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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

Putin marks 25 years in the Kremlin with Ukraine war and internal authoritarianism at fever pitch - EL PAÍS USA

Ukraine ends Russian gas pipeline to Europe – but how much will it cost Moscow? - The Independent

Ukraine-Russia war latest: Putin launches New Year’s Day drone attack on Kyiv with pregnant woman among injured - The Independent

Themes around the World:

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US-Canada Trade War Impact

Ongoing US-imposed tariffs on Canadian goods, especially in the automotive sector, have strained bilateral trade relations, causing economic uncertainty and job losses in manufacturing hubs like Ontario. Retaliatory duties by Canada and stalled trade negotiations exacerbate risks to investment and supply chains. This trade conflict challenges Canada's export strategies and necessitates diplomatic and economic responses to stabilize cross-border commerce.

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Environmental Challenges: Desertification and Water Scarcity

A UN-backed report highlights that 88% of Turkey is at risk of desertification by 2030 due to climate change, with rising temperatures and declining rainfall severely threatening water resources. Given agriculture's heavy water usage, this poses critical risks to food security, export commodities, and rural livelihoods, necessitating urgent investments in sustainable water management and climate adaptation strategies.

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Hong Kong’s International Financial Role

Hong Kong strives to maintain its distinct international financial status under 'one country, two systems' amid Western perceptions equating it with mainland China. Despite geopolitical headwinds and US-China trade tensions, the city remains a critical regional hub and gateway for capital flows, though uncertainty tempers investment and hiring decisions, influencing regional trade and finance strategies.

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Capital Market Rally and Investor Sentiment

The Tel Aviv Stock Exchange experienced record-breaking rallies fueled by optimism following military successes and reduced risk premiums. Significant inflows into local mutual funds and equities, alongside a strengthening shekel, reflect growing investor confidence, which enhances Israel's attractiveness for foreign and domestic investment, impacting supply chains and corporate financing.

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U.S. Dependence on Chinese Rare Earths

The U.S. faces critical vulnerabilities due to heavy reliance on China for rare earth minerals and permanent magnets essential for military and industrial applications. China's dominance in refining and processing threatens national security and economic stability, prompting calls for revitalizing domestic production and diversifying supply chains to reduce geopolitical risks.

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Social Stability and Public Sentiment

Social narratives around personal relationships and public controversies, while seemingly unrelated to business, influence consumer confidence and social cohesion. These factors indirectly impact market demand, brand perception, and the social license to operate for international firms in Vietnam.

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Real Estate Market Regulatory Changes

Amendments to Egypt’s Old Rent Law phase out fixed-rent contracts, introducing significant rent increases over transitional periods. This legislative change affects approximately 409,000 households, with implications for housing affordability and commercial property markets. The reforms aim to balance tenant protections with property owner rights, impacting real estate investment, rental markets, and urban development strategies.

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NATO Defence Spending and Infrastructure

Canada’s commitment to NATO’s 5% GDP defence spending target includes up to 1.5% for infrastructure with dual-use military and civilian functions. Investments in critical minerals extraction, Arctic ports, rail, and roads supporting defence logistics are prioritized. This broad interpretation supports industrial base strengthening and supply chain security but requires strategic justification to align with NATO and national interests.

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US Tax on Remittances Impact

The introduction of a 1% US tax on cash remittances to Mexico threatens to reduce household spending by up to 25%, disproportionately affecting vulnerable states reliant on remittance inflows. Given remittances constitute 3% of Mexico's GDP, this tax could dampen domestic consumption, disrupt informal financial flows, and provoke government reimbursement measures, influencing economic stability and consumer markets.

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Political Uncertainty Ahead of Upper House Election

The upcoming July 20 Upper House election introduces political uncertainty, with opposition parties advocating consumption tax cuts and restrictions on foreign property ownership. These policy debates could influence fiscal discipline, investor confidence, and foreign investment flows. The election outcome will shape Japan's economic policies, regulatory environment, and international trade posture.

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Critical Minerals and Supply Chain Security

The UK faces strategic challenges securing critical minerals like tungsten and rare earths essential for advanced manufacturing, defence, and technology. With China dominating rare earth supply chains and geopolitical tensions rising, the UK must navigate supply risks, invest in domestic resources, and diversify sources to maintain technological and military capabilities, impacting industrial policy and international trade relations.

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Digital Currency and Financial Infrastructure Integration

Belarus and Russia advocate for integrating central bank digital currency platforms within BRICS to build a multi-level, secure settlement system. This initiative aims to harmonize financial markets, enhance cybersecurity, and develop sovereign economic architectures, leveraging blockchain and IoT technologies to modernize logistics and supply chains in Eurasia.

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State-Level Fiscal Modernization and Debt Risks

Brazil’s $2 billion Inter-American Development Bank loan supports states’ tax administration modernization amid rising subnational debt, which now outpaces federal levels and contributes to a projected 92% public debt-to-GDP ratio. Chronic budget deficits and pension costs at state level threaten fiscal stability, potentially increasing taxes and financial uncertainty for businesses and investors.

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Cross-Border Corruption and Money Laundering

A large-scale corruption and money laundering ring involving Thai and Cambodian labor officials exploits foreign workers through extortion and illicit fees, potentially exceeding ฿6 billion. This undermines labor market integrity, increases operational risks for businesses relying on migrant labor, and highlights governance challenges affecting bilateral relations and economic cooperation.

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Economic Crisis and Corporate Bankruptcies

The Turkish economy is experiencing severe distress, evidenced by high-profile bankruptcies in key sectors such as textiles (YFA Tekstil, Atak Kumaş Tekstil) and food (Peyman Kuruyemiş). Factors include rising costs, currency volatility, and shrinking global demand. These failures disrupt supply chains, increase unemployment, and signal systemic vulnerabilities, posing risks to trade continuity and investment stability.

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Supply Chain Disruptions in Agricultural Imports

Political tensions with Turkey, Iran, and Pakistan have disrupted India's apple imports, leading to supply shortages and price increases for domestic producers in Kashmir and Himachal Pradesh. Border closures and import risks highlight vulnerabilities in agricultural supply chains, impacting food prices, trade flows, and domestic market stability during peak harvest seasons.

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Political Stability and Governance Challenges

France faces political scrutiny with investigations into the far-right National Rally party for alleged campaign finance violations. Political instability and legal probes may affect investor sentiment and the regulatory environment. Additionally, the fragmented parliament complicates governance, impacting policy continuity and economic reforms critical for business confidence.

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Labor Market Strains and Workforce Deficits

Despite a drop in unemployment to 12%, Ukraine faces persistent poverty and a significant labor shortage due to war-related displacement, migration, and mobilization. Skill mismatches and reduced labor market activity constrain economic recovery and industrial productivity, while wage increases and workforce deficits impact operational costs and investment attractiveness.

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Iran's Advanced Defense Capabilities

Iran's development of extensive underground missile facilities and mastery of missile propulsion technology demonstrates significant military resilience. This strategic depth complicates foreign military interventions and sanctions, impacting international defense assessments and influencing investor risk calculations.

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Automotive Industry Challenges and EV Delays

Nissan's postponement of two electric vehicle models' production in the U.S. reflects broader challenges in Japan's automotive sector amid sluggish performance and shifting market dynamics. Delays in EV rollouts affect Japan's competitiveness in the global green mobility transition, supply chain planning, and investment in sustainable technologies.

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Escalating Thai-Cambodian Border Tensions

Heightened military and diplomatic tensions along the Thai-Cambodian border include trade bans, power cuts, increased patrols, and security incidents such as emergency helicopter landings. These developments disrupt cross-border trade, threaten regional stability, and increase security risks, potentially impacting supply chains and investor sentiment in border provinces.

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Stock Market Performance and Investor Confidence

The Nikkei stock index recently surpassed 40,000 points for the first time in months, reflecting improved business sentiment and investor confidence. This bullish market environment supports capital inflows and investment activities, influencing corporate financing and international investor strategies focused on Japan’s equity markets.

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Political Polarization and Conservative Resurgence

Bolsonarist conservatives have reached parity with Lula supporters, reflecting a global trend of rising nationalism and skepticism toward globalization. Evangelical political influence is growing, shaping policy debates on social issues. This polarization introduces policy volatility, complicates reform prospects, and creates an unpredictable environment for business and investment strategies in Brazil.

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Diplomatic Push to Boost Exports

In response to sluggish economic growth and external trade pressures, the UK government has deployed senior diplomats nationwide to promote exports and forge international business partnerships. This initiative targets eight key growth sectors, aiming to unlock £7bn in economic growth by connecting 70,000 ready-to-export UK businesses with foreign markets, enhancing trade resilience and global engagement.

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Political Polarization and Democratic Challenges

Brazil faces deep political polarization with rising conservative Bolsonarist influence matching Lula’s support. The judiciary’s expanded role and erosion of democratic norms fuel institutional crises and uncertainty. This volatile political environment affects policy stability, investor confidence, and the country’s governance, posing risks to long-term economic and social development.

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Climate Policy and Energy Sector Challenges

Canada’s climate commitments under the Paris Agreement face challenges due to slow emissions reductions and continued fossil fuel investments by financial institutions. Government efforts to balance industrial competitiveness with climate action, including support for carbon capture projects and clean energy infrastructure, create uncertainty for investors and complicate the transition to a low-carbon economy.

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Strategic Energy Transit Risks

Turkey's proximity to critical energy chokepoints like the Hormuz Strait exposes it to global energy market volatility. Disruptions in these transit routes could spike oil prices and impact energy supplies. Turkey’s role as an energy corridor is both an opportunity and a risk factor for international energy trade and related investments.

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Geopolitical Tensions Impact Economy

Ongoing global conflicts including the Ukraine war, Middle East tensions, and US-China-Russia rivalry have heightened uncertainty, disrupting investment flows and global trade. Indonesia faces weakened investor confidence, supply chain disruptions from El Niño, and currency depreciation. Despite these challenges, Indonesia's economy shows resilience supported by fiscal measures, but geopolitical risks continue to affect trade and investment stability.

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Impact of Global Trade Tariffs and Negotiations

US tariff policies, exemplified by increased tariffs on Philippine exports and ongoing EU-US trade negotiations, highlight the volatility in global trade frameworks. Saudi businesses must navigate these uncertainties, as tariff shifts can disrupt supply chains, affect export competitiveness, and influence foreign direct investment flows.

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Defense Posture and Regional Security Enhancements

Japan is strengthening its southwestern defense capabilities by relocating V-22 Osprey aircraft to Saga base and seeking US cooperation in aircraft and shipbuilding. These moves reflect strategic responses to regional security challenges, influencing defense industry investments and geopolitical stability critical for international business operations.

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Aviation and Direct US Flights

Thailand’s government advances plans to establish direct flights to the United States, supported by regained FAA Category 1 status and cooperation with US agencies. This initiative aims to enhance tourism, trade, and investment flows, positioning Thailand as a regional aviation hub. Successful implementation could strengthen connectivity and economic integration with key global markets.

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Halal Industry Export Resilience

Indonesia's halal product exports remain robust despite US tariffs, targeting primarily European and OIC markets. Ranking third globally in the halal industry, Indonesia leads in Islamic fashion and holds strong positions in tourism and pharmaceuticals. Government support and a developed halal ecosystem attract significant investment, positioning Indonesia as a key player in the expanding global Islamic economy.

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International Financial Crime and Fraud Networks

Thailand is a focal point for sophisticated international fraud schemes, including a major AU$80 million bond scam operated by Western nationals. Law enforcement actions highlight risks from transnational criminal networks exploiting Thailand’s regulatory gaps, posing reputational and operational risks for foreign investors and financial institutions.

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Rising Indonesian Crude Oil Prices

Indonesia’s crude oil price rose to US$69.33 per barrel in June 2025, driven by Middle East geopolitical tensions, increased global demand, and OPEC supply adjustments. This price surge impacts Indonesia’s energy costs, industrial production, and fiscal revenues, influencing inflation and economic planning. The volatility underscores Indonesia’s vulnerability to global energy market fluctuations.

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Humanitarian Impact and Social Stability

The military aggression resulted in significant civilian casualties, including women and children, fueling national unity and resistance. This humanitarian dimension affects social stability and public sentiment, which in turn influences domestic policy and international perceptions. Businesses must consider these socio-political dynamics when evaluating country risk and operational strategies in Iran.

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Surge in Foreign Tourism and Economic Impact

Japan experienced a record pace in foreign visitors, surpassing 20 million in H1 2025, driven by Chinese New Year and cherry blossom travel. This tourism boom supports sectors like retail, hospitality, and transportation, but also raises infrastructure and social integration challenges, influencing investment strategies in tourism-dependent regions.