Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Iran Has Broken The US Middle East Raj

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On May 7, 2026

14 Comments

It turns out that Trump’s plan to help ships go thru the Strait was ended when both Saudi Arabia and Kuwait refused to let the US use their airspace or US bases in their countries to launch attacks.

The reason is obvious—Iran has repeatedly said that if the war restarts they will hit the Gulf States much harder than before, going after oil infrastructure in particular.

America has proved it can’t protect its Gulf allies. It’s low on interceptors, and what they have goes to Israel. Even with interceptors attacks get thru.

Bases have gone from defending countries to being liabilities. Being American allies drew the Gulf states into a war that devastated them. The Sauds and Kuwaitis have nothing to gain from letting the US launch attacks from their territory. The lesson was painful, but it has been learned.

This also puts an end to the idea that countries can’t deny the US. They just did, as did Spain.

The US Empire is dead. Officially dead. It does not come back from this because the new way of war centered on drones and missiles means that it is impossible for the US to protect its allies.

Likewise the US can no longer guarantee free navigation. This has been obvious for a couple years: if they couldn’t even defeat the Yemenis, they weren’t going to stand a chance against any real nation.

It’s over.

Again this doesn’t mean the US isn’t still a Great power, especially regionally. It can still shove around weak countries which aren’t willing to bear the heavy cost of standing up to it, like Venezuela.

But as time goes by the missiles and drones will spread from China, Russia and Iran to everyone else. Aircraft carriers will be forced way back, reducing sortie tempos, and blockades using ships will become harder and harder. Probably the best way to do a blockade against a far away country will be drone carriers, but even they will be vulnerable to counter-strikes.

This is also going to be a huge problem for the American military industrial complex: their weapons suck. No one is going to want to buy them. The key weapons needed are missiles, drones and air defense and all of those are cheaper and in many cases better from other suppliers.

At this point without data centers the US wouldn’t have essentially zero GDP growth. The stock market is being held up by a few major internet firms who are engaged in a massive circle jerk of financing their customers purchases. Chinese AI is behind American, but 95% cheaper, open source and will converge on the same general abilities, but better for real world tasks involving robots, autonomous vehicles and so on.

If you need to buy something you don’t want to get it from the US. Odds are China has it for less and at least as good, possibly better.

The world doesn’t need American goods. Everyone’s going to move off oil as fast as possible and it’s China that sells that stack. American weapons are crap. American alliances do nothing but give you a nuclear umbrella you can’t trust the US to deploy.  Trade is increasingly moving off the dollar and on to the Yuan, so sanctions will work less and less well and in less than five years will be basically useless except against vassals.

All that will be left is a wasting ability to use a legacy 90s tech military against the weak, and that’s going away too.

The US Empire is cooked. America’s elites were handed one of the strongest hands in history and pissed it all away in three generations. Truly late Roman Empire levels of incompetence.

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American Elites Have Reverse Empire Dysmorphia

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On May 6, 2026

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There’s a clinical diagnosis called body dysmorphia, where people think there’s something wrong with their body when it’s fine. Colloquially, some people refer to “reverse body dysmorphia” where someone thinks their body is better than it is.

In late middle aged men this often exhibits itself as thinking that they’re stronger, tougher and better in a fight than they are, feeling they’re as good as they were when younger. Some find out the hard way they’re wrong, picking a fight they can’t win.

This applies to American elites. They think America is as powerful as it was back during the Gulf War: able to crush opponents. It leads to constant incorrect decisions. The first major one was believing that sanctions would destroy the Russian economy and lead to victory for Ukraine.

The second major error was the second Iranian war. They thought they could easily beat Iran and overthrow its government. Instead all their local bases were smashed, they Strait of Hormuz was closed by the Iranians, their carrier groups forced back, and their one attempted ground action in Iran, to seize Iran’s enriched uranium reserve, was a bloody fiasco.

Since then they’ve tried to escort out ships and retreated. They’ve put on a blockade of the blockade, and Iran hasn’t buckled and Trump in particular keeps spouting on about how Iran is essentially already defeated and eager for a deal even as Iran has repeatedly refused negotiations.

The world economy is shuddering, the price of oil and its distillates are soaring, American farmers can’t afford enough fertilizer and Russia and China turn out to be two of the nations most able to weather the storm.

Woops.

And American elites keep talking like there’s a military solution when there isn’t. They keep talking like Iran lost the six week war, and not them. They keep offering peace terms which amount to “give us what we can’t win on the field of battle”.

They think they’re still America in the 90s. They don’t get that America is about half de-industrialized and that its military is set up to fight wars of the 90s, not modern drone and missile wars.

They have Empire dysmorphia, thinking they’re still in their prime, when they are no longer a hegemonic power, but only a Great Power. They can push around weak nations like Cuba or Venezuela, but not great powers, and Iran is a great power, as they proved by beating the US.

As long as America keep thinking they’re the only big dog, with the possible exception of China, they’re going to keep walking chin first into fights they can’t win, and their collapse is going to accelerate as a result. Their sanctions on China completely backfired and instead of China’s old stance, which was to trade with the US and let it slowly decline, China has pushed on ever tech lead that the West has.

Europe is similar. They don’t get that they aren’t even a Great Power any more. They are just weak, corrupt, sclerotic nations without any significant resources, who even added all together aren’t in the technological race. They’re deindustrializing. And they keep talking tough and making enemies.

Insanity. Sheer insanity.

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America Exports Record 6.4 Million Barrels of Crude

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On May 5, 2026

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Today’s headline news chronicles our triumphant, record-breaking petroleum exports: 6.4 million barrels a day. The highest weekly figure ever recorded. On the surface, it appears America may just make up in exports what the closure of the Straits of Hormuz prevents.

On the surface.

The reality of our domestic petroleum situation is more dire. The same week America exported record amounts of crude it quietly drew down its strategic reserve to the tune of 7.1 million barrels a day same week ending April 24. This represents the largest drawdown since 2022.

Let’s do some simmple arithmetic: drawdown strategic reserves by 7.1 mln and export 6.4 mln. Subtract and you get a net loss of 700,000 barrels a week. That’s the burn rate of crude oil. Not slack. Vanishing.

Adding insult to injury, Morgan Stanley reports that gasoline inventories are at their lowest level since well, ever. Yes, ever. By August gasoline reserves will freefall to 198 million barrels. 

In reality, America is facing an unsustainable crude oil burn rate coupled with a completely unsustainable draw down in gasoline reserves. These drawdowns are occurring in the face of perilously high petroleum prices, including gasoline.

But domestic petroleum production, and refining capacity will make up the difference!

What part of unsustainable did you not understand?

For example, the oil refinery on Corpus Christi Bay here in South Texas is effectively off-line because it has no water source. Lake Corpus Christi is dry. No water, no refinery, no gasoline.

To make matters worse, domestic crude production is trending flat to down, even as WTI spot prices are in the $102 range.

Permian Basin rig counts, a leading indicator of what future crude production will look like, are down 15.33% YoY. Oklahoma rig counts are down from 55 last April to 43 today. That’s a -21% decline YoY. New Mexico dropped 3 rigs and Wyoming dumped 1. What about Eagle Ford shale oil you ask? At $102 a barrel shale has to be profitable. True, but there hasn’t been a drilling permit issued in the Eagle Ford basin in three years. None have been filed with the state since the crisis with Iran began. There’s a reason for this. WTI spot prices are $102 a barrel, as I previously noted. Those are spot prices for oil deliverable right this minute. If you go 12 months out on the contract curve to May 2027, the price of WTI Falls to $73 a barrel. At that price shale oil isn’t in the sweet spot. 

Moreover, what the prices in May 2027 are telling policy makers, factory owners, grocery store managers, freight shippers and the like in bright red flashing lights are that a deflationary spiral is a very real possibility.

Here’s where the rubber hits the road: the petroleum and gasoline burn rate will force the Fed’s hand and compel a rate increase to prevent a massive inflationary spike.

But what is the Fed to do six months to a year from now when the looming credit crisis, and housing collapse reach critical mass and unravel, popping the AI bubble the blowoff?

We’re literally exporting our seed corn.

You can’t reap what you don’t sow.

Is A Famine Baked In For 2027?

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On May 4, 2026

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Now let’s be clear, I don’t expect a famine in America, though I do expect a lot more people to die from hunger because food prices are going to be a lot higher.

Fertilizer in America:

Note that in addition to the war, this is a policy failure at the domestic level. Farmers should be subsidized and prices should be limited to whatever is actually reasonable based on increased non-domestic costs. The first thing you do is make sure your farmers can grow food, because without food, you’ve got nothing, and as Lenin said, every country is three missed meals away from revolution. (It’s actually more than that, but the rhetorical point remains.)

Most farmers use tractors. Most tractors use diesel, and those prices are rising too. They will continue to rise because the oil which is being restricted is the best oil for creating distillates like diesel, bunker fuel (ships) and jet fuel.

In Pakistan we have the following:

Growers have expressed serious concern over the worsening condition of the agriculture sector, stating that it is already on the brink of collapse due to low returns on crops, while continuous increases in diesel and fertilizer prices are delivering a severe blow.

They pointed out that despite urea being locally produced, its prices are rising every other day, which they termed beyond understanding. The growers criticized the government for increasing levies on petroleum products, particularly diesel, allegedly to cover tax shortfalls due to inefficiencies of the Federal Board of Revenue (FBR).

India continues to impress, not only do they have increasing diesel prices, but they’ve increased taxes on diesel to make the problem worse. (This sort of thing is why, no, India is not the next China. China has massive reserves, controls prices when necessary and disallows export when needed.)

Of course, if your country is already in trouble, you’re going to get in the neck:

The new report, From Hormuz to the Frontlines of Hunger, traces how disruption to the Strait of Hormuz and uncertainty around commercial shipping are affecting six crisis-affected countries: Sudan, Somalia, Ethiopia, Pakistan, Myanmar, and Lebanon…

Key findings include:

  • Global urea prices, a key fertilizer benchmark, rose 85% between December 2025 and March 2026. 
  • In Somalia, fuel prices more than doubled, adding pressure on food, transport and water costs. 
  • In Myanmar, diesel prices rose 160% since the start of the war, affecting irrigation, milling and transport. 
  • In Sudan, gasoline costs in Khartoum rose 66% in a single week in early April, making moving food delivery to market commercially unviable. 

Pakistan is almost certain to have a famine as well. Australian farmers are completely screwed as the country only has two refineries (down from eight 20 years ago because it was cheaper to buy from China, y’know. Too bad China won’t sell to Australia when they’re shortages, which a five year old could have predicted, but hey, max profit is all we are allowed to take into account.)

So far what we’ve seen is mostly higher prices for fuel and fertilizer, though some countries already have shortages. This is the logistics overhang — tankers already full and on route, storage facilities already full, etc, etc… But that’s coming to an end right about NOW. And what will start happening is actual shortages. (Jet fuel is supposedly down to 14 days in the US, though that’s not important for agriculture.)

Rich countries will outbid poor countries, but high prices mean farmer simply can’t afford all the diesel and fertilizer they need. They can’t ship their animals to slaughterhouses, etc, etc.

The next year is going to be ugly. Even if the war ended today, which can only happen if the US declares victory and lets Iran, in fact, win, it’d be ugly. But if the closure of the Strait continues, multiple countries will have famines and almost everyone is going to have significantly increased food prices, which means a lot of poor people will go hungry and some will die. It’s great Congress has cut food stamps every few years for the past 30 odd years.

If the war does go kinetic again, Iran will destroy vast amounts of oil infrastructure, and the crisis will go on for years.

The only sane response is to end the war, but that would mean de-facto acknowledging Iran is a great power and the US is no longer a global hegemonic power. Oh, and Israel might be more restricted in its ability to mass murder civilians, with their extra special emphasis on children, doctors, nurses, paramedics and firefighters.

What good is life if Israel and America can’t commit war crimes with complete immunity? This would be a complete violation of American and Israeli values, and Trump and Congress just cannot abide the idea that they don’t get to rape, murder and/or torture anyone they want. (Which is why Trump keeps shoving Cuba around. If you can’t bully the big kid, find a small kid to beat the shit out of.)

Anyway, on a personal level, if you can, stock up on shelf-stable staples. Today is the cheapest they’re going to be for at least a couple years.

Everyone reads these article for free, but the site and Ian take money to run. If you value the writing here and can, please subscribe or donate.

Week-end Wrap – Political Economy – May 03, 2026

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On May 3, 2026

3 Comments

Week-end Wrap – Political Economy – May 03, 2026

by Tony Wikrent

 

War

War, El Niño, Pestilence, and Famine: The Coming Shock to Global Food Supplies

Craig Tindale [via Naked Capitalism 04-27-2025]

 

Why Iran’s Oil Infrastructure Is Not Exploding Like Trump Said It Would

Murtaza Hussain, May 01, 2026 [Drop Site News]

 

Why U.S. Oil Companies Are Not Plugging the World’s Energy Gap

[New York Times, via Naked Capitalism 05-02-2025]

 

Trump not violating any law

‘He who saves his Country does not violate any Law’

Trump Stuns By Saying ‘I Don’t Know’ When Asked Directly NBC’s Kristen Welker ‘Don’t You Need to Uphold the Constitution?’

Joe DePaolo, May 4th, 2025

 

Trump blames No Kings for assassination attempt

[Popular Information, via Naked Capitalism 04-29-2025]

 

Comey Indictment Shows Justice Dept. Got the Message From Bondi’s Firing

Glenn Thrush, April 30, 2026 [Washington Post]

In naming only an interim successor as acting attorney general, President Trump has established even greater incentives to execute his most extreme demands, current and former officials say.

Read More

Open Thread

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On May 2, 2026

27 Comments

Use to discuss topics unrelated to recent posts.

We Don’t Need Chinese Exceptionalism

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On April 30, 2026

36 Comments

Chinese and American flags flying together

Thirty years ago I knew that China would be the next “America”. The next “Britain.” The next industrial and technological hegemon.

I wrote about this back in the early 2000s, at BOPNews, the Agonist and FDL. When the Chinese were let into the WTO by Bill Clinton their rise and replacement of the US became inevitable.

At one time the British were the greatest in the world. They were exceptional: smarter and more powerful than anyone else.

Then we had a century of American exceptionalism. The American way was the best way. Americans were superior. They were more creative. Their government system was the ideal system, etc, etc…

American exceptionalism was and is ugly. The American system was not the best of all time (contra the idiotic “End of History” thesis) and neither was the British or, more generally, European “Liberal Democracy”.

Nor is the Chinese system the greatest of all time. Chinese culture is not the world’s greatest culture. The Chinese people are not innately superior to other people.

China industrialized the same way that almost everyone did. They had support from the current industrial hegemon, same as both America and Japan did. (Japan had British help during the Meiji period and American help after WWII.) They ran a protectionist mercantile export policy. Instead of tariffs they used currency manipulation.

British financiers built a ton of American industry, because profits were higher in America than in the more mature industrial state of Britain. Americans offshored and outsourced to China because profits were higher in China.

There’s no way to do mass offshoring to a country without also transferring technology, but more than that, wherever the manufacturing floor is, the technological lead follows. It takes twenty to thirty years to gain the tech lead once you’ve gained the manufacturing lead.

China also ran the rest of the Japanese playbook: get your population educated, starting with getting everyone primary education. Then get everyone secondary education. Only then do you go all out at the university level.

This is the way almost every nation (there are less than five exceptions) has industrialized. If you want the full explanation, read “Bad Samaritans.”

What makes China different is what made the US different from Britain: it’s a continental power with a much larger population than the previous hegemonic power. So it can scale better and once it takes the leads the previous power is cooked.

This is why Japan had to cut a deal with the US: why it could be forced to give up its tech and industrial lead: it’s an island nation with a smaller population than the US. That can’t be done to China, because it’s larger and because so much of what it needs now comes from uninterruptible continental supply chains. (Plus, very soon, they will be a greater naval power than America.)

We’re going to have a “Chinese Century” and we’re going to have to put up with tons of claims of Chinese exceptionalism. Their system is innately better, they have a superior culture, they’re more creative than everyone else and heck, as a race they’re superior.

They aren’t. They don’t even have as good a claim as Britain did: they weren’t the first. They just did what a ton of other countries did, including the US, Japan, South Korean and Taiwan.

This doesn’t mean they don’t deserve admiration and credit for becoming the hegemonic power. They still had to do a lot of things right, including taking advantage of a foolish and stupid financializing elite in America, just as the Americans took advantage of a foolish and stupid financializing elite in Britain. They worked hard. They worked smart. They deserve their century in the sun, and if they’re smart and capable, maybe they’ll get two centuries if climate change doesn’t take them down.

But they aren’t innately superior. They’re following a well worn playbook, taking advantage of the usual cycle of ideological change within hegemonic powers.

The screams of America exceptionalism were bullshit. Claims of Chinese exceptionalism are also bullshit except in the sense that they are currently on top. Over time they will be corrupted from within, because this is a universal pattern which always happens and someone else will take the lead. They will remain a great power if

1) they avoid collapse into warlordism, however, because they are a continental power who will retain a large population even after the onrushing demographic collapse; and,

2) There isn’t another true revolution in production and technology like the industrial revolution, which happens somewhere other than China.

America exceptionalism was ugly and tiresome. So is Chinese exceptionalism.

Everyone reads these article for free, but the site and Ian take money to run. If you value the writing here and can, please subscribe or donate.

 

Can Trump’s “Blockade of the Blockade” Force Iran To Submit?

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On April 29, 2026

25 Comments

After the Iran/US truce, Trump put a blockade on vessels going to Iran for oil. This resulted in Iran not opening the Strait of Hormuz as they had originally intended.

At first the blockade was not very effective, but it appears to have tightened and is now stopping most oil export from Iran. It appears that it will take over 2 months for oil storage to fill up.

There are two suppositions here, on the US part:

1) Iran needs the money;

2) Iran can’t shut down oil production without harming its oil fields in the long run.

Iran does, of course, need the money, but it isn’t completely reliant on shipping oil for income and it seems likely it can get enough to keep the key parts of the government and the military running.

As for the second, a detailed analysis shows that Iran’s fields mostly aren’t type that are damaged by shut downs. Key graph from a long analytical piece.

This analysis suggests that the U.S. blockade of Iran’s oil exports will not cause catastrophic, or even very serious, damage to its upstream oil industry. If and when the blockade is relaxed, Iran will probably be able to resume production promptly at about 70 percent and regain most of its pre-war capacity within a few months.

It’s also worth noting that Iran does have a military option. While the US blockade is widespread, for it to be effective some ships have to be in range of Iran’s missiles and drones. It wouldn’t be all that hard to deplete the on-ship stocks of missile interceptors and force a withdrawal, and it’s quite possible Iran could sink some ships if they attacked with enough drones and missiles to overwhelm defenses.

Iran has, historically, been unwilling to start hostilities. It has always absorbed the first hit. Will it continue to do so? Is it willing to end the cease-fire? The new leader is far more hawkish than the old one, and while Iran still has “moderates” in some positions of power, hard liners are far more powerful than they were under the previous supreme leader.

What we have is an endurance race. Can the US withstand high priced oil longer than Iran can survive without significant oil exports?

If Iran breaks first, the question is whether it will offer the US a better peace deal, or if it will go back to the military option.

Under the old leadership the smart bet would have been concessions. Under the new leadership? I don’t know. If it were my decision, I’d go kinetic. There’s no deal Trump is willing to give while he thinks he’s winning that will not cripple Iran in the long run.

For Iran to win, Trump has to believe America has lost. And right now he thinks America is winning.

Everyone reads these article for free, but the site and Ian take money to run. If you value the writing here and can, please subscribe or donate.

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