Mission Grey Daily Brief - November 18, 2024
Summary of the Global Situation for Businesses and Investors
The G20 summit in Brazil is overshadowed by two major wars and Donald Trump's recent election victory. Heightened global tensions and uncertainty about an incoming Trump administration have tempered any expectations for a strongly worded statement addressing the conflicts in the Middle East and between Russia and Ukraine. Experts instead anticipate a final document focused on social issues like the eradication of hunger — one of Brazil's priorities — even if it aims to include at least a mention of the ongoing wars.
Typhoons in the Philippines have caused tidal surges and displaced massive numbers of people.
Geopolitical tensions simmer as Cop29 heads into its second week in Baku, Azerbaijan. Climate advocates are urging world leaders to commit to a strong finance deal.
Japan and Ukraine have signed a security info-sharing pact to boost cooperation.
Russia-Ukraine War
The Russia-Ukraine war has dragged past its thousandth day, with hundreds of missiles and drones streaking across Kyiv's skies, killing at least two people, leaving a dozen more injured, and damaging the country's already beleaguered energy grid. Russia's relentless aerial bombardment has destroyed half of Ukraine's energy production capacity, according to President Volodymyr Zelensky.
With the harsh Ukrainian winter fast approaching, the country is already suffering from major energy shortfalls, while its outmanned and outgunned forces have been steadily ceding ground to the Kremlin's troops for weeks. Kyiv has implored its Western allies for help to rebuild its energy grid — a hugely expensive undertaking — and to supply its outgunned forces with more aerial defence weapons.
Many in Ukraine fear that Western help will not be as freely given following the imminent return of Trump to the White House in January. The Republican president-elect has frequently questioned the United States' backing for Ukraine, and campaigned with the promise of cutting a quick deal to end the war.
Joe Biden has authorised Ukraine’s use of long-range missiles to strike hundreds of miles inside Russia for the first time, according to reports. The decision marks a major policy shift and comes after Russia warned that Moscow would see the move to allow the use of US-made missiles as an “escalation.” With Biden leaving office in two months, president-elect Donald Trump has indicated he will limit American support for Ukraine and pledged to end the war quickly once he takes office in January.
Ukrainian President Volodymyr Zelensky has campaigned for months to allow Ukraine’s military to use US weapons to hit Russian military targets far from its border, and retains important allies in both parties in Congress. He said Sunday evening that the strikes, if carried out, would "speak for themselves." But he did not confirm the authorization directly.
The Kremlin has said that if the United States allowed Ukraine to use US-made weapons to strike far into Russia, it would lead to a rise in tension and deepen the involvement of the United States in the conflict.
North Korea's Involvement in the Russia-Ukraine War
North Korea may end up sending Putin 100,000 troops for his war, according to people familiar with assessments made by some Group of 20 nations. The analysis is one of several on the evolving partnership between Russian President Vladimir Putin and North Korean leader Kim Jong Un, said the people, speaking on condition of anonymity to talk about private discussions. They stressed that such a move wasn’t imminent and that military support at that scale — if it occurred — would likely happen in batches with troops rotating over time rather than in a single deployment.
Ukraine’s ambassador to South Korea made a similar assessment earlier this month. Dmytro Ponomarenko said in an interview with VOA that Kyiv expected up to 15,000 North Korean troops deployed to fight in Russia’s Kursk region – and possibly in occupied areas of eastern Ukraine – to rotate every few months.
Kim’s decision to send North Korean troops to join Russia’s fight against Ukraine has alarmed Kyiv’s allies, who’ve warned that it risks exacerbating what is already Europe’s largest conflict since World War II. They believe the deepening cooperation between Putin and Kim could also impact the security balance in the Indo-Pacific region, where there’s mounting rivalry between China and the US.
The issue will be raised by several allies at the G-20 Summit in Brazil this week including by German Chancellor Olaf Scholz when he meets Chinese President Xi Jinping, Bloomberg previously reported. Scholz told Putin Friday in a rare phone call that the deployment of North Korean troops was a “grave escalation” of the war against Ukraine.
Scholz will press the Chinese leader at their meeting in Rio on Tuesday to use his influence over Russia and North Korea to avoid further escalation in the war, according to German officials.
The North Korean deployment shows the war is becoming globalized and Scholz and Xi will need to discuss this new dimension of the conflict, the officials said.
Worries were also raised by allies at the APEC gathering in Lima, Peru, this past week, another person said.
Xi has been the biggest benefactor to Putin and Kim in recent years, and sees both leaders as partners in pushing against the US-led world order. But his government has remained silent publicly on the dispatch of North Korean troops to Russia — a sign the Chinese president may be unhappy with the arrangement.
The Kim-Putin partnership risks adding economic pressure on China, just as Xi is bracing for potential disruption from tariffs threatened by US President-elect Donald Trump when he returns to the White House. It also undermines Beijing’s argument that the US shouldn’t have military alliances in the Indo-Pacific region.
China doesn’t “allow conflict and turmoil to happen on the Korean Peninsula” and it won’t “sit idly by when its strategic security and core interests are under threat,” Xi told US President Joe Biden at talks Saturday on the sidelines of the Asia-Pacific Economic Cooperation summit in Lima.
North Korea has so far sent more than 10,000 troops to fight alongside Putin’s army in Russia’s Kursk region, where Ukrainian forces have occupied part of the border territory since a surprise incursion in August. In return, Russia is providing money and helping North Korea increase its capabilities.
South Korea has said there’s a “high chance” that North Korea will seek cutting-edge technology transfers from Russia — including technology related to tactical nuclear weapons, intercontinental ballistic missiles, reconnaissance satellites and ballistic missile submarines.
As well as manpower, North Korea has also sent millions of rounds of artillery ammunition and other weapons to Russia. The Financial Times reported this week, citing Ukrainian intelligence, that Pyongyang has supplied long-range rocket and artillery systems to Russia.
US-China Relations
China’s leader Xi Jinping met for the last time with President Biden on Saturday, but was already looking ahead to President-elect Donald Trump and his "America first" policies, saying Beijing "is ready to work with a new U.S. administration."
During their talks on the sidelines of the annual Asia-Pacific Economic Cooperation summit in Peru, Xi cautioned that a stable China-U.S. relationship was critical not only to the two nations but to the "future and destiny of humanity."
Without mentioning Trump’s name, Xi appeared to signal his concern that the incoming president’s protectionist rhetoric on the campaign trail could send the U.S.-China relationship into another valley.
"China is ready to work with a new U.S. administration to maintain communication, expand cooperation and manage differences so as to strive for a steady transition of the China-U.S. relationship for the benefit of the two peoples," Xi said through an interpreter.
Xi, who is firmly entrenched atop China’s political hierarchy, spoke forcefully in his brief remarks before reporters. Biden, who is winding down more than 50 years of public service, talked in broader brushstrokes about where the relationship between the two countries has gone.
He reflected not just on the past four years but on the decades the two have known each other.
"We haven’t always agreed, but our conversations have always been candid and always been frank. We’ve never kidded one another," Biden said. "These conversations prevent miscalculations, and they ensure the competition between our two countries will not veer into conflict."
Biden urged Xi to dissuade North Korea from further deepening its support for Russia’s war on Ukraine. The leaders, with top aides surrounding them, gathered around a long rectangle of tables in an expansive conference room at a Lima hotel.
They had much to discuss, including China’s indirect support for Russia, human rights issues, technology and Taiwan, the self-ruled democracy that Beijing claims as its own. On artificial intelligence, the two agreed on the need to maintain human control over the decision to use nuclear weapons and more broadly improve safety and international cooperation of the rapidly expanding technology.
There’s much uncertainty about what lies ahead in the U.S.-China relationship under Trump, who campaigned promising to levy 60% tariffs on Chinese imports.
Already, many American companies, including Nike and eyewear retailer Warby Parker, have been diversifying their sourcing away from China. Shoe brand Steve Madden says it plans to cut imports from China by as much as 45% next year.
In a congratulatory message to Trump after his victory over Vice President Kamala Harris, Xi called for the U.S. and China to manage their differences and get along in a new era. In front of cameras Saturday, Xi spoke to Biden — but it was unmistakable that his message was directed at Trump.
"In a major flourishing sci-tech revolution, neither decoupling nor supply chain disruption is a solution," Xi said. "Only mutual, beneficial cooperation can lead to common development. ‘Small yard, high fence’ is not what a major country should pursue."
Biden administration officials have said they would advise the Trump team that managing the intense competition with Beijing will likely be the most significant foreign policy challenge they will face.
On Saturday, White House national security adviser Jake Sullivan said Biden had reinforced to Xi "that these next two months are a time of transition" and that the president would like to pass off the U.S.-China relationship "in stable terms" to the new administration.
Biden has viewed his relationship with Xi as among the most consequential on the international stage and put much effort into cultivating it.
Trump's "America First" Policy
Trump's "America First" policy could shift the Horn of Africa policy and shake up Mideast diplomacy on Iran.
Trump's recent election victory and the imminent return of an America First doctrine may also hamper the diplomatic spirit needed for broad agreement on divisive issues at the G20 summit in Brazil.<co: 11>G20 summit in Brazil.</
Further Reading:
BREAKING NEWS: Japan, Ukraine sign security info-sharing pact to boost cooperation - Kyodo News Plus
Biden approves Ukraine’s use of long-range missiles inside Russia for first time - The Independent
FirstFT: Biden authorises Ukraine to strike Russia with long-range US missiles - Financial Times
Geopolitical tensions simmer as Cop29 heads into second week - The National
North Korea may end up sending Putin 100,000 troops for his war - Fortune
North Korea ‘supplying Russia’ with long-range rocket and artillery systems - Financial Times
Russia launches massive drone, missile attack targeting Ukraine’s power grid - FRANCE 24 English
Trump already shaking up Mideast diplomacy on Iran - Al-Monitor
Themes around the World:
Nickel quota cuts, ore scarcity
Lower 2026 nickel-ore RKAB quotas (260–270m tons vs 379m in 2025) risk a ~130m-ton feedstock gap and 70–75% smelter utilization. Rising ore imports and allocation disputes increase cost volatility and execution risk for EV, stainless, and upstream investors.
Critical infrastructure sabotage concerns
Suspicious vessel loitering near submarine cable protection zones underscores risks to Taiwan’s dense undersea cable network. Any disruption would hit payments, cloud connectivity, and just-in-time coordination. Multinationals should harden telecom redundancy, data routing, and crisis communications.
US–Indonesia tariff deal uncertainty
Ratification and legal uncertainty around the US–Indonesia Reciprocal Trade Agreement (ART) and a flat US 15% tariff reshape market access. Rules-of-origin conditions (e.g., US cotton) and security-alignment clauses risk supply-chain redesign, compliance burdens, and sector-specific margin shocks.
Tariff volatility and legal resets
Supreme Court limits IEEPA tariffs, triggering refunds and a temporary 10% Section 122 surcharge with talk of 15%. USTR has opened broad Section 301 probes to rebuild tariff leverage. Expect rapid rule changes, higher landed costs, and planning uncertainty.
Gas supply disruption and rationing
Egypt’s structural gas deficit (about 6.2 bcfd demand versus ~4.1 bcfd output) has been exposed by Israel’s export suspensions and pricier LNG. Egypt halted LNG exports and expanded regas capacity, while power-saving measures risk intermittent industrial curtailments and higher operating costs.
Tax administration and revenue crackdown
Revenue shortfalls push intensified FBR enforcement, target revisions and policy tightening. Multinationals face higher audit probability, withholding tax complexity, and cash-flow hits from upfront taxes and delayed refunds, raising working-capital needs and compliance costs across supply chains.
Critical minerals diversification push
China’s dual-use export controls affecting Japanese entities are accelerating diversification. Japan is in talks with India to develop Rajasthan hard-rock rare earths (1.29m tonnes REO identified) for magnet supply, changing sourcing strategies for EVs, electronics, and defense supply chains.
Labor law expansion raises disruption
The “Yellow Envelope” amendments broaden employer responsibility and subcontractor bargaining rights, triggering large-scale negotiation demands across industries. Businesses face higher risk of overlapping bargaining units, slower restructuring and automation decisions, and increased strike incidence—especially in manufacturing and logistics.
Domestic politics affecting economic policy
Opposition-led legislative initiatives, including limits on exporting advanced chip know-how, and scrutiny of the ART ratification process can delay policy execution. Businesses should monitor parliamentary timelines, consultation requirements, and potential rule changes affecting investment approvals and market access.
Energieschockrisiko durch Nahostkonflikt
Die Iran-Krise treibt Öl- und Dieselpreise; Szenarien sehen bei Brent $100 BIP-Verluste von 0,3% (2026) und 0,6% (2027) bzw. rund €40 Mrd. Höhere Energie- und Transportkosten belasten Industrie, Logistik, Inflation und Preisgestaltung internationaler Lieferketten.
Defense spending and fiscal drift
Conflict-related outlays are likely to widen Israel’s fiscal deficit and reshape procurement priorities. JPMorgan estimates 2026 deficit rising to ~4.2% of GDP (about 9bn shekels extra). Expect increased defense/dual-use demand, potential tax adjustments, and budget reprioritization.
Textile Export Competitiveness Pressure
Textiles generate about 60% of Pakistan’s exports and employ over 15 million workers, but rising energy costs, customs delays and freight uncertainty are eroding competitiveness. Industry groups warn orders are shifting to Bangladesh, India, Vietnam and Turkey.
Data privacy and adtech compliance
Japan’s tightening privacy regime—APPI revisions and Telecom Business Act rules on cookie-linked data transfers—raises compliance burdens for digital marketers, platforms, and cross-border data handlers. Firms must redesign consent, disclosure, and vendor controls, increasing operational and legal risk.
EU integration and market alignment
Ukraine deepens EU transport and trade integration: extension of EU “transport visa-free” to 2027, European-gauge rail projects, and rollout of e-freight documentation. However, EU accession timing remains uncertain, complicating long-horizon regulatory and market-access assumptions.
US-Taiwan Strategic Alignment Deepens
Closer economic and investment ties with the US are reinforcing Taiwan’s role in trusted technology and supply-chain networks. Expanded US corporate investment and policy support can attract capital, but they may also sharpen exposure to cross-Strait tensions and geopolitical bloc fragmentation.
Higher-for-longer rates and strong dollar
Sticky inflation and war-driven energy risks are delaying Fed cuts, supporting a stronger dollar and higher hedging costs. This affects trade financing, emerging-market demand, and USD-priced commodities, while compressing non-U.S. earnings for multinationals and raising the hurdle rate for U.S. investment.
Maritime chokepoints and freight risk
Simultaneous constraints around Hormuz and Red Sea/Suez are extending voyages 10–14 days and raising shipping costs 30–50%. Japan-linked vessels face insurance and security constraints, complicating automotive, food, and energy logistics and inventory planning for import-reliant sectors.
EU accession path and alignment
Ukraine’s push for faster EU entry (targeting 2027) faces resistance in key capitals, with debate shifting to phased integration. Companies should anticipate accelerated regulatory convergence in customs, product standards, energy, and digital rules—yet with political uncertainty and delays.
Shekel volatility and FX management
Israel’s currency can swing sharply with war risk and tech inflows. After Google’s $32bn Wiz acquisition, authorities arranged for an estimated $2.5bn tax payment in USD to avoid abrupt shekel appreciation, aiming to protect exporters—important for pricing, hedging, and repatriation strategy.
LNG Expansion Reshapes Energy Trade
The United States is strengthening its role as a global energy supplier, including a 13% export-capacity increase at Plaquemines to 3.85 Bcf/d. This supports energy security for allies but may also transmit global gas-price volatility into US industrial costs and utility bills.
Carbon market credibility and regulation
Alleged R$45.5bn “carbon stock” valuation fraud tied to Banco Master is accelerating federal regulation of Brazil’s carbon market. Tighter governance, registries, and oversight will reshape voluntary offsets, due diligence needs, and financing structures for nature-based and industrial decarbonisation projects.
China trade recalibration pressures
Germany is pragmatically re‑engaging China amid stagnation and trade‑war risk. China was top partner in 2025; imports rose to €170.6bn while exports fell to €81.3bn, widening deficits. Firms face dependency management, market access friction and regulatory scrutiny.
US–China managed trade reset
Washington is pursuing “managed” US–China trade with tougher enforcement and new probes, ahead of leader-level talks that may include tariff rollbacks, rare earths and investment. Firms face shifting duty exposure, export-market access uncertainty, and accelerated China-plus supply diversification.
Cybersecurity regulation and threat intensity
Ransomware attacks rose sharply in 2025 and new UK cyber resilience legislation, alongside EU-adjacent regimes like NIS2 and DORA, raises compliance expectations. Mid-market firms face higher reporting and control requirements, driving investment in unified security platforms and vendor due diligence.
Border management and compliance friction
U.S. pressure on fentanyl and migration can translate into tougher inspections and episodic bottlenecks at crossings. Even without new tariffs, tighter enforcement raises lead-time variability for just-in-time supply chains, prompting higher inventories, diversified gateways, and enhanced customs compliance.
US-EU Tariff and LNG Pressure
France faces business uncertainty from transatlantic trade tensions as Washington presses the EU over tariff arrangements while leveraging LNG access. Exporters, importers, and energy buyers could see changing tariff exposure, procurement costs, and contractual risk across Atlantic-facing operations.
Energy shock lifts inflation, rates
Middle East conflict-driven oil and gas spikes are pushing UK CPI toward ~3–3.5% and forcing the Bank of England to hold 3.75% (and signal possible hikes). Higher funding, mortgage and hedging costs tighten credit and capex appetite for multinationals.
Sanctions volatility and carve‑outs
Russia’s trade environment remains dominated by rapidly shifting US/EU sanctions, with short wind‑down licenses and buyer waivers periodically reopening flows. This creates sudden compliance exposure, contract frustration, and pricing distortions across energy, shipping, finance, and commodity trading.
LNG export constraints and improvisation
Sanctions and limited specialized tonnage constrain Arctic LNG projects, forcing complex ship-to-ship transfers and reliance on a small shadow LNG fleet. Any single-vessel loss materially reduces capacity, affecting global LNG balances, spot prices, and long-term contracting decisions.
US-China Trade Truce Fragility
Paris talks preserved a fragile 2025 trade truce, but new US Section 301 and forced-labor probes could trigger fresh tariffs within months. Businesses face renewed uncertainty over market access, customs costs, compliance, and bilateral sourcing decisions across manufacturing and agriculture.
Critical minerals as strategic leverage
China is tightening long-term planning for rare earths and export controls, while shortages persist abroad (yttrium/scandium) despite partial easing. This raises sudden supply-stop risk for aerospace, EVs and semiconductors, driving diversification, stockpiling and compliance costs.
Energy import dependence resurges
Israel-linked supply disruptions and higher oil prices have forced Egypt to halt LNG exports via Idku, pull forward LNG imports, and implement power-saving measures. Fuel prices rose 14–30%, raising operating costs for logistics, manufacturing, and energy-intensive projects.
Shipbuilding gains with strategic pressure
Korean yards are benefiting from tanker demand, US shipbuilding cooperation, and linked investment opportunities, including Hanwha’s Philadelphia expansion. Yet Chinese yards won 80% of February global newbuild orders, challenging Korea on price and delivery, including in LNG carriers.
Defense rearmament, procurement bottlenecks
Rearmament is boosting opportunities for primes and SMEs, but slow procurement limits spillover. Companies call for faster processes and broader access to funds; Berlin is pursuing secure communications (a Bundeswehr “Starlink” constellation). Defense demand reshapes manufacturing, tech, and supply chains.
Aviation And Tourism Demand Volatility
Tourism and aviation expansion continues—Saudia carried ~27m tourists/visitors in 2025 toward a 150m-visitor 2030 target—but regional airspace disruptions are causing periodic route suspensions and reroutings. Businesses reliant on travel, events or air cargo should build redundancy in itineraries and inventory.
Russia fiscal stress and spending cuts
Despite occasional oil-price windfalls, Russia’s budget remains pressured by revenue declines and high war spending. Planning for non-core spending cuts and reliance on the National Wealth Fund increase macro uncertainty, affecting suppliers, contractors, and payment reliability.