Lebanon needs help with recovery, not more destruction

The 20th-century poet Nadia Tueni wrote of Lebanon: “I belong to a country that commits suicide every day while it is being assassinated.” One of the symptoms today is that when I recently enquired about a promising youth movement I had not heard from for a while, I was told that, out of the 82 members, only two remained and 80 had left the country. This is the brain drain that Prince Hassan bin Talal of Jordan described as better than brain in the drain.

We are getting all the help we do not need — the impression is that the International Monetary Fund wants to kill the banks and the US government wants to kill the cash companies and add sanctions to the toxic mix. In addition, we are told that we will get help, not for recovery but for the army if it will fight Hezbollah. As if Lebanon needs even more destruction. This will not fix the drain; it will only make it worse.

Lebanon does need help, but the figures just do not add up in the government plan to return people’s deposits. I do not understand the logic myself. In the attempt to decrease the gap, large depositors are considered the enemy, but in any economic recovery they should be allies, the investors you want to attract back. There is an attempt, of dubious legality and practicality, to declare a significant portion of deposits as illegitimate in order to decrease the gap. This will make it certain that nobody will ever trust the country or invest in it again. The age of governments taking over private property is gone forever, let alone in Lebanon. This is not the way to regain trust.

A recent House Foreign Affairs Committee hearing on US policy toward Lebanon and obstacles toward dismantling Hezbollah’s grip on power offered several recommendations. Among them was the US supporting the Lebanese army and government. There was also the dismantling of the cash economy used by Hezbollah to launder funds, sanctioning the cash companies and Lebanese politicians and supporting Lebanon’s recovery. While the intentions are good, there are many ways in which such moves could also do more harm.

Lebanon does need help, but the figures just do not add up in the government plan to return people’s deposits

Nadim Shehadi

There is no military solution in Lebanon. If Israel could not disarm or destroy Hamas in a war that lasted more than two years, the Lebanese army cannot wage an internal war against Hezbollah to disarm it. The unfortunate incident between Lebanon’s army chief, Gen. Rodolphe Haykal, and Sen. Lindsey Graham last week illustrated this misunderstanding. Graham wanted Haykal to admit that Hezbollah is a terrorist organization, which would logically lead to the army fighting it. But Haykal was in Washington asking for help building capacity to deploy the army in the south, not to pick a fight with Hezbollah.

Also, any expansion of the army’s role would have an economic cost as well as a political one. The object of achieving peace on the Israeli border should be to decrease military spending, rather than the military budget becoming unsustainable. Politically, the fact that we have had four presidents appointed, not elected, from the army is a sign of the failure of the political process. Reviving the economy and the political process means a careful recalibration of the power and cost of the army.

The solution is a political one, not a military one: it is a fight for the constituency of Hezbollah and not against it. Most important is that such a solution will impact every country where the Islamic Revolutionary Guard Corps has taken root within the community — Lebanon, Iraq, Yemen, Palestine and Iran itself. Over a period of 40 years, militias have invested in hijacking and indoctrinating whole communities in these countries. The Shiite community is the main victim of Hezbollah. Its accumulated wealth and institutions are held hostage, the result of generations of investment both in Lebanon and in the diaspora. This is the classic dilemma of rescuing the hostage while inflicting the minimum damage — and this includes the cash economy.

But what about the cash economy and the cash companies that are now under attack? The story is that, while the government, the IMF, the central bank and the banks exchange blame for the crisis and bicker over the solutions, all have a long way to go before they regain people’s trust.

Reviving the economy and the political process means a careful recalibration of the power and cost of the army

Nadim Shehadi

In the meantime, the Lebanese survive as best they can and manage within a cash-based economy. They use local versions of digital finance or peer-to-peer apps like Whish or OMT, some of which partner with international transfer companies like Western Union or MoneyGram. In a dollarized economy, taxi drivers ask you to pay through the app because of the scarcity of small denominations. Supermarkets and small businesses too. Some of these companies have grown and provide services like paying bills and collecting pensions. The major banks have created their own apps to enter the market, but frankly they cannot compete and have been heavily damaged by the crisis.

The cash companies generally operate under license from the central bank but control is obviously limited. The result is that the whole cash economy is under attack, accused of money laundering for Hezbollah. While it is undoubtedly true that Hezbollah uses the cash economy and its instruments, it will always find alternatives if they are shut down. In fact, Lebanon is among the top 20 users of cryptocurrency and stablecoins. Sanctioning these cash companies before the banks are operational and have gained confidence will disrupt the little that is left functioning and is the equivalent of strangling the Lebanese economy while it is in desperate need of a recovery. The damage could be irreversible.

The captured state is the other victim, similar to the way in which Latin American drug cartels capture societies through violence, extortion and gang control. Like Latin America, the problem also transcends borders and controlling it in one place makes it emerge in others. Not only is a solution regional there, it is also linked through drug smuggling, money laundering and other criminal activities to that of the IRGC’s control.

In a country where the state is captured and society taken hostage, the objective is to liberate them and help them recover, but some of the solutions discussed for Lebanon may finish them off or make them even more reliant on Hezbollah. Lebanon, with its history of building consensus and coexistence, is where a solution can succeed and become a model for others.

• Nadim Shehadi is an economist and political adviser. X: @Confusezeus