Why did you start it? What is your goal? How will you end it? A week after America launched Operation Epic Fury, Donald Trump still cannot conjure a coherent answer to any of the three key questions of warfare.
But all the intelligence suggests that, even with an extended military campaign, the US cannot force one of its suggested aims: regime change in Iran. The Washington Post cited a classified report suggesting as much and I am hearing exactly the same thing from governments across Europe.
A long war would be disastrous for the global economy, with oil prices jumping to well over $100 a barrel, followed by higher inflation, higher interest rates and lower growth. Some European countries, including Germany, the Netherlands and now the UK, are already suffering low gas storage volumes. A short war would be just as bad: Trump loses his nerve, abandons the operation and leaves the antagonism in the Middle East to escalate. Even in this scenario it is far from clear that the flows of oil and gas would return to normal quickly.
The high oil price has already led the US to drop its oil sanctions against Russia. That would be headline news most days, but not today. Vladimir Putin has resumed oil deliveries to India, but this time not at a discount, but a premium. The Russians are back in business. Putin threatened last week that he is considering cutting all the remaining supplies to Europe. So a week into the US war against Iran and we are already looking at very different endgame scenarios for the Ukraine war. Wasn’t Russia supposed to go bankrupt?
Meanwhile, the West’s scenarios get progressively worse; the battlefield question has become an industrial one.
The West is currently facing a supply-chain crisis for military procurement. Even the world’s most powerful army cannot assume victory if the war lasts more than a few weeks. It may simply run out of key materiel. And the US is already running into bottlenecks. Contrary to Trump’s recent claims that the US has “a virtually unlimited supply” of munitions, Foreign Policy magazine reports that the war is already burning through the US/Israeli arsenal at such an alarming rate that the retaliatory destruction caused by Iran could take years to fix — and only then if the defense-critical minerals can be sourced. Tracing the military supply chains all the way back to their original sources, the journalists discovered that it is all but impossible to “instantly reverse decades of consolidated construction lines and atrophied mineral processing capacity”.
“The battlefield question has become an industrial one.”
The decline set in decades ago. Back at the turn of this millennium, outsourcing was the cool thing to do, especially in the US. The service economy was the future then. And during this golden age of globalization, all the metal bashers wandered off to China, leaving the economies of the West to focus on higher value-added services such as finance. Coming from Germany, a country with a strong industrial tradition, I noted a good deal of contempt for industry among the elites of London or New York. I have argued myself that Germany overspecialized in some of the old-tech industries, such as cars. But getting rid of base industrial services, such as steel and chemical plants, is not smart for purely strategic reasons.
Metals, minerals and chemicals sit at the top of every supply chain, and most have to be extracted. These raw materials are then processed to produce those essential base materials like steel, aluminum, or magnets. The material goes through a number of further processing stages and if the final product is complex, like a military radar, or even a car, there will be many additional nodes in your supply chains. Small wonder the German car industry regularly breaks into sweat whenever China restricts the supply of any single piece of equipment — such as an essential mid-range semiconductor. Without it, their engines are useless.
But the specific advantage that both Russia and China have over the West is not simply their wealth of metals and minerals — it’s the fact that they can also process them. China’s expertise in processing its raw material is unparalleled: there is a lot of know-how in producing rare earth magnets from neodymium. And we are currently paying a heavy price for a service industry fetish. I blame the macroeconomists. There are no supply chains in standard macroeconomic models. The stuff just arrived at our door. These models worked in the fair-weather environment of a globalized, multilateral trading system, but not in our world today.
Were the Prussian military historian Carl von Clausewitz alive today, he would be taking an interest in supply chains. Back when he was in action, the key powers had plenty of blacksmiths and sweatshops to produce weapons, cannons and ammunition. Their bottleneck was money and soldiers. But he did understand that strategy was dependent on the “hard math of supply”. Today, you cannot claim to have a military strategy without a clear idea of your supply chains.
And if Putin and Xi Jinping understand one thing, it is industrial supply chains. Putin wrote his thesis on Russia’s mineral resources with a call for them to be nationalized. Western commentators obsessed over whether he plagiarized the thesis. But a far more important question is why he chose that particular sector as a theme to hone his plagiarizing skills, rather than finance.
Xi formed his economic views as a young man when he observed the decline of the Soviet Union, a country known for its smokestack industries. Xi became a champion of modern industry. He disproved the lazy thesis that governments can’t pick industrial winners. China is doing this all the time. The difference is that they are picking industries, not companies. They picked rare earths, magnets, car batteries, electric cars, solar panels, robotics, among others.
Can any of us name any western leader with an interest in mining? Or a knowledge of downstream industrial processes? That’s for people in anoraks, isn’t it? Trump was a developer of prime property before he entered politics. Emmanuel Macron was an investment banker. Keir Starmer and Friedrich Merz were lawyers. Meanwhile, successive governments in America have chosen to transform industrial heartlands into a rust belt which has ultimately constrained its military-strategic options. It can choose to become protectionist, as it has done under Trump. Or it can pursue regime change in distant lands as it did under George W. Bush. But it cannot pursue both at the same time.
Imagine, then, the nightmare scenario for the West: the simultaneous invasion by China of Taiwan, by Russia of the Baltic Republics, and by North Korea of South Korea. I don’t think this is particularly likely because each has its own tactical and strategic timelines. For as long as Russia fights in Ukraine, it is not in a position to fight another land war.
But the West would not even be prepared for one of them. If China were to go for Taiwan now, the US might try to stop it — especially if China were to restrict supplies of semiconductors. But it is far from clear that Trump would be ready for a long fight with another nuclear superpower. If you are running out of missiles after a week of fighting against Iran, then how could you possibly take on another enemy?
I have to admit that I found Trump’s pacifism during the election campaign one of his more appealing characteristics. He appeared to have broken with the failed policies of some of his predecessors. The US war record is dismal. The country hasn’t had a successful conflict since Korea. They totally messed up the Middle East. I don’t want to speculate what, or who, got him into this one — he certainly doesn’t seem to know. But it will become the defining moment of his entire presidency.
Perhaps some of these scenarios can be mitigated. Certainly, the oil price could come down, as shipping in the Strait of Hormuz returns to normal. But what I cannot see is a scenario that brings peace and stability to the Middle East and which preserves economic stability in the rest of the world at the same time.
I can, however, see a scenario that delivers neither.
