In terms of number estimates, what do you see as the total cost of Lebanon’s recovery from war damages and economic meltdown, and what would you say the opportunity costs of conflict (the foregone development in Lebanon, Israel-Palestine, Jordan, Egypt, and Syria because of money spent on military expenses) were?
PS: Obviously for Lebanon there’s the immediate cost of the devastation and destruction over the last two years relating to the war, which is estimated at around USD $11 billion. And then of course there’s the entire collapse of 2019, USD $70 billion losses and so on, but that’s a broader perspective. In terms of opportunity costs in the region, the countries that were affected—obviously Lebanon, obviously the Palestinian economy—very devasted. The Jordanian, UAE, Saudi [states] were not involved in the war so they did not have huge opportunity costs in that sense. Egypt had significant losses because of the Houthis and their attacks on the Red Sea. So Egypt was a significant loser as well. Syria was already shut down as an economy and is hoping to recover. I’m not sure it shut down even more, but their situation is different.
The main point [for Lebanon] here is that Lebanon’s economy has suffered for over 50 years from having an active front with Israel. It’s good to look back between 1949 and 1967-68. Lebanon had an armistice agreement with Israel. There was no military activity across the border and obviously Lebanon saw a tremendous boom, tremendous investment in the 50’s and the first two thirds of the 60’s. That was really the golden age. The armistice agreement held and there was really no active front with Israel. Then beginning in ‘68 and then the Cairo Agreement in ’69, the PLO (Palestinian Liberation Organization) opened a front from Lebanon on Israel and that started [a period of] over 50 years in which Lebanon was a front, an arena. Where Arab countries—Syria and Egypt initially, and then others, Libya and others, and eventually Iran used Lebanon as a front against Israel. So from ’68-’69 up until 2024-2025, going on up until today, you can see the enormous cost of Lebanon being an active front. So from the early 70s, then the collapse of the mid-70s, and what we’ve seen in the last decades, really an inability to fully recover after the war. And then further losses along the way in the past years.
There’s no doubt that ending the state of war and [entering] a cessation of hostilities would be a very important turning point.
What is your assessment of the direct talks that started in Naqoura?
PS: The talks on the border through the mechanism right now are a very important symbolic step. Right now they’re quite limited conversations relating to the cessation of hostilities agreement, relating to Lebanon wanting to secure an Israeli withdrawal from south Lebanon, wanting to return captives that are in Israel to Lebanon, wanting to stop Israeli attacks inside Lebanon. On the Israeli side they want to see that the area south of the Litani is completely free of Hezbollah weapons and fighting capacity. They want clarity on what the plan is north of the Litani. That’s the scope of the talks right now, quite narrow in that sense. Broader talks would have to await a different time or different system.
How long could the process take?
PS: It’s hard to say how long the process could take, but it’s possible to say that the process might fail because Israel has very clear demands on Lebanon which include the disarmament of Hezbollah. How urgently they press that demand if Lebanon cannot fully disarm Hezbollah in the near future, Israel might say well the talks are off. Lebanon has demands on Israel to withdraw from five points, stop its attacks on Lebanon and so forth. One can see from Israeli officials that they don’t seem to be in a mood to give those concessions so we will see what the talks bring. Maybe there will be positive surprises but they do look difficult for now. The risk of a continued war or significant escalation maybe is postponed a bit but is still there.
What are the risks and benefits? Are there economc benefits that came from peace agreements between Israel and Jordan or Israel and Egypt?
PS: It’s important to know that the peace agreements or the Abraham Accords are first and foremost political agreements in the sense that Egypt on its side obviously wanted to get the Sinai back, which is a huge success for it. They could not afford to remain in open warfare with Israel. That’s the essence of the agreement. Egypt and Israel did not develop significant economic agreements; that was not the Egyptian point. They maintained sort of a cold peace as it were. Jordan as well did not want to be in a state of war with Israel. That would be very costly for it. So for both countries, Egypt and Jordan, they know that if they make peace with Israel they get tremendous US support. Effectively guarantees of US support because the US would be pleased with them and the pro-Israel lobby in the US would vouch for them, would support them. So by making peace with Israel they lock in US support.
What have been the GDP gains of the Abraham accords over the past five years to the initial signatory countries, what could the economic gains be for Leb and would the Abraham Accords be the only way for reaching such outcomes?
PS: On the economic gains on the Abraham Accords I don’t have significant data, I’m not an economist, but again when you look at the four countries that signed the Abraham Accords they did it for largely political and security reasons. The UAE wanted to cement its strategic relationship with the US. They wanted Israeli support in Washington, particularly to push through its F-45 deals and other major agreements it wants to build with the US, leading up to the recent agreements on Artificial Intelligence. So again, making peace with Israel the UAE gets tremendous US support indefinitely. Bahrain similarly in a very precarious security situation—high risk from Iran—absolutely needs deep US support. So that again was one of the main reasons there. Morocco wanted US support for its claim on the Western Sahara. They got it; that was its main advantage. Morocco has no security concerns with Israel. And on the case of the fourth country, Sudan, they wanted to get off the tariff list from the US and that is indeed what happened. So the main reasons were mainly political, security and so on. Of the four, the UAE does look at economic benefits more than the others. It had maintained a very warm normalization with Israel until October 7th. And there’s investments going back and forth—maybe not huge, but the UAE certainly does see high tech and research and other advanced technology partnerships as well as security partnerships in high tech security issues between the UAE and Israel.
For the others, Bahrain, Morocco, Sudan –of course Sudan is in civil war—but they don’t have any major economic gains.
In terms of possible effects for Lebanon, I would say two things. If Lebanon was able simply to reestablish the armistice with Israel or even a cessation of hostilities that is permanent and the Lebanese Army fully took over the country, Hezbollah no longer puts the country at risk or is disarmed, and regional investors and global investors really see Lebanon as now stable, sovereign and secure, that would definitely be a huge economic boost for Lebanon. Obviously provided also that Lebanon went through the [necessary] banking reforms so that the system would be functioning. The first scenario is to go back to the status quo before 1967. There was huge investment, and you could reap huge benefits. If one went into an Abraham Accords with Israel, you would get huge benefits. One benefit is that Lebanon would be no longer a country at war, no longer a risky place. Investors would feel confident, but also you would get the benefit of exchanges with one of the biggest economies in the Middle East, the Israeli economy. That could be in many sectors—information, technology, tourism, real estate, agriculture. There’s no doubt that there would be benefits. What the numbers would be is hard to say.
This interview was conducted via Whatsapp voice notes
Paul Salem is a senior fellow and former president of the Middle East Institute
