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Jim Muir

Lebanon: Adrift in stormy seas

The value of savings in Lebanese pounds has been slashed by around 80 percent [Getty]

Date of publication: 22 July, 2020

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Comment: With its currency in free-fall, half the population plunged into poverty, and IMF talks in disarray, Lebanon appears to be lurching towards a chaotic collapse, writes Jim Muir.
It happened very quickly. Onlookers did not have time to intervene, even ihad they been willing to approach someone carrying a gun.

Ali al-Haqq, 61 years old, from Hermel, in the eastern Beqaa Valley, had prepared meticulously. He took himself to Hamra, the once upmarket thoroughfare which remains the spine of West Beirut. Outside the cafe Dunkin' Donuts, he lay down on the pavement and swiftly put a bullet through his own head.

He left behind a handwritten message, attached to a small Lebanese flag and an official document attesting to the fact that he had no criminal record. His message said simply: "Ana mish kafir", I am not an unbeliever. In Islam, suicide is forbidden. Tweeters were swift to complete the quotation from the Ziad Rahbani song: "Al-Jaua Kafir," Hunger is the unbeliever.

Ali al-Haqq had apparently returned from a job in the Gulf and set up a small shop in Beirut's heavily Shia southern suburbs, but it failed, as so many other businesses are now doing. Like a rapidly growing army of Lebanese - around half the population - he found himself plunged into poverty and unable to provide for his two daughters. In desperation, he took the only way out he could see.

The suicide of Ali al-Haqq and at least one other in a different part of the country may have failed to galvanise Lebanon's bickering politicians, but it struck a chord on social media and its political impact was not lost. It brought a chorus of anger, in particular from Christian religious leaders, reflecting the popular mood.

"I address whatever conscience you may still have," the respected Greek Orthodox Archbishop Elias Audi told the politicians in his Sunday sermon two days later. "Do you sleep easy at night while those under your care starve, and die of thirst and by suicide?"

Economic desperation is now the norm

"The political leaders have neither the courage nor the freedom to come together and find ways out of the suffering," added his Maronite counterpart, the influential patriarch Beshara Raai, whose words would resonate with the country's Maronite president, Michel Aoun.

The prelate's intervention pitched him into the political arena and prompted visits to his patriarchate by the Sunni leader Saad Hariri (currently in opposition) and the Saudi ambassador, who has been increasingly active.

Financial chaos

The Lebanese currency pegged for decades at 1,500 to the US dollar with the two currencies being interchangeable even at petty street level, has continued its nosedive, fluctuating beyond 8,000. This means that those with savings or earnings in Lebanese pounds have seen the value of their labour or deposits slashed by around 80 percent, while prices have shot up sharply. Economic desperation is now the norm.

Increasingly Lebanon is resembling a ship in a wild storm being driven towards the rocks with its engine broken down and the wheel unattended, while seven or eight captains and their crews fight on the deck over who should profit from the cargo, deaf to the cries of distress from desperate and terrified passengers.

And there is no lifeboat in sight. If such a thing existed, it was the talks that began in May between Beirut and the IMF, but which have now stalled because they were getting nowhere.

Lebanon desperately needs an accord with the IMF, because it should unlock a much-needed injection of liquidity (Beirut needs at least $10–15 billion) but also open the doors to support from other international donors and backers who are holding back until the country pulls itself together, and enacts some basic reforms to ensure that funds do not simply disappear into the pockets of the corrupt, as so often before.

Read more: Anger against Lebanon's banks is justified, legitimate and progressive

The Lebanese negotiating team was not even able to speak with one voice, its components, from the central bank (BDL), the Finance Ministry, the presidency and the prime minister's office being at odds among themselves on such basic issues as the extent of the country's losses and how they should be spread.

This reflected a row between the government on one hand and the BDL, the banks and the parliament on the other. A parliamentary committee judged the losses to be less than half the $90 billion or more estimated by the government, whose "reform programme" is the basis of the IMF talks.

"The core of the issue is whether there can be unity of purpose in the country that can then carry forward a set of very tough but necessary measures," said Kristalina Georgieva, the IMF managing director, as the talks were frozen.

The Lebanese disarray was underlined by the resignation of two key financial officials attached to the team, adviser Henri Chaoul and Alain Bifani, who was Director-General of the Finance Ministry for the past 20 years.

"I have come to the realisation that there is no will to implement either reforms or a restructuring of the banking sector including the Central Bank," said Chaoul in his resignation letter. "Without deep and painful reforms, away from the failed politics and policies-as-usual approach, we would be embarking on a lost decade (or two) marked by an underlying chaotic social environment and a further escalation of poverty which is already rising at an alarming rate."

Bifani said there was a "criminal campaign" by vested interests to play down the loss figures which he estimated at $61 billion, and make the public pay for the sins of the corrupt political barons who have bankrupted the country.

The government's reform document involves a one-time "haircut" whereby the biggest depositors with money trapped in the banks would have to convert part of their deposits into shares in the bank, assets in a special recovery fund or some other formula. The top two per cent of private bank accounts hold a large proportion of the estimated $125 billion (75 percent of it in dollars) currently frozen in the banks.

Any kind of intrusion on bank accounts is, however, roundly rejected by many of the politicians, including the parliamentary speaker, Nabih Berri, who has repeatedly vowed that no legislation to that effect would ever be passed.

Increasingly Lebanon is resembling a ship in a wild storm being driven towards the rocks with its engine broken down and the wheel unattended

The situation has produced a bizarre phenomenon whereby all the politicians are calling for an end to corruption and for reforms, even those widely regarded as the most corrupt, the most responsible for the current crisis, and the most accused of actively obstructing reforms behind the scenes.

The result has been that the Lebanese team in talks with the IMF has not been able to point to any meaningful movement towards the reforms the IMF and the international powers are waiting to see.

Beirut plunged into darkness

The crucial bellwether and most egregiously scandalous sector is electricity. As though to rub that fact in, power supplies have recently been even more curtailed than ever.

In Beirut, from the end of June power cuts were averaging around 22 hours a day, a disaster for those without access to the local generators that have sprung up everywhere to cover the habitual gap of three hours a day.

Now Beirutis go to sleep and wake to the roar of generators which have been operating almost around the clock. If they find themselves with a persistent cough, it is much more likely to be from generator fumes than from Covid-19.

Some $47 billion is estimated to have been pumped into the electricity sector over recent years, but it is still losing $2 billion a year. Reforms have been discussed and even agreed for several years, but nothing is done. Among the steps the IMF is waiting for, is the establishment of an independent Control Board for the state-owned electricity company EDL which would take precedence over the Finance Ministry.

The most Lebanon has been able to agree on is to appoint a new six-person Executive Board for EDL, a minor step. And that took some haggling. Because the six have to come from the top six of the country's 18 recognised sects - a Sunni, a Shia and a Druze on the Muslim side; a Maronite, a Greek Orthodox and a Greek Catholic for the Christians.

That's how Lebanon works. Or not. Alain Bifani, for example, the resigned Finance Ministry Director-General, has to be replaced by a fellow Maronite.

America, Hezbollah trade accusations

All of this was meanwhile playing into a scenario of rising invective between the US and Iran's local allies Hezbollah, part of the wider contest between Washington and Tehran that is pushing and pulling throughout the region.

The American ambassador, Dorothy Shea, interviewed on the Saudi TV channel Al-Hadath, accused Hezbollah of hampering efforts to deal with the economic crisis, triggering an embarrassing episode when a Hezbollah-leaning judge in Tyre banned the Lebanese media from carrying the ambassador's statements or news, only to be slapped down by the government.

The Hezbollah leader Hassan Nasrallah hit back, accusing the US of interfering in Lebanese affairs and imposing a blockade on Lebanon and warning that its efforts to pressure the Iranian-backed movement - for example through the "Caesar Act" sanctions regime that was launched on 17 June - would backfire on Washington's own allies.

Some of them, no fans of Hezbollah, have expressed the conviction that the US campaign to isolate and hurt the movement would result mainly in collateral damage to the country and its people as a whole.

It may also drive Lebanon to look east. Nasrallah said that he was discussing with the government an Iranian offer to sell Lebanon fuel for its power stations in exchange for Lebanese pounds, which would ease the country's dollar crisis. A visit by an Iraqi delegation also produced hopes for fuel supplies in exchange for Lebanese fruit and vegetables. There is talk of financial help from the Chinese too.

While the Iran-US framing of the crisis is certainly there, European diplomats say the real issue remains broader than that - Lebanon's failure to unite enough to come up with the minimum of reforms needed to trigger the financial rescue packages that sympathetic countries such as France are waiting to release.

There is a widespread perception in Beirut that the government led by Hassan Diab, in office only since February, has failed, with contacts going on behind the scenes to agree on a replacement in advance in order to avoid a dangerous vacuum.

The Diab government, supposedly technocratic, has ministers nominated only by the Hezbollah-led alliance that includes President Aoun and his Free Patriotic Movement, headed by his powerful son-in-law Gebran Bassil. A new government with full Sunni participation, whether led by Saad al-Hariri or someone else such as respected diplomat Nawaf Salam, would be less likely to be dismissed by Washington as "beholden to Hezbollah".

Revolution glows beneath the embers

Meanwhile the "Revolution" which erupted last October in protest against corruption, incompetence and penury may not have fizzled out entirely, but its glory days when hundreds of thousands of demonstrators all across the country turned out to demand the departure of the political class are, for the moment at least, a distant memory.

The situation has produced a bizarre phenomenon whereby all the politicians are calling for an end to corruption and for reforms, even those widely regarded as the most corrupt

It faced its big test on 6 June, when at least 25 of the protest movement's dozens of groups backed the call for a major post-Covid-lockdown demonstration in central Beirut. It was a disaster. Only a few thousand people showed up, they were attacked by scooter-borne thugs from nearby Shia quarters, shops were smashed and looted, and there were clashes with riot police. Former supporters of the movement complained bitterly that it had been infiltrated and hijacked by provocateurs.

The movement had failed to produce a unified political programme, any kind of organisational structures, or a leadership. Many of their erstwhile followers have been ground down by daily survival worries.

But the politicians are aware of the universal support that its slogans commanded - many of their own followers are suffering too - and that the crossing of certain red lines could trigger another outburst of spontaneous combustion. Many of the movement's ideas have in fact entered the government's own discourse.

Meanwhile despite repressive action by security forces, a hard core of activists has kept up topical protests at specific locations or events, and roads are cut by tyre-burning demonstrators from time to time. But there has been nothing approaching the mass protests of late last year.

Jim Muir is a Middle East correspondent for the BBC based in Beirut.

Follow him on Twitter: @MuirJim

This article was originally published by our partners at Orient XXI


Opinions expressed in this article remain those of the author, and do not necessarily represent those of The New Arab, its editorial board or staff.

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