Mission Grey Daily Brief - October 26, 2024
Summary of the Global Situation for Businesses and Investors
The war in Ukraine continues to dominate global affairs, with North Korean troops moving towards the frontline and Russian forces suffering record casualty rates. Elon Musk is accused of having close ties with Vladimir Putin, withholding Starlink access from Taiwan as a favour to China. US Treasury Secretary Janet Yellen announced new sanctions targeting secondary entities in countries supplying Russia with critical items for its military. Belarusian President Alexander Lukashenko threatened war if Russia attempts to annex Belarus. South Korea is threatening to arm Ukraine in response to North Korea's support for Russia. Putin hosted the BRICS summit in Russia, praising its role as a counterbalance to the West's "perverse methods", and pushing for the creation of a new payment system as an alternative to the SWIFT network. Israel launched a retaliatory strike on Iran.
Russia's War in Ukraine
The war in Ukraine continues to be a major concern for businesses and investors, with the conflict entering its 975th day and Russian forces suffering record casualty rates. North Korean troops are moving towards the frontline, posing a significant threat to Ukraine's defence. Vladimir Putin is pulling Kim Jong Un deeper into the war, revealing a weakness in the Kremlin's ability to recruit troops at home. North Korea's infusion of fresh soldiers will remain practically risk-free for Pyongyang, unless the United States returns to its aggressive sanctions posture against the Kim regime. Russia is no stranger to employing foreign armies, with Cossack warriors famously fighting for the tsars in centuries past and the Red Army bolstering its ranks with Mongolian troops when it invaded China at the end of World War II. Today, the "TikTok soldiers" of Chechen warlord Ramzan Kadyrov are scattered across Ukraine's front lines.
After nearly three years of fighting, Putin is running low on cannon fodder. The Kremlin is finding it difficult and expensive to entice more of Russia's poor and desperate to sign up for the war, even with promises of bonuses and good pay. In theory, Moscow could force millions of its fighting-age men into the Ukrainian meat grinder through conscription, but this option is politically perilous. The Putin regime discovered the dangers of the draft when it briefly attempted a "partial mobilization" in September 2022, with Russians responding with howls of opposition. The government quickly backed off of the effort, informing many that their call-up orders were issued by "mistake". Since then, Russia has relied on mercenary groups and lucrative payouts to make the "golden handshake" in exchange for military service in Ukraine. Even these enticements are proving to be insufficient for the Kremlin's manpower needs.
By providing fresh troops to Russia, North Korea will likely help to backfill some, but not all, of Moscow's gaps. US Defense Secretary Lloyd Austin warned the news is a "very, very serious issue", but cautioned that the precise contribution of Pyongyang's troops remained unknown. For the Kim regime, support for Russia has many strategic benefits and few risks. First, protection from United Nations sanctions. Russia has used its Security Council veto to repeatedly shield North Korea from international monitoring and penalties for its prohibited missile tests and nuclear weapons development. Second, a security guarantee from the world's largest nuclear power. This summer, Moscow and Pyongyang agreed to a NATO-style mutual defense pledge, promising to aid each other in the event of war. Third, North Korea's troops will gain valuable combat experience if they survive. Finally, and perhaps most importantly, the Kim regime will likely benefit from Russian technology transfers that could greatly accelerate its missile and nuclear programs.
In exchange, the costs to North Korea are a pittance. An expeditionary force of roughly 12,000 soldiers is small potatoes compared to Kim's million-man army. His related shipments of around three million artillery shells to Russia is also a small fraction of his total stockpile. The danger to Ukraine is great, however, with a senior Ukrainian official stating that the addition of North Korean artillery on the battlefield has been "much worse than the Shaheds", the Iranian-designed kamikaze drones that Russia is using to pound Kyiv's troops and infrastructure.
Elon Musk's Alleged Ties with Vladimir Putin
Elon Musk is accused of having close ties with Vladimir Putin, withholding Starlink access from Taiwan as a favour to China. The Wall Street Journal reported that Putin asked Musk to withhold Starlink from Taiwan as a favour to China's Xi Jinping, with unnamed officials stating that Musk has been in regular contact with Putin since 2022. The Journal reported that in late 2023, Musk received his first request from the Kremlin to refrain from activating Starlink over Taiwan, citing a former Russian intelligence officer. The request was made for Beijing's sake, as Moscow increasingly relied on trade from China. Based on The Journal's findings, it's unclear exactly how many times Putin or his administration asked Musk for the favour.
The Chinese embassy in Washington told The Journal that it was not aware of the specifics of this arrangement, and did not respond to a separate request for comment sent outside regular business hours by Business Insider. Taiwan does not have official Starlink access because its laws require satellite services to be provided through a joint venture with a local operator that maintains majority ownership. The New York Times reported that SpaceX was unwilling to accept such an arrangement, and the self-governed island is thus creating its own low-earth orbit satellite network. Musk's reported conversations with Putin coincide with his apparent shift in rhetoric toward Ukraine in late 2022. Until that point, the billionaire had vocally supported Kyiv, providing it with 15,000 Starlink terminals.
In October of that year, he began seeking funding from the Pentagon to continue the free services, tweeting that they were taking a financial toll. Musk also tweeted a poll that month about a peace plan reflecting some of Russia's war demands at the time, including Russia's formal obtaining of Crimea and a guarantee of Ukraine's neutrality. The billionaire's post drew the fury of pro-Ukrainian accounts, but he added that he only suggested those measures to avoid further death in Ukraine and the risk of nuclear war. "Obviously, we are pro-Ukraine", he tweeted, saying that SpaceX had spent about $80 million on free Starlink for Ukraine. Two weeks later, Ian Bremmer, a political scientist who founded Eurasia Group, wrote in an email to his subscribers that Musk had spoken with Putin before tweeting this controversial peace plan. Per Bremmer, Putin had told Musk that if he could not accomplish his goals in Ukraine, he would turn to "major escalation". Musk and the Kremlin said Bremmer's report was untrue.
The allegations present awkward implications for the US, with Musk's SpaceX holding defense and space contracts with the Pentagon and NASA. An analysis published on Monday by The New York Times reported that the company has $3.6 billion in contracts with the Defense Department — primarily for launching American satellites into orbit — and $11.8 billion with NASA. Russian forces were reported to be buying up Starlink terminals earlier this year to help their invasion of Ukraine. The system has been vital to Ukrainian forces over the two-year conflict. But Russian agents are reportedly now using 'intermediaries' in Dubai in order to get their hands on the terminals, circumventing western sanctions imposed on Russia. House Democrats warned that Russia's use of the system in Ukraine could raise national security concerns in March. In a letter to SpaceX, two Democrats on the House Oversight Committee demanded information about Russia's potential illegal acquisition of the satellite-enabled terminals, according to the Washington Post. The letter cited recent allegations from Ukrainian intelligence officials, who say that Russian troops are using Starlink terminals to coordinate war efforts in eastern Ukraine, in potential violation of US sanctions.
As founder of SpaceX, Musk has cultivated close ties with US military and intelligence, with access to sensitive information. The company is the primary rocket launcher for both NASA and the Pentagon. Starlink has said it does not do any business in or with Russia, and Musk has branded claims of association with Putin "absurd". Dmitry Peskov, spokesperson for the Kremlin, insisted neither Putin nor the Kremlin were in regular contact with Musk. Musk has not yet commented on the claims published in the WSJ. The Kremlin today slammed the claims in the WSJ report as "not true" and "absolutely false". While Beijing remains officially neutral on the conflict between Russia and Ukraine, it has supported Putin's claims that the war was provoked by western aggression. The US this month imposed its first sanctions on Chinese firms for making weapons for Russia, accusing them of collaborating with Russian defence firms to produce drones vital to the war effort.
US Treasury Secretary Janet Yellen Announces New Sanctions
US Treasury Secretary Janet Yellen announced new sanctions targeting secondary entities in countries supplying Russia with critical items for its military. Yellen told world financial leaders gathered in Washington for annual meetings of the International Monetary Fund (IMF) and World Bank that "We will unveil strong new sanctions targeting those facilitating the Kremlin's war machine, including intermediaries in third countries that are supplying Russia with critical inputs for its military". The IMF and World Bank meetings mark the last major international finance gathering to be held during President Joe Biden's administration and come as the state of the economy and inflation are top concerns for American voters. The presidential election between the Republican party nominee, former President Donald Trump, and Democratic party nominee Vice President Kamala Harris is slated to be decided on November 5, with the outcome expected to have an enormous impact on global finance and the world's economy.
Yellen touched on the use of the proceeds from frozen Russian sovereign assets to provide loans for Ukraine. As she spoke, the European Parliament approved a loan of up to 35 billion euros ($38 billion) for Ukraine's defense and reconstruction that will be repaid using future revenues from Russian central bank assets frozen abroad. Yellen referred to the overall $50 billion loan package being negotiated by the Group of Seven and EU allies, saying the United States expects to be able to contribute $20 billion. The U.S. Treasury Department is "working tirelessly to unlock the economic value of frozen Russian sovereign assets to aid Ukraine", Yellen said. Earlier on October 22, Britain announced its readiness to provide Ukraine with a loan of<co: 2>Earlier on October 22, Britain announced its readiness to provide Ukraine with a loan of
Further Reading:
As North Korea, Iran and China support Russia’s war, is a ‘new axis’ emerging? - CNN
If South Korea decides to get involved in Ukraine, it has powerful options - Business Insider
Israel launches retaliatory strike on Iran - Financial Times
Lukashenko warns of war if Russia attempts to annex Belarus - RBC-Ukraine
North Korea’s troops reveal Putin’s Ukraine pickle — no more cannon fodder - New York Post
Putin 'asked Elon Musk to switch off internet over Taiwan as a favour to China' - Daily Mail
Vance says it is Ukraine's decision to end the war - NBC News
Vladimir Putin signals North Korean troops are in Russia - Financial Times
Themes around the World:
Russian Strategic Indoctrination and Hybrid Warfare
Russia’s use of education and propaganda to justify prolonged conflict, combined with hybrid tactics like drone strikes and misinformation campaigns, aims to destabilize Ukraine internally and weaken international support. This creates a complex operational environment, increasing risks for businesses and complicating reconstruction and investment efforts.
Transatlantic Relations and Diplomacy
Germany's diplomatic efforts under Chancellor Merz to maintain strong ties with the U.S., especially managing relations with former President Trump, are critical. The uncertain U.S. stance on European security and Ukraine support affects NATO cohesion, defense spending commitments, and Germany’s role in transatlantic trade and security frameworks.
Fiscal Strains and Political Uncertainty
Brazil faces mounting fiscal challenges with a 2025 deficit forecast of 0.51% of GDP and public debt nearing 79.8% of GDP. High interest rates at 14.75% increase refinancing costs. Political uncertainty, including President Lula’s potential fourth term and congressional resistance to reforms, undermines investor confidence and complicates fiscal consolidation efforts.
Middle East Conflict and Oil Prices
The escalating Israel-Iran conflict threatens to disrupt global oil supplies, particularly via the Strait of Hormuz, a critical chokepoint for 20% of the world's oil and LNG. This geopolitical tension has caused oil prices to surge, impacting UK inflation, consumer costs, and business operations. Prolonged instability risks stagflation, supply chain disruptions, and increased energy costs for the UK economy.
Trade Strategy and Protectionism
The UK unveiled its first comprehensive trade strategy in decades, aiming to boost exports, protect domestic industries from unfair foreign competition, and counteract global protectionism, especially in response to US tariffs. The strategy includes expanding export finance, enhancing trade defense tools, and pursuing multiple trade deals to secure market access and safeguard supply chains.
Trade Route Vulnerabilities
India's trade is highly exposed to potential disruptions in critical maritime corridors such as the Strait of Hormuz and the Red Sea, which handle over 60% of its trade. Conflict-induced blockades or heightened risks could increase freight costs, delay shipments, and disrupt supply chains, compelling government and industry stakeholders to coordinate mitigation strategies and contingency planning.
US-Israel Strategic Alliance
The elevated US-Israel alliance, underscored by US military support and coordinated operations against Iran, reinforces Israel's security posture. This partnership influences regional stability, defense spending, and investor confidence, shaping Israel's geopolitical risk profile and international economic relations.
Electric Vehicle Industry Financial Strains
Thailand’s EV sector, exemplified by NETA Auto, faces liquidity crises with unpaid government subsidies and dealer network collapses threatening after-sales services and warranty support. Rising insurance premiums and export underperformance compound risks. The instability jeopardizes Thailand’s ambitions to become a regional EV manufacturing hub and could disrupt supply chains and investor confidence in green technology sectors.
Fiscal Consolidation and Debt Management
Egypt’s external budget sector debt declined by USD 2 billion over ten months, aided by renewed foreign investor confidence and extended debt maturities. Despite revenue losses from the Suez Canal and increased energy subsidies, the government achieved a primary budget surplus of 3.1%. Tax reforms and increased revenues reflect progress in fiscal discipline supporting macroeconomic stability.
Middle East Conflict Impact on Energy
Escalating Israel-Iran tensions threaten global energy markets, particularly through the Strait of Hormuz, a critical chokepoint for 20 million barrels of oil daily. Potential disruptions could spike oil prices, increase shipping costs, and create volatility in global markets. This geopolitical risk influences Canada's energy exports, stock markets, and currency stability, with implications for supply chains and investor sentiment.
U.S. Dollar Weakness and Capital Flows
The U.S. dollar has depreciated nearly 10% on a trade-weighted basis amid concerns over trade policies and global investor confidence. With the U.S. net international investment position at an all-time low, capital inflows may slow, impacting financing for trade deficits and budget imbalances. Currency volatility influences multinational operations, investment returns, and global purchasing power.
Escalating Israel-Iran Conflict
The ongoing military conflict between Israel and Iran, including missile strikes and air raids, significantly threatens Israel's economic stability, investor confidence, and infrastructure. Protracted warfare risks credit rating downgrades, capital flight, and volatility in financial markets, impacting international trade and investment strategies. The conflict also disrupts supply chains and business operations due to physical damage and heightened security concerns.
Iran’s Military Capabilities and Deterrence
Iran’s enhanced missile and drone capabilities have increased its deterrent strength, causing concern among regional adversaries, notably Israel. The demonstrated ability to neutralize advanced defense systems and conduct retaliatory strikes elevates Iran’s strategic position, influencing regional security calculations and potentially deterring foreign military interventions, which affects risk assessments for businesses operating in or near the region.
Inflationary Pressures from Geopolitical Risks
Escalating conflicts and trade disruptions contribute to rising costs in energy, shipping, and consumer goods sectors. Increased tariffs and supply chain bottlenecks exacerbate inflationary pressures, affecting US businesses and households. These dynamics influence monetary policy decisions, consumer sentiment, and corporate pricing strategies, with broad implications for economic stability.
Canada’s Enhanced NATO Defence Commitment
Canada has pledged to increase defense spending to 2% of GDP and support NATO’s 5% target by 2035, including investments in infrastructure and critical minerals. The broad NATO definition allows dual-use projects like ports and railways to qualify, facilitating strategic infrastructure upgrades. This commitment bolsters Canada’s national security, defense industrial base, and aligns with allied collective readiness, impacting defense procurement and economic policy.
Climate Change and Environmental Vulnerabilities
Pakistan faces severe climate risks including unprecedented heatwaves, floods, and environmental degradation, threatening agriculture, health, and economic stability. Climate-related events could reduce GDP by up to 20% by 2050. The country’s economic surveys and policies currently lack integration of climate risks, undermining long-term planning. Corporate and governmental initiatives are emerging to promote sustainability and resilience.
Rising Security and Crime Concerns
Turkey ranks low on global safety indexes due to internal conflicts, terrorism threats, and organized crime, including drug trafficking via Turkish-flagged vessels. These security challenges disrupt supply chains, increase operational risks, and necessitate enhanced due diligence and risk mitigation strategies for international trade and investment.
U.S. Dollar Weakness and Capital Flows
The U.S. dollar has depreciated nearly 10% on a trade-weighted basis in 2025, reflecting investor concerns over U.S. trade policies, geopolitical risks, and economic outlook. The net international investment position is at an all-time low, raising questions about the U.S.'s attractiveness as a safe haven. Currency fluctuations impact trade competitiveness, foreign investment, and multinational business operations.
China’s Strategic Mineral Investments
China is aggressively investing billions in Brazil’s mining sector, targeting critical minerals like copper, lithium, and rare earths essential for green technologies and electronics. This deepening economic engagement strengthens China-Brazil ties but raises sovereignty concerns over resource control. The trend reshapes global supply chains and presents both opportunities and risks for Brazil’s strategic autonomy and industrial development.
Energy Price Fluctuations
The conflict has triggered a surge in global oil prices, rising over 7% in a week due to fears of attacks on Iranian refineries. This increase raises operational costs for Israeli businesses and global supply chains, impacting inflation and trade costs, while also influencing energy security considerations in the region.
Declining Israeli Risk Premium
Despite conflict, Israel's risk premium has notably decreased due to successful military operations and geopolitical developments. This decline has strengthened the shekel, boosted stock market performance, and lowered government borrowing costs, enhancing Israel's attractiveness for foreign investors and improving capital market stability.
US-Thailand Trade Negotiations
Ongoing US-Thailand trade talks are critical amid the US court blocking Trump-era tariffs that threatened Thai exports with up to 36% duties. The Thai government is urgently assessing risks and preparing negotiation strategies to avoid tariff hikes, which could severely impact Thailand’s export-driven economy and investment climate, especially with a looming US Supreme Court appeal.
Media Independence and Business Models
Insights from European media companies like Mediapart and Agora emphasize resilience, financial independence, and subscription-based models amid global media challenges. These trends reflect broader shifts in information dissemination, public trust, and digital monetization strategies, which can influence public opinion, regulatory environments, and investor relations in Germany.
Military Supply Chains and Regional Conflicts
Russian intelligence reports Serbia’s indirect military supplies to Ukraine via intermediaries, highlighting complex supply chains supporting conflict zones. This dynamic affects regional security, sanctions enforcement, and risks for companies involved in defense-related trade, influencing geopolitical risk evaluations for investors.
Western Military Aid and Industrial Cooperation
Continued Western military support, including initiatives for joint production of Ukrainian weapons, strengthens Ukraine’s defense capabilities and industrial base. This cooperation enhances Ukraine’s strategic autonomy, supports economic activity in defense sectors, and signals sustained international commitment, influencing investor perceptions and regional security dynamics.
Monetary Policy and Financial Market Stability
The Bank of Japan (BOJ) is cautiously managing bond-buying tapering and monetary tightening to avoid unsettling financial markets. The BOJ's approach to slowing bond-buying reductions and readiness to adjust policies as needed reflects concerns over inflation, currency stability, and the impact of overseas trade policies on Japan’s economic outlook.
Social Media Fraud and Cybersecurity
Incidents of online scams, such as fraudulent sales via Facebook, highlight vulnerabilities in Vietnam's digital marketplace. These challenges necessitate enhanced cybersecurity measures and regulatory oversight to protect consumers and maintain trust in e-commerce platforms, critical for sustaining foreign investment and trade.
Leadership Changes in Economic Governance
The appointment of Seyed Ali Madanizadeh as Iran’s new Minister of Economic Affairs and Finance indicates a potential shift in economic policy and reform priorities. His background in economics and structural reforms may influence investment climate and fiscal management, affecting business strategies and economic stability.
Defense Industry Partnerships Controversy
Baykar's joint venture with Italian defense firm Leonardo, amid allegations of Israeli arms trade, has sparked domestic and international criticism. This controversy risks reputational damage, potential sanctions, and political backlash, complicating Turkey's defense exports and international collaborations, thereby affecting strategic partnerships and investor sentiment in the defense sector.
Geopolitical Realignment and Foreign Policy
Under Lula, Brazil is distancing from the US and Israel, adopting a pro-Iran stance and deepening ties with China and Russia. This shift risks alienating key Western markets and technology partners, while increasing geopolitical tensions. Brazil’s digital governance moves toward Chinese-style regulation further complicate relations with Western democracies.
International Diplomatic Repercussions
Turkey's human rights record and regional policies have led to diplomatic frictions, including discussions in international bodies and legislative actions abroad. These tensions risk trade restrictions, visa limitations, and reduced bilateral cooperation, which can hinder market access and complicate multinational operations involving Turkey.
Currency Fluctuations and Economic Risks
A weakening US dollar amid ongoing trade wars is driving an appreciating Thai baht, challenging export competitiveness and tourism affordability. Economists warn this currency dynamic, combined with rising debt and sluggish recovery, could precipitate economic stagnation unless structural reforms and strategic trade agreements, including ASEAN unity and FTAs, are pursued decisively.
Real Estate Market Dynamics
The regional conflict has created a complex real estate environment in Egypt, with increased demand as property is viewed as a safe haven asset. However, rising construction costs due to energy price volatility and supply chain disruptions threaten project execution and pricing strategies, potentially impacting investment returns and sector stability.
China’s Domestic Economic Challenges and Policy Adaptation
China faces deflationary pressures, industrial overcapacity, and a complex external environment. Premier Li Qiang emphasizes policy adaptability, domestic consumption expansion, and unified market building to sustain high-quality development. These internal dynamics affect China’s economic resilience and its attractiveness for foreign investment and global supply chain integration.
Emerging Geoengineering Threats
Concerns have been raised about potential hostile use of solar geoengineering technologies, such as sun-blocking aerosols, by adversaries like Russia. Such actions could disrupt UK agriculture, energy production, and climate stability, posing novel security and economic risks. The UK government is investing in research but must also prepare for possible weaponization of these emerging technologies.
Geopolitical Shocks Impacting Markets
Global geopolitical tensions, notably the Middle East conflict escalation, have triggered volatility in Brazil’s financial markets, with the B3 index falling amid risk-off sentiment. Rising oil prices and inflationary pressures compound domestic fiscal vulnerabilities, affecting investor sentiment and increasing uncertainty for trade, investment, and economic stability.