Mission Grey Daily Brief - January 14, 2025

Summary of the Global Situation for Businesses and Investors

The global situation remains highly volatile, with several geopolitical and economic developments that could impact businesses and investors. The US-Russia relationship continues to be strained, with US officials warning Russia against bringing the war in Ukraine to the US. Meanwhile, Russia has accused the US of destabilising global markets with sanctions on the Russian energy sector. In the Middle East, Saudi Arabia is pushing for the lifting of sanctions on Syria to support the country's reconstruction, while Turkey is urging a balanced approach. In Asia, North Korea has fired multiple short-range missiles, raising tensions in the region. Lastly, Russia is eyeing Libya as a potential military substitute for Syria, but Libyans are resisting this move.

US-Russia Tensions

The US-Russia relationship remains tense, with US officials warning Russia against bringing the war in Ukraine to the US. According to a New York Times report, aides to President Joe Biden sent a warning to Russian President Vladimir Putin after they feared that the Russians may attempt to bring the war in Ukraine to the US. This summer, cargo shipments began to catch fire at German, British, and Polish airports and warehouses, and both Washington and the Europeans believed that the Russians were responsible. In August, the White House grew concerned that the Russians were also planning to bring their sabotage to the US, according to secretly obtained intelligence. Aides to Biden reportedly reached out to Putin via Russian officials to put an end to sabotage at European airports and warehouses. Homeland Security Secretary Alejandro Mayorkas put in place new screening restrictions on cargo bound for the US in August. When the warnings once again arose in October, Mayorkas pushed the executives at the largest airlines flying into the US to take further measures to make sure there wasn’t a disaster in the middle of a flight. White House officials were not sure whether Putin had ordered the plot or if he even was aware. It was possible he had not been made aware, but at this point, a major effort was started to push him to put an end to it. Similarly to when the US believed Russia was considering using a nuclear weapon in Ukraine in October 2022, Biden sent National Security Adviser Jake Sullivan and C.I.A. Director William Burns to warn Putin’s aides. The warning stipulated that if Russia’s sabotage led to a mass casualty event in the air or on the ground, the US would hold Russia accountable for “enabling terrorism.” While Sullivan and Burns didn’t state what shape the response would take, they did say it would mean that the shadow war between Russia and the US would reach new heights.

Russia-Ukraine War

The Russia-Ukraine war continues to be a major concern for the global community. On Monday, the Kremlin said that the latest round of US sanctions on the Russian energy sector risked destabilising global markets. Kremlin spokesman Dmitry Peskov said, “It is clear that the United States will continue to try to undermine the positions of our companies in non-competitive ways, but we expect that we will be able to counteract this. At the same time, of course, such decisions cannot but lead to a certain destabilisation of international energy markets, oil markets. We will very carefully monitor the consequences and configure the work of our companies in order to minimise the consequences of these … illegal decisions.” The US and its allies have imposed sanctions on Russia's energy sector in response to its invasion of Ukraine, which has led to a significant reduction in Russia's oil and gas exports. This has resulted in a decline in Russia's energy revenues, which could potentially impact its ability to fund the war effort in Ukraine.

North Korea Missile Launches

North Korea has fired multiple short-range missiles off its east coast, raising tensions in the region. The missiles travelled about 250 km (155 miles) after lifting off at around 09:30 am (0030 GMT) from Kanggye, Jagang Province, near the country's border with China. South Korea's military said that the launch marked Pyongyang's latest show of force just days ahead of US President-elect Donald Trump's return to office. South Korea's Acting President Choi Sang-mok condemned the launch as a violation of United Nations Security Council resolutions and said Seoul would sternly respond to North Korea's provocations. Japan's Chief Cabinet Secretary Yoshimasa Hayashi said he was aware of the missile test, and Tokyo was taking all possible measures to respond through close cooperation with Washington and Seoul, including real-time sharing of missile warning data. The launch came about a week after the North fired what it claimed was a new intermediate-range hypersonic ballistic missile, which was its first missile test since Nov. 5. South Korean Foreign Minister Cho Tae-yul and Japanese Foreign Minister Takeshi Iwaya condemned the North's nuclear and missile development on Monday and pledged to boost security ties following talks in Seoul. U.S. Secretary of State Antony Blinken, while visiting Seoul last week, also called for further strengthening of bilateral and trilateral cooperation involving Tokyo to better counter Pyongyang's growing military threats. Tuesday's launch occurred days before the inauguration of Trump, who held unprecedented summits with North Korean leader Kim Jong Un during his first term and has touted their personal rapport. South Korean lawmakers, after being briefed by the National Intelligence Service, said on Monday that Pyongyang's recent weapons tests were partly aimed at "showing off its U.S. deterrent assets and drawing Trump's attention" after vowing "the toughest anti-U.S. counteraction" at a key year-end policy meeting last month.

Russia's Interest in Libya

Russia is eyeing Libya as a potential military substitute for Syria, but Libyans are resisting this move. Russia has been a key player in the Syrian civil war, providing military support to the Assad regime. However, with the fall of President Bashar Assad and the emergence of a new interim government in Syria, Russia is looking for alternative military bases in the region. Libya, which has been in a state of political and military turmoil since the fall of Muammar Gaddafi in 2011, is seen as a potential candidate. However, Libyans are wary of Russia's intentions and are resisting its attempts to establish a military presence in the country. Libyan officials have stated that they will not allow Russia to use their country as a military base and have called on the international community to support their efforts to maintain their sovereignty and territorial integrity.

Themes around the World:

Rising Franco-German Defense and Policy Tensions

France is increasingly uneasy about Germany’s €500 billion defense buildup and growing influence in European security and industrial policy. Disputes over joint defense projects and diverging strategic priorities could affect cross-border investments and the future of European industrial cooperation.

Sustainability and Environmental Policy Challenges

Indonesia faces mounting criticism over deforestation, land conversion, and large concessions, which increase disaster risks and threaten long-term sustainability. Environmental management and regulatory enforcement are under scrutiny, affecting international partnerships and compliance with global ESG standards.

Regulatory Reforms and Business Environment

Ongoing economic reforms target improved investment climate, streamlined licensing, and expanded digital and physical infrastructure. The government is enhancing free zones, logistics corridors, and industrial clusters, notably in the Suez Canal Economic Zone, to boost exports and attract diversified FDI, especially in manufacturing and green energy.

Market Transparency and Capital Outflows

Indonesia’s stock market suffered an $80 billion rout in January 2026 after MSCI flagged transparency and ownership concerns, threatening a downgrade to frontier market status. Regulatory reforms, including a 15% free float requirement, are underway, but investor confidence and foreign capital flows remain fragile.

Eastern Economic Corridor Bottlenecks

Land shortages, regulatory delays, and infrastructure constraints in the Eastern Economic Corridor (EEC) are stalling high-value investment projects. The government is prioritizing zoning reforms and expanding investment to new regions, directly affecting supply chain planning and industrial expansion.

Ambitious Double-Digit Growth Targets

Vietnam’s leadership has set an annual GDP growth target of over 10% for 2026–2030. Achieving this requires deep reforms, infrastructure investment, and innovation, but also poses risks if global shocks or policy execution falter, impacting investor confidence and economic stability.

Resilient Policy Reforms and Governance

Recent reforms include tax simplification, legal modernization, and improved ease of doing business. These measures support startups, MSMEs, and foreign investors, fostering a more transparent, predictable, and growth-oriented business environment that underpins India’s economic ascent.

Nearshoring Surge Reshapes Supply Chains

Mexico’s nearshoring boom is accelerating, with high-tech exports from states like Jalisco growing by 89% in 2025. Companies are relocating production from Asia to Mexico, leveraging proximity, cost advantages, and USMCA access, making Mexico a central hub for North American supply chains and investment.

Critical Minerals and Mining Policy Shifts

USMCA renegotiation is spotlighting critical minerals, with Mexico and the US seeking alignment on definitions and supply chain security. Delays in environmental permitting and regulatory clarity hamper mining investment, but reforms could unlock new opportunities in lithium, silver, and other strategic resources.

Currency Collapse Fuels Economic Instability

The Iranian rial’s collapse—losing over 50% of its value in 2025—has triggered hyperinflation, supply chain breakdowns, and widespread business closures. Volatile exchange rates and dollar scarcity undermine contract reliability, price stability, and the viability of trade and investment.

Dual-Base Manufacturing and Talent Challenges

TSMC’s dual-core strategy—expanding advanced manufacturing in both Taiwan and the US—raises concerns about talent shortages, operational costs, and logistical complexity. Engineering talent recruitment, energy, and water supply remain critical constraints for sustained growth.

High Unemployment and Labor Market Shifts

Finland’s unemployment rate has reached 10.6%, the highest in the EU, driven by weak domestic demand and structural changes. While tech and green sectors are hiring, traditional industries face layoffs, affecting consumer demand and workforce availability for international investors.

Semiconductor Industry Policy Overhaul

South Korea passed a landmark law to strengthen its semiconductor sector, establishing a presidential commission and special funding. The law aims to secure technological leadership in AI chips, centralize support, and incentivize regional development, directly impacting global tech supply chains and investment flows.

Geoeconomic Rivalry and Supply Chain Realignment

US-China strategic competition over technology, critical minerals, and industrial policy is driving global supply chain realignment. Companies are diversifying sourcing, investing in resilience, and reassessing exposure to geopolitical risks, with implications for cost structures and market access.

Investment Climate Amid Geopolitical Tensions

Geopolitical instability, including US-EU disputes and global conflicts, has led to increased market volatility and cautious investment. French markets have seen declines, and sectors like tech and industry face job cuts, prompting investors to adopt more defensive and selective strategies.

Regulatory Sovereignty and Policy Autonomy Concerns

The imposition of EU-style ESG and regulatory standards through the trade agreement raises concerns about Brazil’s policy autonomy and federal structure. Businesses face higher compliance costs and potential exclusion from markets if unable to meet external certification and traceability requirements.

Export-Led Growth Amid Weak Demand

China’s 2025 growth was driven by record exports and a $1.2 trillion trade surplus, offsetting a 20% drop in US-bound shipments. However, domestic demand remains subdued due to a prolonged property crisis and weak consumer confidence, raising sustainability concerns.

Remittances and External Account Volatility

Remittances remain a critical source of foreign exchange, recently surpassing $41 billion annually. However, Pakistan’s current account remains vulnerable to shifts in remittance flows, export performance, and import demand, creating volatility that affects currency stability and investment confidence.

Investment Climate and SME Funding Gap

Renewed investor confidence is evident, with FDI pipelines growing, especially in renewables and tech. However, a R350 billion SME funding gap persists, as stricter governance and financial controls limit access to capital for smaller, informal businesses.

India-Canada Energy and Minerals Reset

Canada and India are negotiating broad accords on energy, critical minerals, and AI, aiming to double bilateral trade by 2030. This diplomatic reset opens new markets for Canadian resources, supports supply chain diversification, and strengthens Canada’s position in Asian growth markets.

Escalating US-China Trade Tensions

Renewed tariffs, technology restrictions, and currency disputes have intensified US-China trade friction, disrupting global supply chains and investment flows. Businesses face rising costs, regulatory uncertainty, and increased risk of retaliation, impacting international operations and strategic planning.

ESG and Sustainability Standards Tighten

Germany’s modular building sector is increasingly shaped by strict ESG and sustainability requirements, including CSRD implementation. Compliance with green building standards and lifecycle emissions reporting is now essential for market access, financing, and supply chain integration.

Energy Transition and Power Security

Eskom’s reforms and renewable energy expansion have reduced load shedding, but high electricity costs and grid vulnerabilities persist. Recent tariff relief for energy-intensive industries aims to prevent deindustrialization, yet long-term competitiveness depends on sustainable pricing and infrastructure modernization.

Supply Chain Diversification and Resilience

India is positioning itself as an alternative to China for global supply chains, leveraging policy incentives, infrastructure upgrades, and trade agreements. However, external shocks—such as US tariffs and currency volatility—remain key risks for supply chain stability and export growth.

Surge in Used EV Market Drives Battery Reuse

France’s used electric vehicle market grew 30% in 2025, with battery longevity and second-life applications now critical. This trend boosts demand for battery reuse solutions, influencing investment strategies and the structure of aftersales and recycling supply chains.

Supply Chain Dominance and China’s Role

China’s deep integration in Indonesia’s nickel mining and processing sectors has entrenched its dominance in the EV battery supply chain. This reliance on Chinese capital and technology exposes Indonesia to external shocks, environmental concerns, and limited leverage in global value chains.

Major Infrastructure and Capital Relocation Push

Significant investments are flowing into Indonesia’s new capital, IKN, with new projects in commercial, culinary, and office sectors. This development signals increased investor confidence and aims to establish IKN as a new economic growth hub by 2028, influencing long-term investment strategies.

EU Tightens Oil Price Cap Measures

The European Union will lower the Russian oil price cap to $44.1 per barrel from February 2026, intensifying restrictions on Russian crude and refined products. Russia has responded with export bans under price cap contracts, further complicating global energy supply chains and compliance for international traders.

EU Energy Decoupling and Bans

The EU has legislated a full ban on Russian LNG and pipeline gas imports by 2027, with plans to phase out Russian oil as well. This structural decoupling will reshape European energy markets, accelerate diversification, and impact global energy flows, with significant implications for Russian revenues and EU supply chains.

US-Led Board of Peace Reshapes Governance

The establishment of the US-chaired Board of Peace, with Israel as a member, is redefining post-war Gaza governance and reconstruction. The board’s broad mandate and financial requirements create new frameworks for international engagement, but also provoke political tensions and uncertainty for investors.

Real Estate Liberalization and Mega-Projects

Recent legal reforms allow foreign ownership of land and property, sparking global investor interest. Mega-projects like NEOM and the Red Sea Project, combined with digitalization and AI-driven innovation, are transforming the real estate sector and urban infrastructure landscape.

Critical Minerals Strategy Reshapes Trade

Australia’s $1.2 billion critical minerals reserve, focused on antimony, gallium, and rare earths, aims to reduce reliance on China and stabilize supply chains. This initiative underpins new trade agreements, attracts investment, and enhances Australia’s role in global technology and defense supply networks.

Green Hydrogen Investment Surge

Over R$64 billion in green hydrogen projects are awaiting final investment decisions in 2026, contingent on regulatory clarity and grid access. Brazil’s emerging hydrogen sector is positioned for global supply chains, with China’s strategic focus and domestic incentives accelerating industrial and export opportunities.

Foreign Exchange and Debt Pressures

Egypt faces significant external debt obligations, with $50 billion due in 2026 and total external debt at $163.7 billion. While foreign reserves reached $51.45 billion, reliance on Gulf deposits and IMF support underscores persistent currency and liquidity risks.

Fiscal Policy Uncertainty and Election Risks

Debates over tax cuts and fiscal sustainability dominate Japan’s political agenda ahead of elections. Uncertainty around consumption tax reforms and social security funding could affect market confidence, currency stability, and the broader investment climate for international businesses.

Hamas Disarmament and Demilitarization Unresolved

Efforts to fully disarm Hamas and demilitarize Gaza remain contested, with Israel insisting on complete disarmament before reconstruction. This impasse delays aid, infrastructure rebuilding, and business re-entry, creating persistent uncertainty for supply chains and investment planning.