Insights

Lebanon: between old problems and future challenges

Hit by the worst economic and financial crisis in its history, Lebanon is on the brink of collapse. The international community has promised assistance in exchange for reforms. Moreover, the newly established government does not seem to offer anything new on the political level, and the dramatic events of recent days are exacerbating the existing tension within a highly unstable social context.

A country on the verge of collapse: historical background

International media and institutions do not seem to be particularly interested in Lebanon these days. This is understandable: the international impact of the US withdrawal from Afghanistan and the Kabul Airport attack requires governments to switch their focus to other areas. The importance of Lebanon in regional dynamics, however, cannot be disregarded.

To understand the country’s complex context, it is useful to focus our analysis on economic, political and geopolitical aspects, all of which are interlinked.

As noted in the latest World Bank Lebanon Economic Monitor, issued in June 2021, the country is facing one of the worst economic and financial crises experienced globally since the mid-nineteenth century.

The difficult situation faced in the last 40 years has prevented Lebanon from enjoying political stability and economic solidity. A sort of French “creation” – born as a spin-off of the Syrian Protectorate which included the Christian Maronite enclave, the coastal area, and the Beqaa valley, inhabited by a mostly Muslim population – until 1958 the country enjoyed a fragile stability. But since then, its history has been characterised by a string of civil wars, political killings – including those of Christian President Bashir Gemayel in 1982 and Sunni Prime Minister Rafiq Hariri in 2005 – and foreign interferences ranging from the presence of PLO bases to Israeli invasion, Syrian occupation and enduring Iranian influence through Hezbollah.

Additionally, the conflict between Hezbollah and Israel continues, more or less openly, to this day, and Israel considers the existence of the Shia movement as a threat to its own security. Moreover, a territorial dispute on the so-called Shebaa Farms – under Israeli military occupation since 1967, but claimed by Lebanon – also exists between the two countries.

Syria, for its part, has traditionally considered Lebanon as a natural extension of its territory and has maintained occupation troops in the country until the end of 2005, when the two countries normalised their diplomatic relations. However, to this day, both Syria and Iran maintain a certain degree of influence over Lebanon’s internal political balance, through the Shia parties, Hezbollah and Amal. Saudi Arabia also exercises a relevant influence over Lebanon’s stability through economic and political support to the Sunni faction led by Saad Hariri (former Prime Minister Rafiq’s son) – especially as part of a strategy to contain Iranian influence. In the last few years, Turkey and Qatar have promoted themselves as credible mediators for the internal stabilisation of the country. Outside the region, Lebanon maintains good relations with the Western World, and in particular with some European countries such as Italy and France, the two most active countries within the United Nations Interim Force in Lebanon (UNIFIL).

The current Lebanese institutional structure is based on the Ta’if agreements, a treaty signed by all national political forces in the Saudi Arabian city of Ta’if in 1989 to put an end to the civil war. Although criticised by some, the agreement represents a model to regulate a highly fragmented political system. Lebanon is a Parliamentary Republic, in which institutional balance is governed by a power-sharing system along ethnic and religious lines. According to this scheme, normally, the president of the Republic is a Christian Maronite, the Prime Minister is a Sunni Muslim and the Speaker of the Parliament is a Shia Muslim. Half of the 128 seats available in the country’s unicameral parliament are reserved for the Christian community, while the remaining half are shared between Shia and Sunni Muslims.

Latest developments

However, it was the most recent events that determined the current situation. In 2019, in a context of economic depression and severe fiscal crisis, the government announced plans to introduce a tax on phone calls via WhatsApp, Facebook Messenger and Facetime in a bid to collect new revenues. This was the last straw. Violent protests broke out throughout the country. Maybe for the first time in history, all factions found themselves united in demanding a complete changeover in the country’s political leadership, which was perceived as corrupt and focussed on its own interests as opposed to those of the nation.

In March 2020, the Lebanese Central Bank declared default and the situation has continued to deteriorate ever since, exacerbating existing problems. In August 2020, the explosion at Beirut port marked the point of no return towards the country’s economic and political collapse. The blast killed at least 217 people, injured 7,000 and displaced 300,000 from their homes.

Economic losses caused by the explosion at the port – the main gateway for imported goods – are estimated at US$4 billion. The blast also marked a point of no return in politics, as the Lebanese government had proven completely unable to carry out appropriate controls on explosive depots located in the centre of Beirut and, after the fact, it was not able to identify those responsible for the accident.

Already in 2019, with the anchoring of the Lebanese Pound to the US Dollar, the national currency had lost 80 percent of its value and this year it lost a further 40 percent.

The concurrent crisis of the banking system has had devastating consequences on citizens’ savings. Despite repeated interventions by the International Monetary Fund – to which Lebanon has a US$10 billion debt – today, the country is facing a concrete risk of running out of resources, which could lead to default.

According to World Bank estimates, over half of the Lebanese population probably lives under the national poverty line, although the lack of official data makes it difficult to understand what the actual poverty rates are in the country. Lebanon’s Gross Domestic Product fell from about US$55 billion in 2018 to about US$33 billion in 2020. In a country where the richest top 10 percent of families own 70 percent of the wealth, prices increased by 367 percent in a year. The purchasing power of salaries paid in national currency – which is the case with most of the workforce – has taken such a blow that these are now insufficient to meet basic needs.

The most vulnerable families can thus be forced to adopt extreme coping strategies such as borrowing money at extortionate rates or selling their belongings, even just to buy some food. Such high poverty rates could have lasting consequences on development, as well as on the population’s life cycle. Apart from facing sky-rocketing food prices, people have to queue for miles at petrol stations and the Lebanese army – which is tasked not only with controlling some of the most sensitive borders in the world, but also with maintaining internal peace in a highly fragmented society – has warned that it is itself at risk of disintegration as soldiers are not being paid.

The consequences of the crisis can be seen especially in four essential basic public services: electricity, water, education, and sanitation and hygiene.

Egyptian and Jordanian gas and electricity supplies have not yet arrived. Iran donations of gas and oil, via Syria, have failed to generate sufficient electricity. As a consequence, Lebanon has remained in total blackout since the closure of the two main public power plants, al-Zahrani and Deir Ammar. In an attempt to repair the situation, the army transported 6 million liters of fuel to each power plant to solve the issue, but a few hours after standard production was restored, an explosion occurred in the al-Zaharani plant, losing 250,000 liters of fuel. The causes are still unclear.

To find a solution, Iran had agreed with Hezbollah to send fuel, via Syria, in order to bypass US sanctions. Yet this proved to be ineffective. In dealing with Iran, Hezbollah has been strongly criticized for acting as a state within the state, yet it has been instrumental in being perceived as supporting the needs of the population. Syria has also acted as a conduit of Iranian material support to Lebanon in an attempt to break its isolation.

The pandemic

The deflagration of the Covid-19 pandemic has worsened the country’s vulnerability and exacerbated the existing economic and financial crisis, with evident impacts on the most vulnerable groups. Lebanon’s health system is dominated by the private sector and influenced by confessional considerations. Throughout the country, hospitals are managed and financed by sectarian political parties. This causes a series of inequalities, including people being denied access to some hospitals on religious grounds, or when they cannot afford to pay medical expenses.

As highlighted in a July 2020 report by the Observatory on International Politics – an Italian collaboration project between Parliament, the Ministry of Foreign Affairs and four research institutes – it is not just control over hospitals that is split among religious communities and parties: the same applies to vaccines, making Lebanon one of the very few countries in the world that delegate part of their vaccine procurement to private entrepreneurs.

According to the World Bank, the inability to provide an adequate solution to the country’s various ongoing crises is the result of a lack of political consensus on effective initiatives and, at the same time, of a consensus on defending a bankrupt economic system which has, for a long time, benefitted only a minority of the population.

Demography, confessionalism and political fallouts

The division of power along sectarian lines is still a reality, although the demographic weight of each community has changed over time. Available data vary widely, also because the last official census dates back to 1932 and major sources, including the UN World Population Prospects and the World Bank, indicate that official data are unreliable. In general, however, considering an estimated population of between 5.5 million (CIA World Factbook) and 6.8 million people (UN), the majority is probably Muslim (estimated at between 54 and 60 percent), with minor variations between Sunnis and Shias. Christians – the majority of whom are Maronites – are estimated at between 33.7 and 40.5 percent. Despite oscillations in estimates, Muslims clearly constitute the majority of the population. This represents a source of instability as the country’s institutions and economy have historically been based on the dominance of Maronites.

The situation is further complicated by the presence of 1.5 million Syrian refugees, 18,500 refugees from Ethiopia, Iraq, Sudan and other countries, and more than 200,000 Palestinian refugees (UNCHR). The presence of these refugees, who do not have any political weight, makes it even more difficult to manage the crisis. It also contributes to fuelling a situation that sees refugees and impoverished Lebanese pitched against each other along ethnic lines.

As in other occasions in Lebanon’s recent history, the political response to the country’s economic and financial problems has been slow and based on the defence of short-term interests and positions of power. The division of power among religious communities through parliamentary “quotas” and institutional positions – which are assigned according to confessional affiliations – is the way local elites use religion for political goals, leveraging private networks to provide favours and informal welfare services on a sectarian basis.

This system seeks to “freeze” electoral consensus and feed the power of traditional confessional parties. These have maintained the loyalty of affiliated citizens trough parallel systems of political-sectarian favours, ranging from the allocation of public sector jobs and the supply of essential services such as healthcare, to private financing for business and financial activities. However, the reduction in foreign investments, which were one of the main sources of private wealth, means this is no longer viable.

The country’s political fracas becomes evident by looking at the names of current leading politicians. The President of the Republic, Michel Aoun, and the Speaker of Parliament, Nabih Berri, have been politically active for more than 40 years. Saad Hariri, tasked with forming the new government after the August 2020 Beirut blast and the resignation of Hassan Diab, had already been Prime Minister twice and comes from a well-known family in Lebanon: his father Rafiq was the founder of the Sunni Future Party and a Prime Minister himself. Hariri failed to form a government and resigned on 15 August 2021. On 10 September, Najib Mikati managed to form a government, after a tug-of-war with President Aoun, who preferred having eight ministers instead of nine, so that he could control the government, if necessary.

The new government, however, will have 24 ministers, eight for each political group: one third for Aoun and his allies from the Revolutionary Armenian Alliance, and Talal Arslane, political leader of the Druze group; one third for Shia parties (Amal, Hezbollah and their allies), and one third for the Sunnis (including Walid Jumblatt’s Progressive Socialist Party).

Mikati is one of the richest men in Lebanon. A Sunni, he served as Minister of Public Works and Transport in 1998, and was Prime Minister twice, in 2005 and 2011. He is considered a symbol of the status quo and is apparently very unpopular. So much so that, on the eve of his nomination as President Designate, there were demonstrations outside his house, and he was accused of corruption and nepotism.

The role of the international community

The international donor conference jointly organised by France and the United Nations on 4 August 2021 – with Italy as one of the participants – raised US$370 million (€312 million) in immediate assistance for Lebanon. This was compounded, according to President Macron’s office, by pledges for “substantial in-kind aid”. The French President kicked off commitments by pledging nearly €100 million and a donation of 500,000 Covid-19 vaccines.

However, Macron had strong words for Lebanese leaders, accusing them of “deliberately letting things fester” and prioritizing their “personal and sectarian interests over those of the Lebanese people”. Macron’s commitment was followed by Biden’s pledge for nearly US$100 million (€84.4 million) of new humanitarian assistance for Lebanon. However, Biden also stressed that “no amount of outside assistance will ever be enough, if Lebanon’s own leaders do not commit to do the hard but necessary work of reforming the economy and combating corruption.” Two previous donor conferences, in 2020, had raised €280 million in emergency assistance. Although the transfer of these funds is unconditional, the conference warned that the international community will not start any wider rescue plan until and unless Lebanon itself commits to fight corruption and undertake economic reforms.

Geopolitical issues and external influences

Lebanon’s political, social and economic problems are not independent from geopolitical issues. The country is at the heart of changing regional assets, and is particularly vulnerable vis-à-vis its two neighbours, Syria and Israel. On the one hand, the persistence of the Assad Regime in Syria, despite ongoing internal conflict since 2011, has strengthened the position of Hezbollah – an ally of Syria – within the country, exacerbating tensions. On the other, growing tensions between Hezbollah and Israel imply the risk of a possible new conflict. Hezbollah has been officially taking part in the war in Syria since 2013, alongside Iran and the Assad regime. Its military success against the Sunni jihadists of the Syrian opposition, both in Syria and along the Lebanese border, has resulted in growing public and electoral support. Closer ties with the Christian Party led by President Michel Aoun have also strengthened the weight of Hezbollah in key Lebanese state institutions. However, the political rise of Hezbollah and its “normalisation” have been criticised by Israel, and increased the risk of war, which has so far been avoided despite the ongoing confrontation on Syrian soil.

The crisis has also made Lebanon more vulnerable to new forms of external interference.

After last year’s port blast, French President Macron swiftly – and somewhat brazenly – organised a visit to Beirut. And just as swiftly, he organised an International Donor Conference, taking the liberty to openly criticize the Lebanese political leadership. Lebanon has traditionally been France’s window on the Near East and Macron’s fast intervention signals the country’s willingness to play a major role here. The rousing welcome given by the Lebanese population to the French President and the 60,000 signatures on a petition to get the country back under French control should not be underestimated either.

Turkey, on its part, seems interested in penetrating into Lebanon through a soft-power strategy. According to various sources, Turkey has allocated funds to sponsor study visits, language courses, religious and cultural activities, as well as to support mosques in Lebanon, while a Turkish hospital will soon be opened in Sidon. Additionally, Turkey is among the first countries to provide assistance to higher education in the country.

China and Russia have also demonstrated their interest in filling the gaps left by the US in the Near East. The reconstruction of Beirut’s port infrastructure is attracting international construction firms, whose countries of origin could gain strategic and economic advantages from this. On one hand, thanks to its geographic position, the Beirut port could secure a greater influence in the whole Eastern Mediterranean area, which is also rich in gas fields. And on the other, whoever will be responsible for the port’s reconstruction, will end up controlling it and becoming the main beneficiary of its activities in the future, as the Lebanese authorities are likely to adopt a scheme of construction, management and transfer to private companies.

Immediately after the Beirut blast, various countries offered to rebuild the port. Kuwait, Turkey and France were among the first. China also expressed an interest in being included in the procurement process for the reconstruction. As noted by analysts, “China has already the control of various ports in the Eastern Mediterranean region, such as Alexandria (Egypt), Haifa (Israel), Piraeus (Greece), Tripoli (Lebanon).” China’s increasing interest in Lebanon – which is clearly highlighted in an interesting analysis by IFI Security – can be linked to the Belt and Road Initiative (BRI), or Silk Road, a global infrastructure development strategy promoted by the Chinese government.

From a political point of view, China’s growing presence in the Eastern Mediterranean represents a challenge for the Western World, which has historical links with Arab and non- Arab countries on the southern shores of the Mediterranean. In the case of Lebanon, China’s penetration could be facilitated by political and strategic action, especially on the part of Hezbollah.

Meanwhile, in the past few years, after its involvement in the Syrian war, Russia has started playing a growing role in Lebanon too, and has developed an interest in the recently discovered offshore gas fields in the Eastern Mediterranean basin. Russian company Novatek is part of a consortium with France’s Total and Italy’s ENI, which is currently exploring the region’s seabed through oil and gas offshore exploration and production agreements with the Lebanese government. Additionally, as mentioned before, Russia is among the countries that have expressed an interest in the reconstruction of Beirut’s port.

Hezbollah’s major role in the unstable context of Lebanon increases the country’s strategic importance for Iran. Although not brokered directly by the Lebanese government, Iranian funds have benefitted both the Shia community and the Lebanese economy as a whole. The announcement that Iranian oil tankers were on their way to Lebanon is a further step in this direction. As noted in the Report by the Italian Observatory on International Politics mentioned above, the growing activity of Iranian forces on Lebanese soil has transformed the country into a pawn in the rivalry between Saudi Arabia and Iran. This is especially true with regard to the illegal trafficking in drugs and arms which cross the country on their way to Syria and the Gulf Countries.

Lebanon and Italy

Italy’s bilateral relations with Lebanon remain strong. Italy is among Lebanon’s main trade partners and has a 38-year direct military presence in the country both as part as UNIFIL (over 1,000 Italian soldiers and four generals have been deployed in the last 10 years – the most relevant contribution to the mission) and through MIBIL (the Italian Bilateral Mission in Lebanon). In terms of international cooperation, Lebanon is considered a priority country for Italy and is one of the main beneficiaries of Italian assistance. Italy’s presence is significant across the whole country and in all sectors, including archaeologic restoration, infrastructure, health services and humanitarian support to both vulnerable Lebanese and refugees from Syria and Palestine. These efforts are appreciated by all parties involved, and the deep influence gained through its military presence over the years could pave the way for Italy to play a high-profile role in what is now one of the most strategically relevant areas of the Mediterranean.

With its excellent ability to mediate in situations of tension, Italy has been a constant presence in Lebanon for decades. Now the country is also involved in the exploration of offshore gas fields, and the participation of Italian companies in the reconstruction of Beirut port could bring further benefits.

Conclusions

It is very difficult to tell what will happen in Lebanon in the future. There are number of crises to be managed, and none of them has an easy solution. The Lebanese people should help themselves. However, it seems that, through their long and dramatic history, they have never learnt to do that. Some experts stress that the involvement of international actors to facilitate dialogue among Lebanese political forces appears to be necessary to settle existing disputes. Indeed, the 1989 Ta’if agreements which put an end to the civil war and promoted the return to a normal situation in the country were sponsored by Saudi Arabia, with the tacit consent of the US. The main provisions of the agreements included modifying political quotas in favour of the Muslim community stipulated in the 1943 Lebanese National Pact; reasserting the sovereignty of Lebanon over Southern Lebanon, which was at the time occupied by Israel; disarming non-state militias, with special reference to Hezbollah (which is, however, still very active, and often in opposition to the regular army); and legitimizing the presence of Syrian troops as keepers of the peace, but only for a limited period of two years (but they eventually only withdrew in 2005). The 2008 Doha agreement, which stopped in its tracks a potential new civil war, was also reached under the aegis of the Arab League and the US. However, the current situation suggests that neither agreement has yielded concrete results.

On 10 September 2021, a new government was sworn in. At least now, the country will be able to negotiate with the International Monetary Fund, for which a functional government is a precondition. But problems among – and within – confessional groups still remain. The “old” names of Lebanese politics are still in power. This is worrying on two counts: on one hand, it highlights the absence of a young political class that could find new solutions to serious problems that have, over time, become structural. On the other, it reaffirms the total lack of will on the part the old political class, more interested in cultivating its own partisan interests than in modernising the country. Lebanese civil society should therefore make more of an effort to promote change, however difficult this may be.

However, there is hope that Lebanon’s desperate need for foreign aid will push political forces to agree on a common path of reorganisation and recovery. Maybe, the international community’s threat of “no assistance without reform” will help to make this happen.

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