Michael Karam: Lebanon cannot have it both ways

As global politics heats up, will the Lebanese business community get the chance to realise its true potential?

Powered by automated translation

Israeli prime minister Benjamin Netanyahu was due to meet his British counterpart Theresa May yesterday to discuss a wide range of issues, with trade likely to be a key area of focus.

The visit comes as a new world order takes shape. Mrs May, with her sights firmly set on a post-Brexit UK, has already been to the US, where she sought to sustain her country’s “special” relationship by cosying up to the US new administration, one that has already made it clear that Israel is a “friend” in a region that is otherwise being cast as an outpost of all things bad.

So as the Duke of Wellington might say, dispositions are being made. US president Donald Trump and Mr Netanyahu are peas in a hardline pod. The announcement of new sanctions on Iran suits both countries and Lebanon’s future hangs in the balance. Does the most liberal nation in the region want to be seen as an Iranian satellite, an asset of what US defence secretary James Mattis last week declared “the single biggest state sponsor of terrorism in the world” or will Lebanon somehow summon up the will to reject Iranian influence and concentrate on doing what it does best, consolidating a millennia-old reputation as a thriving and vibrant service-based entrepôt?

Because depending on whom you talk to, Iran runs Lebanon. It does this via Hizbollah, the militant Shia party that operates virtually outside the state and whose armed wing has for four decades been fighting a bitter struggle with Israel. And with Lebanon potentially vulnerable to international sanctions as part of overall pressure on Iran, the relationship between the party and the country could be stretched to breaking point.

The Lebanese business community has until now been patient with Hizbollah. In July 2006, the tourism industry was decimated by the fallout of the party’s reckless one-month war with Israel, then for the next two years it felt the economic financial pain as the party and its allies took over Beirut’s commercial centre. Since 2008 and the so-called Doha conference which ended the 18-month sit-in, Hizbollah has been more involved in government and has admittedly put forward some capable ministers. However there has always been the nagging feeling that the country will never realise its true economic potential as long as the party continues to act as an adjunct of Iran’s Republican guard.

Lebanon’s banking sector stands to lose most from any increased pressure on Iran. Hizbollah has a US rap sheet as long as one of its Katyusha missiles. The party has been linked with the Mexican drug gangs and it is widely assumed that it has used Lebanon’s banking secrecy laws to fund its operations. Indeed, Beirut’s offshore financial services sector has grown by a reported 12 per cent per annum since 2006 and has an estimated US$175 billion in deposits. Lebanon has been one of the countries to fall under the microscope of the 2010 Foreign Account Tax Compliance Act, better known as Fatca. The Lebanese central bank has done its best to comply, but it knows that ulti­mately Hizbollah does what it wants.

Lebanon has been at this particular crossroads before. In 1975 the country was nothing short of an economic miracle. The Lebanese pound was practically a hard currency and Lebanese banking education and aviation ruled supreme across the region, while its service sector was famed across the globe. Meanwhile its engineers helped to build the modern GCC.

Back then, the fly in the Lev­antine ointment was the Palestinian Liberation Organization, a party whose presence in Lebanon divided the country in a similar way to what Hizbollah has done today. It was this division that paved the way to civil war, and the economic dream quickly became a sectarian nightmare.

With an unpredictable new sheriff in the White House and a bullish Israel on its doorstep, there will surely be a day of reckoning for Lebanon and it won’t be pretty. The Lebanese must recognise they can’t play for both sides.

Michael Karam is a freelance writer who lives between Beirut and Brighton.


Follow The National's Business section on Twitter