Regional turmoil threatens to engulf Lebanon

A perfect storm

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Three sets of regional conflicts and turmoil are impacting Lebanon. The country, yet again, finds itself in the most volatile of all regions, with a weak state and a corrupt set of politicians. You would not wish this storm on your worst enemies.

The first is the ongoing turmoil emanating from the growing wealth gap, soaring unemployment, large youth demographic, and the ailing arrangements or social contracts in rentier states. The Arab region, according to a report by Carnegie Middle East Center fellow, Lydia Assouad, is by far the most unequal region in the world today, even when compared to Latin America and South Asia. This dim reality was only sustainable when governments, either oil producing or backed by an oil-producing state, grew the public sector enormously to provide employment to the widest strata of Arab societies. In Jordan, for instance, the government employs a third of the working population. Given the structural changes in oil prices and the global economic slowdown, this is no longer sustainable. Governments are now coming to terms with the need to shrink the public sector, decrease or even lift subsidies on energy and bread, and float their national currencies. This occurred in Egypt, and is being considered even in wealthier Arab states, such as Saudi Arabia. These painful changes cannot go without a serious reshuffle of the social contracts between states and their citizens. Previously, the government provided subsidies and ample public sector employment; in return, the public gave away their political rights and freedoms. Today, this is no longer sustainable. Marwan Muasher, the former Jordanian foreign minister and vice president of studies at Carnegie, rightly calls this the death of the rentier state.

At the heart of the above change lies the first and second waves of protests in the Arab region. Following eight years of conflict in Syria, another deeper economic change is taking place that will once again affect Lebanon’s stability (after causing a refugee crisis in the first instance). The European and US sanctions and the return of state cronyism have further depreciated the Syrian lira, triggering local protests, and widening the regime’s circle of troubles. (Dozens of new Rami Makhloufs—Assad’s cousin, and Syria’s “wealthiest businessmen,” at least until his rumored arrest last month—or Makhlouf-likes have emerged with major deals and contracts as the conflict has waned.) This has, and most definitely will, impact Lebanon, where politicians are now blaming the recent appreciation of the Lebanese lira on the ongoing Syrian crisis and rising demands for US dollars. 

Regional reverberations

In Sudan and Algeria, we saw protests resulting in political change; though it is too early to tell if this will change will be sustainable in the long term. Egypt now is seeing a new wave of bolder protests, which are continuing in spite of the state’s severe repression. There is an underlying domino effect, and a persistence that highlights the failure of authoritarianism’s cosmetic remedies. In 2011, following the first wave of protests in the Arab region, Lebanon witnessed some reverberations, though in a weaker and disorganized form. To be fair to the protesters, the Lebanese political class’s response was very successful in exploiting the protests, subsuming them under the country’s sectarian politics. Today, Lebanon shares with the troubled Arab nations a set of negative economic indicators and a political class that has rotted in the public imagination. One can assume that wide Lebanese protests are on the horizon.

The second regional trend is the ill-thought-out and unplanned US maximum pressure campaign on Iran. The Trump administration, which has the highest turnover of senior officials in a president’s first term in US history, has no plan. The only seemingly visible goal is maximizing the financial pain of Iran and its Lebanese ally Hezbollah. Evident is the lack of any planning for what follows. This was clear in the aftermath of the attacks on parked tankers off the port of Fujairah in the United Arab Emirates, the uptick in attacks on southern Saudi Arabia, and the destructive raids on Aramco. This is a trend that is detrimental to Lebanon. The sanctions on Iran have triggered a military escalation in the Gulf, but this is not inclusive and could spillover into Lebanon. This nearly happened in September, when one Israeli drone exploded and another fell in southern Beirut, leading to a controlled Hezbollah response. Many now think the question of a military escalation in Lebanon is one of “when” and not “if.”

Difficult choices ahead

By the same token, regional strife will impact Lebanon’s economy. The impacts of the attacks on Saudi Arabia, and the region, will affect the Lebanese diaspora and their remittances to Lebanon—a fifth of which come from Saudi Arabia. The US sanctions on Hezbollah have accelerated the already deteriorating financial situation in Lebanon. The element of surprise, with numerous announcements on sanctions and the escalating threats to individuals and institutions—in spite of the central bank’s full cooperation with the US treasury department—had its impact on trust in the financial system. Sanctioning the subsequently liquidated Jammal Trust Bank also shocked the system. The threatening and uncautious rhetoric against Hezbollah and its allies (presumably a majority of the Parliament) by visiting US officials has created a tense atmosphere, increasing the country’s fragility and exposure to danger. Lebanese politicians had thought that many months separated them from economic collapse, and one can assume the US sanctions and escalation pulled the date closer, taking the Lebanese by surprise and contributing toward today’s chaos.

A third, though less visible trend, is the regional and international struggle over gas production in the Eastern Medditerranean. The most visible roles are those of the Egyptians, Russians, and Turks. As it embarks toward exploration steps in Block 4 this December, Lebanon has to make difficult choices, and appeasing all sides might not be sufficient. Recent political tensions with Turks, and closer ties to Egypt, signal that Lebanese politicians are already realigning themselves. These choices might bring about some troublesome reactions.

In all cases, Lebanon seems to be entering a perfect storm, albeit with the worst possible crew in charge.

Mohanad Hage Ali is the director of communications and a fellow at the Carnegie Middle East Center.