LEBANON: WORST ECONOMIC CRISIS OVER A CENTURY AND WHY WE SHOULD CARE

FRANCESCO FIMIANI WRITES — Why should Middle East analysts and anyone else interested in the region’s economy and geopolitics be concerned about the tiny nation of Lebanon? Because, in shambles as it is now, it provides yet another theatre for proxy war in the region.

The country is facing its worst crisis since the 40 year-long civil war that raged during the 20th century and concluded with just a very delicate agreement formalized in the Taif Agreement in 1989.

It’s hard to wrap one’s head around the sheer misery besieging this tiny western Asian nation once labeled the “Switzerland of the East.” Its currency has lost more than 90% of its value. Lebanese people are being denied access to their savings from most banks in the country, so that it has become increasingly difficult to afford even basic items like water and bread. Recent reports claim that the poorest in the country fell about 5.5 million Lebanese pounds ($3,652) short of the 6.1 million pounds ($4,050) needed monthly to afford basic goods”. These medicine, food and fuel shortages can be partly attributed to the shocking 2020 Beirut Port explosion that devastated Lebanon’s main access to the rest of the world. Roughly $7.4B worth of traded goods passed through the Port of Beirut before its decimation, a significant increase in the past several years as Syria’s civil war has forced Lebanon to rely on its access to the ocean for goods, commerce, and business. With the COVID-19 pandemic that has totaled over half a million cases and almost 8,000 deaths in the country and which will probably continue as Lebanon has almost no medical infrastructure to carry out tests, vaccinations, and patients in intensive care, the country’s prospects seem even more grim.

Politics in Lebanon is in just as much disarray. Almost a year after Hassan Diab resigned over the Port of Beirut explosion scandal, President Michel Aoun and Prime Minister Saad Hariri have been unable to form a governing coalition. Respected media outlet France24 reports that this can be attributed to reasons ranging from: Hariri’s proclivity to appointing primarily technocrats in his cabinet; Aoun favoring a disproportionately high percentage of Christians in the cabinet; and Lebanese leaders unable and unwilling to bend to the international community’s requests for structural political and economic changes in return for financial support.

It’s hard to see how Lebanon can come out of this crisis without significant international and regional support. Though the Lebanese people are very proud of the many times they’ve been able to pick themselves up and start again, which is why the Phoenix is such an important symbol in the country, many think the rubble has covered every ray of light. In fact, thousands and thousands of middle class Lebanese families, the backbone of Lebanon’s working population, have left the country in search of a better life elsewhere. As one Lebanese person put it when interviewed by France24, “the middle class who stay behind are les nouveaux pauvres (the new poor). A brain drain could be catastrophic.

The Middle East is located at the intersection of many geopolitical power conflicts. Saudi Arabia and Iran have been battling each other through proxy wars in the Houthi rebellion in Yemen; Turkey and Russia have been at odds with each other while contributing to military campaigns in Syria; the US contributed to significant region destabilization with its intervention in Iraq, and Qatar has been accused of funding terrorism in the region.

Despite murderous instabilities, Iraq, Syria and Yemen remain three very strategic dominoes. Under the Saddam Hussein regime, Iraq’s hostility to Saudi Arabia and Iran was actually beneficial to the region as it acted as a buffer between the two regional powers and to varying degrees was able to keep its Sunni-Shia divide at bay. Syria and Yemen followed in the 2010s decade as new theatres of the proxy war, with Iran’s backing of Houthi rebels and upholding the Assad regime widely seen as ploys to encircle Saudi Arabia with Iranian influence and create a playing field in the Middle East favorable to Iran’s desires.

Lebanon of 2021 is shaping up to be fertile ground as the fourth domino in this proxy war.

Why exactly would Iran prey on Lebanon’s downfall? Iran would benefit from gaining more power and support not just in the country, but in the region as well. Lebanon has not paid much regard to its Shia minority community. Mainly located in Southern Lebanon, the most neglected and abjectly poor region of the country, the community has been left largely to its own devices since the start of the Lebanese civil war. Shia in the South have generally had access to the most subpar infrastructure in the nation, less fertile land, and,due to close proximity with Israel, have also been subject to dislocation and artillery. Hezbollah grew out of this despair and ever since has been relatively successful at providing the missing services from the national Lebanese government in Beirut.

Hezbollah is a militant Shia Islamist organization that prides itself in having repelled Israeli troops from Lebanon in the 2006 Israeli-Hezbollah war. Hezbollah has been growing in Lebanon, with Iran pumping hundreds of millions of dollars into the organization not just to gain access to new weapons but to have representation in Lebanese politics as well. In 2018, the organization saw them gain 13 seats in the parliament and be absorbed into the winning coalition.

What might be the fallout of all this? When countries descend into chaos politically, economically or both, citizens tend to vote for extremists. Hezbollah, especially given its credentials for sustaining economic life in the neglected south of Lebanon, could become an increasingly attractive movement for Lebanese who see no hope in traditional politics or who don’t have the means to escape the fractured country in search of a better life elsewhere.

This article isn’t about taking sides or promoting economic or military intervention in any country in the Middle East, but to raise difficult questions: Will Saudi Arabia intervene to rescue Lebanon from despair and empower the Sunnis in power? Will Iran intervene to elevate Hezbollah’s status in the country? Will Iran’s influence in Lebanon escalate tensions with its southern neighbor Israel? Could an empowered Hezbollah ally itself closer to the Palestinian cause it has supported for decades now and taunt Israel? Will France, former colonial administrator of Lebanon, see these power shifts as a threat to its own interests in the region? And finally, could any of these outcomes render the country of Lebanon even more inhospitable for its citizens? Who really cares about the people of Lebanon?

2 Replies to “LEBANON: WORST ECONOMIC CRISIS OVER A CENTURY AND WHY WE SHOULD CARE”

  1. Surely the future must be in the regaining of the value for the currency. Apparently no one values a currency they do not need or use so it is up to governments to make sure that everyone’s taxes and licenses for this and for that are paid with the countries own currency and not USA dollars.

    Russians made full use of the barter system when their currency fell to similar chaos in the “1960s.” Also you might well ponder on the words of treasury chairman Alan Greenspan when he said that no country can fall short of IT’S OBLIGATIONS in it’s own currency.

    Shame for Lebanon, once beautiful garden of the middle East. Tragic.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.