Energy ministers from Egypt, Cyprus, Greece, Israel, Italy, Jordan, and the Palestinian Authority took an important step toward establishing an Eastern Mediterranean Gas Forum (EMGF) on January 14, in Cairo. According to the declaration that followed the meeting, the EMGF will, among other things, assist in the creation of a regional gas market, ensure the security of supply and demand, optimize resource development, facilitate the use of existing infrastructure, and build new infrastructure, if necessary.

The forum’s raison d’être is regional energy cooperation. Almost ten years to the day after the announcement of the discovery of the Tamar field in Israel (January 17, 2009)—the first major gas discovery in the Levant Basin—it has become increasingly clear that regional cooperation is needed to make the most of the region’s resources.

The Eastern Mediterranean’s gas potential is promising. Besides Egypt, the countries in the region face challenges to exploit their resources. First, these resources are mostly offshore, in deep and ultra-deep waters. When found in commercial quantities, their extraction is expensive. Second, the relevant infrastructure to monetize these resources barely exists (outside Egypt). And if this were not enough, the geopolitical risk is high due to a number of factors: conflict in Syria; terrorism; the Cyprus problem; sour relations between Cyprus and Turkey; a constant state of tension between Lebanon and Israel; and deteriorating relations between Turkey and Egypt, and between Turkey and Israel. In 2018, we saw that heightened political tension in this part of the world could quickly evolve into a confrontation, when Turkish warships prevented a drillship from reaching its drilling target in Block 3 of Cyprus’ Exclusive Economic Zone (EEZ).

These challenges largely explain why a number of gas fields in the region have not been developed yet. One way to overcome these difficulties is through regional cooperation, and this is why the announcement of an East Mediterranean Gas Forum is a significant development.

The EMGF will be based in Cairo and will be open for other Eastern Mediterranean countries to join, provided they share the forum’s interests and objectives, and the founders of the forum accept their membership.

Besides Syria, which is still struggling with its civil war, there are two notable absences: Turkey and Lebanon. The presence of Israel in the EMGF is seen as a barrier to Lebanon’s involvement, while poor relations between some of the EMGF founding members and Turkey was another rationale for the forum, beyond energy cooperation. Each of these countries has perceived reasons to complain about Turkish behavior recently:

Cyprus

In addition to the longstanding and unresolved Cyprus dispute, Ankara and Nicosia have been at loggerheads over exploration for hydrocarbon resources in the Cypriot EEZ. Since 2003, Turkey has denounced all the maritime border agreements signed by Cyprus with its neighbors and lobbied these countries to reject them on the grounds that: (1) the current Republic of Cyprus (RoC) does not represent Cyprus as a whole, and thus cannot sign international agreements on its behalf; and (2) that islands should not have the same capacity to generate maritime zones as other states. (Turkey does not recognize that islands should have equal rights in generating maritime zones and claiming full-fledged EEZs.) Turkey, therefore, claims that certain parts of the Cypriot EEZ fall within its continental shelf or under the jurisdiction of the Turkish Republic of Northern Cyprus.

All this explains why Ankara rejects exploratory activity in the Cypriot EEZ. Since 2008, it has made a point to monitor, and sometimes harass, surveyors and drillships conducting operations in Cypriot waters. On at least two occasions, it went as far as blocking their work. Turkey is also threatening to conduct exploratory activity off Cypriot coasts. In addition, there are renewed calls in Turkey for the establishment of a Turkish naval base in Northern Cyprus to protect Turkey’s rights and interests in the Eastern Mediterranean.

Greece

Turkey’s relationship with Greece is similarly tense. Ankara has always pursued a policy of provocation in the Aegean, but President Recep Tayyip Erdogan has taken it to another level, with frequent confrontations at sea, repeated violations of Greek airspace (an incident in April 2018 claimed the life of a Greek pilot), and renewed claims to Greek islands. In his first visit to Greece as Turkish president in 2017, Erdogan declared that the 1923 Treaty of Lausanne must be reconsidered—in effect calling for a redrawing of the borders with Greece—and raised concerns about the Turkish minority in Greece.

Turkey also objects to Greece’s rights to exploit energy resources in certain parts of its waters far from the Greek mainland. Once again using the argument that islands’ capacity to generate maritime zones should be limited, Ankara reportedly tried to undermine Greece’s relations with Libya by claiming that Athens was encroaching on Libya’s continental shelf. According to Turkish media reports, the Turkish defense minister, Hulusi Akar, presented maps supposedly demonstrating this point to the Libyan government that ignored the influence of islands such as Crete (or Cyprus) on marine territory.

Egypt

The ousting of President Mohamed Morsi in 2013 severely strained relations between Egypt and Turkey. Erdogan in effect denies the legitimacy of the current Egyptian regime, arguing that it was established after a coup against a democratically elected president. In August 2013, Turkey called on the UN Security Council to impose sanctions on Egypt. Erdogan continues to express support for the Muslim Brotherhood, sometimes by making the Rabia sign (a hand gesture used to protest the violently suppressed sit-in at Rabia Square in Cairo) and never misses an occasion to call for the release of Morsi and all political prisoners in Egypt. Cairo views such statements and positions as a provocation.

Israel

The once strategic relationship between Israel and Turkey has gradually deteriorated over time, particularly since Israel launched Operation Cast Lead against Hamas in Gaza, in 2008-2009, which was followed by the Mavi Marmara aid flotilla incident in 2010. Relations between the two countries never fully recovered, even after the US-brokered Israeli apology to Turkey in 2013 and the normalization of relations in 2016 (partly motivated by energy cooperation).

The situation deteriorated again in 2018. Last Spring, Israeli forces used live fire and killed over 100 Palestinians in Gaza who were protesting the US decision to move the American embassy to Jerusalem. Erdogan accused Israel of carrying out genocide and expelled the Israeli ambassador from Turkey, withdrawing the Turkish ambassador from Tel Aviv. He later accused Israel of apartheid. This series of statements and actions were viewed as deeply hostile by the Israelis.

It is in this regional context that the East Mediterranean Gas Forum was established. On the one hand, there are offshore resources that—until now, at least—require cooperation to facilitate their exploitation, and on the other, we see renewed geopolitical rivalries in the Eastern Mediterranean.

If we take the second of these considerations, the geopolitical context, it is clear that this alignment is primarily in reaction to what many of the founding members perceive as aggressive Turkish behavior over the last few years. Many Lebanese are ignoring this dimension and feel that this forum, and this alignment, is directed against them.

This Lebanese misreading of the situation would not be an issue if it did not threaten to influence policy making. The first reaction, expressed by certain media and public officials was seemingly knee-jerk, dismissing the forum and its member states, and suggesting we pursue a parallel track with those countries that were not present—Turkey and Syria—in addition to other countries in the region, such as Iraq. For some, this was an impulsive reaction to being left out, leaving little room for rationality. But for others, this was seen as an opportunity to push forward an “isolationist” tendency that advocates that Lebanon should look east for friends and partners, limiting their options elsewhere. The announcement of the EMGF provided them with additional arguments to support their case.

A more thought out approach would be to strengthen relations even further with all regional players, whether in or outside the EMGF (with the exception of Israel, for obvious reasons). A small country like Lebanon does not have the luxury of picking and choosing its friends, with an enemy state to the south, and a Syria mired in conflict along the rest of its border. Membership of the EMGF and good relationships with those outside the forum are not mutually exclusive. Cyprus, Egypt, and Turkey are all very relevant to, and potential partners in, Lebanon’s future gas ambitions, if commercial quantities are found.

For those tempted by an isolationist approach, it is also good to keep in mind that the EMGF is not a closed club either. It is open for other countries in the region to join. It is conceivable that a country that is not a member today, like Turkey, could join it in the future, particularly if a solution is found for the Cyprus dispute (negotiations are expected to resume this year) or if it adopts a less antagonistic approach toward other member states. In this case, would the “non-EMGF club” that some are calling for in Lebanon not look very feeble? In 2013, then-energy minister Gebran Bassil told Middle East Strategic Perspectives (which this writer cofounded) that: “Unlike Israel for example, Lebanon does not face a regional boycott, and we’re not isolated from supply routes to Europe.” Six years later, Israel appears to be less isolated than the minister thought. The challenge is to avoid finding ourselves as isolated as Israel once was; keeping our options open is our best route forward.

Troublesome logistics

Another reaction to the EMGF announcement, expressed last month by then-caretaker energy minister, Cesar Abi Khalil, was to brush off the forum, which has the potential to facilitate the development and monetization of the region’s resources. “Lebanon is not worried about exporting its gas … We have many options to monetize our resources,” Abi Khalil said in an interview on LBCI on January 15, citing the local market, the state’s share of produced hydrocarbons, and possible export routes. Lebanon, he said, could be linked from the north to Turkey and on to Europe through the Arab Gas Pipeline (though the pipeline extension to Turkey through Syria is yet to be built), and from the south to Egypt and its LNG plants, via the Arab Gas Pipeline as well. He also cited a third export option, involving a possible offshore pipeline to Turkey.

However, it is not certain at all that the local market alone would justify developing future resources. This means that export routes are likely needed. Second, the export ideas Abi Khalil listed are only possible options at this point. And they all come with a host of challenges: from prices and commercial viability of some of the projects he mentioned, to political and security risks which might hamper the development of some other projects, and—if we are able to overcome that—there may be issues with the capacity of the infrastructure we are eyeing. These are, in fact, the same challenges that are present in almost every country in the Eastern Mediterranean (save for Egypt), and which largely motivated the institutionalization of regional cooperation, under the EMGF, in an effort to overcome these challenges.

Clearly, the announcement of the East Mediterranean Gas Forum has caused some confusion in Lebanon as to how to deal with being left out of this new regional configuration. It is important to keep in mind that, if there is an alignment, it is not directed against Lebanon. More than any other member state, Egypt has the possibility to reach out to Lebanon. Egypt is the key player in this new configuration, and, as an Arab country that maintains close ties with Lebanon, it can play an important role in reassuring the Lebanese about the project while also seeking to strengthen prospects for energy cooperation between the two countries.

Two major topics are keeping economists, politicians, academicians, journalists, and others busy nowadays. The first topic is the real value of the Lebanese lira and if the nominal rate must be de-pegged or moved to a lesser pegged value in order to relieve us from our current monetary, economic, and financial misery. The other topic is how Lebanon should protect its currency and economy in the future should petroleum profits start flowing, since any petroleum related legislation we draft today will need to protect us from the famous Dutch disease. The issue that most do not realize is that those two topics are very much intertwined, because Lebanon is already suffering from Dutch disease. What we need to do is to escape a worsening of the disease. The solution is definitely not devaluation; we should rather use the lira to build the proper platform for economic growth.

The Dutch disease

The discovery of the elephant natural gas field in Groningen north of Holland in 1959, changed the lives of Dutch citizens forever—massive amount of revenues started flowing into the coffers of the government as well as into the economy. However, in return, the Dutch witnessed a collapse in investments, an unemployment hike, a drop in industrial exports, and a drop in purchasing power, despite the appreciation of the Gilder, its currency at the time. What happened?

The sudden increase in riches caused a sudden increase in spending by both the private sector and the public sector, whose expenditures reached 50 percent of its GDP at the peak, one of the highest in the world. This increase in consumption led to an increased demand for tradable goods and services, as well as non-tradable goods and services.

Tradable goods and services are those that can be purchased and transferred between countries without barriers such as transport costs or trade restrictions, and as a result their prices become global and not easily influenced by the demand or supply of one country. This means any society with sudden increase in wealth would consume more tradables regardless if they are produced locally or internationally. Most tradables are food products, manufactured goods, metals, stones, petroleum products, and some global services, such as commercial travel and corporate financial services.

Nontradables are not economically feasible to consume across borders, are usually retail and wholesale sectors, restaurants, hotels, local transport, warehousing, communications, public utilities, real estate, retail banking, and most personal and commercial services. This means that even if the price of a haircut, an apartment’s rent, a meal, a phone bill, or ATM fees are cheaper in Budapest, it is not economically feasible for a resident in Amsterdam to travel to Budapest every time she needs to get a haircut, eat, make a phone call, withdraw cash, or sleep.

This also means that the increase in demand on those goods raises their prices locally in Holland, while the price of tradables (local and foreign made) remain the same, since their global nature will not be impacted by the increase in demand by the Dutch.

The resulting relative difference in price between tradables and nontradables means two things:

First, the increase in the price of nontradables will lead to more profits in those sectors, and to an increase in the wages of the workers, which will attract capital and labor on the expense of manufacturing and agriculture (the major tradables).

Second, this relative difference in price leads to an appreciation of the real value of the currency, which leads to an increase in the price of exports for the country’s trading partners.

This is what happened to the Netherlands, colloquially known as Holland, as demand increased locally due to petroleum revenues, leading to an appreciation of the Gilder and the collapse of its pride sector, which was manufacturing. Holland realized the challenge, which became known as the Dutch disease, and learned a lot from it. Its experience set the stage for a new pedagogy in economics and revenue management of natural resources. Today, the Netherlands is one of the most successful economies in the world, while petroleum income represents less than 1 percent of the total government revenues.

Dutch disease, therefore, is a disease that is suffered by any economy that relies on foreign currency inflows into the economy, and which is directed toward consumption rather than investment, resulting in an overpriced services sector (electricity, water, restaurants, communication, transportation, real estate), a drop in its exports, and its industries and farmers suffer the most … welcome to Lebanon. The foreign currency inflows can result from the sale of natural resources, but also from remittances or foreign aid—the result is the same.

The Lebanese lira

The Lebanese economy is always characterized as a rentier economy that ignores productive sectors and revolves around real estate and banks. This is true, but it is not only the result of corruption, wrong economic policies, and accumulation of debt over three decades, but is also a disease that has been around for more than half a century, and which has a cure, and that cure is not devaluation.

When Lebanon decided to peg its currency in the early- to mid-1990s, it was a wise choice economically for a small open economy with free movement of capital. The confidence that the peg provides attracts investments and foreign deposits, however, to avoid the curse of those flows, they should have been directed toward investment in industry, agriculture, and infrastructure, and not consumption and real estate. The lira becomes subject to massive pressures such as the ones we are witnessing today, when those accumulated flows start losing confidence in the financial and economic model of Lebanon, and start exiting. It is true that Banque du Liban (BDL), Lebanon’s central bank, has ample ammunition to defend the lira but we need to ask ourselves: How good is our lira if no one wants to exchange goods and services with us? Turning those flows into 20 billion dollars of imports yearly is the problem, not the exchange ratio; instead they need to be directed to become a powerful force in creating economic growth, employment, and reducing poverty.

Restructuring the Lebanese model

The necessary steps to restructure the Lebanese economic and financial model is to restructure the way we handle those large deposits in the banking sector so they can be a blessing and not a curse:

1) Reduce the deficit of the government immediately through the known solutions of reducing corruption and wasteful spending, reforming the electricity sector, and collecting taxes better. The objective is not only to reverse the debt dynamics and create fiscal space to improve public services, but also to reduce credit risk and consequently reduce the cost of borrowing, so the private sector is incentivized to increase the size of its operations, and as a result its exports and the taxes it pays to the government.

2) Urgently invest in infrastructure to support economic growth and with the least amount of borrowing possible. Off-balance sheet concessionary project financing should be available through CEDRE under PPP structures, and increased borrowing by the government should be avoided. Additionally, mutual funds could be structured, so all Lebanese depositors can participate in infrastructure investing and benefit from the resulting returns.

3) Urgent simplification of government procedures with Lebanon ranked at a pathetic 142 in the world in ease of doing business.

4) Master plan to seriously grow the agriculture and industry sectors and hence their exports.

Petroleum Lebanon

Lebanon is not facing the risk of catching the Dutch disease  should its petroleum exports begin, but it risks the deterioration of its Dutch disease into something worse. Today the country is characterized by a large financial sector full with lazy deposits, and a public sector filled with corruption that leads to poor government services, which in return leads to low investments, low economic growth, small economy, high unemployment, and high income inequality.

The steps above are necessary to get out of our current failed economic and financial model and to get ready for a petroleum Lebanon or else we will fall into the resource curse where things will get much worse and we will suffer like Nigeria, Angola, Iraq, and Venezuela. Avoiding the resource curse lies in the governance and revenue management of the petroleum sector, where countries such as Botswana, Chile, and Norway turned their diamonds, copper, and oil into an accumulation of wealth.

The best way to manage petroleum revenues is to separate them from current spending, especially in countries with weak governance such as Lebanon, and to turn this newly generated financial wealth into three types of capital: human capital through investment in education and healthcare; infrastructure capital, which serves an economy for decades of economic transformation; and financial capital through diversified savings. This method of investing petroleum wealth benefits both the living and future generations, directly and indirectly. The future generation will have a reservoir of education, health, infrastructure, and cash.

The Lebanese Sovereign Wealth Fund has been designed as such to protect the future income generated from petroleum activities by separating this income from current spending, and instead channel it into human capital and productive sectors, in a conditional and forethought way.

We are now left with the duty of real reform and restructuring of our economy and public sector, before a new disease is named after Lebanon.

In Executive’s view of things that happened locally in January 2019, three incidents testified to the presence—and the perils of—irrational expectations. Such expectations actually work in two directions, with different attendant risks: The first direction is that of excessive enthusiasm, very well-known to the economically literate from the last global exposure to “irrational exuberance,” in the build-up to the Great Recession of 2007 —2009. The second, and even greater, danger of irrational expectations comes from the negative: the numbness of despair, the rage induced by fear, and, worst of all, the animalistic blindness of mindless panic.

No one should and nobody—unless working with an ulterior motive—would pretend that there is any serious chance of irrational exuberance when contemplating the future of the Lebanese economy at the start of 2019. Neither does the country today harbor grand messianic expectations of another national political savior, as a conflict-fatigued people did in Lebanon some 27 years ago, when the national perspective shifted from the immense exhaustion of internal conflicts to the enthusiasm of Rafik Hariri’s reconstruction drive and Horizon 2000 plans. The swing from desperation to confidence at the time was memorably reflected in the successful rescue of the Lebanese lira and its shift from radical depreciation before December 1992 to controlled stability ever since the mid-nineties.

While it would be a waste of time to warn of irrational exuberance in Lebanon at the threshold of what could be a new horizon for the 2020s and beyond, it seems most appropriate and prudent to regard the risks of irrationally negative expectations. Gloomy sentiments are ever-present in the country today, as demonstrated and exacerbated last month by the Arab League Economic and Social Development Summit (AESD Summit), the continuing lack of government and national vision, and the downgrade of the sovereign risk. Containing the spread of irrational negative expectations is a worthy cause, and one that might entail an immunity-building exercise in rational uncertainty.

As a mental approach, rational uncertainty proposes using the toolset of rational evaluation rather than succumbing to ideological gloom, willful propaganda or, God forbid, blind panic, when contemplating the radical uncertainty of Lebanese existence.

The rational uncertainty approach contains two elements: First, the acknowledgement that uncertainty is the only certainty we can ever truly have. Uncertainty cannot be eliminated; it is what remains once we strip off the mental assumptions that one might predict the future from the past or extrapolate unknown pasts from the present. Uncertainty rules universal, and this means that no one can reasonably argue that nothing about the Lebanese state could ever get worse, or that nothing in Lebanon could ever improve.

Second, we should remind ourselves that there is always more than one possibility ahead. It is our rationality that allows and maintains our determination toward building a better future, rather than falling into depression over the possibility of a worse one.

The first and, theoretically, most monumental agenda item for Lebanon last month was the hosting of the AESD Summit. This event was an operational and organizational victory but, in Executive’s analysis, not a significant win.

The not inexpensive gathering produced nothing glorious and report-worthy in terms of either Arab regional progress to a new and better performance of national economies or decisive strengthening of under-designed and overextended social safety networks in Arab League member states. Nor did the assembled dignitaries leave most Lebanese with increased hopes for more regional economic growth through better trade and customs agreements, or for Arab-owned solutions to the Syrian refugee situation and the reconstruction challenges posed by devastation in certain Arab countries.

It is no surprise then that this AESD Summit was barely mentioned in the international press, nor that the only local benefits noted by Executive editors were temporary relief from Beirut’s insane traffic and joy to those children who were given time off from school.

From a local vantage point, it can also be noted that some of the desired elements of the summit—like the presence of Arab heads of states—were not the decisive missing factors that prevented this summit from being successful. In fact, when examined with the toolkit of rational uncertainty, the summit was not hopeless. Uncertainty should allow for the possibility that future efforts for economic and social development in this region still may succeed, just as rational evaluation (based on speeches and closing communiques) finds that the meaningful elements missing from the AESD Summit were analysis, cohesion, debate, compromise, transparency, and a will to change.

The second report-worthy event, in the perception of Executive editors, was the loss of a bet. The substance of this bet, made on the first workday of 2019, was whether government formation would happen before or after January 19. The wager was modest, a stein of draft beer at a local resto pub, which by its diminutive size reflected the sad fact that no serious bet on Lebanese political sanity appeared viable to any of us at Executive. Needless to say, the bet that cabinet would be formed in time for Beirut to host its first regional political summit on Arab League level in almost 17 years was lost.

However, it must be noted here that both bettors felt like winners, because they enjoyed the settling of the bet in the affable company of friends—Lebanon was the real losing party. Executive’s reluctant conclusion was that making any bet and wagering any hope on a moment when strategic political insights would be delivered to political players is not within rational reach.

This suggests for the medium term (even after the surprise cabinet formation on January 31), it is not advisable to have exuberant expectations of an efficient government or reform process. Yet again, the agenda of proposed reforms (see story 20) and the—ever so fanciful and outsourced—national economic vision for Lebanon 2025 and 2035 deserve the benefit of the doubt. Executive is certainly determined to stay on the reform and development ball—including taking our own advocacy and economic plan forward through inclusive discussion and rational passion—in 2019. We will be relentlessly expanding our efforts to support and augment whatever vision we find credible, regardless of its author’s name or affiliation (currently at 230 measures). 

A third event of note on the Lebanese stage of puerile politics reminded Executive editors of the dramatic power of ill-spoken words. Anyone in a stable relationship is—or at least should be—aware that the effort to repair the impact of a carelessly uttered affront to a loved one can be a hundred times as arduous as the effort of uttering the stupid and damaging phrase.

In this regard, modern finance appears to be just as sensitive and vulnerable as the—infinitely more valuable—relationship of stable trust and love in a married couple or between a good leader and the people. Case in point: the ominous two words—“debt restructuring”—that reminded Lebanon and its international partners last month of the importance of sticking to a careful approach of rational uncertainty. At least that was the translation of a comment by Lebanon’s then-caretaker finance minister Ali Hassan Khalil that appeared in English-language media, causing frenzied trading for a period that was short but still far too long. It even appears to have caused panicked comments by normally cool financial observers, seen, for example, in the atypical quick formulation and issuance of a downgrade in Lebanon’s sovereign rating by respected international agency Moody’s.

This serves to emphasize how the power of a bad word in such vulnerable times could generate very bad outcomes, if the country’s internal and external markets and investors succumb to irrational fears instead of maintaining a cool, rational assessment of uncertainty.

An approach of rational uncertainty may even be prudent when looking at the state of the world. It certainly seems appropriate in considering our Lebanese state—which, nota bene, at 99 years of age still has some charms, and not a little potential.

The Arab League Economic and Social Development summit hosted in Beirut in late January produced at least one solid takeaway: the reiterated recognition that Lebanon does not hold the keys to its own future and so must ride the bench during this economically and politically pivotal time for the region. With a government finally formed on January 31, Lebanon finds itself engulfed in domestic and regional uncertainties and struggling on a tightrope to maintain its balance.

The mid-January summit was viewed by some observers as an unsuccessful event when measured against hoped-for outcomes for the host country, which included: a resolution to the myriad and competing perspectives on Arab states’ relations with Syria, the provision of financial or other support to refugees, and a decision regarding the general direction for Lebanon in 2019. According to Paul Salem, president of the Washington-based Middle East Institute, in a late-January Weekly Briefing published by the think tank: “The large number of no-shows reflects a general view among many Arab heads of state that Lebanon is too deeply under the political and security sway of Iran and Hezbollah. It might also reflect a slowing down of the momentum to normalize ties with the Assad regime, and a desire to avoid giving political support to the Lebanese president and his allies, who would like to see the Arab League end its suspension of Syria.”

False hopes

Much of the final communique from the summit comprised of reiterations of previous promises, though there was a new proposal for a $200 million technology and digital economy investment fund for the region. Lebanon’s president called for the creation of an Arab Bank for Reconstruction and Development that would serve as a funding structure for the reconstruction of wartorn Arab states, while Qatar committed to purchase $500 million worth of Lebanese sovereign debt.

What is Qatar actually buying with this offer to purchase government bonds? Perhaps it is backdoor access to Arab decision-making. Before 2010, the political influence of Qatar in Lebanon was mainly limited to the former employing a fraction of their surplus petroleum revenues to help rebuild the latter after the 2006 war with Israel. During the Arab Spring, Qatar placed its bet on the Syrian opposition and supported political Islam in the region (both losing wagers), and has maintained ties with Iran to the ire of Arab counterparts—the latter two Qatari decisions, along with inter-GCC rivalries, were the major driving impulses behind the Saudi-led blockade in 2017. Less than a day after the Qatari bond-buying commitment, Saudi Arabia’s finance minister said at the World Economic Forum that the Kingdom was poised to “support Lebanon all the way,” but did not offer specifics.

Should the Lebanese have hoped for more tangible outcomes? The results of this summit have historically been weak, both in terms of effecting change at the regional level, in either a political or economic sense, and in the fulfillment of past promises made.

In 2007, there was a consensus movement by Gulf countries to try to gather the region together, evidenced by the proposal to integrate the region into a monetary union, borne of the traumatic experience of Iraq’s invasion of Kuwait. Plans to form an Arab customs union and integrate scientific research were announced during the 2009 summit, but as soon as the Arab Spring erupted this consensus evaporated, leaving regional integration proposals still on the table.

When compared with other regional political blocs, the Arab League is often characterized as a political tiger that roars, but whose measures rarely have teeth. The regional body has traditionally been propelled on the strength of the Saudis’ financial clout and Egypt’s political persuasion; when the interests of those two countries aligned, the institution worked.

In the current environment, there is an alignment of Egyptian and Saudi interests in countering Iran and opposing Qatar, but when it comes to solutions for Syria’s war and readmittance of Syria into the body, there seems to be disunity. On the question of discourse at a lower level, it appears that the Arab League is still very far from having an interest-driven joint position, and this is visible when one looks at how Lebanon has reacted to issues such as the Libyan question and Syrian conundrum. The Lebanese position has been internally divided and not based on prioritizing national practical interests, but rather on the political positions of individual parties, and the reemergence of decades-old grievances.

Given the unfulfilled promises of past summits, what could the Beirut summit have produced for Lebanon, within a fragmented region, in which multiple countries see increasing inequality, poverty, and specters of civil unrest? One might have hoped that even if only minor economic solutions were on offer to Lebanon, then outside powers could perhaps have spurred on a political agreement to form cabinet prior to the gathering. But any hope of that was dashed by the maneuvering of various political factions in the lead up to the summit.

Tangled loyalties

While there may still be emotional pain in Lebanon over the disappearance of Imam Musa Sadr 41 years ago, Lebanese political factions’ punishment of Libya for the evils of the Gaddafi regime—and Libya’s subsequent boycott of January’s summit—does not bode well for the future improvement of Lebanon’s regional role and interactivity with other Arab states. If there is any potential for Lebanon to be an actor on the regional stage rather than a pawn thrown around by outside forces, can Beirut afford to harbor such extreme resentment over past injustices?

When it comes to relations with Syria, some observers believed Bashar al-Assad was blocking the formation of Lebanon’s government. The fact that this could even be a possibility, that Assad could theoretically exert such pressure on Lebanon, is because the Lebanese state and its representatives are subsidiary to the links between communities and foreign interests. The Lebanese state may not as driven by foreign interests as it was during and after the civil war, but tribal linkages in society and pressure groups still exert a powerful influence capable of incapacitating the state and preventing it from undertaking activity vital for its survival. Because these groups can basically make the state impotent or operationally dysfunctional, how can Lebanon be made more immune to these pressures?

Despite the Qatari offer, Lebanon walks away from the summit with more questions than answers, or solutions. The country is in a difficult position as domestic economic pressures mount and trust in the country’s financial system erodes. Unfortunately, the post-summit sentiment is that nothing will be decided in Lebanon, or for Lebanon, until foreign-sponsored gatherings shape the future political and economic direction of the region.