Lebanon is “hurtling
toward total collapse”, according to one commentator. The World Bank believes that the country’s financial
and economic crisis is one of the severest the world has witnessed in the past
150 years. A number of factors have
contributed to Lebanon’s disastrous situation, but a major cause of its
troubles is the dominant position that Iran has managed to acquire in the
nation’s political life, by way of its proxy Hezbollah. But now that Iran is undergoing a severe
economic crisis of its own, a window of opportunity may have opened for its
malign influence over Lebanon to be weakened, if not entirely eliminated.
Lebanon is on the verge
of a political, economic and social catastrophe. It has been without a government for eight
months. Food and medicines are in short supply, electricity cuts last for much
of the day, while people are queuing for hours at gas stations and, as they clash
over who gets to fill their tank first, fist fights have turned into shootings. Now criminal gangs are moving in to exploit
the situation. A representative of the union for fuel distributors and gas
stations in Lebanon said: “Individuals claiming to be in charge of security at
gas stations are using extortion… The owners of over 140 gas stations are refusing
to accept deliveries of gasoline because they have been exposed to extortion
and beatings.”
On June 22 the acting
administration raised the price of bread for the fifth time in a year. The latest increase — 18 percent from the
last raise in February — was the result of the decision to end subsidies on sugar
and yeast, which both go up in price in consequence.
On June 1 the World Bank
issued a report on the rapidly deteriorating situation. It believes that more than half of Lebanon‘s
population may have been pushed below the poverty line. While the official rate of exchange for one
US dollar is 1,507 Lebanese pounds, the banks do not permit currency conversion
or foreign fund transfers and so dollars are simply not available at the
official rate. On June 25 the rate on
the black market was 16,450 Lebanese pounds.
The country’s gross domestic product, close to $55bn in 2018, plummeted to
some $33bn last year. Foreign currency
reserves are at an all-time low.
The World Bank pulls no
punches in its criticism of Lebanon’s political elite in which Hezbollah
features so strongly. It accuses them of
deliberately failing to tackle the country’s many problems, which include the
economic and financial crisis, the Covid pandemic and last year’s Port of
Beirut explosion. The inaction, says the
report, is due to failure to agree on policy initiatives but also a continuing political
consensus that defends “a bankrupt economic system, which benefited a few for
so long”.
Following the explosion in Port Beirut in August 2020, Saad Hariri was named by the Lebanese parliament as prime minister designate, and charged with forming a new government. So far, because of an ongoing dispute between him and President Michel Aoun over the composition of the new administration, he failed to do so. On 17 July 2021 he stepped down.
Hariri wanted to assemble a technocrat cabinet dedicated to enacting the reforms long demanded by the World Bank, the International Monetary Fund and donor countries such as the US and France. In March he stormed out of a meeting with Aoun, telling reporters that the president had sent him a proposed list of ministers and asked him to sign off on them. Hariri had rejected the request as unconstitutional. Aoun is a strong supporter of Hezbollah, the Iran-backed Shi’ite group that dominates Lebanese politics and underpins his presidency. According to Hariri, Aoun was pushing for a third of all cabinet seats for his Hezbollah allies and their supporters, which would give them veto power over government decisions.
The shoeing into power in Iran on June 18 of a hard-line extremist, Ebrahim Raisi, as its new president can be seen as a desperate effort by the ruling élite to shore up the power of a regime in economic freefall. The value of the rial, the national currency, has halved over the past two years, inflation is running at 50 per cent and the country is experiencing mass unemployment. Popular protests are bursting out in major towns and cities all over Iran.
Hezbollah’s popularity among
the Shia population owes much to the vast sums it has spent in its social and
health programs. The collapse of the
Iranian economy means that the regime is no longer able to pay its Hezbollah proxy
in dollars. Its financial support is now
provided in the rapidly depreciating Lebanese currency.
Bahaa Hariri, the
brother of Lebanon’s designated prime minister Saad, is a billionaire
businessman. He is reported to believe
that if Iran cannot continue with its payments, support for Hezbollah will quickly
collapse. “Some die-hard supporters will maintain their allegiance to Hezbollah,”
he is reported as saying, “but many others will no longer be prepared to
support the movement if the payments stop.”
One failing economy is
attempting to support another while simultaneously trying to maintain the
political status quo. That is scarcely a
sustainable situation. If Iran’s
deteriorating economic position results in Hezbollah losing power in Lebanon,
this might provide the opportunity for Hariri to resume his effort to assemble his technocrat
cabinet and institute the economic reforms necessary to pull the country back from
the brink of disaster.
https://jewishbusinessnews.com/2021/07/02/lebanon-and-iran-breaking-the-bond/
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