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:

Nuclear file uncertainty and snapback risk

Collapsed US–Iran talks and intensified scrutiny of Iran’s enriched uranium stockpile increase the probability of tighter multilateral sanctions, export controls and secondary-sanctions actions. Businesses should plan for rapid compliance changes affecting dual-use goods, shipping services, and intermediaries linked to Iran-adjacent trade.

Conditional Tech Trade Reopening

Nvidia’s restart of H200 production for approved Chinese customers shows limited reopening within strict controls, even as top-end chips remain banned. This creates uneven market access, volatile procurement cycles and planning uncertainty for AI, data-center and industrial automation investors.

Growth and Investment Slowdown

The Finance Ministry cut its 2026 growth forecast to 4.7% from 5.2%, citing reserve mobilization, temporary shutdowns, weaker private consumption and uncertainty affecting investment and foreign trade, all of which complicate market-entry timing and capital-allocation decisions.

Financial System Dysfunction

Banking disruption, ATM cash shortages, and the launch of a 10 million rial note underscore deep financial stress. Businesses operating in or with Iran face elevated payment failure, convertibility, liquidity, and treasury-management risks, especially as digital channels and banking confidence weaken.

Energy Market Shock Transmission

Disruption around Iran and Hormuz is feeding through to global oil, gas, freight, and inflation dynamics well beyond Iran itself. With around one-fifth of global oil normally transiting Hormuz, sustained instability can reshape sourcing strategies, inventory planning, and hedging costs across multiple industries.

Wage acceleration and cost pass-through

Spring wage talks remain strong (Rengo seeks ~5.94% in 2026), while firms increasingly meet higher demands. If wages feed sustained inflation, BoJ tightens faster. Businesses should expect upward labor costs, pricing recalibration, and shifting consumer demand patterns.

Sanctions politics and energy transit

EU sanctions renewal has become entangled with energy transit disputes (Druzhba pipeline damage) and member-state veto leverage. For firms, this raises volatility in sanctions timelines, Russia-related compliance burdens, and regional energy supply/price risks.

Mining sector liberalization and expansion

Saudi mining is scaling fast under Vision 2030: Ma’aden posted 2025 profit up 156% to SR7.35bn and record phosphate output (6.72m tonnes). New licenses and improved global rankings signal opportunities in minerals, services, and downstream processing.

CUSMA review and tariff risk

Mandatory 2026 CUSMA/USMCA review and revived U.S. tariff tools (Sections 232/301/122) are the biggest macro uncertainty. Sectoral duties already hit steel, aluminum and autos, threatening integrated North American supply chains, pricing, and capex planning for exporters.

EU-China industrial policy trade friction

Europe’s proposed “Made in Europe” procurement and investment conditions target sectors where China dominates, including EVs, batteries and solar. China calls the plan discriminatory and WTO-incompatible, raising risk of retaliatory measures, tighter market access, and more compliance burdens for cross-border investors.

Downstream EV Supply Chain Expansion

Indonesia remains central to global EV materials, producing about 2.2 million tonnes of nickel annually, roughly 40% of world output. Continued refining expansion supports battery investment opportunities, but foreign firms must navigate policy activism, local processing mandates, and concentration risk.

Energy import vulnerability and price shocks

Taiwan imports ~96% of energy and holds roughly 10–11 days of LNG reserves, making it highly exposed to chokepoint disruptions and Middle East supply shocks. Higher spot LNG buying can lift inflation and operating costs for energy-intensive manufacturers and logistics providers.

Payments fragmentation and crypto channels

Cross-border settlement increasingly shifts toward yuan use, alternative messaging, and emerging regulation for bank-run crypto exchanges and stablecoins. While enabling trade under sanctions, it adds AML/CTF complexity, FX liquidity risk, and heightened scrutiny for counterparties handling digital-asset rails.

Trade facilitation and export competitiveness

Government prioritises export-led growth via trade facilitation and tariff rationalisation. Outcomes matter for textiles and other export sectors facing weak demand and high input costs. Faster border procedures, stable FX access and predictable duties can materially improve sourcing and delivery timelines.

Port, rail, and inland logistics risk

U.S. import volumes are pressured by tariff uncertainty while inland risks rise from cargo theft, weather volatility, and potential CDL/driver eligibility changes. This can tighten trucking capacity, elevate distribution costs, and complicate just‑in‑time inventory strategies for importers and manufacturers.

Enerji fiyatları, cari açık riski

Türkiye’nin enerji ithalat bağımlılığı, Brent’in ~96 $/varil seviyelerine çıkmasıyla maliyet ve enflasyon kanalı üzerinden büyümeyi baskılıyor. Sürmekte olan şokta akaryakıt vergi “kayar ölçek” mekanizması tampon sağlasa da uzun sürerse cari açık ve fiyatlama riski yükselir.

Baht volatility and monetary easing

The baht has weakened toward 32 per US dollar on risk-off flows and higher oil import costs (energy imports ~5–6% of GDP). The Bank of Thailand cut rates to 1% and may ease further, influencing hedging needs, import pricing and funding conditions.

Supply-Chain Trust Becomes Strategic

Taiwan’s role as a trusted technology and electronics hub depends increasingly on rigorous compliance, traceability and governance standards. Any breach involving sanctioned entities or diverted goods could damage supplier credibility, trigger foreign enforcement and reshape sourcing decisions by multinational customers.

Security Threats to Logistics Networks

Cargo theft, extortion and federal highway insecurity remain material operating risks for manufacturers and distributors. Business groups are now advocating a parallel security arrangement with the United States, reflecting the direct impact of crime on delivery reliability, insurance costs and workforce safety.

US Tariff Exposure Hits Exports

UK goods exports to the United States fell 10.3% to £59.2 billion last year, with car exports down 28.1% to £7.5 billion. Continued US tariff uncertainty increases pressure to diversify markets, reassess transatlantic pricing, and reduce trade friction elsewhere.

Lira Volatility and Tightening

Turkey’s lira remains under heavy pressure near 44 per dollar as inflation stayed around 31.5% and policy rates were held at 37%, with funding costs pushed toward 40%. Currency instability raises import costs, hedging expenses, financing risk, and pricing uncertainty for foreign investors.

Steel Protectionism Reshapes Supply Chains

London will cut tariff-free steel quotas by 60% from July and impose 50% duties above quota, backed by a £2.5 billion strategy. The shift protects domestic capacity but raises input costs for construction, automotive, infrastructure, and imported intermediate supply chains.

Nuclear Power Competitive Advantage

France’s strong nuclear fleet is cushioning electricity costs versus peers, with 2027 power futures near €50/MWh versus above €100 in Germany. This supports energy-intensive manufacturing, data centers, and export competitiveness, even as gas-linked volatility still affects parts of industry.

Regulatory Predictability Under Scrutiny

Foreign investors are increasingly focused on policy speed and legal predictability, amid concerns over digital regulation, labor law changes and rapid legislative action. This raises perceived governance risk, which can weigh on capital inflows, valuations and long-term investment commitments.

Grid expansion and electrification buildout

GE Vernova will invest $200m in a Hai Phong HVDC transformer facility, targeting operations by 2028, and explore HVDC cooperation with EVN. Stronger transmission supports industrial load growth and renewables integration, but permitting timelines and grid constraints remain material.

Fragile Growth and Export Weakness

Macroeconomic conditions have stabilised but remain soft for investors. Real GDP growth improved from 0.5% in 2024 to 1.1% in 2025, driven mainly by consumption, while exports declined amid logistics constraints and external tariff pressure on key tradable sectors.

US Tariff And Probe Exposure

Washington’s tariff stance remains the top external risk: Trump threatened tariffs of 25% from 15%, while USTR Section 301 probes on overcapacity and forced labor could hit autos, semiconductors and other exports, complicating pricing, contracts and market access planning.

Inflation rebound and demand risk

Urban inflation accelerated to 13.4% in February amid food and utility pressures, then faced additional pass-through from devaluation and fuel hikes. Real household demand may soften, wage pressures rise, and the central bank could pause or reverse easing, raising financing costs.

Hormuz Shipping And Energy Risk

The Strait of Hormuz remains selectively constrained, with vessel attacks and traffic far below normal levels. Because roughly one-fifth of global oil and gas flows typically transit the route, shipping costs, insurance premiums, and energy price volatility remain major business risks.

Telecom regulation and connectivity economics

CRTC-mandated fibre wholesale access is reshaping competition and investment incentives, with incumbents disputing provisioning and interim rates. For businesses, outcomes affect broadband pricing, service quality, and rollout speed—especially for remote operations and digital-heavy sectors needing reliable connectivity.

Farm Labor Policy Turns Contradictory

Immigration crackdowns worsened agricultural labor shortages, pushing Washington to expand and cheapen H-2A hiring. With only 182 domestic applicants for more than 415,000 farm postings, agribusiness faces ongoing labor dependence, litigation risk, food-price pressures, and operational uncertainty across seasonal supply chains.

Sanctions volatility and enforcement risk

Western sanctions remain dynamic, with stepped-up targeting of shipping, insurance and intermediaries. Recent temporary waivers and political disputes over new EU packages increase compliance uncertainty, heightening due-diligence costs, contract risk, and potential secondary-sanctions exposure for traders, banks, and logistics providers.

Monetary Tightening and Lira

Turkey’s central bank held rates at 37% and kept overnight funding at 40% as inflation stayed at 31.5% in February. Lira defense has reportedly consumed about $26 billion in reserves, raising financing, hedging, import-cost, and repatriation risks for foreign businesses.

Domestic gas reservation and LNG tradeoffs

Policy uncertainty around an east-coast gas reservation scheme from 2027 and tougher state bargaining is reshaping contracts. WA’s Woodside deal trades extra LNG exports for 23 PJ domestic supply by 2029, signalling tighter intervention risk for energy-intensive industry.

Energy security policy and regulation

Government responses include oil‑reserve releases (Germany plans ~2.4m barrels) and possible limits on daily fuel price hikes plus stronger antitrust powers. Debate over long‑term gas contracts, storage rules, and even fracking adds regulatory volatility for energy users and investors.

Manufacturing Cost Pass-Through

Research indicates roughly 80% to 100% of tariff costs are passed into US prices, with tariff revenue reaching $264 billion in 2025. For exporters and investors, this signals margin pressure, selective repricing, and weaker demand in industries reliant on imported inputs.