Hezbollah international financing targeted by US bill
BEIRUT - Lebanon’s banking system, the country’s last bastion of free market success, appears to be in the middle of a spat between Hezbollah and the Lebanese government.
Despite a constitutional crisis that has left Lebanon without a president and the war in next-door Syria, Lebanon’s banks have remained profitable, seemingly bulletproof like the central bank itself or indeed the Lebanese lira, which has not budged against the US dollar in years.
Years of turmoil have created a unique banking system able to withstand regional and local shocks from political strife and wars, raising its central bank governor to a level comparable to other heroes etched into the annals of the country’s troubled history.
That might explain why the sector is being eyed by Hezbollah as a subject that will pay dividends if attacked, verbally at least, by the Shia group.
Hezbollah leader Hassan Nasrallah is feeling the heat from a US bill passed in December that marginalises his party from entering the sector, either locally in Lebanon or internationally.
Most who know Hezbollah know that it is not interested in using the Lebanese banking system but that has not stopped Lebanese banks from being extra sensitive about being linked in even the slightest way with the party, which has had money-laundering scandals in recent years, snaring at least one Lebanese bank in its web.
A coterie of silver-haired Lebanese bankers is to visit the United States to reaffirm the commitment of Lebanon’s financial institutions to international resolutions aimed at combating money laundering and so-called terror financing, barely weeks after the ink dried on US President Barack Obama’s laws that tighten financial sanctions on Hezbollah.
The trip follows the US House of Representatives unanimously passing the Hezbollah International Financing Prevention Act of 2015 in December. It aims to prevent the party and “associated entities from gaining access to international financial and other institutions”.
The law, drafted before Obama’s move to bring Hezbollah’s chief sponsor Iran into the fold of diplomatic relations with the West, punishes any financial body that does business with Hezbollah and its backers.
Experts in Lebanon have been trying to fathom whether Nasrallah’s words were just the typical knee-jerk, anti-US rhetoric usually found in his firebrand speeches or there was something lingering beneath the surface.
Earlier in December, Nasrallah urged the Lebanese government to “protect” its citizens against US sanctions but stressed that Hezbollah neither channelled funds through Lebanese financial institutions nor had any money stashed in Lebanese banks.
The Lebanese delegation, led by Association of Banks in Lebanon Chairman Joseph Tarbey, is to visit Washington at the end of January, when meetings are scheduled with officials from the US departments of State and Treasury, as well as congressional members who drafted the law targeting Hezbollah. Many of those representatives hail from hawkish groups that condemn Obama’s radical move to draw Iran into the international community.
The delegation is also to visit New York to meet representatives of correspondent banks. Critical to its activities is to assure the Americans that Hezbollah — or any of its associates — can taint the spread sheets of Lebanese banks that are hooked into the global financial system. Its worries are that one incident could lead to Lebanese banks being ostracised by Washington.
It is very unlikely Lebanese banks would be hung out to dry, though. A senior source from Lebanon’s banking industry told local media recently that “Lebanese banks are already subject to the independent monetary authority represented by the Central Bank of Lebanon and cannot violate international laws because it would jeopardise their membership in the global financial system”.
The central bank continues to do a sterling job at keeping the lira stable and attracting deposits. Its governor, Riad Salameh, is regularly serenaded as a presidential candidate based on his unique formula of sustaining the world’s highest inflation-adjusted interest rates to maintain a dollar peg that is key to luring funds. The trade-off is high borrowing costs but it is a price worth paying to keep the lira solid.
Could the same words be used when examining Hezbollah’s financial and political accounts? It is the best kept secret in Beirut that party officials are on half salaries as the fruits of Iran’s boom economy — pitched at 3.8% growth for 2016 — are pencilled in for years, rather than months, to come. In the meantime, expect some sour grapes.