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.

Themes around the World:

Erosion of US Economic Safe-Haven Status

Erratic trade and monetary policies have triggered market volatility, with global investors questioning the reliability of US assets. A ‘Sell America’ trend could weaken the dollar, raise borrowing costs, and undermine the US’s traditional role as a global financial anchor.

Canada’s Strategic Pivot Toward China

Canada’s landmark trade deal with China lowers tariffs on Chinese EVs and Canadian agricultural exports, signaling a diversification away from US reliance. This recalibration aims to unlock $3 billion in exports but risks US retaliation and complicates future North American trade negotiations.

Semiconductor Tariffs and Industrial Policy

The US is combining higher chip tariffs with conditional exemptions tied to domestic capacity commitments, using firms like TSMC as leverage. A 25% tariff on certain advanced chips raises costs short‑term but accelerates fab investment decisions and reshapes electronics sourcing strategies.

Record Trade Surplus Fuels Expansion

China’s 2025 trade surplus hit $1.2 trillion, driven by export growth to Africa, ASEAN, Latin America, and the EU, offsetting US declines. This export reliance boosts global influence but risks long-term structural imbalances and protectionist backlash.

Cryptocurrency as a Sanctions Evasion Tool

Iran’s central bank has purchased over $500 million in USDT (Tether) to defend the rial and facilitate trade, reflecting a shift toward digital assets to bypass financial restrictions. This strategy highlights both the regime’s adaptability and the increasing complexity of compliance for international firms engaging with Iran.

Environmental and Social Risk Management

Large-scale battery projects face heightened scrutiny over pollution and safety risks, with calls for independent risk assessments. Environmental compliance is becoming a decisive factor for project approval, affecting investment timelines and stakeholder relations.

Foreign-exchange liquidity and devaluation risk

Egypt’s external financing needs keep FX availability tight, raising risks of renewed pound depreciation, import backlogs, and payment delays. Firms should plan for fluctuating LC/TT settlement, higher hedging costs, and periodic administrative controls that can disrupt procurement cycles and profit repatriation.

US-France Trade Tensions Escalate

Rising US tariffs on French wine and digital services, coupled with threats of broader sanctions, create uncertainty for exporters and investors. These tensions, intensified by political disputes, risk disrupting transatlantic trade and investment flows.

Compliance Costs and ESG Barriers in EU Trade

While the EU FTA offers tariff-free access, Indian exporters face high compliance costs from the EU’s carbon border tax and ESG standards. These non-tariff barriers could offset gains, especially for steel, aluminum, and emission-intensive sectors, requiring strategic adaptation by businesses.

Haushalts- und Rechtsrisiken

Fiskalpolitik bleibt rechtlich und politisch volatil: Nach früheren Karlsruher Urteilen drohen erneut Verfassungsklagen gegen den Bundeshaushalt 2025. Unsicherheit über Schuldenbremse, Sondervermögen und Förderlogiken erschwert Planungssicherheit für öffentliche Aufträge, Infrastruktur-Pipelines und Co-Finanzierungen privater Investoren.

Northern Sea Route and Arctic Ambitions

Russia’s development of the Northern Sea Route, with Chinese and Indian involvement, aims to create a major Eurasian trade corridor. While promising shorter Asia-Europe shipping, the project faces geopolitical risks, environmental concerns, and possible sanctions exposure for participating firms.

Canada-China Strategic Trade Pivot

Canada’s new agreement with China lowers tariffs on Chinese EVs and secures reduced Chinese tariffs on Canadian agriculture. This shift diversifies trade but risks US retaliation, reshapes supply chains, and could attract Chinese investment in Canadian manufacturing and energy sectors.

Outbound investment restrictions expand

Treasury’s outbound investment security program is hardening into a durable compliance regime for certain China-linked AI, quantum, and semiconductor investments. Multinationals should expect transaction screening, notification/recordkeeping duties, and chilling effects on cross-border venture and joint-development strategies.

EU-Mercosur Deal Sparks Unrest

France’s opposition to the EU-Mercosur trade agreement, driven by farmer protests and political divisions, delays ratification and threatens supply chain stability. The deal’s fate will shape market access, regulatory risks, and strategic raw materials sourcing for years.

USMCA Review and Trade Uncertainty

The 2026 review of the US-Mexico-Canada Agreement (USMCA) is underway amid rising US-Canada tensions and US protectionism. Potential reforms to rules of origin, minerals, and labor laws could reshape North American trade, impacting $665 billion in Mexican exports, mostly to the US.

Semiconductor tariffs and reshoring

New U.S. tariffs on advanced AI semiconductors, alongside incentives for domestic fabrication, are reshaping electronics supply chains. Foreign suppliers may face higher landed costs, while OEMs must plan dual-sourcing, redesign bills of materials, and adjust product roadmaps amid policy uncertainty.

Global Supply Chain Diversification Trend

Amid US-led tariff wars, UK businesses are accelerating efforts to diversify suppliers and markets, particularly towards India and Asia-Pacific. This shift aims to mitigate risks from geopolitical shocks and ensure resilience in critical sectors such as automotive and technology.

Housing and construction capacity constraints

Housing commencements and completions remain below national targets, signalling ongoing constraints in labour, permitting and materials. Construction volatility can disrupt demand for building products, logistics and services, and keep pressure on wages and inflation—affecting operating costs for project-based investors.

Security Risks and Regional Instability

Persistent terrorism, border tensions with Afghanistan, and internal unrest continue to disrupt supply chains, deter foreign investment, and raise operational costs. Recent US and international travel advisories highlight sustained security risks, especially in Khyber Pakhtunkhwa and Balochistan, impacting business confidence and insurance premiums.

Auto sector disruption and China competition

Chinese vehicle imports are surging, widening the China trade gap and intensifying pressure on local manufacturing. Government is courting Chinese investment (e.g., potential plant transfers) while considering trade defenses and new-energy-vehicle policy. Suppliers face localisation shifts, pricing pressure and policy uncertainty.

Nickel quota tightening and audits

Jakarta plans to cut 2026 nickel ore mining permits to 250–260m wet tons from 379m in 2025, alongside MOMS verification delays and tighter audits. Expect supply volatility, higher nickel prices, and permitting risk for battery, steel, and EV supply chains.

Private Sector Role in Recovery and Innovation

Major global firms and financial institutions, including BlackRock, are actively shaping Ukraine’s recovery strategy. The focus is on mobilizing private capital, modernizing infrastructure, and fostering innovation, especially in energy and technology, despite ongoing operational risks from conflict.

Defense Industry Privatization and Growth

Israel’s defense sector is undergoing privatization, with major IPOs planned for Israel Aerospace Industries and Rafael. Rising global demand for Israeli defense technology, especially in Europe, is boosting exports and cross-border partnerships, reshaping investment strategies.

Political Gridlock on Defense and Security

Taiwan’s $40 billion defense budget faces parliamentary opposition, raising concerns about its deterrence capabilities amid rising Chinese military activity. Political divisions could impact defense procurement, foreign confidence, and overall security stability.

Lieferkettenrecht, Bürokratie, ESG

17 Verbände fordern Aussetzung oder Angleichung des deutschen Lieferkettengesetzes an EU-Recht (EU-Schwelle: >5.000 Beschäftigte und 1,5 Mrd. € Umsatz; DE: ab 1.000 Beschäftigte). Für multinationale Firmen bleibt ESG-Compliance komplex, mit Haftungs-, Audit- und Reportingkosten sowie Reputationsrisiken.

Supply Chain Regionalization and Diversification

Geopolitical polarization and rising tariffs are accelerating the shift toward regionalized and diversified supply chains. Companies are prioritizing resilience, flexibility, and scenario planning over cost efficiency, with Southeast Asia, Eastern Europe, and Latin America emerging as alternative hubs.

Infrastructure Investment and Modernization

Private investment in infrastructure has surged, with R382.5 billion committed in 2025, but public sector investment lags. Major projects in digital networks, ports, and logistics are underway, yet persistent bottlenecks and underinvestment threaten supply chain efficiency and export competitiveness.

FX controls and dong volatility

Vietnam’s USD/VND dynamics remain sensitive to global rates; the SBV set a central rate at 25,098 VND/USD (Jan 27) while authorities prepare stricter penalties for illegal FX trading under Decree 340/2025 (effective Feb 9, 2026). Hedging and repatriation planning matter.

Supply Chain Resilience and Nearshoring

Canadian policy emphasizes strengthening domestic supply chains, especially for critical minerals and EVs, and leveraging nearshoring opportunities. Investments in infrastructure and technology aim to reduce vulnerabilities exposed by global disruptions and geopolitical tensions.

Energy transition meets grid constraints

Renewables are growing rapidly, yet Brazil curtailed roughly 20% of wind/solar output in 2025 with estimated losses around BRL 6.5bn, reflecting grid bottlenecks. Investors must factor transmission availability, curtailment clauses and regulatory responses into projects and PPAs.

Shadow fleet shipping disruption

Iran’s sanctioned “shadow fleet” faces escalating interdictions and designations, with vessels and intermediaries increasingly targeted. Seizures and ship-to-ship transfer scrutiny raise freight, insurance, and demurrage costs, delaying deliveries and complicating due diligence for traders, terminals, and banks.

Logistics and rail capacity buildout

Saudi ports handled 8.3m containers in 2025 (+10.6% YoY), while Saudi Arabia Railways carried 30m tons of freight and 14m passengers in 2025, cutting 2m truck trips. Accelerating multimodal capacity supports supply-chain resilience and inland distribution competitiveness.

Crypto and fintech rulebook tightening

The FCA is advancing a full cryptoasset authorization regime, consulting on Consumer Duty, safeguarding, SMCR accountability and reporting, with an application gateway expected in late 2026 and rules effective 2027. Market access and product design will increasingly hinge on governance readiness.

Energy Crisis and Industrial Competitiveness

Pakistan’s energy sector faces high tariffs, under-utilized capacity, and inefficient contracts, which act as a tax on industry and exports. Efforts to privatize distribution and reform generation contracts are ongoing, but structural inefficiencies remain a major constraint on manufacturing and supply chains.

AI Basic Act compliance burden

Korea’s new AI framework requires labeling AI-generated content, user notification, and human oversight for high-impact uses (health, transport, finance). Foreign platforms with large Korean user bases may need local presence. Compliance costs and liability management will shape market entry and product design.

Supply Chain Disruptions and Contingency Planning

UK firms face significant supply chain risks from tariff shocks and potential trade war escalation. Business groups urge contingency planning, as higher import costs, border delays, and regulatory divergence threaten profitability, especially for SMEs and multinationals with transatlantic operations.