Analysis

In Squeezing Hezbollah's Coffers, U.S. Is Also Hurting Lebanon

The latest round of sanctions are meant to hurt the Shi'ite group, but will also deal a blow to the country’s already financially shaky economy

Lebanese Prime Minister Saad Hariri touring Israeli border area on Friday.
AP

Lebanese Prime Minister Saad Hariri is mired in a complicated political dilemma. The sanctions against Hezbollah that the U.S. Congress is preparing are liable to hurt his country’s economy far more significantly than those imposed during Barack Obama’s time in office. Hariri, a fierce opponent of the Shi’ite group, would be happier if the administration were to find ways to hit Hezbollah’s coffers directly without harming the state’s economy, for example by blocking the money transfer routes between Iran and Hezbollah or by stopping the funds it gets from South America.

However, the new sanctions will also hurt the Amal organization, the head of which, Nabih Berri, is the speaker of the Lebanese Parliament. In addition, the sanctions will impose stricter limitations on the Lebanese banks and block investments that could serve not only the organization but also the state. Because of all these repercussions, Hariri sent a delegation of Lebanese dignitaries to the United States this month to try to halt the legislative process.

Hariri knows that this is an uphill battle, especially at a time when President Donald Trump has made it his goal to fight terror organizations and to shrink Iran’s influence in the world. Thus far, the slew of sanctions the American administration has imposed on Lebanon since the end of the Second Lebanon War in 2006 has not made a dent in Hezbollah’s cash flow. Though Lebanese banks have cooperated with the prohibition on opening accounts for Hezbollah activists and managing the organization’s funds, Hezbollah has found roundabout ways to managecontributions.

For 12 years the government operated with interim budgets due to severe political disagreements. The new government has submitted a proposed budget of about $15 billion. This is a deficit budget that will rely on projected revenue of about $10.8 billion and will require the government to borrow the remainder from banks or international funding organizations.

However, Lebanon’s national debt amounts to about $70 billion – approximately 170 percent of the gross domestic product. About half the national debt is owed to banks and it is not clear where the revenue will come from. Tourism, one of the key industries in the Lebanese economy, has plummeted dramatically since the start of the war in Syria. The marketing of agricultural produce from Lebanon to the Arab countries has also shrunk fatally, as most of the routes for transporting it via Syria are blocked. One hope lies in offshore gas drilling — an area that does interest foreign companies. But before that can be done, the economic boundaries between Israel and Lebanon must be demarcated in order to prevent Israel from damaging Lebanese gas fields.

Hezbollah leader Sheikh Hassan Nasrallah speaks on a screen via a video link, during a rally  in a southern suburb of Beirut, Lebanon, Tuesday, May 2, 2017.
Bilal Hussein / AP

Another source of income – remittances from Lebanese citizens who are working abroad, mainly in Arab countries – is also endangered. This amounts to about $7.2 billion flowing into the country annually. But economic reforms adopted by the Gulf States in the wake of the crisis in oil prices are liable to reduce the number of foreign workers, among them, Lebanese workers. Thus the unemployment rate in Lebanon — which is already about 25 percent — is also liable to swell.

At the same time, Lebanon is hosting about 1.1 million Syrian refugees, making it the country hosting the largest number per capita. About one quarter of all the citizens of Lebanon are refugees, including the Palestinian refugees, whose number is estimated at about half a million. Hariri is now demanding that the donor countries fund the aid for refugees that Lebanon is receiving according to a formula of $10,000 to $12,000 a year per refugee, as compared to $1,000 to $2,000 today.

Given the state of the United Nations aid organization’s budgets and the European countries’ unwillingness to increase support, it is doubtful that the amount Lebanon ultimately receives will be anywhere near what Hariri is demanding.

Lebanon, which fears the permanent settlement of the Syrian refugees in its territory, has thus far refrained from setting up refugee camps. The refugees, who live in every possible shelter, are free to find ways to support themselves, which in turn affects the incomes of Lebanese citizens. These, of course, are illegal earnings since Lebanon does not grant work permits and hence the refugees are not given social benefits and are subject to the whims of their employers.

It is true that these refugees contribute to the economy by boosting consumption, not to mention enriching the small business owners – who pay them an average monthly wage of about $250, as compared to the accepted minimum wage in Lebanon of $445 per month. But that contribution doesn’t offset what the government spends on them — more than $18 billion during the six years of the war. The phenomena of refugees driven to sell a kidney is becoming increasingly common according to reports in the foreign press. A donor receives about $8,000 for a kidney, enough to support him for a year, but then this puts an end to his source of income.

These figures make clear the extent to which the Lebanese economy is liable to suffer from another dose of sanctions. The problem is that it is impossible to disengage Hezbollah from the Lebanese government as long as the international community continues to cooperate with the government despite Hezbollah’s participation in it. However, if the international community fails to cooperate with the government, Lebanon is liable to fall apart economically and politically and “bestow” itself as a gift to Iran.