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:

High energy costs, gas risk

Germany faces structurally higher industrial power costs and renewed gas-storage risk. Storage levels were ~26–34% in early February and summer prices near winter 2026/27 reduce refill incentives; some sites may close. Energy-intensive production and contracts face volatility.

Maritime and insurance risk premia

Geopolitical volatility continues to reshape Asia–Europe logistics. Even as Red Sea routes partially normalize, rate swings and capacity overhang drive volatile freight pricing. China exporters and importers should plan for sudden rerouting, longer lead times, and higher war-risk insurance.

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.

Investment unlock via omnibus law

Government is drafting an “omnibus” investment law to streamline land, permits, property rules, and investor visas, targeting ~THB900bn in realized investment from BOI-approved projects. If enacted, it could shorten project timelines, reduce regulatory friction, and boost greenfield expansion.

Tech sector volatility and rebalancing

High-tech remains ~57% of exports and 17% of GDP, but job seekers reached 16,300 (double 2022) and talent outflows persist. Funding rebounded to ~$15.6bn in 2025, increasingly defense-tech oriented, reshaping partners’ go-to-market and compliance needs.

Labor shortages and foreign workers policy

Mobilization and restricted Palestinian labor have intensified shortages, especially in construction; courts are also shaping foreign-worker rules. Project timelines, costs, and contractor capacity remain volatile, impacting real estate, infrastructure delivery, and onsite operational planning.

External debt rollovers, FX buffers

Pakistan’s reliance on short-term bilateral rollovers and Chinese commercial loans keeps reserves fragile; a recent $700m repayment cut gross reserves to about $15.5bn. Tight buffers raise devaluation risk, restrict profit repatriation and disrupt import-dependent supply chains.

New trade deals and friend-shoring

US is using reciprocal trade agreements to rewire supply chains toward strategic partners. The US–Taiwan deal caps many tariffs at 15%, links chip treatment to US investment, and includes large procurement and investment pledges, influencing regional manufacturing footprints and sourcing decisions.

Power grid and CFE investment gap

Electricity availability and interconnection delays increasingly constrain industrial expansions. Reports of reduced CFE investment and grid stress elevate outage and curtailment risk, pushing firms toward onsite generation, energy-efficiency capex, and more complex PPAs and permitting.

Geopolitical alignment and sanctions exposure

Heightened US–South Africa tensions increase tail-risk of targeted financial measures. With roughly 20% of SA government debt held by foreigners, any restrictions could spike yields and weaken the rand, complicating trade finance, USD liquidity, and investment returns.

Seguridad logística y robo de carga

Bloqueos, violencia y robo de carga aumentan interrupciones operativas. En 2025, 82% de robos se concentró en Centro (51%) y Bajío (31%); incidentes con violencia predominan. Riesgo: mayores primas de seguro, escoltas, inventarios de seguridad y demoras transfronterizas.

Coal output controls, export risk

Jakarta is signaling coal production limits for 2026 (proposal: 600m tons vs 790m in 2025), though top miners may be exempt. Annual RKAB approvals create uncertainty, thinning spot liquidity and complicating long-term export contracts for Asia’s import-dependent buyers.

Regional war and security risk

Gaza conflict and spillovers (Lebanon, Iran proxies) keep Israel’s risk premium elevated, raising insurance, freight, and business-continuity costs. Mobilization and security alerts disrupt staffing and site access, while renewed escalation could rapidly impair ports, aviation, and cross-border trade.

Climate shocks and supply disruptions

Monsoon floods and climate volatility continue to disrupt agriculture, transport and industrial operations; 2025 flooding displaced millions and raised ongoing exposure. Climate-resilience financing under RSF also shapes infrastructure standards, insurance costs, and due-diligence requirements for long-lived assets.

Transbordo China y cumplimiento aduanero

EE.UU. acusa a México de servir como “staging area” para bienes chinos y posibles prácticas de evasión arancelaria. Aumentará escrutinio aduanero, auditorías de origen y medidas antidumping, elevando riesgo de detenciones en frontera, sanciones y mayores costos de compliance.

Incertidumbre por revisión del T-MEC

La revisión obligatoria del T‑MEC antes del 1 de julio y señales en Washington de renegociación o incluso salida elevan el riesgo arancelario y de reglas de origen. Esto afecta decisiones de localización, contratos de largo plazo y valuación de proyectos exportadores.

Global trade remedies against overcapacity

Rising anti-dumping and safeguard actions targeting China-made steel and other industrial goods reflect persistent overcapacity and subsidization concerns. More tariffs, quotas, and investigations increase landed costs, disrupt procurement, and heighten retaliation risk across unrelated sectors, including commodities.

Secondary tariffs and sanctions extraterritoriality

Washington is expanding secondary measures, including tariffs on countries trading with Iran and pressure on partners over Russia-linked commerce. This raises third-country compliance burdens, increases tracing requirements across multi-tier supply chains, and elevates retaliation and WTO-dispute risks for multinationals.

Energy insecurity and high costs

Gas storage fell below 30% in early February, with some Bavarian sites near-empty, boosting LNG reliance and price volatility. Elevated energy costs threaten energy‑intensive production, contract pricing, and Germany’s investment appeal versus the US and Asia.

Energia, capacidade e risco climático

A Aneel aprovou leilões de reserva de capacidade em março, com preço-teto de até R$ 1,6 milhão/MW-ano e 368 projetos cadastrados. O mix renovável exige reforço de potência firme e transmissão; eventos climáticos aumentam riscos de custo e continuidade operacional.

Monetary easing amid weak growth

Inflation fell to 3.0% in January (services 4.4%) and unemployment rose to 5.2%, lifting expectations of a March Bank Rate cut from 3.75% to 3.5%. Shifting rates affect GBP, borrowing costs, hedging, and demand forecasts for exporters and investors.

Semiconductor Export Boom, Policy Risk

Chip exports are surging on AI demand, but firms face execution risk under Korea’s “Special Chips Act,” plus exposure to U.S.-China tech controls and customer concentration. This affects capex timing, subsidy access, and supply assurances for downstream electronics and automotive producers.

Tech industrial policy and AI compute

The UK is pushing advanced computing and semiconductor capability. Fractile plans £100m investment over three years, including a Bristol engineering and test facility, underscoring incentives and procurement focus. Opportunities rise for R&D, but export controls, talent scarcity, and funding selectivity shape market entry.

Semiconductor tariffs and controls

A tightening blend of Section 232 chip tariffs, case-by-case export licensing, and enforcement actions (e.g., a $252m Applied Materials settlement) is reshaping cross-border tech trade, raising compliance costs, and accelerating supply-chain diversification away from China.

Domestic Demand and Housing Fragility

Authorities remain cautious about easing as housing-related financial-stability risks persist, constraining policy flexibility. Weaker domestic demand limits revenue growth for consumer-facing businesses while keeping labor and input costs sticky, and it heightens sensitivity to external shocks and currency swings.

Ports, logistics upgrades and new routes

Gwadar airport, free zone incentives (23‑year tax holiday; duty exemptions) and highway links aim to expand re-export and processing capacity, while Karachi seeks terminal cost rationalisation and new Africa sea routes. Execution quality will determine lead-time and cost improvements.

Corporate governance and shareholder activism

Ongoing governance reforms and investor pressure continue to reshape capital allocation, buybacks and M&A. Foreign investors face improving transparency and board independence, but also higher expectations on ESG, cyber controls and supply-chain due diligence in listed companies.

Energy tariff overhaul and costs

IMF-linked power tariff restructuring is shifting from volumetric to higher fixed charges, while cutting industrial per-unit rates. Changes can lift inflation yet reduce cross-subsidies. Businesses face uncertainty in electricity bills, competitiveness, and contract pricing for factories.

Forced-labor import enforcement intensifies

CBP enforcement under the Uyghur Forced Labor Prevention Act continues to drive detentions and documentation demands, increasingly affecting complex goods. Companies need deeper tier-n traceability, auditable supplier evidence, and contingency inventory planning to avoid port holds and write-offs.

Natural gas exports and regional deals

Israeli gas flows to Egypt have risen with pipelines reportedly at full capacity, supporting regional power and LNG dynamics. Export reliability and pricing depend on security and contract reforms in Egypt, influencing energy-intensive industries and investment in infrastructure.

Energy import dependence and LNG

Taiwan’s tight energy margins and heavy LNG reliance create acute vulnerability to maritime disruption. Under the U.S. deal, Taiwan plans US$44.4B LNG/crude purchases through 2029, underscoring strategic stockpiling, grid upgrades, and potential cost volatility for industry.

US reciprocal tariff deal pending

Indonesia and the US are preparing to sign an Agreement on Reciprocal Tariff (ART), with talks reportedly reducing a mooted 32% US tariff to ~19% and carving out key Indonesian exports. Commitments may include ~$15bn Indonesian purchases of US energy, reshaping trade flows.

Balochistan security threatens projects

Militant violence in Balochistan is disrupting logistics and deterring FDI, including audits and security redesigns around the $7bn Reko Diq project. Attacks on rail and highways raise insurance, security and schedule costs for mining, energy, and corridor-linked supply chains.

Rising electricity cost exposure

A windless cold spell drove Finnish wholesale power prices sharply higher, intensifying scrutiny of energy-hungry data centres. For immersive tech operators, energy hedging, flexible workloads and heat-reuse options become key, affecting total cost of ownership and resilience planning.

War-driven fiscal and labor strain

Bank of Israel estimates Gaza-war economic cost at ~352bn shekels (~$113bn), with defense outlays and reserve mobilization disrupting labor availability. Higher deficits and taxes risk tighter procurement, slower project timelines, and elevated country risk premiums for investors.

Nearshoring growth meets constraints

Mexico continues attracting manufacturing and logistics investments, especially in northern and Bajío corridors, but execution risk is rising from land, permitting, utilities, and labor availability. Firms should stress-test project schedules, supplier capacity, and cross-border throughput assumptions.