Mission Grey Daily Brief - June 28, 2024

Summary of the Global Situation for Businesses and Investors

The global situation remains complex, with the war in Ukraine continuing to rage and causing significant disruptions. The conflict has led to increased cooperation between Russia, China, North Korea, and Iran, raising concerns about global security. Meanwhile, the Communist Party in China faces questions about its ability to address the country's economic challenges. In the UK, a betting scandal involving members of the Conservative Party and Prime Minister Rishi Sunak's security detail has emerged, while in El Salvador, President Nayib Bukele has ordered the mass firing of 300 employees from the Culture Ministry. Lastly, international experts warn of a growing famine crisis in Sudan, with 755,000 people at risk in the coming months.

Ukraine-Russia War

The war in Ukraine continues to rage, with Russia targeting Ukraine's energy infrastructure, causing chronic power cuts and aiming to make cities unlivable. This systematic destruction is considered a war crime under international law, and it has already wiped out 50% of Ukraine's electricity-generating capacity. The conflict has also resulted in the world's largest displacement crisis, with over 11 million people forced to flee their homes. The war has now been ongoing for almost two and a half years, and Ukraine is facing significant challenges in terms of mobilization and government fatigue.

Growing Cooperation Between Russia, China, North Korea, and Iran

The US has flagged a growing threat to global security as Russia deepens its cooperation with China, North Korea, and Iran. This quasi-alliance now covers weapons sales, energy, and finance, with Russia seeking assistance for its war in Ukraine. The four countries are also increasing their space collaboration, with Russia launching an Iranian satellite and plans for a Russo-Chinese lunar nuclear power plant. Additionally, Russia and North Korea have revived a mutual defense agreement, with both nations pledging military assistance to each other in the event of war. This growing partnership adds complexity to the already contested space domain and has raised concerns among US officials.

China's Communist Party Faces Challenges

With China's economy facing vulnerabilities, investors, analysts, and business leaders are questioning whether the Communist Party is willing and able to design and execute an effective response. The upcoming meeting of the party's Central Committee on July 15 will be an opportunity for China's leaders to address these concerns. However, it seems more likely that the meeting will highlight the gap between the party's rhetoric and its actions.

UK Betting Scandal

In the UK, a betting scandal has emerged, involving members of the Conservative Party and Prime Minister Rishi Sunak's security detail. Up to 15 Conservative Party members are being investigated by the Gambling Commission for allegedly using insider information to place bets on the surprise election date announced by Sunak. This scandal has led to the withdrawal of support for two MPs and the suspension of several individuals, including a police officer assigned as a bodyguard to the Prime Minister.

El Salvador's Culture Ministry Firings

In El Salvador, President Nayib Bukele has ordered the mass firing of 300 employees from the Culture Ministry, stating that they were <co: 13,33,5

Themes around the World:

Taiwan Strait grey-zone supply shocks

Intensifying PLA and coast-guard activity around Taiwan supports a “quarantine” scenario that could disrupt commercial shipping without open war, raising insurance premiums, rerouting costs, and delivery delays. High exposure sectors include electronics, LNG-dependent manufacturing, and time-sensitive components.

Ports and freight connectivity upgrades

Karachi logistics is improving via DP World–Pakistan Railways Pipri freight corridor and new automated bulk-handling equipment, aiming to shift containers from road to rail and reduce turnaround times. Execution risk persists, but successful delivery lowers inland logistics costs and delays.

Trade remedies and export barriers

Vietnam faces intensifying trade-defense actions in key markets. Example: the US imposed antidumping duties of 47.12% on Vietnamese hard empty capsules, alongside CVDs. Similar risks can spread to steel and other goods, elevating legal costs and reshaping sourcing strategies.

Sanctions compliance incentives harden

OFSI now states penalties can be reduced up to 30% for self-reporting and cooperation. For online investing firms with cross-border clients, stronger screening, escalation and audit trails become strategic necessities as UK sanctions enforcement intensity rises.

Red Sea route gradual reopening

Following reduced Houthi attacks, major carriers are cautiously rerouting some services via the Suez/Red Sea again, lowering transit times versus Cape routes. However, renewed US–Iran tensions keep insurance, security surcharges and schedule reliability risk elevated for Israel-linked cargo.

Talent constraints and migration policy

Hiring plans across strategic industries and demographic pressures are tightening labour markets, increasing competition for engineers, welders, and software/AI profiles. Evolving immigration tools (e.g., Talent Passport thresholds and rules) influence workforce planning, relocation costs, and project delivery risk.

Maritime services ban on crude

Brussels proposes banning EU shipping, insurance, finance and port services for Russian crude at any price, moving beyond the G7 price cap. If adopted, logistics will shift further to higher‑risk shadow channels, raising freight, delays, and legal liability.

Consumption tax reform rollout

Implementation of the new dual VAT (CBS/IBS) and selective tax advances, with a testing phase starting in 2026 and long transition. Firms face significant ERP, pricing, contracting and cash‑flow changes as non-cumulativity expands and sectoral carve‑outs evolve.

Nickel governance and reporting gaps

Regulators disclosed a major Chinese-linked nickel smelter failed to submit mandatory investment activity reports, weakening oversight of capital, production, taxes, and environmental compliance. This heightens governance and ESG due-diligence needs for counterparties in Indonesia’s nickel downstreaming ecosystem.

Gaza spillovers and border constraints

Rafah crossing reopening remains tightly controlled, with limited throughput and heightened security frictions. Ongoing regional instability elevates political and security risk, disrupts overland logistics to Levant markets, and can trigger compliance and duty-of-care requirements for firms.

Monetary policy and FX volatility

Banxico signaled further rate cuts are possible if tax and tariff changes do not trigger second-round inflation. With the policy rate around 7% and inflation near 3.8% early 2026, financing costs may ease, but peso volatility can impact input pricing and hedging needs.

FX Volatility and Capital Flows

The won remains prone to sharp moves amid foreign equity flows and shifting hedging behavior. Korea’s National Pension Service, with ~59.6% of AUM overseas and 0% FX hedge, may change strategy in 2026, potentially moving USD/KRW and altering pricing, repatriation and hedging costs.

Sanctions, compliance, crypto enforcement

Ukraine is expanding sanctions against entities and individuals supporting Russia’s defence and financial networks, including crypto payment and mining channels linked to component procurement. This raises counterparty, KYC/AML and re-export control burdens for regional traders and service providers, especially across hubs like UAE and Hong Kong.

Infrastructure capex boosts logistics

Economic Survey signals sustained infrastructure push via PM GatiShakti and high public capex. Rail electrification reached 99.1% by Oct 2025; inland water cargo rose to 146 MMT in FY25; ports improve global rankings—lowering transit times and costs.

Tax and GST compliance digitization

Authorities are shifting to data-driven, risk-based enforcement: expanded e-invoicing and automated “nudge” campaigns, plus proposed e-way bill reforms toward trusted-dealer, tech-enabled logistics. This raises auditability and system-risk exposure, especially for MSMEs and cross-border traders.

Tariff volatility and litigation

Aggressive, frequently revised tariffs—often justified under emergency authorities—are raising input costs and retail prices while chilling capex. Ongoing court challenges, including a pending Supreme Court ruling, create material uncertainty for exporters, importers, and contract pricing through 2026.

High-risk Black Sea shipping

Merchant shipping faces drone attacks, sea mines, GNSS jamming/spoofing, and sudden port stoppages under ISPS Level 3. Operational disruption and claims exposure rise for hull, cargo, delay, and crew welfare, complicating charterparty clauses, safe-port warranties, and routing decisions.

Logistics disruption and labor risk

Rail and potential port labor disruptions remain a recurrent risk, with spillovers into U.S.-bound flows. For exporters of bulk commodities and importers of containerized goods, stoppages elevate inventory buffers, demurrage, and rerouting costs, stressing time-sensitive supply chains.

Shift toward LFP/next-gen chemistries

European producers’ reliance on NMC faces pressure as Chinese suppliers scale LFP and sodium-ion, and solid-state projects advance. French plants may need retooling, new equipment, and revised sourcing to stay cost-competitive, affecting procurement, licensing and offtake contracts.

LNG permitting accelerates exports

A faster, “regular order” approach to LNG export permits and terminal approvals is boosting long-term contracting (often 15–20 years) with Europe and Asia, shaping global gas pricing, supporting US upstream investment, and offering buyers diversification from geopolitically riskier suppliers.

Palm oil biofuels and export controls

Indonesia is maintaining B40 biodiesel in 2026 and advancing aviation/bioethanol initiatives, while leadership signaled bans on exporting used cooking oil feedstocks. Policy supports energy security and domestic processing, but can tighten global vegetable oil supply, alter contracts, and increase input-cost volatility.

Escalating sanctions and shadow fleet

U.S. “maximum pressure” is tightening on Iran’s oil and petrochemical exports, targeting 14 tankers and dozens of entities while partners like India step up interdictions. Elevated secondary-sanctions exposure raises freight, insurance, compliance costs and disruption risk for global shipping and traders.

Digital regulation–trade linkage escalation

Coupang’s data-breach probe has triggered U.S. investor ISDS and Section 301 pressure, showing how privacy, platform and competition enforcement can become trade disputes. Multinationals should expect higher regulatory scrutiny, litigation risk, and bilateral retaliation dynamics in digital markets.

Critical minerals and battery supply chains

Canada is positioning itself as a “trusted supplier” of critical minerals, supporting mining, processing and battery ecosystems. This creates opportunities in offtakes and JV processing, but permitting timelines, Indigenous consultation, and infrastructure constraints can delay projects and cashflows.

US–Taiwan reciprocal trade pact

A newly signed U.S.–Taiwan trade agreement caps U.S. tariffs at 15% and exempts 2,072 product categories, cutting average tariffs to ~12.33%. Taiwan will liberalize most U.S. imports and commit large purchases (e.g., US$44.4B LNG/crude) affecting sourcing strategies.

Sanctions enforcement intensifies at sea

UK and allies are escalating action against Russia’s ‘shadow fleet’, including interdictions, proposed boarding powers and broader maritime-services bans. Shipping, insurers, traders and banks face higher compliance burdens, detention risk, route disruption and potentially higher freight and war-risk premiums.

US tariffs hit German exports

US baseline 15% EU duty is biting: Germany’s 2025 exports to the United States fell 9.3% to about €147bn; the bilateral surplus dropped to €52.2bn. Automakers, machinery and chemicals face margin pressure, reshoring decisions, and supply-chain reconfiguration.

US–Indonesia reciprocal tariff reset

A new US–Indonesia reciprocal trade agreement lowers US tariffs on Indonesian goods to ~19% while Indonesia removes tariffs on most US products. Expect near-term changes in market access, compliance requirements, and competitive pressure in textiles, agribusiness, and manufacturing.

Energy security and LNG contracting

Shrinking domestic gas output and delayed petroleum-law amendments increase reliance on LNG; gas supplies roughly 60% of power generation. PTT, Egat and Gulf are locking long-term LNG deals (15-year contracts, 0.8–1.0 mtpa). Electricity-price volatility and industrial costs remain key.

Seguridad: robo de carga y extorsión

El robo a transporte de carga superó MXN 7 mil millones en pérdidas en 2025; rutas clave (México‑Querétaro, Córdoba‑Puebla) concentran incidentes y se usan inhibidores (“jammers”). Eleva costos de seguros, inventario y escoltas, y obliga a rediseñar rutas y SLAs.

Infrastructure works disrupt logistics corridors

Large-scale Deutsche Bahn renewals and signalling upgrades are causing multi-month closures, with wider EU freight impacts on the Scandinavia–Mediterranean corridor. Congestion and modal shifts raise lead times and costs; shippers should diversify routes, build buffers, and lock capacity early.

Crime, corruption and governance strain

Allegations of syndicate infiltration and corruption within policing and procurement elevate security, extortion, and compliance risks for investors. Weak enforcement can disrupt logistics corridors and construction sites, raise insurance costs, and complicate due diligence and partner selection.

Monetary tightening and demand pressures

The RBA lifted the cash rate 25bp to 3.85% as inflation re-accelerated (headline ~3.8% y/y; core ~3.3–3.4%) and labour markets stayed tight (~4.1% unemployment). Higher funding costs and a stronger AUD affect capex timing, valuations, and import/export competitiveness.

India–US trade pact reset

A new interim India–US trade framework cuts U.S. tariffs to ~18% on many Indian exports while India reduces tariffs and non-tariff barriers for U.S. goods. Companies should reassess rules-of-origin, pricing, market access, and compliance timelines.

Tariff rationalisation amid protectionism

Recent tariff schedules cut duties on many inputs, improving manufacturing cost structures, while maintaining high protection on finished goods in select sectors. This mix changes sourcing decisions, compliance requirements, and effective protection rates, influencing export orientation versus domestic-market rent-seeking.

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.