Mission Grey Daily Brief - September 08, 2024

Summary of the Global Situation for Businesses and Investors

Algeria's presidential election, Libya's oil exports standstill, political tensions in France, and the possibility of Belarus' involvement in the Russia-Ukraine war are the key issues impacting the global situation today. In Algeria, the incumbent president is expected to win a second term despite concerns over deteriorating human rights and low voter turnout. Libya's oil exports are at a near standstill due to political tensions over the control of the nation's central bank, which manages oil revenues. Protests in France against the appointment of Michel Barnier as Prime Minister reflect political divisions in the country, as a left-wing coalition won the most seats in the lower house of parliament in the July elections. Meanwhile, Belarus' proximity to Ukraine and its relationship with Russia raise concerns about its potential involvement in the war.

Algeria's Presidential Election

Algeria held a presidential election on Saturday, with preliminary data showing a voter turnout of around 48%. The incumbent president, Abdelmadjid Tebboune, is expected to win a second five-year term despite concerns over deteriorating human rights and a history of embarrassing statements. Human rights groups and opposition figures have criticized the government for dissolving political parties, civil society organizations, and independent media outlets, as well as a spike in arbitrary arrests. The election took place against a backdrop of economic challenges, with the government failing to contain soaring inflation and meet export growth targets. Algeria's largest opposition party, the Rally for Culture and Democracy (RCD), has been a particular target of government crackdowns, with 60 of its activists arrested in August. The country has also never had a peaceful transition of power, and the military's influence remains strong. The election results are expected today.

Libya's Oil Exports Standstill

Libya's oil exports are at a near standstill due to political tensions over the control of the nation's central bank, which manages oil revenues. Forces aligned with eastern leader Khalifa Haftar halted production at major oil fields on August 26, slashing output by half. This disruption has sent ripples through global energy markets, causing a brief rise in world oil prices above $80 per barrel. While a recent agreement between rival governments has raised hopes for a resolution, industry analysts warn that the situation remains unsettled. Libya's oil production is critical to its economy, accounting for 98% of government income and 65% of its GDP. The National Oil Corporation has declared force majeure, seeking release from its contractual obligations. The situation has also impacted OPEC members' views on China's oil demand, which may be weaker than anticipated due to a transition to electric vehicles.

Political Tensions in France

Tens of thousands of demonstrators took to the streets of Paris and other French cities to protest the appointment of Michel Barnier as Prime Minister by President Emmanuel Macron. The protests reflect political divisions in the country, as a left-wing coalition won the most seats in the lower house of parliament in the July elections. Macron's decision to appoint a veteran conservative has been denounced as a "power grab" that undermines democracy. Surveys suggest that a majority of French voters believe Macron has "disregarded" and "stolen" the election results. The protests come just days before Denmark's vote in the European Union election, and in the context of an increasingly polarized political climate across Europe, as seen in the recent assassination attempt on Slovakia's Prime Minister.

Belarus and the Russia-Ukraine War

As the Russia-Ukraine war continues, attention turns to the situation along Ukraine's border with Belarus. Belarus has played a key supporting role in the war, with Russian troops and equipment positioned in Belarus before the invasion. Tensions have escalated in recent months, with Belarus positioning thousands of troops near the Ukrainian border. While backchannel negotiations led to their repositioning, there remains a concern that Belarus may come under pressure from Russia to become directly involved in the war. Ukraine has been fortifying its border with Belarus and does not seek a confrontation but cannot rule out the possibility. A potential Belarusian military intervention could involve a joint attack on Kyiv, forcing Ukraine to redeploy troops from frontline positions.

Recommendations for Businesses and Investors

Algeria: Businesses and investors should closely monitor the situation in Algeria, particularly regarding the protection of human rights and the potential for economic reforms. While political stability may be appealing, the country's history of arbitrary arrests and lack of respect for civil society organizations could pose risks.
Libya: The uncertainty surrounding Libya's oil exports underlines the risks of investing in countries with political instability and a heavy reliance on a single industry. Businesses and investors should be cautious about entering or expanding operations in Libya until the situation stabilizes.
France: Political tensions in France highlight the risks of investing in a country with a polarized political climate. Businesses and investors should monitor the situation and be prepared for potential policy changes if the left-wing coalition gains more influence.
Belarus: The potential involvement of Belarus in the Russia-Ukraine war underscores the dangers of doing business in or with countries that support or enable authoritarian regimes. Businesses and investors should avoid any involvement with Belarus to prevent reputational and ethical risks, as well as potential economic disruptions.

Themes around the World:

Legal and Political Pressure from China

China is intensifying cross-border political repression targeting Taiwanese lawmakers and public figures, aiming to undermine Taiwan's democratic institutions and intimidate its political actors. This campaign threatens Taiwan's internal stability and challenges the broader international rules-based order, complicating diplomatic relations and domestic governance.

Domestic Political Repression Amid Social Liberalization

While visible social restrictions, such as veil enforcement, are easing to placate public sentiment, Iran’s regime simultaneously intensifies political crackdowns on dissent, including arrests of academics and activists. This dual approach reflects regime efforts to maintain control amid economic hardship and social unrest, creating a complex environment for civil society and foreign engagement.

Economic Slowdown and Recovery Risks

South Africa faces a significant economic slowdown risk, with 78% of businesses reporting losses due to sluggish growth. This persistent challenge affects liquidity, cash flow, and profitability, exacerbated by global trade tensions and geopolitical instability. Businesses must adopt proactive risk management and scenario planning to build resilience amid volatile economic conditions.

Production Re-positioning and Supply Chain Shifts

Amid global supply chain uncertainties and G7 near-shoring policies, Vietnam benefits from regional production re-positioning, attracting investments in electronics, medical equipment, and renewable energy. However, challenges remain in meeting high-tech industry standards and enhancing domestic value addition to fully capitalize on shifting global manufacturing dynamics.

Stock Market Volatility and Valuation Concerns

Australian equity markets have experienced sharp declines, driven by fears of overvalued technology stocks, global interest rate uncertainty, and slowing commodity demand. This volatility affects investor confidence, capital flows, and sectoral performance, particularly in financials, mining, and technology, with implications for investment strategies and economic growth.

Geopolitical Risks and Gold Prices

Global geopolitical tensions have driven a surge in gold prices, with Indonesia's gold sales rising 20% year-on-year. Gold's role as a safe-haven asset attracts increased domestic investment, impacting inflation dynamics and consumer behavior. This trend reflects broader investor risk aversion and affects commodity markets and monetary policy considerations in Indonesia.

US-Iran Diplomatic Stalemate and Negotiation Deadlock

Prolonged mistrust and rigid positions have stalled US-Iran diplomatic efforts, perpetuating sanctions and regional tensions. The absence of a breakthrough limits Iran’s access to global financial systems and markets, constraining economic growth and complicating international business operations and partnerships.

Record Bank Profits Amid Consumer Strain

Israeli banks reported record profits, with Q3 2025 earnings at NIS 8.7 billion, fueled by high interest rates and wide financial spreads. However, these gains come at consumers' expense, with low deposit returns and high loan costs, prompting regulatory scrutiny and potential reforms to curb bank profiteering and protect economic stability.

China’s Covert Investment in U.S. Industries

China has funneled over $200 billion in hidden loans to U.S. companies via offshore shell companies, targeting strategic sectors such as robotics, semiconductors, and biotech. This covert financing raises national security concerns and complicates U.S.-China economic relations, impacting foreign investment scrutiny and cross-border trade policies.

Declining Russian Oil Demand from Key Buyers

India and China, Russia’s largest oil customers, have reduced purchases ahead of US sanctions enforcement. This buyer pullback has widened the Urals crude discount to Brent to historic levels, increasing Russian crude inventories and pressuring export revenues, signaling a shift in global energy trade flows and complicating Russia’s market access.

Upcoming Fiscal Policy and Budgetary Pressures

The forthcoming Autumn Budget is expected to introduce significant tax increases amid weak growth and rising unemployment. Fiscal tightening during economic fragility could exacerbate downturn risks, influencing business costs, consumer spending, and overall economic stability.

Geopolitical Risks Affecting Energy Infrastructure

Ukrainian attacks on key Russian oil ports and refineries, including Novorossiysk and Saratov, have disrupted oil shipments and raised global energy market volatility. Combined with Iranian tanker seizures near the Strait of Hormuz, these events inject geopolitical premiums into oil prices, complicating supply chains and increasing risk premiums for international energy traders and investors.

Corporate Crypto Exposure and Regulatory Scrutiny

Japanese corporations holding significant digital asset positions face mounting losses amid volatile crypto markets. Regulatory bodies, including the Japan Exchange Group, are intensifying oversight on governance and risk management related to crypto holdings. This evolving regulatory landscape may reshape corporate strategies and investor confidence in Japan’s digital asset ecosystem.

Transparency and Public Access to ART Documents

The Malaysian government has made ART documents publicly accessible on the MITI website, including FAQs addressing public concerns. This transparency effort aims to build trust, counter misinformation, and facilitate informed discourse among stakeholders, enhancing governance and accountability in trade negotiations.

Currency Volatility and Forex Market Dynamics

The Indian Rupee experienced significant depreciation in 2025 but shows signs of stabilization supported by a low current account deficit and strong foreign exchange reserves. Foreign outflows have been offset by domestic investor inflows. Trade policy shifts and tariff changes globally will continue to influence forex volatility, necessitating hedging strategies for market participants.

Currency Exchange Rate Volatility

The Pakistani rupee exhibits fluctuations against major currencies, impacting import costs, export competitiveness, and inflation dynamics. Exchange rate instability complicates financial planning for businesses engaged in international trade and investment. Market participants closely monitor currency trends, while government interventions aim to stabilize the rupee, though political and economic uncertainties limit predictability.

Public Perception of US Influence

Australian public opinion shows increased concern over US interference, reflecting a nuanced view of alliance dynamics amid geopolitical tensions. This shift influences political and economic policy considerations, including defense spending and foreign investment controls, affecting Australia's strategic positioning and trade relationships in a complex international environment.

Social Policy and Human Rights Challenges

Issues such as gender violence, migration, and human rights disputes with the US influence Mexico’s social stability and international image. Government responses include national plans against sexual abuse and migration fee hikes affecting foreign workers. These factors shape labor market dynamics, regulatory environments, and corporate social responsibility considerations for investors.

Foreign-Invested Exporters' Economic Security Impact

Foreign-invested firms, though only 6% of exporters, contribute 15% of South Korea's exports, highlighting their outsized role in trade. This growing influence raises economic security concerns, prompting calls for enhanced screening and regulatory frameworks to monitor indirect foreign control and safeguard supply chains, balancing foreign investment benefits with national security imperatives.

Economic Contraction and Trade Impact

Japan's economy contracted 1.8% annualized in Q3 2025, driven by declining exports amid rising U.S. tariffs and sluggish domestic demand. The contraction signals vulnerabilities in Japan's export-oriented economy, especially in the automotive sector, and raises concerns about prolonged recession risks, affecting global supply chains and investment strategies linked to Japan.

Thailand-Cambodia Border Conflict Impact

Renewed clashes along the Thailand-Cambodia border threaten economic stability, risking a 130 billion baht loss in exports and disrupting labor supply with up to 500,000 Cambodian workers previously employed in Thailand. Tourism and border trade suffer, potentially reducing GDP by 100 billion baht. However, ongoing US-Thailand trade negotiations remain unaffected, underscoring resilience in bilateral economic ties.

Japan-China Diplomatic Tensions

Prime Minister Takaichi's remarks on Taiwan have sharply escalated diplomatic tensions with China, leading to retaliatory measures such as travel advisories and import bans. This deterioration threatens Japan's economic stability, particularly impacting tourism, trade, and bilateral relations, with potential long-term damage to regional security and economic cooperation.

Ukrainian-American Business Contributions

Ukrainian-American enterprises generate nearly $60 billion annually and support approximately 300,000 US jobs, particularly in technology sectors like AI and cloud computing. This diaspora-driven economic activity strengthens bilateral economic ties, fosters innovation, and provides indirect support to Ukraine’s economy through sustained business linkages.

Banking Sector Risks Amid Rapid Credit Growth

Fitch Ratings warns that Vietnam's banking sector faces elevated risks due to rapid credit expansion and the planned removal of credit quotas. High leverage and concentrated lending to large conglomerates could threaten financial stability. While credit growth supports economic activity, regulators must balance expansion with risk management to maintain banking sector resilience and investor confidence.

Labor and Fiscal Policy Challenges

Upcoming fiscal and labor reforms, including increased taxes like the IEPS and potential reductions in working hours, present challenges for Mexico’s economic growth and business environment. These changes require careful navigation by companies to manage costs and compliance, influencing investment decisions and operational strategies.

Shekel Strength and Economic Stability

The Israeli shekel has surged to a four-year high, appreciating 17% against the US dollar since the onset of regional conflicts. This currency strength reflects reduced risk premiums, improved credit ratings, and investor confidence amid relative geopolitical calm. A strong shekel impacts trade competitiveness, foreign investment inflows, and monetary policy decisions, influencing business operations and export dynamics.

China-Japan Diplomatic Tensions

Prime Minister Takaichi's remarks on Taiwan have escalated diplomatic tensions with China, leading to retaliatory measures such as travel advisories and import bans. This has triggered market volatility, reduced Chinese tourism, and strained bilateral trade, particularly impacting Japan's tourism, retail, and seafood export sectors, thereby increasing geopolitical risk for investors and businesses operating in Japan.

Foreign Investment Interest in Steel Industry

Foreign investors from Europe, China, and Vietnam show strong interest in Indonesia's steel sector, seeking to establish local production facilities. Despite domestic steel production capacity, utilization remains low due to competition from imports, especially from China. Strategic support and regulatory facilitation are critical to attract investment and enhance domestic steel industry competitiveness.

Rare Earths as Geopolitical Leverage

China's control over rare earth element exports remains a critical bargaining chip amid US-China trade negotiations. Recent export declines and ongoing talks highlight the strategic importance of these materials for defense, renewable energy, and high-tech manufacturing. Disruptions or restrictions could significantly impact global supply chains and cost structures for key industries.

Geopolitical Tensions and Commodity Markets

Geopolitical risks, including Middle East conflicts and U.S.-China trade tensions, are reshaping commodity markets by causing supply chain disruptions and price volatility. Energy commodities like crude oil carry a geopolitical risk premium, while industrial metals face demand fluctuations. Safe-haven assets such as gold have surged amid uncertainty, influencing global trade and investment strategies.

Impact of US Tariffs on GDP Growth

The US's reciprocal tariff policies are projected to slow Thailand's GDP growth to 1.7% in 2026, down from 2% in 2025. With 82% of Thai exports to the US subject to Section 232 tariffs, export performance faces pressure, potentially weakening global trade volumes. This external challenge, combined with domestic economic and political uncertainties, underscores the need for strategic trade diversification and fiscal resilience.

Water Crisis and Infrastructure Challenges

Iran is grappling with a severe multi-year drought compounded by mismanagement and over-extraction of groundwater. This water scarcity threatens urban centers like Tehran with potential evacuations, undermining economic productivity, agricultural output, and social stability, thereby increasing country risk for investors and businesses.

Economic Security and Investment Screening

Growing global economic security concerns necessitate refined foreign investment screening in South Korea. Current frameworks enable review of potentially harmful investments, but experts advocate expanding oversight to indirect investments and enhancing post-approval management. Strengthening institutional frameworks aims to maximize foreign investment benefits while safeguarding supply chains and national security.

Currency Volatility Risks

Turkish companies rank currency exchange rate fluctuations as their top risk, causing significant financial losses (73.3%). This volatility impacts investment decisions, cost structures, and supply chain pricing, necessitating robust risk management strategies for foreign investors and multinational firms operating in Turkey.

Thailand Economic Growth Slowdown

Thailand's Q3 2025 economic growth slowed sharply to 1.6% year-on-year, weighed down by weak private consumption amid high household debt and fragile confidence. Despite robust export growth driven by electronics and AI-related sectors, domestic uncertainty and political instability dampen overall economic momentum, prompting government loan buyback schemes and cautious monetary policy outlooks.

Rare Earth Minerals as Strategic Resources

Brazil emerges as a potential alternative supplier of rare earth elements amid China’s export restrictions. Rich deposits, particularly in Minas Gerais, attract foreign investment, but infrastructure and processing capabilities lag. Environmental concerns and political uncertainties pose risks to Brazil’s ambition to become a reliable global supplier.