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<ul class="summary-list"><li>Trump has said he plans to bring down gas prices by boosting US oil production.</li><li>ExxonMobil CEO Darren Woods doesn't see a US oil boom in the near future.</li></ul>President-elect Donald Trump's promise to unleash a <a target="_blank" class="" href="https://www.businessinsider.com/cost-expensive-goods-price-impact-presidential-election-scenarios-trump-harris-2024-10">big oil boom</a> in the US and lower gas prices is running up against a market reality: The world is already awash in fossil fuels. ExxonMobil CEO Darren Woods told <a target="_blank" class="" href="https://www.semafor.com/article/11/12/2024/exxon-ceo-darren-woods-donald-trump-shouldnt-scrap-methane-regulations">Semafor</a> on November 12 that while he wants to maintain US oil production at its current highs, the market is already well supplied. "I don't think today that production in the US is constrained," he said. "I don't know that there's an opportunity to unleash a lot of production in the near term." During the presidential campaign, Trump said that he planned to lower energy prices — including the <a target="_blank" class="" href="https://www.nytimes.com/2024/09/10/us/politics/trump-economics-gas-tariffs-inflation.html">cost of gas</a> — by increasing US oil production. "We will frack, frack, frack and drill, baby, drill," Trump <a target="_blank" class="" href="https://www.factcheck.org/2024/10/the-issues-trumps-proposal-to-lower-prices-by-increasing-energy-production/">said</a> in October. "I will cut your energy prices in half within 12 months." In September, Trump <a target="_blank" class="" href="https://www.nytimes.com/2024/09/10/us/politics/trump-economics-gas-tariffs-inflation.html">said</a> he would reduce gas prices to below $2 a gallon. Energy analysts told Business Insider that big oil companies are more focused on returning money to shareholders than investing in projects that boost production, especially because China isn't importing as much oil due to its economic downturn. Their comments underscore how little control a US president has over the oil and gas market, including prices at the pump. "It's a global market," Ben Cahill, director of energy markets and policy at the University of Texas at Austin, told BI. "There's very little any president can do to change the direction of oil or gasoline prices." Cahill added that he expects the US to increase oil production, but it will happen gradually. The US is already producing record amounts of oil, at <a target="_blank" href="https://www.eia.gov/todayinenergy/detail.php?id=61545">12.9 million barrels of crude a day in 2023</a> compared with about 11 million barrels per day in 2020, when Trump was in office. Last year, the US also became the world's biggest exporter of natural gas. In October, the US Energy Information Administration <a target="_blank" href="https://www.enerdata.net/publications/daily-energy-news/us-eia-expects-domestic-crude-oil-production-reach-135-mbd-2025.html#:~:text=At%20a%20global%20scale%2C%20the,13.5%20mb%2Fd%20in%202025.">projected</a> that the US would produce 13.5million barrels a day in 2025, hitting another record. And there is room for the industry to expand. Woods <a target="_blank" href="https://www.cnbc.com/2024/11/01/exxon-ceo-says-us-election-wont-affect-oil-production.html">told</a> CNBC earlier this month that there are areas in the Gulf of Mexico — where federal leasing hasn't allowed companies to drill — that could be a source of additional oil production in the long term. Patrick De Haan, head of petroleum analysis at GasBuddy, told BI that Trump could take some steps to try to boost US oil production, including easing regulations to open up additional places for companies to drill and working with OPEC. However, he said boosting oil production while keeping prices at a desired level is a "delicate balance" for the industry. "If oil prices drop, you're likely to see a natural decline in US oil production over the long run," he said, adding, "Oil companies have shareholders to be accountable to." In recent years, the US has increased oil production even as President Joe Biden imposed stricter limits on greenhouse gas emissions from power plants, oil and gas infrastructure, and gas-powered vehicles to help slow the climate crisis. In a separate interview with <a target="_blank" class="" href="https://www.wsj.com/business/energy-oil/exxon-says-trump-should-keep-u-s-in-paris-climate-pact-3d8de471">The Wall Street Journal</a>, Woods added that the US shouldn't drop out of the Paris Agreement as Trump did in his first term and has promised to do again. The nearly 200 countries signed onto that agreement <a target="_blank" class="" href="https://www.businessinsider.com/countries-strike-historic-climate-dealfossil-fuels-dubai-2023-12">struck a deal last year at the UN climate summit </a>to move away from fossil fuels this decade and the triple renewable energy by 2030. Woods told Semafor that he supports Biden's limits on methane emissions from the oil and gas sector. Exxon and other US oil majors have goals to reduce emissions, but climate scientists warn<a target="_blank" class="" href="https://www.businessinsider.com/exxon-chevron-investors-reject-climate-change-proposals-2023-6">they aren't aggressive enough</a> to avert catastrophic levels of global warming.

Trump said he'll unleash an oil boom. Exxon Mobil CEO says not so fast.

<ul class="summary-list"><li>Russian President Vladimir Putin is hosting the BRICS summit in Kazan, Russia.</li><li>Putin is touting trade in local currencies, a move away from the US dollar.</li></ul>Russian President Vladimir Putin is hosting a major summit with over 20 world leaders, whom he's trying to convince to ditch the dollar.De-dollarization is one of Putin's priorities because trading in local currencies means that a heavily sanctioned Russia would not be beholden to the Western US dollar-dominated global financial order.But it's not easy to move away from the greenback. BRICS' summit organizers have advised foreign attendees to bring cash — specifically, US dollars and euros — to the event, in the Russian city of Kazan.Most Russian banks will only take US dollars or euros — which Moscow has deemed "toxic currencies" — to exchange for rubles, according to a guide on the <a target="_blank" class="" href="https://brics-russia2024.ru/en/summit/participants/cards/">summit's website.</a>Going cashless isn't an option, since it's not possible to use Mastercard or Visa cards issued outside Russia in the country. The two card issuers <a target="_blank" class="" href="https://www.businessinsider.com/visa-mastercard-suspend-operations-in-russia-amid-ukraine-invasion-2022-3">halted local operations</a> days after Russia invaded Ukraine in 2022.China's Union Pay cards may be used — "but with restrictions," per the guide.Attendees may apply for Russia's Mir payment card — and there's a bank at Kazan's international airport to get a card, exchange currency, and withdraw cash.These issues with payments not only undermine the bluster of the BRICS group's call to de-dollarize, but they also underscore the immense challenge BRICS would have to unseat King Dollar, which is firmly entrenched in the global financial order.The group of emerging nations anchored by Brazil, Russia, India, China, and South Africa is not giving up.On Tuesday, Putin again touted the use of local currencies on the sidelines of the summit's first day."The growth of payments in local currencies makes it possible to reduce the debt service fee, increase the financial independence of BRICS member countries, and also to mitigate geopolitical risks to the greatest extent possible and, as much as possible in the current world, separate economic development from politics," Putin said on Tuesday at a meeting with Dilma Rousseff, the president of the BRICS New Development Bank, according to <a target="_blank" class="" href="https://tass.com/world/1859601">Russia's TASS state news agency.</a><h2 id="49d28f59-3027-4723-802e-f105b909d1c0">Putin caps a social year with BRICS summit</h2>Putin is also hobnobbing with Chinese leader Xi Jinping, Indian Prime Minister Narendra Modi, South Africa's president, and the UN Secretary-General at the summit this week. Brazilian president Luiz Inácio Lula da Silva canceled his trip after a fall at home.The BRICS summit is larger this year because the <a target="_blank" class="" href="https://www.businessinsider.com/brics-summit-countries-interested-brazil-russia-india-china-south-africa-2023-8">West-weary</a> group has welcomed the new members of Egypt, Ethiopia, Iran, and the United Arab Emirates over the past year. Saudi Arabia has been invited but has not formally joined the club.Russia is the BRICS chair this year, so a bigger summit is a feather in the cap for Putin, who has had a <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-asia-countries-flaunt-russia-putin-diplomacy-relationship-brics-2024-9">busy social calendar</a> this year, even though Russia and the Russian leader himself have been heavily sanctioned.Before the BRICS summit, Putin was already globetrotting and socializing with top leaders from Asian countries including <a target="_blank" rel="" class="" href="https://www.businessinsider.com/putin-bromance-xi-jinping-display-china-remains-wary-russia-2024-5">China,</a> <a target="_blank" rel="" class="" href="https://www.businessinsider.com/russia-economy-india-modi-putin-hug-west-isolation-big-blow-2024-7">India,</a> <a target="_blank" rel="" class="" href="https://www.businessinsider.com/vietnam-russia-putin-visit-us-wary-manufacturing-supply-chain-diplomacy-2024-6">Vietnam,</a> and <a target="_blank" rel=" nofollow" class="" href="http://en.kremlin.ru/events/president/news/74678">Indonesia.</a>Despite the BRICS' interest in reshaping the world order, the group is fraught with rivalries and competing interests that it first has to overcome, analysts told <a target="_blank" class="" href="https://www.businessinsider.com/russia-hosts-brics-summit-defy-west-us-economy-china-dollar-2024-10">Business Insider.</a>"Behind the rhetoric, there's a huge concern — even within Russia — whether the new members will become their equals," said Evgeny Roshchin, a visiting scholar at Johns Hopkins University's Henry A. Kissinger Center for Global Affairs, at a press briefing held by the Center for European Policy Analysis on Monday.

Putin's dollar problem is on clear display at the BRICS summit, starting with the moment guests land at the airport

<ul class="summary-list"><li>Russia is hosting a BRICS summit this week, showing the limits of attempts to isolate it.</li><li>The grouping is buoyant after ballooning from five members to nine.</li></ul>Russia is flexing its muscles at the center of the BRICS economic bloc which seeks to rival the West.The nation is hosting a meeting of the grouping this week, the first since the group almost doubled its membership.The larger grouping gives them more weight — and is a rebuke to Western-led attempts to isolate Russia economically.It also complicates the grouping, introducing new competing interests and rivalries.Geopolitical analysts say it could dilute the group's ability to take action, and reduce it to a talking shop.Iran, Egypt, Ethiopia, and the United Arab Emirates are the new BRICs entrants, joining earlier members Russia, India, China, Brazil, and South Africa. Saudi Arabia has been invited to join but has not formally done so yet.Russian President Vladimir Putin <a target="_blank" class="" href="https://brics-russia2024.ru/en/">touted</a> the expansion as proof of the group's "growing authority" and role in international affairs.Yet geopolitical tensions and competing interests among the group are dragging down Russia's efforts to use it to chip away at the dominance of the West, particularly the US dollar."BRICS expansion is no easy task," said Abishur Prakash, the founder of The Geopolitical Business, a strategy advisory firm in Toronto."It risks creating rival camps within the group," he told Business Insider.<h2 id="a422f5a1-a2fa-40bb-898f-89b58f30e598">A 'raw' grouping</h2>Since its founding in 2006 — with Brazil, Russia, India, and China as members, before South Africa joined in 2010 — the bloc has tried to challenge Western economic dominance.Over the past two decades, its members experienced significant economic growth. After the recent expansion, its member states represent almost 46% of the world's population and about 25% of global exports.Last year, more than 40 countries <a target="_blank" href="https://www.businessinsider.com/brics-summit-countries-interested-brazil-russia-india-china-south-africa-2023-8">expressed interest</a> in joining the bloc.But Anton Barbashin, cofounder and editorial director at Riddle Russia, an online journal on Russian affairs, described the group as a "raw collection" of countries.They have "no chance" of political unity due to competing interests and starkly differing attitudes, he said.Members have grappled with <a target="_blank" class="" href=" https://www.cfr.org/backgrounder/what-brics-group-and-why-it-expanding">internal disagreements</a> over relations with the West, territorial claims, and Russia's invasion of Ukraine.Others are engaged in internal standoffs. India and China have clashed over disputed territory along their border, though they <a target="_blank" class="" href="https://www.youtube.com/live/QiqK0eIJn8E">announced a deal</a> on patrolling arrangements this week.Some countries — notably India and South Africa — also have a tricky balancing act to do, engaging with the group without alienating their partners in the West.<h2 id="1875563d-1228-4de5-a7cc-5b63106239c1">Talking shop</h2>Barbashin told BI that the BRICS Summit is important for Russia because it has been cut out from other international platforms.It's a way to communicate and possibly strike "some deals in the future that we don't necessarily foresee," he said.In total, representatives of 32 countries are set to attend the summit this week, according to Moscow.Barbashin said that the group's size masks its relative impotence."It's just a nice facade," he said, "and it falls within the idea that economic growth should translate into a greater political setting."Leaders are expected to discuss how far members are willing to commit to the group.Una Aleksandra Berzina-Cerenkova, director at Riga Stradins University's China Studies Center, told Politico that "China uses BRICS to give it a mandate to push global visions and post-Western vision."During a press briefing held by the Center for European Policy Analysis on Monday, one analyst foresaw major hurdles for the group to move past its status as a "debating club."Evgeny Roshchin, a visiting scholar at Johns Hopkins University's Henry A. Kissinger Center for Global Affairs, said the group would need to choose how to distribute power between its members should more join."Behind the rhetoric, there's a huge concern — even within Russia — whether the new members will become their equals," he said, noting that Russia could lose its leverage and decision-making among a large group of notionally equal members.<h2 id="ab0780f6-acfd-427a-bc7c-109fb06111f1">Taking on the dollar</h2>Another challenge BRIC members like Russia and China face is trying to change the fundamentals of global <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://www.businessinsider.com/russia-economy-commodities-trading-centers-brics-us-dominated-global-finance-2024-10">financial trading systems</a> that rely overwhelmingly on the US dollar.During a <a target="_blank" rel="noopener noreferrer" class="c-link" href="http://en.kremlin.ru/events/president/news/75349">BRICS Business Forum</a> in Moscow last week, Putin said group members were working on alternative payment systems, as a rival to SWIFT.The alternative systems would aid cross-border payments between members, according to a <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://www.yakovpartners.com/publications/imfs/">report</a> by Russia's finance ministry, its central bank, and consultancy Yakov &amp; Partners.It envisioned a network of payments using local currencies rather than a default reserve currency like the dollar.Russia already has a model it can look to for transactions among central banks: the mBridge system under the <a target="_blank" rel="noopener noreferrer" class="c-link" href="https://markets.businessinsider.com/news/currencies/cbdcs-crypto-central-banks-bis-digital-currencies-bitcoin-stablecoins-tether-2021-9">Bank for International Settlements</a>.BRICS members are also toying with alternative currencies, spanning Chin'a digital yuan and Moscow's interest in crypto.The greenback, though, will be <a target="_blank" class="" href="https://markets.businessinsider.com/news/currencies/de-dollarization-dollar-war-currency-usd-dominance-china-yuan-economy-2024-5">hard to dethrone</a> — even without competing priorities and rivalry among BRICS members."Russia wants to create an alternative to Western financial infrastructures," Barbashin said.But "there's no chance of making anything like a union or an alliance," he said.BRICS members are united in that they want to see change, he said "but there's no real strategy within BRICS aside from fancy phrases to make it work."

Putin's expanded BRICS summit proves he has friends — but risks buckling under its own contradictions

<ul class="summary-list"><li>Texas-based multimanager Crestline Summit is looking to grow.</li><li>The $3 billion hedge-fund platform launched in 2015 from the firm's fund-of-funds business.</li></ul>For some hedge funds, a cash hurdle is seen as an olive branch to antsy investors frustrated by dwindling returns. For others, such as the $3 billion hedge-fund platform Crestline Summit, it is a part of their expansion plans.The Texas-based manager launched its multi-strategy offering in 2015 out of the firm's existing fund-of-funds business. In May, it launched a leveraged version of its flagship stable value strategy, offering investors in its three strategies a cash hurdle for performance fees.The firm still charges management fees to cover operating expenses and pass-through fees to pay its 30 portfolio managers. The cash hurdle, which means they only get paid for performance above Treasury bills, also comes with more of a payout for the firm if the manager significantly outperforms."There's alignment with forward-thinking LPs who don't want to put the portfolio managers or the fund managers in such a position that they don't make money," said Caroline Cooley, Crestline Summit's chief investment officer."There is a give-and-take where we're not going to charge on the interest-rate component of the return, but we will charge a higher rate for the alpha component of the return."Cash hurdles are expected to be more common thanks to higher interest rates and vocal allocators such as the Teacher Retirement System of Texas, which led a group of dozens of investors to call for such fee agreements <a target="_blank" href="https://www.pionline.com/hedge-funds/pension-funds-consultants-press-cash-hurdles-hedge-fund-fee-arrangements">in an open letter earlier this year</a>. ExodusPoint, the New York-based fund run by Michael Gelband, <a target="_blank" href="https://www.businessinsider.com/exoduspoint-multistrategy-hedge-funds-lower-fees-adopt-cash-hurdle-2024-9">has been the most prominent hedge fund</a> to adopt such a structure so far.But the hurdles are just one element of Crestline's overall plans. This business, which is part of a broader $18 billion alternatives manager, is "in expansion mode, full stop," according to Neilson Arbour, the deputy chief investment officer of Crestline Summit. The manager plans to add up to four more PMs this year. While the battle for talent among multimanagers is not cheap, the firm hopes its flexibility will win over PMs."We're at this inflection point, this escape velocity, of where the business is and where we see it growing to, and we're excited about that," Arbour said.<h2 id="d1d782b4-ebc0-4406-adb9-2127aa6e366a">More than just compensation</h2>With a bet-on-themselves fee structure, the firm believes it can attract capital, and its newest offering includes backing from the massive pension fund Texas Teachers.But the culture is why leaders believe talent will come."We have to pay competitive rates for people. But we also recognize that in a world where everyone has a job, people take jobs for lots of different reasons, of which pay is one of them," Cooley said.As Arbour put it, "capital and economics are commoditized to a point."Crestline believes it is more flexible with PMs than larger pod peers. Roughly half of its PMs operate externally, meaning they're able to raise additional capital alongside Crestline's investment. One such manager is former Citadel PM Josh White, who started trading at his London-based Regents Gate earlier this year with capital from Crestline."It might enable you to find the person that's been kind of a cog in the wheel of a platform for all of their life, and now they want their name on the door," Cooley said of allowing external PMs."We don't want to pass that man or woman up from joining us and being a real contributor to the program."<h2 id="1a692577-a430-475e-9933-101cf62135c7">Not the 'indentured servitude model'</h2>While being external doesn't mean there are different risk limits, it does give some more entrepreneurial investors the chance to try their hand at business building. And though the firm might not offer the largest compensation guarantee, executives believe the overall package is compelling."Some of our competitors are kind of an indentured servitude model," said Scott Nelson, who runs the client partnership group."What we've tried to do, candidly, is be people that those portfolio managers who are very good, who have options, choose to work with."The brand the firm is trying to push externally is that they are "capital partners, not capital providers," Nelson said.Structuring risk limits around the certain type of strategies a PM runs, for example, is proof they don't see themselves as a one-size-fits-all, executives say, and the firm's performance has kept pace with larger rivals. A person familiar with the manager's flagship strategy said Crestline was up nearly 12% in 2023, <a target="_blank" href="https://www.businessinsider.com/2023-hedge-fund-returns-for-citadel-millennium-point72-multistrats-2024-1#:~:text=Ken%20Griffin's%20Citadel%20led%20the,Balyasny%2C%20Schonfeld%2C%20and%20Walleye.">besting funds</a> such as Point72 and Millennium. This year, the strategy is up 5.8% through August."There are some structural elements to how we engage that is, we think, a more balanced, fair approach than some of our competitors," Nelson said."The overall package has allowed us to punch well above our weight."

Why $3 billion Crestline Summit believes it's different from the 'indentured servitude model' of its multimanager rivals

<ul class="summary-list"><li>The US can "ill afford" another war if conflict breaks out in East Asia, Gen. Charles Flynn warned.</li><li>From the Middle East to Russia, authoritarian regimes are challenging US power.</li></ul>The US Army's outgoing <a target="_blank" class="" href="https://www.businessinsider.com/top-general-us-army-would-be-key-player-war-pacific-2024-2">top commander in the Pacific region </a>has warned that the US can "ill afford" another war because its military is vastly overstretched.According<a target="_blank" class="" href="https://www.defenseone.com/threats/2024/10/regional-war-asia-would-be-global-problem-us-pacific-army-chief-warns/400333/?oref=d1-homepage-river"> to Defense One, </a>Gen. Charles Flynn said that the US' authoritarian rivals — Russia, China, Iran, and North Korea — had been placing increasing pressure on American military resources.Speaking at the AUSA conference in Washington DC last week, Flynn described the technology and military alliances between the authoritarian states as a "very dangerous combination."Collaboration between these countries has stepped up. Russia has received Shahed drones from Iran, which it has used to attack Ukrainian cities. It has also received diplomatic and economic backing from China, while North Korea has sent rockets and troops.Russia's returned the favor to Iran, helping it evade sanctions and to arm Iranian proxies Hezbollah and the Houthis.In East Asia, Russia recently formed <a target="_blank" class="" href="https://www.businessinsider.com/north-korea-to-send-thousands-troops-aid-russia-ukraine-2024">a military pact with North Korea</a>, and has engaged in massive military drills alongside China as it menaces Taiwan with invasion."There's a limited regional war going on in Europe," Flynn said. "There's a limited regional war going on in the Middle East. We can ill afford another limited regional war in Asia. Why? Because it will be a global problem for all of us."If war erupts between the US and China it could have devastating global economic consequences.<a target="_blank" class="" href="https://www.bloomberg.com/news/features/2024-01-09/if-china-invades-taiwan-it-would-cost-world-economy-10-trillion">Bloomberg Economics </a>in January estimated that a war could cost up to $10 trillion, which is around 10% of global GDP.<a target="_blank" class="" href="https://www.economicsobservatory.com/how-are-geopolitical-risks-affecting-the-world-economy">The Economic Observatory </a>in March found that a broader conflict in the Middle East would spike oil prices and inflation, while if part of Ukraine is handed to Russia as part of a peace deal it would further disrupt food and oil markets.<div type="image" title="Kim Jong Un and Vladimir Putin stand under a stone gazebo surrounded by people in military dress and others in suits." height="683" width="1024" msid="114433082" hostid="261" sizebytes="76672"></div>Flynn is not the first to warn of the dangers posed by the new alliance of authoritarian powers.In January, Kathryn Levantovscaia, deputy director of the Forward Defense program at the Atlantic Council, <a target="_blank" class="" href="https://www.atlanticcouncil.org/blogs/new-atlanticist/overstretched-and-undersupplied-can-the-us-afford-its-global-security-blanket/">wrote</a> that the US military is stretched thin amid threats in Europe, the Middle East, and East Asia."Pursuing regional stability in Europe and the Middle East simultaneously are critical and costly endeavors," she said."Doing so at the current pace in light of capacity limitations could backfire and damage not only Ukraine but also NATO."At the same time, the United States lacks the requisite focus to take on a Chinese threat to Taiwan and to defend its Pacific position because the US military and defense industrial base are stretched thin."In October last year, Marines Lieutenant-General Stephen Sklenka, the deputy commander of all US forces in the Indo-Pacific, told <a target="_blank" class="" href="https://archive.is/nsbWa#selection-3243.0-3243.101">the Sydney Morning Herald </a>that the US' growing number of military commitments could distract from its ability to counter China's aggression. "So far, we haven't had any stuff taken out of this theatre. There is always the chance of what I refer to as a strategic distraction," he told the publication. The US military retained the capacity to <a target="_blank" href="https://www.businessinsider.com/us-no-longer-fight-two-major-wars-at-same-time-2023-11">fight two major wars</a> simultaneously throughout the Cold War, but it shifted its stance in 2018 to be able to fight one major war while deterring a second adversary.The plan was formed in response to China's growing military might. Some critics are calling on the US to resume its "two-war" posture <a target="_blank" class="" href="https://www.businessinsider.com/russia-china-brink-military-alliance-may-overwhelm-us-putin-xi-2023-12">and say the current doctrine</a> doesn't account for the double threat posed by China and Russia, its two most powerful adversaries.Raphael Cohen, an analyst with the RAND Corporation think tank, told <a target="_blank" class="" href="https://www.businessinsider.com/us-no-longer-fight-two-major-wars-at-same-time-2023-11">BI last November</a> that retaining the capacity to fight Russia and China at the same time would entail a huge boost in US military spending.But the threats could be countered, he said, by strengthening the US' alliances.The problem of how to boost military spending amid global instability is a challenge governments around the world are facing.Military budgets are increasing across the world, with the <a target="_blank" class="" href="https://www.sipri.org/databases/milex">Stockholm International Peace Research Institute</a> in May finding that US military budget in 2024 was $886 billion, an 8% increase over two years.Levantovscaia estimated that the US needs an additional $300 billion in the annual defense budget directed toward revitalizing the US defense industrial base to help defend against global threats."In short, the United States faces a strategic choice. Its means are insufficient to achieve its ends," she wrote."To close the gap, it must move one or the other."

The US can 'ill afford' another war now its rivals are teaming up so well, US general says

The US Navy faces critical shipbuilding problems that could hobble it in <a target="_blank" class="" href="https://www.businessinsider.com/us-military-china-missile-problem-getting-worse-2024-5">a war with China</a>.The Navy's aging fleet of aircraft carriers, destroyers, and submarines faces lengthy maintenance and repair backlogs, and it can't build new warships fast enough. Yearslong delays and cost overruns are plaguing new construction.These are all symptoms of a larger issue: the hollowing out of the vast American shipbuilding industry the Navy depends on.Nowhere are the stakes higher than in the Indo-Pacific, where a US Navy not at full strength could face a substantial Chinese battle force and an expanding arsenal of anti-ship missiles. In this scenario, American warships are unlikely to sail away unscathed, and US industrial capacity may not be up to the task of repairing them or building replacements fast enough, officials and naval analysts have warned.<div type="image" title="Several ships are under construction at a shipbuilding enterprise in the Taicang Port Economic and Technological Development Zone in Suzhou, Jiangsu province, China, on July 15, 2024." height="2970" width="5280" msid="115383231" hostid="261" sizebytes="992198"></div>China boasts the largest navy in the world, and its sprawling shipyards rapidly pump out warships and commercial vessels, potentially allowing it to absorb losses more easily than the US Navy. As it stands, China's yards can simply outbuild the US's."Given the shipbuilding challenges, the budget situation, and challenges with recruiting and retention, the Navy is at a crossroads as it faces rapidly evolving threats from peer adversaries, such as China," Shelby Oakley, a director in the US Government Accountability Office who oversees the office's investigations of Navy shipbuilding, told Business Insider.<h2 id="f184d04b-a818-4ec3-ad8b-f52edc8ea134">Why is so much warship work behind schedule and over budget?</h2><div type="image" title="Shipbuilding workers walk past the USS George Washington as it rests pcerside." height="1333" width="2000" msid="115383243" hostid="261" sizebytes="445680"></div>The US shipbuilding industry is a shadow of what it was in the final years of the Cold War. The Navy is reliant on only a handful of major shipbuilders that design and construct different ship classes: Huntington Ingalls Industries (aircraft carriers, submarines, amphibious ships, destroyers), General Dynamics (submarines, destroyers, support ships), and Fincantieri Marinette Marine Corporation (frigates). Higher production rates would require infrastructure costs and a larger workforce. Repair and maintenance are likewise constrained by the few public yards available.A Department of the Navy review earlier this year found that <a target="_blank" class="" href="https://www.businessinsider.com/biggest-us-navy-shipbuilding-projects-are-delayed-by-years-2024-4">top US Navy shipbuilding projects, from new submarines to surface ships, are delayed by years and facing ballooning costs.</a>The longest project delays, expected to be at least three years, are for the coming Block IV Virginia-class attack submarines and the Constellation-class guided-missile frigate. The Navy's first Columbia-class ballistic missile submarine, <a target="_blank" class="" href="https://www.businessinsider.com/navy-may-keep-ohio-missile-subs-longer-over-columbia-cost-2022-7">a priority for the Pentagon</a>, isn't expected to arrive until 12 to 16 months after its planned delivery, potentially leaving a hole in readiness plans for the nation's nuclear forces. And the Navy's next Ford-class carrier, USS Enterprise, faces a delay of 18 to 26 months.<div type="image" title="Chinese shipyard workers working on various elements of shipping equipment in Nantong, China, on July 8, 2024." height="2505" width="3543" msid="115383233" hostid="261" sizebytes="976120"></div>Navy officials, analysts, and industry figures attribute delays to a range of challenges, including a lack of coordination among the stakeholders, inconsistent defense budgets, shifting Navy requirements, the lasting impacts of COVID-19, inflation, a dwindling workforce, and supply-chain issues.Other factors include backlogs and program mismanagement on top of a shrunken industry where sole-source suppliers are awarded projects with limited market competition. Shipbuilders, dependent on materials from overseas, are regularly left waiting for parts to arrive, and pre-pandemic contracts are now out of sync with the current economy.Oakley said that the GAO had observed consistent issues with Navy cost estimates, which "are often lacking and the assumptions unrealistic."<div type="image" title="A yellow rope is in the forefront of the picture, connecting across a body of water to parts of a shipyard." height="3475" width="5213" msid="115383246" hostid="261" sizebytes="2151506"></div>Shipbuilders begin work before designs are finished, resulting in out-of-sync work, but the Navy's budget doesn't adjust for cost increases and extended schedules. That reduces "the Navy's buying power" and contributes "to program instability," Oakley said.That leaves the industry in an uncertain position. Paula Zorensky, the vice president of the Shipbuilders Council of America, told BI that while shipyards make long-term investments to meet the Navy's demands, the Navy has pulled back on planned programs. "That inconsistent demand signal contributes to uncertainty in the industrial base, which was already contending with broader economic challenges of inflation, delays caused by the pandemic, and other economic factors," she said.The Navy has consistently encountered problems building the fleet of at least 355 ships it has said it needs. <a target="_blank" class="" href="https://www.businessinsider.com/navy-carrier-uss-gerald-ford-deploys-after-years-of-delays-2023-4">Challenges with new technologies bogged down the first-in-class aircraft carrier USS Gerald R. Ford</a>; the Zumwalt class was cut to just three stealth destroyers and left without ammo for its main guns; and the flawed littoral combat ships are already being decommissioned even though some of them have been in service for just a few years.<div type="image" title="Navy SEALs climb aboard a US Navy submarine." height="4024" width="6048" msid="115383244" hostid="261" sizebytes="488582"></div>The Navy's push toward increasingly advanced designs and platforms has, in some ways, contributed to issues as well, Bryan Clark, a former Navy officer who's now a defense expert at the Hudson Institute, told BI. "If you look at it, pretty much every class of warship the Navy's building right now is behind schedule, and that's because the requirements have grown faster than the shipyard's capacity to deliver them."It's a complex problem that the Navy is dealing with as it also struggles to maintain and repair its existing fleet. While the submarine force is seen as critical to US combat power in the Pacific, it was reported in 2023 that 40% of the 49 submarines available at the time were idling, waiting for maintenance due to worker shortages and supply-chain problems.Mackenzie Eaglen, a senior fellow at the American Enterprise Institute, wrote in September that the Navy needed to break what she called the "doom loop." Costs for shipbuilding, maintenance, and repairs continue to rise as the fleet ages and shrinks and new construction issues arise. And while the Navy criticizes shipbuilders, shipbuilders are lamenting the rising costs of wages, inflationary pressures, and budget uncertainty.<h2 id="8d223ba3-734f-43de-95ba-221b9541d098">What does that mean in a war?</h2><div type="image" title="The USS Dwight D. Eisenhower aircraft carrier sits in a dry dock at a shipyard with a grayish blue sky in the background." height="2192" width="3300" msid="115383240" hostid="261" sizebytes="617600"></div>The US Navy has not been in a naval war since World War II, when its shipbuilders rapidly expanded the <a target="_blank" href="https://www.history.navy.mil/research/histories/ship-histories/us-ship-force-levels.html#1938">fleet</a> to 6,768 ships, eight times what the Navy had at the time of the Pearl Harbor attack, by the war's end, overcoming the losses of high-end naval combat. Many naval experts say the US couldn't do anything like that today."When inevitable combat damage occurs, we may not have the capacity to get ships back into the fight," Bryan McGrath, a retired naval officer and the managing director of The FerryBridge Group LLC, told BI.The GAO reported in 2021 that <a target="_blank" href="https://www.businessinsider.com/us-navy-not-ready-to-do-battle-damage-repairs-report-2021-6">battle-damage repair</a> capabilities would be critical in a fight against a peer or near-peer adversary, especially if the US cannot build new ships or replace ones lost in battle, but that is lacking. The agency reported that "battle damage repairs may further exacerbate" the "ongoing shipyard challenges to keep up with regular maintenance demand," only making things worse.<div type="image" title="A black and white satellite image showing an overview of Jiangnan Shipyard and Chinese shipbuilding." height="5894" width="7342" msid="115383241" hostid="261" sizebytes="3613556"></div>China has pursued a <a target="_blank" class="" href="https://www.businessinsider.com/us-senators-express-concern-over-low-attack-submarine-procurement-plan-2024-3">substantial naval buildup and the capacity to replace lost vessels or repair damaged ones by making shipbuilding a national priority</a>. Unclassified US Navy data suggests China has 230 times the US capacity. Much of its strength there comes from its commercial shipbuilding, which shares yards and resources with its military.Shipyards like Dalian in northeastern China, Huangpu Wenchong near Hong Kong, and the Jiangnan and Hudong-Zhonghua yards near Shanghai are all operated by subsidiaries of the state-owned China State Shipbuilding Corporation. Together with other yards, they are delivering on Chinese national defense ambitions while also dominating commercial shipbuilding."I don't even think they're really playing the same game, to be honest with you," Matthew Funaiole, a senior fellow with the China Power Project at the Center for Strategic and International Studies, told BI. While the US has struggled in recent decades, losing its edge in the commercial shipbuilding industry to foreign competitors that can build cheaper, <a target="_blank" class="" href="https://www.businessinsider.com/china-shipbuilding-military-plans-not-without-struggles-2024-9">China's expansion has made it the global shipbuilding leader</a>.<div type="image" title="Two Chinese aircraft carriers, a formation of fighter jets, and rows of warships sail forward in a blue ocean." height="3280" width="4920" msid="115383247" hostid="261" sizebytes="628980"></div>An important debate centers on quality versus quantity. China has the numbers, but the US still maintains more advanced, combat-proven warships. It is an "indisputable fact that US warships are the envy of the world, that no other nation on Earth comes close to our ability to field incredibly powerful, networked, and survivable warships," said McGrath, who commanded the destroyer USS Bulkeley.But that edge is not guaranteed. In 2020, the US Office of Naval Intelligence said China's ships were increasingly comparable to US ships. Technological advances will likely strain China's shipyards as they have US yards. And with a much younger fleet, China's maintenance and repair capacity hasn't really been put to the test yet, but that younger fleet also means it isn't grappling with some of the challenges the US is facing.<h2 id="44a879d6-1ea9-4cce-b50b-6b9e450028ee">How does the US fix this?</h2><div type="image" title="From above, workers conduct maintenance on the USS Ronald Reagan aircraft carrier." height="1500" width="1500" msid="115383245" hostid="261" sizebytes="198344"></div>The US Navy's shipbuilding woes aren't new, and there simply isn't a quick fix.Earlier this year, Adm. Lisa Franchetti, the chief of naval operations, said that the force needed to be ready for the possibility of a war with China by 2027, which is when the US has assessed <a target="_blank" class="" href="https://www.businessinsider.com/red-flags-tell-us-when-chinas-ready-to-invade-taiwan-2024-4">Beijing has ordered its military to be ready to seize Taiwan</a>. That date does not mean conflict is inevitable; it's a benchmark.While it's impossible for the Navy to catch up to China's shipbuilding might by then, Franchetti has suggested the focus should be on readying current platforms and fixing maintenance issues. Autonomous systems are also a priority for the Department of Defense and could shape how the US fights China. Beijing, too, is working on similar systems.<div type="image" title="Three US Navy warships are seen sailing in blue waters against a blue sky." height="2336" width="3271" msid="115383232" hostid="261" sizebytes="383292"></div>The US Navy fights as part of a joint force, one that has been investing in anti-ship capabilities, intermediate-range fires, and other measures to blunt China's edge.But in the long term, experts and analysts have said the US needs to make significant investments in rejuvenating its military shipbuilding capabilities and capacity, ramp up production, and streamline its design process. A clearer strategy for industry and establishing stable supply chains, as well as hiring and keeping talented workers, is critical, too. Larger investments and drastic changes may be needed to build and maintain a force beyond 300 ships.<div type="image" title="The top of the USS Enterprise aircraft carrier sits at a shipyard during decommissioning against a grayish blue sky." height="3456" width="5184" msid="115383234" hostid="261" sizebytes="444092"></div>The US also sees opportunities with allies in the Pacific. US Navy leadership has <a target="_blank" class="" href="https://www.businessinsider.com/us-navy-secretary-floored-by-ally-south-koreas-shipbuilding-2024-4">praised Japan and South Korea for their strong shipbuilding industries</a> and has considered partnering with them to revive dormant US shipyards and reduce China's advantage.Despite shipyard struggles, the US remains the top naval power for the time being."Even if the process is not pretty at times, the Navy builds the most powerful and capable warships on the planet in the US with American workers," Oakley said. "The people of the Navy and the industrial base are hardworking and focused on the evolving threats we face as a nation. In addition, the contractor workforce has some of the most highly skilled welders, electricians, and pipe fitters in the world."

Weak shipbuilding could be the US Navy's Achilles' heel in a war with China

<ul class="summary-list"><li>Russia this week launched large-scale naval and air drills with China.</li><li>Military cooperation between the two powers is growing.</li></ul>China and Russia have long railed against what they claim is the malign influence of US power. Now, they're sending a signal to the West that they have the combined military strength to challenge <keyword id="22115694" type="General" weightage="20" keywordseo="US-dominance" source="keywords">US dominance</keyword>. On Tuesday, the Russian military launched large-scale naval and air drills in the <keyword id="21182587" type="General" weightage="20" keywordseo="Sea-of-Japan" source="keywords">Sea of Japan</keyword> alongside China. Taking place in the Pacific and Arctic Oceans, the Mediterranean, Caspian, and Baltic Seas, the "Ocean-24" exercise is massive in scale. According to the Russian Defense Ministry, it involves more than 400 warships, submarines, and support vessels, more than 120 planes and helicopters, and more than 90,000 troops. "This exercise aims to deepen the <keyword id="20275236" type="General" weightage="20" keywordseo="strategic-cooperation" source="keywords">strategic cooperation</keyword> level between the Chinese and Russian militaries and enhance their ability to jointly deal with security threats," China's Defense Ministry said Monday, reported <a target="_blank" class="" href="https://www.themoscowtimes.com/2024/09/09/china-to-hold-military-drills-with-russia-this-month-a86302">the AFP newswire.</a> It's the second time in only three months that the powers have held joint <keyword id="20252562" type="General" weightage="20" keywordseo="military-exercises" source="keywords">military exercises</keyword>, with drills held near the southern Chinese port of Guangdong in July. It's a sign of the growing military alignment of the powers, with the <a target="_blank" class="" href="https://x.com/ChinaPowerCSIS/status/1821607307702108546">China Power Project finding</a> that of the 102 joint exercises held by the militaries since 2003, more than half took place in the last seven years. Graeme Thompson, an analyst with the Eurasia Group, told Business Insider that Russia and China were sending a message. "Russia's naval exercises are intended to signal that Moscow is still a global power that can operate in a range of blue-water theaters around the world," he said. "China's participation is part of a long-running trend of deeper Sino-Russian strategic cooperation and military integration." <h2>An <keyword id="23230129" type="General" weightage="20" keywordseo="anti-US" source="keywords">anti-US</keyword> axis</h2> <div type="image" title="Putin and Xi walking past a row of Chinese soldiers in full dress uniforms holding rifles and standing to attention" height="632" width="1024" msid="113295564" hostid="261"></div>On the eve of Russia's invasion of Ukraine, China's leader Xi Jinping and Russia's President Vladimir Putin declared a "no limits" partnership as part of their shared mission to challenge US global dominance. In the three years since, China has provided Russia with crucial diplomatic and economic support as it faced isolation over the Ukraine invasion, and, according to the US, is providing the Kremlin with increasing support for its weapons industry. In defiance of the West, both nations are flexing their power and showcasing their capacity to project military strength. The Pacific, where the US and its allies, including <a target="_blank" href="https://www.businessinsider.com/us-aircraft-carrier-south-korea-north-korea-russia-putin-kim-2024-6">South Korea and Japan, have a major</a> naval presence, is a potential flash point. The joint exercises are taking place in the Sea of Japan and Sea of Japan and the Sea of Okhotsk. China and Russia both have territorial disputes with Japan, while China is menacing Taiwan with invasion, a move that could trigger conflict with the US. "There's clearly an intention on the part of Beijing and Moscow to show that they can jointly project power in the Indo-Pacific," Thompson said. China's continuing to strengthen its partnership with Russia despite increasingly stark criticism<a target="_blank" class="" href="https://www.businessinsider.com/nato-accused-china-supplying-russia-arms-components-ukraine-war-2024-7"> from the West.</a> The July military exercises came after NATO accused China of being a "decisive enabler" of Russia's war in Ukraine. <h2>Great power competition intensifies</h2> <div type="image" title="A large explosion behind two US military armoured vehicles during a military show in Alaska" height="683" width="1024" msid="113295563" hostid="261"></div>Some experts are warning that joint Russian and Chinese military strength poses a serious challenge to the West. It's a potential threat on a scale the US hasn't faced in decades, with its military focused on fighting militant groups in the face of chaos in the Middle East. "A full-scale China-Russia alliance would present the United States with a threat unlike any it has confronted since the end of the Cold War," analyst Chels Michta wrote in an <a target="_blank" href="https://cepa.org/author/chels-michta/">article for the Center for European Policy Analysis last November.</a> The Congressional Commission on the Strategic Posture of the United<a target="_blank" href="https://www.ida.org/-/media/feature/publications/A/Am/Americas%20Strategic%20Posture/Strategic-Posture-Commission-Report.pdf"> States last October </a>urged the Pentagon to urgently revise its strategy so it could potentially fight both powers at the same time. Some analysts, though, are pointing to tensions between Russia and China that could weaken the alliance. Russia has become a junior partner to Xi's China, and it is increasingly reliant on it to keep its war machine and economy running. And China is likely using the war in Ukraine for its own purposes, to weaken and distract the West as it plans a possible attack on Taiwan, analysts at the <a target="_blank" class="" href="https://www.rusi.org/explore-our-research/publications/commentary/russia-and-china-true-nature-their-cooperation">Royal United Services Institute in the UK wrote in July.</a> But for now, the alliance is growing closer, and Thompson said that the US would be watching the latest military exercises between Russia and China closely. "This is yet another signal that the geopolitical environment continues to deteriorate amid ongoing great power competition," he said. Correction: September 12, 2024 — An earlier version of this story misspelled the surname of an analyst with the Eurasia Group. It's Thompson, not Thomson.

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