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The price of sovereignty: Are we prepared to pay more for less vulnerability?

15/04/2026
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Ever since the eighteenth century, there has been a prevailing belief that mutually beneficial commercial relationships between nations provide a powerful disincentive to international conflict.

Montesquieu perhaps put it best in his Spirit of the Laws (XX.1-2):

“Commerce cures destructive prejudices, and it is an almost general rule that everywhere there are gentle mores, there is commerce and that everywhere there is commerce there are gentle mores … The natural effect of commerce leads to peace. Two nations that trade with each other become reciprocally dependent; if one has an interest in buying, the other has an interest in selling, and all unions are founded on mutual needs.”

This conviction of the moral and political importance of interdependence was taken up in the nineteenth century by Giuseppe Mazzini, in his still insightful articulation of the possibility of a cosmopolitan nationalism:

“No nation lives exclusively on its own produce today. You live by exchanges, by imports and exports. An impoverished foreign nation, where the number of consumers diminishes, is one market let for you. A foreign business ruined by the consequences of a bad administration produces mischief and crises in your own business … The only lasting hope for you lies [then] in the general amelioration, improvement, and brotherhood of all the peoples of Europe …”

After the devastation of the First and Second World Wars, the principle that commerce is conducive to peace was the guiding philosophy behind the establishment of some of our vital international institutions. And even if its implementation has been inconsistent and most of the economic benefits have tended to flow upward toward wealthier nations, the belief was that such disparities represent a fault in design not in the animating principle itself. We should remember, for instance, the role interdependence played in thawing Cold War antipathies. As West German Chancellor Helmut Schmidt told US President Jimmy Carter in 1980 regarding Germany’s decision to develop a joint energy policy with the Soviet Union, “those engaged in trade with each other do not shoot at one another”.

But the practices of interdependence and “oil diplomacy” that emerged from energy crises of 1973 and 1979 paradoxically reinforced the reality of a further source of instability — one that has become especially pronounced in 2022 and again in 2026, after Russia’s invasion of Ukraine and the current conflict in the Middle East. And that is what Michael LaBelle calls the use of energy as a “weapon of war”, in which assertions of state sovereignty intentionally disrupt relationships of energy interdependence in order to inflict economic pain.

This leaves nations like Australia — which is both a major energy exporter (of LNG and the critical materials for solar panels, among other things) and extremely reliant on fuel imports for our own energy needs — vulnerable to disruptions in the global supply chain as the result of international conflict. When this sense of vulnerability translates into higher fuel costs or uncertain supply, and when it accentuates an already palpable sense of rising unaffordability, it can be a catalyst for democratic instability and popular resentment.

Even as Prime Minister Anthony Albanese acknowledges the reality of Australia’s dependence on other countries for our fuel needs by making diplomatic trips to Singapore, Malaysia and Brunei, he has also stressed the need to reduce that dependence: “The Middle East conflict has reminded us of … the need to make more things [in Australia], of the need to not be at the end of supply chains and to be less vulnerable to global events.”

For many, becoming “less vulnerable” means pursuing greater “energy sovereignty”, or even “energy nationalism”. But what would that pursuit entail? Some insist it means a turn to far greater reliance on renewables; for others, the Environmental Protection and Biodiversity Act (EPBC) has denied Australia access to its own oil reserves. And then there is the vexed question of the balance between Australia’s LNG exports and its domestic reserves. But on top of all this is the likelihood that greater “energy sovereignty” will likely prove more costly to voters.

The tension between these three elements — the benefits of interdependence, the dangers of vulnerability to global supply chains, and the domestic costs of greater self-reliance — presents one of the most vexing problems of our time.

Guest: Hamish McKenzie, Deputy Program Director of Grattan Institute’s Energy and Climate Change program.

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