Beirut explosion: international sympathy unlikely to lead to bailout

Before the Beirut port disaster western donors insisted on fundamental reforms before rescuing collapsing economy

Two men gaze at the devastated Beirut port from a damaged building in the nearby neighbourhood of Mar Mikaehl. AFP

The Beirut port disaster provoked international sympathy for Lebanon but not enough to revive chances of an economic bailout, European diplomats and Middle East bankers said on Thursday.

"There is a big awareness that any penny in cash will go to enrich the coffers of a corrupt state and to engorge the fortunes of the kleptomaniac political class," a senior international banker in Dubai told The National.

At least 2,750 tonnes of ammonium nitrate blew up just east of the city centre on Tuesday, killing at least 145 people and destroying parts of the capital.

Arab and western nations were quick to send medical aid and other basic assistance.

Before the tragedy, most of the Lebanese political class was seeking “a bailout for a failed state”, the banker said, without serious changes to a system in which the currency was devalued and the economy crushed.

He expected the international assistance would go much beyond aid for the thousands of Lebanese wounded or left homeless, and possibly some rebuilding aid for damaged districts in Beirut.

French President Emmanuel Macron was in Beirut on Thursday to show support.

Mr Macron floated a vague initiative to bridge decades of division and reduce corruption, a hallmark of Lebanon’s Second Republic after the end of the civil war in 1990.

A man told him in the Christian Gemayzeh district of East Beirut that the Lebanese “don't want the money to go to our government".

"You can trust me so that the help comes to you directly," Mr Macron replied.

He has taken special interest in Lebanon beyond France’s traditionally close ties to its former colonial territory.

Mr Macron personally intervened three years ago to mend ties between former Lebanese prime minister Saad Al Hariri and Saudi Arabia.

But two French political sources expected any long-term rescue to rely on reforms that the Hezbollah-aligned government has not enacted.

They referred to comments two weeks ago by French Foreign Minister Jean-Yves Le Drian in Beirut, in which he chided the Lebanese political class for failing to act on sparing the country from financial ruin.

One of the sources said that although Mr Macron sometimes ignores the advice of his Foreign Ministry, “ultimately he cannot appear as rescuing a government beholden to Hezbollah” and deviating from the US stance.

The explosion occurred weeks after talks ended between the government and the International Monetary Fund for an emergency financial package.

The government defaulted in March on its public debt, after bans on dollar deposits were imposed to halt a run on the banks.

A German diplomat said the Lebanese government was succeeding in “employing the disaster politically” and would probably receive a visit to Beirut by a higher-ranking official from Berlin.

He said it was standard procedure in such disasters for the German Development Ministry to divert funds temporarily from existing aid projects in Lebanon towards a “rapid response” to help the country cope.

“Germany may end up financing a special reconstruction project in the aftermath of the disaster but I do not think there will be cash flow transfers to the government,” the diplomat said.

Another European diplomat said the explosion, and the corruption and incompetence behind it, presented EU policymakers with a quandary.

He said the disaster showed the need “to stabilise this corrupt system” while “there is rampant evidence that this system is deeply corrupt and simply not able and willing to reform".