An analysis argues Australia should position itself as a critical middle-power grid supporter for U.S. data centers to secure long-term energy export value.
In a world shaped by great-power competition, middle powers advance most effectively by forming coalitions of the capable—coalitions dedicated to building strength while safeguarding their relationships with the United States. Australia is leading this approach, forging managed dependencies that convert vulnerabilities into leverage, beginning with AUKUS.
Australia recognized early that middle powers punched above their weight and wielded outsized influence during the post–Cold War era precisely because they were sheltered by U.S. hegemony and the enforcement of a rules-based order. That system is now fracturing. Hedging is no longer viable, and key powers are demanding clear alignment.
Middle powers that have not yet grasped this shift overestimate their own strength, mistakenly believing they can band together to rival the great powers. Geopolitical reality dictates otherwise, and Washington remains unimpressed. In July, U.S. Under Secretary of Defense for Policy Elbridge Colby dismissed this notion. Writing on X, he noted that the Department of Defense was ‘not concerned that this is a serious possibility,’ but warned that allies might believe otherwise and ‘waste valuable time, money, and political capital on a distraction.’
All middle powers confront the same new reality; what separates them is their response. Canada, frequently compared to Australia, is pursuing a strategy that deepens its partnership with China—a choice that directly conflicts with the imperative of remaining anchored within the U.S. orbit as a valued ally. Given Canada’s profound economic and security ties with the United States, its pivot toward Beijing has prompted Washington to adopt a harder line in bilateral dealings with Ottawa. Canada’s strategy, which implies cosying up to China to hedge against the U.S., amounts to a strategic own-goal.
Unlike Canada, Australia has rendered its alignment with the United States both clear and concrete. Far from a concession of sovereignty, this stance is a strategic asset that required significant political courage to implement. The primary instrument is AUKUS: a trilateral security partnership with the United States and Britain, underpinned by binding commitments and tangible capabilities. AUKUS leaves no ambiguity regarding Australia’s position or its willingness to act.
More than a conventional defense procurement initiative, AUKUS represents the most advanced real-world iteration of a coalition of the capable. Whereas traditional coalitions prioritized inclusivity and rhetoric, coalitions of the capable demand capability and decisive action. They feature flexible membership, focused missions, rapid execution, and formidable power. AUKUS clears this benchmark by concentrating squarely on nuclear-powered submarines and a portfolio of advanced technologies.
Australia’s next priority is addressing its economic overexposure to China, a trade relationship valued at A$326 billion in 2025. Despite political intent, meaningful diversification has yet to materialize. Investment patterns, however, have shifted: Chinese foreign direct investment in Australia has fallen to among its lowest levels since 2006. This represents a quiet but consequential structural change. Consequently, Australia’s operative logic is not economic rupture but selective decoupling—reducing dependency in strategic sectors weaponized by Beijing, including technology, infrastructure, and critical minerals processing.
To better shield itself from Chinese counter-moves, Australia must render itself indispensable to the United States, ensuring that any strike against Australian territory automatically implicates core U.S. security interests. Three opportunities stand out. First are critical minerals. Australia possesses some of the world’s largest critical-mineral reserves, which will prove essential for the artificial intelligence and defense supply chains of the coming era of great-power competition. While China currently dominates processing, the U.S.-Australia Framework for Securing Supply in the Mining and Processing of Critical Minerals and Rare Earths, signed in 2025, establishes Australia as Washington’s primary trusted alternative.
Second, Australia should leverage its strategic geography. Positioned outside China’s dense strike-missile envelope while anchoring the southern Indo-Pacific, the country provides forward submarine basing at HMAS Stirling, long-range strike capabilities at Tindal, and vital intelligence infrastructure at Pine Gap. This network of joint facilities, developed over six decades, grants Washington strategic depth unavailable anywhere else in the region.
Third, Australia can host data-center infrastructure for U.S. technology firms. This initiative is already underway, demonstrated by AI company Anthropic’s ongoing negotiations with the Australian government for up to 1.4 gigawatts of capacity.
The objective is not independence from Washington, but a managed dependency within the U.S. orbit that renders Australia indispensable. This is strategic acumen that systematically converts vulnerability into leverage.
Australia’s geopolitical instinct, evident in its firm alignment choices, confers a credibility that hedging middle powers struggle to match. That credibility forms the foundation for broader ambitions: leadership of a coalition of the capable across the Indo-Pacific, and a unique bridging role between the Euro-Atlantic and Indo-Pacific theaters that no other nation is positioned to fulfill.
The middle powers that thrived under the old international order did not build the system that granted them influence; they merely benefited from it. That system is now fracturing, and the influence it once conferred is being withdrawn. The states that recognize this shift earliest and act with the clarity and conviction the moment demands will ultimately shape the architecture that replaces it.
Raquel Garbers is a senior fellow at ASPI, the Macdonald-Laurier Institute, and the Center for North American Prosperity and Security. She is a former senior official with the Canadian Department of National Defence. Michelle Khiangte serves as executive coordinator at ASPI.