Gaming America’s Next Big War
Who wins and who loses in a battle in the South China Sea?
“When goods do not cross borders, soldiers will.”
~ Frederic Bastiat (attributed)
Joel Bowman, appraising the situation from Buenos Aires, Argentina...
Welcome to another Sunday Session, dear reader, that time of the week when we gather around the campfire, rustle up a few tall tales and give thanks that we made it through another seven days without our trigger-happy, power-drunk overlords nuking our precious blue orb into oblivion...
On that cheery note, we have a special treat in store for you today. We recently caught up with Harvard-trained geologist, energy and resource expert, keen geopolitical observer and all-round man of letters, Mr. Byron King.
Your weekend correspondent first met Byron almost two decades ago, when we worked together (with Bill Bonner) during the old Daily Reckoning days. Byron invited us up to Titusville, PA. the birthplace of the American oil industry, where Colonel Edwin Drake sank the nation’s first commercially viable well way back in the 1850s. We spent the day talking to local historians and even dynamite fracking a well. (Fire in the hole!)
Fast forward to 2021 and Byron kindly agreed to lend his insights during our first ever Winter Catastrophe event for Bonner Private Research. He and fellow natural resource expert, Rick Rule, alerted early members to what they saw as a coming energy supply crunch, owing in no small part to western governments commitment to burdensome regulation and even outright hostility to conventional energy, such as Colonel Drake had brought to the market.
Of course, that was before events kicked off on the Russian/Ukrainian border and the geopolitical situation fractured into rapidly accelerating de-globalization, whereby western governments lined up behind the NATO flag and BRICS nations began talking (even more) openly about ending the petro-dollar hegemony and reverting to a whole ‘nutha payment system altogether.
From Proverb to Policy
On that last point, the old proverb “the enemy of my enemy is my friend” has practically been translated into a foreign policy platform between Russia and China, as western sanctions essentially play cupid between the energy and manufacturing powerhouses. Trade between the neighboring nations hit a record 1.3 trillion yuan (USD $190 billion) last year while trade between Russia and EU nations continued to dwindle.
In raw numbers, Russian crude exports to China grew 10% during 2022, according to Reuters, while rail exports of liquified petroleum gas (LPG) more than doubled for the year. Figures from Gazprom show gas flow through the Power of Siberia 1 pipeline rose an additional 50%.
And as Byron highlighted during our recent Fatal Conceits podcast, the global “shadow fleet” of tankers carrying Russian energy exports to foreign shores has blown out to a massive 600 tankers... and counting.
Meanwhile, the two nations are deep in negotiations over the Power of Siberia 2 pipeline. Energy Intelligence had the story:
Russia is also talking to Beijing about a 50 Bcm/yr contract with CNPC to export gas via the proposed Power of Siberia 2 pipeline and a transit section in Mongolia dubbed Soyuz Vostok.
Apart from monetizing new gas resources in East Siberia, Power of Siberia 2 would also take gas from West Siberian fields, which have traditionally supplied Europe and Russia's domestic market.
The talks come as Russia and China signed an intergovernmental agreement on January 31 pertaining to pipeline gas supplies via the Far Eastern Route, an agreement in which the nations “are committed to supporting the use of their national currencies for payments under the contract.”
While China watches closely the action unfolding on Russia’s western border with the Ukraine, and the subsequent response of western governments, it’s no secret that the sleeping dragon has one eye on the “Island of Formosa,” Taiwan.
What might a kinetic situation between the US and China look like in the South China Sea? What could it mean for geopolitical stability, the global exchange of goods and the viability of already frayed supply chains? What might it portend for the future of what French Minister of Finance Valéry Giscard d'Estaing called America’s “exorbitant privilege,” in the form of dollar hegemony?
For these questions and more, we turn again to Mr. Byron King. As you may have heard in the latest episode of the Fatal Conceits podcast, which you can listen to here…
… Byron recently published an article examining the potential outcomes of a kinetic war with China over Taiwan in the South China Sea. The predictions may surprise (or even shock) you… but as Byron writes, it’s an exercise worth “gaming out.”
Special thanks to Paradigm Press, publishers of Jim Rickard’s Strategic Intelligence, which Byron co-authors with Mr. Rickards, for allowing us permission to offer this essay to our Sunday Session readers. Please enjoy...
Gaming America’s Next Big War
By Byron W. King, Senior Geologist
And the end of the fight is a tombstone white
with the name of the late deceased,
And the epitaph drear: “A Fool lies here
who tried to hustle the East.”~ Rudyard Kipling, The Naulahka
“Hustle the East,” eh? Well, along those lines and not long ago, a well-regarded U.S. think tank – some are better than others – conducted war games premised on a conflict between the U.S. and the People’s Republic of China over Taiwan. The setup was that China invaded Taiwan, and the U.S. and Japan intervened.
In this article, we’ll look at these war games and ponder the implications. The idea is to help you understand what goes on in the shadowy upper reaches of geopolitics. Plus, we want to improve your perspective as an investor, so I’ll explain a few things that help decipher the noise that passes for “news” out there.
And note: as a retired U.S. naval officer, I’m obliged to say up front that everything here is personal opinion. I do not speak on behalf of the Navy, the Department of Defense or U.S. government.
Preliminarily, let’s set aside our natural distaste for war, and any related moral judgment. Don’t overly criticize the war game process, thinking “That cannot/should not/ought not ever happen.” Because yes, we know that. Meanwhile, gaming out wars is what some people do and, frankly, it’s a useful exercise.
In this case, a group of professionals at the Center for Strategic and International Studies (CSIS) played out 24 distinct operational combat scenarios. And in most iterations, the American-led alliance prevailed, but not in all.
In some scenarios the U.S. and its allies came out solidly ahead. But in others the “Blue Team” barely eked out a win. And under some versions the Blues just plain lost the war.
Meanwhile, even when the U.S. won, the cost was high; a big whack of its navy sunk and about half of its air force wrecked, while Taiwan and Japan also suffered massive losses. As CSIS put it in the summary of results:
“In most scenarios, the United States/Taiwan/Japan defeated a conventional amphibious invasion by China and maintained an autonomous Taiwan. However, this defense came at a high cost. The United States and its allies lost dozens of ships, hundreds of aircraft, and tens of thousands of service members. Taiwan saw its economy devastated. Further, the high losses damaged the U.S. global position for many years.”
Among those “dozens of ships” lost were two or more aircraft carriers in every scenario, plus many other large surface vessels. Some way to win, eh? Lose immense numbers of your ships, planes and people. Indeed, U.S. forces haven’t suffered such disastrous material and personnel losses since World War II.
Let The Games Begin!
Right away one wonders what magnitude of political earthquake would shake Washington if news broke of even one aircraft carrier and much of its battle group plunging beneath the waves, losing 5,000 and more people in a matter of hours.
Plus, add the loss of everyone and everything else destroyed elsewhere in a fight with China; things like runways, aircraft and shelters, harbors, storage areas, etc. In many ways, it would be a national heart attack.
By its nature, war gaming can be a nerdy pursuit. Done right, it’s a highly disciplined mental process that ties together massive levels of arcane information, ideally to envision the future.
And gaming is not just for battles and wars, either. In fact, the game process is an excellent way for any organization to test how its goals marry up with available resources and capabilities. Can you do what you want with what you have? If not, then what else do you need?
Or stated in another way, gaming the future is the heart of strategic thinking. Along these lines, recall Sun Tzu who long ago wrote (about 500 BCE), “The supreme art of war is to subdue the enemy without fighting.” That is, you always want to search for your opponent’s weaknesses because, most assuredly, he is searching for yours.
Closer in time than Sun Tzu, it’s disconcerting to go through the CSIS war games that predict huge U.S. and allied losses in people and equipment; although absolutely, someone must ponder things like this, at least in the abstract. And in this instance, CSIS and its people have done us all a favor.
Meanwhile, aside from CSIS, many other entities – U.S. and foreign – also model and game war scenarios. These range from military and intelligence planning cells deep within the government, to the corporate world and academia.
And definitely, don’t forget Jim Rickards who helped set up a CIA war game process that involves financial destabilization, described in his 2012 book Currency Wars: the Making of the Next Global Crisis.
Not Your Grandfather’s War
In fact, war games have an ancient pedigree going back to Biblical times.
For example, consider the blood-and-guts-oriented Book of Joel 3/9: “Proclaim this among the nations: Prepare for war! Rouse the warriors! Let all the fighting men draw near and attack.”
Well, that was then, when combat involved picking up a sword or spear, running to the sound of the horns, and forming a battle line.
Today, war planning is far more complicated, and I don’t mean those old Avalon Hill strategy board games you may have played many years ago.
No, modern war gaming – the real McCoy – is an immensely complex affair. At the highest levels, it involves advanced math such as linear algebra, probability analysis and partial differential equations.
Consider just one “simple” (ha!) example of a modern battle scenario: a salvo of, say, 25 supersonic cruise missiles all aimed at an aircraft carrier battle group.
From the war gamer’s perspective, each missile has certain capabilities, summarized in what’s called a “weapons effectiveness index” (WEI). These include range, speed, altitudes, guidance, seeker head, anti-jamming ability, warhead and more. It’s all embodied in a couple of numbers.
Downrange, the battle group has an array of defensive capabilities, including onboard and offboard surveillance, tracking and targeting systems, plus a variety of electronic warfare systems, decoys, distractions, and numerous anti-air capabilities ranging from surface to air missiles to gun systems. Again, reduce it all to a couple of numbers.
Now, start mixing up probabilities of incoming missiles being detected, tracked, and diverted or destroyed, versus probabilities of hits on battle group ships.
It’s no secret to say that high-confidence defense against fast-moving cruise missiles may require five or six antiair missiles to shoot down each incoming round. And if you do that math, your battle group might require over 150 missiles to have a chance of stopping the attack; and even then, some “leakers” might still get through. And that’s just one attack, after which the missile magazines are mostly empty.
This scenario is but one illustration out of countless possibilities. But it shows how we’re not dealing with your grandfather’s war anymore, where the proverbial “men behind the guns” shot down Kamikaze airplanes at 500 yards. It’s not like what you see in the old Victory at Sea videos; this is the age of anti-ship missiles that move at blinding speeds.
And from this one scenario, it only becomes more difficult. That is, take the example from above and multiply it times about 50,000. Yes, a huge multiple, because that’s the scope of planning necessary to fight even a relatively short-duration war these days, say about a month.
War planners must calculate probabilities not just for one missile attack, but dozens or hundreds. Not one torpedo attack but, again, dozens or hundreds. And it’s not one air attack but literally thousands.
And remember, all of this math is necessary to game out one war-at-sea scenario in the China-invades-Taiwan model. And as I noted above, CSIS ran 24 scenarios through the blender. There’s nothing easy about it.
More specifically, much of modern war gaming supports war planning in which people work out courses of action for a wide array of conflict scenarios. In essence, who are you planning to fight? Where? How? What resources does your side have? What does the other side have? Easy questions, one might think, but with complex, endless answers.
With these CSIS war games, we’re privy to an outsider’s peek into the secure rooms. And just this glimpse reveals a certain approach to the operational dynamics of a Taiwan-centered conflict (and keep in mind, this is but one possible approach out of many).
By way of analogy, think back three, four or five decades to the Cold War in Europe. Then, the U.S. and NATO routinely war-gamed how to fight the Soviet Union. One critical element of any potential conflict focused on defending the Fulda Gap in Germany.
The idea of those long-ago European war games was to envision what combat operations would look like against an invading Red Army. And one central aspect of holding the Fulda line, or not, was whether the situation would go nuclear. Yes, serious stuff.
More Questions Than Answers
Fast-forward to today, as U.S. planners think about the Taiwan invasion scenario. The basic idea is to explore whether or not a defense against a Chinese invasion of Taiwan is militarily possible.
That is, if fighting China over Taiwan is a hopeless case then that’s worth knowing, and the sooner the better. If defeat is a foregone conclusion, then the U.S. should not mount a quixotic effort to defend Taiwan, no matter what anybody thinks about the people or government there, let alone the computer chip factories.
But what if there’s a better-case scenario? What if Taiwan can somehow defend itself from China without massive U.S. assistance? Well, that’s worth knowing too because it opens the door for the U.S. to pursue a more flexible approach to its entire Indo-Pacific Ocean geostrategy.
And then we reach the nitty-gritty takeaways of the recent CSIS analysis. That is, under certain conditions, U.S. intervention can thwart a Chinese invasion, but not in every case. And always, the fight comes with immense and gruesome costs, immediate, medium, and long-term.
In most CSIS war scenarios, the U.S. “wins,” but not in all cases. And then come the next hard questions, such as whether defending Taiwan is more of a pyrrhic victory. Because clearly, based on game outcomes, helping Taiwan hold back China breaks the back of much combat power of the U.S. Navy and Air Force. Is that a price that Americans are willing to pay?
Meanwhile, consider just a few (of many) second and third order effects of losing so many people and all that metal in a war on the other side of the planet. What does that do to the U.S. economy and strength of the dollar, as well as to the country’s politics, if not culture? Can Americans even mentally process the idea of “losing” a major war, where large numbers of people and the cream of U.S. tech – naval and aerial – are destroyed?
Plus, depending on scenarios, the predictable costs of the fight raise new questions about the long-term trajectories of U.S. military power. For all the money spent over all the years, has the country built the right things? Just consider a recent Wall Street Journal front page article about how the U.S. weapons industry is “unprepared for a China conflict.” (Citing CSIS, by the way.)
And there are even deeper issues and questions.
Clearly, and across entire spectra of politics and economics, the U.S. faces new global realities. America’s so-called “unipolar moment” in the post-Cold War world has ended. So, what does it mean to U.S. commitments and alliances around the world? We have wide-open questions here, right?
Another important point of the CSIS report is that it’s now public. More than likely, the CSIS war game serves as a backdoor method to share high level U.S. thinking with China, such that Chinese leaders also understand the risks involved with a Taiwan invasion, all towards the goal of long-term deterrence.
Of course, every war can be described as a series of battles, such as those wars gamed by CSIS. Yet the design of war – the “architecture,” so to speak – occurs at an entirely other level of thinking.
In the 1920s a Soviet military scholar named Aleksandr Svechin wrote, “It is extraordinarily hard to predict the conditions of war. For each war, it is necessary to work out a particular line for its strategic conduct. Each war is a unique case, demanding the establishment of a particular logic and not the application of some template.”
Svechin’s point is that to truly understand the foundations of any given war, you must understand that every war has a nature, a logic, and an underlying philosophy that controls theories, policies, strategic goals.
Begin with just the basics of geography, certainly space and time as well as fundamentals like water or land, flat or mountains, dry or wet, and much more. Then one must understand the people one confronts, down to language and culture. Who are you planning to fight? And why?
This recalls a story from the fabulous 1992 book, We Were Soldiers Once… And Young, by Harold Moore and Joseph Galloway. The short version is that, early in the Vietnam War a U.S. helicopter returned from a mission with arrows sticking out of its side.
A few young maintenance troops laughed at the idea that Vietnamese would fight the mighty U.S. war machine with bows and arrows. But an older, crusty, senior enlisted guy pointed out how important it is to respect people who are willing to stand up against you, armed only with bows and arrows. You see the distinction here, right? Know the opponent, know the enemy, know yourself. It’s classic Sun Tzu.
After the basics of geography and people, one can then dive into the idea of a nation’s combat power, and the country’s ability to generate and – much more important! – to regenerate it. Because war is the application and attrition of force.
The Production of War (Defense Contractors Are Listening)
Obviously, countries wage war with people and weaponry, all of which must come from somewhere, preferably a home industrial and energy base. It’s very basic; it’s Napoleon 101, so to speak. Indeed, Monsieur le General once quipped that God is on the side of the army with the most battalions.
Napoleon had a good point, although time marched on. And in 1947, the military correspondent for the New York Times, the legendary Hanson Baldwin, expanded on Napoleon in a book entitled The Price of Power. He wrote, “Victory in modern war is no longer won by the big battalions but by the big factories, backed by the big laboratories and the busy scientists.”
In other words, modern warfare is at root industrial. Baldwin had just witnessed the U.S. production effort of World War II. The clear lesson was that a nation’s combat power is only as good as the amounts and quality of equipment it can field into the hands of well-trained people. What have your factories produced? And what can they continue to produce, to replace what you use up?
Which brings us back to that recent CSIS wargame. Yes, the U.S. has impressive ships and aircraft, but so do the Chinese courtesy of their new, modern industrial complex that cranks out significant numbers of platforms and related weapons like rockets and cruise missiles. At some point, to quote no less than Joseph Stalin, “Quantity has a quality all of its own.”
In most runs of the CSIS wargames, U.S. forces blasted the hell out of Chinese forces, until the magazines and weapon lockers ran out of rounds. In some scenarios, the application of force was even enough to prevail and save the day for Taiwan. In other scenarios though, it wasn’t enough. Fortunes of war, and all that…
Meanwhile, Chinese weapons whizzed through the air and under the water. At sea, more than a few anti-ship cruise missiles leaked through the ferocious American defenses, to rip many U.S. vessels to shreds. And in fact, most U.S. aircraft were lost while parked on the ground, as well-targeted Chinese missiles rained down.
Okay, take a deep breath and calm down. This description of steel rain falling from the sky is all based on a set of war games. It’s not real, and nobody has sunk anyone’s ships; not yet. But it’s a cautionary tale.
One immediate response of U.S. policymakers might be that the Navy and Air Force must move more munitions into the region (if available), and store ammo and airplanes in hardened shelters. All of this takes time and money, which is a problem that recalls a similar issue that the U.S. faced in the 1930s, namely garrisoning the Philippines.
Then again, there are other approaches. For example, the Air Force recently withdrew some front line combat aircraft from bases in Guam, perhaps out of fear that they are simply too vulnerable to a surprise attack.
One longer-term lesson is that the U.S. must improve its ability to track and destroy supersonic cruise missiles and move ahead with its own new versions of advanced weapons. The problem is, though, that the U.S. took a long holiday (about 32 years, by some accounts) from thinking too hard about the future. It’s not unfair to say that the U.S. lags behind Russian missiles/antimissile technology by two decades or more, and even China is perhaps a decade ahead.
I won’t belabor the fine points of research, development, procurement, testing and fielding new weapons. It gets into the perennial American argument over guns versus butter: how much new funding – meaning how many more ten$ of billion$ of dollar$ – to direct towards the so-called “military industrial complex.”
Any crash program of funding and development for new systems opens numerous other cans of worms, if not whoopass (if you’ll excuse the saying). And along these lines the next really big “war game,” so to speak, will play out on Capitol Hill with battles over what to spend and with whom.
From in investor standpoint, the big defense names are mostly familiar: Boeing, Lockheed, Northrop-Grumman, Raytheon, General Dynamics, Huntington-Ingalls, BAE Systems, Honeywell, Leidos, L3-Harris; and of course, many more up and down the supply chains.
To sum up, we began with a quote from Rudyard Kipling, and we’ll end with a quip from Marshal Maurice de Saxe, a French general of the mid-18th century who made a deeply insightful comment that should be etched into the granite of immortality.
That is, “A mule that made twenty campaigns under Julius Caesar, would still be but a mule.”
In other words, raw experience is meaningless unless it can be applied to greater levels of understanding. And over the past three decades post-Cold War, the U.S. has pursued many military adventures and expeditions, and made many mistakes. So, what has the country and its leadership class learned? The idea now is to apply the lessons and move ahead, to get out of the way of whatever is inbound. Because something is always inbound.
Thank you for reading.
Best wishes…
Byron W. King
Senior Geologist, Rickards Strategic Intelligence
And that will do it for us for this special edition of your Sunday Session. Thanks again to Byron for his words of wisdom… and to you, dear reader, for taking the time to spend a few minutes of your weekend with us, trying to puzzle out the world around us.
As usual, we’ll throw a transcript of the above recording up on the Bonner Private Research substack page early next week (we’ll let you know when it’s up)… but at almost 4,000 words and counting, that’s probably enough for one issue.
We’re off to meet some friends for lunch (and a couple of pisco sours) at a Peruvian ceviche joint nearby, La Mar. Whatever you’re doing this Sunday, we hope you’re surrounded by good people, interesting conversation and tasty fare.
Until next time...
Cheers,
Joel Bowman
 | A guest post by
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The thirty-two war game scenarios conducted by CSIS produced a different outcome of horrendous death and destruction. But each of them feature the US loosing large numbers of ships and planes to swarms of missiles and torpedoes. These losses will literally knock the US off the world stage
Missing, however, is the equally horrendous economic consequences. War between China and the US will immediately result in China losing its best customer and largest debtor and the US losing its primary source of a vast array of Chinese-made goods from medicines to chips to I Phones to toys.
It would be illustrative for a think tank to forecast the impact a war with China will have on the American people whose economic welfare is attributable to using Chinese medicines, parts, goods and components to make and sell items nationally and worldwide
Small but telling case in point: most of the medicines in the infirmaries aboard US ships and in US military bases not just in Asia but throughout the world come from China
I appreciate the comments so far, but I find myself thinking of a recent news article. I believe the basic point was that many students who are recent or soon to be graduates find the idea of a 40 hour a week job very stressful. Imagine those same folks fighting a war. We are still desperate for reason to invade politics at all levels. Oh to dream. ////........JJ