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Mission Grey Daily Brief - December 12, 2024

Summary of the Global Situation for Businesses and Investors

The fall of Syrian President Bashar al-Assad has sent shockwaves across the Middle East, with Israel and Turkey taking action to protect their interests and Iran facing a weakened position. In Ukraine, escalating trade tensions between the US and China are threatening the supply of critical drone components, potentially hindering Ukraine's war effort. Taiwan is demanding an end to China's military activity in nearby waters, citing unilateral actions that undermine peace and stability. Meanwhile, Myanmar's economy is expected to contract, impacted by floods and ongoing conflict.

The Fall of Assad and its Regional Implications

The fall of Syrian President Bashar al-Assad has significantly altered the geopolitical landscape in the Middle East. Israel and Turkey have taken swift action to protect their interests in the region. Israel has conducted strikes against Syria's naval fleet and bombed weapons silos, warplanes, and tanks, citing concerns about these assets falling into the hands of terrorist elements. Turkey, on the other hand, has struck Kurdish positions in northern Syria, where Turkish coercion is likely to increase.

The fall of Assad has weakened Iran, a key regional ally, and may embolden Israel to pursue its ambitions in the region. Iran's missile programme and militias have been degraded, and there are concerns that Iran may accelerate its uranium enrichment programme in response to new threats. This development could have implications for the region's stability and may require a coordinated response from the international community.

US-China Trade Tensions and their Impact on Ukraine

Escalating trade tensions between the US and China are threatening the supply of critical drone components to Ukraine, potentially hindering its war effort against Russia. China dominates the market for smaller drones and their components, which have dual-use civilian and military applications. Experts have warned about a growing dependence on China's control over the global supply chain for drones.

China's move to restrict the sale of drone components is seen as a response to US restrictions on the sale of high-bandwidth memory chips and semiconductor equipment to China. This tit-for-tat trade war could have significant consequences for Ukraine's battlefield capabilities, especially as drones have played a pivotal role in the war.

Washington has expressed a need to create new supply chains and diversify away from China to mitigate the risks associated with this growing dependence. The US and its allies should consider alternative sources for critical components and strengthen efforts to de-risk supply chains to ensure the continued effectiveness of Ukraine's war effort.

Taiwan's Response to China's Military Activity

Taiwan has demanded that China end its ongoing military activity in nearby waters, citing unilateral actions that undermine peace and stability in the Taiwan Strait. Taiwanese defense officials have detected Chinese ships and formations designed to demonstrate control over the waters.

China has restricted airspace off its southeast coast, indicating potential military drills, and has not confirmed whether these exercises will take place. Taiwanese officials believe these actions are in response to President Lai Ching-te's recent visits to Hawaii and Guam, which China views as provocations.

China claims Taiwan as its territory and opposes any official contact between Taiwan and foreign governments. Taiwan's response highlights the ongoing tensions in the region and the need for a diplomatic resolution to maintain stability.

Myanmar's Economic Challenges Amid Conflict and Floods

Myanmar's economy is expected to contract due to floods and ongoing conflict, according to the World Bank. The country has been in turmoil since 2021, when the military seized power from the elected civilian government, triggering widespread protests and an armed rebellion.

The conflict has severely affected lives and livelihoods, disrupting production and supply chains, and heightening economic uncertainty. The manufacturing and services sectors are projected to contract, with persistent shortages of raw materials, imported inputs, and electricity.

The World Bank has warned of a further deterioration in conditions if fighting intensifies. Businesses operating in Myanmar or with supply chains in the region should closely monitor the situation and consider contingency plans to mitigate potential disruptions.


Further Reading:

Assad’s exit opens a chance to rein in his backer Iran. Europe must seize it - The Guardian

Assad’s fall, Romania’s canceled election, Trump’s Taiwan approach, and more: Your questions, answered - GZERO Media

Hard Numbers: Tehran’s pollution closes schools, Social media swing vote, Militia controls Myanmar-Bangladesh border, Signs of Assad-era torture, Big boost for Ukraine - GZERO Media

Live news: Iran says fall of Assad was planned by US and Israel - Financial Times

Myanmar's economy set to contract as floods and fighting take heavy toll, the World Bank says - Yahoo! Voices

Myanmar's economy to shrink as floods compound crisis, says World Bank By Reuters - Investing.com

Newspaper headlines: Israel 'sinks navy' in Syria and Rayner to force through jail plans - BBC.com

Sri Lanka, Bangladesh and now Syria: Could Iran be the next? - The Times of India

Taiwan demands that China end its military activity in nearby waters - The Independent

The fall of Syria's Assad has renewed hope for the release of U.S. journalist Austin Tice - NPR

Ukraine Caught In The Middle As U.S.-China Trade Hostilities Target Drones - Radio Free Europe / Radio Liberty

Themes around the World:

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U.S.-Brazil Trade Negotiations and Tariff Dynamics

Following high-level talks between Presidents Lula and Trump, Brazil and the U.S. initiated tariff negotiations to prevent escalations affecting key Brazilian exports such as beef and steel. These discussions are critical for maintaining stable trade relations, supply chain reliability, and cost structures for businesses operating across North America and Brazil.

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E-Commerce Logistics Expansion

Thailand's e-commerce logistics market is rapidly expanding, valued at USD 2 billion and projected to grow with rising online retail penetration and demand for same-day delivery. Investments in automation, digital tracking, and infrastructure modernization are transforming the sector, positioning Thailand as a regional e-commerce logistics hub within ASEAN by 2030.

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Political Influence on Market Narratives

The Kospi index has become a political battleground, with ruling parties framing market movements to support policy agendas, including ambitious targets like 'Kospi 5000.' This politicization risks undermining market transparency and investor confidence, complicating objective assessment of economic fundamentals and investment risks.

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Expanding Capital Market Participation

The Indonesian capital market reached over 19 million investors by October 2025, with a 58.4% increase in new investors compared to 2024. Growth is driven by younger demographics and extensive financial literacy initiatives by IDX. This broadening investor base enhances market depth, liquidity, and resilience, supporting long-term capital market development and inclusive economic growth.

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US Domestic Challenges: Cybersecurity and Government Shutdown

The US faces significant domestic challenges impacting business operations and investor confidence. A cybersecurity breach at the Congressional Budget Office, suspected to be by a foreign actor, raises security concerns. Concurrently, an extended government shutdown disrupts federal operations, delays economic reporting, and threatens airline flight reductions, exacerbating uncertainty and operational risks across sectors.

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China Trade Deficit Crisis

Germany confronts a record €87 billion trade deficit with China, reflecting a deteriorating industrial relationship. German exports to China have fallen sharply, while imports rise, especially in automotive sectors. This shift challenges Germany's export-driven economy and complicates geopolitical ties, necessitating urgent policy reassessment and strategic engagement with Beijing.

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Impact of US Sanctions on Russian Oil

US sanctions targeting Russia's top oil producers, Rosneft and Lukoil, have significantly disrupted Russian crude exports. These measures have led to reduced shipments, increased floating storage, and forced buyers like India and China to reconsider purchases. The sanctions impose a pricing discount on Russian oil, squeezing Kremlin revenues and threatening global oil supply dynamics.

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Ruble's Vulnerability Amid Sanctions

The Russian ruble remains decoupled from market fundamentals due to sanctions but faces long-term depreciation pressures. Economic stress, tight monetary policy, and declining export revenues contribute to currency weakness. This volatility complicates financial planning and cross-border transactions for businesses operating in or with Russia.

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Critical Minerals and Resource Development

Canada is positioning itself as a key player in critical mineral production essential for green technologies and digital economies. The federal budget includes a $2 billion sovereign wealth fund and mining tax incentives to attract private capital, enhancing Canada's role in global supply chains and investment appeal in resource sectors.

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Nickel Industry Investment and Green Energy

Vale Indonesia posted Rp886.3 billion profit in Q3 2025, with significant investments from Danantara in nickel processing projects incorporating renewable energy sources. This aligns with global decarbonization trends, positioning Indonesia as a key player in sustainable mining and battery material supply chains, attracting green investments and technology partnerships.

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Political Volatility and Election Impact

Brazil faces heightened political volatility ahead of the 2026 presidential elections, with right-wing opposition testing new ticket pairings and ongoing judicial probes into corruption. This uncertainty could affect investor confidence, fiscal reforms, and market stability, influencing foreign investment and economic policy direction in a critical election year.

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US-China Trade Tensions Persist

Despite a temporary truce and tariff reductions, US-China trade relations remain strained with ongoing risks of sanctions, export restrictions, and transshipment issues. These tensions impact supply chains, export orders, and pricing pressures, challenging China's export momentum and complicating international trade strategies for businesses reliant on Sino-American commerce.

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Brazil-U.S. Trade Negotiations and Tariff Stability

Following high-level talks between Presidents Lula and Trump, Brazil and the U.S. initiated tariff negotiations to prevent escalation. This is critical for protecting key Brazilian exports such as beef and steel, ensuring stable trade relations. The outcome will influence supply chain reliability, cost structures, and market access for companies engaged in North American trade.

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Geopolitical Tensions and Trade Risks

Heightened geopolitical instability, including US-China rivalry and regional conflicts, is driving trade uncertainties and supply chain fragility. Australia's strategic alignment with the US through AUKUS and its complex relationship with China create diplomatic and economic challenges, influencing investment flows and regional security dynamics.

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Australia-China Relations and Regional Security Dynamics

Australia's rhetoric framing China as a security threat contrasts with the economic interdependence and improving bilateral ties. Military expansions under AUKUS and confrontational postures risk regional instability and may undermine long-term trade and diplomatic interests. Balancing defense commitments with constructive engagement remains critical for sustainable regional security and economic cooperation.

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Missile Stockpile Replenishment via Sanctions Loopholes

Iran is reportedly importing large quantities of sodium perchlorate from China, a precursor for solid missile propellant, exploiting legal gray areas in UN sanctions. These shipments suggest efforts to rebuild and expand missile capabilities despite international restrictions, raising geopolitical tensions and complicating diplomatic negotiations over Iran's military programs.

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US Tariffs Impact on Exports

The imposition of punitive US tariffs, reaching up to 50%, on Indian exports, particularly textiles, gems, and seafood, poses a significant risk to India's export-oriented sectors. This trade friction disrupts supply chains, reduces competitiveness, and threatens employment in MSMEs, challenging India's trade relations and export growth, especially with its largest market, the US.

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Energy Sector Investment and Offshore Exploration

Pakistan is revitalizing its energy sector with bids for 23 offshore oil blocks, involving major local and Turkish firms, aiming to reduce energy import dependence. However, significant investment of up to $5 billion is required amid security risks and political instability. Energy infrastructure development is critical for economic stability but remains vulnerable to geopolitical and domestic challenges.

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Rising Foreign Direct Investment (FDI) Inflows

FDI disbursement hit a five-year high of $21.3 billion in the first ten months of 2025, dominated by manufacturing and processing sectors. New investments from Singapore, China, the US, and Japan focus on high-tech and renewable energy. This inflow supports industrial growth and integration into global supply chains, though quality and domestic-foreign business linkages remain areas for improvement.

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Rare Earth Minerals Strategic Importance

Brazil holds about 25% of global rare earth reserves, attracting U.S. interest amid geopolitical shifts. Though commercial production is years away, these minerals could reshape Brazil's geopolitical leverage and trade relations, especially with the U.S. and China, affecting sectors like steel, agriculture, telecom, and aerospace.

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Currency Market Volatility and Tax Policy Effects

Aggressive tax hikes in France and the UK have triggered capital flight towards USD assets, fueling a strong US dollar rally. This currency shift impacts global trade competitiveness, investment flows, and financial markets, requiring multinational businesses to adapt currency risk management and investment strategies accordingly.

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‘Chip-to-Ship’ Conglomerate Strategy Risks

Vietnam's push for large national champions like Vingroup to lead mega infrastructure projects, including a $70 billion high-speed railway, raises concerns over financial risks and favoritism. Central bank and finance ministry warnings highlight high leverage, lack of experience, and risky state-backed financing structures. This strategy may exacerbate banking sector concentration risks and affect Vietnam's credit ratings if not carefully managed.

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Manufacturing Sector Industrialization

Saudi Arabia is rapidly expanding its manufacturing base through state-backed policies prioritizing local content and government procurement. The sector grew nearly 6% year-on-year, with over 12,480 factories operating. This industrial momentum fosters self-sufficiency, technology-driven innovation, and export readiness, aligning with the National Industrial Strategy to triple manufacturing GDP by 2030.

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Iran-China Strategic Economic Partnership

Iran and China are deepening economic ties through joint cooperative committees focusing on mining, petrochemicals, and industrial investment. With bilateral trade exceeding $13 billion, China remains Iran's primary trade partner, mitigating sanctions impacts. This partnership offers Iran alternative markets and investment sources, reshaping regional economic alignments and supply chains.

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U.S.-Mexico Trade Relations and Tariff Negotiations

Progress in U.S.-Mexico trade talks continues amid tensions, including U.S. airline route cancellations and tariff threats. The stability of bilateral trade is critical for supply chains and market access, especially under the USMCA framework. Ongoing negotiations and tariff reprieves affect investment decisions and operational planning for companies engaged in cross-border commerce.

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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.

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Missile Stockpile Replenishment via Sanctions Loopholes

Iran is importing large quantities of sodium perchlorate from China, a precursor for solid missile fuel, exploiting UN sanctions' gray areas. This enables Iran to rebuild and expand its missile arsenal despite international restrictions, increasing regional security risks and complicating geopolitical stability, which may trigger further sanctions and impact trade relations.

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Foreign Direct Investment Challenges

Despite recent improvements in investor confidence, Pakistan faces a significant outflow of multinational corporations due to high energy costs, regulatory uncertainty, and political instability. The exit of major firms like P&G and Microsoft signals systemic issues undermining long-term FDI retention and economic growth prospects.

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Shekel Currency Strengthening

The Israeli shekel has appreciated significantly, reaching a four-year high against the US dollar, driven by reduced geopolitical risks, improved investor confidence, and a stable ceasefire in Gaza. This currency strength enhances Israel's purchasing power and investment appeal but may pressure export competitiveness, impacting trade balances and multinational business operations.

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Economic Instability and Inflation Crisis

Pakistan faces persistent economic challenges including rising inflation, fuel price hikes, and fragile currency stability. Inflation surged to 6.2% in October 2025, driven by supply shocks and policy inconsistencies, straining household budgets and increasing operational costs for businesses. This inflationary environment undermines purchasing power, disrupts supply chains, and deters investment due to cost uncertainties.

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Profit Warnings Reflect Economic Uncertainty

UK-listed companies, especially in Yorkshire and the Midlands, have issued fewer profit warnings year-on-year but still face challenges from weak consumer confidence, geopolitical uncertainty, and policy changes. Construction, industrials, and retail sectors are notably affected, signaling ongoing margin pressures, order delays, and tariff impacts that disrupt supply chains and investment decisions.

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Export Growth Driven by Manufacturing

Exports reached US$209.8 billion by September 2025, up 8.14% YoY, with non-oil and gas exports growing 9.57%. Key contributors include palm oil, non-iron base metals, jewelry, chemicals, and electronics. This diversification enhances Indonesia's trade resilience and competitiveness, affecting supply chain configurations and export-oriented investments.

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International Perception of French Corporations

French multinational corporations maintain a generally positive image internationally, supported by strong ESG practices and strategic communication. Companies like Renault, Airbus, and Stellantis lead in media influence, enhancing France's soft power and attractiveness for foreign investment despite domestic political challenges, thereby supporting France's global economic positioning.

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US Investment Dominance and Risks

Despite concerns over government debt and trade tariffs, US remains the primary destination for global investment flows. Major financial executives highlight the US's appeal over Europe and Asia, driven by innovation and market depth. However, risks of economic slowdown are considered overblown, with sustained capital allocation to dollar-based assets expected.

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Inflation Dynamics and Wage Growth

Japan experiences sustained inflation above the BoJ's 2% target and notable wage increases exceeding 5% annually, marking a departure from decades of deflation. This inflationary environment supports consumer spending and corporate profitability but complicates monetary policy decisions and impacts cost structures for businesses and international trade competitiveness.

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T-MEC Review Risks in 2026

The upcoming 2026 review of the US-Mexico-Canada Agreement (T-MEC) poses the primary risk to Mexico's economy. While expected to pass with limited disruption, uncertainties remain due to potential US political shifts and tariff negotiations. This impacts trade stability, investor confidence, and growth projections, with a cautious economic outlook of 0.5% growth and 4% inflation.