For Lebanon, US sanctions wait at the gates

The protesters in Iran might soon be joined by Lebanese on the streets of Beirut, who will chant anti-Hezbollah slogans.
Sunday 19/08/2018
A Hezbollah fighter stands at a watch tower at Juroud Arsal near the Syria-Lebanon border. (Reuters)
In the crosshairs. A Hezbollah fighter stands at a watch tower at Juroud Arsal near the Syria-Lebanon border. (Reuters)

The Middle East has entered a new and perhaps more perilous stage as the Trump administration proceeds with placing sanctions on Iran, as well as doubling tariffs on Turkey’s steel imports.

While these measures are unrelated, they signal the opening of a new economic front, introducing the notion of sanctions as a potent and unconventional method of wreaking devastation on many of the smaller countries of the region and, in particular, on Lebanon.

Nowhere has this been more apparent than in the visible effects taking shape in Hezbollah and Lebanon’s fragile banking apparatus.

For the past decade, the Lebanese state has been spiralling downward, propelled mainly by its political elite’s corruption and, more important, their failure to work through the regional challenges brought about by the Sunni-Shia schism and Iran’s expansionist policies.

For Iran, or at least its Islamic Revolutionary Guard Corps, Lebanon has been a success story, with Hezbollah infiltrating Shia society and the state, proclaiming itself and its arsenal legitimate and exposing Lebanon and its fragile economy to Western economic sanctions.

Hezbollah General-Secretary Hassan Nasrallah, in a recent speech, downplayed the repercussions of the US sanctions on Iran and his own outfit, arrogantly affirming that Hezbollah’s militia was still able to go to war with Israel, should the need arise.

Yet Nasrallah’s populist rhetoric does little to hide Lebanon’s crumbling economic circumstances, coupled with his sponsor Iran’s deteriorating economy, the effects of which are starting to tell on Hezbollah’s military and civilian structure.

Hezbollah, like many of Lebanon’s financial establishments, has been undergoing restructuring measures intended to cut costs and downsize its staff, some of whom have not received their salaries for months. More important, Hezbollah’s constant talk of its final withdrawal from Syria, while based in part on political and military factors, reflects Iran’s shrinking ability to meet the costs of Hezbollah’s deployment and mobilisation there.

Proof can be found in the bureaucracy of its war. Hezbollah recently downgraded Syria’s status from “land of jihad,” thus reducing the cost of maintaining its force there, with Hezbollah fighters now receiving only their basic salary ($600 a month) with no danger pay or any of the additional subsidies that accompany it.

Even with such cuts to its budget, Hezbollah needs to attend to the hundreds of wounded veterans, some of whom are permanently disabled, as well as the families of thousands of fighters killed.

Practically, Hezbollah’s financial circumstances can only deteriorate. The US sanctions against Iran are designed specifically, not to so much punish Tehran for any supposed breach of the nuclear deal, but to curtail its spreading military reach across the region. It is this reach that Hezbollah has been instrumental in spearheading in Lebanon and elsewhere and, by extension, exposing its host’s economic backbone, the banking sector, to untenable risks.

The looming spectre of sanctions forced all Lebanese banks to cooperate fully with the US Treasury. However, that cooperation has been passive rather than proactive, principally out of concern for repercussions that Hezbollah and Iran might enact.

To steady the ship, the Central Bank of Lebanon and the wider banking sector unequivocally confirmed the US sanctions would not damage the economy. However, simultaneous to that, many of the measures they are adopting indicate otherwise.

One ominous indicator of the dangers ahead is the central bank’s decision to allow commercial banks in Lebanon to reschedule payments on loans issued in Lebanese pounds, provided they transfer those funds to dollars. These anti-inflation measures are one of the growing number of worrying indicators that the Central Bank of Lebanon is bracing itself for collapse, thus giving the lie to talk of business as normal.

The protesters in bazaars in Iran might soon be joined by Lebanese on the streets of Beirut, who will chant anti-Hezbollah slogans. The Lebanese might have stayed quiet over Hezbollah’s takeover of government and all that accompanied that. However, they are unlikely to remain silent when their economy collapses under the weight of the US and perhaps even Arab sanctions.

Nasrallah and Turkish President Recep Tayyip Erdogan have relied heavily in their fiery speeches on calls for divine intervention. However, in matters related to the economy, God helps those who help themselves, an expression whose meaning appears to have eluded the Lebanese and their leaders.

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