The author is co-founder and co-chairman of Oaktree Capital

Powerful investment themes sometimes emerge in the connections between seemingly unrelated events. The outbreak of the war in Ukraine has revealed such a theme that I believe investors should be aware of.

At a recent meeting of the Brookfield Asset Management Committee I attended, discussions about Europe’s reliance on Russian energy commodities raised links to another dimension of international affairs: offshoring. At first glance, the two problems appear to have little in common. But, as I wrote in a recent memo, I think it’s beneficial to juxtapose them.

The desire to punish Moscow for unconscionable behavior is complicated by Europe’s heavy reliance on Russia for its energy needs: it supplies about one-third of Europe’s oil, 45 percent of imported gas and nearly half of its coal.

Therefore, the sanctions against Russia include exceptions for the sale of energy commodities. In fact, we are determined to influence Russia through sanctions – just not the most effective sanctions possible, because they require significant sacrifices from Europe.

Europe appears to have allowed its reliance on energy imports to increase significantly (especially from Russia) as it wants to be ecologically responsible at home. Security doesn’t seem to get much thought.

But choosing to rely on hostile neighbors for necessities is like building a bank vault and contracting thugs to staff it with guards. The adverse effects of Europe’s reliance on Russian oil and gas have only recently entered the consciousness of many. But the negative effects of another topic I focus on – offshoring – have been in people’s minds for a long time.

In recent decades, many industries have moved a significant portion of their production overseas, reducing costs by using cheaper labor. This process promotes economic growth in emerging countries where jobs are done, increases savings and competitiveness for manufacturers and importers, and provides consumers with lower-priced goods.

But offshoring has also led to the disappearance of millions of U.S. jobs and the hollowing out of our manufacturing regions and middle class.

Furthermore, supply chain disruptions caused by the Covid-19 pandemic have revealed the vulnerabilities created by offshoring. As the economy recovers, supply cannot keep up with demand growth.

Semiconductors are a prominent example of this trend. By 2020, the United States and Europe will account for only 20% of global semiconductor production, down from about 80% in 1990. The world relies on TSMC and South Korea’s Samsung for advanced chips. The persistent shortage of such chips underscores the dangers of the situation.

So what’s the link between Europe’s energy crisis and chip shortages? Although they differ in many ways, both are characterized by an insufficient supply of essential goods required by countries or companies that allow themselves to depend on others.

Europe’s oil and gas imports from Russia make it vulnerable to hostile, unprincipled states (and worse in this case, individuals). Offshoring likewise makes countries and companies dependent on positive relationships with foreign countries and the efficiency of our transportation systems.

Awareness of these negative effects of globalization is shifting the behavior of companies and countries towards local sourcing.

If the pendulum continues to move in the direction I foresee for a while, it will have implications for investors. Globalization has been a boon for global gross domestic product, the economy it has boosted, and companies that benefit from lower costs by sourcing overseas.

Swing will be less favorable in these respects. However, it may improve importer safety, increase the competitiveness of onshore producers and the number of domestic manufacturing jobs, and create investment opportunities in the transition.

How long will the pendulum shift from global to local? The answer depends on how the current situation is resolved and which force wins: the need for reliability and safety or the desire for cheap procurement. After decades of globalization and cost minimization, I think we’re on the verge of finding investment opportunities in the transition to reliable supply.