Mission Grey Daily Brief - January 02, 2025
Summary of the Global Situation for Businesses and Investors
The Russia-Ukraine war continues to rage on, with Putin launching a New Year's Day drone attack on Kyiv, North Korean troops joining the fight, and Western countries lifting their ban on Ukraine using long-range missiles to attack targets inside Russia. Meanwhile, Israel is wary of deepening ties between Russia and Iran, which could involve a nuclear program. In Montenegro, several people were killed in a shooting after a bar brawl, and the shooter is still on the run. Thailand's aviation sector is expected to improve in 2025, but the country will need to manage its power supply as the data centre industry grows.
Russia-Ukraine War
The Russia-Ukraine war has been internationalised, with North Korean troops joining the fight and Western countries lifting their ban on Ukraine using long-range missiles to attack targets inside Russia. Russia has been receiving military assistance from Iran and North Korea, while Ukraine has been receiving financial and military assistance from the US, NATO, and the EU. Ukraine has ended a five-year deal that allowed Russian gas to flow to EU states through its pipeline networks, significantly reducing Russian gas imports to the EU. This move will cost Russia billions and impact countries like Moldova, which rely on Russian gas via Ukraine.
Israel-Russia-Iran Relations
Israel is wary of deepening ties between Russia and Iran, which could involve a nuclear program. Russia and Iran have been working together on a nuclear program, and Israel is concerned about the potential implications of this collaboration. Israel has been working to neutralise its enemies, and the deepening ties between Russia and Iran could pose a threat to Israel's security.
Montenegro Shooting
In Montenegro, several people were killed in a shooting after a bar brawl, and the shooter is still on the run. The shooter, identified only by his initials AM, fled the scene armed, and police have dispatched special troops to search for him. The shooting has caused concern among residents, and police have urged them to remain calm and stay indoors.
Thailand's Aviation Sector and Power Supply
Thailand's aviation sector is expected to improve in 2025, but the country will need to manage its power supply as the data centre industry grows. Thailand is seeing a significant increase in power demand as the government pushes the growth of data centres and the cloud service industry. The Board of Investment is supporting investment projects in data centres and cloud services, and Thailand is becoming a regional digital innovation hub. However, data centres are crucial infrastructure for artificial intelligence (AI) technology, and if AI-based tasks continue to grow in Thailand, a huge amount of electricity will be needed to keep the facilities running. One AI-embedded data centre requires between 300 and 1,000 megawatts of electricity, and Thailand will need to find a way to meet this demand while reducing its carbon footprint and ensuring a stable supply.
Further Reading:
Breaking News: Several killed as man opens fire in Montenegro bar - Telangana Today
Consulting the oracles - Bangkok Post
How the wars of 2024 brought together rivals and created enemies - BBC.com
Israel wary as Russia-Iran ties deepen, possibly involving nuclear program - Al-Monitor
Ukraine ends Russian gas pipeline to Europe – but how much will it cost Moscow? - The Independent
Themes around the World:
Rising Foreign Asset Holdings and Domestic Investment Decline
South Korea’s foreign financial assets have surged to $2.7 trillion, over half of GDP, driven by current account surpluses and outbound investments. While enhancing external financial strength, this trend weakens domestic capital markets, depresses the won, and exposes the economy to global risks, potentially undermining long-term growth and productivity.
Foreign Direct Investment Trends
FDI inflows remain mixed, with October 2025 recording $178.9 million, a slight decline from September. Key sectors attracting investment include power, financial services, and communications, with major contributions from China, UAE, and the Netherlands. Despite sectoral growth, overall FDI has declined sharply year-on-year, reflecting investor caution amid economic and political uncertainties.
National Core Hydrogen Network Expansion
The UK is advancing its core hydrogen network with a £164 million Ofgem investment, focusing on Project Union to repurpose and build pipelines connecting industrial clusters across Scotland and Northern England. This infrastructure will enable large-scale hydrogen transport, support decarbonization of heavy industries, create over 3,100 jobs, and add £300 million in annual economic value, strengthening energy security and attracting private investment.
EU Integration and Reform Challenges
Ukraine's EU accession process shows progress but is hindered by persistent issues in anti-corruption enforcement, judicial independence, and public sector transparency. Delays and political resistance to reforms risk slowing integration, affecting investor confidence and access to EU markets and financial support.
Regional Instability and Security Risks
Ongoing conflicts in the Middle East, including attacks by Yemen's Houthi rebels and conflicts in Sudan and Gaza, threaten Saudi Arabia's supply chains, maritime security, and tourism projects along the Red Sea coast. These risks increase insurance costs, disrupt logistics, and could delay or derail key Vision 2030 initiatives.
Foreign Direct Investment and Structural Reforms
FDI inflows have declined amid the exit of multinational firms and policy unpredictability. Recent investments are capital-intensive but lack innovation and technology transfer. Experts emphasize the need for governance reforms, stable taxation, and improved regulatory frameworks to attract sustainable, innovation-driven FDI critical for long-term growth and job creation in sectors like IT and pharmaceuticals.
Credit Rating Upgrades and Investor Sentiment
Recent upgrades by S&P Global and removal from the FATF grey list have boosted investor confidence, leading to increased foreign bond inflows and stock market gains. This improved sentiment lowers borrowing costs and may attract further capital, supporting economic growth and financial market stability.
Supply Chain and Material Security Efforts
Amid China-U.S. trade tensions and global supply chain disruptions, Taiwan is advancing domestic production of critical materials like rare earth elements and neon gas essential for high-tech and defense industries. This strategic push aims to reduce dependency, enhance supply chain resilience, and maintain Taiwan's competitive edge in semiconductor manufacturing.
Infrastructure Deficiencies and Load-Shedding Impact
Persistent electricity shortages and infrastructure bottlenecks, particularly in logistics hubs like the Port of Durban, increase operational costs and disrupt supply chains. Load-shedding has eased but remains a concern, limiting South Africa's competitiveness and deterring investment in energy-intensive sectors.
Fiscal Policy and Currency Market Effects
Aggressive tax hikes in France contribute to capital flight towards USD assets, fueling a strong US dollar rally. These fiscal measures impact foreign investment attractiveness and alter currency valuations, affecting trade competitiveness and investment flows. The interplay between French fiscal policy and global currency markets presents both risks and opportunities for multinational investors and exporters.
Oil Production and Sanctions Impact
Venezuela's oil output remains below pre-crisis levels, with official figures around 1.13 million bpd. U.S. sanctions and operational restrictions limit foreign investment and revenue flows, though Chevron's limited license and Russian chemical imports sustain production. Oil remains the economic backbone, but infrastructure decay and corruption hinder recovery, affecting global energy markets and trade dynamics.
Geopolitical Risks Impacting Forex and Trade
Ongoing geopolitical tensions in regions like the Middle East, South Asia, and East Asia significantly influence the Indian Rupee and trade flows. Conflicts and trade disputes, especially involving the US, China, and neighboring countries, create currency volatility and supply chain disruptions, necessitating risk management strategies for forex traders and businesses reliant on stable trade relations.
Economic Instability and Currency Surge
Iran faces severe economic instability marked by a sharp rise in the US dollar and gold prices, with the dollar surpassing 1.13 million rials. This surge is driven by runaway inflation, capital flight, and the reimposition of UN sanctions, exacerbating public dissatisfaction and complicating foreign trade and investment strategies.
Corruption Scandals in Energy Sector
A major corruption scandal involving a $100 million kickback scheme in Ukraine's state-owned energy companies, including Energoatom, has implicated close associates of President Zelenskyy. This undermines governance credibility, risks alienating Western allies, and threatens continued financial and military support critical for Ukraine's war effort and economic stability.
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.
Economic Stagnation and Governance Concerns
Reports highlight economic stagnation, weakened democratic institutions, and executive dominance undermining legislative and judicial independence. Such governance challenges increase political risk, potentially deterring investment and complicating Mexico's ability to implement reforms critical for economic growth and trade facilitation.
Ruble Currency Vulnerabilities
Sanctions have decoupled the Russian ruble from market fundamentals, but underlying economic pressures such as falling export revenues and domestic financial stress point to a gradual depreciation. Currency instability poses risks for foreign investors and complicates cross-border trade and financial operations.
European Defense Sector Volatility
European defense stocks have declined amid signals of potential de-escalation in the Ukraine conflict and US pressure for peace. This volatility reflects investor uncertainty about future defense spending, impacting defense contractors and related supply chains across Europe, with implications for long-term industry planning and government procurement.
Thailand-Cambodia Border Conflict Impact
Renewed clashes along the Thailand-Cambodia border threaten economic stability, risking a 130 billion baht loss in exports and disrupting labor supply with up to 500,000 Cambodian workers previously employed in Thailand. Tourism and border trade suffer, potentially reducing GDP by 100 billion baht. However, ongoing US-Thailand trade negotiations remain unaffected, underscoring resilience in bilateral economic ties.
Fintech Market Growth and Innovation
Thailand's fintech sector is projected to grow at a CAGR of 15.84% through 2033, driven by digital payment adoption, regulatory support, and increased smartphone penetration. Innovations in blockchain, AI, and open banking enhance financial inclusion and service personalization. Collaboration between fintechs and traditional banks fosters a dynamic ecosystem supporting the country's digital economy and underserved populations.
Trade Uncertainty and Tariffs
Trade uncertainty, driven by US tariffs and geopolitical tensions, has surged as the top concern for Irish firms, surpassing labor costs. While some exemptions exist, tariffs on exports to the US remain a risk, affecting investment decisions and revenue expectations. Ireland's open economy and dependence on global trade amplify vulnerability to shifts in trade policies.
Manufacturing and Industrial Expansion
The kingdom’s manufacturing sector is undergoing rapid growth supported by government policies prioritizing local content and industrial innovation. With a 6% year-on-year expansion and over 12,480 factories, Saudi Arabia aims to triple manufacturing GDP contribution by 2030. This industrial momentum enhances supply chain localization, reduces import reliance, and fosters export-ready technology-driven industries.
Geopolitical and Economic Policy Uncertainty
Persistent geopolitical tensions, particularly involving US trade and economic policies, continue to cloud the global outlook. This uncertainty affects business investment, consumer spending, and employment growth in Ireland, with downside risks linked to further tariff changes or trade disruptions, while any easing could spur stronger domestic demand.
Investor Confidence Amid Political Risks
Despite political turmoil and credit downgrades, French companies maintain a positive international image, supported by strong social responsibility and sustainability practices. Government initiatives like 'Choose France' aim to bolster domestic investment and highlight resilience in key sectors such as aerospace and digital services, helping to sustain investor confidence and economic momentum.
Vision 2030 and Economic Sovereignty
Vision 2030 is redefining Saudi Arabia's economic sovereignty by shifting focus from oil rents to knowledge-based sectors, including AI, digital technologies, and semiconductors. The Public Investment Fund (PIF) plays a pivotal role in strategic investments, while fiscal policies ensure long-term sustainability. This transformation enhances domestic decision-making and reduces vulnerability to global market volatility.
Systemic Corruption and Governance Challenges
The IMF's comprehensive report highlights entrenched corruption across Pakistan's institutions, including judiciary, police, and state-owned enterprises. Elite capture distorts markets and impedes fair competition, undermining investor trust and economic growth. Governance reforms are critical to unlocking GDP growth potential and reducing dependence on external bailouts, but political resistance and lack of transparency remain major obstacles.
Domestic Capital Outflows and Investment Base Erosion
Korea's foreign financial assets reached $2.7 trillion, over half of GDP, driven by retail and institutional overseas investments. While enhancing external financial soundness, this trend weakens domestic capital markets, depresses the won, and exposes Korea to global risks. Declining domestic investment amid an aging population threatens long-term productivity and economic vitality.
Domestic Growth Cycle and Investment Outlook
India's domestic growth cycle shows signs of bottoming out with supportive factors such as low interest rates, easing crude oil prices, and a normal monsoon. Government investments in infrastructure, manufacturing, and renewable energy, coupled with private sector capex recovery and Production Linked Incentive (PLI) scheme expansion, underpin a medium-term uptrend in investment, fostering sustained economic momentum despite global trade uncertainties.
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.
Banking Sector Credit Outlook
Fitch upgraded the credit outlook for leading Israeli banks from negative to stable, maintaining an A- rating. This signals recovery from wartime disruptions and reduced financial sector risks. Stability in banking supports credit availability, investor trust, and overall economic normalization, crucial for business operations and capital flows.
Corporate Risk Management and Cybersecurity Challenges
Indian firms confront escalating risks from cyber threats, regulatory pressures, economic volatility, and talent shortages. Despite awareness, few quantify exposures or evaluate insurance efficacy. Enhanced data-driven risk management, scenario planning, and resilience-building are imperative to sustain competitiveness amid digital disruption and tightening compliance environments.
Financial Regulation and Market Integrity
Following removal from the FATF gray list, Turkey faces ongoing scrutiny with a FATF delegation visit assessing anti-money laundering efforts. Authorities have intensified probes into illicit financial activities, suspending licenses of payment firms amid rapid sector growth. The government pledges tougher penalties and enhanced regulations to combat market manipulation, aiming to bolster investor confidence and financial market transparency.
US-Saudi Strategic Partnership Expansion
The historic $575 billion in deals between Saudi Arabia and the US encompasses technology, energy, defense, and finance sectors, reinforcing a strategic alliance. This partnership facilitates technology transfer, advanced manufacturing, and defense cooperation, positioning Saudi Arabia as a key player in the emerging global order shaped by AI, energy security, and industrial resilience.
Geopolitical and Security Risks Ahead of G20
The upcoming G20 summit in Johannesburg has heightened security concerns, with preparations underway to mitigate potential protests and shutdowns. Such events pose risks of operational disruptions and require coordinated law enforcement efforts to ensure stability, which is vital for maintaining investor confidence and smooth business operations during high-profile international gatherings.
Weakened Consumer Confidence Impact
Profit warnings across UK-listed companies increasingly cite weaker consumer confidence as a critical factor, reaching the highest levels since 2022. This decline in consumer sentiment affects discretionary spending, particularly in retail and construction sectors, leading to margin pressures and supply chain disruptions, thereby influencing corporate profitability and investment decisions.
Structural Economic Reforms Imperative
Experts emphasize the urgent need for comprehensive reforms including tax rationalization, regulatory clarity, improved governance, and enhanced investor protections to attract sustainable FDI and foster innovation-led growth. Without these reforms, Pakistan risks continued economic stagnation, capital flight, and erosion of its industrial base.