Analysis |

Lebanon Signed a New Electricity Deal, but It May Not Be Enough to Keep It Afloat

When the central and commercial banks are battling a shortage of dollars and the state is unable to pay for basic services, electricity and gas will not be enough to save to Lebanon

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
Right to left: Syria's energy minister, Lebanon's energy minister and Jordan's energy minister, at the signing of the tripartite gas supply agreement for Lebanon between the three countries, yesterday.
Right to left: Syria's energy minister, Lebanon's energy minister and Jordan's energy minister, at the signing of the tripartite gas supply agreement for Lebanon between the three countries, yesterdayCredit: ANWAR AMRO - AFP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

The ceremony was festive, the participants were all smiles, the mutual congratulations spoke of a “new era” and the hope of rescuing Lebanon from its economic crisis. The Lebanese energy minister told how the U.S. ambassador to Beirut, Dorothy Shea, called to congratulate him on the agreement – but, at the very same time, as if just to spoil things – the electricity went out in the Lebanese Energy Ministry building.

The signing of the tripartite agreement between Jordan, Lebanon and Syria to supply Jordanian electricity to Lebanon has still not lit up the streets of Beirut. At least another two months will pass before Syria completes adapting its transmission lines entering Lebanon, and even then the quantities of electricity will not satisfy the entire demand of the country.

But it is a start, and later Lebanon will receive Egyptian gas that will also pass through Syria – which will take a 10 percent cut in return for its agreement to let these energy resources pass through its territory.

This agreement, woven with the help of the United States – even though officially it violates the sanctions imposed on Syria – is considered to be emergency aid to a country that has been becoming darker in recent years, with hospitals and operating rooms unable to function, schools closed because of the cold, citizens collecting junk and things to burn to heat their homes a little, and long lines of cars waiting in front of gas stations in the hope of getting a bit of gas – which is also running out because of the limited funding to buy it.

But when the central bank and commercial banks are battling a shortage of dollars and the country is unable to pay for basic services, and is by now defined as a failed country that is unable to meets its obligations – electricity and gas will not be enough.

A family is heating up their home in a village in southern Lebanon, this week.Credit: AZIZ TAHER/ Reuters

The solution for Lebanon’s economic problems does not require a magic formula. The donor countries committed over three years ago to loaning some $11 billion, and the International Monetary Fund is also willing to lend Lebanon $5 billion to $10 billion, but the condition is that the Lebanese government carry out deep economic reforms to demonstrate control over the country, and pass legislation to ensure its ability to use the aid for the purposes it is intended – and provide convincing guarantees of its ability to pay back its debts.

At the moment, Lebanon has no resources of its own and some of its old debts and repayments of government bonds have had to be restructured – a move that has deterred even more investors and financial institutions from involvement in Lebanon. The hope now is that the Gulf states, and especially Saudi Arabia and the United Arab Emirates, will put up the necessary guarantees to calm the donor nations.

But bad blood has been flowing between Saudi Arabia and Lebanon, which comes from the efforts of Saudi Crown Prince Mohammed bin Salman to remove Hezbollah from the government, shrink Iranian influence and return to being in charge of what happens in Lebanon, as it was during the time of Prime Minister Rafiq al-Hariri, who was assassinated in 2005. These efforts reached their peak in 2017 when the Saudis invited then Prime Minister Saad al-Hariri, Rafiq’s son, for a visit in Riyadh – and then forced him to announce his resignation. This move ended in a fiasco.

The international, and especially French, pressure on Saudi Arabia managed to release Hariri, who immediately upon his return announced he was revoking his resignation. Last year Saudi Arabia imposed another particularly painful sanction on Lebanon when it banned imports of Lebanese goods after discovering a number of huge shipments of millions of Ecstasy tablets and other drugs, exported from Lebanon in container shipments of regular goods.

The Saudis, who suspended diplomatic relations with Lebanon in October, were then joined by the UAE and Bahrain and this completed the stranglehold, mostly agricultural, of the Lebanese economy. But recently Kuwait has proposed its services as a mediator and, in consultation with Saudi Arabia and UAE, has formulated a list of demands for Lebanon as a condition for renewing economic ties and providing the financial guarantees Lebanon needs to receive international aid.

Lebanon's central bank in Beirut.Credit: Mohamed Azakir/ Reuters

“This is a declaration of surrender meant to humiliate Lebanon,” was Hezbollah’s response to the demands presented to the government by Kuwait’s foreign minister at the end of last week. These include a Lebanese commitment to supervise border crossings, check outgoing shipments to the Gulf states and coordinate actions to prevent smuggling. But the explosive materials lie in the demand that Lebanon commit to carrying out all UN resolutions, and especially Security Council Resolution 1599 from 2004 and 1701, which ended the Second Lebanon War with Israel.

These two resolutions include an impossible section, according to which the government only will have full control of all weapons in the country, and the weapons of the armed militias, including Hezbollah, will be taken from them. The demands also include that Lebanon reply to these terms in writing by January 29, a week from the date they were delivered. This is the price tag that Lebanon will be required to pay if it wants to survive, say the Gulf states.

It would be best not to hold your breath before the Saudi ultimatum expires. Hezbollah has no intention of participating in the government’s discussions whether to decide to debate the list of demands – and without its participation the cabinet cannot make a decision. Hezbollah, which would be expected to be the main casualty of Lebanon’s agreement to the demands, “proposes” to wait until the elections scheduled for May 15 and pass the debate on to the next government, rather than foster disputes among the present government, whose days are numbered.

This would mean that Lebanon will need to survive on its last fumes for at least another five months, and realistically for a lot longer than that – considering that forming a government in Lebanon is a saga that can last for a few seasons – and especially after the latest big shock.

On Monday, Saad al-Hariri announced he is suspending his political activity and does not plan on running in the coming parliamentary election. In his announcement on television, choking with tears and in a wavering voice, Hariri thanked all those who were at his side and helped him, and called for his al-Mustaqbal party to do the same.

The immediate problem is that the political embarrassment and confusion caused by the announcement of his retirement will make it even harder to make critical decisions to solve the crisis in Lebanon, and it puts the feasibility of the elections in doubt. Lebanon is nearing a situation in which it may have electricity – but nothing will remain to light up with it.

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