Transcript
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The hosts introduce the Russian invasion of Ukraine and immediately assess its impact on global shipping. They discuss naval deployments, Black Sea access, and the first major economic effects, especially energy and grain disruptions.
Speaker A
Hi.Welcome to this episode of what's Going on with Shipping.I'm your host, Sal Mercogliano.Today we're joined by the captain and CEO himself of GCaptain, John Conrad.It's February 24, 2022, and of course, the big news right now is the Russian invasion of Ukraine.
So I thought I'd invite John on and we could talk about the impact this invasion is going to have on global shipping and.And all across the shipping industry entirely.So, John, welcome back to the show.Love to get your assessment on what you think the situation is and the impact going forward here.
Speaker B
Yeah, we've been talking about this, Sal, you and me on Twitter and my last article on g Captain really preparing people for this.
We were very hopeful that the invasion would not happen, but the fact is that the.The tanks, the ammo, the fuel is very heavy, has to be moved by ships.There have to be warships in place for an invasion there to protect the skies and land.And the Russians had all the pieces in place.And then the last night, they invaded the Ukraine.
And the Ukraine does not appear to be fully ready.They've made some basic mistakes in the beginning.For instance, they did not blow up the bridges across the rivers to prevent the Russian troops from coming in, and they have not gotten much support.We do not have any.There have not been any new NATO warships coming into the Black Sea all month.
The closest carrier strike group is in the Med or Adriatic.And it looks like there is not much that we are able to do or willing to do to prevent this incursion.So unfortunately, Russia has taken over the Ukraine and there is nothing there to stop them.And while there are some silver linings, for instance, we were worried about cyber attacks that seemed like something that Russia could easily pull off and beyond the borders of the Ukraine.They have attacked within the Ukraine, but there hasn't been widespread global fallout.
What's your take, Sal?
Speaker A
Yeah, first off, on the naval issues, too, I always recommend over to Naval Institute News.They cover that naval aspect really well.They got a great story here by Sam Legrone talking about the disposition of naval forces.Right now.
The Russians moved in three large cruisers, these big Slava class cruisers, and they got one in the eastern Med, one in basically the central Med, just south of Crete, one up in the Black Sea.The US Navy has reinforced.I mean, you have the Truman battle group that's probably up in the Adriatic or Western Mediterranean right now, but they brought in a slew of warships, including a quartet of destroyers above and beyond.I mean, there's four stationed in Rota, Spain.There's four brought over.And then there's a cruiser and several destroyers with the Truman Battle Group.So you've got a large naval presence definitely in the Black Sea.Right.I mean, excuse me, in the, in the Mediterranean.Right.Now, one of the things that we talked about is there really isn't a presence in the Black Sea that we know of with US naval forces because of the Montreal Convention of 1936.
You have to get permission from the Turks 15 days in advance before you can basically send ships into the Black Sea.So right now there's not a US Naval presence in there.There is a NATO presence.We know the Bulgarians and the Romanians are there, but.But not a US Naval presence.
Speaker B
They're there because they have coastline on the Black Sea.Right.So they are not subject to the convention you mentioned.
Speaker A
Right, exactly.Since they have a coastline right there, they're able to go ahead and do that and have their ships there on a routine basis.In other words, don't have to ask for permission.Same thing for the Russians, too, by the way.So the Russians have that ability, too, that they can move their forces in and out of the area pretty much at will.I think there's a couple of key things here.And again, I really recommend everybody go over to the GCAP and take a look.You guys are pumping out the stories here left and right and really covering that maritime aspect integration way.And one of the things I love is this recent story that you all had here from Bloomberg that really talked about this.And one of the things I liked about it is it highlighted four key things to look at here talking about that energy spike.
I think that's true right off the bat.I think that energy spike is going to be such an essential one.The last EIA report for February reported that Russia was providing 20% of the LNG into Europe.And one of those main pipelines crosses right across Ukraine right now.And the question is, are the Ukrainians going to destroy that pipeline?I think they will.
The Russians are probably going to try to grab it, make sure it's secure.But the other issue there is Europe may cut off that energy pipeline.They may not want Russian lng.I think that's a key factor.And if that doesn't happen.
You all had another great story the other day talking about the Qataris and how Qatar was talking about that.They're at max capacity right now.They're flown as much LNG as they can.Their tankers are fully booked.American LNG is heading across in record number to Europe to the point that Europe is awash in LNG right now.
But the question is how much storage is available?Can a float storage replace pipelines?That's always a tough thing to do.You talked about key commodities right there, obviously grain and wheat and corn and all sorts of grain.According to the last review of maritime transport, Ukraine is responsible for 10% of the world's exported grain.
Russia's involved in 9%.So I mean, we're talking about 1/5 of the world's food supply that is at play here.And then again, you have the economic headwinds.We've already been talking about this, watching the stocks over in Europe right now for Maersk and hapagloid.They're down 7, 8% right now.
So they're taking a hit.We know that we saw the stock market on a rally, as you mentioned before.We started talking here was on a rally and then all of a sudden took a tumble.And then there the sanctions coming out too.What are these sanctions going to do?How are they going to impact them?Sitting right now in Odessa is a Costco container ship.What are sanctions going to be for trading in this area going forward?So I think there's.
The conversation breaks down how the Black Sea functions as a critical trade corridor for food, oil, and LNG. They examine pipeline risks, port closures, sanctions, and the limits of NATO and US naval presence in the region.
Speaker A
There's a lot going on here, obviously, and I think for us to get a handle on it, maybe we should break them down a little bit more.
Speaker B
Yeah, there's a lot of secondary and tertiary effects as well.I was trying to explain this to my brother Tim, who runs unofficial networks.His skisight doesn't really do the logistics, but he said, why is this such a big issue for shipping and the congestion?He said when an area is shut down, especially huge producer Ukraine is number two in terms of a quality black soil right behind the US Midwest.It's enormous breadbasket.
Well, there are other places where they can get food from and substitute other food.But imagine in your town, there's the supermarket and the supermarket closes and then trades restrictions.So the town says you can't drive your car anymore, so you have to drive your bike or you can take an Uber.That's the options your town gives you.But the supermarket's broken, so now everyone's got to get in an Uber and go to neighboring town supermarkets.
That is what happens when you shut down a major geographical area like the Black Sea.All the ships have to go from their routine to much longer runs to pick up food from elsewhere and energy and everything else.And that's what is going to really exacerbate the trade crisis.Here.And that's just one of the major effects.
Speaker A
Right?And you know, I think you do that great job in talking about that in your story.And then the follow on story here too, which, which builds on that, that Bloomberg story which talks about the ports and pipelines and how these are the key commodity sites.I think you're exactly right.You know, the Black Sea is a big bowl.You know, it's.It's a big bowl and you have these massive rivers that dump into it.And again, it's, you know, everyone.The description for Ukraine for me has always been Kansas on steroids.It looks just like Kansas, Nebraska, but it's like four times as big.
And it's huge flat area.It's grain, like crazy iron ore, raw materials coming out of it.Same thing for Russia.You've got the oil coming out of the Baku fields and the pipelines there.So you've got this pipeline, this ever flow of oil coming out of the region.
And now you have this story too, where the potential for this to expand even more.Because now we're talking about this idea that all of a sudden a Turkish ship got hit by a bomb off the Ukrainian ports and this is what happens in conflict they don't ever see.I
Speaker B
didn't work on that story.I think it was Mike, but I believe it just came up.But I believe it's Cargill.Right.Which is a US Company was chartering that ship.
Speaker A
I think so.And right out of the port of Odessa, right there.And again, Odessa becomes the main port for Ukraine because it loses Sevastopol in the Crimea in 2014 when Russia takes it.And so this process is moving on.And I think that also goes to the larger issue is what is Putin's overall objective here?We had discussions about this and I was pretty sure that Putin was focusing on eastern Ukraine.He's going into the Donbas.
He kind of flipped the scenario around by announcing that they were independent, and then his troops are going in as kind of liberators and peacekeepers.But now he's launched his three prong attack in and the question is, does he take over the whole Ukraine?Does he annex the eastern part and replace the government in Kiev with a friendlier government?Because he doesn't like the government that's in Kiev right now.Does he take the entire shoreline from Ukraine and cut it off?
I think at the very least he's looking to connect the Crimea to Russia.He wants that land bridge.
Speaker B
It's not just the Crimea.It's the Sea of.I'm Going to butcher this.The Sea of Asimov.The Caspian Sea connects with canals through Crimea and the Kerch Strait.And this Danae river is like our Mississippi River.People don't understand.They think all this green stuff gets on trucks.And if you leave this podcast with nothing else, if you just remember one thing, in my opinion, it's the absolute weight of the food which feeds a global population in the billions.Food and energy.So everyone in their house, think of lifting a bag of rice that's heavy.Think of lifting a five gallon drug, gasoline or cold to hit your house.Now, five gallons.
That is what movement.And that's why it has to move on these rivers and seas.It can't go on airplanes.And that's why this section is so critical.It's a real choke point.
And I don't know what we have protecting it.Right?We gave some ships to the Bulgarians and Romanians.We can't bring in NATO warships from other countries because the Montrose Convention and the BAS for straits.We got Romania and Bulgaria protecting.
Marad came out and said that US flagships should.When are we going to stop getting ridiculous, absolutely ridiculous news from Mehrat?They went and told US flagships that keep a lookout and if you're under attack, press the security button and if you have time, call NATO headquarters in London.What are they going to do to protect the US And NATO ships without warships in there?Are the Bulgarian and Romanian ships that are patrolling the Black Sea enough?
I don't know that I'm asking.
Speaker A
I don't think they are.And again, that's that.That's a big issue.We've seen
Speaker B
clear right now.There are no US Flagships.They're avoiding it in the Black Sea, right?As far as we can tell from AIs,
Speaker A
as far as we can tell, there's no US vessels.We know the US Navy isn't there and understand you can't clandestinely get ships in the Black Sea.Their photograph coming through the Bosphorus and the Dardanelles.There are people who photograph every ship going through there.So everybody knows who's going in and out of there.And again, the issue you have is we had vessels up there, but we removed them.And we can only keep vessels in the Black Sea for 21 days.Since we're not a nation that borders the Black Sea under the Montreux convention in 1936, we're only allowed a limited time there.We're limited in the net.We
Speaker B
have hundreds of ships in the navy.I mean, how many destroyers do we own.Oh,
Speaker A
well, you know, right now, I mean, there's at least almost a dozen destroyers in the Mediterranean area.As I mentioned to you before, there was four that came over with the, with the Truman Battle Group.There are four others that were sent over and there's four that are based in Rota.
And that's just us, you know, not, we're not talking about other NATO forces.And the reason why there wasn't at least one or two vessels rotating in and out of the Black Sea, I'm not sure about, you know, why was there not a constant, you know, presence of NATO there?And that goes to, you know, an article I wrote for GCAM where we were talking about, you know, if you really wanted to deter Putin, you'd start moving ships in the area.And I'm not just talking about warships.I'm talking about ships loaded with American combat gear.
You know, the pre positioning ships out of Diego Garcia in the Western Pacific.One of those vessels.
Speaker B
Where are those ships now?Can you show us where they are right now?
Speaker A
Yeah, well, I mean, one of them is up in Norway right now for part of an exercise.And so that's USNS Sizzler, which is up in the very northern reaches of Norway, up in a station area where they have a brigade of Marine equipment stored.This is a leftover from the Cold War.And we have gear stored in Europe.I mean, we've got several brigades worth of equipment that are on the ground.All you got to do is fly in Marines and army troops and you basically instant units.
However, the larger brigades.And again, this is part of the strategy the US has is we have a unit in the central Indian Ocean at an island called Diego Garcia.It's part of the British Indian Ocean territories just south of Maldives right here.They sit there and kind of sit and wait.And what they have is an entire brigade worth of marine equipment for 16,000 Marines and then half of an army brigade and the other half is up in the western Pacific along with the 3rd or the 2nd Marine Squadron.
There used to be an entire pre positioning fleet in the Mediterranean, but that was phased out in 2012 because we didn't think it was necessary.And so we phased it out.
The speakers explore worst-case scenarios involving the Suez Canal, Russian submarines, insurance spikes, and cyberattacks on shipping. They argue that deterrence failed and compare the crisis to earlier historical conflicts and strategic miscalculations.
Speaker A
But what we're finding
Speaker B
back to the Russian cruiser location just real quick.I mean, if we're talking worst case scenario, you got the Var Yag right there.We already know, not from recent events, the ever given, but also going back to previous conflicts in the Suez, how easy it is for any just moderately powerful Navy that is near the Suez to block the Suez just by sinking issue.Right.So worst case scenario, we got the Varag there.It could easily, I believe, correct me if I'm wrong, close down the Suez.And all of our equipment is in Diego Garcia because we've removed the pre positioning equipment from Mediterranean.
Am I getting this right?
Speaker A
Right.And I would add too that again, you know, Varg is a surface ship.Now a lot in the navy would tell you these are, these are outdated vessels, they were built in the 80s and so they're nothing.
Speaker B
How well this one would do against a peer to peer conflict, the Navy destroyer.
Speaker A
Right.
Speaker B
But the Varag versus sending long distance missiles into the Suez or going toward near the entrance of the Suez and even using conventional goods is not, does not seem.How would those ships protect themselves?Right.
Speaker A
Well, I mean you can shut down the Suez very easily and more importantly the Soviets.So I keep saying Soviets all the time because I feel like we're, we're in the middle of a cold war, you know, like a Red Storm rising Tom Clancy movie here.But the Russians also have Kilo class submarines, they're diesel submarines which are in the area again, which, you know, the, the US will probably have submarines in the area.There'll be subs in the Mediterranean, there'll be NATO subs in the Mediterranean.But again, it only takes a threat to shut something down.And more importantly, again, it's global shipping.
These are international companies, these are companies that are operating internationally and they're not going to take risks because if all of a sudden we already know the Black Sea has been allocated as a war risk area.So we've seen increased insurance rates in that area.If the Russians announce any vessels trading with X country can be targeted, well, insurance rates are going to go through the roof.And let's be clear, shipping companies hate paying insurance as much as you hate paying car insurance.And if all of a sudden your shipping insurance goes from what you pay as a middle aged male to all of a sudden you're paying for what an 18 year old male is paying spikes through the roof, you're going to reroute ships, you may not move your vessels.
And this is the implication I think that we're seeing.The other one I would argue that really needs to be talked about is I am sure that right now in Russia, Ukraine, the cyber fights are fighting right now.I'm sure that there are attacks on infrastructure
Speaker B
before we get to there.Just really quick with the Suez too.We don't even need a warship because Russia is, I believe the number Two or number three, provider of seafarers in the world.So huge population of Russian seafarers on commercial ships.Ships.I guarantee there are Russian captains on the Suez right now who could pull on every given right.And just sink their own ship in the middle.
Speaker A
Yeah, well, again, you don't even have to sink it.You just got to get it sideways, and then we know it can be done.And again, these are elements that can happen.Now, again, Russia is probably the most interesting scenario for this, because China, people who have been talking about the China situation, but China is so dependent on global trade.Russia isn't so much dependent on.It really isn't.And it gets a lot of stuff from overseas, but it exports a lot more.It's food, it's oil, it's.LNG is really important.And again, we got to come back to the idea that Putin just left the Beijing Olympics.
He met with Chairman Xi over in China.So we don't know what kind of deal's been hatched where he can provide oil and lng.And
Speaker B
yesterday was Fatherland Day of Russia.Big national holiday.
Speaker A
Big national holiday.And so one of the things that we keep kind of talking about here is what's the implications here around global trade?And again, I come back to the cyber attack in 2017 when Maersk was hit.When the notpiece virus hit Maersk, she wasn't targeted.It was an incidental attack between Ukraine and Russia at the time.
And that attack destroyed, what, 49,000 computers, half of their 5,000 servers send them.It put them offline for almost a month.I think it cost them about $300 billion is the estimate in 2017.And that was an incidental attack.They weren't targeted at all.
And fortunately, in 2017, trade was down.There was excess container capacity.So if your cargo was on a Maersk ship at the time, you were kind of stuck.But if your cargo had to be loaded on Amersk ship, well, you can put it on msc, you can put it on Hop Hog, you can put it on somebody else that doesn't exist right now.And the nightmare scenario here is what happens if these cyber attacks get loose and start shutting down global shipping.There's no excess capacity out there at all.And, you know, these things don't.I'm literally teaching a course right now on world civilization, and we're talking about World War I.And so we're talking about how a conflict in Southeast Europe between two countries exploded into a world war.And, you know, it's the eerie kind of deja vu Going on right now between.
Okay, is this present day or are we talking about 100 years ago right now in my class?
Speaker B
Well, I just read the book 2034 by Admiral Stavertis.There
Speaker A
you
Speaker B
go.
And in that book, the Chinese actually take over the navigational computers on our F35 fighters and our destroyers and sink a large portion of our ship.That is fiction, but it's possibility.So what is that worst case scenario to me?And I hate to go out on a limb here, but as you know, I've been saying for a week to all of our friends that this is going to happen.The things that are in place.
No one believes me.You know, I was telling everyone to wear a mask when everyone was saying I was crazy.So I have a fairly good track record in the past, so I'm willing to go out in.But
Speaker A
we have to weigh this about the other things we don't listen to you on, John.But anyway, go ahead.You're right on this.
Speaker B
I've been horrible and predicting the Yankees beating the Red Sox for the last 10 years.But okay, you know what, what I see is happening through some of my sources and intel and I'm pulling a lot of together and a lot of it comes from Peter Zehan, the author of Absentee Superpower.But I believe that Putin went into Crimea, to Crimea, came up with war plans for Ukraine and shelved those war plans.
And then as President Biden withdrew troops from Afghanistan, Putin was watching carefully.And by the fact that it was such a mess, he said, this is our opportunity.The United States is weak.They can't handle this invasion.And because of everything that's happening, Federal Reserve and the economy and everything else distracted.This was his opportunity.Move the troops in there.Pulled the classic Hitler.I mean this was Hitler doing.When you saw the Hitler giving those animated speeches, you were like, you know, in German, I always thought as a kid, like what could he possibly sing that gets everyone so excited?
And what he was saying in those animated speeches is I want peace in our day.I want peace for Poland, I want peace for the United Kingdom.Those are not war mongering.Those were peace.And that's what Putin said.We are not going in.This is training.We want peace in the Ukraine.And then of course they invade.So I think he got the troops ready.They've been ready for about a month.He had a limited window because you need cold weather to get the tanks and the frozen ground.And he waited to see what our reaction was.And these pre positioning ships did not leave Diego Garcia they did not leave the East Coast.There was no carrier, got moved into the Black Sea.
Turkey did not invite us in.There was no protection of shipping as he started closing the ports.And then he said, wow, this is, you know, so I think, I think it would kind of been on the prefaces for a few weeks as he saw what we were doing and when he realized we weren't doing anything except I think 3,000 troops in Poland, which is nothing.But what is the larger implications?United States is the only country that is all three of these food dependent, energy dependent and cyber and financially independent.
We could shut down the subsea cable, shut down the ships, and we could feed ourselves in energy.Wouldn't be a happy scenario.But on the other end of the scale is China.China needs the food and the energy.Energy comes through Russia, food comes through the Ukraine.
Is China a big part of this?Where is this green?When Russia takes control and energy going, I think it could be China.And the question is, does that open up for invasion in Tai on as well?
Speaker A
I think you're right.I think you got to look at the big picture all the time.And, you know, it was really amazing to me to watch this unfold because again, you know, I'm doing this thing with World War I.So I'm seeing the parallels here about nationalism and, you know, we want Russians under Russian control, you know, and this is classic.I mean, it's classic what dictators and authoritarian rulers want.You know, the, you know, Russians are suffering under Ukraine, therefore we have to go liberate them.Where are the peacekeepers?They're the, you know, technically the invaders.And you're right.I mean, they keep arguing for these very positive things.I mean, read what they say and see what they say.
It's a lot different.They're not talking about war.They're talking about this will guarantee peace.
This section focuses on Russian oil, US refinery constraints, and how the war could reshape freight, fuel, and commodity markets. They also revisit the lack of deterrence, the role of shipping in national security, and the broader geopolitical stakes involving China.
Speaker A
Right.And you mentioned a really important factor is things like that I talk about a lot is national security through shipping and everything for the United States.So right here you ran a story the other day.It was a Bloomberg story.US Tanker ports seek alternatives to Russian oil.I talked about this on my Tuesday episode of what the Ship.And I talked about the fact that most people don't realize we import Russian oil.And the reason we import Russian oil is because all the fracking oil that we get, we can't refine it because we don't have the refinery capacity to refine lighter oil.Oil is not the same.It's different styles of oil.So we wind up having to buy heavier Russian oil to go into our refineries because we have that capacity.But we're not drilling heavy oil anymore.We're getting lighter oil.
Speaker B
It's impossible to build new infrastructure.So we can't build those new refineries to, to pivot right to the types
Speaker A
the last refinery we built.Brand new, brand new.
We've added on the refineries, but a brand new one was like 1977, you know, and we've added on and this makes us, you know, even though we're a washing oil, I would argue we produce more oil than we could ever, ever use right now because of this, we can't refine it.And so we're literally in a position where we're shipping oil out and bringing gas or even worse, we're bringing in.In oil in, but it's not our oil.It's somebody else's oil.
Speaker B
But we're bringing in not gas, but diesel as well.My, my heating oil that I just filled up the tank yesterday in Massachusetts.That came from Europe, which is where they're, they're desperate for lng.So we're shipping LNG over and they're sending diesel back and Russia is sending us.True.But we're have an export of crude.It's crazy,
Speaker A
right?And, and again, it goes back to that situation.
Speaker B
Soaks up available shipping hulls, which sends freight rates drop and breaks the ports
Speaker A
already have a shortage in vessels right now.And, you know, it goes back to this issue too, that you just mentioned that really kind of irks me more than anything else because, you know, one of my first academic things ever wrote about was the Persian Gulf War of 1990.
Speaker B
Freeman of the New York Times yesterday saying, the poor crisis is over.That's what irked me the most this week.
Speaker A
Yeah, that.Well, that irked me
Speaker B
too.
Speaker A
That irked me too,
Speaker B
because
Speaker A
he's not.I mean, yeah, we're not at 100 ships off the port of LA.We're at 70 ships, which is like, okay, we're down 30%.It's like, well, wait a minute, we're.We're up 70% or 700% of what we used to be all the time.And we keep missing that.But the other thing that, of course, Charleston is now backed up and we're seeing this magnify across the board.
But the other thing that you mentioned was we did not use deterrence in 1990 when Saddam was threatening to go into Kuwait.We didn't have an alliance with Kuwait.We had no alliance with Kuwait.We had Nothing with Kuwait.But what we do is we didn't move vessels beforehand.We didn't indicate to Saddam Hussein that we would react.But, you know, the whole world reacted.It was.It was a massive military buildup.You know, over half a million troops from around the world went and fought and liberated Kuwait, defended Saudi Arabia, but also created a very long presence in the Middle East.
But again, we didn't deter Putin here at all.There was no NATO presence that we see, you know, beyond the Bulgarians and Romanians to shield vessels like the Turkish vessel that just got hit.You know, we should have provided an air net, we should have provided security in the western and southern Black Sea, because what we're seeing right now is the Russians have closed the Kerch Strait, this area here between Crimea and Russia.You've got ships piling up south and north of the strait right now.There's no.
Speaker B
That's what we do.Freedom of navigation is like the Navy's top budget item, I would believe, right,
Speaker A
in
Speaker B
terms of what we spend our money on.
Speaker A
And they do freedom of navigation around sand islands in the South China Sea.
We've done freedom of navigation in the Black Sea.But again, right when the moment was needed, we're not there.And what we see right now is the Sea of Azov is cut off.The Russians are basically either piling the ships north of the strait or the ships that were south heading northbound are turning around.We see multiple vessels turning around now heading to the Dardanelles, heading to Istanbul and then out of Odessa.We're seeing ships leave Odessa right now because the Ukrainians.We got this report from Hamburg port that operates the big terminal there, that the Ukrainians have shut down the terminal, and so the port is shut down at this time.So, I mean, again, the Black Sea is maybe not on everybody's radar, but it really should be.Because the other element you have here out of Novaresk is the terminus for a large pipeline, a Russian pipeline that goes into the Caspian Sea, into Georgia, Azerbaijani, that whole region right there, there.
And we're seeing tankers flowing out here.
And the question becomes, now, what is going to be the response of the UN and NATO in terms of sanctions?Are they going to start sanctioning?We know they sanctioned the Russian container liner FESCO, the 44th largest container liner in the world, but they don't do a lot of international.They're more coastal and feeder ships.But what's going to happen with ships going into Russian ports?I mean, what's the next step?Because, again, what we're going to see is increased fuel costs for vessels.That means increased freight costs right off the way you're going to create instability in regions if the potential eastern Mediterranean becomes a potential war zone.Escalating insurance rates just to come through the Suez.Do vessels route around Africa to avoid those insurance rates?And they will if it's less money for them.If it's sailing more and it's less money, they'll do it.
But it's going to cause backlogs in vessel arrivals in Europe and America.America.So I, I think we've got so many issues at play here, John and I.Again, I know everybody's focused on the humanitarian.
Speaker B
What can we do if.If the Turks don't invite us through the Bosphorus and really limit down whether it's legal or illegal?We know some of the bloodiest wars in human history.You know, Gallipoli.Everyone thinks Churchill was a hero of World War II.He was, but he was the villain of World War I with Gallipoli.I mean, that is a very difficult military.
Speaker A
Literally reading this book right now.This is a book from Nick Lambert, the Warlords and the Gallipoli Disaster.And the subtitle of this book is How Globalized Trade Led Britain to Its Worst Defeat in the First World War.And what Nick does in that book is he takes this idea that the whole purpose of the Gallipoli operation was to capture Constantinople and basically knock the Turks out.What he says is, no, it was to get to the wheat and food, food in Ukraine because Europe needed it because they, you know, their kids were fighting, they weren't farming.And this was going to have.And because of a bad winter in America and in Canada, there was going to be shortages and we had to get to that food.
And.And literally we're facing the same exact thing right now.That's why I keep getting this deja vu about what's going on right now.Sorry, I didn't mean to cut you off.
Speaker B
Oh, no, no, no.That's great stuff.I look for.I would like to read that book.But the other side of the equation is the Russian troops are here.If you're going to fight a battle, unfortunately, the US kind of does this asymmetrical warfare, the old style, where more tanks down the middle.But the smart move here would be maneuver warfare.They're exposed in their northern front.
If a war did break out, I think a lot of the smart move will be from the north.But we don't have any icebreakers to get Zimmermansk, do we?
Speaker A
Well, it's interesting to note that
Speaker B
Russia has over 50 heavy icebreakers.We have one heavy that keeps catching fire.
How do we fight a battle up there?How do we fight Russia?I don't see how we can.
Speaker A
I mean, the Navy recently conducted an exercise up in the Arctic, up in that region, because trying to fly from the Black Sea or the Mediterranean to Moscow is way too long.But from the north, it's a lot quicker.
Quicker.It's a lot, you know, closer.And, you know, I, I don't, I don't see us getting into, unfortunately, you know, you know, fortunately, I should say not unfortunately, but fortunately, I don't see us getting into the major NATO Russia war here, unfortunately.
Speaker B
But this is what stops Putin, is the warships in the Black Sea, the icebreakers and warships that can, whether we do or not, can invade Moscow.I think that's what de.Escalates tension, that strength.They speak softly but carry a stick.Right now we are yelling and screaming, national policy wise, and we're carrying peace shooters in these areas.
Speaker A
Oh, I think, you know, I think we missed the moment of deterrence.You know, we blew that.I mean, just obviously blew that.We didn't have it.And again, the argument here wasn't.I would argue again, it's not so much to defend Ukraine, but it's also to defend global trade, which, again, the US Navy argues is its primary mission, in many ways is to protect trade.I had this huge Twitter discussion with Walker Mills from Simsec.I won't
Speaker B
get you started.I won't get you.
Speaker A
You
Speaker B
were on vacation.Right,
Speaker A
but literally, I was ready to leave on vacation.I had to answer.I think I posted like 18 tweets.You know, he got me going on that one.
But, you know, okay, don't defend Ukraine, but this is going to impact global trade.And if you're sitting there saying, okay, we're the protector of global trade and even it's not the US Navy, even if it's NATO and the British navy and the French and whoever else, there should have been a presence in the Black Sea.I think the Turks now, their vessel got bombed, should sit there and say, you know what, we can waive the convention.Bring your ships in, let's park them in the Black Sea and start providing protection for this global trade.Because again,
Speaker B
donate modern ships to Bulgaria and Romania, start stocking them up.
Speaker A
Yeah, I mean, Bulgaria is running old Belgian frigates from the 1970s.The British gave the Romanians two type 22 destroyers, destroyers from the 1980s that have fought basically the generation that fought in the Falklands War.But again, what they need is Burke class destroyers with that spy radar to be able to monitor everything that's going on.There needed to be deterrence in my way.Again, we talk about the idea that the seas are free and we're benefiting from the greatest transportation revolution in history.Greg Easterbrook talks about it in his book.Bruce Jones talks about it in his book book how the US Navy has benefited and created this free market economy.And we all benefit from this free trade.But listen, the Black Sea, even though it's a little kind of pool of water off to the side, is as vital in some ways than the Atlantic and the Pacific route.
And we have to understand that because again, that food and supplies that are coming in here are now going to be constrained and cut off and that's going to have implications on.We're seeing the futures more market take off like crazy now because, because nobody knows what, what's going to be.Oh, and I'll throw one other thing.
Speaker B
Market.We, we, we, we been selling off for weeks and then invasion happened.It sold off last night and right before we started the NASDAQ was back at, you know, approaching yesterday's closing price wheat futures.Just the last hour like oh, war's over.They think people are thinking this is Iraq, the first Iraq war all over again because Russia is not getting much pushback from the Ukraine.But they don't understand the global energy and the control, the stranglehold Russia has on this region and what they can do to commodity prices.Look at the price of oil.People are saying this is crazy, $100 barrel of oil.Well what it was 10 years ago we had $120, $130 barrel oil.But we've also between doubled and tripled the monetary supply.So that barrel of oil, that's $100 in 2012-13 at the height dollars is really a 40, 50 barrel an oil and gunver which is the trading arm that was started energy training arm of the Russian Algol Garps.
And there's considerable thought that Putin was a secret member, but I don't know if that's true.There's a book the world is for Sale.You can read about it there.Don't take my word, but those guys are calling for $150 barrel oil and the CEO of Gumber is saying that's conservative.And this is an energy trading firm started by Russian oligarchs in Estonia.
The discussion turns to container shortages, agricultural exports, maritime policy failures, and the need for better logistics planning. They close by stressing the long-term consequences of the invasion and the importance of learning from history.
Speaker B
Saying and they're not just saying it, they're actively betting on this and stock market thinks that this crisis is over.It's not a big deal.It's okay.I don't know how many texts from friends I said, russia's invaded the Ukraine many times over history.But last week everyone was texting me, putin is not dumb enough to go into the Ukraine.And guess what?
Speaker A
Well, I agree with you because I had somebody tell me the same thing you were talking about earlier, about, okay, they're not going to invade Ukraine because the fields are muddy.It's like, well, yeah, but there's highways now.You know, the Soviets built highways and, you know, between World War II and today.And what are the tanks doing?They're riding up paved roads, you know, that's what they're doing.
You know, and so they're able to move.The other.The other story that I thought was really important because we were talking about grain and is, is there's an opportunity here for some profit by American agriculture to fill that.The deficiency out there.You.
Yet they can't get their product out because why?Because there's empty containers piling up the west coast ports and the large shipping lines, the big nine carriers are prioritizing empties over exports.And so, you know, ag, which has an opportunity now to make money in a way we haven't seen in a long time, they're going to suffer.I got a note from a company in Seattle saying that they can't get reefer containers.You know, they would typically in the past be able to get containers out of LA and Long beach ships would leave la, Long beach, go to Oakland, go to Seattle, Tacoma, drop off empties and reefers and load AG to go back to Europe.
They're not doing that anymore because they want to get back to Europe as fast, I mean, back to Asia as fast as they can load and return.And so what do we have?We have literally American agriculture, which could feed the world, is not going to be able to get out because we don't have the container ships or the bulk carriers to do the that because of this disruption going on in the ports.And that's what I mean by how much all this.
Speaker B
If you got a large amount of grain you need to get overseas, give me a call.I'll only charge you a small percentage to get you the available hulls because they're not thinking outside the containers.Right?We got a large fleet of barges and other coastal, which you wrote about in Vietnam.We use barges to get over to Vietnam.We're not thinking out of the box.We're not Thinking creatively.We're not thinking defensively, we're not thinking we've lost the lessons of the Cold War.
Speaker A
And I go back, I go back,
Speaker B
rookie mistakes we're making here.
Speaker A
Well, and I go back to something you mentioned at the very beginning.Where is the national maritime policy people and talking about this again, we're what a year and I don't know how many months now into a year and two months into the Biden administration and still don't have ahead of the maritime administration.The Federal Maritime Commission is trying to catch up to what's happening happening in the supply chain but they're constrained by rules and lack of authority and staffing and manpower.And again we see ourselves completely fumbling.Where was the people talking about?Listen, if this war happens, if Russia goes into Ukraine, it's going to have this impact on the economics around the world and trade in everything we know.
Yet that does not seem to get conveyed.
Speaker B
There must
Speaker A
be
Speaker B
a merchant marine think tank, right?We have how many?We had dozens of military thinks think tanks.Right?There must have.What's the one?There's even one in Santa Monica that's right on the beach.That Rams Corporation.I spent a week there, you know, so, so who are, who are permanently amerent trade logistics, global security think tank people?
Speaker A
I don't know because this is the issue I come back to.I literally just.Somebody just sent me a tweet from one of those, you know, one of the generals were on Fox News or something like that that.
And the general sat there and basically said, he goes, he goes, what you don't need here is a military commander.You need a logistics committee.You need someone who knows supply and logistics because this is what this is all about.It's like, you know, we're great at fighting.
Speaker B
Military generals and admirals win battles.
The legit logisticians.Right?Am I?
Speaker A
Well but, but the problem is we keep throwing, you know, in the military side, military war fighters into logistics roles and they don't understand the logic logistics.And one of the things I think we've seen in the supply chain crisis right now is and you've seen it with the growth of entities like G Captain and freight waves and other entities out there is how vital supply and logistics is the supply chain.I got students coming to me now, it's like how do I get into this supply chain stuff?Because there seems like there's great opportunity and I tell students you don't have to be a business major to do this.Listen, historians are great for, for this, you know, political science, you know, public administration people.There is a role for everybody in this and it's so vital for everybody to get in.John, we're pushing up on time because I don't want to get too long because we can go on forever on this, any last little bit here.
And I'm sure we'll come back in here and talk about this in another day or so and see what's going on.
Speaker B
I've said it before, the CEO of Maerse, the CEO of msc, they have to go to the White House.They got to go to Marad, we got to get on one pitch.I mean, the biggest problem that we have with all of this is manpower, right?That they talk about the Maritime Administration, the lack of manpower, yet the IMO just killed the sexual harassment.
The only bill to come through the imo, the US Delegate killed it.Well, we just alienated half the workforce in America, the whole female.And we got environmental concerns, we got all of this.And it's only going to solve if, if we all come together.And unfortunately, the US Is going to have to take a lead because we have the navy and we have the economic trade sanctions and stuff to do that.
What are your thoughts?
Speaker A
Well, I agree.I think one of the things that we need to be focusing on right now is I just can't help but think that if we had American ships on a routine basis in the Black Sea trading, not just warships, but if we had ships going into Odessa, we had ships coming in and out, that there may have been some more hesitation by Russia to go in there.There, you know, right now, again, you get a Chinese, the biggest ship right now in Odessa right now is a Costco vessel.It's one of the Chinese vessels.
We just saw the Turkish vessel get hit.And, you know, if there's Americans out there, you know, you may be more hesitant to do it.If, again, if it's a Panamanian, Liberian flag vessel, who cares?You know, they don't care.They're not worried about, you know, endangering that trade.They're not worried about the crews, I would argue in doing that.But the problem is we've kind of of abrogated this out and we allow trade to be handled by kind of the least common denominators out there, crews that have been at sea way too long over the time allotted.They're not doing their four to six months.They're doing 10 to 12 months out there.And again, we benefit from that trade greatly.
And the only other thing I would add, John and again, I want to give you the rich rewards you deserve.Is that you, you call this, I mean, Again, here's your February 15th article where you talked about this, that Wall street should forget Putin and start counting ships.We should have been watching this the entire time.And I think you were exactly right on this call and looking at issues, you hit the commercial issues, you hit the insurance.You talked about military logistics and is the US Ready for war with Russia and who can tell us the risk of war?And basically we abrogated that.We failed it at times.And in many ways you got what the analogy I keep hearing over and over again is this is Munich with Hitler going into Czechoslovakia and the Sudetenland, you know, the two republics in the Donbass region were the Sudetenland.
And it was only a matter of time till Putin took over the whole thing.And that's basically what he's done because again, there was very, he saw dissent among not just the NATO members like Germany and a few others, but he saw a dissent in the American ranks.
He saw that the US did not have a coherent policy.They weren't clear on what they were going to do.They didn't move assets like they could have.I mean, we have the ability to move at that's one of the things that the US Military does very well, is we can move forces around.And we didn't do it because again, the reason to have a military isn't to use it but is to deter against somebody like this.And I can't tell you the number of people I've had arguments with, with over the past five years talking about why we need a US Merchant marine for national security.And all I keep hearing is the same exact thing, is that there's never going to be another major war.There's never going to be a conflict.You know, the idea of conventional forces going to war against each other and every time I ever hear that, I say the same thing back to them.
It's like, congratulations, peace in our time, which is the famous Neville Chamberlain quote coming back from Munich.
And, and you know, this is why you need, you know,
Speaker B
it was never going to happen 10 years ago because we had those pre position ships in the Met and the thing and around the world.And we were, we were willing to use our nuclear weapons and we had big sticks and you know, we, we didn't, we built carriers that worked right out of shipyard.
Speaker A
Again, I agree with you entirely, John.I appreciate you coming on today and talking about this.
We're going to follow up with this, be sure if you're watching us.Number one, please subscribe to my channel.Go ahead, hit the Be alert about new videos when they come out.Leave a comment.We'll be.We'll try to answer them all and get back to you with them.Share it across social media and be sure to follow G Captain.Get on there.They have a newsletter that you can get daily in your inbox every morning so you find out what's going on.Follow along with G Captain all the time because that's one of your best sources for information regarding maritime commercial shipping out there.John, anything else you want to add before we sign up off?
Speaker B
I just, I just think this is, you know, everyone, everyone, especially with the stock market thing, everything I hear, everyone is underestimating the long term impact of this.If you own a business, you, you're in the military or something else, wake up.This is a lot bigger thing.And otherwise my hearts and prayers, you know, go out to the people of the Ukraine.
Speaker A
Yeah, I think we always got to remember that as we talk about this and we are talking about economics and trade and everything like that.I think the worst thing is the fact that we're allowing a nation to invade another nation, to kill its members and to terrorize its citizens, which is just to me, again, amazing.We've come to this point through so many conflicts in history where we know that this can happen and we can deter it and we've got the ability to stop these things from happening and we let it happen.To me, it's unfortunately why I'm a historian Orient because we never seem to learn the lessons from history and we continually have to kind of drum it into people's heads.We keep forgetting that what happens in the past can happen again in the present and the future.
With that cheery note, until our next episode, this is John and Sal signing off.