Opinion |

A Desperate Lebanon May Find a Savior in Beijing

No one is going to put up the financing for reconstruction after the Beirut port disaster, except maybe China in order to expand its presence in the Middle East

David Rosenberg
David Rosenberg
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Ship on fire following the August 4 blast in Beirut port
Ship on fire following the August 4 blast in Beirut portCredit: AFP
David Rosenberg
David Rosenberg

There’s a gaping hole filled with water where the Port of Beirut once stood, not to mention thousands of surrounding buildings were damaged or destroyed. Who’s going to pay to rebuild all of this?

There’s been an outpouring of support for Lebanon since the August 4 explosion, with the leaders of 15 governments pledging close to $300 million. But that’s only for the immediate tasks of cleaning up the rubble and proving medical care for the wounded. The cost of reconstruction has been variously estimated at between $5 billion to the more likely $15 billion. Insurance will cover only a fraction of that.

The Lebanese government can’t perform the most basic functions like ensuring a regular supply of electricity or collecting garbage. Under the circumstances, it’s hard to imagine it marshaling the resources to rebuild the port and large swathes of Beirut. In any case, even if it had the managerial capabilities, Lebanon is broke and its economy is in shambles. It has been engaged in fruitless negotiations with the International Monetary Fund over a rescue package to help it cope with its $90 billion in public debt. Where is it going to get another $15 billion?

Whatever sympathy the world feels now will probably soon dissipate, all the more so since the disaster was self-inflicted. The markets won’t be there either to help. Ordinarily, construction of a new port and the high-end real estate that surrounds it would be regarded as an attractive investment. But given Lebanon’s dire financial state, its endemic corruption and Hezbollah in government, tapping the financial markets for capital is out of the question.

Maybe, faced with the disaster from the explosion and rising public anger, Lebanon’s corrupt political class will finally cede power and clear the way for an internationally financed reconstruction program. But don’t count on it. They haven’t shown the slightest inclination, even as they have presided over months of economic disaster. They are too entrenched to go quietly. Yet Lebanon may have a white knight in China.

Beijing has so far offered nothing beyond emergency aid and expressions of sympathy. But from the Chinese point of view, the destruction of Beirut port, if not the adjacent real estate, could offer a compelling commercial and strategic opportunity. How often does a port in a major city astride a major shipping route of great interest to China suddenly come up for the taking?

If China is interested, the interest doesn’t come from nowhere. It fits snugly into the vast Belt and Road initiative unveiled in 2013 to build a network of land and sea links stretching between China, Europe Africa and Oceania. The Middle East, being right in the middle and a major source of China’s energy supplies, is a critical part of the program.

Israel by the way is a small player in the Belt and Road initiative, even if the term itself is rarely mentioned, perhaps because the program has been accused of exploiting underdeveloped countries. Chinese companies are building the new port facilities in Ashdod and Haifa and will be operating the Haifa Port under a 25-year contract. Ashdod and Haifa are part of a string of East Mediterranean ports Chinese companies have helped develop and/or control, including Piraeus in Greece, Tripoli in Lebanon and Port Said in Egypt.

And even before the disaster, China had expressed an interest in expanding its presence in Lebanon.

What does Beijing hope to get out of this? In the short run, port construction provides jobs and contracts for Chinese companies. In the long run, they help China project its power across Eurasia while ensuring its exports reach markets efficiently and at low cost. They deepen the country’s presence in a strategic part of the world at the cost of the traditional hegemons of Europe and the United States. They may even one day serve the needs of the Chinese navy as the port of Djibouti in the Horn of Africa does.

Soldiers of China's People's Liberation Army (PLA) stand on a ship sailing off to set up a base in Djibouti, from a military port in Zhanjiang, Guangdong province, China July 11, 2017.Credit: CHINA STRINGER NETWORK/REUTERS

This is classic imperialism. The suits come first with contracts and deals and the boots come later to keep the restless locals in order. There are already hints of that in the impending economic accord between Iran and China, which rumor says may include stationing 5,000 Chinese troops in the country. Even if it doesn’t, Chinese companies will get rights to build airports, high-speed railways and subways, and a 5G mobile networks and to operate free-trade zones.

It’s obvious why Tehran is considering such a deal. Besides offering an opportunity to stick its tongue out at the Trump sanctions, it has no choice: Its economy is in a state of collapse and U.S. sanctions don’t leave it many other partners. Lebanon is in the same kind of sinking ship and Beijing might prove ready to throw a lifeline.

Based on the experience of other countries, China will likely be more of a winner than Lebanon. China will provide cheap financing, but Lebanon will be saddled with the debt (if it insists on retaining control of the port) or loss of control of the port (if it cedes the operating contract to Chinese companies). Its economy will benefit to the extent it gets a port, but the jobs will go to Chinese laborers and the sub-contracting to Chinese companies.

What Beijing won’t demand is any annoying reforms, like an end to corruption. For Lebanon’s elite, that’s a win-win.

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