Grey swans on the horizon.

Byline: Sakib Sherani

BRITISH thinker and author Nassim Nicholas Taleb has described Black Swan events as occurrences that are highly improbable yet catastrophic in their impact. Grey swan events can be described as high-risk, moderate probability events that have the potential to either remain 'white swans', and hence pose no risk, or convert to 'black swans' with disastrous consequences. (It is important to emphasise this is my definition, and it differs somewhat from the standard ie conventional definition used in the financial markets).

While many commentators have termed the recent assassination by the US of Gen Qassem Soleimani as a 'black swan' event, by my definition it could be described as a grey swan since its probability was not insignificantly low, and arguably growing progressively since 2015, however discounted it may have been by the protagonists. The global, regional as well as domestic environment Pakistan faces on multiple fronts is dominated by 'grey swans'. Here are some of the main ones.

Read more: Qasem Soleimani - the general who became an Iran icon by targeting US

Geopolitics: The risk environment Pakistan faces is dominated by geopolitical/regional risks. Three risks stand out. Chief amongst these, of course, is the threat of any further escalation between the US and Iran sparking an all-out regional conflagration. While the protagonists appear to be observing a strategic pause for now, with the balance of risks indicating both sides preferring to avoid an open conflict, this situation could change with another brazen miscalculation and flouting of international law by the US (or Iran).

The consequences for the region, including Pakistan, of yet another conflict in the Middle East involving the US and its regional allies would be disastrous. The resulting instability could last for a very long time with serious unintended consequences. At the very least, it would lead to a super-spike in the international price of oil, as well as for the wider energy cluster, the choking off of foreign direct investment and other private capital flows to, and from, the region, and the flight of capital from the region. The resulting impact on the economies of the Gulf countries will have a knock-on impact on labour markets - and potentially on remittances sent by non-resident Pakistanis (NRPs). Remittances from NRPs are almost as large as Pakistan's export earnings, and around 60 per cent of these emanate from the GCC countries.

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