‘America First’ is a risk to Lebanon and the Middle East

The United States’ pursuit of Iran and Hezbollah

Last month marked the 35th anniversary of the deadliest attack against US forces since World War II: the bombing of the US Marine barracks in Beirut on October 23, 1983 that killed over three hundred people, including 241 US military personnel. The official US line now is that elements of what would later become Hezbollah, backed by Syria and Iran, were responsible for the attack—although all three parties continue to deny involvement. During an event marking the anniversary, US President Donald Trump, with his customary love of theatrical moments, signed new legislation targeting Hezbollah. The first response from Lebanon was defiant.

For a long time the United States has pitted itself against Iran and, by extension, Hezbollah. Since the Islamic Revolution at the end of the 1970s in Iran and, later, Hezbollah’s inception during the Lebanese Civil War, the Americans have hunted the two in a remarkably consistent way. This has not changed under President Trump; American strategy, however, has shifted. It has been influenced by a fundamental repositioning of US policy vis-a-vis the entire world—a mindset most commonly referred to as “America First.” The Trump administration has been more aggressive in removing itself from or renegotiating existing treaties, and seems content with exercising a much more risk-friendly foreign policy. To understand how this new policy of Trumpism has affected Hezbollah, Lebanon, or Iran, looking at the realities on the ground is somewhat pointless. To understand these changes, one should instead examine Trump’s version of reality. This is not a new phenomena when regarding the foreign policy of America, but under Trump it has become particularly acute.

Trumpism writ large

The Trump paradigm, which is not an openly declared policy, is that the US will do what it likes and what suits it, with little regard to how it impacts other nations—allies included. This has had huge global implications. How many treaties has Trump made redundant, or at least announced his intention to scrap? In less than two years Trump has, for example, exited a landmark international climate change agreement, unilaterally walked away from the Iran nuclear deal, and, most recently, indicated he would junk an arms control agreement with Russia. Every foreign policy decision under Trump’s direction is a wild card.

Trump’s targeting of Hezbollah comes as part of a shift in America’s Middle East strategy to more closely reflect the policy goals of Israel and, to a lesser extent, Saudi Arabia—both hellbent on countering Iranian influence across the region. So far, Trump’s administration has sought to counter the group by targeting its financiers. This is not a radical departure from the previous administration, but it seems that Obama during his second term was less interested in pursuing Hezbollah and more amenable to working with the group’s patron, Iran.

In 2008, at the outset of the Obama administration, the Drug Enforcement Administration (DEA) launched a law enforcement campaign, code-named Project Cassandra, to disrupt Hezbollah’s alleged global drug trafficking and money laundering network. Following its investigation into Hezbollah’s sources of funding, the DEA alleged that the group reaped $1 billion per year laundering money from drug proceeds.

Near the end of Obama’s first term, drawing on evidence from the DEA investigation, the US Treasury blacklisted local financial institution the Lebanese Canadian Bank (LCB). According to the original indictment issued in the Southern District of New York US Federal District Court, LCB was involved in a tri-continental money laundering operation that stretched from South America to North America and West Africa. A money exchange entity in a West African country that was a subsidiary of LCB was accused of channeling the proceeds, but the money came mostly from manipulation of the used car market, including pre-owned vehicle dealerships in the US, with smaller amounts coming from Latin America. Allegedly, LCB was also involved in the financing of Hezbollah activity, but the actual affiliation of LCB was never visible, above the level of individual branch managers having some connections to the group. There was never a smoking gun linking bank executives to Hezbollah, and, in 2013, LCB’s board and all shareholders agreed to a settlement of over $100 million on the condition of no admission of guilt.

That year, discussions began in earnest between the Obama administration and its counterparts on the UN Security Council, plus Germany and the EU, that ultimately led to negotiations on an Iran nuclear deal framework. In pursuit of a drawdown of Iran’s nuclear weapons capability, the Obama administration began quietly withdrawing support for Project Cassandra, a Politico investigation published last December reported. The Politico investigation concluded that the Obama administration sidelined the operation because it feared DEA investigations and Treasury actions would jeopardize negotiations with Iran.

Ramping up sanctions

It was only 15 months ago, in August 2017, that Lebanon’s prime minister, Saad Hariri, stood on the White House lawn as Trump declared a forthcoming answer to the “menace” of Hezbollah. At the time, we did not know what Trump had in store.

In May, Trump withdrew the United States from the Iran nuclear deal, in part on the implied notion that Iran was using the country’s economic recovery from sanctions relief to fund Hezbollah. The Americans see Iran’s support for Hezbollah as a destabilizing force, in both a political and security sense, away from the interests of the US and its allies in the region. The Iranians see Hezbollah as a useful tool extending Persian political influence and its interpretation of Shiite Islam, Waliyat al-faqih, serving as a resistance and counter to Israel and, in recent years, securing mutual interests in Syria.

In August, the US reapplied a first phase of sanctions, and in early November reimposed a second phase of sanctions targeting key Iranian trading and energy activities, namely the nation’s petroleum exports. The US is targeting Iran’s economy to alter its political influence and military behavior in the region, and to temper Iranian financial support to Hezbollah.

Back in 2015, after the Iran deal was concluded, Congress passed a law—the “Hizballah International Financing Prevention Act” (HIFPA)—meant to kneecap the group financially and isolate it from the banking system worldwide. The legislation may have been driven more by America’s political environment rather than regulatory need, Executive reported in 2016, placating conservatives and war hawks in the Congress enraged by the agreement with Iran. It is, however, unclear what practical effect that law had in cutting Hezbollah off from the international financial system. HIFPA required the Obama administration to report to Congress on Hezbollah’s alleged narcotics trafficking and alleged transnational criminal activities, but if that was done the reports were never made public.

Amendments to HIFPA had been rumored to be in the works since mid-2017, as Executive reported, and finally, at the end of October, as America’s renewed clampdown on Iran was set to begin, Trump signed new legislation amending HIFPA,  the “Hizballah International Financing Prevention Amendments Act of 2017” (HIFPAA).

Congruently, throughout 2018, the US Treasury has sanctioned nearly 40 individuals and entities, “pursuant to the Hizballah Financial Sanctions Regulations.” In October, the US Department of Justice (DOJ) named Hezbollah as one of the “transnational organized crime threats” to the United States, alongside four Central American cartels. The DOJ move comes nearly 10 months after it formed the Hezbollah Financing and Narcoterrorism Team, tasked with “investigating individuals and networks providing support to Hezbollah, and pursuing prosecutions,” according to a DOJ statement. The statement also added that the new DOJ unit will work to “restrict the flow of money to foreign terrorist organizations as well as disrupt violent international drug trafficking operations.”

Through sanctions and the law enforcement actions, it seems a case is being built that could lead to indictments in US courts of Hezbollah officials and entities, or their affiliates. As of yet, we do not know how strictly the US will pursue Hezbollah on these fronts, how widely the US will cast its net, or whether there will be collateral damage. But what is clear so far is that the Trump administration is coming hard for Hezbollah, and this pursuit will likely intensify.

Diplomacy no more

The main difference between the Obama and the Trump administration in all this is that the former was pursuing Hezbollah while easing off its patron, Iran, while the latter is going full throttle after both. Under Obama, the US pursued a diplomatic solution to the prospect of an Iranian nuclear weapon, whereas now the US is seemingly on a path toward military confrontation with Iran and its allies—if Iran does not change course in its regional influence campaign.

At the moment, Iranians—and arguably the world at large—are content to wait out Trump. We do not know what impact the reapplication of sanctions on Iran will have on economies in the region, nor what will happen to the price of oil. If the Iranian oil supply to the market is disrupted, it could cause price shocks and keep the cost per barrel high. These dynamics will start to emerge toward the end of the year, in time for the next OPEC/Non-OPEC meeting, in December. We also do not know what these American actions mean for Iran’s patronage of Hezbollah, and the country’s regional ambitions. Neither do we know Trump’s endgame—assuming he has one—if Iran and its allies do not capitulate to American demands.

How all of this will affect Lebanon remains to be seen. We know that past experience with US law enforcement and Treasury sanctions forced the closure of LCB in 2011, and when the HIFPA legislation was implemented in 2016, a local bank was bombed. That summer, Lebanon’s central bank had ordered commercial banks to comply with the US law. After they did, the head office of Blom Bank, one of Lebanon’s largest banks, was targeted. There was no claim of responsibility for the bombing and local law enforcement did not publicly reveal the results of an investigation into the event, if one was even conducted.

Hezbollah might assume important ministerial positions in Lebanon’s next government, namely the portfolio of the Ministry of Public Health. Suggestions that a Hezbollah-run health ministry would jeopardize foreign funding to the ministry’s programs is the next game of who will blink first. By now we know it is not beyond Trump to manipulate American soft power at multilateral institutions, in diplomatic or financial form, to get what he’s after, and in truth those were carrots long before Trump was elected. But what will happen if America’s implicit threat is ignored—either by Lebanon, Hezbollah, or Iran—is an unknown, as the world at large continues to react to this wild card president.

Jeremy Arbid

Jeremy is Executive's in house energy and public policy analyst.

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