Israeli Army Unit That Assesses Arab Mood Offers a New Take on Lebanon

Soldiers from Military Intelligence tell TheMarker how the price of oil will impact Saudi Arabia or what trash piling up in Beirut means for Hezbollah.

Lebanese anti-government protesters clash with policemen outside the Environment Ministry in support of activists who were detained after staging a sit-in inside, in downtown Beirut, Lebanon, Thursday, Jan. 14, 2016.
AP

The news Israelis are accustomed to getting from Lebanon, its neighbor to the north, is of one kind: civil war, Hezbollah firing rockets, the Israeli Air Force bombing in retaliation, and the assassination of terrorist leaders. Yet a rather different kind of story slunk in back in August 2015: Thousands of young Lebanese taking to the streets in what was called “the garbage protest.”

The crisis had begun a month earlier, when the Na’ema dump, south of Beirut, was closed following the warnings of environmentalists and after the contract between the authorities and the waste disposal company ended. Its date to close was known in advance, but no alternative solution was found.

At the height of summer, garbage began to pile up in the streets.As the people marched, they screamed “You stink,” meaning not only the rotting trash but the stench emanating from the corrupt, dysfunctional government. At one point the protest seemed likely to develop into a national howl, sort of like the Israeli cost-of-living protests.

Eventually, in early September 2015, the crisis was resolved. The government agreed to transfer the waste management handling to local government and to open two new landfills, near the border with Syria.

“For years the government in Lebanon was dominated by a handful of families. The sense is that they can’t change anything there because of the political structure,” says an Israeli army officer who can only be identified as Captain A., who tracks the Hezbollah and Lebanon economy for Military Intelligence.

Workers start to load garbage bags into trucks from a street in Jdeideh, east Beirut, Lebanon, Saturday, March 19, 2016.
Bilal Hussein, AP

“Things reached the absurdity that since 2005, Lebanon has had no budget. Everything works on autopilot, but sometimes things need to be done, such as to establish a new dump in Beirut. This point may have been resolved, but fundamentally nothing has changed,” says A. “Nevertheless, it bears noting what happened here: Citizens rose up and said, ‘We’ve had it with the corruption.’ There is a trend here of public concern that never existed before in Lebanon.”

Mood the average man

A. belongs to the economics and society division of MI. From its headquarters in central Tel Aviv, this division doesn’t count tanks or soldiers in enemy countries, or of the terror organizations operating therein. It looks at life in these places and analyzes the mood of the man in the street, usually based on information in the public domain. What their day to day life looks like; what bothers them; and how strong the basic economy is. In recent years the army has placed greater stress on such research. Some of the soldiers serving in it completed bachelor’s degrees at the University of Haifa, which has tools to analyze the kind of information they’re collecting.

We met five soldiers, each of whom was responsible for a specific region in the Middle East, or general trends. They can recite the price of oil, not only now but historically. They know stats like unemployment and how much bread costs in the various Arab countries.

Note however that the unit did not predict the Arab Spring, which erupted in Tunisia in 2010, any more than anyone else did. It was a turning point, admits A. “It made us understand that we need to develop more socioeconomic tools. We realized we needed to dig deeper, to understand the people of the Middle East, not only the echelon of decision makers.”

A month and a half before the crisis erupted in Syria in March 2011, President Bashar Assad granted an interview in which he explained why what happened in Libya and Egypt couldn’t happen in Syria, says A. Even people who live in a place can be surprised by developments, he explains – nobody can predict revolution will erupt on a particular date.

The upheavals in the Arab world changed concepts, and methods of data collection too, mainly how to find information on organizations like ISIS, which may control large territories but hardly issues formal statistics. “We had to consider how to research the economic aspect of this thing,” says A. “A country has structural tools to study its own economy, growth and forex reserves, data you can get from the IMF to analyze the state of the economy. It’s a lot more complicated with organizations like Hezbollah and ISIS. You need a different methodology.”

Beyond being a murderous terror organization, ISIS is also an extraordinary economic phenomenon. It conquered vast territories on the border between Syria and Iraq, seizing natural resources like oil wells as well as strategic wheat and barley fields. It also set up a tax collection system, no less – some of the tax inspectors are employees of the Iraqi government, which continues to pay their salaries. The tax can be as much as 50% of the residents’ income. It also takes tax from local businesses, and charges trucks driving through its areas.

So while Hezbollah and Hamas need aid, ISIS decided to set up a state, a caliphate, with an economic system.

TheMarker: Lacking official statistics, how can ISIS’ economic situation be studied?

A.: “There is more material on the internet than people realize. One needs to check the reliability of the source and like in journalism, cross-reference with other sources, when possible. And learn Arabic and Persian.”

How exactly does ISIS win popular support?

“It began with ISIS coming in strong and terrifying the people. Simultaneously it tried to portray itself as a moderate organization that cares about the good of the people. A person living under ISIS lives in fear but also knows that people getting bombed elsewhere have it worse. A man says, ‘I can’t smoke cigarettes or watch soccer, and women know they have to wear headscarves. But life can go on.’ ISIS uses the carrot and the stick. The stick is very big, of course, a lot of prohibitions, fines and heavy punishments for deviants from the straight and narrow.” Even if the organization is now under pressure, what’s for sure is the locals aren’t about to take to the streets, he adds.

The unit keeps a close watch on oil prices, which spiked to $140 a barrel in 2008. Experts dramatically warned that every time people gassed up the car, they were supporting terrorism.

Israeli leaders called for the development of alternatives to oil and the Prime Minister’s Office set up a national program to achieve that aim. It’s still working, though today it has less economic incentive, since oil prices plummeted to $40-$50 a barrel (in January it even fell to a low point of $26.60). The freefall was caused in part by the development of technology to extract oil from shale. Russia and Canada became major oil exporters and U.S. dependence on Arab oil practically vanished.

But low oil prices led to another set of apocalyptic predictions — that as the economies collapsed, the Middle East would disintegrate into warring clans.

“Look at Syria,” says Captain Y. “At some point in the 2000s, it shifted from exporting oil to importing it. Shifting from an economy based on rental income to an economy relying on other things is a difficult process. It takes decades to recover. Of course, there were other reasons for the economic crisis in Syria and for its dissolution, but it showcases what happens to an economy that relies on high oil prices, without looking at other alternatives for the future.”

In the Gulf, most of the people get high subsidies from the state or work for the government anyway, getting fat salaries, while foreign workers do the heavy labor. In the Qatari labor force, 86% are foreign workers, says Lieutenant Y. “That could continue as long as oil stayed high. With low oil, they have to develop alternative industries.”

Saudi-Iranian tensions

The low price of oil is hampering Iran’s economic recovery now, adds Captain Y. “It’s also creating tension between Iran and Saudi Arabia. Iran wants to step up production in order to spur its economy but Saudi Arabia objects. It would prefer to scale down oil production to prevent prices from dropping.”

On the other hand, low oil could actually help Tehran explain the need for various reforms to the people, Captain A. notes.

Broadly speaking, they say, Iran’s economy has structural problems, including excessive state intervention in the economy, lack of transparency, and difficulty attracting foreign investment. It also has strengths that give it great potential, such as developed industry and an educated general public compared with other Middle Eastern nations.

Lebanon, an oil importer, is doing well from cheap oil, though it could lose aid from Saudi Arabia. “In contrast to the past, oil prices derive from economic causes, not geopolitical ones like war in the Middle East or one-time economic crises,” says Lieutenant Y. “It will be hard for oil prices to return to $100 per barrel and that is a change to which the countries around us will have to accustom themselves. It’s already happening through structural economic changes. For example, abolishing subsidies to citizens had been a taboo subject in the Arab world. But even Saudi Arabia is doing it now. In Saudi Arabia, gas costs a shekel per liter because of the policy of subsidies, but that could change. It’s part of the vision for Saudi Arabia 2030 – a plan that involves the state disengaging from the economy, reducing the public sector and cutting back subsidies.”

Unemployment risk

Some areas of the Middle East are in such trouble that oil prices don’t matter much one way or another to them. The Gaza Strip is one. Blockaded from one side by Israel and on the other by Egypt, its economy is in ruins not only by Middle Eastern standards but by global ones. Gaza usually makes headlines for the incessant rounds of fighting, the last being Operation Protective Edge in mid-2014. Between the rounds, the Israeli public completely forgets the simmering human pressure cooker in which almost 2 million people live. The Economics and Society unit watches Gaza too.

“It has difficult problems, first of all in infrastructure,” says Lieutenant S. “We’re talking about a place where they have electricity between six to eight hours a day. Gaza has one power station and there is no infrastructure solution on the horizon. The water economy also has a severe infrastructure problem that seems unsolvable. The over-pumping is severe. The year 2020, in four years, has been marked as the time the Gazan water problem will become irreversible. The water will have become so saline that it can’t be pumped and treated to make it usable any more. There are 1.8 million people there today. In 20 years there will be 2.3 million. Demand for water and electricity will just grow while the resources are dwindling.”

Saudi Arabia and Qatar had pledged much aid to Gaza but little materialized, and did so slowly, Lieut. S. says. Rehabilitation is progressing, however, which is helping to reduce unemployment – though down from 40% to 50%, it’s still at 38%.

Among Gazans aged 20-29, unemployment is 60%, and that’s a dangerous age to be idle, she adds. The distress creates pressure on Gaza’s leaders, Hamas, which can choose to direct the pressure outwards, towards Israel.

In fact 30% of the young people in the Middle East are unemployed, Lieutenant Y. points out, which the extremist organizations view as opportunity.

If there’s anything to be optimistic about, it’s Tunisia: It shows the best chance of transiting to a more liberal, democratic model, says Major General Y. The regime change was quite smooth and radical Islam is less influential. Note that its economy isn’t oil-based and that its birthrate is relatively low, and now civil liberties are starting to be instituted, including female empowerment.