they haven't yet. So that indicates to me either great disagreement inside of Russia what to do next. Russia lacking the capabilities of taking massive action. Both or neither. So it's a guess of what they're doing, but that they're not doing anything significant. But talking about it is in itself significant.
- [34:40]
A
Well, as you said, George, the next few weeks will be critical. Let's leave it there. Thanks, as always, for being on the podcast. Thanks out there for listening. We'll be back again next week with another podcast from Geopolitical Futures. But until then, you take care and goodbye. You can find all of our expert geopolitical analysis@geopoliticalfutures.com.