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Economics – After the vote

What happens to foreign aid and financing if the opposition wins?

by Executive Staff

Lebanon has often been used as a battleground for various regional and global disputes. Sometimes those battles are conducted with weapons. Over the last three years, the battle has involved aid money.
Lebanon has received billions in financial, military and development aid from around the world. Paris III saw dozens of nations pledge more than $7 billion to Lebanon. The country’s debt has been restructured with help from the European Union (EU) and international financial institutions. Saudi Arabia pumped cash into Lebanon during the 2006 war and funds development projects. Iran has built roads and reconstructed parts of South Lebanon and the Bekaa Valley. Qatar rebuilt Bint Jbeil and other villages devastated in 2006. And the United States (US) has provided military hardware and development aid to Lebanon.
With both coalitions in Lebanon’s parliamentary contest enjoying strong support from foreign government, could the outcome of the elections affect aid to Lebanon? And would economic support from countries backing the governing March 14 coalition — such as the US and Saudi Arabia — dry up if the March 8 coalition wins? Statements from Washington seem to indicate this is a possibility.
In March, senior US State Department official Jeffrey Feltman indicated the amount of US aid to Lebanon could depend on the results of the country’s parliamentary elections in June.
“We anticipate that the shape of the US assistance programs in Lebanon will be evaluated in the context of Lebanon’s parliamentary election results and the policies formed by the new Cabinet,” the former US Ambassador to Lebanon told a US Congressional committee.
A spokesperson for the US Embassy in Beirut confirms the State Department’s non-committal position, saying that US aid to Lebanon would be assessed in light of the forthcoming election results. “We don’t have a crystal ball,” says spokesperson Cherie Lenzen.
US aid to Lebanon has been America’s way of trying to compete with Hizbullah, which the US considers a terrorist organization, and to promote the pro-Western March 14.
“Many US policy makers fear that without significant outside support, the March 14 movement will not be able to

    Lebanon’s patrons

    Following the July 2006 war, some of Lebanon’s biggest financial supporters met to pledge loans and grant money to help rebuild the country, improve infrastructure and implement reforms. The most significant of these meetings was the Paris III conference in January 2007.
    Top pledges form the Paris III conference include:

  • The European Investment Bank: $1.25 billion
  • Saudi Arabia: $1.1 billion
  • The World Bank: $975 million
  • The United States: $890 million
  • The Arab Fund for Economic and Social Development: $750 million
  • The European Commission: $680 million
  • France: $650 million
  • The United Arab Emirates: $300 million
  • Other significant contributions include:
    SAUDI ARABIA: Pledged a total of $1.59 billion to Lebanon in assistance and deposits to the Central Bank of Lebanon in 2006.
    UNITED STATES: Pledged $140 million after 2006 war to rebuild the Mdeirej bridge, oil clean-up and to fund development projects.
    EUROPEAN UNION: Pledged $111 million for reconstruction of infrastructure, support of reforms, and humanitarian relief in 2006.

withstand Syrian and Iranian meddling through their Shiite proxies, Hizbullah,” says a 2007 Congressional Research Report on US aid to Lebanon.
US fears of March 8’s ascendancy caused American aid to skyrocket. Since the 2006 war, the US has sent $1.3 billion in assistance to Lebanon, according to the embassy. Before 2006, US aid totaled around $40 million annually. And for the first time in more than 20 years, a significant portion of the aid money (40 percent) is military aid. Still, this pales in comparison to the aid the US sends Israel.

Money for guns
The US has already provided $90.7 million to the Lebanese Armed Forced (LAF) in 2009. President Barack Obama’s administration has requested Congress approve additional assistance in the amount of $98.4 million. That would make the total amount of assistance for the LAF in 2009 $189.1 million.
But are Lebanese worried about losing American and other nations’ financial support and aid if March 8 wins? If some countries withdrew aid, would it have a significant impact on Lebanon’s economy?
“I think that this would be disastrous for the economy because the opposition believes in the ‘resistance society’ or the resistance Lebanon,” says March 14 parliamentary candidate Samy Gemayel regarding a possible March 8 win. “This means more and more wars and more and more instability and you know what […] effect a lack of stability has on the economy.”
Hanin Ghaddar, managing editor of NOW Lebanon, a pro-March 14 website, also worries about what a March 8 win could mean.
“All kinds of aid is coming from the West. That will probably stop if March 8 wins,” she remarks.
Ghaddar says the Future Movement is the only party with an economic plan. As for Hizbullah, “all they care about is having an independent army. They don’t care about the rest of the country. I’m sure Iran won’t be able to send us bags of money like they did before.”
But would the US really stop sending aid if March 8 wins?
Abdo Saad, director of the Beirut Center for Research and Information, doesn’t seem to think so. He believes it is in America’s interest to continue providing aid to Lebanon, no matter who wins the upcoming elections.
“US aid is insignificant in Lebanon,” says Saad, and even if March 8 does win, he predicted the aid “wouldn’t stop.”
Saad explained that it is unlikely other major donors — such as Saudi Arabia or the EU — would withdraw their assistance to Lebanon based on the outcome of the elections. Following the 2006 war, the EU pledged $111 million in aid, the US $140 million and Saudi Arabia $500 million, plus another $1 billion to Lebanon’s central bank, making Saudi Arabia one of Lebanon’s biggest financial supporters.
But with Syria taking steps to heal its rifts with Saudi Arabia and the US, competing aid to Lebanon might become less relevant. If the US and Iran make a diplomatic breakthrough, the political symbolism of the aid from either country would be much less significant than in years past.
Ali Hamdan, senior adviser to Parliament Speaker Nabih Berry — a leading March 8 figure — sounds an optimistic note about these recent rapprochements, especially in the context of the upcoming elections in Lebanon.
“We’re seeing with the new [US] administration serious reconsideration of all policies in the region,” he says. “I believe dialogue is leading that policy, and this is helpful for Lebanon.”
Hamdan dismissed Feltman’s statement as unhelpful, and said the US is “trying to influence the elections, and this will open the door to other camps” to do the same.
Hamdan says the US government should not contradict itself, as US officials have repeatedly stated that there should not be foreign interference in Lebanon’s elections. He expects the US to respect the outcome of the elections.
But Lebanon is not the Palestinian territories, where the US notoriously supported an election and then condemned the result. More specifically, it’s not Gaza, where the US and EU have imposed sanctions on the territory, controlled by Hamas which, like Hizbullah, is classified by the US as a terrorist organization. In Lebanon, it would be virtually impossible to isolate and sanction Hizbullah and its allies without also harming those parties America supports.

Clinton’s cards
Late last month, US Secretary of State Hillary Clinton said she was concerned about an opposition victory. But she indicated that punishing the Lebanese for a March 8 win would be difficult, since US aid already flows to a government that includes Hizbullah.
“We are currently supporting the Lebanese government, which has Hizbullah in it and we are doing that because on balance it is in the interest of the US,” Clinton said in a testimony before a US Congressional subcommittee on April 23. Clinton visited Lebanon a few days later to meet with President Michel Suleiman. She also visited the tomb of former Prime Minister Rafiq Hariri.
Clinton’s statement in some ways echoed an argument March 8 has used since 2006. Yassine Jaber, an Amal parliament member from Nabatieh running for re-election, says no matter who wins, the Lebanese government by nature must be a coalition including all of Lebanon’s political parties and factions.
“If we get a majority, we want to insist that whoever is in the minority take part in any government,” he says. “All major speakers amongst the 8th of March have been saying once and again that we want a full partnership.”
Mohamad Abou Hamia is bitter about US assistance to Lebanon. The professor of economics at the Lebanese American University said the country wouldn’t need that much international aid if the US and other donors had pushed for a quicker end to the 2006 war.
“If the US really would like to help Lebanon, they could have done it four years ago [by] stopping the destructions of its villages, towns and infrastructure,” he says. “US aid has never been that important to many Lebanese.”
“Why wait for the election outcome?” Hamia asks. “I don’t believe many Lebanese are counting on US aid to solve their economic problems, and I don’t think Lebanon is [so] vital to US interests that the US government will rush to help its economy fundamentally after the coming election.”
Abdo Saad of the Beirut Center for Research has an alternative strategy if US money dries up.
“We could get aid from somewhere else, like Iran,” he says. “Iran has already paid $1 billion in reconstruction aid to Hizbullah.”
But for some Lebanese, talk of Iranian aid and the politics of resistance associated with the March 8 coalition haven’t served Lebanon’s economy well, or even done enough to help its own supporters.
“March 8 represents a country I don’t want to be in,” says Eli Khoury, CEO of Saatchi and Saatchi Levant and a self-described cedar revolutionary. “They represent Iran, or Syria at best. I don’t see a Syria and an Iran that people aspire to.”
Khoury remarks that Lebanon’s political parties’ economic platforms are directly linked to their stances on other political questions.
“An economy can only prosper if there’s freedom of speech. They [Hizbullah] don’t allow it now. Imagine if they were in power,” he says.
MP Jaber dismisses these statements by March 14 supporters as scare tactics.
“I think that someone is trying to scare the Lebanese voters to take decisions so they elect under fear,” he says. “The 8th of March bloc does not propose to run the country. We believe very much in a democracy built on consensus.”
Consensual rule and power sharing are cornerstones of the Lebanese governing system. But election analysts say the coalition that wins the 2009 election is likely to do so by only a slim majority.
“Nobody will get an absolute majority in parliament,” says Jad Chaaban, an economics professor at the American University of Beirut. Chaaban believes that whatever the election outcome, “it won’t affect Lebanon’s relationship with the West.”

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