Zelensky Gets Called To The Principal's Office
Cutting Europe Down To Size
In a post earlier this year ("Cutting Zelensky Down To Size"), I wrote that President Trump and Vice President Vance exposing President Zelensky's arrogance was the first step in preparing Americans for peace.
— Portfolio Armor (@PortfolioArmor) March 1, 2025
Today's meetings at the White House were about preparing Zelensky and his European backers for peace. That may require cutting Europe down to size. As Patricia Marins pointed out in a post on X yesterday, Russia matters a lot more to the U.S. strategically than Europe (and especially Ukraine) does. Trump may not make this point to them explicitly, but it provides context as to why he wants to end the war and normalize relations with Russia.
Before we get to Marins' post, a couple of investing notes related to today's White House meetings:
- One of our system's top names on Friday was a drone manufacturer. I have trades teed up for two other top names from Friday's list that fit our reindustrialization theme, but I skipped the drone manufacturer for now. I don't think the market has fully priced in the possibility of Trump ending the Ukraine war, and I expect military tech names to drop if that happens, which may be a buying opportunity. In the meantime, we've got two great setups for today. If you want a heads up when we place those trades, feel free to sign up for our trading Substack/occasional email list below.
- If you want to add downside protection here, as a reminder, you can use the Portfolio Armor website or iPhone app to scan for the optimal hedges given your risk tolerance and time frame.
Now on to Patricia Marins' post.
Authored by Patricia Marins on X
Why The U.S. Needs Russia
Why does the US need Russia? Beyond Donald Trump
Far beyond Trump or anyone else, there is a project of US hegemony that transcends White House terms and encapsulates American interests.
Russia does not threaten US hegemony today as the Soviet Union once did, but China, with over 1.3 billion people and a robust economy, boasting the largest industrial base on the planet, does threaten the US. Washington knows China is its true adversary, especially militarily.
The Chinese are flying fighter prototypes of a generation ahead of the Americans, launching missiles a generation ahead, with radars nearly a generation and a half ahead, and dominating the gallium market. In naval terms, China's production capacity is vast, and combined with Russia’s, it may account for over 60% of global military shipbuilding when às consider submarines. The US has unmatched industrial transformation capacity but needs to control the technological gap, partly by separating Russia from China.
Despite China’s impressive defense industry advances, Beijing still relies on Russian technologies and supplies for its armed forces in several areas.
Nuclear Sector: China is reducing its military dependence on Russia, but it remains significant. The Type 041 submarine, with a compact nuclear reactor inspired by Russia’s VAU-6, relies on Moscow’s expertise. Similarly, nuclear reactors for future space projects are based on Russia’s Topaz-II, showing China’s reliance on Russian nuclear technology for space, submarines and obviously speed up the production of nuclear warheads.
Armor: Chinese military armor, vital for tanks like the Type 99 and destroyers like the Type 055, uses Russian titanium alloys and composites. If we Compare Chinese tanks like the VT4 to Russian equivalents in weight and protection, we can see as China still has far to go.
Submarines: Chinese submarines, like the Type 096, depend on Russian stealth propulsion and nuclear reactors to rival Western naval powers. The MGK-335 sonars in China’s Kilo-class submarines are another critical Russian technology for underwater operations. This is an area where China lags, and Russia leads, with technology transfers alarming the West.
Warships: Chinese ships, like the Type 055 destroyer and Type 054 frigate, use gas turbines based on Russia’s UGT-25000, microelectronics for HHQ-9 air defense systems, and Russian steels and composites for naval armor. Naval radars, like the Type 346A on the Type 052D, also rely on Russian microelectronics.
Drones: China is nearly self-sufficient in drones, but specific military models, like the hypersonic WZ-8, use Russian electro-optical sensors and composites.
Jamming: In electronic warfare, a major Western concern, China relies on Russia for sophisticated jamming systems, like those inspired by the Krasukha, used on ships like the Type 055. With Russian microelectronics, China advances but remains behind Russia’s signal-jamming expertise.
Aviation: J-20 fighters rely on Russian AL-31F and AL-41F engines, outperforming China’s WS-15. Z-20 helicopters use components based on Russia’s VK-2500 engine, key for high-altitude operations.
Missile and Rocket Systems: DF-21D ballistic and CJ-10 cruise missiles use Russian microelectronics and sensors for precision guidance, as do other Chinese models. Artillery systems like the PHL-03 and PLZ-05 howitzer use Russian alloys for launch tubes and barrels.
Though China has adapted Russian designs to create its weapons, its reliance on Russian supplies persists and will continue through licensed agreements. From microelectronics to titanium alloys, nuclear reactors to jamming systems, the Sino-Russian partnership is a delicate interdependence, strengthened by Western sanctions.
Working towards distancing the Russians and Chinese is a priority for the US after the sanctions had the opposite effect.
The Europeans' problems with the Russians have become a lesser issue compared to America's survival as hegemonic superpower.
Notes
Note 1 Although the Chinese are ahead in radar technology and GaN production, the Americans have excellent integration of these systems at all levels. However, this requires Gallium, where China leads with over 90% of world production. The US situation is not comfortable in this field.
Note 2 I observed during the recent India-Pakistan conflict how only the Chinese executed their "ABC" very well, leaving nothing to be desired in terms of AWACS integration, ground-based radars, aircraft, and missiles.
Note 3 I didn't mention this in the post, but another major problem for the West is Russia’s energy capacity to support China's growth. This occurs while Europe is practically relying on much more expensive energy sources. How to reverse this?
Note 4 The US's strength is not necessarily what they are before a conflict, but how their industry transforms into a war machine without rivalries. However, this does not apply to proxy wars, which will shape the coming decades.
Note 5 China's major weaknesses are still submarines and missile defense systems. Chinese systems are inferior to all those that have been refined in the Ukrainian battlefield, involving Western systems. Machine learning is vital for the performance of these systems.