Mission Grey Daily Brief - December 18, 2024
Summary of the Global Situation for Businesses and Investors
The global situation remains complex and dynamic, with several significant geopolitical and economic developments unfolding. In the Middle East, the fall of the Assad regime in Syria has opened a new front for geopolitical competition, with Israel and Turkey seeking to advance their conflicting national and regional security interests. Meanwhile, North Korean troops are fighting alongside Russian forces in Ukraine, killing Russian troops and inflicting heavy casualties. In the Balkans, Russia is losing political influence, as Bosnia and Herzegovina seeks to reduce its dependence on Russian gas. Lastly, US-Iran relations are set to undergo a significant shift with the incoming Trump administration's return to a "maximum pressure" policy.
Geopolitical Competition in the Middle East
The fall of the Assad regime in Syria has opened a new front for geopolitical competition in the Middle East. Israel and Turkey are seeking to advance their conflicting national and regional security interests, with Turkey backing the Sunni rebel group Hayat Tahrir al-Sham (HTS) and Israel taking advantage of the power vacuum to advance its territorial and security ambitions. Turkey's support for HTS has backstabbed Syria's traditional allies, Iran and Russia, while Israel's actions have been denounced by Arab countries who demand Syria's sovereignty and territorial integrity be respected.
North Korean Troops in Ukraine
North Korean troops are fighting alongside Russian forces in Ukraine, killing Russian troops and inflicting heavy casualties. This development comes amid concerns over Russia's deployment of thousands of North Korean troops to retake territory lost to Ukraine, particularly in the Kursk border region. Russia has also deployed a lethal new intermediate-range ballistic missile, which US intelligence predicts could be used against Ukraine again soon.
Russia's Political Influence in the Balkans
In the Balkans, Russia is losing political influence, as Bosnia and Herzegovina seeks to reduce its dependence on Russian gas. The US Embassy in BiH has appealed for the construction of the Zagvozd – Novi Travnik gas pipeline, which would provide a link to the LNG terminal on Krk and serve as a branch of the future Adriatic-Ionian gas pipeline, supplying Bosnia and Herzegovina with gas from Azerbaijan. However, Dragan Čović, the leader of HDZ BiH, has conditioned the project on the establishment of a new company based in Mostar, which would be managed by the HDZ BiH.
US-Iran Relations
US-Iran relations are set to undergo a significant shift with the incoming Trump administration's return to a "maximum pressure" policy. This policy aims to confront Iran both directly and indirectly, through the marginalization of groups like the Houthis that allegedly receive support from the Iranian Revolutionary Guard (IRGC) and other organizations. The Houthis face an inevitable FTO redesignation and a renewed focus by the Trump administration, with Hezbollah in a severely weakened state due to the US-backed Israeli assault on Lebanon.
Further Reading:
North Korean troops take heavy casualties fighting Ukrainian forces, says US - Financial Times
REMEMBER THIS YEAR AND THE NEXT: Russia Will Lose Its Political Satellites in the Balkans - Žurnal
Trump is bringing a hawkish Iran policy back in with him - The Independent
Trump slams Biden over Ukraine's use of US missiles to attack Russia - Euronews
Themes around the World:
Labour Market and Immigration Shifts
The UK labour market is shaped by new immigration policies, skills shortages, and demographic trends. Restrictions on migrant mobility and evolving visa rules affect talent availability, wage pressures, and long-term economic growth.
Supply Chains Strained by Workforce Loss
Widespread displacement, conscription, and casualties have reduced Ukraine’s workforce and damaged logistics infrastructure. These factors contribute to ongoing supply chain disruptions, limiting service coverage and production capacity, with a challenging outlook for 2026.
EU Green Deal and CBAM Impact
The EU’s Carbon Border Adjustment Mechanism (CBAM) and green deal policies are reshaping Turkey’s export landscape. Sectors with high carbon intensity face new costs and compliance requirements, affecting competitiveness in key markets and driving urgent green transition needs.
Infrastructure Investment and Bottlenecks
Vietnam plans to secure $5.5 billion in foreign loans for infrastructure in 2026 and aims for $38 billion by 2030. However, persistent bottlenecks in land clearance, project approval, and disbursement threaten timely delivery, impacting logistics, FDI, and supply chain efficiency.
Foreign Investment Hits Six-Year High
Foreign ownership of Korean stocks reached 37.18%, the highest since 2020, with strong inflows into semiconductors, shipbuilding, defense, and nuclear power. This trend reflects global investor confidence but also exposes Korea to external shocks and geopolitical tensions.
Shifting Patterns in Foreign Investment
Foreign direct investment in China fell 9.5% in 2025, reflecting investor caution amid regulatory tightening and geopolitical friction. However, select countries like Switzerland and the UAE increased their stakes, highlighting nuanced opportunities and the need for market-specific strategies.
Semiconductor Supply Chain Realignment
The US-Taiwan trade deal mandates $250 billion in Taiwanese investment in US semiconductor manufacturing, aiming to relocate up to 40% of Taiwan’s chip supply to the US. This shift is reshaping global supply chains and risk management strategies for international businesses.
Global Supply Chain Diversification Trend
Amid US-led tariff wars, UK businesses are accelerating efforts to diversify suppliers and markets, particularly towards India and Asia-Pacific. This shift aims to mitigate risks from geopolitical shocks and ensure resilience in critical sectors such as automotive and technology.
US-France Trade Tensions Escalate
Rising US tariffs on French wine and digital services, coupled with threats of broader sanctions, create uncertainty for exporters and investors. These tensions, intensified by political disputes, risk disrupting transatlantic trade and investment flows.
Fiscal Stabilization and Policy Reform
South Africa is nearing a fiscal turning point, with debt-to-GDP stabilizing and primary surpluses returning. Improved fiscal credibility has strengthened the rand and bonds, but sustaining reforms and managing coalition politics remain critical for long-term investor confidence.
EU Energy Decoupling and Bans
The EU has legislated a full ban on Russian LNG and pipeline gas imports by 2027, with plans to phase out Russian oil as well. This structural decoupling will reshape European energy markets, accelerate diversification, and impact global energy flows, with significant implications for Russian revenues and EU supply chains.
Critical Infrastructure and Supply Chain Vulnerabilities
Sanctions, sabotage, and decentralization of import authority to border provinces have disrupted Iran’s logistics and energy infrastructure. Businesses face heightened risks of supply interruptions, regulatory unpredictability, and challenges in securing essential goods and services.
Critical Energy Sector Vulnerabilities
Iran’s oil and gas infrastructure faces decay, sabotage, and sanctions pressure. Power outages, fuel shortages, and the threat of supply disruptions—especially in the Strait of Hormuz—pose significant risks to global energy markets and supply chains reliant on Iranian exports.
Monetary Policy Shifts and Inflation
Turkey’s central bank has shifted to a cautious easing cycle, lowering the policy rate to 37% as inflation fell to 30.9% in December 2025. While investor confidence is improving, inflation volatility and policy uncertainty remain significant risks for business planning and financing.
Critical Infrastructure Security and Baltic Risks
Finland is leading regional efforts to protect critical underwater infrastructure in the Baltic Sea, establishing new monitoring centers to prevent sabotage. Heightened regional tensions and Russian military activity increase operational risks for logistics, energy, and telecom supply chains.
Supply Chain Vulnerabilities Persist
Supply chain disruptions have eased but remain a concern, especially in sectors reliant on semiconductors and critical materials. Geopolitical tensions, particularly US-China and EU-US, continue to threaten the stability and resilience of German and European supply chains.
Supply Chain Evolution and Resilience
China’s supply chain is undergoing a ‘super evolution’ with AI-driven logistics, global warehouse networks, and flexible manufacturing. These advances enhance efficiency and resilience, positioning China as a global supply chain hub despite rising geopolitical risks.
Sovereign Wealth Fund and State Intervention
The Danantara sovereign wealth fund, managing $1 trillion in assets, is central to President Prabowo’s industrialization and investment agenda. While intended to boost efficiency and co-investment, increased state involvement and leadership changes have raised questions about governance, fiscal discipline, and market independence.
Nearshoring Surge Reshapes Supply Chains
Mexico’s nearshoring boom is accelerating, with high-tech exports from states like Jalisco growing by 89% in 2025. Companies are relocating production from Asia to Mexico, leveraging proximity, cost advantages, and USMCA access, making Mexico a central hub for North American supply chains and investment.
Environmental Licensing and Climate Policy Reform
Brazil’s new General Environmental Licensing Law streamlines approvals for business projects, while COP 30 participation and new climate governance policies signal a commitment to sustainable development. These changes reduce regulatory bottlenecks but also require compliance with stricter environmental and emissions standards.
Severe Disruption of Export Logistics
Russian attacks on port infrastructure have reduced Ukraine’s export earnings by about $1 billion in Q1 2026. Grain and metals exports have been rerouted via rail, but overall volumes are down 47% year-on-year, creating significant supply chain and revenue challenges for exporters and partners.
Chronic Debt Dependency Crisis
Pakistan’s reliance on foreign loans from China, Saudi Arabia, UAE, and the IMF has reached critical levels, with external debt exceeding $128 billion. This dependency forces policy compromises and exposes businesses to currency volatility, regulatory unpredictability, and lender-driven reforms.
KOSPI Rally and Market Reform Momentum
South Korea’s stock market surpassed 5,000 points, buoyed by AI, semiconductors, and market reforms. Despite this, the ‘Korea Discount’ persists due to governance and security risks. Market volatility and foreign investor sentiment remain critical for capital market strategies.
Northern Sea Route and Arctic Ambitions
Russia’s development of the Northern Sea Route, with Chinese and Indian involvement, aims to create a major Eurasian trade corridor. While promising shorter Asia-Europe shipping, the project faces geopolitical risks, environmental concerns, and possible sanctions exposure for participating firms.
Tariffs, Trade Tensions, and Supply Chain Realignment
The US continues to escalate tariffs, notably on South Korea, Taiwan, and Canada, as part of an 'America First' industrial policy. Recent deals require massive foreign investment in US manufacturing in exchange for tariff relief, with Taiwan and South Korea pledging over $600 billion. These policies are pressuring global supply chains to relocate to the US, but also driving allies and rivals to diversify away from American markets, increasing long-term uncertainty for international business operations.
Financial Sector Resilience and Growth Outlook
Israel’s economy demonstrates resilience, with strong currency performance, low unemployment, and robust growth forecasts for 2026. Rate cuts and potential normalization agreements could further boost foreign investment and exports, enhancing the country’s attractiveness for global investors.
Agribusiness Gains, But With Caveats
Brazilian agriculture stands to benefit from tariff-free access to the EU for beef, chicken, coffee, and other products. However, quotas, safeguard mechanisms, and stringent EU standards—especially on sustainability—limit upside and introduce unpredictability for exporters, affecting long-term supply chain planning.
UK Government Pursues Diplomatic Resolution
Prime Minister Starmer has ruled out immediate tariff retaliation, emphasizing dialogue and alliance unity. The UK seeks to avoid escalation, but faces political pressure to defend national interests, balancing economic stability with transatlantic and European alliances.
Surge in Foreign Direct Investment Inflows
Foreign investment in Germany more than doubled to €96 billion in 2025, reflecting confidence in its stability, legal certainty, and EU market access. This trend strengthens Germany’s position as a European business hub, but also increases scrutiny on strategic sectors and regulatory frameworks.
Political Stability and Policy Continuity
President Prabowo’s administration has emphasized industrial revitalization, infrastructure development, and regulatory streamlining. Political stability and policy continuity underpin Indonesia’s attractiveness for long-term international trade and investment strategies.
Political Gridlock on Defense and Security
Taiwan’s $40 billion defense budget faces parliamentary opposition, raising concerns about its deterrence capabilities amid rising Chinese military activity. Political divisions could impact defense procurement, foreign confidence, and overall security stability.
Supply Chain Disruption and Resilience Imperatives
Australian supply chains face persistent disruption from geopolitical fragmentation, labor shortages, and shifting trade rules. Recent surveys show a strategic divide among leaders, with resilience, diversification, and digital transformation emerging as top priorities for international business continuity.
UK-EU Relations and Trade Frictions
Despite the Trade and Cooperation Agreement, UK-EU trade faces ongoing frictions, including customs checks, sectoral disputes, and unresolved issues in energy and services. These tensions add complexity and costs to cross-border operations.
US Foreign Investment Scrutiny Rises
Foreign investment in the US faces heightened scrutiny, particularly in strategic sectors and from Chinese investors. Regulatory barriers and national security reviews are increasingly shaping cross-border M&A, technology transfers, and capital flows.
Real Estate Market Correction and Recovery
Major Canadian cities have seen steep declines in real estate transactions and prices since 2021, with Toronto and Vancouver at multi-decade lows. While 2026 is forecast as a recovery year, high mortgage renewal rates and affordability issues will continue to influence investment and consumer demand.
Infrastructure Reconstruction and Investment Challenges
Gaza’s reconstruction is estimated to require $50–70 billion, but funding pledges remain inadequate. The scale of destruction, combined with political and security risks, creates significant challenges for infrastructure, energy, and technology investors seeking stable returns in post-conflict environments.