The governor of Lebanon’s central bank, Riad Salameh, has been ordered to appear before an investigating judge this Monday to testify on the bank’s conduct, which many view as responsible for Lebanon’s severe economic crisis.
At first glance, this is a necessary probe into the way the central bank allocated millions of dollars at the official exchange rate to importers of basic staples. The importers then sold them on the black market, earning profits a few times over instead of using them for their intended purpose. With the official exchange rate at 1,517 Lebanese pounds to the dollar and the black market offering 9,000 pounds, the temptation was too great.
Salameh is suspected of collaborating with the banks and importers, failing to supervise the use of the money and not using his power to investigate the swindle at a time when the general public, and even most importers, were forbidden to withdraw dollars. The investigation into the central bank is one condition set by French President Emmanuel Macron for raising money for Lebanon after the explosion at Beirut’s port last August.
Salameh is also under criminal investigation by the Swiss authorities, who suspect him of transferring millions of dollars – some say as much as $2.5 billion – from the central bank to private accounts over 18 years. One account holder was his brother, Raja Salameh, who owns a company in which the central bank governor is a partner.
Salameh says the amounts are exaggerated and the money didn’t come from the central bank. He’s expected to testify to this effect before a Swiss prosecutor.
The central bank’s corruption is no secret, but it has never been investigated by the Lebanese authorities because Salameh has two powerful patrons. One is Prime Minister-designate Saad Hariri. The other is the U.S. government, which considers him a vital interlocutor in dealing with Lebanese affairs – politics in particular.
Salameh has headed the central bank since 1993, making him the longest-serving central bank governor in the world. His current term expires in 2023, and President Michel Aoun has already said he won’t extend it. But Aoun’s term ends even before that, so it’s not clear which of them will leave office first.
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But anyone who thinks this is Lebanon’s only source of corruption and that Salameh’s ouster will solve the problem should consider the political and legal tangles this case is mired in.
The investigation into the central bank was launched by the district attorney in the Mount Lebanon Governorate, Judge Ghada Aoun, who is very close to President Aoun. A year ago, she was nominated for a senior judicial post, but the High Judicial Council, which itself is up to its neck in political considerations, gave the job to a different judge.
President Aoun promptly came to his protégée’s aid by freezing all appointments. Ghada Aoun began harshly criticizing the council on social media, in blatant violation of the judiciary’s bylaws and ethics code.
Loath to lend Lebanon money
Salameh’s supporters, including Hariri, now claim that the investigation into the central bank is designed to enable the president to seize control of it by ousting Salameh and blaming him for the crisis. Granted, the president is also the person who, with Hezbollah’s support, tapped Hariri to form the next government, but Hariri has failed to do so for three months now, mainly because Aoun hasn’t approved the list of ministers.
Now Aoun is demanding that the number of ministers be increased from 18 to 20, with the two extras being his personal appointments. Hariri vehemently opposes this.
The number of ministers and their political affiliation matters greatly because under the Lebanese constitution, the government can approve key decisions only with the consent of two-thirds of the cabinet. Therefore, anyone who controls one-third of the ministers plus one has veto power. An addition of two ministers would give Aoun the number needed to block anything Hariri might propose if and when he forms a government, including economic reforms, the state budget and international agreements.
The tension between Hariri and Aoun recently peaked following the leak of a video in which Aoun could be heard calling Hariri a liar and deeming his efforts to form a government a bluff. Meanwhile, Hariri’s supporters have accused Aoun of trying to pave the way for his son-in-law Gebran Bassil – Hariri’s sworn enemy – to become the next president.
Officially, the president is chosen by parliament. But traditionally, parliament approves whoever the cabinet decides on. Thus if Aoun controls one-third of the ministers plus one, he can not only get Bassil nominated, he can prevent the appointment of any other candidate.
The pointlessness of the efforts to form a responsible government led the longtime leader of the Druze community, Walid Jumblatt, to urge Hariri to stop trying as long as Hezbollah and Aoun’s Free Patriotic Movement are Lebanon’s real decision-makers.
“Let them take the entire country, every part of it, into their hands,” he told the Voice of Lebanon radio station. “Let them bear responsibility, for better or worse. Why should we participate without getting anything?”
It’s unlikely that Hariri will take this advice, and not just because he sees forming a government as a “national mission.” He needs this position of power to prevent Aoun and his son-in-law from taking over completely.
These political calculations, which aren’t divorced from the bitter residue of the past and hefty economic interests, have thwarted every attempt to satisfy even a small part of the demands of the World Bank, the International Monetary Fund and the French government.
But meeting these demands is a condition for releasing both an estimated $11 billion in funds from donor countries and sizable loans from international financial institutions. Aside from $264 million provided as a loan to the caretaker government and aid to victims of the blast at Beirut’s port, the financial institutions have been unwilling to provide credit to the collapsing country.
Macron is expected to visit Lebanon later this month to try to work a miracle that would get a government formed. But he’s well aware that magic isn’t one of his talents, so he recently changed the strategy he plans to propose to the caretaker government.
Instead of waiting until a new government is formed, which could take many more weeks, if not months, he’s proposing that the caretaker government start implementing reforms. That would give him solid arguments for trying to persuade donor countries to release at least some of the money they’ve pledged.
But this proposal, too, will fall victim to Lebanon’s vicious cycle, because any reform would reduce the status and power of the country’s political and economic elites.
These considerations don’t interest ordinary Lebanese, who are suffering an unemployment rate topping 30 percent, a cost of living that has skyrocketed more than 140 percent and that insane exchange rate of 9,000 pounds to the dollar. And that’s without mentioning the 3,100 coronavirus deaths out of around 300,000 diagnosed patients, most of whom can’t find a hospital bed.
Last weekend, mass demonstrations erupted in the northern city of Tripoli, and the police and army were sent to suppress them. In the ensuing violent clashes, one person was killed and hundreds injured.
The clashes continued for more than four days, during which dozens of Molotov cocktails were thrown, the historic city hall was torched and protesters were seen carrying guns. There was a fear the protests would spread to other parts of the country.
Tripoli is Lebanon’s second-largest city with some 750,000 residents. It’s also the country’s poorest city. Most of its inhabitants are Sunni Muslims, including many Syrian and Palestinian refugees.
This fact has already prompted claims that the protests were an uprising in which foreign actors and countries keen on Lebanon’s destruction played a role. Lebanese pundits are warning that Sunni militias modeled on the Shi’ite Hezbollah might spring up in Tripoli, and this could drag the country into a new civil war.
Meddling by “foreign actors” is Lebanon’s middle name. Once it was only Syria, but today the list of countries sticking their fingers into Lebanon’s fragile situation includes Iran, Turkey, Qatar, Saudi Arabia, France, the United States and Israel.
Unlike the demonstrations in 2019, which mainly drew the middle class and students, this time the poorest people have erupted into the streets. Lebanon has been in lockdown since January 11. The closure is slated to end Monday but the coronavirus statistics may well require an extension, especially considering that vaccinations haven’t begun.
Prime Minister Hassan Diab has said the first vaccines are expected to arrive in mid-February, but the government has bought only 6.3 million doses, enough to provide the requisite two doses to only around half the population. And while a prioritization plan exists, hospitals and clinics haven’t yet received detailed instructions on how to distribute the vaccines, how to recruit staff needed to administer them and what the pace of inoculation will be.
The government says the entire population will be vaccinated by the end of this year, including the 1.5 million refugees and approximately 400,000 foreign workers, most of them Syrian. But bitter experience teaches that in Lebanon such plans usually remain on paper. And it’s not hard to guess which classes will benefit from the vaccine first.
As a professor at the American University of Beirut told me in an email: Lebanon is a country in the process of dissolution. In fact, it may be witnessing its last days as an independent country. Maybe Israel would agree to annex it?