Economic crisis has crippled Lebanon. Will relations to the Gulf states be able to help it to rebuild?
https://www.jpost.com-By ELIE PODEH, EITAN ISHAI
A NEWSPAPER headline reads ‘Saudi Arabia announces a boycott of Lebanon,’ at a newsstand in Beirut last month.(photo credit: AZIZ TAHER/REUTERS)
Throughout its history, Lebanon has known endless crises, wars and occupations, foreign interventions and two bloody civil wars. Nonetheless, for the past two years it has been mired in the throes of an economic crisis unprecedented even in its own grim history.
The numbers tell it all. Since the economic crisis broke out in October 2019, the GDP has plummeted 40%, while the Lebanese pound has been devalued by no less than 90%. Massive loans the state took out, combined with regime corruption, have pushed up the national debt to 155% of the GNP, and the debt to product ratio to the highest in the world. Distrust of the government by local citizens and foreign investors alike has led to an investment drain and severe foreign currency shortage. The coronavirus pandemic combined with the August 2020 explosion that leveled the Beirut port have further exacerbated the situation.
In practical terms, over two-thirds of the citizens in the country once dubbed the “Switzerland of the Middle East” have been plunged below the poverty line. Electricity and gasoline are now luxuries and even they are only available occasionally. And in 15% of households, the children have had to stop going to school in recent months in order to help their families eke out a living.
As if this were not enough, the government of technocrats formed in September after a political crisis lasting more than a year is also being challenged by growing domestic tensions between Hezbollah and its opponents, which recently deteriorated into shootings on the streets of Beirut in broad daylight.
Lebanon sustained yet another blow in recent days when Saudi Arabia announced the expulsion of the Lebanese ambassador from Riyadh and a recall of its ambassador from Beirut for consultations. What is worse, the Saudis also announced a complete ban of imports from Lebanon. A short time later, its close allies Bahrain, Kuwait and the UAE recalled their ambassadors from the Lebanese capital.
These harsh measures followed a declaration by Lebanese Information Minister George Kordahi (in August), criticizing the Saudi-led military operation in Yemen and accusing the Saudis of attacks on the Houthi rebels who were only acting in “self-defense.” This pronouncement infuriated the palace in Riyadh. The ongoing military engagement in Yemen may not top the news in Israel, but it is the main issue on the Saudi agenda, a war in defense of the homeland against aggression by proxies of its greatest rival, Iran, who have been attacking targets within the kingdom. The fact that the harsh Saudi reaction came over two months after the Lebanese minister’s remarks (before he joined the government) points to the fact that it was looking for an excuse to exacerbate its fight against Hezbollah.
Beirut is now trying to limit the damage and seeking a speedy end to the crisis. Saudi Arabia and the Gulf states as a whole are of paramount importance to Lebanon. Thus, for example, the volume of Lebanese exports to Saudi Arabia, Kuwait and the UAE alone topped $1 billion in 2019. In other words, if Lebanon wants to rebuild its shattered economy, it simply cannot afford to alienate the Gulf states.
Prime Minister Najib Mikati is well aware of this and has rushed to form a special emergency cabinet tasked with proposing a speedy resolution of the crisis. His office even announced that he had hinted to Kordahi that he would do well to step down, saying he should “make the right decision” in order to avoid further deepening Lebanon’s crisis.
Despite the harsh Saudi steps, Lebanon is too important for the Saudis to walk away. The kingdom aspires to position itself as a regional power and a leader of the Sunni world in particular, and of the Muslim world, in general, and it cannot afford to lose its hold in the Land of the Cedars. What is more, a Saudi withdrawal from Lebanon would make it even more susceptible than it is already to an Iranian takeover.
Hezbollah, too, is well aware that Lebanon is unlikely to survive, not to mention overcome the severe economic downturn, without the presence of the Gulf states. As of now, Hezbollah is still expressing support for the minister who generated the storm and declaring that his resignation is out of the question, but Nasrallah is unlikely to insist on preventing the resignation if it helps the Saudis climb down from the tree they scaled.
The United States is trying to mediate between the sides. The US administration in interested in the survival of the fragile Lebanese government to the extent that a representative of the US Embassy in Beirut was present at the meeting of the emergency cabinet formed by the prime minister, according to Lebanese media.
In light of the sides’ shared interests, the current crisis will presumably be resolved sooner or later. Nonetheless, a comprehensive solution to Lebanon’s deep ills does not appear in the offing. The fragile sectarian balance of power is not conducive to addressing the country’s fundamental problems. At most, it enables dealing with temporary crises, and even then with great difficulty and external help, making the next crisis only a matter of time.
Prof. Elie Podeh teaches at Hebrew University’s Department of Islamic and Middle Eastern studies and is a board member of Mitvim, the Israeli Institute for Regional Foreign Policies. Eitan Ishai is a PhD candidate at Hebrew University, specializing in Lebanon.