Chris’ note: It’s been more than six months since Russia invaded Ukraine. The bullets may be flying thousands of miles away… But it’s set off twin food and energy crises around the world.

Colleague Nomi Prins went live last night with a deep dive into the energy crisis… and what you can do to prepare your portfolio. She also revealed five sectors that will suffer as this crisis evolves … and the five that are set to soar. So if you missed last night’s event, catch the replay here now.

Then read on for a Q&A I did with Peter Zeihan in April. He founded the consulting firm Zeihan on Geopolitics, where his clients include the U.S. military. He’s also a New York Times bestselling author.

Below, he’ll explain how Russia’s war is causing turmoil in the food and energy markets. You’ll hear from him on why the Russian oil industry is in deep trouble… three reasons a global food crisis is now inevitable… and why North America will weather the coming storm surprisingly well.

Q&A With Peter Zeihan

Chris: A kind of financial warfare has erupted around the world in response to Russia’s invasion. There are food and energy crises around the globe… jumps in oil prices… and other commodity price spikes – particularly in energy and agricultural commodities. How do you see all this this playing out in energy markets?

Peter: A lot of things are happening at once…

First, probably half of Russian energy output is possible only because of foreign consultants who do a lot of the technical work.

And the further east into Russia you go, the more true that becomes. Most of the oil fields they’ve brought online over the last 20 years are east of the Ural Mountains. The Russians couldn’t have done that without outside assistance.

Then you have to consider geography and climate.

Most of Russia’s wells are in permafrost regions. And many of those regions have been thawing and refreezing. This damages the wells. And if the damage is extensive enough, you have to redrill it. And that means outsourcing the labor… often from Western drilling companies.

Next, they have ship captains refusing to pick up cargo at Russian ports. And companies won’t insure Russian ships. That makes sea shipping very difficult.

Somewhere between 2 and 3.5 million barrels of Russian crude oil a day aren’t reaching consumers because of this.

So pressure is building throughout the oil-transportation network from the border to the wells. We’ve even seen refineries in Russia turning off because they can’t offload their cargo. They have no storage space.

Chris: Can’t China and India step in and take up that demand?

Peter: The short answer is no.

Those Eastern fields are the technically difficult ones. The infrastructure going East is maxed out. So the only way to get crude from China or India is to go through Russia’s Western ports.

But these are shallow-water ports. So super tankers can’t dock in them.

The Russians would need take their oil – 100,000 to 300,000 barrels at a time – on smaller shuttle tankers out to deep water. Then they’d need to do a sea-to-sea transfer in someone else’s waters… and sail on with the super tanker. The only places it could do that are opposite NATO capitals.

Anyone who thinks that’s an option doesn’t know much about logistics.

Chris: Food scarcity is another big issue on our radar right now here at Legacy Research. You’re talking about disruptions to the oil and natural gas supplies. And that impacts our ability to make food.

Then we have the fact that Russia is the world’s largest wheat exporter and Ukraine is the fifth-largest wheat exporter.

What happens when we don’t have enough energy in the system, plus this spike in food prices?

Peter: We’re looking at critical food shortages. And it comes down mostly to three things…

First, most Ukrainian wheat is going off the market. It won’t come back. The Russians are destroying all the physical infrastructure they can, including what you need to grow and export wheat.

They started on April 3 with a missile strike against Odessa targeting the port facilities there. That’s where most of the wheat goes out.

Second, there are major knock-on effects for farmers. Disruptions in oil and natural gas won’t just impact our ability to fuel our cars. That energy fuels our tractors. You can’t have an industrialized food supply system without it.

Everyone in the world who relies on industrialized agriculture – about 90% of us – will feel some pressure.

Third, and most important, is fertilizer.

The three most common fertilizers in agriculture today are made from potash, phosphate, and nitrogen.

Russia and its ally Belarus make up 40% of the potash fertilizer market. And exports have gone to zero.

To make matters worse, we already had shortages of phosphate fertilizer because of problems with Chinese supply.

Then there are nitrogen fertilizers. Nitrogen comes from natural gas. And Russia is one of the world’s largest nitrogen producers.

So we’ve lost a lot of Russian nitrogen exports. And everywhere else has stopped making nitrogen-based fertilizer because the natural gas price has exploded. That includes all of Europe.

We’re looking at chronic, multiyear shortages of three main types of fertilizer we need to grow food.

Chris: What kind of issues will North Americans face? Will it be as bad as it is for Europeans?

Peter: This is actually a huge opportunity if you’re in agriculture in North America. We do most of our fertilizer production within the continent. And our imports are pretty secure.

So if you’re looking at gross yields, the problem will be most concentrated in Brazil. It’s the world’s fourth-largest agricultural producer. But it gets almost all its fertilizer from the former Soviet space and South Asia. So we’re talking about drastic cuts in yield capacity.

Chris: What ripple effects are in store for the rest of 2022 and 2023?

Peter: At a minimum, we’re looking at a food crisis at least three or four times as intense the one that triggered the Arab Spring in 2010.

The Middle East depends on imports and exports from Russia and Ukraine. And aid organizations will struggle to deal with the shortages.

The World Food Program – the food-assistance branch of the United Nations – gets half of its grain from Ukraine. But now, Ukraine will have to import its grain instead of exporting it.

Chris: It’s an extremely troubling scenario. What other effects will the energy and food crises bring?

Peter: In a lot of places, this will trigger significant de-industrialization. You can’t have a modern industrial civilization if you don’t regularly have these inputs.

We’re not quite ready to wrap our minds around what that means for everybody.

One of the reasons that everything moved to the U.S. after World War II was because there were no alternatives. The U.S. was the only industrialized power, except Canada, that didn’t get leveled during the war.

Americans think of the 1950s as the glory days when everything was built here and exported to the world. But as the rest of the world recovered, industrialization spread. And once we got to 1990, it spread to the post-Soviet system overall.

Between 1946 and about 2000, the whole world industrialized and joined the U.S. and Canada.

If we go back now to a system like what we had before 1946, countries that industrialized during that 54-year window can’t maintain that system.

They depended on American-led globalization, trade, and access to natural resources. And that’s not the case anymore.

The globalized exchange system that has allowed oil to make it from the Middle East to, say, Northeast Asia – that will disappear. And the Northeast Asians don’t have the military capacity to convoy stuff themselves.

So you’re looking at a series of resource wars. You’re looking at a series of supply chain wars. And for a lot of countries, there’s no way they can fight that.

We’re going to see a lot of countries regress. And not to where they were in 2000… but to where they were in 1938. And for a lot of them, that means major problems like no electricity.

Chris: What’s the outlook for the U.S.?

Peter: Everyone will have to adjust economically. And not everyone can. But the U.S. can at least try.

I’m not saying the next decade will be easy. But the U.S. has everything it needs – a consumer base… an advanced financial system… raw materials… and farmland – to make a go of it.

Chris: Thanks, Peter.

Peter: You’re welcome.

Chris here again… As I mentioned up top, last night, Nomi held a special broadcast about the energy crisis – her Running on Empty Summit.

On top of her deeper dive into the energy crisis, she discussed a special kind of investment that could hand you up to 50 times your money. And she showed how it works. So make sure to catch up on the replay here.

And if you’re already subscribed to Nomi’s Distortion Report advisory, you can catch her interview with Peter Zeihan here. Legacy Inner Circle members can catch it here.