China to build aircraft carrier-sized ‘science island’

China’s massive maritime science infrastructure – an aircraft carrier-sized floating artificial island – has officially entered its engineering construction phase. On October 18, Shanghai Jiao Tong University (SJTU), the facility’s lead developer, signed a construction contract worth over 2.7 billion yuan (US$405 million) with a shipbuilder under China State Shipbuilding Corporation, according to media reports.

The semi-submersible twin-hull platform is the world’s first mobile, self-sustaining artificial island and is expected to be fully completed and delivered by June 2030, news outlet Shanghai Observer reported on October 21.

During deep-sea and far-ocean expeditions, traditional research vessels struggle to remain stationary in gale force winds and massive waves for extended periods. In such violently pitching environments, on-board precision optical instruments and analytical balances cannot function properly.

Conversely, while fixed offshore platforms are massive and highly resistant to wind and waves, they lack self-propulsion and cannot be relocated to suit changing research needs.

The ultra large floating research platform therefore fills a unique need, and what makes it revolutionary is its combination of mobility and permanence.

Unlike fixed research stations or conventional vessels constrained by fuel and supplies, the floating island can cruise at 11 knots, or about 20 km/h (12.4mph), while supporting more than 200 researchers.

Officially named the Deep-Sea All-Weather Resident Floating Research Facility and designated as a major national scientific infrastructure project in China’s 14th five-year plan, the facility – also dubbed a “far-sea floating mobile island” – is the culmination of a decade of research and planning.

The structure measures 138 meters (453 feet) long and 85 meters wide, with its main deck sitting 45 meters above water – roughly the height of a 15-storey building.

This means that, even in extreme sea conditions churning up 20-metre waves, the swells would be unable to breach and flood the core laboratory zones and living quarters on the main deck.

The platform’s maximum displacement is about 74,000 tons, surpassing the vast majority of conventional destroyers and research vessels worldwide and approaching the scale of a large aircraft carrier. China’s newest aircraft carrier, the Fujian, has a displacement of more than 80,000 tons.

Its twin-hull design allows it to operate in sea state 7, namely “high” seas with six to nine-meter waves. And it can survive typhoons as intense as up to Force 17 on the Extended Beaufort Scale.

Notably, while it is officially a civilian research platform, engineers behind the project have proposed a nuclear-blast-proof design.

To support prolonged, high-intensity deep-sea research, the floating island features comprehensive architecture comprising a main platform system, a shipborne laboratory system and a shore-based support network.

The shipborne component features six laboratories dedicated to researching core fields such as heavy marine equipment and systems technology, marine disaster meteorological observation and the long-term observation of marine ecosystems.

According to China’s state news agency Xinhua in May, Zhou Meng, the project’s chief scientist and dean of SJTU’s School of Oceanography, said the facility would excel in scenarios such as sea trials for high-end equipment, close-range typhoon detection and marine scientific observation.

The mega facility would also be open to, and shared with, global research institutions and enterprises, Zhou added.

 

AI Bubble: Investors Must Prepare for a Crisis Worse Than Sub-Prime

The artificial intelligence revolution may transform the global economy, but investors must not confuse technological progress with guaranteed financial returns.

The warning signs are becoming increasingly difficult to ignore. More than US$2 trillion in market value is set to disappear from the technology-heavy Nasdaq 100 in October, which has already declined over 5.8%. Investors are beginning to question whether the enormous sums being poured into artificial intelligence (AI) infrastructure can generate adequate returns within a reasonable period.

The problem extends beyond declining share prices. Big Tech companies are escalating capital expenditure, building data centres, acquiring expensive computing equipment and expanding infrastructure at an extraordinary pace. Morgan Stanley expects AI infrastructure spending to exceed US$1 trillion next year, while J.P. Morgan projects global AI capital expenditure of US$5.5 trillion by 2030.

What makes this development particularly worrying is the growing dependence on external financing. Companies that once financed expansion through substantial operating cash flows are increasingly approaching bond and equity markets. Meta's proposed US$97.5 billion fundraising and Microsoft's reported US$25 billion bond issuance illustrate the scale of financing requirements.

Investors must ask a fundamental question: what happens if anticipated AI revenues fail to justify these investments?

Data centres, specialized chips and associated infrastructure involve enormous upfront costs. Technology also evolves rapidly, creating the possibility that today's expensive assets could lose economic value before delivering expected returns.

The sub-prime mortgage crisis demonstrated how excessive optimism, leverage and interconnected financial exposures can turn a seemingly contained problem into a global financial catastrophe.

The AI investment cycle carries a different risk profile, but its potential transmission channels are equally concerning.

A sharp correction in technology valuations could spread into corporate bonds, private credit, banks and institutional investment portfolios.

There is no denying AI's transformative potential. However, technological breakthroughs do not guarantee that every company investing in them will earn attractive returns. Nor does strong revenue growth automatically justify unlimited capital expenditure.

My warning to investors is simple: do not become prisoners of the AI narrative. Examine valuations, debt exposure, cash flows and realistic returns before committing capital. The danger is not that AI will fail, but that financial markets may have priced in an exceptionally optimistic future.

If expectations collapse, the resulting financial damage could extend far beyond Silicon Valley. Investors who ignore these warning signs today may discover tomorrow that the AI bubble was considerably more dangerous than they imagined.

Arabs Must Come Out of the Illusion That the US Is There to Protect Them

When we launched our blog, Geo Politics in South Asia and MENA, in June 2012, I had a clear perception that the United States wanted to keep Arab monarchies strategically dependent on Washington. Its objectives were straightforward: secure access to inexpensive oil, ensure petroleum transactions remained predominantly dollar-denominated, and sell billions of dollars' worth of weapons to wealthy Arab states.

The US-Saudi strategic relationship laid the foundation for this arrangement. Over subsequent decades, Washington consolidated its influence over Arab oil producers while becoming their principal arms supplier.

Following the Islamic Revolution in Iran in 1979, the United States increasingly promoted the narrative that Iran posed a greater threat to Arab security than Israel. This perception helped Washington strengthen its military presence and deepen Arab dependence on American protection.

Egypt, although not part of the Arabian Peninsula, was persuaded to sign the Camp David Accords and subsequently normalize relations with Israel. During Trump's first presidency, several other Arab countries were encouraged to join the Abraham Accords.

Meanwhile, the United States established military bases across the Gulf, ostensibly to protect Arab monarchies against Iranian aggression. Recent developments, however, have exposed the limitations of this security arrangement. American bases were extensively used in military operations against Iran, yet their presence did not guarantee adequate protection against Iranian missile and drone attacks on Arab territories.

Developments surrounding the Strait of Hormuz have further strengthened the perception that Washington's regional priorities do not necessarily coincide with those of Arab oil producers. Disruption of this vital energy corridor threatens not only Iran but also the economic interests of Gulf exporters.

These developments should compel Arab leaders to reconsider decades of strategic dependence. The Iranian threat should not remain a permanent justification for Arab subservience to American interests.

The Gulf Cooperation Council (GCC) must convene an emergency summit to initiate a new regional security framework. Member states should overcome historical animosities, establish cordial relations with Iran and stop outsourcing their security to Washington.

They must also strengthen independent defence capabilities and expand strategic partnerships with China and Russia.

The time has come for Arab monarchies to recognize that American protection comes with American priorities. Regional security must be built through regional cooperation, not purchased through endless arms deals.

PSX benchmark index up 2.5%WoW

Pakistan Stock Exchange (PSX) staged a recovery during the outgoing week due to rejuvenation of diplomatic engagement to resolve the Middle East conflict, and higher than expected corporate earnings announced during the ongoing result season. The benchmark Index gained 4,034 points or 2.5%WoW to close at 166,409 on Friday, October 30, 2026. The average daily trading volume surged by 121%WoW to 1,095 million shares.

Driving the diplomatic momentum were Pakistan-proposed talks in Tehran between the Makkah Pact states and Iran, alongside reports of renewed US outreach to Iran ahead of the US midterm elections.

Meanwhile, supply concerns fueled by Houthi attacks on Saudi Arabia and tanker incidents near the Strait of Hormuz kept Brent crude elevated, up 0.7%WoW at US$117.1/ bbl as of Friday.

On the macroeconomic front, State Bank of Pakistan (SBP) raised the policy rate by 50bps to 12.0% (its first hike since April), while raising its FY27 remittances forecast to US$45 billion from US$44 billion and foreign exchange reserves forecast to US$23 billion end December 2026 and US$25 billion for end June 2027.

The SBP raised PKR1.8 trillion in the latest T-bills auction against a target of PKR1.7 trillion, with cut-off yields rising by 25-61bps across tenors.

Foreign exchange reserves held by SBP rose to US$21.5 billion as of October 23, 2026.

Other major news flow during the week included: 1) The US Federal Reserve holds interest rates steady, 2) Pakistan considers raising US$500 million via a second Panda bond in 2HFY27 without ADB/ AIIB guarantees, 3) Pakistan secures third LNG cargo from Qatar in October, 4) SIFC lines up US$40 billion investment pipeline across 38 projects, including a proposed US$6 billion refinery program, and 5) Pakistan seeks new US$600 million World Bank loan tied to structural and trade reforms.

Top performing sectors were Leasing, Transport, and Tobacco, while the lagged included Paper & Board, Apparel, and Jute.

Major net buyers were Other Organizations (US$50.9 million) and Individuals (US$7.3 million), major net sellers were Foreigners (US$60.6 million) and Insurance Companies (US$4.0 million).

Top performing scrips were: GHNI, CNERGY, TGL, KOHC, and COLG, while laggards included: PKGS, INIL, LCI, AGP, and IMAGE.

AKD Securities expects the market to improve on the back of strengthening economic indicators. Any positive development on Middle East conflict could moderate international oil prices and serve as a key trigger for market as it paves the way for monetary easing.

The market continues to trade at attractive valuations, with forward P/E of 6.0x.

Top picks of the brokerage house include: OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.

Trump Must Not Make the Mistake of Attacking Iran Again

The US-Israel war on Iran, which began on February 28, 2026, should have taught President Donald Trump an important lesson: military superiority does not automatically translate into strategic victory. Yet reports suggest that the administration is considering another assault on Iran after the November 3 midterm elections. Trump must not repeat the mistake of launching another military offensive.

The financial cost alone should prompt serious reconsideration. According to the latest Pentagon estimate, the war has cost American taxpayers approximately US$47.1 billion through October 16. This figure does not include the full cost of repairing damaged US military installations in the region. After spending this staggering amount, Washington has failed to bring Iran to its knees. Instead, the conflict has raised questions about American military deterrence and tarnished the country's international image.

Senator Chris Murphy, after attending a classified briefing on possible renewed military operations, described the administration's proposed plan as "insane". He warned that another assault could trigger devastating escalation, prolong the conflict and undermine America's commitment to the rule of law. His concerns deserve attention, particularly given reports that Iranian energy infrastructure, military installations and nuclear facilities feature among potential targets.

Trump must understand that the longer this confrontation continues, the greater the damage to American credibility. Further attacks may not weaken Iran's resolve; they could reinforce its determination to resist external pressure. Indeed, imprudent American policies risk turning Iran into an even bigger strategic specter, while Arab allies increasingly question the security guarantees offered by Washington.

The Gulf states have already experienced the consequences of being drawn into a confrontation involving their territory and security interests. Their growing uncertainty should not be mistaken for unconditional support for another American military adventure.

Meanwhile, China and Russia are gradually expanding their diplomatic and strategic engagement in the region. Every prolonged American miscalculation creates additional space for these powers to challenge Washington's traditional influence. The erosion of US hegemony in the Middle East may therefore become an unintended consequence of its own policies.

The reported diplomatic outreach by Vice President JD Vance offers an opportunity to reconsider the course of action. Washington should pursue negotiations rather than another bombing campaign. Iran's Foreign Minister Abbas Araghchi has also reiterated Tehran's willingness to pursue a peaceful resolution, while insisting on its right to defend itself.

Trump should recognize that ending a war without achieving every military objective is not necessarily defeat. Launching another military offensive without a credible exit strategy could prove far costlier. It may further weaken American credibility, undermine the confidence of Arab allies and hasten the end of US hegemony in the Middle East.

Stephen Schwarzman: The King of Capital and a Unique Diplomat

At 79, Stephen A. Schwarzman remains one of the most influential personalities in global finance. Widely known as the "King of Capital," he is the co-founder, chairman and chief executive of Blackstone, one of the world's largest alternative investment management firms. His journey from a modest family business in Pennsylvania to the commanding heights of international finance is a remarkable story of ambition, calculated risk-taking and persistence.

Born on February 14, 1947, in Philadelphia, Schwarzman grew up in a family that operated a dry-goods store. His early exposure to business came from working alongside his father. At just 14, he demonstrated an entrepreneurial instinct by starting a lawn-mowing business and employing his younger twin brothers.

He graduated from Yale University in 1969 and subsequently earned an MBA from Harvard Business School in 1972. His professional career began on Wall Street, where he joined Lehman Brothers and quickly established himself in mergers and acquisitions. By the age of 31, he had become a managing director.

In 1985, Schwarzman joined hands with Peter G. Peterson, a former chairman of Lehman Brothers, to establish Blackstone. What started as a two-person investment advisory business gradually evolved into a global financial powerhouse. Today, Blackstone employs approximately 5,000 people and manages more than US$1.3 trillion in assets. Its investments span private equity, real estate, infrastructure, credit, life sciences and other alternative asset classes. It has also emerged as a major investor in data centres, critical infrastructure supporting the global artificial intelligence revolution.

Interestingly, Schwarzman acknowledges that Japan played a crucial role in Blackstone's early survival and expansion. Japanese investors provided important capital when the firm was struggling to establish itself. He also developed enduring relationships with Japanese business leaders, including Yasuo Kanzaki of Nikko Securities. His admiration for former Japanese Prime Minister Shinzo Abe reflects his interest in economic reform and political leadership.

Beyond business, Schwarzman has cultivated relationships with successive US presidents and international political leaders. He describes himself as someone willing to serve his country by communicating American economic and trade priorities to foreign governments. He has particularly sought to facilitate understanding between Washington and Beijing, including during Donald Trump's presidency.

His engagement with China also extends to education. In 2013, he established the Schwarzman Scholars program at Tsinghua University in Beijing, modelled on the Rhodes Scholarship, to develop future global leaders with a deeper understanding of China. His philanthropic contributions have also supported Yale University, the New York Public Library and other educational and cultural institutions.

In 2019, Schwarzman published What It Takes: Lessons in the Pursuit of Excellence, sharing experiences from his business career, failures and personal development.

Two principles summarize his philosophy: "A better tomorrow" and "learn every day." His life illustrates how entrepreneurial ambition, strategic relationships and continuous learning can transform a modest beginning into an institution of global significance.

Ultimately, Schwarzman's influence extends well beyond Wall Street. Through Blackstone's investment decisions, philanthropic initiatives and relationships with political leaders, he occupies a distinctive position at the intersection of global finance, business and diplomacy.

Pakistan’s Closed Borders: The Enormous Economic Cost

Pakistan shares borders with four countries: India, Afghanistan, Iran and China. Recent media reports have highlighted restrictions on cross-border movement, with China remaining an important exception. While security considerations may justify temporary closures, their economic consequences deserve much greater scrutiny.

The immediate impact is visible. Traders on both sides face delayed deliveries, stranded consignments and mounting financial losses. Perishable commodities are particularly vulnerable, as delays can destroy their value. Disrupted supplies also affect domestic prices, while shortages of essential goods impose additional costs on consumers. Transporters, logistics companies and workers dependent on cross-border commerce suffer as commercial activity comes to a standstill.

Yet an important question remains largely unaddressed: what is the total economic cost of closing Pakistan’s borders, and how much revenue does the government forgo?

Transit-related charges, customs services, port handling, warehousing and transportation generate economic activity and, where applicable, public revenue. Prolonged restrictions can disrupt these revenue streams while affecting employment, foreign exchange earnings and regional connectivity. The government should quantify these losses rather than treat border closures merely as administrative or security measures.

Afghanistan presents a distinct challenge because it is landlocked and depends on neighbouring countries for access to international markets. International transit arrangements recognize the importance of facilitating such movement, although the precise obligations and permissible restrictions depend on applicable agreements and laws. Pakistan should clarify how its border policy reconciles legitimate security requirements with its transit commitments.

Security is frequently cited to justify restrictions along the Pakistan-Afghanistan border. However, the effectiveness of prolonged closures in preventing cross-border terrorism deserves objective evaluation. If militant networks can exploit porous stretches of the frontier, restricting legitimate commerce may impose substantial economic costs without necessarily resolving the underlying security problem.

The Pakistan-Iran border raises another question. With tensions surrounding the Strait of Hormuz disrupting regional trade, Pakistan’s land routes have acquired additional strategic significance. Whether restrictions were intended to impede transit goods destined for Iran remains unverified. Nevertheless, the circumstances warrant transparency about the rationale, economic consequences and intended outcomes of such measures.

Pakistan needs a coherent border-management policy that combines effective security with the facilitation of legitimate trade. The government should publish the reasons for closures, their duration, estimated fiscal and commercial losses, and the criteria for reopening crossings.

National security is indispensable, but so is economic resilience. Before closing vital trade routes for extended periods, policymakers must assess both the security benefits and the economic costs. Without such an assessment, Pakistan risks sacrificing trade, revenue and regional connectivity without establishing whether the restrictions deliver commensurate benefits.

Netanyahu’s ‘Godfathers’ Still Working to Keep Him in Power

Benjamin Netanyahu’s marginal lead in Israel’s parliamentary election has not secured his political future. With neither major bloc reaching the 61 seats required for a majority, Arab-led parties have emerged as potential kingmakers. Their 19 projected seats could prove decisive, although ideological differences and opposition leaders’ reluctance to cooperate with Arab representatives complicate the formation of an alternative government.

The coming days may witness intense political bargaining. Netanyahu and his supporters will have strong incentives to prevent the opposition from assembling a majority. Political promises, incentives and pressure could all feature in negotiations, although any claim of coercion or attempts to buy political loyalty would require evidence. Arab representatives, meanwhile, have an opportunity to demand meaningful commitments on equality, public services and civil rights.

Yet Netanyahu’s political survival cannot be examined in isolation from his regional ambitions. His government has pursued policies aligned with Israel’s nationalist and Zionist constituencies while seeking to expand diplomatic normalization through the Abraham Accords. The question is whether these ambitions are strengthening Israel’s regional position or creating new strategic liabilities.

The UAE illustrates this dilemma. It invested heavily in becoming a secure, technologically advanced and internationally connected business hub. The regional conflict and threats to critical infrastructure have exposed the vulnerability of even sophisticated Gulf economies. Any perception that Israel’s actions have undermined the UAE’s security and standing could encourage other Gulf monarchies to approach normalization with greater caution.

Saudi Arabia has additional reasons to reconsider its strategic calculations. The Kingdom has traditionally relied on its partnership with Washington for security assurances. If Saudi leaders conclude that the United States has failed to protect their strategic assets, whether through deliberate restraint or serious security shortcomings, confidence in that partnership could suffer.

Consequently, Saudi participation in the Abraham Accords should not be taken for granted. Riyadh would have to weigh the benefits of normalization against credible security guarantees, regional stability and progress towards Palestinian statehood.

Netanyahu’s ‘Godfathers’ may continue working to preserve his political position, but keeping him in office is not the same as securing Israel’s long-term strategic interests. The real test is whether political survival at home can be reconciled with diminishing confidence among neighbouring Arab states.

Do Seven Sisters Fuel Conflicts Around the World?

The Seven Sisters, a group of seven major Western oil companies that dominated the international petroleum industry during much of the 20th century, symbolized the concentration of corporate power over energy resources. Today, a broader question deserves attention: do powerful commercial interests benefit so substantially from conflict that they have an incentive to sustain geopolitical tensions?

The military-industrial complex, Wall Street, media houses and shipping companies operate in different sectors, yet conflicts can create lucrative opportunities for all of them. Defence contractors may secure additional orders, financial markets experience heightened trading activity, media organizations attract larger audiences, and shipping companies charge higher rates to reflect security risks. Oil producers and traders may also benefit from rising prices, although others suffer substantial losses.

The US-Israel war on Iran, which began on February 28, 2026, provides a compelling case for examining this hypothesis. Disruptions to energy supplies and shipping through the Strait of Hormuz have intensified volatility in global oil markets. On October 26, West Texas Intermediate (WTI) crude settled at US$101.76 per barrel, while Brent crude closed at US$115.81. The resulting differential of approximately US$14 illustrates how geopolitical disruptions can reshape commodity markets. However, price movements alone do not establish manipulation or prove that commercial interests caused the conflict.

The more consequential question is whether these beneficiaries merely exploit wars or also influence decisions that prolong them. Answering it requires examining corporate lobbying, political financing, defence contracts, media ownership and the relationships between business interests and policymakers. Profiting from a conflict is not, in itself, evidence of having engineered it.

The human and economic costs of war are enormous. Ordinary citizens face higher energy bills, inflation, disrupted trade and insecurity, while particular companies may enjoy exceptional profits. These unequal outcomes raise legitimate questions about accountability and the influence of vested interests over public policy.

The Seven Sisters no longer exercise the same dominance they once did, but the wider relationship between corporate power and geopolitical conflict merits scrutiny. The essential question is not simply who profits from war, but whether those profits influence decisions about when wars begin—and when they end.

Will Netanyahu Accept Defeat?

Benjamin Netanyahu’s possible defeat would be more than the political downfall of Israel’s longest-serving prime minister. It could expose personal vulnerabilities, unsettle hardline allies, affect defence-related interests and challenge a wider network of political influence that I describe as “the syndicate.”

The first issue is Netanyahu’s personal future. Facing corruption charges since his indictment in 2019, he has a legal battle that losing office would not automatically resolve in his favour. Although imprisonment is not an inevitable consequence of electoral defeat, the prospect of losing political influence could make his future considerably more uncertain. His political survival and legal predicament therefore form an important part of the debate.

The second issue concerns Israel’s hardliners. Netanyahu has been central to the coalition politics that enabled right-wing and religious parties to exercise considerable influence over government policy. His departure could leave some of these allies without their principal political broker, forcing them to reconsider their strategy and search for alternative leadership.

The third dimension involves the military-industrial complex. Prolonged regional conflicts have sustained demand for weapons and defence technology. A change of government would not necessarily weaken Israel’s defence industry, but it could alter procurement priorities, strategic calculations and the political justification for military operations.

The fourth and most consequential dimension is what I call “the syndicate” - a wider network of political, strategic and economic interests whose objectives may overlap with Netanyahu’s continued leadership. His close relationship with Donald Trump adds an international dimension to this argument. Whether Netanyahu’s departure would constitute a setback for this wider network, however, depends on how far its interests are tied to him personally rather than to institutions and policies that could survive his departure.

The central question is whether Netanyahu would accept not only an electoral verdict but also the consequences of losing power. Israel’s parliamentary system makes coalition negotiations crucial, while the judicial process would continue to follow its own course.

Ultimately, Netanyahu’s political future will depend on voters, coalition arithmetic and the legal process. But the implications of his departure could extend well beyond one individual. The real test would be whether Israel’s political system can manage a change of leadership while holding its leaders accountable—and whether the interests built around Netanyahu could retain their influence without him.

Lula Victory or Defeat of Trumphology?

The re-election of Brazilian President Luiz Inácio Lula da Silva could prove to be more than a domestic political victory. By defeating Flávio Bolsonaro, the son of former president Jair Bolsonaro, Lula has delivered a significant setback to a right-wing political movement aligned with US President Donald Trump. The question is whether this victory signals the beginning of a broader backlash against Trumphology.

During his second term, Trump has pursued an aggressive agenda encompassing a trade war with China, sanctions on Russia, unwavering support for Israel in its campaign against Hamas, efforts to dislodge Venezuela’s leadership and, most consequentially, the US-Israel war against Iran. These initiatives were intended to reinforce American power and advance Washington’s strategic interests. Yet their cumulative consequences have raised questions about the costs of confrontation and the damage to America’s international standing.

Lula’s victory suggests that Trump’s political influence is not irresistible. His support for ideologically aligned leaders does not guarantee electoral success. Brazil’s electorate has demonstrated that domestic priorities, democratic choices and national sovereignty can outweigh ideological alignment with Washington.

Some political observers speculate that Israeli Prime Minister Benjamin Netanyahu could be the next leader to face a serious political setback. Others anticipate further upheaval in Venezuela, potentially creating an opportunity for the return of leadership previously displaced from power. These possibilities remain speculative, however, and depend on separate domestic and international developments.

The US midterm elections offer another important test. A setback for Trump’s Republican Party could constrain his legislative agenda, intensify domestic scrutiny and complicate the implementation of his foreign policy. Nevertheless, neither the scale of such a setback nor its consequences can be predicted with certainty.

It would be premature to interpret Lula’s victory as the beginning of the end of Trump’s political dominance. Brazil has its own economic, social and democratic considerations, and its voters were not necessarily casting ballots to influence American politics.

Nevertheless, the result carries a wider message: political power abroad cannot indefinitely substitute for domestic legitimacy, economic performance and diplomatic credibility.

Those who believe Trump has tarnished America’s image may celebrate Lula’s victory as an encouraging sign. Whether it becomes a turning point in global politics will depend on subsequent developments, not merely on the hopes of Trump’s opponents. Lula may have won an election, but whether this amounts to a defeat of Trumphology remains an open question.

 

US and EU Adapting Divergent Policies to Tackle Energy Crisis

The United States and the European Union appear to be pursuing divergent energy policies, exposing the tension between geopolitical commitments and economic necessities. While Washington is easing restrictions to facilitate Russian diesel supplies, Brussels is preparing another package of sanctions against Russian entities involved in the energy trade. Why are two Western partners responding so differently to energy insecurity?

The answer lies in their contrasting energy circumstances, domestic political pressures and strategic priorities.

The United States is facing a sharp rise in diesel prices, which reached US$6.32 per gallon on October 23, compared with US$3.63 a year earlier. With Brent crude approaching US$120 per barrel amid escalating Middle Eastern tensions, the pressure on President Donald Trump is mounting ahead of the November 3 midterm elections. His decision to facilitate Russian diesel supplies reflects an attempt to contain domestic fuel costs, even if it requires a pragmatic departure from the sanctions approach.

The first Russian tanker, carrying approximately 40,000 tons of diesel, is not expected to reach New York until November 7. Moreover, the shipment is too small to make a meaningful difference to a tight global diesel market. The agreement's immediate political significance may therefore exceed its practical impact on American consumers.

Interestingly, the US natural gas market presents a contrasting picture. Henry Hub futures have fallen to US$2.66 per million British thermal units (MMBtu), as abundant inventories, mild weather and recovering supplies outweigh strong liquefied natural gas demand. The United States faces expensive diesel even as domestic natural gas remains relatively cheap.

Europe, meanwhile, faces a serious natural gas challenge. Its benchmark TTF prices have climbed above €93 per megawatt-hour, their highest level since December 2022. Restricted Qatari LNG supplies, colder weather and storage levels below 75% have heightened concerns about winter energy security. Yet the EU is preparing further sanctions targeting Russian oil producers, refiners, traders and shipping entities.

This divergence reflects different calculations of economic necessity and geopolitical responsibility. Washington is prioritizing immediate domestic pressures, while Brussels remains committed to restricting Moscow's energy revenues following Russia's invasion of Ukraine. Both approaches involve trade-offs between strategic objectives and energy security.

Ultimately, energy markets do not respect political boundaries. If Washington is willing to reconsider restrictions when domestic needs demand it, Europe must also assess how its sanctions policy balances geopolitical objectives against economic resilience. The central question is whether political commitments can remain sustainable when the cost of energy security becomes increasingly difficult for consumers and businesses to bear.

US Faces a Worse Defeat in Iran Than in Afghanistan

The United States may be heading towards a strategic setback in Iran more consequential than its humiliating withdrawal from Afghanistan. The two conflicts differ fundamentally in their military, political and geographical realities. Afghanistan exposed the limits of American nation-building; Iran could expose the limits of American military coercion.

In Afghanistan, Washington had important advantages. Its 2001 military campaign relied heavily on the Northern Alliance, an indigenous force opposed to the Taliban government. American airpower, special operations forces and local allies rapidly brought down the Taliban regime.

Subsequently, Washington installed and supported a government that provided the political framework for a prolonged American military presence. Regional cooperation and access to supply routes enabled the United States to sustain its operations despite Afghanistan being landlocked. Yet, after two decades of intervention, the US-backed government collapsed in August 2021, forcing American forces to withdraw.

Iran presents a different strategic equation. Washington has no comparable indigenous force capable of readily replacing the Iranian government, nor can it assume that military pressure will produce political fragmentation. Iran possesses established state institutions, substantial military capabilities and the geographical advantage of being positioned along the Strait of Hormuz, a vital artery of global energy trade.

American military bases in GCC countries provide platforms for repeated air strikes. However, the ability to attack Iran from neighbouring territories is not equivalent to the ability to occupy its land, establish a sustainable military presence or impose a political settlement. After months of confrontation, the absence of an American ground presence inside Iran underscores the difference between possessing overwhelming firepower and translating it into control on the ground.

More importantly, external aggression can produce consequences contrary to those intended. A nation divided over domestic policies may still unite against a foreign adversary. Iran's national cohesion should not be taken for granted, but neither should Washington assume that military devastation will automatically trigger political surrender.

The ultimate test is not how many targets American forces destroy, but whether Washington can achieve its declared objectives at an acceptable military, economic and political cost.

Afghanistan demonstrated that military victory does not guarantee a sustainable political outcome. Iran could deliver an even more damaging lesson - a superpower may win battles, inflict enormous destruction and still lose the strategic contest. If Washington cannot translate its military superiority into a durable settlement on its terms, its eventual outcome in Iran could prove worse than Afghanistan.

Lana Zaki Nusseibeh: An Emirati Woman Aspiring to Lead the UN

Lana Zaki Nusseibeh, a senior Emirati diplomat and former ambassador to the United Nations, has emerged as a candidate for the organization’s top position. Nominated by the United Arab Emirates on October 21, 2026, she brings extensive experience in multilateral diplomacy. If elected, she would become the first woman to serve as UN Secretary-General, marking a historic milestone for the organization.

Nusseibeh served as the UAE’s Permanent Representative to the UN from 2013 to 2024. During her tenure, she held several prominent positions, including Vice-President of the UN General Assembly and President of the Executive Board of UN Women. She also presided over the Security Council during the UAE’s elected membership in 2022–2023. Her diplomatic experience spans international security, humanitarian affairs, sustainable development and institutional reform.

A significant feature of her candidacy is the collective endorsement of all six members of the Gulf Cooperation Council (GCC). This regional backing strengthens her credentials and could help her build support beyond the Arab world. Her nomination also raises the prospect of an Arab-backed woman reaching the highest position in the UN system.

Her prospects will depend, however, on the broader geopolitical landscape. The UAE’s close relations with Israel, formalized through the Abraham Accords, may work in her favour among certain Western political constituencies. Nevertheless, it would be premature to assume that these ties guarantee support from influential Jewish organizations or political lobbies.

Ultimately, her selection will depend on whether she can secure the necessary support in the UN Security Council, particularly from its five permanent members. Her diplomatic record and regional backing make her a credible contender, but the outcome will be shaped by international negotiations and competing geopolitical interests.

Trump’s Louder Rhetoric and the Limits of American Power

The louder Donald Trump’s rhetoric becomes, the more pressing a question emerges: has the US-led war on Iran delivered the strategic outcomes Washington promised? Military power can inflict enormous damage, but translating battlefield superiority into political submission is an altogether different challenge.

The decision to attack Iran while diplomatic negotiations were under way undermined the credibility of diplomacy itself. If negotiations can be interrupted by military action, what assurance can any adversary have that future American commitments will be honoured? The consequences extend beyond Tehran, weakening confidence in Washington as a negotiating partner.

The reported killing of Iran’s spiritual leader appears to have failed to produce the anticipated political transformation. Rather than compelling the Iranian leadership to surrender, the campaign has confronted the US with the resilience of a state whose institutions and national interests cannot simply be eliminated through targeted strikes.

At the outset, expectations were raised that the conflict would be short-lived. Yet a prolonged confrontation without Iranian unconditional surrender raises serious questions about the assumptions underpinning the military campaign. Escalating threats may project determination, but they cannot substitute for a credible exit strategy.

The Gulf Cooperation Council (GCC) countries face their own strategic dilemma. If their military installations are perceived as serving Israel’s security more directly than their own, the political justification for hosting foreign forces becomes increasingly contentious. Regional security arrangements cannot remain sustainable without the confidence of host countries and their populations.

The Strait of Hormuz presents another contradiction. Restricting Iranian oil exports may impose costs on Tehran, but disruption to maritime trade also threatens Arab oil producers through reduced export opportunities, higher transport costs and uncertainty over energy revenues. Economic pressure is rarely a one-sided instrument.

Meanwhile, Iran’s ability to withstand the campaign may reinforce perceptions of its military resilience and regional influence, regardless of the physical damage it has suffered.

Reports of Trump seeking Russian diesel supplies would add another uncomfortable dimension if confirmed, even a superpower can face practical vulnerabilities when geopolitical confrontation disrupts energy markets.

Ultimately, the measure of American power is not the volume of presidential rhetoric but the ability to achieve sustainable political objectives. If coercion fails to secure submission, Washington must reconsider whether escalation is strengthening its position—or exposing the limits of military supremacy.

PSX benchmark index declines 2.4%WoW

Pakistan Stock Exchange (PSX) experienced volatility during the outgoing week amid continued Houthi attacks on Saudi Arabia, with news of the US planning an attack on Iran after midterm elections.

The benchmark Index declined by 4,045 points or 2.4%WoW to close at 162,375 on Friday, October 23, 2026. Average daily trading volume declined by 13.4%WoW to 496 million shares.

Brent crude futures climbed by 6.4%WoW to US$114.9/ bbl as of Friday. Meanwhile, local HSD and Petrol prices declined attributed to a decline in refinery crack cap by authorities and relatively stable Dubai crude oil prices.

On the macroeconomic front, FY26 GDP growth revised slightly down to 3.65% from provisional estimates of 3.7% as compared to 3.1% in FY25.

The World Bank projected FY27 GDP growth at 3.8% and inflation at 8.2% (7.1% in FY26).

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased to US$21.49 billion as of October 16, 2026.

Banking sector deposits rose 16%YoY to PKR40.8 trillion at end September 2026.

Consumer auto financing increased 33.6%YoY to PKR407 billion in September 2026 (up for the 22nd consecutive month).

Urea offtakes rose 42%YoY to 611,000 tons in September 2026 amid channel inventory build-up ahead of the Rabi season, whereas DAP offtakes declined 30%YoY to 68,000 tons amid higher local prices.

Power generation grew 6%YoY in 1QFY27 amid recovery in electricity consumption.

Cotton arrivals increased 8%YoY to 4.1 million bales as of October 15, 2026.

Other major news flow during the week included: 1) Finance Minister sought Fitch’s view on what Pakistan needs to move into the BB rating category, 2) Prime Minister approved the draft of Auto Policy for five years, 3) Weekly SPI rose 0.65%WoW and 11.85%YoY, 4) Privatization Commission pre-qualified 10 bidders for IESCO, and 5) Power sector circular debt rose to PKR1.7 trillion, while gas sector liabilities increased to PKR3.6 trillion as of Jun 30, 2026.

Top performing sectors were: Modarabas, Sugar & Allied Industries, and Leasing Companies, while laggards included: Refinery, Technology and Communication, and Woolen.

Major net selling was recorded by Mutual Funds (US$10.2 million) and foreigners (US$5.7 million), while major buyers were Individuals (US$14.0 million.

Top performing scrips were: THCCL, UPFL, PSEL, TPLRF1, and BWCL, while laggards included: PTC, PGLC, AHCL, ATRL, and KAPCO.

AKD Securities expects the market to improve on the back of strengthening economic indicators.

The brokerage house expected upcoming MPC meeting as a major catalyst and predicts the central bank to maintain the status quo.

Any positive development on Middle East conflict could moderate international oil prices and serve as a key trigger for market as it paves the way for monetary easing.

The market continues to trade at attractive valuations.

Top picks of the brokerage house include: OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.

Pakistan’s Textile Industry

Perpetual Dependence on Preferential Treatment

Pakistan’s textile industry is once again seeking government intervention to safeguard its preferential access to the European Union under the GSP+ regime. In a letter dated October 22, 2026, the Pakistan Textile Council (PTC) urged Prime Minister Shehbaz Sharif to mobilize federal ministries and provincial governments to meet the EU’s requirements. While protecting export markets is a legitimate concern, the industry’s persistent dependence on government support raises a fundamental question, when will it learn to compete on merit rather than concessions?

For decades, Pakistan’s textile and clothing industry has benefited from cheap cotton, textile quotas and preferential market access under the GSP and GSP+ regimes. Yet, barring a few islands of excellence, much of the industry has failed to undertake adequate balancing, modernization and replacement (BMR), upgrade technology, improve quality standards and develop internationally competitive products. Its preference for exporting raw cotton, yarn and intermediate goods rather than moving decisively towards higher-value finished products reflects a persistent failure to capture greater value from the country’s resources.

Preferential access can provide breathing space, but it cannot substitute for productivity, innovation, compliance and efficient resource utilization. An industry that repeatedly seeks official intervention while neglecting structural weaknesses should not be surprised when competitors gain ground. Cheap inputs and tariff concessions may improve margins temporarily, but they cannot indefinitely compensate for inadequate investment, inconsistent quality and weak competitiveness.

The stakes are considerable. In FY2025-26, the EU-27 absorbed US$7.103 billion, or 39.5% of Pakistan’s textile and apparel exports. Yet sector exports to the bloc declined by 2%. Meanwhile, India is pursuing deeper trade integration with the EU, while Bangladesh is exploring closer trade ties. These developments expose Pakistan’s vulnerability to changing trade preferences.

The EU’s emphasis on human rights, labour standards, the rule of law and environmental protection must also be treated as more than bureaucratic hurdles. Compliance is integral to sustainable participation in modern global supply chains.

The government should pursue GSP+ retention through credible reforms, but the industry must reciprocate by investing in technology, skills, product development and value addition. Preferential access should be a bridge towards competitiveness, not a permanent crutch.

Pakistan cannot build a resilient export economy by repeatedly negotiating concessions while postponing the reforms needed to compete without them.

US-Iran War: Will Trump Pay the Price at the Midterms?

The US–Iran war may become President Donald Trump’s biggest political liability ahead of the November 3 midterm elections. Two contrasting outcomes are possible: Republicans could gain seats if Trump delivers a convincing victory, or lose ground if voters blame him for an inconclusive war, soaring energy costs and economic uncertainty. The balance appears to favour the second scenario.

Trump’s approval rating has fallen to a record low, while rising gasoline prices and disruptions to global energy supplies are adding to public discontent. The effective closure of the Strait of Hormuz has complicated Washington’s efforts to stabilize oil markets, while the absence of a credible exit strategy raises questions about the war’s ultimate objectives.

Iran, too, appears to understand the political stakes. By keeping negotiations alive without rushing towards a settlement, Tehran hopes to deny Trump a diplomatic victory before the elections. Its calculation is straightforward - the longer the conflict continues, the greater the potential political cost for the White House. Yet this strategy is not without risks, as sanctions, the US maritime blockade and economic hardship are also hurting Iran.

The real battlefield may therefore be shifting from Iran to the American ballot box.

For Democrats and other defenders of institutional checks and balances, the midterms offer an opportunity to curb Trump’s political power. Having failed to remove him through impeachment, his opponents may seek to achieve through elections what they could not accomplish through Congress’s removal process.

A Democratic victory would not dislodge Trump from the presidency, but control of either chamber could strengthen congressional oversight, obstruct parts of his legislative agenda and intensify scrutiny of his conduct of the war.

My assessment is that Republicans face a greater risk of losing seats than making significant gains. American voters may be less interested in claims of military success than in the cost of the conflict, its uncertain outcome and its impact on their daily lives.

The November 3 elections could thus deliver a powerful message - a president may initiate a war, but he cannot dictate how voters judge its consequences.

Attock Refinery: A legacy spread over a century

Adil Khattak, CEO of Attock Refinery since 2005, has been associated with the Attock Oil Group for almost 50 years. He has extensive experience in engineering, maintenance, human resource management, project management and marketing.

Khattak also holds Chief Executive Officer position of Attock Gen Limited, National Cleaner Production Centre, President, Attock Sahara Foundation. He is on the Boards of Attock Petroleum Limited, Attock Hospital Limited, Oil Companies Advisory Council (OCAC), Petroleum Institute of Pakistan (PIP), Lahore University of Management Sciences (LUMS), Ghulam Ishaq Khan Institute of Engineering Sciences and Technology (GIKI), Sustainable Development Policy Institute (SDPI) and Co- Chair, NUST Corporate Advisory Council (CAC). Followings are excerpts from his exclusive interview with Pakistan & Gulf Economist:

PAGE: Attock is the first refinery established in Rawalpindi. Tell us about its decades of experience.

Adil Khattak: Attock Refinery (ARL) has a proud history spanning more than a century and is among the oldest operating refineries in the region. Its origins can be traced to the discovery of oil at Khaur in 1915, recognized as the first commercial oil discovery in what is now Pakistan and one of the earliest in the subcontinent.

Refining operations commenced in February 1922 at Morgah, Rawalpindi, with two small units having a combined capacity of 2,500 barrels per day. Over the past 104 years, ARL has evolved into a modern refinery with a nameplate capacity of 53,400 barrels per day.

Throughout this journey, ARL has played a pioneering role in Pakistan’s petroleum refining industry, contributing to industrial development, technological advancement and the country’s energy requirements while maintaining a strong emphasis on safety, environmental protection and product quality.

PAGE: How have its operations grown over the years?

Khattak: ARL’s growth has been driven by successive phases of expansion and modernization in response to increasing indigenous crude oil production, changing market requirements and technological developments.

Notable milestones include the early production of low sulphur diesel and furnace oil in 1988, the introduction of low lead premium gasoline in 1999, and the installation of a Heavy Crude Unit and Catalytic Reformer. A major expansion and upgradation project completed in 2016 further enhanced refining capabilities, motor gasoline production and diesel quality.

ARL has also been an early adopter of international management standards, including ISO 9001, ISO 14001 and ISO 50001, reflecting its commitment to operational efficiency and environmental performance.

We are now embarking on another significant phase of modernization following the signing of the Refinery Upgrade Agreement on 24 September 2026. The planned investment of approximately US$600 million will focus on meeting the requirements of the Brownfield Refining Policy, including the production of cleaner Euro-V fuels and increasing motor gasoline production.

PAGE: It is believed that Attock Refinery operates entirely on indigenous crude oil. How has the experience been?

Khattak: Yes, ARL is the only refinery in Pakistan operating entirely on indigenous crude oil, sourced from various oilfields across the country, particularly in the Potohar and Khyber Pakhtunkhwa regions. This distinctive capability supports Pakistan’s upstream exploration and production industry while contributing directly to national energy security.

As the only refinery in northern Pakistan, ARL occupies a strategically important position. By processing domestically produced crude into essential petroleum products, we reduce reliance on imported crude and finished products, support import substitution and help the country conserve valuable foreign exchange.

The importance of this capability has become particularly evident during recent geopolitical disruptions affecting the Strait of Hormuz. While refineries dependent on imported crude, understandably, remain exposed to international shipping routes and associated supply risks, ARL’s indigenous crude supply chain provides an important degree of resilience. Our ability to source crude domestically and produce finished petroleum products within Pakistan helps maintain continuity of supplies, particularly in the northern region, during periods of international uncertainty.

Over the years, ARL has developed considerable technical expertise in processing indigenous crude oils ranging from light to heavy grades, supported by an established network of pipelines and road tankers connecting producing fields to the refinery.

PAGE: Attock Refinery or its holding company has acquired a significant stake in National Refinery Limited?

Khattak: Attock Refinery holds a 25% shareholding in National Refinery (NRL), acquired as part of its privatization in 2005.

ARL and NRL are separate, publicly listed companies on the Pakistan Stock Exchange, each with its own Board of Directors, management and independent operational and financial responsibilities.

PAGE: What is your opinion about Pakistan’s oil refining capacity? Do we need more refineries?

Khattak: Pakistan’s 5 refineries currently have an installed refining capacity of approximately 450,000 barrels per day. However, capacity utilization has remained below potential for various reasons, including challenges in the upliftment of furnace oil due to declining domestic demand and the influx of smuggled high-speed diesel, which has undermined legitimate market demand and, at times, forced refineries to curtail production.

The immediate priority should therefore be to optimize and modernize existing refineries rather than simply add capacity. The recently signed Refinery Upgrade Agreements represent a

major step in this direction, with planned investments of approximately US$5–6 billion.

Following these upgrades, the country’s motor gasoline production is expected to increase by approximately 70%, high-speed diesel by around 40%, while furnace oil production is projected to decline by approximately 65%. These investments will improve fuel quality, reduce dependence on imported finished products and generate foreign exchange savings.

Pakistan also introduced its Greenfield Refining Policy in 2023, offering substantial incentives, including a 20-year income tax holiday and 25 years of tariff protection for qualifying large-scale refineries. Despite these incentives, new refinery development has remained challenging.

This reflects the substantial capital requirements, financing complexities and long-term commercial commitments associated with a greenfield refinery. For instance, the proposed integrated refinery and petrochemical complex at Gwadar has been estimated at approximately US$10 billion.

In the longer term, additional refining capacity may be required depending on economic growth, future petroleum demand and the evolving energy mix. However, investments must be commercially and technically sound, supported by modern refining technology and a stable, predictable policy environment.

US Revival of Prize Law Could Transform Maritime Risks

The United States is preparing to revive a largely dormant maritime legal framework that could significantly expand its power to seize vessels and cargo during armed conflicts. The proposed rules, published by the US District Court for the Southern District of Texas, could revive prize law, which has not been invoked since the aftermath of World War II.

Unlike conventional civil forfeiture, which generally allows vessel owners, cargo interests and other claimants to contest seizures, prize law determines whether ships or cargo can be lawfully captured as enemy property, contraband or property involved in violating a blockade. Under this framework, ownership could transfer immediately to the capturing nation, which may appropriate the property for government use or sell it, with proceeds deposited into the US Treasury.

The proposed procedures would establish modern mechanisms for presenting evidence, verifying ownership, limiting discovery and hearing appeals. The court has invited public comments until October 23, 2026, before deciding whether to adopt the rules.

The timing is significant. As military operations in the Middle East intensify, Washington appears increasingly interested in restricting Iran's ability to export oil and sustain maritime trade. Prize law could provide an additional instrument to enforce blockades, extending the risk beyond sanctioned tankers to third-party vessels and cargoes caught violating lawful wartime restrictions.

This development could fundamentally alter the risk calculations of shipping companies, charterers, cargo owners and insurers. Vessels that are not themselves sanctioned may nevertheless face capture if their activities fall within the scope of applicable wartime rules. Consequently, route planning, insurance coverage, ownership transparency and security assessments would assume greater importance.

The implications extend to Southeast Asia, particularly Malaysia's Eastern Outer Ports Limit anchorage, where opaque ship-to-ship transfers of Iranian crude destined for China have attracted attention. Complex ownership structures, indirect cargo movements and deceptive shipping practices could complicate enforcement while increasing the risk of regional maritime disputes.

However, the revival of prize law raises concerns about potential overreach. Although the proposed procedures may strengthen enforcement against blockade evasion, their application must remain consistent with international law, due process and legitimate commercial interests. Broad or arbitrary seizures could undermine confidence in maritime trade and intensify geopolitical tensions.

The strategic takeaway is clear: an old wartime instrument could become a powerful tool of modern economic pressure. Shipping companies must reassess their exposure, while governments and maritime authorities should prepare for a more contested trading environment. The revival of prize law may strengthen Washington's enforcement capabilities, but its legitimacy will ultimately depend on transparent procedures, legal safeguards and disciplined implementation.

Beyond Refining: Building Pakistan’s Energy Backbone

Usama Qureshi has built a career on turnarounds. At K-Electric, as Chief Marketing Officer and Chief of Staff, he was part of the leadership team behind the utility's turnaround, a story later taught at Harvard Business School and the Harvard Kennedy School. As Managing Director and CEO of Hamdard Laboratories Pakistan, he led the modernization of a Pakistani household name. He began his career at Pakistan State Oil, on the team that revived its fuel cards business.

Since joining Cnergyico in 2021, becoming Vice Chairman in 2022, he has brought the same instinct to a business operating at national scale. He shapes long-term strategy, strengthens governance and makes the Company's case to government, regulators and international partners. He also sits on the boards of the Company's subsidiaries. Twenty-five years across energy, FMCG, fintech and telecommunications give him an unusually wide lens. He is Chief Executive Officer of Amps & Volts (formerly Oasis Energy), an electrical switchgear and power solutions manufacturer. He is also Strategic Advisor to Kuickpay, a payments aggregation platform.

Beyond the boardroom, he is one of the sector's most visible voices, writing and speaking on Pakistan's energy future and economic policy. He serves on the Global Advisory Council of the Commonwealth Enterprise and Investment Council (CWEIC), which Cnergyico has joined as a Strategic Partner. He also champions Pakistan's trade and exports through the FPCCI and national business councils. He holds an MBA.

Followings are excerpts from an exclusive interview with Pakistan & Gulf Economist:

PAGE: Please tell us briefly about Cnergyico, from an oil refinery to an important component of Pakistan’s emerging energy infrastructure.

Usama Qureshi: Cnergyico’s journey has been one of continuous growth, integration and investment in Pakistan’s energy infrastructure. From our beginnings as a refining business, we have evolved into a vertically integrated energy company with operations spanning refining, petroleum marketing, storage, logistics and distribution.

Today, Cnergyico operates Pakistan’s largest oil refining complex by installed capacity, with a combined capacity of 156,000 barrels per day. Our infrastructure also includes the country’s first and only Single Buoy Mooring (SBM), substantial crude oil storage capacity and a nationwide network of more than 480 retail outlets under the byco brand.

This integrated model allows us to participate across the petroleum value chain, from importing crude oil and refining it into finished products to storing, distributing and marketing those products. As Pakistan’s energy requirements evolve, our objective is to strengthen energy security, diversify crude supply sources, improve product quality and progressively modernize our refining infrastructure.

PAGE: The company enjoys a few distinctions, including the largest refining capacity of 156,000 barrels per day. What has been the average capacity utilization and what is being done to improve it?

Qureshi: Our installed refining capacity is 156,000 barrels per day. Average utilization has been around 35%, or about 55,000 barrels per day. However, this must be viewed mainly in the context of local market demand, refining margins and the ability of the domestic market to absorb locally refined products. During the recent crisis, when imports were constrained and local demand was strong, Cnergyico increased throughput to more than 80,000 barrels per day.

The refinery is therefore not constrained by its technical nameplate capacity. Utilization is primarily driven by prevailing market and economic conditions. Our approach is to operate at levels that provide an optimal product yield and economic return rather than simply maximizing throughput irrespective of market conditions.

Going forward, we are working on several fronts to raise utilization on a sustainable basis: diversifying crude supply, securing better commercial terms, developing product exports through a second SBM and completing the refinery modernization program. Improved domestic demand and a more conducive refining environment will support this further.

PAGE: The company processes crude from different regions and has recently imported West African and American crude. How has the experience been?

Qureshi: One of Cnergyico’s key strengths is the flexibility of its refining configuration and associated infrastructure, which enables us to evaluate and process crude oil from diverse geographical sources.

Our processing of West African crudes demonstrated the refinery’s ability to handle crudes of different characteristics and complexity. Similarly, sourcing West Texas Intermediate (WTI) from the United States has broadened Pakistan’s crude supply options beyond its traditional dependence on Middle Eastern suppliers. Our crude procurement decisions are commercial and

technical in nature. We assess each crude on landed cost, freight, product yields, refinery compatibility, financing terms, reliability of supply and prevailing market conditions. The ability to source from multiple regions gives us greater flexibility and contributes to Pakistan’s broader objective of energy security.

The experience has reinforced our view that diversification is strategically valuable. Rather than depending on a limited number of supply sources, we can evaluate opportunities across the international market and select crude grades that offer the best combination of operational compatibility, economics and supply security. This flexibility has served both the refinery and the country well during periods of supply disruption.

PAGE: Another unique feature is the Single Buoy Mooring (SBM) facility. How has this contributed to achieving higher synergy?

Qureshi: The SBM is one of Cnergyico’s most important strategic assets and provides a significant logistical advantage. It enables crude oil and petroleum products to be received offshore and transferred through dedicated pipelines directly to our storage and refining facilities.

The SBM can receive fully laden Suezmax and Aframax vessels, which cannot berth fully laden at Karachi Port or Port Qasim. It is connected to our onshore facilities through approximately 11.5 kilometres of subsea and 3.3 kilometres of onshore pipeline. This creates several synergies. It reduces dependence on conventional port infrastructure, enables the handling of larger crude cargoes, supports economies of scale, lowers logistics complexity and connects crude imports directly with our storage and refining complex.

The SBM was particularly useful in receiving our WTI and West African crude cargoes. On these longer voyages, the ability to bring in larger cargoes helps lower the freight cost per barrel. From a national perspective, this infrastructure also contributes to energy security and reduces pressure on conventional port facilities.

PAGE: Cnergyico owns and operates retail outlets and also supplies products to other OMCs. How does this help in achieving higher standards of finished products?

Qureshi: Our vertically integrated model provides an important advantage because we remain connected with the product throughout much of the value chain, from crude selection and refining to storage and ultimately the retail customer.

Cnergyico operates a nationwide network of more than 480 Byco outlets while also supplying petroleum products to other oil marketing companies and organizations. This gives us direct exposure to market requirements and customer expectations.

Quality control is maintained through established specifications and testing procedures at the refinery and across the supply chain. Having refining and marketing within the same business also provides valuable feedback on product performance, demand patterns and changing customer requirements. As we proceed with refinery modernization, this integration will become even more valuable. Our objective is to produce cleaner, higher-value fuels meeting Euro-V specifications while ensuring that quality is maintained throughout storage, transportation and delivery.

PAGE: Some analysts believe Cnergyico’s location is a bottleneck because transportation by bowsers is expensive and problematic during the monsoon season. How has the experience been?

Qureshi: Every industrial location presents a combination of logistical advantages and challenges. Our location at Hub provides a major strategic advantage because of its proximity to the coast and direct integration with our SBM, storage infrastructure and refining complex.

We recognize that inland movement of finished products by road tankers involves transportation costs and can face temporary disruption during extreme weather or poor road conditions. These challenges are not unique to Cnergyico and form part of the broader logistics environment in Pakistan. Our integrated storage and distribution network, inventory planning and supply chain management help mitigate these risks. Importantly, any assessment of our location must also take into account the advantages of direct offshore crude handling through the SBM, access to large cargoes and extensive on-site storage.

We continue to optimize our logistics footprint so that products reach different markets efficiently and reliably while maintaining the required safety and product quality standards.

PAGE: How does the proposed modernization program help in improving the quality of products?

The refinery modernization program is fundamental to Cnergyico’s long-term strategy. We have initiated work on a refinery upgrade project involving an investment of more than US$1 billion.

In September we signed the upgrade agreement with the Government under the refining policy. The project is designed to materially change our product slate. It will increase production of higher-value products, particularly High-Speed Diesel and Motor Gasoline, while significantly reducing production of Furnace Oil. Most importantly from a product quality perspective, the upgraded configuration will enable our products to meet Euro-V specifications, which means cleaner fuels with substantially improved environmental characteristics.

The upgrade will deliver benefits on several fronts: better product quality, a higher proportion of valuable transportation fuels, lower furnace oil output, improved refinery economics and a reduced environmental footprint. It also aligns Cnergyico with Pakistan’s broader objective of modernizing its refining sector and reducing dependence on imported finished products.

We are also planning a second SBM for product exports. This will improve refinery utilization, reduce our dependence on the local market alone and generate much-needed foreign exchange for the country.

PAGE: How did Cnergyico respond to the recent disruption in Gulf oil supplies and what role did it play in keeping the country supplied?

The disruption in the Strait of Hormuz earlier this year was one of the most serious energy security tests Pakistan has faced. Before the conflict, around 90 percent of the country’s oil and LNG imports passed through Hormuz. When imported finished products became difficult to secure, domestic refining became the country’s first line of supply. Cnergyico responded on three fronts.

First, we raised refinery throughput to more than 80,000 barrels per day to meet local demand at a time when imported products were scarce.

Second, because our crude sourcing was already diversified, we continued processing crude from outside the Gulf, including WTI from the United States and grades from West Africa. Over nine months we imported around 8.1 million barrels of US crude.

Third, our SBM allowed these large cargoes to be received directly at Hub without adding to congestion at Karachi’s ports, while our storage capacity and Byco network kept products moving to customers across the country.

The crisis showed in practical terms why domestic refining capacity, diverse crude sources and independent offshore import infrastructure matter for national energy security. It has also strengthened the case for our refinery upgrade and a second SBM, which will add further resilience.

PAGE: Cnergyico has returned to profitability after a difficult period. What drove this turnaround?

Qureshi: The last few years were challenging for the entire refining sector. High finance costs, limited working capital, weak local demand and competition from smuggled products all weighed on refinery economics. The company recorded a loss in FY2025.

FY2026 marked a clear turnaround. For the year ended June 30, 2026, Cnergyico reported a profit after tax of PKR10.75 billion compared with a loss of PKR2.90 billion the previous year. Sales rose to PKR410.2 billion from PKR296.7 billion and earnings per share were PKR1.96 against a loss per share of PKR0.53.

Several factors contributed. We diversified our crude sourcing and became the first refinery in Pakistan to process US crude, which improved product yields and operational flexibility.

We operated with tighter cost discipline and expanded product exports, earning foreign exchange for the country. Stronger refining margins during the crisis helped, but the groundwork for the recovery had been laid well before it.

Our focus now is to make this recovery sustainable through the upgrade program, higher utilization and a stronger export business.

PAGE: Cnergyico’s refinery is located away from the city in Balochistan. How does the company engage with the communities around it?

Qureshi: For us, CSR is not a set of one-off events. Our refinery has been part of this community for more than three decades and its progress is tied to ours. Our approach rests on three principles. We focus on the five villages closest to our operations. We work through established partners who bring expertise and accountability. We sustain our programs year after year so that communities can rely on them.

Education, with a focus on women:

Through our partnership with The Citizens Foundation (TCF), we support government primary schools in the area and provide transport so that children can reach school safely. We sponsor female teachers at a girl’s school in Gaddani and support young women from Mouza Kund training as midwives. Investing in women teachers and midwives builds skills that stay within the community.

Health and clean water:

Access to healthcare is limited in the area, so we run an ambulance service that connects the surrounding villages to hospitals in Hub and Karachi. We have also provided equipment to LRBT’s Secondary Eye Hospital in Quetta, extending our support for eye care across the province.

Clean drinking water is scarce in this part of coastal Balochistan. Our seven solar-powered reverse osmosis (RO) plants supply safe drinking water to five villages using renewable energy.

Livelihoods and dignity:

With Akhuwat, we support interest-free microfinance that helps families in Hub build their livelihoods. With Bioniks Welfare Organization, we provide prosthetic limbs to people who could not otherwise afford them, helping them return to work and daily life.

The refinery itself supports more than 3,000 direct and indirect jobs in the area, which remains our largest contribution to the local economy.

Environment:

Responsible operations are the foundation of our environmental commitment. A coral reef has developed along our subsea pipeline between the SBM and the refinery, a rare marine habitat in Pakistani waters that we continue to support. We have also planted trees around our refining complex.

Our biggest environmental contribution, however, will come from the refinery upgrade, which will produce Euro-V fuels with substantially lower sulphur content.

As the upgrade progresses, our footprint in the region will grow through more jobs, local procurement and cleaner fuels. We intend our community programs to grow alongside it.