Return to Homepage
Image

Mission Grey Daily Brief - October 25, 2024

Summary of the Global Situation for Businesses and Investors

The world is witnessing a troubling rise in business bankruptcies, with Slovenia and Germany projected to experience significant increases. This trend reflects broader economic challenges affecting companies globally, including geopolitical tensions and a slow recovery from the pandemic. Meanwhile, Georgia is going to the polls in a critical election that could determine whether the country veers towards a more authoritarian, Russia-aligned path. The deployment of North Korean troops to Russia has raised concerns about a potential escalation of the conflict in Ukraine. Additionally, Israel and Iran-backed groups are engaged in a deadly conflict in the Gaza Strip and Lebanon, with rising civilian casualties and a growing humanitarian crisis.

Georgia's Election: A Tussle Between Russia and the West

On Saturday, Georgians will vote in a critical election that could determine the country's future trajectory. For the past three decades, Georgia has maintained strong pro-western aspirations, with polls showing up to 80% of its residents favour joining the EU. However, the government, led by the populist Georgian Dream (GD) party, has increasingly shifted away from the west in favour of Russia, showing reluctance to condemn Moscow for its invasion of Ukraine. The parliamentary elections are seen by many as the most important since independence from the Soviet Union in 1991, with the country's democratic future hanging in the balance.

North Korea's Involvement in the Ukraine War

North Korea has sent troops to Russia, raising concerns about a potential escalation of the conflict in Ukraine. The US has seen evidence of this deployment, and Belarusian leader Alexander Lukashenko has warned Russia against sending North Korean troops to war, stating that it would lead to escalation and the deployment of NATO troops to Ukraine. South Korea has threatened to arm Ukraine in response to North Korea's support for Russia, condemning the deployment of North Korean troops. Analysts say South Korean weapons could make a significant difference for Ukraine, but South Korea remains wary of getting involved due to its long-standing ban on sending military assistance to foreign countries at war.

Israel-Iran Conflict in Gaza and Lebanon

The Israel-Iran conflict in Gaza and Lebanon has resulted in rising civilian casualties and a growing humanitarian crisis. Israel has launched a withering offensive, with almost 43,000 people killed and virtually all of Gaza's 2.3 million people displaced. Israel has been under pressure from many allies, including the United States, for the rising number of civilian casualties and accusations of hindering aid supplies. Iran-backed Hezbollah has escalated its attacks on Israel, using "precision missiles" and new types of drones. The US has designated Hezbollah a terrorist organization, and Hezbollah's political party has seats in the Lebanese parliament.

Turkey's Airstrikes in Syria and Iraq

Turkish forces have launched airstrikes on suspected Kurdish militant targets in Syria and Iraq after an attack on a state aerospace company in Ankara killed five people. The strikes targeted sites linked to the Kurdistan Workers' Party (PKK), which is recognised as a terrorist group by the US, EU, and others. The Ankara attack came at a fragile moment in the decades-long conflict between Turkey and the PKK, coinciding with renewed discussions about a possible ceasefire. The deal would involve offering Abdullah Ocalan, the PKK's imprisoned leader, a chance to reduce his life sentence in exchange for dismantling the PKK's military wing. However, past peace efforts have collapsed and led to a surge in violence, with strong opposition to any agreement from factions on both sides.


Further Reading:

5 things to know for Oct. 24: Presidential race, North Korean soldiers, Boeing strike, Iranian hackers, Tropical Storm Trami - CNN

Harris Calls Trump a Fascist, and North Korea Has Sent Troops to Russia - The New York Times

If South Korea decides to get involved in Ukraine, it has powerful options - Business Insider

North Korea knows its troops could desert in Ukraine. It has chilling ways to keep them in line. - Business Insider

One of Russia's closest allies warned it against sending North Korean troops to war - Business Insider

Serbian, Kosovar Negotiators Meet With EU Envoy To Jump-Start Stalled Talks - Radio Free Europe / Radio Liberty

Surge in Bankruptcies: Slovenia and Germany Face Significant Increases - Independent Balkan News Agency

Turkey strikes northern Iraq and Syria after attack kills 5 near Ankara - The Independent

Turkish raids kill dozens in Syria and Iraq after Ankara attack - Financial Times

Watershed moment as Georgia goes to polls in tussle between Russia and west - The Guardian

Themes around the World:

Flag

Climate Change Impact

Thailand has been affected by intensifying storms and extreme weather events attributed to climate change, causing economic losses and casualties. The country is taking steps to address this, with Phase II of the Thailand Taxonomy focusing on the construction, real estate, manufacturing, agriculture, and waste management sectors.

Flag

US-India Relations

The US presidential election outcome will significantly impact India, particularly in defence, trade, and strategic sectors. A Trump victory may lead to higher tariffs and immigration restrictions, while a Harris presidency is likely to emphasize economic resilience and reduce reliance on global supply chains. The US is a major investor in India across various sectors.

Flag

US-China Competition

Competition with China is a key theme in US politics, with economic growth, military drills, and trade wars impacting businesses. China's lead in battery technology and supply chain control is a concern, while US tax policies aim to bolster economic growth.

Flag

Economic Growth Forecast

The International Monetary Fund (IMF) slashed Japan's 2024 growth forecast to 0.3%, the lowest since the pandemic, citing auto supply disruptions and the fading of one-off factors like tourism. However, the IMF predicts Japan's growth will accelerate to 1.1% in 2025, driven by wage and consumption increases.

Flag

India-Canada Diplomatic Rift

The recent diplomatic rift between India and Canada over accusations of Indian government agents' involvement in murder and extortion has raised concerns about the impact on bilateral trade and immigration ties. While no economic retaliation has been imposed yet, experts warn of potential disruptions to economic growth, with businesspeople from both countries possibly seeking opportunities elsewhere.

Flag

China's Africa Strategy

China's Belt and Road Initiative focuses on infrastructure and resource extraction in Africa. Political instability in Africa poses challenges to China's investments and may force a shift from its non-interference policy. China's involvement in Africa has enabled a geopolitical shift towards it but has not contributed to self-determined African development.

Flag

US-China Trade Diversification

The US is restricting investments into strategic sectors in China, prompting global companies to diversify their supply chains beyond China. India stands to benefit from this shift, particularly in the pharmaceutical and electronics industries, as it has a sophisticated industrial base and skilled workforce.

Flag

Energy Market Reforms

Proposed reforms to the UK's energy market, including zonal pricing, have sparked debate. While some argue that zonal pricing will reduce costs and encourage investment in renewables, others fear it will lead to higher bills for energy-intensive industries and raise costs for clean energy developers, potentially impacting the UK's climate goals and consumer bills.

Flag

Economic Slowdown

France's economy is facing challenges with a projected public debt of over €3 trillion and a widening deficit. Austerity measures and budget cuts have been proposed, but there are doubts about the government's ability to implement effective measures. This instability could slow down EU-wide growth.

Flag

US-China Port Competition

China has rapidly expanded its port infrastructure in the Global South, raising concerns about commercial, military, and intelligence-gathering uses. US ports lag behind in number and quality, with vulnerabilities exposed by Chinese-made cranes equipped with sensors and communication devices.

Flag

Western Military Aid Uncertainty

The future of Western military aid to Ukraine is uncertain due to the upcoming US presidential election. Both candidates have been vague on their Ukraine policies, with Republican candidate Donald Trump expressing skepticism about further support.

Flag

Global Supply Chain Shifts

India has the potential to become a competitive alternative manufacturing hub as global supply chains are rapidly reshaped. To capitalize on this opportunity, India should reduce tariffs and ease foreign direct investment (FDI) restrictions, according to World Bank economist Franziska Ohnsorge.

Flag

Foreign Investment Opportunities

Japan is attracting more foreign investment, with the yen's depreciation making Japanese assets more attractive. The country is also easing restrictions for foreign lawyers, creating more opportunities for international law firms, particularly those advising on cross-border deals. This shift in focus from China is due to increasing geopolitical risks.

Flag

Automotive Sector Struggles

The automotive sector in France is facing setbacks with a wave of plant closures due to a drop in electric vehicle sales and competition from China. This has led to strikes and job losses, and there are concerns about the pace of electrifying the vehicle fleet and the affordability of electric cars for the middle class.

Flag

International Business Relations

India's Tata Group faces criticism for its involvement with Israel, particularly in the manufacturing of weapons and provision of IT services for the Israeli military. Activists urge companies like Amazon and Google to withdraw from deals connected to the Israeli military.

Flag

Industrial Overcapacity and Exports

China's industrial sector is producing more output than can be sustainably absorbed, leading to a flood of cheap exports and trade tensions. This overproduction is causing global market instability and protectionist responses from other countries.

Flag

US Military Aid and Pressure

The US, Israel's major ally and biggest supplier of arms, has threatened to cut military support if Israel does not improve humanitarian aid access to Gaza within 30 days. This pressure could jeopardize US military aid to Israel, though similar threats in the past have not stopped the flow of weapons. The US has also agreed to send Israel a missile defense system to deter Iranian ballistic missile attacks.

Flag

Food Security Concerns

Environmental, economic, and political shocks have led to global food insecurity, impacting availability, access, utilization, and stability. China is capitalizing on its agricultural advancements to forge partnerships, posing a challenge to US leadership in the Global South and risking a fracture in the global food system.

Flag

US Economic Performance

The US economy is showing signs of strength, with rising equity benchmarks, strong retail sales, and lower jobless claims. The US dollar has also gained value, and improved polling for a potential Trump victory has boosted volatility in trading and the dollar's value.

Flag

Shifting Global Order

Germany's economic model, which relied on trade with growing economies, is facing challenges due to a shifting global order. Exports to China have fallen, and German companies face competition from Chinese rivals. Additionally, German carmakers are facing pressure from Trump's trade policies, which threaten tariffs on vehicles not made in the US.

Flag

Geopolitical Risks

India's role in supplying restricted technology to Russia has raised concerns among Western allies. This underscores the challenges of enforcing sanctions and the potential for India to fill gaps in the global supply chain due to its position as an intermediary.

Flag

Political Turmoil and Budgetary Challenges

France's political landscape is marked by a hung parliament and fierce budget debates. The new government's plans to tackle the deficit with tax hikes and spending cuts have sparked an outcry from left-wing lawmakers and unions, who argue that these measures will unfairly impact low-income families, apprentices, retirees, and small businesses. The government's survival hangs in the balance.

Flag

US-Israel Relations

The US is Israel's major ally and biggest supplier of arms, with 69% of Israel's arm imports coming from the US in 2023. However, the US has warned Israel that it may stop supplying weapons if the humanitarian situation in Gaza does not improve, threatening to halt shipments if Israel invades the southern city of Rafah.

Flag

US-China Competition

Competition with China is a central issue in US politics, with economic growth, military aspects, and supply chain disruptions as key dimensions. China's lead in battery technology and production has put the US at a disadvantage, and US policy aims to boost domestic industries. US-China tensions over Taiwan also threaten global economic stability.

Flag

Use of Private Security Contractors

Israel is considering using private security contractors, possibly including UK special forces veterans, to deliver aid to Gaza. This decision is controversial as aid agencies fear being targeted as combatants if they are part of militarized convoys. The use of private security firms has been proposed by Israeli-American businessman Mordechai Kahana's firm, Global Delivery Company (GDC), which has experience in war zones.

Flag

Western Military Aid to Ukraine

Ukraine has received military aid, including weapons and fighter jets, from Western countries to support its defense against Russia. However, experts warn that many of these weapons may not survive the war if used to their maximum potential. The West needs to be prepared for potential losses while understanding that the support is crucial for Ukraine's victory.

Flag

Cannabis Market Opportunities

Germany's cannabis market is experiencing rapid growth following regulatory changes and the decriminalization of cannabis sales. The patient base has grown significantly, and companies like Sanity Group are projecting substantial revenue increases. However, there are supply chain challenges in meeting the increasing demand, and uncertainty remains due to the evolving regulatory landscape.

Flag

US-China Trade and Investment Tensions

The US has imposed restrictions on investment in Chinese tech firms and is considering a ban on the use of Chinese-made drones. This follows China's sanctions on US drone suppliers to Ukraine and US companies selling combat drones to Taiwan. These moves highlight rising tensions and the potential for supply chain disruptions, impacting businesses in both countries.

Flag

Economic Impact of War

Israel's war against Hamas and Hezbollah militant groups has resulted in high financial costs, with military spending increasing significantly. This has led to concerns about declining investment, higher taxes, and a strain on government budgets. The conflict has also disrupted the tourism industry and hindered economic growth, particularly in border areas.

Flag

Ukraine's Drone Warfare

Ukraine's use of drones has been crucial for surveillance, targeting, and strikes, with the country now developing its own military-grade drones. This has implications for the global arms market as Ukraine considers lifting its export ban on drones, and for the future of warfare as American firms adapt to a more self-reliant Ukraine.

Flag

Banking Sector Hesitancy

German banks are hesitant to lend, making it difficult for German companies to secure loans and limiting business investments and job creation. This is partly due to the economic uncertainty and the risky lending environment caused by potential debt refinancing and rising interest rates.

Flag

Food Insecurity and Climate Change

Environmental, economic, and political shocks have led to food insecurity and social unrest. Climate change, conflict, and supply issues impact food availability and access, with implications for US and global security.

Flag

Africa Investments and Geopolitics

China's investments in Africa through the Belt and Road Initiative have been impacted by political instability and coups. This has led to a shift in focus towards protecting its own development and maintaining control over investments, potentially undermining its noninterference policy.

Flag

Export Ban Impact

Ukraine's export ban on military goods has helped local defense companies grow but is now hurting their business. Lifting the ban could generate revenue but risks Russian forces obtaining sensitive information and technology.

Flag

UK's RegTech Sector

The UK's RegTech industry is expected to grow substantially, driven by technological advancements and increasing regulatory pressures. The demand for RegTech solutions is rising as organizations seek to enhance compliance and risk management capabilities, particularly in the financial sector.

Flag

Political Repression and Economic Risk

Under Xi Jinping, the Chinese Communist Party has become more repressive and assertive. This has resulted in an exodus of businesses due to regulatory risks, reputational risks, and concerns about human rights and property protections.