Mission Grey Daily Brief - December 20, 2024

Summary of the Global Situation for Businesses and Investors

The world is witnessing a landscape dominated by conflicts and wars, exacerbated by the rise of economic and trade protectionism and the prevalence of double standards. Russia and North Korea continue to engage in military action in Ukraine, while Israel and Yemen are trading attacks in the war on Gaza. Georgia is experiencing unprecedented government violence in response to mass protests, and Egypt, Türkiye, and Iran are addressing regional issues at the D-8 summit in Cairo. Meanwhile, India has successfully resisted China's salami-slicing strategy, and Turkey and Qatar are emerging as brokers and kingmakers in Syria, filling the void left by the collapse of Iranian influence.

Russia's Military Action in Ukraine

Russia's military action in Ukraine continues to escalate, with President Vladimir Putin expressing readiness to compromise with President-elect Donald Trump on ending the war and no conditions for beginning talks with Kyiv. However, Putin maintains that Russia is advancing toward its main goals in Ukraine and rules out making any major territorial concessions. Ukrainian President Volodymyr Zelenskyy pushes European countries to provide guarantees to protect Ukraine after the war concludes, emphasising the need for support from the United States under Trump.

The conflict has resulted in casualties on both sides, with Russian missile attacks killing and wounding civilians in Ukraine's northeastern Kharkiv region and southeastern city of Kryvyi Rih. Ukraine has also launched missiles at Russia's Rostov region, leading to a fire at an oil refinery.

Israel-Yemen Conflict

The conflict between Israel and Yemen has escalated, with the US imposing new sanctions targeting the Houthis as the Yemeni group continues to trade attacks with Israel amid the war on Gaza. The US Department of the Treasury announced penalties on Thursday on Hashem al-Madani, the governor of the central bank in Houthi-controlled Sanaa, and several Houthi officials and associated companies, accusing them of helping the group acquire “dual-use and weapons components”. The US Treasury described al-Madani as the “primary overseer of funds sent to the Houthis” by the Quds Force of Iran’s Islamic Revolutionary Guard Corps.

Yemen has two competing central banks, one in the Houthi-controlled capital Sanaa that serves areas of the country controlled by the rebel group, and another in Aden for the areas of the country controlled by the internationally recognised government and other anti-Houthi groups. The US sanctions came hours after Israel bombed targets in Yemen, including power stations near Sanaa, killing at least nine people.

Unrest in Georgia

In response to mass protests, the ruling Georgian Dream party has unleashed unprecedented violence against thousands of demonstrators, with more than 400 people detained and many subjected to brutal treatment by police and law enforcement. The developments reflect a broader geopolitical trend as great power competition intensifies and America’s adversaries seek to weaken its alliances and turn traditional Western partners against it.

As the incoming Trump administration prepares to tackle a range of foreign policy priorities, the crisis in Georgia demands significant attention. The risk is that the moment will not be recognized, and the opportunity lost. Having reached the zenith of its global influence after the collapse of the Soviet Union, the US has seen a decline in its standing over the past two decades as China rises and forms an alliance of growing significance with Russia and other disgruntled authoritarian states.

The incoming administration can alter this dynamic by defending its strategic interests and acting decisively to support its partners. Helping Georgia remain in the pro-Western camp could be a relatively easy victory — one that would send a strong message about Washington’s resolve and strengthen its position in the region and beyond.

Turkey and Qatar's Role in Syria

With Iran on the decline, a new axis is rising in the Middle East, and Syria is still key. Turkish President Recep Tayyip Erdoğan and Qatar are emerging as brokers and kingmakers in Syria, filling the void left by the collapse of Iranian influence in the pivotal country. Their sudden emergence raises the prospect of a realignment of the Arab Middle East.

For years, Turkey and Qatar backed what had been written off as the losing side in Syria’s civil war. With the Assad regime’s fall, and as Iran’s influence wanes, they are geopolitical winners. The Mideast’s axis of power is shifting, but it still runs through Syria.

While they have their own ambitious interests to pursue, both see an opportunity to use Syria to revive a common regional agenda: support for popular democratic movements and Islamist political parties. Since the fall of Bashar al-Assad, Turkey and Qatar have been the most active foreign governments in Syria. Turkish intelligence chief İbrahim Kalın was in Damascus Friday; a Qatari government delegation visited the capital Sunday and reopened its embassy Tuesday.

At a gathering in Doha last week with the foreign ministers of Iran and Russia, the main outside backers of the crumbled Assad regime, the Turkish and Qatari foreign ministers worked behind the scenes to ensure a bloodless transition of power. In Doha and later in a meeting in Aqaba, Jordan, it was Turkey and Qatar that Arab states, the United States, the European Union, and the United Nations relied on to reach out to the interim Syrian government.

They were well positioned. Only weeks before, as Arab states were moving to normalize ties with Syria and calls were growing in Washington to lift sanctions on the Assad regime, Turkey and Qatar were the last two countries supporting the Syrian opposition. Qatar was the only nation that recognized the opposition as the legitimate Syrian government.

Themes around the World:

Reconstruction, Seismic and Compliance Risk

Post‑earthquake reconstruction continues, with large public and PPP procurement and significant regulatory scrutiny. Companies face opportunities in construction materials, engineering and logistics, but must manage seismic-building codes, local permitting, anti-corruption controls and contractor capacity constraints in affected regions.

EU trade friction on palm/nickel

Trade disputes and regulatory barriers with Europe—spanning palm sustainability rules and nickel downstreaming—remain a structural risk for exporters. Firms should anticipate tighter traceability demands, litigation/WTO uncertainty, and potential market-access shifts toward alternative destinations and FTAs.

Infrastructure, labor, and logistics fragility

US supply chains remain exposed to chokepoints across ports, rail, and trucking, with labor negotiations and capacity constraints amplifying disruption risk. Importers should diversify entry points, build buffer inventories for critical inputs, and strengthen real-time visibility and contingency routing.

Minerais críticos e nova geopolítica

Terras raras ganham prioridade: Serra Verde obteve empréstimo de US$565 mi com opção de participação minoritária dos EUA; o setor projeta US$76,9 bi em investimentos 2026–2030, incluindo ~US$2,4 bi em terras raras. Oportunidades crescem, porém com riscos regulatórios e de processamento doméstico.

Energiepreise, Gasvorräte, Versorgung

Gasspeicher fielen Anfang Februar unter 30%, teures LNG und Transportengpässe erhöhen Preisrisiken. Parallel stützt der Staat Strompreise (rund 30 Mrd. € 2026). Für energieintensive Branchen bleiben Standortkosten, Vertragsstrukturen und Hedging zentral für Investitionen und Produktion.

BEG subsidies and budget risk

Federal BEG/BAFA support is critical to Wärmewende economics, but annual budget ceilings and frequent program adjustments create stop‑start ordering behavior. International suppliers face higher payment-cycle uncertainty, while investors must model demand cliffs, compliance documentation, and administrative throughput constraints.

Federal shutdown and fiscal brinkmanship

Recurring U.S. fiscal standoffs are disrupting federal services and increasing macro uncertainty. A partial government shutdown began after Congress missed funding deadlines, with estimates of up to $11B GDP loss if prolonged. Impacts include delayed permits, customs/agency backlogs, contractor payment risks, and market volatility.

Defense rearmament boosts industrial demand

France is increasing defence outlays and production tempo; major primes are hiring at scale (e.g., Thales >9,000 hires globally, ~3,300 in France, over half in defence). Creates opportunities in aerospace/defence supply chains but tightens skilled‑labour availability and compliance requirements.

Défense: hausse des dépenses 2026

Le budget 2026 prévoit 57,2 Md€ pour les armées (+13%) et une actualisation de la LPM attendue au printemps. Opportunités: marchés défense, cybersécurité, drones; contraintes: conformité export, priorités industrielles, tensions sur capacités et main-d’œuvre.

EU trade defense and carbon measures

France supports tougher EU trade defense and climate-linked border measures (e.g., CBAM) amid tensions over Chinese industrial overcapacity. Businesses should expect more customs friction, documentation burdens for embedded carbon, and greater tariff/sanctions uncertainty in China-facing supply chains.

Critical minerals alliance reshaping

Washington is building a “preferential” critical-minerals trade zone with price floors and stockpiling, pressuring partners to align and reduce China exposure. Canada’s positioning will affect mining, refining, battery investment and eligibility for U.S.-linked supply chains.

Defense rearmament boosts demand

Germany is accelerating procurement, including a €536m first tranche of loitering munitions within a €4.3bn framework and NATO long-range drone initiatives. This supports select industrial orders and dual-use tech investment, but tightens export controls, compliance, and supply competition for components.

Environmental licensing and ESG exposure

Congressional disputes over environmental licensing reforms and tighter deforestation scrutiny are increasing permitting uncertainty for infrastructure, mining and agribusiness. Exporters face rising compliance demands—especially linked to deforestation-free requirements—raising audit, traceability and contract-risk costs across supply chains.

Ports, corridors, and logistics buildout

Cairo is rolling out seven multimodal trade corridors, 70 km of new deep-water berths, and a network targeting 33 dry ports. New financing such as the $200m Safaga terminal (with $115m arranged) supports capacity, inland clearance, and supply-chain resilience.

Data regulation tightening under DUAA

Most provisions of the UK Data (Use and Access) Act entered into force, expanding ICO powers and enabling fines up to £17.5m or 4% of global turnover under PECR. Multinationals face higher compliance costs for AI, marketing, and cross‑border data operations.

Critical minerals investment opportunities, risks

Ukraine is advancing licensing and production-sharing models for strategic minerals, including lithium projects with large capex (reported up to US$700m initial; longer-term >US$1.8bn). Potential upside is high for EU battery supply chains, but war-risk insurance, permitting integrity, and infrastructure security remain decisive.

Semiconductor reshoring with conditional relief

New chip policy links tariff relief to US-based capacity buildout, using leading foundries’ domestic investment as leverage. For global manufacturers and hyperscalers, this reshapes procurement and pricing, favors suppliers with US footprints, and increases strategic pressure on Taiwan-centric sourcing models.

Shadow fleet disruption and seizures

Western maritime posture is shifting from monitoring to interdiction: boarding, detentions, and potential seizures of falsely flagged tankers are rising. Russia is reflagging vessels to regain protection, but insurers, shipowners, and charterers face higher legal, safety, and reputational risks on Russia-linked routes.

Technology dependence and shortages

Despite ‘import substitution’ rhetoric, Russia remains reliant on high-tech imports; Chinese microchips reportedly supply ~90% of needs. Gaps persist in transport and industrial capabilities, raising risks of equipment shortages, degraded maintenance cycles, and unpredictable regulatory interventions to secure inputs.

Tax uncertainty and retrospective levies

Court-backed ‘super tax’ recoveries (around Rs310bn) and concerns over retroactive application undermine predictability. Firms face higher effective tax burdens, potential disputes and arbitration risk. This dampens FDI appetite and encourages short-horizon, defensive capital allocation.

Black Sea ports under fire

Russia is intensifying strikes on ports and shipping, pressuring Ukraine’s Odesa-area maritime corridor. Export volumes are volatile, with corridor exports reported down about 45% year-on-year in April 2025, while insurance, freight rates, and route planning remain highly sensitive.

Shadow fleet interdiction and shipping risk

Western enforcement is shifting from monitoring to interdiction: boardings, seizures, and “stateless vessel” designations target Russia-linked tankers using false flags and AIS gaps. This increases marine insurance premiums, port due‑diligence burdens, and disruption risk for Black Sea, Baltic, and Mediterranean routes.

China trade frictions resurface

Australia’s anti-dumping tariffs on Chinese steel (10% plus earlier 35–113% duties) raise retaliation risks across iron ore, beef and education services. Firms should stress-test China exposure, diversify markets and monitor WTO disputes and safeguard-style measures.

AI-led boom, labor and wage pressure

AI-driven export demand is lifting activity and wages; regular wages rose 3.09% in 2025 to NT$47,884, beating 1.66% inflation, while electronics overtime hit 27.9 hours. Businesses should expect tighter talent markets, higher labor costs, and capacity strain in electronics supply chains.

US–Taiwan tariff pact reshapes trade

A new reciprocal US–Taiwan deal locks a 15% US tariff on Taiwanese imports while Taiwan removes or cuts about 99% of tariff barriers and tackles non-tariff barriers. It shifts pricing, compliance, and market-access assumptions across autos, food, pharma, and electronics.

Energy supply, pricing, and arrears

Egypt is pressing international oil companies to double output by 2030 and revise contracts as legacy gas pricing becomes uneconomic. Reports of arrears (e.g., >$200m owed to one producer) highlight payment-risk, while new Western Desert finds support medium-term supply.

Expanded Sanctions and Secondary Measures

Congress and the administration are widening sanctions tools, including efforts to target Russia’s ‘shadow fleet’ and a proposed 25% tariff penalty on countries trading with Iran. This raises counterparty, shipping, and insurance risk and increases compliance costs across global trade corridors.

Industrial policy reshapes investment

CHIPS/IRA-style incentives and local-content rules steer capex toward U.S. manufacturing, batteries, and clean tech, while raising compliance complexity for multinationals. Subsidies can improve U.S. project economics, but may trigger trade frictions, retaliation, and fragmented global production strategies.

AI chip export controls tighten

Washington is enforcing stringent licensing and end-use conditions for advanced AI chips to China (e.g., Nvidia H200), including KYC and monitoring. Policy swings can quickly change market access, cloud capacity planning, and JV strategies, while raising diversion, enforcement, and reputational risks.

Port infrastructure under sustained strikes

A concentrated wave of Russian attacks on ports and ships—Dec 2–Jan 12 made up ~10% of all such strikes since 2022—targets Ukraine’s export backbone. Damage and interruptions raise demurrage and storage costs, deter carriers, and complicate export contracting for agriculture and metals.

IMF programme and macro conditionality

Late-February IMF review will determine release of a $1bn EFF tranche, shaping FX reserves, taxation, privatisation and monetary policy. Policy slippage risks renewed import controls, payment delays and currency volatility that directly affect trade finance and investor confidence.

Tariff volatility and retaliation

U.S. tariff policy is increasingly used for leverage, prompting EU countermeasure planning and disrupting exporters. Firms face abrupt duty changes, contract renegotiations, and demand shifts (e.g., European autos, wine/spirits). Diversification and tariff-engineering are rising priorities.

FX Volatility and Capital Flows

The won remains prone to sharp moves amid foreign equity flows and shifting hedging behavior. Korea’s National Pension Service, with ~59.6% of AUM overseas and 0% FX hedge, may change strategy in 2026, potentially moving USD/KRW and altering pricing, repatriation and hedging costs.

Red Sea shipping risk premium

Houthi attacks on Israel-linked vessels are suspended but conditional on Gaza calm, leaving a fragile ceasefire. Insurers and carriers maintain high-risk routing assumptions in Red Sea/Bab el-Mandeb, impacting transit times, freight costs, and reliability for Israel-related supply chains.

Third-country hubs targeted

EU proposals would sanction non-EU ports and facilitators—including Georgia’s Kulevi and Indonesia’s Karimun—and activate an anti-circumvention tool restricting exports to high-risk jurisdictions (e.g., Kyrgyzstan). Multinationals face expanded due diligence on transshipment, refining, and re-export chains.

Licenciamento ambiental e conflitos

Protestos indígenas bloquearam acesso a terminal no Tapajós, contestando dragagem e privatização de hidrovias, enquanto mudanças no licenciamento aumentam incerteza jurídica. Para agronegócio e mineração, atrasos podem interromper rotas do Arco Norte, encarecer seguros e exigir due diligence socioambiental reforçada.