Mission Grey Daily Brief - February 23, 2025
Summary of the Global Situation for Businesses and Investors
As the third anniversary of the Russia-Ukraine war approaches, the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. In other news, Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, and Swedish authorities are investigating a damaged cable in the Baltic Sea, which has heightened fears of Russian sabotage and spying in the region.
Ukraine-Russia War
The Russia-Ukraine war is approaching its third anniversary, and the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the US Congress, where defending Ukraine from Russia has had bipartisan support. However, Vice President JD Vance admonished Zelenskyy for publicly warning Trump about falling for Russian disinformation.
Trump's false claims have caused a political rift with the US, as Ukrainian forces, outnumbered and outgunned, increasingly struggle to hold back Russia's slow but steady advances. Trump has also signalled his desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia. Reports have emerged of US and Russian officials meeting in Saudi Arabia to discuss a possible ceasefire without input from Ukraine.
Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. Senior US officials have suggested Ukraine will have to give up its goals of joining NATO and retaining the 20% of its territory seized by Russia. No Ukrainian officials were present at the Saudi meeting, and European allies have also expressed concerns that they are being sidelined.
Israel-Hamas Ceasefire Deal
Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, which has paused over 15 months of war but is nearing the end of its first phase. The latest hostage release, to be followed by the freeing of hundreds of Palestinians imprisoned by Israel, is going ahead after tensions mounted over a grisly and heart-wrenching dispute triggered this week when Hamas initially handed over the wrong body for Shiri Bibas, an Israeli mother of two young boys abducted by militants.
The dispute over the body's identity raised new doubt about the ceasefire deal, and negotiations over a second phase, in which Hamas would release dozens more hostages in exchange for a lasting ceasefire and an Israeli withdrawal, are likely to be even more difficult. The six hostages being freed are the last living ones to be released under the ceasefire's first phase. The new releases brought a moment of joy and relief for families, but with the ceasefire's future uncertain, fears remain over the fate of the remaining hostages seized during the Oct. 7, 2023, attack by Hamas that killed 1,200 in Israel and ignited the war.
Damaged Cable in the Baltic Sea
Swedish authorities are investigating a damaged cable that was discovered in the Baltic Sea, according to Swedish news agency TT. The breakage is the latest in a string of recent incidents of ruptured undersea cables that have heightened fears of Russian sabotage and spying in the region. Late last month, authorities discovered damage to the undersea fiber-optic cable running between the Latvian city of Ventspils and Sweden’s Gotland. A vessel belonging to a Bulgarian shipping company was seized but later released after Swedish prosecutors ruled out initial suspicions that sabotage caused the damage.
The most recent break was found off the island of Gotland, south of Stockholm, in the Swedish economic zone, TT reported Friday. The cable runs between Germany and Finland. Prime Minister Ulf Kristersson said on the social media platform X on Friday that the government takes all reports of damage to infrastructure in the Baltic Sea very seriously.
Russia-Ukraine War and Business
The Russia-Ukraine war has had a devastating impact on both countries, with hundreds of thousands killed or wounded, tens of thousands missing, and millions fleeing the country. The war has also had a significant impact on the global economy, with rising energy prices and supply chain disruptions.
For businesses, the war has created significant uncertainty and risk, particularly for those with operations in the region. The war has also disrupted global supply chains, particularly for energy and food, which has led to higher prices and reduced availability.
To mitigate these risks, businesses should diversify their supply chains and consider alternative sources of energy and food. They should also monitor the situation closely and be prepared to adapt their operations as needed.
Further Reading:
BBC forced to apologise as EastEnders star says a racial slur live on air
Hamas frees 3 more Israeli hostages
Sweden is investigating a cable break in the Baltic Sea
Three More Israeli Hostages Freed By Hamas As Gaza Ceasefire Deal Advances
Trump-Putin summit preparations are underway, Russia says
Ukrainians Rally Around Zelensky as Trump and Putin Denigrate Him
Ukrainians rally around their president after Trump seeks to denigrate him
Ukrainians rally around their president after Trump’s harsh comments
Themes around the World:
EU integration and regulatory alignment
Ukraine reports 84% implementation of EU Association Agreement tasks (up from 81%), with strong progress in SPS and financial regulation. Gradual integration is more likely than fast-tracked accession, shaping long-term market access, compliance, and investor confidence.
China Decoupling Through Controls
US policy is accelerating economic separation from China through tariffs, supply-chain scrutiny, and trade investigations. China’s share of US imports fell to 7% by December 2025, but rerouting through third countries is rising, increasing compliance burdens and supplier due diligence.
Logistics bottlenecks and concession pipeline
Port, rail, and road capacity constraints continue to shape export competitiveness and domestic distribution costs, while concession and auction programs create investable opportunities. Execution risk remains in licensing, local-content requirements, and judicial challenges, which can delay timelines and raise project costs.
Tariff Regime Volatility Persists
US trade policy remains highly unpredictable after the Supreme Court voided key emergency tariffs, leaving a temporary 10% blanket duty and ongoing Section 301 and 232 actions. The uncertainty complicates pricing, sourcing, contract terms, capital allocation, and market-entry planning for exporters and investors.
High Rates Squeeze Investment Planning
Elevated financing costs and inflation pressures continue to constrain private investment despite selective state support. Expert RA expects the policy rate to fall only gradually toward 12% by end-2026, while possible tax increases and weakening profitability raise refinancing, expansion, and SME solvency risks.
Energy Security Investment Push
Despite price shocks, Turkey reports no immediate supply shortage, citing diversified sourcing, 71% gas storage levels, and domestic projects in Sakarya, Gabar, Somalia, and Akkuyu. These investments could improve resilience, but also redirect fiscal resources and influence industrial competitiveness over time.
Capital controls and profit traps
Foreign firms continue to face restrictions on dividend repatriation and deal approvals for “unfriendly” jurisdictions, leaving profits trapped and exits difficult. This worsens investment risk, reduces valuation, and raises the hurdle rate for any Russia‑linked asset or JV exposure.
Tourism Weakness and Service Spillovers
Tourism remains a critical demand engine, yet Thailand could lose up to 3 million visitors and 150 billion baht if Middle East disruption persists. Softer arrivals, especially from Europe and China, are weighing on hotels, aviation, retail and regional service supply chains.
Energy security pivots to imports
Indonesia plans to absorb oil shocks via larger subsidies and is discussing greater US energy purchases (reported US$15bn) plus LNG contracting (Masela talks narrowed to five global buyers). Volatile prices raise cost risk for industry and for energy-intensive manufacturers.
Pound Volatility and Financing Pressure
The Egyptian pound briefly weakened beyond EGP 53 per dollar as portfolio outflows accelerated and exchange-rate flexibility widened. With external debt around $169 billion and 2026 debt service near $27 billion, importers and investors face elevated currency, refinancing, and pricing risks.
Shipbuilding gains with strategic pressure
Korean yards are benefiting from tanker demand, US shipbuilding cooperation, and linked investment opportunities, including Hanwha’s Philadelphia expansion. Yet Chinese yards won 80% of February global newbuild orders, challenging Korea on price and delivery, including in LNG carriers.
Sector Tariffs Hit Industrial Exports
U.S. tariffs continue to weigh on strategic Mexican exports, especially autos, steel and aluminum. Steel exports reportedly fell 53% under 50% U.S. duties, while automotive parts tariffs are raising supplier costs and complicating pricing, production planning and cross-border investment decisions.
China supply-chain stabilization push
Seoul and Beijing resumed ministerial talks after four years, agreeing hotlines for logistics disruptions, export-control dialogue, and faster treatment for rare earths and magnets. With semiconductors accounting for 26% of bilateral trade, this directly affects sourcing resilience and China operations.
Coalition Reforms Raise Policy Uncertainty
The governing coalition is advancing tax, pension, welfare, and health-insurance reforms amid large fiscal gaps, including a €20 billion budget hole in 2027 and €60 billion in each of the following two years. Businesses face uncertainty over taxation, labor costs, and consumer demand.
Red Sea Logistics Hub
Saudi Arabia is rapidly strengthening its role as a regional logistics fallback. New shipping services, a Khorfakkan-Dammam corridor, and a 1,700-km rail link to Jordan are cutting transit times, supporting cargo continuity and improving resilience for multinational supply chains.
USMCA And Allied Trade Strains
New US trade probes targeting partners including Canada, Mexico, the EU, Japan, and South Korea risk disrupting allied commercial ties and upcoming USMCA talks. Businesses should expect tougher market access negotiations, localized retaliation risk, and uncertainty around North American supply-chain exemptions.
US tariff reset, FTA acceleration
US tariffs shifting to a 15% uniform rate for 150 days narrows Thailand’s disadvantage (previously ~19% on some goods), encouraging shipment front-loading. Thailand is accelerating FTAs (EU, Korea, ASEAN-Canada), reshaping market access and sourcing strategies.
Arctic Infrastructure Opens New Corridors
Major northern projects such as Nunavut’s Grays Bay Road and Port would connect mineral deposits to global markets via a deepwater Arctic port, 230-kilometre all-season road and airstrip. If advanced, they could transform mining logistics, sovereignty-linked infrastructure priorities and frontier investment opportunities.
Auto And Consumer Markets Opening
Australia will liberalise access for EU passenger cars and lift the luxury car tax threshold for EU electric vehicles to A$120,000, exempting roughly 75% of them. This raises competitive pressure in autos, distribution, retail, charging, and aftersales ecosystems.
Palm Oil Rules Squeeze Exporters
Palm oil producers face higher export levies, possible rules retaining 50% of export proceeds for one year, and tighter domestic biodiesel demand. These measures could restrict liquidity, reduce exportable volumes and alter global edible oil and biofuel trade flows.
Financial System Dysfunction
Banking disruption, ATM cash shortages, and the launch of a 10 million rial note underscore deep financial stress. Businesses operating in or with Iran face elevated payment failure, convertibility, liquidity, and treasury-management risks, especially as digital channels and banking confidence weaken.
Trade Diversion Toward Europe
China’s trade patterns are shifting as exports of rare earth magnets and other strategic goods tilt away from the US and toward Europe. For multinationals, this suggests changing tariff exposure, partner dependence and logistics routing, with greater regionalization across procurement and sales networks.
Escalation risk to energy infrastructure
Strikes have hit Iranian fuel depots and logistics sites while Kharg Island—handling about 90% of Iran’s oil exports—remains a critical vulnerability. Any attack or interdiction could remove up to ~1.6 million bpd, potentially pushing crude above $100 and raising regional force majeure risk.
Import Substitution Weakens Industrial Quality
Russian manufacturers still rely heavily on imported components despite localization claims. In machine tools, final products may be 70% domestic, yet 80-95% of CNC systems and sensors remain imported. The result is lower quality, rising costs, and persistent fragility in industrial supply chains.
LNG Export Capacity Expands
LNG Canada is ramping exports to Asia and moving closer to Phase 2 expansion after pipeline agreements with Coastal GasLink. With Phase 1 nameplate capacity at 14 mtpa and Asian spot LNG prices up 80% in March, Canada’s energy export leverage is increasing.
Property Slump Fiscal Spillovers
China’s property downturn continues to weigh on growth and local finances. Property investment fell 11.1%, sales by floor area dropped 13.5%, and new housing starts plunged 23.1%, constraining construction-linked demand, municipal spending, payment conditions, and private-sector confidence.
Semiconductor Ambitions Accelerate
Vietnam is pushing semiconductors as a strategic industry, with over 50 design firms, about 7,000 engineers, and more than US$14.2 billion in sector FDI. Opportunities in packaging, testing, and design are expanding, but talent shortages and ecosystem gaps still constrain scale-up.
South China Sea Tensions Persist
Vietnam’s protest over China’s reclamation at Antelope Reef highlights enduring maritime risk near major shipping lanes and energy interests. Although immediate commercial disruption is limited, heightened surveillance, security frictions and geopolitical uncertainty can affect investor sentiment, insurance and contingency planning.
Inflation and Shekel Pressure
Oil above $100 a barrel, a weaker shekel and fuel-price pressures threaten to lift inflation by about one percentage point, reducing chances of near-term rate cuts and increasing hedging, financing and pricing challenges for importers and exporters.
Monetary Easing, Cost Volatility
Brazil’s central bank cut the Selic rate to 14.75% from 15%, but inflation forecasts remain elevated at 3.9% for 2026 and oil-linked fuel volatility is complicating logistics, financing costs, working capital planning, and demand conditions for foreign investors and operators.
US Tariff Exposure Hits Exports
UK goods exports to the United States fell 10.3% to £59.2 billion last year, with car exports down 28.1% to £7.5 billion. Continued US tariff uncertainty increases pressure to diversify markets, reassess transatlantic pricing, and reduce trade friction elsewhere.
Reserves Defense and Intervention
Turkey’s central bank is using an expanded defense toolkit, including tighter liquidity, state-bank FX intervention, and possible gold-for-currency swaps. With gold reserves around $135 billion and reported Treasury sales, reserve management now materially affects capital flows, sovereign risk perceptions, and market liquidity.
Critical Minerals Industrial Push
Ottawa and provinces are accelerating graphite, lithium and broader critical-minerals development to reduce allied dependence on China. A CAD$459 million financing package for Nouveau Monde Graphite and Ontario support for 68 exploration projects strengthen mining, processing and battery supply-chain prospects.
AI-driven semiconductor boom
Semiconductor exports are surging on AI server and high-bandwidth-memory demand, lifting Korea’s trade balance but deepening exposure to chip-cycle volatility. Capacity additions are constrained by cleanroom buildouts, with major new supply largely arriving 2027–2028, sustaining tight component markets.
Power Grid Capacity Constraint
Rising electricity demand from data centers, manufacturing, and electrification is straining U.S. grid capacity and raising cost-allocation disputes. Washington launched a $1.9 billion grid-upgrade push, but transmission bottlenecks and higher power prices remain material risks for site selection and operating costs.
Labor Shortages Raise Operating Costs
Manufacturing hubs are facing acute worker shortages as electronics expansion intensifies competition for labor. Firms are increasing signing bonuses, recruitment benefits and wages, especially in northern industrial corridors and Ho Chi Minh City, raising operating costs and complicating production ramp-ups for global suppliers.