Black smoke rises from an Israeli air strike on the outskirts of Yaroun in south Lebanon. AP
Black smoke rises from an Israeli air strike on the outskirts of Yaroun in south Lebanon. AP
Black smoke rises from an Israeli air strike on the outskirts of Yaroun in south Lebanon. AP
Black smoke rises from an Israeli air strike on the outskirts of Yaroun in south Lebanon. AP

No end in sight for escalating Israel-Lebanon border conflict


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In the early days of the Lebanon-Israel border war, young men could still be found on the streets and in the cafes of Kafr Kila, a southern Lebanese town directly in Israel’s line of fire.

In the town square, crossed by a concrete barrier separating Israel from Lebanon, a mixture of bravado and defiance prevailed.

Neighbours would gather on each other’s balconies as they watched Israeli shells fall on nearby areas.

But two months later, the steady worsening of fighting has made the town uninhabitable – even for the most resilient of residents. The town square is mostly empty, with the separation wall looming over it ominously.

“People underestimated war,” said Hassan Cheet, Mayor of Kafr Kila and leader of its emergency medical services team.

On Monday, the mayor of the nearby town of Taybeh was killed when an Israeli shell fell on his balcony.

“Our problem as southerners is we are too acclimated to conflict,” Mr Cheet said.

“It’s normal to us, we think everything will be OK. It’s not like Israel is going to target me out of everyone.”

Tens of thousands of residents on both sides of the border have been displaced since October 8, when Hezbollah and allied groups began the conflict with Israel.

From the outset, Hezbollah sought to demonstrate the “unification of fronts”: a strategy in which groups associated with the so-called Axis of Resistance, supported by Iran, would come to each others’ aid when threatened.

Hezbollah’s stated goal was to support its ally Hamas and distract its sworn enemy, Israel, from its invasion of the Gaza Strip.

Israel, meanwhile, is bent on preventing the Iran-backed militia from exerting influence on the outcome of the conflict.

As thousands of residents from northern Israel’s border areas remain displaced, Israel's government is eager to re-establish security there.

Hezbollah says its deterrence has succeeded in drawing one third of Israel’s army to the border and away from Gaza.

But Israel’s siege has continued unabated, with more than 18,400 people killed so far.

A home in Ayta Ash Shab, south Lebanon, which was hit by an Israeli strike, leaving the homeowner injured. Matt Kynaston / The National
A home in Ayta Ash Shab, south Lebanon, which was hit by an Israeli strike, leaving the homeowner injured. Matt Kynaston / The National

Existential consequences

But Hezbollah and Israel have continued to tiptoe around the possibility of a full-scale war.

Hezbollah “has shown some restraint in responding, showing their preference not to get involved in a conflict now”, explained Mohanad Hage Ali, a senior fellow at the Carnegie Middle East Centre, a Beirut-based think tank.

Meanwhile, “Israel believes war with Hezbollah is necessary”, he said.

This leaves Hezbollah with a complex dilemma. The group has chosen to maintain a consistent level of combat but does not seem ready to pay the political cost of war, with Lebanon already struggling with one of the worst economic crises in modern history.

While Hezbollah has largely fired at Israeli military sites, Israel has escalated its attacks and its hostile speech.

The Israeli military has been conducting air strikes deeper and deeper into Lebanese territory.

At least 17 civilians have been killed in Israeli strikes on south Lebanon since the eruption of the frontier conflict, including three journalists – compared to four civilians in Israel.

On Sunday, an Israeli raid destroyed an entire neighbourhood in the southern border town of Aitaroun, injuring several people.

At the weekend, footage showing the green hills of southern Lebanon under carpet bombing-like bombardment went viral on social media.

A Lebanese soldier was killed last Tuesday in Israeli artillery shelling – the first since the conflict began. The Lebanese military is not involved in the fighting.

Last week, Israeli National Security Adviser Tzachi Hanegbi said his country would have “to impose a new reality” on Lebanon after the end of its operation in Gaza.

His comments have been echoed by other Israeli officials.

“The situation in the north must be changed,” Mr Hanegbi told Israeli media.

“And it will change. If Hezbollah agrees to change things via diplomacy, very good. But I don't believe it will.”

The rubble of a house destroyed in an Israeli strike in the southern Lebanese village of Majdal Zoun. AFP
The rubble of a house destroyed in an Israeli strike in the southern Lebanese village of Majdal Zoun. AFP

Part of the negotiation process

Mr Cheet said Israel's bombardment of border villages such as Kafr Kila is near constant.

But he still takes the risk of sleeping in Kafr Kila’s civil defence headquarters in case he is needed.

He told The National that artillery shelling and machinegun fire are often so intense that ambulance teams cannot get to affected areas.

“Once Israel is hurt or threatened they strike back at anything,” Mr Cheet said.

“They don’t know what they’re doing or where they’re shooting. They’re just going for a lot of destruction.”

Israel’s recent escalation is “part of the negotiation process” to increase pressure on Lebanon, said Mr Hage Ali.

“Israel is flexing its muscles, in a bid to capitalise on gaining additional security guarantees along the Lebanese borders,” he said.

The guarantee in question is UN Security Council Resolution 1701 – intended to resolve the 2006 Lebanon war – which calls for the withdrawal of Hezbollah from south of the Litani River.

The application of Resolution 1701 “is extremely important for the Israelis, especially after the inadequacy of their previous strategic stance, including military restraint, advanced technology and defensive structures, completely failed on October 7”, a western diplomat told The National.

The diplomat mentioned that the 100,000 people evacuated from northern Israel’s villages will not be returning as long as Hezbollah – a much stronger militia than Hamas – reigns near their doorstep.

The negotiations around Resolution 1701 were discussed as part of international efforts, notably by the US and France, to restore stability to southern Lebanon, the diplomat said.

But Hezbollah has resisted attempts at negotiation, baulking at Israeli demands for the group to withdraw from the southern-most areas of Lebanon.

Israel maintains a maximalist approach of “either diplomacy or force”, while Hezbollah has refused to have this kind of discussion as long as the Gaza war continues, the diplomat said.

“There are no negotiations,” Qassem Kassir, a political analyst, told The National.

“It is impossible to revert to Resolution 1701 amid the war on the Gaza Strip. Hezbollah continues its operations and is prepared for any confrontation.”

In the meantime, the surge in violence has compelled most of the residents to completely abandon their villages.

Imane Reda, 39, a resident of Ayta Shaab, is among the 60,000 people displaced from the south.

Ms Reda used to return to her village from time to time to check on her home, but told The National that recently, the situation had become “much worse than before”.

She is no longer able to visit her village during pauses in the fighting. There are no more lulls, she said.

Smoke billows from a Israeli army post on the border with Lebanon after it was hit by rocket fire. AFP
Smoke billows from a Israeli army post on the border with Lebanon after it was hit by rocket fire. AFP
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: December 13, 2023, 8:34 AM