Lebanon needs its friends as state disintegrates

It took the newly Hezbollah-appointed Lebanese Prime Minister Hassan Diab more than a month to stop flights to and from Iran in response to the difficult COVID-19 situation. Flights to and from Italy, which experienced a spike in cases long after Iran, were cancelled within a week. But it was impossible to do the same with Tehran. This is truly symbolic of the relationship between a vassal state and its master. Even though — after a major public outcry — the government finally took the decision to stop flights, one could ask who will stop Hezbollah fighters or the Islamic Revolutionary Guard Corps from arriving by land via Syria? Who has the capacity to do so?

Unfortunately, the Lebanese people are not only facing a threat to their health due to the Hezbollah-controlled government. The financial health of the state and even its future are also at high risk. As expected, Lebanon will default on its Eurobond debt and will probably also default on all its upcoming liabilities payments. It is now clear to everyone that the entire banking system is in negative equity, starting from Banque du Liban, the central bank. It wouldn’t be a surprise — as banks might also default and go bankrupt — to see a wave of consolidation and nationalization and tighter government control of the sector. Lebanese bondholders are also set to see the value of their holdings go down or disappear. Finally, the “haircut” everyone has been talking about will look more like a crew cut than anything else. Even if it starts with large account holders, the size of the problem will mean everybody is affected.

Despite promises of change by the current government, little should be expected. As difficult as it is, restructuring the debt is the easy part. The hard part is restructuring government. Indeed, how can a state function properly while a militia acting as the army can choose what laws apply to its members and threaten those who do not serve its interests? All three branches of power are under Hezbollah’s thumb: Executive, legislative and judiciary. The state is bleeding sovereign capital due to this corruption and mismanagement. All indications point to the fact that it is heading for collapse and an inability to honor its commitments, from the salaries of public officials to pension payments and other obligations. This will cause more instability and plunge many into poverty, and the country into high levels of insecurity.

As difficult as it is, restructuring the debt is the easy part. The hard part is restructuring government

Khaled Abou Zahr

What, therefore, can the best experts do if any restructuring of government institutions cannot go forward because it would conflict with Hezbollah’s interests? Can they change the electricity sector? Can they impose border controls? Can they even control construction permits? Hezbollah, which has systematically weakened the state, will always put its own interests first. Today, the government cannot even exert its authority on illegal activities being conducted in plain sight; it can’t even impose its control over the country’s full territory. So how can this government be capable of bringing change to the public sector, which currently benefits many financially and politically?

As the situation worsens, Iran has a plan for Lebanon. Do not think otherwise. It will not let go of its best foreign covert and diplomatic tool, which is Hezbollah. Now that full control is asserted, the Iranian plan is a broader integration with Iraq, which does not face the same international sanctions as Tehran. It can also count on Syria for logistics; yet Iraqi integration will be easier and can also help Iran. Iran has stronger control in Iraq compared to Syria and can create new alliances, starting from the energy sector, which benefits its axis. Incidentally, when Hezbollah focused on taking control of Lebanon’s Ministry of Public Health — as the Iranian-affiliated parties also did in Iraq — no one investigated the reason. It is clearer now.

In this arrangement, Lebanon will not get a full solution, but just enough to keep limited government functioning to face domestic challenges, while Hezbollah keeps calling the shots. Lebanon will no longer honor any of its international commitments. Hezbollah wants to keep this structure as it enables it to use the government as a shield for all of its activities. Worse, it is ready to change the regime and take full control of the state: A regime of terror. Oppression will be more visible in the coming months in any case.

The alternative solution, which is the solution protesters want and Lebanon should aim for, would require a complete overhaul of Lebanese politics and would start with Hezbollah giving up its military arsenal and control of government institutions. This is, of course, wishful thinking. Even the reforms required by the International Monetary Fund (IMF) that could bring some financial aid require more control over government activities — starting from border control — and this does not suit Hezbollah, which initially refused this course of action. Negotiations with the support of France might nevertheless take place to try and reduce the IMF’s requirements in order to get at least part of the bailout. If, by some miracle, this happens, it is condemning Lebanon to even more hardship and will further sink it into debt that it won’t be able to honor.

As the situation deteriorates and people suffer, the true friends of Lebanon will certainly help, but most probably through humanitarian channels and not through the government. Shadow financial structures will be developed to support some businesses. In short, the Lebanese state will continue its disintegration. Yet, as the situation with COVID-19 clears, protests can force change. It is not impossible. Iran is weakened for many obvious reasons and Lebanon still has friends in the US and the Arab world. They need to see a way forward, as the Lebanese people do too. It is time for a new leadership with a new vision.

• Khaled Abou Zahr is CEO of Eurabia, a media and tech company. He is also the editor of Al-Watan Al-Arabi.