By Dr. Warwick Powell, Substack, 2/17/26

Warwick Powell is an Adjunct Professor at Queensland University of Professor working at the intersection of China, digital technologies, supply chains, financial flows and global political economy & governance.

Preface: as we near the fourth anniversary of the formal initiation of Russia’s Special Military Operation in Ukraine, I reflect on the state of the war, its trajectory and likely cadence through a quantitative lens. It’s something I have been doing on-and-off for a few years now, which led me to conclude a while ago that the collective west has already experienced a debilitating strategic defeat, even as the fighting continued. Wars are system-on-system propositions, and the west’s fragilities in terms of repair, replenishment and replacement capabilities has been fully exposed. My core evaluation remains, and this essay explains some of the reasoning for this focusing on the raw ledger of the situation as it presents itself in Ukraine. I won’t be the least surprised to see the war transition to what some call a ‘dirty war’ with increased frequency of assassinations, sabotage and general terror replacing formal battlefield engagement. Meanwhile, representatives of the protagonists arrive in Geneva to continue talks.

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Introduction

Attritional warfare, where victory emerges not from decisive manoeuvres but from the sustained erosion of an opponent’s capacity to fight, lends itself to mathematical modelling. In the Russian-Ukrainian War, now entering its fifth year as of February 2026, the dynamics have shifted decisively toward this mode since mid-2022. The conflict’s outcome hinges on the relative rates at which each side can replenish losses in personnel, equipment, and munitions compared to the damage inflicted by the adversary.

This essay synthesises key analytical findings from open-source data, outlines the methodology used to derive estimates of collapse timelines, and presents the raw data ranges underpinning these projections. The goal is not to forecast an exact endpoint – warfare defies such precision – but to demonstrate how known parameters allow us to sketch reasonable trajectories and cadences. By aggregating disparate estimates into a coherent framework, we can discern patterns: gradual depletion accelerating into non-linear collapse, with a plausible window of 6-9 months from now before Ukraine’s defensive sustainability falters irretrievably.

This approach draws on historical precedents, such as the World War I models of Frederick Lanchester, adapted to modern data. It reveals a ledger tilted against Ukraine, driven by Russia’s superior replenishment and fire dominance, exacerbated by recent Western aid constraints. Yet, the analysis underscores some degree of uncertainty: data biases, doctrinal adaptations and external variables like aid surges could alter the cadence. What follows is a dispassionate examination, grounded in numbers, to illustrate how such estimations emerge.

Key Analytical Findings

The core insight from quantifying the war’s attritional phase is that Ukraine’s effective combat power – a composite of manpower, machinery and munitions – is depleting at a net rate that outpaces its replenishment, while Russia’s holds steady or grows marginally. This imbalance, compounded by recent reductions in Western support, points to a tipping point where Ukrainian force density thins below viability, triggering rapid territorial losses and operational collapse.

Based on integrated projections from November 2025 to February 2026 data, the estimated window for this tipping point is 3-6 months from now (May-August 2026), followed by a 3-4 month cascade to functional exhaustion. Overall, this yields a 6-9 month horizon to “floodgates opening,” where advances accelerate from the current 0.3-1 km/day to 5-10 km/day, as seen in historical breakthroughs like the 2022 Kherson retreat. The cadence is non-linear: initial depletion appears stalemated, with monthly losses of 10,000-20,000 lethal units (a term normalising soldiers at 1 unit, tanks at 10, etc.), but once below 73% of peak strength (around 400,000 units), losses surge 2-3 times due to exposed flanks and reduced fire support.

Trajectories vary by data optimism / pessimism. Using Western-leaning estimates (lower Ukrainian losses, higher aid inflows), the threshold arrives in July 2026, with collapse by October. Russian-sourced figures (higher inflicted damage) accelerate this to April-May, with endpoint by August. Recent developments sharpen the grim end: US missile stockpiles, depleted to 25% of Pentagon requirements, have prompted prioritisation of domestic needs under the Trump administration, reducing deliveries. Germany’s February 2026 announcement of exhausted stockpiles further cuts munitions inflows by 20-30%, equivalent to an additional 100-200 daily unit losses for Ukraine.

These findings highlight sustainability as the decisive factor. Russia’s net daily gain of 700-900 units sustains its force at 680,000-700,000, enabling methodical pressure without overextension. Russia also has a reserve army of similar scale not yet mobilised. Ukraine, starting February at 450,000-500,000 units (down from 550,000 in November), nets -100 to -900 units/day, a trajectory that compounds subtly until critical. Aid like the Prioritised Ukraine Requirements List (PURL, ~$15 billion in 2026 from Europe) might add 50-100 units/day temporarily, extending the window by 1-2 months, but production lags (e.g., 60 Patriot missiles/month globally) cannot offset Russia’s 10:1 fire advantage.

The broader implication: the war’s cadence follows a predictable arc in attritional models: slow grind to threshold followed by exponential decay. This allows estimating not just endpoints but inflection points, such as when air defence failures (current stocks cover dozens of salvos against 450 monthly threats) amplify Russian strikes by 10-20%. Absent major escalations, like full NATO intervention, the math suggests Ukraine crosses the ledger’s wrong side by late 2026, with territorial concessions becoming inevitable to preserve residual forces.

This will open the pathway for Russia to successfully push towards, and claim Odessa and perhaps even being in a position to hasten a change of regime in Kiev. My own estimation is that the war will only come to a formal end when these two conditions are met, which will enable formal negotiations to proceed to not just surrender terms but more significantly from Russia’s point of view, a number of critical treaties that go to regional security architecture re-engineering. (See my essay from this time last year, explaining these.)

Methodology and Caveats

The methodology employs a modified Lanchester model, a framework from early 20th-century operations research, to simulate combat dynamics. At its heart, it tracks two variables: each side’s effective force level over time, influenced by replenishment rates and the opponent’s inflicted losses. Forces are aggregated into “lethal units” for comparability – personnel count as 1 unit each, armoured vehicles as 10 (reflecting firepower), and munitions as 0.01 per shell (approximating strike equivalence). This normalisation allows modelling the war as a system of differential equations, where Ukraine’s force U(t) changes as: net replenishment minus losses proportional to Russia’s force R(t), and vice versa.

For transparency, the base model assumes linear attrition until a threshold, then introduces non-linearity. Replenishment (r) includes recruitment, repairs and aid inflows minus decay (e.g., equipment wear). Effectiveness coefficients (α for Ukraine’s impact on Russia, β vice versa) embed doctrinal factors: Russia’s mass artillery yields higher β (0.0012-0.0025 losses per Russian unit-day), while Ukraine’s precision strikes give α around 0.0018-0.0020. Initial conditions are set from theater estimates (U_0 ≈ 550,000 in November 2025, adjusted downward by observed attrition).

Numerical integration – discretising time in daily steps – projects forward: U_{t+1} = U_t + r_U – β R_t, iterated until U hits θ U_0 (θ ≈ 0.73, based on historical density for coherent defence). Post-threshold, a multiplier γ (2.5) amplifies losses, simulating breakthroughs. This yields time to tipping (t*) and full collapse (to 50% force, proxy for operational failure).

Data inputs draw from diverse sources: Western (ISW, CSIS, Oryx) for optimistic ranges, Russian (MoD briefings, mil-blogs) for pessimistic, balanced per stakeholder representation. Recent updates incorporate February 2026 reports on US/German aid constraints, adjusting r_U downward.

Caveats abound, underscoring that this is estimation, not prediction. Data biases: Western sources may underreport Ukrainian losses (500-700/day) to sustain support, while Russian claims (1,200-1,800) inflate for propaganda; truth likely middles. Unmodelled variables include morale (potentially accelerating collapse), weather (winter slows cadences), or black swans like drone surges or some successful third party mediation. Aid is volatile: PURL could ramp, adding months; full cutoff subtracts them. The model assumes constant parameters, but adaptations (e.g., Ukrainian drones flipping local α) could localise deviations. Threshold θ is empirical, drawn from past phases (e.g., Pokrovsk encirclements at ~70% density), but varies by terrain. Finally, aggregation into lethal units simplifies: a tank’s value isn’t fixed at 10, and munitions efficacy depends on targeting.

These limitations mean trajectories are probabilistic ranges, not fixed paths. The value lies in sensitivity: tweaking r_U by +100 units/day (e.g., via Japanese Patriot backfill) delays t* by 30-60 days, showing how data parameters inform cadence adjustments. This framework thus enables reasoned estimation, revealing the war’s underlying arithmetic without claiming omniscience.

Raw Data Ranges

The projections rest on raw data compiled from open sources as of February 2026. Ranges reflect divergences: Western estimates (e.g., Ukrainian General Staff, CSIS, Kiel Institute) tend lower on losses/higher on aid; Russian (MoD, Rybar mil-blogs) higher on inflicted damage. Aggregates focus on theatre (frontline) capacities; global stocks are larger but delivery-constrained.

Manpower (Theatre Active Strength):

• Ukraine: 450,000-550,000 (Western: ~500,000 frontline, rotations strained; Russian: ~450,000 effective, implying higher cumulative depletion). Cumulative losses since 2022: 400,000-1,200,000 (Western ~500,000; Russian ~1.2M).
• Russia: 600,000-700,000 (consistent across sources; total committed ~1.2M). Cumulative: 800,000-1,200,000 (Western ~1.16M; Russian lower, ~600,000).

Daily casualties: Ukraine 500-1,800 personnel (Western 500-700; Russian 1,200-1,800); Russia 900-1,200 (Western higher; Russian ~1,000).

Recruitment: Ukraine 5,000-10,000/month (net ~0 due to losses); Russia 25,000-30,000/month (net +700-900/day).

Machinery (Operational Tanks/AFV/Artillery):

• Ukraine: 2,000-2,500 (losses ~10,000 cumulative; aid ~2,000 delivered). Refurbishment: 50-100/month (net negative from attrition).
• Russia: 7,000-8,500 (losses ~30,000-35,000 cumulative, but ~1,000/month refurbished from stocks).

Daily equipment losses: Ukraine 20-50 (Western lower); Russia 30-60.

Munitions (Artillery Shells, Missiles):

• Ukraine: Stock 500,000-1,000,000 (low; daily use 2,000-3,000). Production/Delivery: 20,000-40,000/month (US/EU ramp to 100,000 delayed; PURL adds ~50,000/year but queued). Air defence: Patriot stocks ~200-300 interceptors (covers 20-30 salvos vs. 450 threats/month); production diversion via PURL delays replenishment.
• Russia: Stock 4M-6M; production 4M-5M/year (~12,000-15,000/day). Fire ratio: 5:1-10:1 advantage.

Recent constraints: US inventories at 25% (1,000-1,500 Patriots total; production 740/year, 75% to Ukraine via Europe). Germany: €20B+ exhausted, no more direct transfers; contingent ~35 PAC-3 (~1 week’s defence).

Net Replenishment and Effectiveness:

• Ukraine r_U: -100 to +100 units/day (pre-February; now -100 to 0 from aid cuts). β (Russian effectiveness): 0.0012-0.0025 (up 10% from air gaps).
• Russia r_R: +700-900/day. α (Ukrainian effectiveness): 0.0018-0.0020.

Threshold: ~400,000 units (73% of Nov 2025 peak). Post-threshold multiplier: 2-3x losses.

These ranges, when integrated, produce the 6-9 month window: base depletion 900-1,500/day to threshold in 50-170 days, then 50-90 days to halving. Cadences emerge from sensitivities – e.g., +50 units/day from PURL extends by 30 days – showing how parameters bound trajectories without dictating them.

Conclusion

This quantitative lens illuminates the Russia-Ukrainian War’s attritional logic: a slow, compounding imbalance leading to abrupt shifts. Key findings sketch a 6-9 month collapse window; the methodology provides the tools for such estimates, and raw data ranges highlight the evidential foundation. By focusing on flows over events, we gain insight into cadences – gradual until non-linear – enabling informed trajectories amid uncertainty. The math doesn’t predict; it frames possibilities, reminding us that wars end when ledgers demand it.

By Sylvia Demarest, Substack, 3/8/26

Introduction

The history of the CIA and the US intelligence community is one of spectacular intelligence failures. For example, both the Islamic Revolution in Iran and the collapse of the Soviet Union came as complete surprises. Iran’s first Ayatollah, Ruhollah Mostafavi Musavi Khomeini, was exiled in Paris and gave regular sermons where he openly described plans to overthrow the Shah. These sermons were available of cassettes all over Iran. I understand the CIA never translated any of these sermons. When I traveled to the Soviet Union in 1988, the currency was weak, goods and services were scarce, yet US intelligence never suspected that Soviet state could dissolve.

It now appears the intelligence community also failed to anticipate how an attack on Iran would impact energy flows, the Gulf states, and the entire global economy. A classified report by the National Intelligence Council was leaked to the Washington Post yesterday. The report concluded that even a large-scale assault on Iran launched by the United States would be unlikely to oust the Islamic republic’s entrenched military and clerical establishment, but the report failed to mention any of the potential knock-on effects, either to transportation in the Persian Gulf where 20% of the global energy flows, or to US military bases, US allies, and the global economy.

It appears the decision was made to initiate a regime change war against Iran without an honest assessment of US preparedness, Iran’s capabilities, or the economic impact of conducting a war in the Persian Gulf. Worse, it appears the US was unprepared to initiate such a war and failed to assess the potential risk to US allies, US bases, and US assets in the Gulf.

This essay will discuss the potential economic and military consequences of this war of choice on Iran. As yesterday’s essay discussed, Iran has been preparing for this war for decades. This does not mean Iran will succeed, but it also implies the US and Israel could fail. Iran is a large well-armed nation larger than western Europe. Iran occupies a strategic location in the middle of a vital logistics hub of the globalized supply chain. Each day the Straits of Hormuz remains effectively closed, will help to build a tsunami of economic consequences.

How’s the War Going

I spent hours trying to get a firm answer to the question of whether the US and Israel had achieved air supremacy over Iran. Several sources said yes–but this does not appear to be correct. The best available evidence indicates that the US and Israel are still using standoff weapons and are not attempting to overfly Iran. According to Larry Johnson, this means the US and Israeli planes “are flying close to Iran’s western border and releasing primarily the Joint Air-to-Surface Standoff Missile aka JASSAMs. These missiles have a range between 230 and 600 miles depending on the variant (AGM-158A JASSM (baseline): ~370 km [230 miles] and AGM-158B JASSM-ER (Extended Range): ~980 km [610 miles]).”

The supply of standoff weapons and interceptors for the US and Israel is running low. Wars are won on logistics. This means the US and Israel initiated a major war without an adequate supply of weapons. After a meeting yesterday at the White House President Trump issued a statement, that said production of “Exquisite Class” weaponry would be quadrupled and added that expansion had already begun three months earlier. The statement named BAE Systems, Boeing, Honeywell Aerospace, L3Harris Missile Solutions, Lockheed Martin, Northrop Grumman, and Raytheon, while Lockheed Martin and Northrop Grumman publicly signaled support afterward.

I have several questions. First, where will the inputs to make these weapons come from? China dominates rare earths and other needed inputs. I doubt China will help the US make weapons that could ultimately be pointed at them. Second, what kind of numbers are we talking about? Finally, what is the time frame, days, months, years? The US started a major war 7 days ago! It is a bit late to be worried about an adequate supply of weapons.

If the US and Isreal run out of standoff weapons, and excluding the use of nuclear missiles, gravity bombs will have to be released from fixed wing aircraft flying over the target. I would imagine Iran has anticipated this and may even have weapons in reserve to target those aircraft. What would happen if Iran shot down a B-2?

The US and Israel keep climbing the escalation ladder. The US bombed a refinery in Iran. Iran bombed a refinery in Israel. The US then bombed a desalination plant in Iran. Iran bombed a desalination plant in Qatar. The Middle East is dry; every country depends on desalination plants for the water they need. Iran is also in a drought. It may seem strategic to bomb Iran’s desalination plants, but Iran will respond by bombing plants in Israel and the Gulf states. Without water none of the Gulf states, including Iran, are viable.

Today the US bombed a refinery in Tehran. The result was a terrible explosion and fire. This means the US deliberately destroyed oil storage facilities in a highly populated area. Is the oil infrastructure of the entire gulf is now a target? Some are trying to excuse the implications of this escalation, but it smells of both depravity and desperation.

Here’s Andrew Korybko: “ A sky-high flaming pillar emerged in the aftermath, toxic smoke clouded out the sun, and blackened rain fell on this city of around 10 million people. The environmental consequences alone could push Tehran to the breaking point after it’s already been struggling with a severe water shortage that earlier led President Masoud Pezeshkian to consider an evacuation.”

What will the US and Israel do next, use nuclear weapons on Iran’s underground bases? This seems to be where this war is heading. But how effective would nuclear weapons be? Here’s a blogger named Patarames: indicating that these underground bases may be difficult for even nuclear weapons to destroy: “Granite rock formations can withstand a 300 kiloton contact explosion delivered by the warheads of a thermonuclear ballistic missile (~ 100 m) if the depth / overlapping surface is about: 300 m, if anchor bolts and mesh lining of tunnels are used. This is typical for very deep missile storage areas and low-risk transit tunnels that can withstand damage. 100 m when using high-class concrete lining. This is typical for critical areas with sensitive equipment and personnel. 30-50m in the presence of high-strength concrete structures for entrance areas. Such transit sections can withstand damage and chips / debris, and they just need to remain passable.”

Obviously, the use of nuclear weapons would be an unacceptable level of escalation for the US and Israel and would represent clear proof that the war is being lost. We also do not know how other nuclear powers will react. The use of nuclear weapons against Iran could result in a global nuclear war.

Given the fog of war and all the censorship, it is difficult to evaluate how the war is going. For example, there are claims that most Iranian missile launchers have been destroyed and that Iran is running out of missiles. This assumes we know how many launchers and missiles Iran has. In fact, is little proof that either missiles or launchers are running low. There is even evidence that most of the launcher’s hit were decoys.

Meanwhile, there is plenty of evidence that the US and Israel cannot intercept Iranian’s latest missiles. MIT Professor Postol claims his studies show an interception rate of 5% or less. Meanwhile, the US and Israel are using interceptors costing millions, that are in short supply, to try and knockdown drones that cost thousands. Iranian has thousands of drones, and drones do not require launchers. It seems clear that Iran is using old missiles and slow drones to exhaust the supply of interceptors across the Middle East.

US bases and radars all over the Middle East have all been either destroyed or seriously damaged. There are also videos showing extensive damage to Israel. The extent of the damage is difficult to verify since Israel has imposed an information ban under penalty of five years in prison. Israel has also expanded the war by invading Lebanon. The invasion does not seem to be going well either. Hezbollah has responded and this means Israel is fighting a two-front war.

Finally, there are indications that there are many more US casualties than we have been told.

The Economic Cost

The military cost to the US is in the billions if not trillions. Aside from the cost of the current war, the US spent decades and billions to build a string of bases across the Middle East, protected by a string of sophisticated radar facilities. All of this is now in ruins. Iran spent the first few days targeting these bases and radars. As a result, the US must now rely on AWACs and satellites for targeting and interception data. The inability to protect US bases in the Middle East implies that the string of 800 US bases all over the world are also vulnerable. The US spent trillions building these bases over the years. Events of the last week point to the need to re-examine the US national security strategy including the entire national security complex. This includes the US Navy since Frigates and Aircraft Carriers are also vulnerable to modern weapons. What would happen if a carrier was sunk?

The effective closure of the Strait of Hormuz by Iran has created an unprecedented economic and logistical crisis for the five Gulf states, UAE, Qatar, Kuwait, Oman and Bahrain. This strain is not just from the lack of earnings but also from the fact that these countries must import 90% of the food they consume and would be uninhabitable without electricity.

Kuwait, Qatar, and Bahrain are almost 100% reliant on the Strait for their exports, earnings, and imports. Now that the Strait has been closed for a week, these states will have to rely on their stock and bond assets and their sovereign wealth funds to maintain government spending.

Oil storage tanks in Saudi Arabia, Kuwait and Qatar are now full and this means production in their oil and gas fields has been shut down. Even if the Strait is opened soon, it will take time to restart production and reinstate revenues. Meanwhile, they have suffered a complete loss of daily revenue.

Qatar, Saudi Arabia, and Kuwait have declared force majeure. All contracts to supply oil and gas are now on hold. Qatar provides roughly 20% of the world’s Liquefied Natural Gas (LNG). A prolonged closure would not only starve Qatar of revenue it would also cause an energy catastrophe in Asia and Europe, potentially leading to a global recession.

Any closure of the Strait for weeks or months would trigger a significant fiscal deficit, threatening the funding of major projects, including support for other wars.

The impact on international aviation is also significant. Following Iranian strikes on Dubai International and Abu Dhabi airports, commercial air traffic has been significantly curtailed. The UAE and Qatar have built massive tourism and logistics sectors. Unlike 1973, these economies are now service based; without flights, their non-oil GDP (hotels, shopping, transit) are also without revenue.

These five states import nearly 90% of their food. While they hold a supply of grain reserves, they lack non-Gulf ports to resupply once those stocks begin to dwindle.

There are ongoing efforts to re-route oil deliveries, but capacity is limited. Only the UAE has a significant port outside the Strait (Fujairah). However, the Habshan-Fujairah pipeline can only handle 1.5 million barrels per day—a fraction of the region’s output.

The risk of “regime change” to 5 ‘sultanates’ in the Gulf rises with each day the Strait remains closed.

But the economic issues go well beyond the Gulf and this war also has the potential to impact the economy of the US and world. Craig Tindale wrote a very important essay discussing the potential economic impact of this war and the closing of the Strait of Hormuz on the global economy. His essay: Systemic Risk: A 12-Order Cascading Analysis of a Zero-Flow Strait of Hormuz Closure is a must read. Here’s part of it:

“The modern world order, having organized itself around efficiency, cost minimization, and logistical precision, has created a machinery of dependence so extreme that the interruption of one narrow corridor can propagate outward into a general crisis of civilization.”

“What appears at first as a maritime blockade is in fact the exposure of the entire global system as a hierarchy of brittle interdependencies.”

“Oil and LNG fail as inputs into electricity, fertilizer, shipping, chemicals, mining, manufacturing, and state finance. “

“As an example, the global polyester chain begins in petrochemicals. A severe disruption to hydrocarbon and petrochemical feedstocks cascades into PTA, MEG, polyester resin, filament, and fabric production, causing acute shortages, price spikes, and factory stoppages across synthetic-heavy apparel segments. The industry does not vanish overnight, but the low-cost, high-volume apparel model starts to break down.”

“From this follows a chain whose logic is cumulative: fuel inflation becomes fertilizer inflation; fertilizer inflation becomes food inflation; food inflation becomes urban instability, sovereign subsidy exhaustion, and ultimately hunger. In this sequence, food shortages are not a secondary humanitarian issue. They are one of the central political outcomes of the crisis, because modern populations do not experience systemic breakdown first through grand strategy, but through unaffordable bread, intermittent power, empty pharmacies, and possibly the collapse of public order. A globalized Arab Spring.”

“In this framework, hyperinflation emerges as the social expression of real physical bottlenecks. When energy-importing states are forced to acquire dollarized fuel at any price, when currencies weaken, when fertilizer and transport costs reprice an entire harvest cycle, inflation ceases to be cyclical and becomes coercive.”

“It enters every household budget and every state ledger at once. The result is the destruction of planning itself: firms cannot quote, governments cannot subsidize, and populations can no longer calculate the future. Under such conditions, credit markets seize up, foreign-exchange reserves drain, sovereign spreads widen, and the boundary between economic crisis and political crisis disappears.”

“Modern technical systems amplify rather than dampen this disorder. The loss of sour crude becomes a sulphur and sulphuric acid crisis; that chemical crisis becomes a copper and cobalt crisis; the metals crisis becomes a transformer, switchgear, and grid crisis; the grid crisis becomes a semiconductor crisis; and the semiconductor crisis becomes a compute and data-centre crisis”.

“Thus, the closure of a maritime strait reaches, by entirely material means, into the server rack, the hospital network, the payment system, the electrical substation, and the defence-industrial base. The myth that digital civilization floats above heavy industry is, in this scenario, extinguished. Compute is shown to rest on copper, transformers, stable voltage, LNG, and ships.”

“For humanity, the systemic risk is total in scope, even if unevenly distributed.”

“The most immediate suffering falls on import-dependent and fiscally weak societies: blackouts, food insecurity, unemployment, debt default, regime stress, and mass unrest. Yet the advanced economies do not escape. They experience industrial contraction, infrastructure delays, AI and semiconductor bottlenecks, strategic stockpiling, and the permanent repricing of security over efficiency. What begins as a supply shock ends as a transformation of the political economy. States abandon the fiction of neutral markets and move toward command allocation, export controls, emergency powers, and militarized trade corridors. Market price gives way to strategic rationing. Globalization does not simply slow; it hardens into armed blocs.”

“The ultimate conclusion is grim: the terminal danger in this model is not one shortage, nor one recession, nor even one war-risk premium. “

“It is the transition from a globally integrated commercial order into a world system governed by scarcity, coercion, and administrative triage.”

“In such a world, hunger, hyperinflation, sovereign failure, technological stagnation, and geopolitical militarization are not separate crises. “

“They are the normal operating features of a civilization that has discovered, too late, that its efficiency was built on concentrated fragility. The closure of Hormuz, under this analysis, is the event through which the modern world recognizes that its supply chains were never only economic structures, but the hidden constitution of social peace itself.”

Does this Mean US Stocks and Bonds Are Mispriced?

The Gulf states, including Saudi Arabia, are in now in crisis. They have suffered a serious loss of oil, gas, and tourist income. Their infrastructure has been damaged and could be further damaged should this war continue. They need cash flow. Several countries have announced that they will no longer honor commitments made to President Trump for investments in the US totaling over $2 trillion. In addition, these countries control enormous investments in US stocks, bond, and real estate. They, and their sovereign wealth funds, may have to liquidate some of these investments to maintain spending. Forced selling is not good for asset prices.

At a minimum, the damage done to the Gulf states and to the global economy means that global liquidity will have to be channeled closer to home and the global flow into the US Treasury market or into the US stock markets may slow.

On Friday the price of West Texas Intermediate hit $91 a barrel. I understand a galleon of gas is selling in some areas of California for $8 a galleon. Some estimate that oil prices could hit $150 a barrel. This will create serious problems for the US and the global economy. The US is a major energy producer and can also rely on Canada, Mexico and Venezuela for energy supplies, but the US cannot escape the impact of high prices.

The rest of the world, especially Europe, are not so lucky. Europe has said it wants to end the import of oil and gas from Russia. Russia just said, OK, we will sell our energy to East Asia. Some commentators have theorized that Russia will be eager to help Donald Trump ease energy prices. Maybe. But Russia also knows that the US has armed and funded Ukraine and has also provided Ukraine with ISR targeting information that has killed Russian soldiers and has been used to attack the Russian mainland. Why would Russia want to bail out the US now?

The US stock market is priced for perfection with 40% of the S&P based on 7 stocks along with an AI bubble in progress. History shows the market depends on a constant stream of investment from abroad, 401K’s, share buybacks, liquidity from US budget deficits, and central bank support.

This Substack had speculated that China could blockade Taiwan, reduce the import of high-end chips, and crash the AI bubble. Well, a blockade is no longer necessary. Taiwan has only a few days of energy supplies. Should the war continue, Taiwan may have to curtail chip production.

Conclusion

This Substack has spent the last 10 months reviewing and discussing several serious issues facing the US economy including the extreme debt levels of the US government and US society. Other essays have questioned the valuations of US stocks, real estate, and bonds. The US must roll over several trillion of US Treasury securities this month. The next few weeks will reveal how the US and the global economy will perform during the economic crisis created by the Israeli and US attack on Iran. Perhaps the US has finally bombed one country too many.

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Iran War Cost Tracker:

https://iran-cost-ticker.com

Russia Matters, 3/6/26

A February 2026 Levada Center survey shows that while most Russians still back the war in Ukraine, support for peace talks has reached a record high—revealing a widening gap between the desire for “peace” and what that peace would entail. While 67% now say peace negotiations should begin, and only 24% want military action to continue—the highest and lowest readings, respectively, since Levada began asking this question in 2022—other polling underscores that many Russians favor talks only on terms Ukrainians are unlikely to accept. For instance, a February 2026 Russian Field survey finds large majorities of Russians deem it “mandatory” for any peace deal that Donbas be recognized as Russian, Ukraine forgo NATO membership and Western sanctions on Russia be lifted, while a January 2026 KIIS poll shows 57% of Ukrainians categorically reject withdrawing troops from Donbas even for Western security guarantees. A separate question in Levada’s February survey finds 57% of Russians consider strikes on Ukraine’s energy infrastructure “rather justified,” versus 20% who say they are unacceptable; opponents mostly cite civilian suffering, while supporters frame the attacks as retaliatory or necessary to weaken Ukraine’s economy and military. See graphs on the Levada poll at the end of the digest.*

By Uriel Araujo, InfoBrics, 2/20/26

Uriel Araujo, Anthropology PhD, is a social scientist specializing in ethnic and religious conflicts, with extensive research on geopolitical dynamics and cultural interactions.

A long-simmering factional war inside Ukraine’s political and security elites is now surfacing more openly. Former army chief Valery Zaluzhny accuses President Zelensky of intimidation as debates over elections and peace talks return. The timing raises questions about succession, leverage, and a looming political reckoning in Kyiv. The far-right and oligarchic elements further complicate the picture

The factional war within Ukraine’s political, military, and security elites is intensifying. And it is increasingly unfolding in public, albeit still underreported in mainstream Western media. The latest development has to do with former commander-in-chief Valery Zaluzhny, who has accused President Volodymyr Zelensky of ordering SBU searches of his office in 2022 as a means of intimidation. The Security Service of Ukraine (SBU) denies it. In any case, if true, why reveal this now? The timing is anything but accidental.

Zaluzhny’s accusation surfaces precisely as discussions around elections, a possible ceasefire, and even a “land for peace” formula re-enter Western and Ukrainian debates. This is thus not a belated accusation driven by conscience, but more likely a political move in a struggle over succession, immunity, and narrative control. One does not survive Ukrainian elite politics by speaking out unless protection or leverage have already been secured.

This struggle is not limited to Zelensky versus Zaluzhny. It also involves the intelligence faction centered on lieutenant general Kyrylo Budanov, whose growing influence has alarmed both military commanders and oligarchic networks. Budanov has been Ukraine’s Head of the Office of the President since January 2, 2026, having previously led the country’s military intelligence (HUR). He also served in the Foreign Intelligence Service. Ukraine’s so-called “deep state” is a battlefield right now.

One may recall that frictions between Zelensky and Zaluzhny were already visible in early 2023, when Pulitzer Prize–winning journalist Seymour Hersh reported that the general had allegedly engaged in independent peace discussions with Russian Chief of Staff Valery Gerasimov, bypassing the President altogether. Zelensky, according to Hersh’s US intelligence sources, was regarded as a “wild card,” unreliable and increasingly isolated.

In fact, Zelensky is arguably a political survivor. In late 2023, there were talks about the West favoring Alexey Arestovich intrigues against the Ukrainian President, Arestovich being a former adviser to the President’s office, with intelligence connections. In 2024, Ukraine’s exiled opposition leader Viktor Medvedchuk said Zelensky could be ousted, having alienated allies domestically and abroad.

And yet the Ukrainian leader has managed to stay. Back in 2022, Zelensky openly declared his vision of Ukraine as a “big Israel”, meaning a heavily militarized, securitized state defined by permanent mobilization and internal surveillance. That was not mere rhetoric: it foreshadowed the consolidation of power, the banning of opposition parties, and the further normalization of security-service intimidation: all of this in turn being the entrenchment of a process that began in 2014, with the Maidan revolution.

Thus far, Western capitals have turned a blind eye to these measures, out of geopolitical expediency, with European Union officials discussing Ukraine’s accession (despite all civil rights issues pertaining to minorities). Be as it may, this tolerance is eroding. Under President Donald Trump, Washington for one thing is clearly signaling fatigue with an open-ended proxy war, so as to be able to pivot elsewhere. The burden is increasingly being shifted onto Europe, which in turn now faces its own strategic anxieties, including tensions with the US itself over American Greenland threats .

This changing external environment partly explains the renewed internal panic in Kyiv. Elections, peace talks, or a forced transition would expose unresolved rivalries, corruption networks, and extremist power centers that have been blatantly whitewashed for years (in the West), not to mention their far-right problem.

The oligarchic dimension further complicates matters. Zelensky’s own rise was inseparable from Ihor Kolomoysky, despite later efforts to distance himself under US pressure. Corruption remains endemic (Ukraine ranked at 104 out of 180 countries by Transparency International in 2023), high enough to undermine military logistics and energy resilience. When Zelensky publicly suggested (last year) that roughly half of the $177 billion allocated to Ukraine never reached Kyiv, he was accusing and warning the West, for leverage, most likely.

The thing is that corruption, by its very nature, cuts both ways. Any serious inquiry into Western misuse of funds would inevitably rebound onto Ukrainian elites themselves, including offshore arrangements revealed in the Pandora Papers.

Meanwhile, armed and paramilitary ultra-nationalism remains a systemic factor. From the integration of the Azov Battalion into the National Guard to the political influence of figures like Dmytro Yarosh, neo-Fascist groups, albeit a minority (in number) have nonetheless shaped post-Maidan Ukraine’s security apparatus. Yarosh famously warned Zelensky he would “hang on a tree on Khreshchatyk” if he sought a peace deal.

Adding to this volatile mix, with the release of some of the Epstein files, more information is surfacing pertaining to human trafficking networks and Ukraine-based ethically dubious biological research. All of that has the potential to draw scrutiny about top Ukrainian authorities, thus increasing the crisis.

Ukraine’s crisis therefore is no longer only about the battlefield. It is about succession, survival, and the inevitable reckoning postponed since 2014. Ending a war, especially an unwinnable one, is difficult enough, even with Trump’s previous promises of ending it “in one day”.

Ending it while armed extremists, rival security services, oligarchs, and foreign patrons all pull in different directions is harder still. The West after all has armed and financed far-right nationalists in Ukraine for over a decade (they are now deeply involved with the country’s deep state), while waging a secret CIA war there. These networks do not go away easily.

To sum it up, whether Zelensky survives this phase politically is an open question. Whether Ukraine emerges more stable afterward is even less certain.

By Matt Stoller, Substack, 3/1/26

…But the big story is of course the war in the Middle East launched on Saturday morning. And while war often seems distinct from the question of political economy, in this case the two are intrinsically linked.

Let’s start with the contours of the conflict itself, which is the second attack on Iran since last June. In that first conflict, Israel killed many people in the regime, and weakened the country significantly. But it was a largely choreographed response, with Iran sending a barrage of rockets repelled by defenses across the Middle East, and then the whole thing ended with a cease fire. Oil prices didn’t much move, and neither did stocks.

This time, it could be different. So far, the U.S. and Israeli forces used air power to kill much of Iran’s leadership. The Iranians haven’t hit back with major missile barrage, but are using a “drip attack,” which is to say, firing small barrages of rockets and drones across Middle Eastern nations, from Israel to Bahrain to Iraq to Kuwait to Saudi Arabia to Jordan to the UAE. They have hit some military bases, but are aiming mostly at soft civilian targets and energy infrastructure, and even data centers. Israelis are in bomb shelters, and some U.S. bases have been hit. Three U.S. solders so far are dead.

It’s not clear whether the Iranian approach is a result of weakness, the lack of a military command, or some sort of strategy. It’s possible their regime will falter, since it is domestically unpopular. Or they could be seeking to get their opponents to waste missile defense assets, and scaring Arab allies into pressing Trump for a cease fire.

But Iran’s bad position doesn’t mean the situation is great for the U.S. and its allies. After the first day, which seemed to be a shocking win for the U.S. and Israel, some sort of fear or exhaustion has set in. The U.S. has used up years of production of high-tech weapons and may run out, while also testing cheap drone technology that it ironically copied from Iran. There is now panic across the wealthy cities of the Middle East, as the airports are closed and the luxury hotels are under sporadic siege by drones and rockets.

It’s never clear what happens in war, so this fight could end tomorrow, or it could go on for weeks. Already Trump is indicating he’s open to negotiations, and the Iranians are making tentative noises to that effect as well. Oil seems to be spiking, which didn’t happen the first time, and there are indications that stocks could be affected. The war is also extremely weird, with the Iranian regime using Twitter to call the American regime a group of pedophiles, and potential civil unrest within Western-aligned Arab states.

So that’s the conflict, summarized by a non-military person reading the news and talking to random military sources. I thought an attack on Iran was a bad idea if for no other reason that Iran can shoot back. I guess we’ll see.

But something about the war did surprise me. When the U.S. launched the attack, I assumed that the decision was a result of some sort of combination of Donald Trump’s rashness, domestic hawk pressure and Israeli interests, all going against world opinion. But as it turns out, much of the elite Western and Middle Eastern world was pressing for this conflict or was fine with it once it started. Rachel Maddow, not exactly a dove, pointed fingers at “the Gulf Arab states who want Iran removed as their regional rival.” Unsurprisingly, both the Israelis and the Saudis lobbied for the war. But when Trump went ahead, he got support from Canada’s Prime Minister Mark Carney, as well as Germany and France and much of the Arab world.

And this support isn’t trivial, the French are sending a strike group to the region. The GOP and national security establishment is mostly satisfied, and half of the Democratic Party took the attitude of California Governor Gavin Newsom, which is to say they are happy for the war, but wish they had been given a heads-up first.

In other words, Trump, far from a unilateralist, is operating within an orthodox foreign policy consensus about the need to topple the Iranian regime. And I found that puzzling. Ten years ago, I worked in the Senate, and I used to ask around about the obsession with Iran. And every foreign policy staffer, no matter how lefty, would say the same thing. “You can’t trust the Iranian regime.” And I would always ask why? The answer, repeated, was “You can’t trust the Iranian regime.” There are many regimes you can’t trust, I would observe, the Saudi government was involved in 9/11. So why is this one so bad? The response was just, “You can’t trust the Iranian regime.” And I could never get a real answer.

There are many theories about this obsession; the Iranians embarrassed the U.S. in the 1970s, and some hawks in America have always wanted to destroy the regime. Israelis are vying for influence with Iranians, and AIPAC gives a lot of money to U.S. politicians. It’s about oil. Neocons have influence in both parties. True, and true. But the bigger dynamic here is bureaucratic.

I’ve long noticed the endless parade of investors heading over to Saudi Arabia, the UAE, and Qatar, getting investments for everything from banking to artificial intelligence. Elon Musk secured money from the Saudis for his AI venture and his takeover of Twitter, Sam Altman sought billions from Abu Dhabi, Anthropic went after money from UAE and Qatar. And JP Morgan, Goldman, Morgan Stanley, Blackrock and Citigroup are competing heavily in the region.

And this trend is not new. In the 1970s, newly wealthy oil princes suddenly found themselves with over four hundred billion dollars, and had to put it somewhere. The deposited it in American banks, who then lent it all over the world, in what was known as “petrodollar recycling.” The corporate, banking, and oil prince worlds have only drawn closer and closer since. In the early 1980s, the merger boom unleashed by the Bork revolution started in the oil patch, and endless waves of mergers have been financed by Arab money. In the 2000s, on a political level, the Bush family linked Texas, the CIA, and the Saudis. In 2013, Al Gore sold his CurrentTV channel to the government of Qatar for $500 million. And in the shale revolution of the 2010s, Texas producers joined Saudi-led OPEC to keep oil prices high.

Today, the Middle East is full of investors in every major venture in the U.S., and most of our think tanks and diplomatic corps are part of that world. Arab elites are also part of the Western establishment. For instance, the giant video game company Electronic Arts was bought with Saudi money, in part because the Saudi prince, Mohammed bin Salman, is a gamer. He also brought the top U.S. comedians to his country for the Riyadh Comedy Festival last year.

The cultures are now so close that Saudi Ambassador Prince Bandar bin Sultan had a private jet painted with the Dallas Cowboys logo, as he was good friend with Cowboys owner Jerry Jones and loved American football. Indeed, while there’s a longstanding pretense of Arab antisemitism and dislike of Israel, it’s notable that both Arab and Israeli elites, including MBS and Israeli Prime Minister Ehud Barak, were extensively involved in the network of Jeff Epstein.

Ultimately, Western elites have dropped any pretense they care about human rights, and Arab elites have dropped any pretense they care about nationalism or Islam. It’s now one giant Davos blob. Here’s David Dayen making the point very clearly.

And indeed that’s true.

According to reports, the Paramount deal has been made possible in large part thanks to equity from Qatar, Abu Dhabi and Saudi Arabia. Middle East money is already flowing freely through global entertainment and media but many are wondering what strings will be attached to this latest and biggest U.S. media investment. These weren’t charity donations.

And that brings us to the collective distrust of Iran throughout all of these networks. Iranians aren’t part of the transnational Davos elite, and are always trying to annoy the people in it by expressing their desire for regional power. So the answer to why you can’t trust the Iranians is that they aren’t part of the club. They don’t paint Cowboys logo on their private jets, nor do they invest in private equity and AI companies, and they aren’t part of investment syndicates for Hollywood studios.

In other words, this attack on Iran isn’t a civilizational conflict, it’s anger from the Epstein class of elites towards a separate group of elites in Iran. Of course, the everyday people who live in these countries want nothing to do with these factional spats. The Americans who have to fight in this war, and the public that must finance it, are unhappy.

The split between elites and the public is vast, and growing. Wars rarely get more popular over time. And this attack may not be one of those conflicts of choice where the cost is mostly invisible to the U.S. It’s possible Iranian missiles and drones could cause meaningful damage to U.S. military assets. It’s possible they actually cause a downdraft or crash in the stock market, and harm the actual investors that called for this war. Or maybe it’s a blip, and Trump decides to declare victory and the Iranians assent to ending it. I don’t know. But the Epstein class, while wealthy and powerful, is greedy and short-sighted. And that means they take all sorts of immensely stupid risks, assuming someone else will always clean up any mess…

***

Missiles are Depleted but Defense Contractors are Cashing In

By Veronica Riccobene, The Lever, 3/5/26

In the weeks before launching strikes in Iran, the Trump administration had a problem: figuring out how to spend the $500 billion in extra Pentagon money the White House plans to request from Congress next year. Just two days later, the administration told Congress that in the next year alone, it plans to burn through $153 billion in additional military funding approved in 2025 — money Congress expected to be spent over five years.

Now, less than a week after the strikes, executives representing weapons manufacturers including RTX (formerly Raytheon) and Lockheed Martin are scheduled to meet with President Donald Trump to discuss the nation’s “diminishing” munitions stockpiles. 

While the president insists U.S. munitions reserves have “never been higher or better,” defense-industry funded consultants and lobbyists are warning that in less than a week, the U.S. has “burn[ed]” through its precision-guided long-range missile reserves. They argue that a shrinking industrial base and declining productivity could undermine U.S. military objectives in places like Ukraine and Israel. Of particular concern are the country’s stockpile of precision missile interceptors, a quarter of which were reportedly depleted in just 12 days of fighting between Israel and Iran last summer and are on track to be further drained in the Iran war.

Yet, since the 1990s, U.S. military spending has nearly doubled, exceeding the combined spending of the next nine largest militaries. 

So where has all that money gone? Into the pockets of top shareholders.

The weapons industry has become incredibly concentrated: Since the 1990s, the number of “prime” contractors working with the Defense Department has shrunk from 51 to five. And in recent years, these giants — propped up by trillions in taxpayer spending — have spent more enriching investors than in expanding production.

Between 2020 and 2025, top military contractors spent $110 billion on buybacks and dividends — more than double what they spent on capital expenditures. Those payouts disproportionately benefit the wealthiest Americans. The top 1 percent of earners control roughly half of all wealth invested in the stock market — including executives and board members who approve buybacks and dividends while enjoying lucrative stock-based compensation. 

It may be fortunate that those billions weren’t instead spent on war munitions designed to cause death and destruction. But much of this money ultimately came from American taxpayers, who are likely to end up footing the bill to replenish U.S. arsenals.

The four largest defense firms in the nation all heavily rely on federal contracts, meaning weapons-industry investors are indirectly lining their pockets with taxpayer dollars. According to the government contract tracker TenderAlpha, in 2024, Department of Defense contracts accounted for between 30 and 40 percent of Boeing and RTX’s revenue, 74 percent of Lockheed Martin’s, and a startling 98 percent of Booz Allen Hamilton’s. 

There are already indications that plenty more tax dollars could be flowing their way. The White House is reportedly planning to ask Congress for another $50 billion in military funding as soon as Friday, a proposal more likely to be approved now that Republicans have torpedoed Democrats’ lobbyist-compromised effort to limit the Iran war.

It’s no wonder that on the Monday following the Iran strikes, Pentagon suppliers saw immediate returns. Responsible Statescraft reports that Lockheed Martin (for which annual defense contracts rival the budget of the entire U.S. State Department) experienced a 3.4 percent stock jump; RTX rose 4.7 percent; and Northrop Grumman posted a 6 percent increase.

Morgan Stanley even issued an advisory this week recommending that investors “consider increasing exposure around themes like defense, security, aerospace and industrial resilience, where government spending can drive multiyear demand.”

The industry’s racket has become so extreme that earlier this year, President Donald Trump issued an executive order barring defense contractors from committing cash to buybacks and dividends if they fail to “produce a superior product, on time and on budget.” He even went so far as to threaten to cancel the federal contracts of RTX — which redistributed $57 billion to investors between 2015 and 2025 — until it ended stock buybacks and instead invested in manufacturing. 

“Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” the president wrote on Truth Social in January. “Executive Pay Packages in the Defense Industry are exorbitant and unjustifiable given how slowly these Companies are delivering vital Equipment to our Military, and our Allies.”

In response, firms including Lockheed Martin and L3Harris agreed to increase their capital expenditures by 38 percent from 2025 and pause buybacks — but have no plans to roll back quarterly dividends. And with bombs now falling on Tehran, these concerns seem likely to fall by the wayside.