Economic inter-reliance was supposed to make the world safer. If we depend on one another, then nobody will upset the applecart.

But what if this mutual dependency just creates weaknesses, instead? Weaknesses that people like Russian President Putin love to exploit…

What if it just encourages complacency? Complacency that ties our supply chains dangerously tight around our ankles…

If you think back through history, this seems to be one of those long-term cycles where each generation or two forgets what their forbears learned the hard way.

First, the world goes through a period of globalisation and trade, with nations becoming reliant on one other as efficiency gains from trade make each country more prosperous overall.

Everyone presumes this is the “end of history”, because a war would be so destructive for everyone concerned, now that we’re so reliant on one another, and nobody can imagine a path other than capitalism and freedom.

But then someone with aims other than international harmony and prosperity sees an opportunity in all of this complacency and weakness. A well-timed invasion, a boycott, sanctions, a proxy war. Or even just subsidies, currency wars or protectionism can trigger the sort of economic chaos which escalates to a bigger conflict in the end.

Sometimes, international economic inter-reliance is so strong that even threatening escalation is enough to get your own way, as it was in Crimea for President Putin. But that is just a stepping stone to a bigger crisis in the end. As we just discovered.

But first, what more can we learn from history’s rhymes? Well, World Wars I and II are obvious examples of all this.

Thanks to some scandalous foreign misadventures inspired by colonial powers, Japan’s oil was cut off by the US, as explained to my German mother when she asked my Japanese parents in-law why they attacked Pearl Harbour. (That’s how my family does Christmas Eve.)

Many of Japan and Germany’s conquests were driven by resources such as oil and rubber. But the World Wars were preceded by a boom in globalisation and a prosperous period for trade. It seemed impossible that there would be a war again.

Similarly, the Napoleonic Wars followed the famous trading booms delivered by the East India Companies.

During those wars, it was French wine that got “sanctioned”, while still sneaking in…

Well, it seems the time has come for us to rediscover what happens when the world is over-dependent on international harmony but someone decides to start a bust-up anyway.

We’ve had a good run since the end of the Soviet Union and the emergence of China back on to the world’s trading stage. Particularly at the beginning. Take a look at the UK stock market and you might notice that the only time the FTSE 100 really boomed, inflation adjusted, was the 90s.

But, in 2020, the wheels fell of the whole story completely. First with Covid lockdowns’ toilet-paper shortages and then with Russian energy. I predict Ukrainian food and Belarussian fertiliser will be next.

Sanctions have caused all sorts of economic chaos, just as the pandemic lockdowns were receding. And the chaos from China’s continuing lockdowns is causing some to question whether it’s not about the pandemic but about disrupting the Western economy.

I mean, I think I’ve made it clear that I believe lockdowns don’t work – who’d be dumb enough to impose one now without ulterior motives?

But let’s focus on Russia – that’s more politically correct.

Unfortunately, we picked a fight with a part of the world upon which we’re reliant for the most important resource of all – energy.

Russia is one of the world’s key energy exporters, depending on how you do the calculations. And it’s crucial to remember that certain nations are more reliant than others on Russian energy.

Strangely enough, the EU has been pushing hard to punish Russia. There’s nothing like sanctioning the import of your own economy’s most important resource and then complaining about the consequences.

Then again, it’s the EU’s troublemakers who are disproportionately reliant on Russian energy. Hungary, for example, imports 110% of its energy needs from Russia (and sells much of that on).

But, wherever you are in the world, and whatever the causes, the consequences of disruption really are flooding in now.

Inflation is heading to double digits in many countries. Producer price inflation is at truly terrifying levels. Energy companies are going bust. And there’s even talk of rationing energy in the UK.

In fact, we’re approaching the second- and third-order effects of the high energy prices already. Bloomberg has reported that “High Gas Prices Force UK Fertilizer Plant to Shut for Good,” which resulted in the Telegraph’s “Steak shortages loom as fertiliser prices rocket.”

They might be able to ignore higher prices, but even the rich struggle with steak shortages.

No wonder the Americans are so upset with President Biden these days. If they’d known sanctioning Russian energy would lead to more expensive steaks, or none at all, they’d have let Putin off the hook from the get-go.

Like with President Nicolás Maduro in Venezuela, all of a sudden. The US is so desperate for oil that it’s relieving sanctions on the pariah state.

Diesel was another big story, but we’ve covered that before. And I’m not going to add the sob story of my fuel bill to the social media frenzy.

It’s not just the sanctions with which we’ve shot ourselves in the food supply. It’s also government policies in all sorts of other areas.

Bloomberg has a good example:

Drivers in the UK are facing record petrol prices, yet the country is exporting millions of liters of the fuel each month to the US, where motorists pay little more than half as much to fill their tanks…

So why will something like 3 billion liters of petrol, and the components to make it, be shipped from the UK to the US this year? Almost entirely because of taxes…

Once you take off the taxes and the costs associated with delivery to gas stations, the relative economics of selling petrol the UK and the US start to look very different — different enough to make it attractive to ship the fuel across the Atlantic to a market that appears to offer far lower prices.

In Australia, one of the world’s largest exporters of coal and gas, there is also talk of coal and gas shortages…

The CEO of Chevron told Bloomberg TV that there’s not enough gasoline and diesel due to a lack of domestic refineries – they’re in Russia too. Why a lack of refineries?

You’re looking at committing capital ten years out, that will need decades to offer a return for shareholders, in a policy environment where governments around the world are saying, ‘We don’t want these products to be used in the future’.

Of course, all political madness has two sides to it. In this case, the opposition is led by a group of US states that are banning their own government treasuries from doing business with banks and funds that boycott fossil fuel companies.

You see, we’ve entered the stage of politics where destruction and self-harm are popular. Whether it’s with Russia, within the EU or US, or just domestically, politicians are out to sabotage their own nation to make a point.

But don’t worry, if you elect the other guy, he’ll do the opposite.

Nick Hubble
Editor, Fortune & Freedom