Sovereignty Is a Supply Chain

In 1977, a cooperative of banks headquartered near Brussels carried roughly 3,000 messages a year for about 500 firms in 22 countries. Its founders had chosen Belgium partly to stay out of the rivalry between New York and London. They were building plumbing: a secure way to tell another bank to move money. By 2016, according to the political scientists Henry Farrell and Abraham Newman, that plumbing, called SWIFT, served some 11,000 financial institutions in more than 200 countries and carried more than 6.5 billion messages a year. Nobody had planned for it to become the nervous system of world finance. It just did, because everyone found it convenient to use what everyone else used.

In 2012, under pressure from Washington and with its own worries about Iran's nuclear program, the European Union banned the provision of financial messaging services to targeted Iranian institutions, and SWIFT disconnected Iranian banks, including the central bank. A former SWIFT chief executive called it "an extraordinary and unprecedented step." Six years later, when the United States walked away from the nuclear deal and threatened to reimpose the restrictions, Europe objected, and SWIFT delisted key Iranian institutions anyway. France's finance minister at the time, Bruno Le Maire, protested that the United States was not "the economic policeman of the planet." He was right as a matter of principle and irrelevant as a matter of fact.

That episode taught me more about sovereignty than any speech on the subject. A sovereign country is not one that declares itself independent. It is one that can still choose. Choose what it produces, what it buys, from whom, and on what terms, and above all, choose how badly it would be hurt if the person holding the switch decided to flip it. Sovereignty is not a flag. It is a supply chain, and it is only as strong as its thinnest link.

The network has a center, and the center has a hand

Farrell and Newman's article, "Weaponized Interdependence," published in International Security in 2019, overturned a comfortable idea. The optimists of globalization had promised that trade and finance would spread power out across a flat, decentralized web. The opposite happened. Networks grow lopsided, with a few hubs vastly more connected than everyone else, and the states that have legal jurisdiction over those hubs, plus the institutions to act, can turn them into weapons. The authors identified two ways. The "panopticon effect": the hub sees everything that passes through it. The "chokepoint effect": the hub can deny passage to an adversary.

The detail I keep coming back to is in their account of SWIFT. Washington probably could not have cut off Iran alone, given that SWIFT sits in Europe; Europe, divided and slow, would probably not have acted without Washington's pressure. Power over a network belongs to whoever has jurisdiction over its nodes and the will to use it. Geography still matters. It has simply moved from the map of territories to the map of hubs.

This is why I read the news of the past few years as a single story told in different dialects. When Ukrainian drones flying above a certain speed briefly lost their Starlink link, the lesson did not depend on who flipped the switch; it depended on who owned it. When Congress wrote a Russia sanctions law and handed the off switch to the White House, diesel prices decided how hard that switch could be pressed. When Beijing proposed to register its AI know-how at the border, it was building a chokepoint in a field where it had none. Satellites, sanctions, algorithms: different materials, same physics.

The thinnest link is a refinery

If you want to see where the chokepoints of the coming decades are, do not look at the mines first. Look at the refineries. The International Energy Agency's Global Critical Minerals Outlook 2025 reports that between 2020 and 2024, the average market share of the top three refining countries for key energy minerals rose from around 82 percent to 86 percent, as some 90 percent of supply growth came from a single top supplier: Indonesia for nickel, China for cobalt, graphite and rare earths. Diversification was the watchword. The world moved in the opposite direction.

Widen the lens to twenty energy-related strategic minerals and the picture gets starker: China is the dominant refiner for 19 of them, with an average market share of around 70 percent. The IEA is unusually direct about what follows. In December 2024 China restricted exports of gallium, germanium and antimony to the United States, then announced restrictions on tungsten, tellurium, bismuth, indium and molybdenum, and on seven heavy rare earth elements. More than half of this broader group of minerals is now subject to some form of export control. And the agency ran the test every finance minister should run: remove the largest producer from the market and see what is left. For battery metals and rare earths, supply outside the leading producer would meet on average only half of the remaining demand in 2035.

Mario Draghi's report to the European Commission, published on September 9, 2024, made the same diagnosis from the buyer's side. China accounts for between 35 and 70 percent of the processing of nickel, copper, lithium and cobalt, and its export restrictions grew ninefold between 2009 and 2020. The EU relies on foreign countries for more than 80 percent of its digital products, services, infrastructure and intellectual property. It has no foundry producing below 22 nanometers and relies on Asia for 75 to 90 percent of wafer fabrication capacity, as, Draghi notes in passing, does the United States. Around 40 percent of Europe's imports come from a small number of suppliers and are hard to substitute, and about half of those come from countries with which it is not strategically aligned.

The most honest sentence in the report is a confession. "In a world of stable geopolitics," Draghi wrote, "we had no reason to be concerned about rising dependencies on countries we expected to remain our friends." Then: "our dependencies have turned out to be vulnerabilities." Europe did not lose its sovereignty to an invader. It outsourced it, one sensible purchasing decision at a time, to whoever was cheapest that quarter.

Insurance, not autarky

Here a liberal has to argue with himself, and I do. The case for interdependence is not naïve. Comparative advantage is real. Buying from the most efficient supplier made Europeans and Americans richer, and the alternative, a country that insists on making everything itself, has a name in economic history, and it is not prosperity. Autarky is the most expensive form of independence ever invented. When politicians say "sovereignty," they often mean subsidies for a favored firm, protection for a domestic incumbent, or a factory opened in a marginal constituency with public money. I have argued on this site that when Berlin writes a check for an industrial AI pact built on someone else's chips, it may be buying a press release rather than independence.

So the objection deserves an answer, not a slogan. My answer is that sovereignty is not the opposite of trade. It is insurance on trade. You do not insure your house because you expect it to burn; you insure it because you cannot afford the one night it does. Draghi uses exactly this language. Becoming more independent creates an "insurance cost" for Europe, he writes: no longer buying from the most efficient supplier may raise costs in the short term. But the "option value" of those investments "increases exponentially in extreme scenarios, as the cut-off of Russian gas has shown." A premium looks like waste every year until the year it does not.

Insurance also tells you how much to buy. You do not insure against every risk; you insure against the ones that would ruin you. That means sovereignty should be precise, not total. It should go where the chokepoint is real: refining rather than every mine, the narrow nodes of chips rather than every gadget, grids and interconnections rather than prestige projects. And it should be bought collectively where it is cheaper that way. Draghi's own point is that critical raw materials are a textbook case where member states, and allies outside the EU, are better off insuring together than each insuring alone.

What the state should do, and stop doing

There is a temptation, when the word sovereignty is spoken, to hand the state a blank check. I would rather hand it a short list. The IEA notes that capital costs for mineral projects in diversified regions are typically around 50 percent higher than for incumbent producers, and that low prices and volatility are scaring off new entrants. Lithium prices surged eightfold in 2021 and 2022, then fell by more than 80 percent from 2023. No private investor builds a refinery on that roller coaster without some floor under it. The tools the agency describes are market tools, not command economy: contracts for difference, cap-and-floor schemes, volume guarantees, strategic stockpiles like the oil reserves that already exist. Those are the instruments of a state that underwrites risk without pretending to run the business.

And then there is the part of sovereignty the state controls entirely and keeps failing at: speed. When France finally signed a lithium concession into law, the decree had taken eighteen months and was, by its own terms, the easiest of the permits the mine would need. A country that takes a decade to authorize a mine, a line or a reactor is not protecting its sovereignty. It is pricing it out of reach. Nobody in Beijing has to sanction a European project that European procedure will smother on its own.

Money is a supply chain too. A state that borrows heavily depends on the people who lend to it, at a rate they set, on a day they choose. When interest on America's debt outspends its defense, that is a sovereignty problem before it is an accounting one, because every dollar of interest is a dollar the country no longer gets to choose how to spend.

Holding nodes, not just avoiding them

The last lesson of the SWIFT story is the one Europeans forget. The hub that cut off Iran was in Belgium. Europe was not only a victim of weaponized interdependence; it was the landlord of one of the most powerful chokepoints on earth, and it never quite learned to act like one. Sovereignty is not only about reducing the nodes others hold over you. It is about holding some that others need, so that any coercion becomes a negotiation. Draghi's report observes, correctly, that dependencies are often two-way: China relies on Europe to absorb its industrial overcapacity. Leverage you never use is not restraint. It is absent-mindedness.

None of this requires a sinister reading of history. I do not think Europe's decline is a plot; I think it is a habit, the habit of assuming that the switch will always be in friendly hands. The friendly hands were real. They are also not guaranteed, and a nation's freedom cannot rest on another nation's mood.

The same structure, I believe, runs through the other two pillars of this site. Inside a country, liberty dies when a few gatekeepers charge everyone else for the right to try, which is the argument of The Toll Booth Society. And every supply chain worth defending ends in a power line and a measurement you can trust, which is why I wrote Progress Is Measured in Kilowatt-Hours and Error Bars.

Sovereignty, then, is not measured in speeches. It is measured in tons of refined metal, in wafers, in gigawatts of firm power, in satellites one controls, in permits granted in months rather than years, in the interest rate a country pays and in the number of switches it holds over others. A nation that can count those things honestly and act on them is free. A nation that cannot will discover its dependencies the way Iran's bankers did in 2012: on the morning a message does not go through.