Lebanon’s Economic Collapse: Consequences for Israel – by Aiman Mansour

14 June 2020

This article was first published by The Jerusalem Institute for Strategy and Security. It is republished on Syria Comment with a few edits and with the permission of its author.

Dr. Aiman Mansour is an expert on inter-Arab politics, Hezbollah and regional strategy. He served for 13 years in the National Security Council / Prime Minister’s Office in various posts, the last being head of the Middle East and Africa Division (2015-2019). Ph.D. in political science from Haifa University. Email: amansour@jiss.org.il

Some Israelis believe that crippling Lebanon economically will weaken Hezbollah and help Israel. They are probably wrong. Lebanon’s economic deterioration is likely to favor Hezbollah, which is positioned to survive the regional unraveling better than its rivals.

Israel has repeatedly failed to properly interpret social and political trends in Lebanon – especially in the Shiite community. Had Israel been more attentive, its strategic situation might have improved. The present economic collapse in Lebanon, which is largely the result of malfeasance and corruption at the highest levels of government, could strengthen Hezbollah’s position.

Israel and the Adversities of the Shiite Community in Lebanon

Since its invasion to Lebanon in 1982, Israel has missed-interpreted significant changes taking place in the Shiite community in Lebanon. Israel refrained from engaging in a serious dialogue with this community and treated it as a minor factor in the Lebanese political arena; instead, emphasizing ties with Christian forces. Israel was also late in recognizing the radicalization taking place in this community in the 1980s and the 1990s. Israel’s policies contributed to this trend and pushed additional villages into the arms of Hezbollah, primarily because of collective punishment against Shiite villages in southern Lebanon in response to Hezbollah’s terrorist attacks. (Note: Most South Lebanese Army members also were Shiite, and the community was deeply resentful of Palestinian organizations because of their brutal rule over southern Lebanon in the 1970s).

Since Israel’s retreat from Lebanon in 2000, and particularly since Hezbollah became the strongest force in Lebanon (a process that was accelerated after Syria removed its forces from Lebanon in 2005), Israel seemed to ignore processes within the Shiite community, particularly its social-economic development.

Rivals March 8 and March 14 camps. (AP Photos)

The growing Shiite stake in Lebanon restrains the use of force against Israel. Creating a Shiite bourgeois class strongly connected to Hezbollah’s leadership, parallel to the fighting of Hezbollah in Syria, has brought economic and social considerations to Hezbollah’s forefront, which shoved aside the military focus on Israel. Therefore, the common wisdom that Lebanon’s economic collapse is in Israel’s interest because it weakens Hezbollah – is a questionable proposition.

Lebanon’s Financial Collapse

It is important to clarify that the current economic collapse in Lebanon is not a result of Hezbollah’s conduct, but mainly of the malfeasance of Lebanon’s economic leaders. This includes its various prime ministers since the Al-Taif Agreement in 1989, and ever since Riad Salame became Governor of the Central Bank of Lebanon. Salame has made it easier for politicians to divert dollars from Lebanese banks into the Central Lebanese Bank, allowing the government to draw funds. All this has been part of an ongoing trend of running a demand-oriented economy based on importing products, without laying the foundations for a productive economy.

On the one hand, Lebanese banks have attracted many investments of Lebanese citizens living in and out the country, ensuring high returns (interest reaching over 7%). On the other hand, the Lebanese state has avoided tax collection from the large financial corporations that are well connected with the political elite, and has failed to invest properly in order to make the Lebanese economy productive. The move of dollars into Lebanese banks and from there to the Central Bank has failed to keep pace with growing demographic and economic needs. This process led to the fall of the Saad Al-Hariri government in October 2019.

Since then, the Hassan Diab government (which took office January 2020) has not articulated a coherent economic policy, and has constantly given in to pressure from Western actors (mainly the US) who threaten to exact a price from Lebanon if the Central Bank Governor is fired, and from domestic political players who disagree about the Governor’s performance and about economic directions for Lebanon. The main issue currently in dispute is whether Lebanon should ask the World Bank and the International Monetary Fund for financial support, and accept the hard conditions entailed; or alternatively “head east” by fully and publicly renewing its relationship with Syria, and from there open the trade lines with Iraq, Jordan and even the Gulf states.

Consequences for the Shiite Community

This process also affects the Hezbollah-led Shiite community, which has been hit by a decrease in Iranian support. (Iran is under severe US sanctions, and also has been hit by the decline in energy prices). The prevailing thinking in Israel (as well as in the US and in Europe) is that a deterioration in the Lebanese economy will force the Lebanese government to invest all its efforts in economic recovery. This will require all of Hezbollah’s energy too, and divert the organization from terrorist activity.

On the other hand, one should consider the implications of economic depression on all sectors in Lebanon, and particularly the Shiite community.

One may safely assume that the difficult economic situation in Lebanon will accelerate emigration to the West and to Gulf countries by pro-Western liberals in Lebanon. This will only increase the influence of Hezbollah and its allies in the political system, leading even to a demand for changing the current political order in Lebanon. This is still based on distribution of power between Christians and Muslims (both Sunnis and Shiites). A shift in favor of the Muslims would give the Shiites more representation in national institutions and more say in the allocation of resources. Another possibility is that Lebanon would abandon its religious quota system and adopt a democratic process based on one person, one vote, regardless of sectarian or regional affiliation. Such a political order would certainly turn the Shiite community, led by Hezbollah, into the dominant force in Lebanese politics.

Second, in contrast to most sectarian communities, the Shiite community is more prepared for collapse and bankruptcy thanks to its networks in social and medical welfare, education, etc. It also is relatively united. Hezbollah’s Shiite rivals do not pose a significant challenge to it. National bankruptcy would probably lead to community-wide cooperating under Hezbollah’s leadership.

By contrast, the Christian community is badly divided along denominational and party lines. The Sunni community also lacks a unified leadership. It is at the mercy of a small coterie of businessmen, some of whom face significant financial difficulties, such as the long dominant Hariri family. The Druze community is more cohesive and better situated to weather the coming economic storm, but it has become negligible in demographic terms and constitutes on 3% to 4% of the Lebanese population.

Third, the Shiite community has been accustomed for centuries to living with deprivation. It should be noted that Hezbollah was founded to look after the interests of the “oppressed,” an element of Shiites historic self-identity. Moreover, Hezbollah’s presence and power as a social-economic organization provides the community with the necessary mechanisms for survival. While the community may not flourish financially, it will not starve. A significant number of its youth will always find employment in Hezbollah’s military branch.

Fourth, Lebanon’s economic collapse will most probably bring about the fall of the Shi’a’s new economic-political elite, which has been promoted by the Shiite community and Hezbollah during the last two decades. This nouveaux riche class within the Shiite community has not only enjoyed the pleasures of life, but has also embraced the patterns of conduct that characterize Lebanon’s elite more generally, such as corruption, nepotism, and a disregard for the privations of the lower classes. A yawning economic and cultural gap has emerged to separate the new Shiite upper class from the rest of the Shiite population. Indeed, the nouveaux riche have been harshly criticized by members of the Shiite community, Hezbollah itself, and even its Secretary General, Hassan Nasrallah. Lebanon’s economic difficulties may crush this bourgeois class and reestablish the community’s self-perception as an “oppressed” people.

Israel should not pursue a policy that will destroy this new Shiite bourgeoisie. It serves as a significant restraint on Hezbollah’s military leadership and works to draw the larger Shiite population into the cosmopolitan culture of Lebanon’s urban life. In this context, the decline of the new Shiite elite could increase the appeal of Hezbollah’s old institutions and increase the population’s dependence on them, especially in light of the fact that the available emigration options are more limited than in the past.

Hizbullah troops 

Consequences for Israel

Israel should not gloat about Lebanon’s misfortunes. While Israel has been able to understand Hezbollah’s hard power and deal with it quite successfully during the “Campaign between the Wars,” it has not yet understood the complexity of the Shiite community and how a process of economic development could have led to centrifugal trends, both within and outside Hezbollah. Nor has Israel known how to take advantage of what many Hezbollah supporters perceive as an existential threat from ISIS, and to investigate the feasibility of an indirect dialogue with the Shiite community in Lebanon, and even with Hezbollah.

Israel ought to adopt the same approach it has used in other places, even with Hamas in Gaza; a more nuanced policy that recognizes that alleviation of an economic crisis in a neighboring area may serve Israel best. In the case of Lebanon, this might include enabling Lebanon to develop its gas resources in the Mediterranean, after agreeing with it on the EEZ border. This may keep the peace in Israel’s northern border.

Comments (4)

maurice brasher said:

This analysis supports Eli J Magnier’s very clear diagnosis which assesses Lebanon’s difficulties (partially caused by sanctions) as elements in favour of Hezbollah, and therefore counter to the “desired intentions” of the US & Israel. It is a continuing mystery as to why (even as “intelligent protagonists”) Israel & the US find it impossible to think like Hezbollah, let alone see the situation “from inside Lebanon”- and not as a set of outside variables they can model at political or military will!

June 14th, 2020, 1:42 pm


Eugene said:

Failing to understand, both the U.S.A. & Israel have the same issue in common, exceptionalism, that they can do what ever they please, regardless of legality. Today’s word of the U.S. pulling out of Syria without a timetable, as well as the turmoil that has engulfed the country, doesn’t bode well for the continuance of said exceptionalism, which could lead to a rude awakening on both countries.

June 14th, 2020, 7:37 pm


Roger Fox said:

An interesting analysis. Thanks for sharing! I completely agree that need a finer policy that recognizes that mitigating the economic crisis in the neighboring region can best serve Israel.

June 15th, 2020, 3:26 pm


Willy Van Damme said:

Very interesting analysis.

July 12th, 2020, 5:56 am


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