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Mission Grey Daily Brief - June 20, 2024

Summary of the Global Situation for Businesses and Investors

The global situation remains complex and dynamic, with ongoing geopolitical tensions, economic shifts, and social unrest shaping the landscape. Notable developments include Russia's deepening ties with North Korea, Finland's controversial plan to curb migration from Russia, France's military cooperation with Armenia, and the impact of the US-China rivalry on the Philippines. Meanwhile, the human rights situation in Myanmar remains dire, and press freedom is under threat in Ukraine and Ecuador.

Russia-North Korea Alliance

Russian President Vladimir Putin's visit to North Korea underscores the strengthening alliance between the two countries, as they seek to counter US-led sanctions. Putin expressed appreciation for North Korea's support of Russia's invasion of Ukraine and vowed to cooperate to establish a "multi-polarized world order." This development has heightened tensions on the Korean Peninsula, with increased military activity and psychological warfare between the two Koreas. The US and its allies have expressed concern over the potential arms arrangement between Russia and North Korea, which could impact the security situation in the region.

Finland's Migration Policy

Finland's parliament is set to approve a controversial proposal to temporarily reject asylum seekers arriving from Russia, citing national security concerns. This move comes amidst accusations that Russia has been encouraging asylum seekers to cross the border as retaliation for Finland's support for Ukraine. While the plan has been justified as a temporary emergency measure, it contradicts international human rights agreements and sets a concerning precedent. The decision has sparked debate and highlights the complex challenges faced by countries in managing migration flows.

France-Armenia Military Ties

France has signed a contract to sell CAESAR self-propelled howitzers to Armenia, marking a shift in Yerevan's diplomatic and military ties away from Russia. This development comes as Armenia seeks to strengthen its military capabilities and move closer to Western countries, accusing Russia of failing to protect it from rival Azerbaijan. The sale of military equipment underscores France's support for Armenia and its role as a key European backer.

US-China Competition in the Philippines

A controversial report alleging a US military disinformation campaign to discredit China's Sinovac vaccine during the COVID-19 pandemic has sparked outrage in the Philippines. Filipino officials have called for an inquiry, and analysts warn that the incident could damage trust in the US and benefit China in their geopolitical rivalry for influence in the region. The US Defense Department suggested the effort was aimed at countering Chinese "malign influence campaigns." The incident highlights the complexities of the US-China competition and its impact on Southeast Asia.

Recommendations for Businesses and Investors

  • Russia-North Korea Alliance: Businesses with operations or investments in Northeast Asia should closely monitor the evolving Russia-North Korea relationship, particularly the potential arms arrangement. The transfer of military technology and resources between the two countries could have significant implications for regional security and sanctions enforcement.
  • Finland's Migration Policy: Businesses operating in Finland or with interests in the country should be aware of the potential impact of the new migration policy on their workforce and supply chains. While the policy aims to address security concerns, it may also affect labor markets and disrupt certain industries that rely on migrant workers.
  • France-Armenia Military Ties: The France-Armenia military cooperation presents opportunities for defense contractors and technology providers to explore potential partnerships and supply chain diversification. Businesses should monitor the implementation of the agreement and assess the potential for new commercial ventures or joint ventures in the region.
  • US-China Competition in the Philippines: Companies operating in the Philippines or with exposure to the Southeast Asian market should factor in the impact of the US-China rivalry on their business strategies. The competition for influence between the two powers may create opportunities for diversification and expansion, particularly in sectors such as technology, trade, and infrastructure development.

Further Reading:

As Putin heads for North Korea, South fires warning shots at North Korean soldiers who temporarily crossed border - CBS News

Australia's prime minister raises journalist incident with China's Li - Yahoo News Canada

Drug-related violence fuels an exodus of Ecuador’s press - Committee to Protect Journalists

Egypt Unlawfully Deported Sudanese Refugees, Rights Group Says - U.S. News & World Report

Explaining Brazil #298: Global ambitions, domestic neglect? - The Brazilian Report

Finnish Law to Stop Migrants at Russia Border Makes Progress in Parliament - U.S. News & World Report

France Says It Will Sell CAESAR Howitzers to Armenia - U.S. News & World Report

High Commissioner for Human Rights Says Myanmar is Being Suffocated by an Illegitimate Military Regime - YubaNet

How will Denmark impede Russia's shadow oil fleet in the Baltic Sea? - Offshore Technology

In Philippines, experts warn anger over US anti-vax report could hurt ties - This Week In Asia

In Ukraine, Narrowing Press Freedoms Cause Growing Concern - The New York Times

Themes around the World:

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Trade facilitation and digital licensing

Authorities aim to cut investment licensing from ~24 months to under 90 days via a unified digital platform, while reducing customs clearance from 16 days to five (target two) and moving ports to 7-day operations. Execution quality will determine actual savings.

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IMF-driven macro stabilization path

An IMF board review (Feb 25) may unlock a $2.3bn tranche, reinforcing exchange-rate flexibility and fiscal consolidation. Record reserves ($52.59bn end‑Jan) and easing inflation (~11.7%) improve import capacity, credit sentiment, and deal-making conditions.

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Financial liquidity chasing commodities

Ample liquidity amid weak real-economy returns is spilling into metals and gold trading, amplifying price volatility. With M2 growth (8.5% y/y) outpacing nominal GDP (3.9%), firms face unpredictable input costs, hedging needs, and potential administrative tightening if bubbles are suspected.

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Energy costs and grid constraints

Energy bills are easing but UK power prices remain sensitive to gas-linked marginal pricing and network constraints. Grid connection queues and infrastructure upgrades influence industrial siting and operating costs, pushing energy-intensive firms toward PPAs, self-generation and resilience planning.

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Minerales críticos y control estatal

México y EE. UU. acordaron un plan sobre minerales críticos y exploran un arreglo multilateral con UE, Japón y Canadá. La inclusión del litio choca con la reserva estatal mexicana, aumentando incertidumbre para JV, permisos y contenido regional en baterías, automotriz y electrónica.

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Kommunale Wärmeplanung steuert Nachfrage

Die kommunale Wärmeplanung entscheidet, wo Wärmenetze ausgebaut werden und wo dezentral (Wärmepumpe/Biomasse) dominiert. Unterschiedliche Planungsstände und Fristen erzeugen stark regionale Nachfrage-Cluster, beeinflussen Standortwahl, Vertriebsnetze, Lagerhaltung sowie Projektpipelines internationaler Wärme- und Infrastrukturinvestoren.

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Energy shortages constrain industry

Winter peak demand is straining gas supply, with household/commercial usage reported around 611 million cubic meters per day, increasing rationing risk for industry. Power and feedstock interruptions can reduce output and reliability for manufacturing, mining, petrochemicals, and exporters.

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Agua y clima: riesgo transfronterizo

México se comprometió a entregar al menos 350,000 acre‑pies anuales a EE. UU. bajo el Tratado de 1944 y a pagar adeudos previos, tras amenazas arancelarias. Sequías y asignaciones industriales pueden generar paros, conflictos sociales y exposición comercial en agroindustria.

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Energy security and gas reservation

Federal plans to introduce an east-coast gas reservation from 2027—requiring LNG exporters to reserve 15–25% for domestic supply—could alter contract structures, price dynamics and feedstock certainty for manufacturers and data centres. Producers warn of arbitrage and margin impacts in winter peaks.

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High-tech FDI and semiconductor scaling

FDI remains strong with US$38.42bn registered in 2025 and US$27.62bn realised (highest 2021–25). Policy emphasis is shifting toward electronics, semiconductors, AI and rare earths, deepening supplier ecosystems but increasing competition for skilled labour and land.

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Secondary pressure on Iran trade

Expanded maximum-pressure measures—new sanctions on Iran’s oil/petrochemical networks and proposals for broad punitive tariffs on countries trading with Iran—raise exposure for shippers, insurers, banks, and traders, increasing due‑diligence costs and disrupting energy and commodity logistics routes.

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BoJ normalization lifts funding costs

The Bank of Japan’s cautious tightening bias—policy rate lifted to 0.75% in December and markets pricing further hikes—raises borrowing costs and may reprice real estate and equities. Firms should revisit capex hurdle rates, refinancing timelines, and counterparty risk.

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Energy security via LNG contracting

With gas ~60% of Thailand’s power mix and domestic supply declining, PTT, Egat, and Gulf are locking in 15-year LNG deals (e.g., 1mtpa with Cheniere; up to 0.8mtpa with Engie) to reduce spot-price exposure. This influences industrial power costs and emissions pathways.

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Indo-Pacific decoupling, China risk

An updated Free and Open Indo-Pacific strategy prioritizes critical-mineral diversification, anti-coercion coordination, and tighter technology alignment with like-minded partners. For firms, this raises the likelihood of China-facing export controls, dual-use compliance burdens, and accelerated “China+1” supply-chain restructuring.

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Coal output controls, export risk

Jakarta is signaling coal production limits for 2026 (proposal: 600m tons vs 790m in 2025), though top miners may be exempt. Annual RKAB approvals create uncertainty, thinning spot liquidity and complicating long-term export contracts for Asia’s import-dependent buyers.

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Foreign investment screening delays

FIRB/treasury foreign investment approvals remain slower and costlier, increasing execution risk for M&A and greenfield projects. Business groups report unpredictable milestones and missed statutory timelines, while fees have risen sharply (e.g., up to ~A$1.2m for >A$2bn investments), affecting deal economics.

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USMCA 2026 review uncertainty

With the July 1 USMCA joint review approaching, Washington is signaling tougher rules of origin, critical-minerals cooperation and anti-dumping measures, while reports of potential U.S. withdrawal add volatility. Preferential access depends on compliance, shaping investment timing and sourcing.

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EU accession-driven regulatory alignment

With accession processes advancing but timelines uncertain, Ukraine is progressively aligning with EU acquis and standards. International firms should anticipate changes in competition policy, customs, technical regulations, and state aid rules—creating compliance workload but improving long-run market access.

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Trade competitiveness and tariff headwinds

Businesses warn of weak exports and tariff pressures, including potential U.S. measures affecting regional trade. Firms should expect tougher price competition versus Vietnam and Malaysia and prioritize rules-of-origin compliance, diversification of end-markets, and scenario planning for new trade barriers.

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Energy policy boosts LNG exports

A shift toward faster permitting and “regular order” approvals for LNG terminals and non-FTA exports signals higher medium-term US gas supply to Europe and Asia. This supports long-term contracting but can raise domestic price volatility and regulatory swings for energy-intensive industries.

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EU compliance for XR biometrics

Immersive systems increasingly process eye-tracking and other biometric signals. In Finland, EU AI and data-protection compliance expectations shape product design, data localization and vendor selection, raising assurance costs but improving trust for regulated buyers in defence, healthcare and industry.

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Volatilidad macro: moneda e inflación

La depreciación del rial y episodios de inflación elevada distorsionan precios, márgenes y planificación. Empresas enfrentan controles de divisas, dificultades de repatriación, mayor riesgo de impago y costos de importación impredecibles, impulsando dolarización informal y contratos más cortos.

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Shadow fleet logistics and enforcement

Investigations show complex “shadow fleet” networks masking Russian oil origins, including ~48 shell firms shipping at least $90bn and rapid entity turnover. Physical enforcement is rising (detentions, fines). Shipping, insurance, and commodity traders face higher disruption, fraud, and reputational risk.

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Supply-chain reshoring for semiconductors

Policy priorities emphasize strengthening strategic supply chains, with rising power demand from semiconductor manufacturing and data centers. Expect continued incentives for domestic/ally-based chip capacity, stricter resilience requirements for tier suppliers, and competition for skilled labor, land, grid connections, and water.

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Water scarcity and treaty pressures

Historic drought and Mexico–U.S. water treaty obligations are becoming operational risks, particularly for water-intensive industries in northern hubs. Potential rationing, higher tariffs, and community pushback can disrupt production, requiring water audits, recycling investment, and site selection adjustments.

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EU–Thailand FTA acceleration

Bangkok and Brussels aim to conclude an EU–Thailand FTA by mid-2026, promising tariff reduction and investment momentum, especially in S-curve industries. However, compliance demands on environment, product standards and regulatory alignment will raise costs for lagging manufacturers and SMEs.

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Macro volatility: shekel and rates

Inflation has eased to around 1.8–2.0%, reopening prospects for Bank of Israel rate cuts, but geopolitical headlines drive sharp shekel swings. This complicates pricing, hedging, and capital planning for exporters/importers, and can change local financing conditions quickly.

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Weather shocks and Jones Act constraints

Severe freezes can disrupt US oil and gas output (estimates up to 25 Bcf/day), forcing LNG imports despite exporter status; Jones Act limits domestic LNG shipping. International buyers and US-linked supply chains should expect episodic price spikes and logistics bottlenecks.

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Security, crime, and operational continuity

Persistent organised crime and infrastructure sabotage risks raise insurance costs, disrupt logistics and construction, and require higher security spending for sites and transport. Business continuity planning, secure transport corridors, and supplier vetting remain essential, especially for high-value exports.

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Government funding shutdown risk

Recurring shutdown episodes and looming DHS funding cliffs inject operational risk into travel, logistics, and federal service delivery. TSA staffing and Coast Guard/FEMA readiness can degrade during lapses, affecting airport throughput, cargo screening, disaster response, and contractor cashflows.

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Higher-rate volatility and costs

RBA tightening bias after lifting the cash rate to 3.85% amid core inflation ~3.4% and capacity constraints increases borrowing-cost uncertainty. Expect impacts on capex hurdle rates, commercial property, consumer demand, and FX. Treasury functions should extend hedging horizons and liquidity buffers.

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DHS funding instability and disruptions

Recurring DHS funding standoffs and partial shutdowns threaten operational continuity for TSA, FEMA reimbursements, Coast Guard readiness, and CISA cybersecurity deployments, while ICE enforcement remains funded. Businesses should anticipate travel friction, disaster-recovery payment delays, and security-service gaps.

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Baht volatility and FX scrutiny

Election risk premia, USD strength, and gold-linked flows are driving short-term baht swings. The central bank is signalling greater operational FX management and scrutiny of non-fundamental inflows. Importers, exporters, and treasury teams should expect hedging costs and tighter FX documentation.

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Competition enforcement in platforms

Israel’s Competition Authority is challenging dominant platform models, signaling tougher antitrust. Wolt may lose its exemption for operating both a delivery platform and its own grocery retail chain, potentially forcing divestment—reshaping last-mile logistics, pricing, and retail partnerships.

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USMCA review and tariff risk

The July 1 USMCA review is clouded by Washington’s tariff-first posture and reported withdrawal talk. Even partial rollbacks remain uncertain. Expect higher compliance costs, volatile rules-of-origin, and elevated hedging needs for North American supply chains and investors.

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Mining investment and regulatory drag

South Africa risks missing the next commodity cycle as exploration spending remains weak—under 1% of global exploration capital—amid policy uncertainty and infrastructure constraints. Rail and port underperformance directly reduces realized mineral export volumes, raising unit costs and deterring greenfield projects.