Rescuers search the rubble of a building after an Israeli air strike on Beirut, on 26 November. EPA
Rescuers search the rubble of a building after an Israeli air strike on Beirut, on 26 November. EPA
Rescuers search the rubble of a building after an Israeli air strike on Beirut, on 26 November. EPA
Rescuers search the rubble of a building after an Israeli air strike on Beirut, on 26 November. EPA

Counting the cost of Israel and Hezbollah's war with no winners


Robert Tollast
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The war in Lebanon has raged for more than a year after Hezbollah intervened in Israel’s war on Gaza on October 8, 2023. The violence has left a trail of devastation and displacement in both countries, but especially in Lebanon, where 3,768 people had been killed by Tuesday, including about 250 children, with villages wiped off the map.

One strike on Saturday in Beirut killed at least 83 and injured hundreds. Overall, about 13,500 people have been injured in Lebanon. And while Israel’s strikes have ostensibly targeted Hezbollah, civil defence personnel have been killed – 21 in two strikes this month – along with 40 Lebanese soldiers, despite the country’s regular army staying on the sidelines of the war.

The sum total of loss points to a conflict that is likely to end inconclusively, despite significant damage to Hezbollah – a war with no winners.

A ceasefire has since been agreed. The truce, announced by US President Joe Biden late on Tuesday, began at 4am local time and is designed to be a "permanent cessation of hostilities" between Israel and Hezbollah.

Lebanese civilians in the rubble of a building in Beirut's southern suburbs. More than 3,700 people have been killed in Lebanon. Reuters
Lebanese civilians in the rubble of a building in Beirut's southern suburbs. More than 3,700 people have been killed in Lebanon. Reuters

On the Israeli side, a steady stream of Hezbollah rocket, drone and missile volleys has killed nearly 50 civilians including foreign workers and in one strike in July, 12 Druze children in the occupied Golan Heights.

According to the Israeli military, Hezbollah has fired more than 16,000 rockets, leading to the displacement of over 65,000 people from northern Israel. Ninety Israeli soldiers have also been killed in action, about half since their invasion on September 30, suggesting the number of wounded is in the hundreds.

Economic damage

Economically, both sides have been hit hard as tourists and investors kept away in fear of the violence, while displaced people – 1.2 million in Lebanon – have been unable to work, putting immense strain on the aid-dependent government. The displaced in Lebanon are thought by the UN to need $250 million per month in assistance, or around $3 billion per year.

For comparison, by the third quarter of 2023, when the war began, Lebanon had received around $1 billion in aid from international donors, according to Blom Bank.

Lebanon has suffered other crushing blows, with financial and material losses amounting to 10 per cent of GDP or higher. In mid-November, the World Bank said damage to the already crisis-hit country was $8.5 billion.

Lebanon had already seen its GDP plummet in an economic crash widely blamed on political corruption and mismanagement in 2018, from around $55 billion that year to $20 billion after Covid-19 and, according to Statistica, recovering to around $24 billion before the war. It was already described by the World Bank as one of the sharpest economic contractions in history.

A Gazan tows suitcases to a yacht ferrying people to Cyprus, in Beirut, Lebanon. Getty Images
A Gazan tows suitcases to a yacht ferrying people to Cyprus, in Beirut, Lebanon. Getty Images

Now the country faces an added reconstruction challenge after the UN warned in late September that more than 23,000 homes had been damaged or destroyed, a figure likely to be much higher now.

The Israeli government’s most recent estimate of damage to the northern border area, including damage to homes and businesses, amounted to $1.35 billion in losses.

But the cost of keeping tens of thousands of soldiers mobilised – many of them reservists, including 40,000 in the Lebanon invasion and tens of thousands more in the Northern Command on high alert – probably runs into billions, including operational costs for equipment and defensive systems such as Iron Dome, which shoots down rockets and drones at $100,000 per interception.

Military balance

Israel’s finance ministry estimated the cost of keeping reservists ready could reach $1.36 billion this year. Early in the Gaza war, Israel’s finance ministry said operations were costing $246 million a day. The intensity of fighting in Lebanon, including air and ground operations, is greater.

Israeli commanders undoubtedly believe this – and hundreds of casualties – is worth the cost to reduce further economic damage and loss of life, by uprooting Hezbollah’s arsenal. US military support since October 7 – over $22 billion according to the Costs of War project at Brown University in the US – enabled Israel to sustain these operations.

An Israeli tank near the border with Lebanon, in the Upper Galilee, northern Israel. EPA
An Israeli tank near the border with Lebanon, in the Upper Galilee, northern Israel. EPA

But for how long? The Bank of Israel has tallied drops in investment in multiple sectors that could wipe 10 per cent off GDP.

This leaves an assessment on the military front which The National previously discussed would be hard to evaluate until fighting ends, as both sides are withholding or deliberately obscuring events on the ground.

A picture is emerging however: one of hard fighting for hilltops, towns and villages in the undulating countryside of south Lebanon. Hezbollah has mounted hundreds of hit-and-run attacks, with videos of operations showing anti-tank guided missiles and quadcopter drones flying into Israeli infantry positions and vehicles, inflicting casualties.

Israel has been able to strike back rapidly using a system called Fireweaver, which connects drone cameras, infantry commanders and sensors on vehicles to quickly point out enemy targets and call on the nearest available weapon. This and a bigger air force with more drones and more heavily protected vehicles is likely to have resulted in fewer Israeli military deaths than in the 33-day 2006 war, when 121 Israeli soldiers died.

But Hezbollah has also stood and fought like a regular army in battles such as for Khiam, despite Israel's massive firepower advantage.

South Lebanon has proven, as it did in 2006, an ideal place to mount ambushes, which can negate advantages such as air power, reducing combat to a “who shoots first” contest. Eight soldiers were killed, including six elite Golani commandos, in one ambush and a separate mortar attack on October 3.

Despite this, Hezbollah has also suffered massive casualties in the fighting, alongside the horrific civilian toll, with some estimates putting their fatalities over 1,500. Many of their commanders and weapons specialists have been killed in hundreds of strikes, including in Syria.

The group has endure, however, keeping up a steady stream of around 100 rockets per day fired at Israel, and in some cases powerful short-range ballistic missiles, spiking at more than 320 rockets in one day this month.

But this is still a fraction of the estimated 1,000 per day they were expected to fire in the event of full-scale war, which erupted with Israel’s September 30 ground invasion.

Scorebox

Dubai Hurricanes 31 Dubai Sports City Eagles 22

Hurricanes

Tries: Finck, Powell, Jordan, Roderick, Heathcote

Cons: Tredray 2, Powell

Eagles

Tries: O’Driscoll 2, Ives

Cons: Carey 2

Pens: Carey

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.”

Updated: November 27, 2024, 6:52 AM