Mission Grey Daily Brief - June 13, 2024
Summary of the Global Situation for Businesses and Investors
US President Joe Biden arrived in Italy for the G7 summit, which will be dominated by discussions on the war in Ukraine and the Middle East, as well as new critical challenges such as artificial intelligence, climate change, and supply chain issues. Biden will also meet with Ukrainian President Volodymyr Zelenskyy to discuss continued US support and sign a bilateral security agreement. Meanwhile, the US announced new sanctions against Russia ahead of the summit, aiming to further isolate and financially weaken Moscow. In other news, China conducted large-scale military exercises around Taiwan, showcasing its ability to launch a blockade with minimal warning. In Europe, military spending is rising amid fears of a potential expansion of the Russia-Ukraine war. Lastly, violent protests erupted in Buenos Aires as Argentina's Senate approved austerity measures proposed by President Javier Milei.
US-Russia Relations and the G7 Summit
US President Joe Biden arrived in Italy for the G7 summit, which will be attended by leaders of Canada, France, Germany, Italy, Japan, and the United Kingdom, and other special invitees. The summit will be dominated by discussions on the war in Ukraine and the Middle East, as well as critical challenges such as artificial intelligence, climate change, and supply chain issues. Biden will meet with Ukrainian President Volodymyr Zelenskyy on Thursday to discuss continued US support and sign a bilateral security agreement, pledging long-term cooperation in defense and security. The agreement aims to strengthen Ukraine's defense capabilities and deter future Russian aggression.
Ahead of the summit, the Biden administration announced over 300 new sanctions against Russia, guided by G7 commitments to intensify pressure and further isolate and financially weaken Moscow. The sanctions target foreign financial institutions supporting Russia's war efforts, restrict access to US software and IT services, and target individuals and entities aiding Russia's war efforts. The US aims to limit Russia's revenue streams and hamper its ability to source materials for the war.
China's Military Exercises Around Taiwan
Last month, China conducted large-scale military exercises around Taiwan, showcasing its ability to launch a blockade or quarantine of the island with minimal warning. The exercises involved elements of the Chinese joint force surrounding the island democracy and highlighted China's ability to escalate drills into a conflict. According to experts, China's fleet is well-suited for a blockade, and the country has been increasing the frequency and normalizing its military presence around Taiwan. This poses a significant threat to Taiwan's economy, as a blockade could cut off trade and shipping routes. While there has been speculation about a potential US response to a Chinese invasion, the US reaction to a blockade or quarantine remains unclear.
Rising Military Spending in Europe
According to the Global Peace Index, Europe's military spending is rising amid fears of a potential expansion of the Russia-Ukraine war. More than three-fourths of European countries increased their military spending in 2023, and 30 out of 39 European countries recorded a deterioration in combat readiness over the past year. The report warns that the world is at a crossroads, with the number of global conflicts reaching 56, the most since World War II. It emphasizes the need for governments and businesses to resolve minor conflicts to prevent them from escalating.
Violent Protests in Argentina
In Buenos Aires, violent protests erupted as Argentina's Senate narrowly approved a set of austerity measures proposed by President Javier Milei. Protesters urging senators to reject the program hurled projectiles at police, who responded with water cannons and tear gas. The measures include a tax package lowering the income tax threshold and a state reform bill that grants broad legislative powers to the president in various areas. President Milei's political party holds a minority of seats in Congress, and he has struggled to strike deals with the opposition. The approval of these measures marks an initial legislative victory for Milei, who rose to power on promises to resolve Argentina's economic crisis.
Risks and Opportunities
- Risks: The G7 summit and the new sanctions against Russia highlight the ongoing geopolitical tensions and economic challenges. Businesses and investors should monitor the situation and assess their exposure to Russian and Ukrainian markets, as well as their supply chain dependencies.
- Opportunities: The G7 summit presents an opportunity for businesses and investors to adapt to changing dynamics and explore alternative supply chains and markets. Additionally, the US commitment to support Ukraine provides a chance for defense and security industries to contribute to Ukraine's defense capabilities.
Further Reading:
Argentina: violent protests as senators back austerity measures of President Milei - The Guardian
Biden Arrives In Italy For G7 Summit, To Meet Ukraine's Zelensky Today - NDTV
Biden administration announces new sanctions against Russia ahead of G7 summit - CNN
Biden heads to Italy to pitch world leaders on more cash for Ukraine - NBC News
Biden leads new drive to cement the West’s Ukraine war effort against Putin – and Trump - CNN
China showed how easily and with no notice it can surround Taiwan - Business Insider
Europe preparing for war as Ukraine conflict looms large, report finds - Al Jazeera English
Themes around the World:
Agricultural Policy and Trade Negotiations
France's agricultural sector faces challenges from EU trade agreements and environmental regulations. Protectionist measures and subsidy reforms influence global agricultural trade patterns, impacting exporters and importers reliant on French produce and affecting commodity supply chains.
Currency Volatility and Economic Pressures
Turkey faces persistent currency volatility and high living costs, challenging business planning and profitability. While public discontent remains muted, inflation and exchange rate fluctuations increase financial risk for international investors and complicate cross-border transactions.
Vision 2030 Economic Reforms Advance
Saudi Arabia continues to implement Vision 2030 reforms, focusing on economic diversification, infrastructure megaprojects, and attracting foreign investment. These initiatives offer new opportunities but require careful navigation of evolving regulations and local partnership requirements.
Shifting Geopolitical Alliances
Israel’s aggressive regional posture has led to increased isolation and shifting alliances, with Gulf states and Turkey recalibrating relations. This dynamic affects trade corridors, investment flows, and the predictability of Israel’s external business environment.
Business Rates And Duty Hikes
Rising business rates and new duties on fuel, alcohol, air travel, and vaping in 2026 will increase operational costs, especially for retail and hospitality. These changes threaten high street viability and may trigger closures, job losses, and supply chain adjustments.
US Trade Access and AGOA Renewal
The renewal of the African Growth and Opportunity Act (AGOA) is pivotal for South African exports to the US. While a three-year extension is likely, eligibility reviews and geopolitical tensions pose uncertainty, threatening duty-free access and impacting sectors like automotive, textiles, and agriculture.
UK Industrial Strategy and Investment Zones
The UK’s 10-year growth plan focuses on attracting investment in finance, life sciences, clean energy, and manufacturing. New investment zones, freeports, and public-private partnerships are designed to enhance competitiveness and supply chain innovation.
Currency Collapse And Hyperinflation
Iran’s rial has lost over half its value in six months, trading at 1.4 million per US dollar, driving inflation above 42%. This has severely eroded purchasing power, destabilized markets, and triggered nationwide protests, directly impacting trade and investment decisions.
Infrastructure Development Initiatives
Vietnam's accelerated infrastructure projects, including ports, highways, and industrial zones, improve logistics efficiency and reduce operational costs. Enhanced connectivity supports export growth and attracts multinational corporations seeking reliable supply chain networks, thereby boosting Vietnam's competitiveness in global markets.
Circular Economy Gains Global Attention
Eskilstuna’s ReTuna shopping center, dedicated to recycled goods, prevents 4,000 tons of CO2 emissions annually and attracts 360,000 visitors. Sweden’s circular economy initiatives are setting benchmarks for sustainable business models and international partnerships.
Trade Policy and International Relations
Brazil's trade policies and diplomatic relations, especially within Mercosur and with major partners like China and the US, play a pivotal role in shaping market access and tariff structures. Shifts in trade agreements or geopolitical tensions can alter supply chain routes and investment flows.
Labor Market Dynamics
Demographic shifts and labor shortages in South Korea affect productivity and wage structures. These changes influence operational costs and investment decisions, prompting businesses to adopt automation and reconsider workforce strategies to maintain competitiveness.
Mining Sector Liberalization and Growth
The Ministry of Industry awarded 172 mining site licenses to 24 companies, including global players, committing SAR671 million to exploration. Mining is positioned as a key industrial pillar, unlocking SAR9.4 trillion in mineral wealth and strengthening mineral supply chains.
EU Trade Policy and Global Realignment
Germany is actively pursuing new trade agreements, notably the India-EU Free Trade Agreement and Mercosur deal, to counterbalance challenges from US protectionism and EU fragmentation. These efforts are critical for maintaining export markets and supply chain resilience amid shifting global alliances.
Geopolitical Tensions with China
Rising geopolitical tensions between Japan and China, including disputes over the East China Sea and Taiwan, pose risks to trade routes and supply chain stability. Businesses face potential disruptions and increased costs due to heightened security measures and possible sanctions, affecting investment decisions and regional partnerships.
Mandatory Ethanol-Blended Fuel Rollout
Indonesia will mandate 10% ethanol-blended fuel by 2028, offering incentives for ethanol plant investments and tax relief. This policy supports bioethanol production, reduces fuel imports, and creates new opportunities for international investors in renewable energy and agribusiness.
Labour Market and Immigration Policies
Changes in immigration rules and labour market dynamics post-Brexit affect talent availability and wage pressures. Restrictions on EU workers influence sectors like agriculture, healthcare, and logistics, compelling companies to adjust workforce strategies and potentially increasing operational costs.
Geopolitical Tensions and Security Risks
Turkey faces escalating regional tensions, notably with Israel, Greece, and in Syria, alongside involvement in the Russia-Ukraine conflict. These dynamics threaten trade routes, investment stability, and supply chain resilience, requiring robust risk management for international business.
Labor Market Reform Momentum
South Korea is advancing major labor reforms in 2026, including reduced working hours, the right to disconnect, and stricter wage systems. These changes will reshape consulting demand, impact supply chains, and influence international investment strategies.
AI-Led Revival in Technology Sector
India’s IT sector is poised for gradual revival in 2026, driven by enterprise AI adoption and digital transformation. While near-term growth is muted due to cost pressures and global headwinds, scaled AI deployments are expected to support long-term deal flow and sector competitiveness.
State Intervention and Industrial Subsidies
The German government is expanding subsidies for new gas-fired power plants and industrial electricity, with €12 billion approved by the EU. While intended to ease energy costs and support heavy industry, these measures raise concerns about long-term fiscal sustainability and market distortions.
Robust Export Growth and Trade Surplus
Vietnam posted a record $20 billion trade surplus in 2025, with exports up 17% and processed industrial goods leading. The US remains the top export market, while China dominates imports. Trade growth supports macroeconomic stability but increases exposure to global demand fluctuations and protectionism.
Semiconductor Industry Dominance
Taiwan is a global leader in semiconductor manufacturing, crucial for electronics and automotive industries worldwide. Disruptions in Taiwan's chip production can significantly affect global supply chains, emphasizing the importance of Taiwan in technology investment strategies and international trade dependencies.
Foreign Portfolio Investment Volatility
After record FPI outflows of USD 17.5 billion in 2025, foreign investors are expected to return in 2026 amid improved earnings and macro stability. However, India’s limited AI production capacity may divert global capital to more AI-exposed markets, affecting sectoral investment flows.
Energy Sector Expansion and Diversification
Egypt's investments in renewable energy and natural gas production enhance energy security and export potential. The development of the East Mediterranean gas fields positions Egypt as a regional energy hub, impacting global energy markets and attracting energy sector investments.
Startup Ecosystem and Venture Investment Surge
South Korea’s government-led support for startups, highlighted at CES 2026, is fostering innovation in AI, deep-tech, and mobility. Seoul’s global ranking and record FDI inflows signal robust opportunities for venture capital, partnerships, and technology-driven business models.
Geopolitical Tensions Impact Supply Chains
Export controls, especially U.S. restrictions on semiconductor technology to China, create operational uncertainty for Korean firms. Temporary exemptions for Samsung and SK Hynix highlight ongoing risks to production stability and cross-border supply chain planning.
GCC Integration and Strategic Partnerships
The Gulf Cooperation Council (GCC) advanced regional unity, security, and economic integration in 2025, with joint defense, customs, and infrastructure projects. Saudi Arabia’s role in the GCC enhances its global influence and stability, supporting cross-border trade and investment.
Regulatory Tightening and Compliance Risks
China is strengthening oversight of outbound investment, foreign acquisitions, and sensitive technologies. New export control laws and anti-dumping investigations increase compliance complexity for multinationals, requiring robust risk management and adaptability to evolving legal frameworks.
Trade Agreements and Regional Integration
Egypt's participation in trade agreements such as the African Continental Free Trade Area (AfCFTA) and bilateral deals expands market access and influences supply chain configurations. These agreements shape tariff structures and cross-border investment flows, impacting international trade strategies.
Trade Relations and Agreements
Thailand's participation in regional trade agreements like RCEP and ASEAN Economic Community shapes its trade dynamics. These agreements facilitate market access, reduce tariffs, and attract foreign direct investment, bolstering Thailand's position in global trade networks.
Political Stability Concerns
Political tensions and governance challenges, including corruption allegations and factionalism within the ruling party, raise concerns about policy continuity and institutional effectiveness. Political risks influence investor confidence and may lead to capital flight or reduced foreign direct investment.
US Dollar Decline Reshapes Investment
The US dollar fell 10–12% against major currencies in 2025, driven by policy uncertainty and global capital flows. This depreciation raised import costs and inflation, but boosted US exports and international investment returns, compelling companies to adapt currency risk strategies and portfolio allocations.
Business Operations Face Regulatory Uncertainty
Vague wording in China’s export controls leaves Japanese and foreign firms exposed to unpredictable enforcement, complicating compliance, risk management, and long-term planning for international operations dependent on Japanese and Chinese inputs.
Collapse of Russian Gas Exports to Europe
Russian pipeline gas sales to Europe plunged 44% in 2025, reaching historic lows as the EU phases out imports by 2027. Russia’s pivot to China cannot fully offset lost revenue, eroding its leverage and reshaping European energy security.
Infrastructure Deficiencies
Inadequate transport and logistics infrastructure, including port congestion and deteriorating road networks, hamper efficient trade flows. These bottlenecks increase lead times and logistics costs, challenging South Africa's role as a regional trade hub and affecting supply chain resilience.