Last week, Lebanon’s Speaker of Parliament, Nabih Berri, announced that an agreement had been reached on a framework for negotiations with Israel to delineate the two nations' maritime boundaries. The agreement, mediated by the US, could allow them to resolve their dispute over offshore gas fields in the Mediterranean.
Mr Berri is a close ally of the militant political party Hezbollah, and the fact that he approved of the framework suggested the party had given him the go-ahead to do so. But it didn’t make the decision any less remarkable. By agreeing to indirect negotiations, Hezbollah implicitly acknowledged that a compromise could be reached when it had argued that Lebanon’s rights to its offshore gas were inviolable. That prior insistence meant, in principle, that there was nothing over which to compromise.
Stark reality, however, has trumped ideology. Lebanon is going through a terrible economic crisis, exacerbated by the resistance of the country’s politicians and parties to introducing reforms that would unlock financial aid from the International Monetary Fund. Such reforms would threaten their networks of corruption and patronage. That is why the prospect of offshore gas reserves represents a valuable lifeline for them, especially when Hezbollah’s and Mr Berri’s supporters are increasingly unhappy with Lebanon's economic situation.
Hezbollah’s acceptance of negotiations between Lebanon and Israel has raised profound questions, too. First, if Lebanon looks to natural gas as an economic lifesaver, this could create dynamics that impose quiet collaboration with Israel – something Hezbollah officially claims to be a nonstarter. But things may not be so simple.
For instance, both countries will need to find a means of exporting natural gas so that the price remains competitive internationally. That means that Israel and Lebanon, along with Cyprus, would benefit from investing in a shared export infrastructure, thereby reducing costs. Lebanon would have an economic incentive to feed its gas into the EastMed Pipeline that those countries, together with Greece, plan to complete by 2025, and which aims to transport natural gas to Italy.
The Lebanese continue to claim that they would not allow their gas to be exported in the same pipeline as Israeli gas. Should Beirut seek to collaborate with the Israelis in exploiting the gas fields, this would put Lebanese officials in a particularly awkward position – claiming that gas has a nationality when it is being exported, but not when it is being extracted.
Competing with the EastMed Pipeline is the Trans-Anatolian Pipeline, which crosses much of Turkey and also reaches Europe. It could represent an alternative path for Lebanese gas. But taking a circuitous route that cuts across northern Anatolia instead of one that is already being planned with two of Lebanon's maritime neighbours would be an odd – and very expensive – move. In other words, should Lebanon want to enter the gas game on the best economic terms, dealing with Israel may be the most sensible option.
Hezbollah's acceptance of negotiations between Lebanon and Israel has raised profound questions
If financial realities are forcing Hezbollah to reconsider Lebanon’s negotiations with Israel over maritime boundaries, then the country’s economic collapse is having more pernicious implications for the party. Hezbollah’s missile arsenal is there as a deterrent to protect Iran and its nuclear programme from Israeli attacks. Yet to what extent is that even conceivable today?
With over 50 per cent of the Lebanese living under the poverty line, and many of them believing Hezbollah to be part of the corrupt political elite, a war with Israel could turn the population decisively against the party. Worse, Lebanon would be so devastated that the very idea of Hezbollah’s “resistance” could be permanently discredited, with the party blamed for acting primarily to benefit Iran instead of Lebanon.
The recent explosion in a Hezbollah arms cache in Ayn Qana in southern Lebanon has led to speculation that it was caused by a surreptitious Israeli military operation. This needs to be confirmed, but people in the south reportedly believe stories of Israeli involvement, and think that Hezbollah declined to react because the party could not afford a conflict with Israel now.
If Hezbollah is unable to retaliate against Israeli or American strikes on Iran because of the domestic repercussions, and if it looks the other way while Lebanon undertakes negotiations Israel, then of what value is its contract with Tehran? The party’s strength was always its ability to impose its agenda on its compatriots, and to threaten those who opposed it. But today, Hezbollah knows that such methods will not work.
That doesn’t meant that Tehran has any intention of giving up on the party. Hezbollah serves many roles besides that of a deterrent against Israel. It is a valuable instrument of Tehran’s influence on the Mediterranean. But it’s also true that Hezbollah’s disregard for the discontent in Lebanon, along with its refusal to help revive the country through economic reform, has meant that it has poisoned its own environment, limiting its margin of manoeuvre on Iran’s behalf.
Iran’s expansion in the Arab world has produced results, but also destruction. Tehran has played on the contradictions in places like Iraq, Yemen, Syria, the Palestinian Territories, and Lebanon in order to advance. But its legacy is fields of ruin. Today, Hezbollah is paying the price for this at home. The party has taken an inflexible position in preserving the mendacious Lebanese political class, thereby collapsing the consensus that had once protected it.
Michael Young is a senior editor at the Carnegie Middle East Centre in Beirut and a columnist for The National
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MATCH INFO
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Man of the match: Kevin de Bruyne (Manchester City)
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
Zayed Sustainability Prize
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
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.”
Five films to watch
Castle in the Sky (1986)
Grave of the Fireflies (1988)
Only Yesterday (1991)
Pom Poki (1994)
The Tale of Princess Kaguya (2013)
Mohammed bin Zayed Majlis
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Zayed Sustainability Prize
Timeline
2012-2015
The company offers payments/bribes to win key contracts in the Middle East
May 2017
The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts
September 2021
Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act
October 2021
Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence
December 2024
Petrofac enters into comprehensive restructuring to strengthen the financial position of the group
May 2025
The High Court of England and Wales approves the company’s restructuring plan
July 2025
The Court of Appeal issues a judgment challenging parts of the restructuring plan
August 2025
Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision
October 2025
Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange
November 2025
180 Petrofac employees laid off in the UAE