Who Will Rebuild Beirut's Port?

The preliminary estimates in which the enormous explosion in the Beirut port caused $3 billion to $5 billion in damage climbed within days to five times as high

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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A ship is docked at the destroyed port of Beirut following a huge explosion that disfigured the Lebanese capital, on August 12, 2020.
A ship is docked at the destroyed port of Beirut following a huge explosion that disfigured the Lebanese capital, on August 12, 2020.Credit: AFP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

The virtual and urgent conference French President Emmanuel Macron convened with the leaders of 15 nations has produced disappointing results. They may have committed to granting Lebanon $300 million in aid, an impressive sum in its own right, but blatantly inadequate even to provide the initial needs of the 300,000 people who lost their homes – and even more so when it comes to laying the foundations of new infrastructure.

The preliminary estimates in which the enormous explosion in the Beirut port caused $3 billion to $5 billion in damage climbed within days to five times as high – and these represent only direct damage and not long-term losses, the critical harm to the Lebanese economy and the loss of exports to Arab countries that receive goods through the Beirut port, and which provide an important source of revenue for the country.

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The emergency aid promised by donor nations, including the United States, which promised $15 million – about half of what France pledged – agreeing to violate sanctions it had imposed on Lebanon, will depend on the establishment of an efficient mechanism to transfer money directly to those who need it. The donor nations, justifiably, do not trust the Lebanese government or other Lebanese groups to transfer the money properly and fairly – if they pass it on at all. The United Nations or international aid agencies seem likeliest to be made responsible for distributing the aid. Once the mode of transferring the money is agreed upon, tracking and supervising methods will be needed – all of which will take their share of the aid money, so it is still hard to estimate how much money will actually reach everyone harmed by the explosion.

While the “small change” targeted to provide immediate aid is waiting for the bureaucracy to release it – the big money, which is supposed to rescue Lebanon from its economic crisis, or at least enable it to rehabilitate the Beirut port – is in no hurry to arrive.

French President Emmanuel Macron gestures as he visits a devastated street of Beirut, August 6, 2020.Credit: POOL/ Reuters

Macron may have declared, as is proper, that France – the “compassionate mother” as it is sometimes described by Lebanese media – stands alongside Lebanon. But it is also presenting a bundle of conditions. These include deep economic reforms, reorganization of the banking system, changes to the status of the central bank and a transparent examination of its decisions – and above all, a stable and responsible government.

The United States has added to these demands the removal of Hezbollah from its political power centers, including from the government ministries it holds. These are not new demands, they were presented to Lebanon back in 2018 when the donor nations promised to give $11 billion – on condition that the country presents a proper plan for reform. They are also the demands of the International Monetary Fund, which Lebanon has asked for a $10 billion loan. These two founts of salvation were frozen and dammed up – and it is doubtful whether they will ever open without a political and economic revolution in Lebanon.

For now, the resignation of the Lebanese government, and the calls for a serious and transparent investigation that will bring those responsible to justice, could be heard at the extensive protests that broke out again at the beginning of the week – and the magic solution is to hold an early election. It is not at all certain that an election would satisfy the demands of the protesters as long as the existing election law perpetuates political divisions among ethnic groups.

The process of changing the election law, even if there is agreement on its content – a large question mark in its own right – as well as holding an election could very well take a number of months, while in the meantime the government would not be able to receive external funding for its ongoing operations, and the amount of foreign currency available for financing imports is quickly running out.

The Lebanese government that could arise will need to decide how to restore the port of Beirut, without which the country would find it difficult to continue functioning. The main question is who would manage the rehabilitation of the port and who would manage the port after its reconstruction. This would requires an investment of billions of dollars, which the government does not have. The accepted way would be to hand over the reconstruction project to an outside company as a BOT (Build-Operate-Transfer) project in which the company doing the work receives a concession limited in time fromthe government to manage the port and profit from it – and at the end of the period it would hand the port back to the government.

The problem in Lebanon is that the port of Beirut was run like a private estate by interest groups that made a fortune from it – many of which are quite well connected to the political power centers, including Hezbollah. For decades, the port was run by the port of Beirut company, owned by Henri Philippe Pharaoun, one of the richest men in Lebanon, who was a cabinet minister in a number of Lebanese governments and owner of the Bank Pharaoun and Chiha.

After the government ports authority took control of the port, it became a source of jobs parceled out by politicians to cronies and a slush fund. If a decision is made to assign reconstruction to an outside firm, the main beneficiaries will be lost – so a harsh fight can be expected. The rehabilitation of the port could also lead to fierce competition among other nations involved in financing its reconstruction. China is almost a natural candidate to win the bidding, but the U.S. may object, and the same would go for any consortium that includes Iran, Turkey or Russia.

Lebanon, which is unable to handle the huge number of injured along with its COVID-19 patients, will find itself at the center of an international battle that will probably not benefit the hundreds of thousands of victims.

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