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Mission Grey Daily Brief - February 14, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently dominated by the potential peace talks between the US and Russia to end the war in Ukraine, which has approached its third anniversary. The US Defense Secretary Pete Hegseth has suggested that Ukraine should abandon its hopes of joining NATO and reclaiming all its occupied territory. This has caused concern among European allies, who are wondering how they can maintain post-WWII security and fill the gap in security assistance that the Biden administration provided to Ukraine. Meanwhile, Turkey's president has arrived in Pakistan to boost trade and economic ties, and Ireland is using its relationship with the US to talk down the prospect of a trade war with the EU. Lastly, the US hostage envoy Boehler has stated that Iran is holding American hostages, which has not impacted stocks.

Potential Peace Talks Between the US and Russia

The potential peace talks between the US and Russia to end the war in Ukraine have caused concern among European allies, who are wondering how they can maintain post-WWII security and fill the gap in security assistance that the Biden administration provided to Ukraine. The US Defense Secretary Pete Hegseth has suggested that Ukraine should abandon its hopes of joining NATO and reclaiming all its occupied territory. This has signalled to Kyiv that the administration's view of a potential settlement is remarkably close to Moscow's vision. Putin has declared that any peace deal must ensure that Ukraine gives up its NATO ambitions and withdraws its troops from the four regions that Russia annexed in September 2022 but never fully captured. Hegseth has indicated that Trump is determined to get Europe to assume most of the financial and military responsibilities for the defense of Ukraine, including a possible peacekeeping force that would not include US troops. Hegseth has also insisted that NATO should play no role in any future military mission to police the peace in Ukraine and that any peacekeeping troops should not be covered by the part of NATO's founding treaty that obliges all allies to come to the aid of any member under attack.

Vice President JD Vance and Secretary of State Marco Rubio are expected to meet Ukrainian President Volodymyr Zelenskyy on Friday for talks that many hope will shed light on Trump's ideas for a negotiated settlement to the war. Trump has been vague about his specific intentions, other than suggesting that a deal will likely result in Ukraine being forced to cede territory that Russia has seized since it annexed Crimea in 2014. Trump has been highly skeptical of that aid and is expected to cut or otherwise limit it as negotiations get underway in the coming days.

Turkey-Pakistan Trade and Economic Ties

Turkey's president has arrived in Pakistan to boost trade and economic ties, and the two countries are expected to sign a number of agreements during the 7th Session of the Pakistan-Turkiye High Level Strategic Cooperation Council (HLSCC). Pakistan and Turkey are bound by historic fraternal ties, and the visit by Erdogan is expected to serve to further deepen the brotherly relations and enhance multifaceted cooperation between the two countries. Pakistan has witnessed a surge in militant violence in recent months, and has deployed additional police officers and paramilitary forces to ensure the security of the Turkish leader and his delegation. The visit comes hours after the U.S. Embassy issued a travel advisory, citing a threat by Pakistani Taliban against the Faisal mosque in Islamabad and asked its citizens to avoid visits to the mosque and nearby areas until further notice.

Potential Trade War Between the EU and the US

Ireland is using its relationship with the US to talk down the prospect of a trade war with the EU. Irish ministers have pushed for reaching a compromise that would avoid tariffs and a trade war and are sending nine government members to US cities for St Patrick’s Day as part of a charm offensive. Irish Finance Minister Paschal Donohoe has said that the EU-US trading relationship has made both of those economies richer over time and a trading dispute will cause harm to all. Mr Donohoe has said that Ireland will be using its voice to highlight what is of benefit to Ireland and Europe, and will be using its voice to make the case for trade to be mutually beneficial, talking about how Irish companies are employing Americans and investing in America. Mr Trump has expressed dissatisfaction with the amount of US goods bought by the EU compared to EU goods bought by the US. As he imposed since-suspended tariffs on Mexico and Canada, Mr Trump said of the EU: "They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them." Ireland’s deputy premier and foreign affairs minister Simon Harris has said that there are opportunities for the EU and Ireland to do more business and more trade with the United States, and therefore address some of the deficit that exists in relation to goods. Mr Donohoe, who is president of the group of eurozone finance ministers, has said that balancing trade with the US in more natural ways could be considered.

Iran Holding American Hostages

The US hostage envoy Boehler has stated that Iran is holding American hostages, which has not impacted stocks. The NASDAQ index is now up 21.46 points or 0.11%, while the S&P index is still down -0.14%, the Dow is down -0.35%, and the Russell 2000 of small cap stocks are down -0.62%. The comments of Trump's talk with Putin have helped to push the US stocks off lows (and the Nasdaq into positive territory), and the US-Russia relationship is thawing following a phone call and potential meeting, along with a prisoner swap announced Tuesday.


Further Reading:

Donald Trump says US and Russia to start talks on Ukraine war ‘immediately’ - Financial Times

Europe left reeling by Trump over Ukraine peace talks with Russia - Financial Times

Geopolitics: Hostage envoy Boehler says Iran has Americans - ForexLive

Ireland will use relationship with US to talk down trade war – finance minister - The Independent

Trump says he might meet Putin in Saudi Arabia after call on Ukraine - Axios

Turkey's president arrives in Pakistan's capital on a 2-day visit to boost trade, economic ties - The Independent

Turkiye’s president arrives in Pakistan’s capital on a 2-day visit to boost trade, economic ties - Arab News

Vance will meet Zelenskyy amid concerns about Trump-Putin talks to end the war in Ukraine

Themes around the World:

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Domestic Supply And Export Controls

Damage to refineries and export terminals is pushing Moscow to consider measures such as renewed gasoline export bans to protect the domestic market. Such interventions can abruptly disrupt product availability, pricing, and fulfillment for industrial users, distributors, and regional supply chains tied to Russia.

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Manufacturing and FDI Push

Ankara is intensifying efforts to attract global capital with incentives for exporters, high-tech industry and strategic manufacturing. Officials say FDI stock has reached about $290 billion, while new proposals include tax advantages, digital visas and streamlined permits for foreign investors.

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Supply Chains Face Geopolitical Stress

German companies report rising concern over geopolitical disruptions, shipping costs, and payment risk as Middle East conflict affects energy and freight corridors. Nearly half of exporters expect weaker payment discipline, increasing working-capital strain and supply-chain contingency requirements across sectors.

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Election-year policy uncertainty

Domestic politics are adding uncertainty to economic and security policy. Budget approval pressures, coalition constraints, and election-year calculations may limit Israeli flexibility on Gaza withdrawals, spending trade-offs, and regulatory decisions, complicating strategic planning for foreign firms and institutional investors.

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Conflict-Driven Shipping Cost Pressures

Global conflict is raising India’s freight costs through rerouting, war-risk surcharges, congestion, and longer transit times. Exporters in agriculture, textiles, chemicals, petroleum products, and engineering goods face margin pressure, forcing greater use of alternate ports, green corridors, and inventory buffers.

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China Controls Critical Inputs

Rising tensions with China are elevating materials and technology risk for Japanese manufacturers. Chinese exports of gallium and germanium to Japan fell to zero in January-February, exposing vulnerability in semiconductors, optics, renewable technology and other advanced industrial supply chains.

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Tourism and Services Scaling

Tourism is becoming a major investment and operating theme, supported by private and sovereign capital. Private-sector tourism investment reached SAR219 billion, total committed investment SAR452 billion, and 2025 tourist arrivals hit 122 million, creating broad opportunities across hospitality, transport, and services supply chains.

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Lower Immigration Tightens Labor Supply

After a period of rapid population growth, Canada has reduced immigration, and the Bank of Canada expects the labor force to see almost no growth in coming years. This shift may intensify hiring pressures, raise wage costs and constrain expansion plans across services, construction and regional operations.

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Rupee Weakness Raises Import Costs

The rupee’s slide toward record lows near 95 per dollar, combined with higher hedging costs and RBI intervention, is lifting the landed cost of oil, electronics, machinery and inputs. Businesses face tighter margins, pricier financing and more volatile treasury management.

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Operational Risk Extends Into Shipping

The maritime environment around Russian trade is becoming more hazardous, with vessel seizures, convoy rerouting, suspected sabotage, and infrastructure security concerns. Businesses face longer routes around northern Europe, greater spill and compliance risks, and higher exposure across shipping and port operations.

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Trade Remedies Narrow Inputs

Vietnam is tightening trade defenses, including temporary anti-circumvention measures on Chinese hot-rolled steel that extend a 27.83% duty. This protects domestic industry but raises input risks for manufacturers reliant on imported materials, potentially increasing sourcing costs and complicating regional procurement strategies.

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Foreign Investment Rules Favor Allies

The EU agreement improves treatment for European investors and service providers, including finance, maritime transport, and business services, while Australia continues prioritising trusted-partner capital in strategic sectors, implying opportunity for allied firms but careful screening for sensitive acquisitions.

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Green Compliance Reshaping Industry

EU carbon and sustainability rules are forcing Vietnamese manufacturers to accelerate emissions reporting, renewable power use, and traceability upgrades. Industrial parks host 35–40% of new FDI and over 500 parks now face growing investor demand for green infrastructure and clean electricity.

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Logistics Reform and Freight Constraints

Japan’s logistics efficiency rules are tightening compliance for shippers and carriers from April 2026. Authorities target 44% truck loading efficiency by 2028 and shorter waiting times, raising operational adjustment costs but accelerating supply-chain modernization and modal shifts.

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Mining Policy And Exploration Constraints

South Africa’s mineral potential is strong, but exploration remains weak due to cadastre delays, tenure uncertainty and administrative bottlenecks. The country attracted only 1% of global exploration spending in 2023, constraining future mining output, beneficiation and critical-mineral supply chains.

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Energy Supply and Loadshedding Risks

Beyond pricing pressures, firms face operational risk from possible RLNG shortfalls from Qatar and transmission bottlenecks, especially during peak summer demand. Higher generation costs and intermittent loadshedding could disrupt factory output, logistics reliability, and cold-chain or continuous-process industries.

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Foreign Investment Reform Momentum

Investor access is improving through the 2025 investment law, including full foreign ownership, stronger protections, and easier capital flows. Net FDI inflows rose 90 percent year-on-year to SR48.4 billion in Q4 2025, reinforcing Saudi Arabia’s appeal for long-term international capital deployment.

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Infrastructure and Port Expansion

Major port, airport and corridor projects are improving Vietnam’s supply-chain attractiveness, notably Da Nang’s $1.7 billion Lien Chieu terminal and logistics upgrades linked to Cai Mep–Thi Vai. Better maritime connectivity should reduce costs, diversify routes, and support export-oriented manufacturing investment.

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Middle East Energy Shock

Japan remains acutely exposed to Gulf disruptions: about 95.1% of crude imports come from the Middle East, and Tokyo has drawn 80 million barrels from reserves. Higher oil and LNG prices threaten power costs, logistics expenses and industrial competitiveness.

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Trade Surplus Masks Concentration Risks

Indonesia continues to post trade surpluses, supported by palm oil and mineral exports, yet external earnings remain concentrated in commodities and key buyers. Heavy dependence on China for nickel demand and on volatile global prices leaves exporters exposed to sudden policy or market shifts.

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BOI Pushes Higher-Value Industry

Board of Investment data show total investment exceeding 670 billion baht, with Thai-majority investment value up 86% in 2025. Incentives are steering capital toward electronics, clean energy, digital infrastructure, transport, and advanced manufacturing, reinforcing Thailand’s industrial upgrading strategy.

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Defense expansion reshaping industry

Germany’s rearmament is creating a meaningful new demand channel for manufacturers, technology firms and suppliers. Defense spending is projected to rise from €86 billion in 2025 to €152 billion by 2029, accelerating procurement, dual-use production and industrial realignment across selected sectors.

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Electronics and Semiconductor Upswing

Thailand’s export strength is increasingly concentrated in electronics, with February electronics exports up 56.8% year on year; ICs and semiconductors rose 6.9% and hard disk drives 19.7%. This supports manufacturing investment, though concentration raises exposure to global tech-cycle swings.

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Soft growth and rate-path uncertainty

Canada’s economy remains fragile despite January GDP growth of 0.1% and a preliminary 0.2% rise in February. With the Bank of Canada holding rates at 2.25% while weighing oil-driven inflation and weak growth, firms face uncertain borrowing, demand, and investment conditions.

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Semiconductor Capacity Expansion Race

TSMC’s record Q1 revenue of NT$1.134 trillion, up 35.1%, underscores Taiwan’s central role in advanced-node supply. Heavy capex and tight 3nm capacity support investment inflows, but intensify competition for land, utilities, talent and upstream equipment access.

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AI Export Boom Accelerates

Taiwan’s trade performance is being lifted by AI and high-performance computing demand, with exports reaching roughly US$640 billion and 2.4% of global exports. Strong chip and server demand supports investment and capacity expansion, but also increases concentration and cyclical exposure.

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Energy System Reconstruction Imperative

Ukraine says it needs about $91 billion over ten years to rebuild its damaged energy system, while attacks continue to disrupt supply. Businesses face power insecurity, but investors see major openings in storage, renewables, gas generation and decentralized grids.

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Labor Shortages from Reserve Call-ups

Extended military reserve duty, school disruptions and employee absences are tightening labor supply across sectors. Construction, manufacturing, services and logistics face staffing gaps, rising wage pressure and execution delays, complicating production planning and increasing operational costs for domestic and foreign businesses.

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Security and Water Stress Risks

Operational risk is elevated by insecurity and resource stress. The OECD estimates insecurity reduces potential growth by 1–2 percentage points annually, while worsening water scarcity and leakage losses of up to 46% threaten manufacturing continuity, site selection and logistics reliability in key industrial regions.

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AI Industrial Deployment Accelerates

China’s open-source AI ecosystem is expanding rapidly despite chip restrictions, with Chinese models gaining global traction and feeding off industrial deployment data. This strengthens China’s competitiveness in logistics, robotics and manufacturing, increasing both partnership opportunities and technology-transfer, cybersecurity and competitive risks.

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Oil Shock and Baht Volatility

Thailand’s import dependence leaves it highly exposed to the Middle East oil shock. The baht has fallen more than 5% this month, with volatility near 9%, raising import costs, weakening investor sentiment and increasing hedging, logistics and pricing risks for businesses.

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Higher operating costs and resilience needs

Conflict conditions are raising the cost of doing business through pricier energy, supply delays, labor disruption, and stronger security requirements. Companies with Israeli operations or suppliers should expect more emphasis on business continuity, dual sourcing, inventory buffers, and contingency logistics planning.

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Nickel Downstreaming Policy Tightens

Jakarta is preparing export levies on processed nickel and revising benchmark pricing while cutting 2026 output quotas. This raises regulatory uncertainty, input costs, and supply discipline across stainless steel and EV battery chains, with major implications for China-linked investors.

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US Pharmaceutical Tariff Shock

The Trump administration’s 100% tariff on patented drug imports threatens Australian pharmaceutical exports worth roughly US$1.32 billion to the US. Although CSL may secure carve-outs, the measure raises trade uncertainty, pressures investment decisions, and may accelerate production shifts abroad.

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Middle East Cost Shock

Conflict-linked disruption in oil and LNG markets is lifting Taiwan’s input, freight and utility costs. Manufacturing PMI stayed expansionary at 55.4, but supplier delivery times worsened and raw-material prices climbed near two-year highs, squeezing margins across industrial supply chains.

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Battery Localization and China Exposure

Paris is courting Asian battery manufacturers to build capacity in northern France, including ProLogium’s subsidized Dunkirk plant backed by about €1.5 billion. The strategy reduces dependence on China-dominated battery and rare-earth supply chains, while increasing scrutiny of foreign investment structures.