By Campaign Agent Ben Abbs
Lebanon seems to be forever walking on ice. Yet, it has proven its remarkable resilience before. An anticipated debt crisis in 2006 never came despite the IMF’s concerns. More recently, the country has balanced societal tensions despite enduring a 29 month political stalemate, but the shock resignation of Lebanon’s Prime Minister Saad Hariri on the 4th of November, claiming he feared an assassination plot, could jeopardise this stability.
Events are moving in Lebanon. Economically, socially, and politically, the temperature is rising again.
Sanctions could cut the lifeline
Lebanon’s economy has suffered from the Syrian war and the influx of refugees, although it has stayed afloat, a new degeneration of relations with the US could cut its last economic lifeline. Lebanon’s economic growth fell through the floor from 8% in 2010 – one year before the Syrian war – to 1% last year. Whilst an influx of cheap labour and humanitarian aid can often be a bonus, Lebanon’s rudimentary public services have struggled to accommodate the sheer size of this refugee intake. Lebanon has the highest per capita burden of refugees from the Syrian war; every 17 people in 100 is a Syrian refugee. The government estimates that the direct budget costs of accommodation are $400 million annually, combined with $2.5 billion in indirect costs of public services erosion.
This has no doubt contributed to Lebanon’s fiscal situation. Lebanon now spends half of government revenue on servicing its public debt, which has reached 147% of GDP and is the third largest in the world. Thus far, the Lebanese diaspora’s remittances have just managed to hold off a fiscal and banking crisis.
Trump’s efforts to hit-back at Iran, after what appears to be a begrudging acceptance of the Iran nuclear deal, may restrict the flow of remittances. The US has drafted proposals to expand existing US sanctions to entities affiliated with Hezbollah, which is backed by Iran, including the recent president Michael Aoun, a staunch ally of Hezbollah. This would push US correspondent banks, who would face fines, to stop business with Lebanese banks, threatening remittances on which Lebanon’s dollarized economy relies.
A Fragile Society Under Pressure
Lebanon’s complex social fabric has made it hard for refugees to find acceptance; they have always been observed with apprehension. Palestinian refugees who fled the 1948 Arab-Israeli war became heavily involved in Lebanon’s subsequent 15-year civil war. Now, the situation may be moving to breaking point. The Christian and Shia communities, currently in political ascendency with the rise of Michael Aoun leading the Christian party and Hezbollah’s activities in Syria, believe that the influx of principally Sunni refugees will upset the country’s delicate sectarian demographic balance.
In recent weeks, the attitude towards refugees has degenerated. During a Lebanese army raid searching for militants, in which 400 Syrian suspects were arrested, five suicide bombers attacked the army. Planned protests by refugees against the arrests were met with a backlash, and a video emerged of a man beating a refugee on the streets of Beirut. In the context of such social tension and the growing political power of the Christian and Shia communities, any economic or political instability could be disastrous. Some suggest that only a bloody memory of sectarian war is allowing Lebanon to cling onto social peace by its fingernails.
Persisting Political Uncertainty
Lebanon remains the focus of wider political tension and regional competition which promotes its political uncertainty. Saudi Arabia may have conceded Lebanon to Iran, but Israel has not. In fact, it is likely to be even more watchful, and even China is becoming interested in Lebanon. The continued influence and interference of foreign and regional politics, a destabilizing factor in a country that is so culturally divided with such polarised political factions, is likely to sustain.
The election of Michael Aoun as president is seen as a victory by Iran and Syria in the Sunni-Shia power-struggle. However, Saudi let Lebanon go, Riyadh used second-tier officials to inform Lebanon it was a secondary concern and stopped sending French military equipment to the army.
Conversely, Israel is increasingly concerned by Hezbollah’s position of power in Lebanon’s political establishment, the proximity of its Iranian allies in Syria, and Hezbollah’s growing military capability, boosted by battleground success in Syria. The Syrian war has allowed Hezbollah to turn itself from a guerrilla force into a conventional military force. It is capable of operating outside its borders and has gained experience and equipment from Russian military advisors and Iran’s Revolutionary Guard. Tension has increased between Israel and Lebanon in recent months, as a shadow war develops, Israeli air raids have targeted Iranian military equipment, believed to be destined for Hezbollah. This has been paralleled by growing inter-state tension in a maritime border dispute as Lebanon and Israel claim sovereignty over a wedge of the Mediterranean Sea in order to attract oil and gas investments.
China is also turning its gaze to Lebanon, with four delegations visiting in the last year. Lebanon is strategically placed as a base to exploit opportunities in the post-war reconstruction of Syria; which it is estimated it will cost $200bn. Lebanon is close enough to act as a base to prepare for reconstruction, but far enough to avoid criticism from the West claiming that China is legitimising President Al-Assad. Lebanon has the infrastructure with a deeper port than Tartus and Latakia in Syria, and quick road access to major cities such as Homs and Damascus. Of course, Russia would be more than happy to see Chinese rather than Western capital in Syria. While this presents opportunities for Lebanon’s struggling economy, it may raise a few eyebrows in the West, and perhaps make the politics of Lebanon and the region even more complicated – if that were possible.
Most recently, the shock resignation of Hariri, who represents the Sunni factions in Lebanon, which he announced from Riyadh, suggests Saudi may be again turning its attention to Lebanon. The meteoric rise of the young Crown Prince Mohammed Bin Salman, known for his ambition and assertive approach, and Saudi Arabia’s escalating Foreign Policy should also be watched for their impact on Lebanon. A Saudi led attempt to re-assert Sunni power in Lebanon could seriously escalate tensions between Lebanon’s wary factions. It only took 24 hours for Hezbollah to declare Saudi forced Hariri to resign.
As of late Tuesday evening, Hariri has returned to Lebanon after an absence of over two weeks. With such an array of factors pitted against Lebanese stability, global businesses and leaders should be watchful of developments in Lebanon. We can all be hopeful that Lebanon’s characteristic resilience will pull through, but if events deteriorate, they are unlikely to do so gradually.
Sources and Further Reading:
- Steve Johnson, Lebanon defies the odds to keep its finances afloat, The FT, 9 June 2017
- David Gardner, Lebanese pluck leader Michel Aoun from pages of nation’s history, The FT, 2 November 2016
- Lebanese PM Hariri resigns, saying he fears assassination plot, BBC, 4 November 2017
- Nazih Osseiran and Erika Solomon, Lebanese grow weary of hosting 1.5m Syrian refugees, The FT, 2 August 2017
- Erika Solomon and Nazih Osseiran, Lebanon hopes Syrian reconstruction will lure Chinese investment, The FT, 26 July 2017
- Beatrix Immenkamp, Briefing: Syrian crisis: Impact on Lebanon, European Parliamentary Research Service, March 2017
- David Gardner, Fragile power balance in Middle East is under threat, The FT, 11 May 2017
- Erika Solomon, Saad Hariri named as Lebanon’s new prime minister, The FT, 3 November 2016
- John Reed and Erika Solomon, Israeli air raids in Syria raise fears of wider conflict, The FT, 22 March 2017
- John Reed and Erika Solomon, Hizbollah boosted by battleground successes in Syria conflict, The FT, 15 February 2017
- Luke Baker and Laila Bassam, Israeli strikes raise stakes in face-off with Hezbollah, Reuters, 2 May 2017
- Frank Gardner, Saudi purge demonstrates ruthlessness of crown prince, BBC, 9 November 2017
- Saad Hariri, Lebanon PM, to return to Beirut ‘in coming days’, BBC, 18 November 2017
- Ben Abbs, Saudi Arabia’s escalating foreign Policy: the Qatar crisis is just the beginning, Global Risk Insights, 1 October 2017
- Lebanon PM forced by Saudis to resign, says Hezbollah, BBC, 5 November 2017
- Saad Hariri returns to Lebanon after shock resignation, Al Jazeera, 21 November 2017