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US 'pressuring Arab states to shun Beirut', Lebanese minister says

Lebanon's currency has lost around 80 percent of its value against the dollar [Getty]

Date of publication: 18 July, 2020

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Amid a worsening economic crisis, Lebanon's government is struggling to find support among its Arab allies.

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US, Lebanon.
The United States is pressuring Arab states to shun Lebanon's government as the country experiences a deepening economic crisis, a minister has said.

Speaking in a radio interview on Friday, Lebanon's Minister of Industry Imad Hoballah said: "Pressure has been exerted by the US on Arab countries not to cooperate with the Lebanese government.

"Prime Minister Hassan Diab assigned ministers to do the necessary work to expand options while placing the interests of Lebanon first, whether in the east or west, in order to reach our goals, foremost among which is the revival of the Lebanese economy and paving the road towards achieving productivity." Hoballah added.

The minister said the US aims to impose a pro-Israel agenda by pressuring Lebanon through its Arab allies.

Facing a worsening economic crisis and with little chance of Western or oil-rich Arab countries providing assistance without substantial reforms, Lebanon's cash-strapped government has looked east, hoping to secure investments from China that could bring relief.

But help from Beijing risks alienating the US, which has suggested such a move could come at the cost of Lebanese-US ties.

A tiny nation of 5 million on a strategic Mediterranean crossroads between Asia and Europe, Lebanon has long been a site where rivalries between Iran and Saudi Arabia have played out. Now, it's becoming a focus of escalating tensions between China and the West.

In recent months, the Lebanese pound has lost around 80 percent of its value against the dollar, prices have soared uncontrollably, and much of its middle class has been plunged into poverty. Talks with the International Monetary Fund for a bailout have faltered, and international donors have refused to unlock $11 billion pledged in 2018, pending major economic reforms and anti-corruption measures.

Left with few choices, Diab’s government - supported by the Iran-backed Hezbollah and its allies - is seeking help from China, an approach that Hezbollah strongly supports.

Hezbollah has advocated for a bigger role for China and other allies in Lebanon. The group had opposed an IMF program to get Lebanon out of its crisis, fearing it would come with political conditions. But it begrudgingly accepted that Lebanon engage in the negotiations as long as the IMF didn’t dictate policy.

Seventeen rounds of talks between the government and the IMF since mid-May have failed to make any progress.

A person familiar with the discussions said it was not an “either-or” choice between China and the IMF, adding that the talks with the IMF are about covering the immediate fiscal deficit, injecting dollars and developing a framework for structural reform, while the discussions with Beijing are about infrastructure projects. The person spoke on condition of anonymity in order to describe the negotiations.

Lebanon defaulted on its sovereign debt in March, and economist Hasan Moukalled said most Western companies will be reluctant to invest there as long as the country does not reach a deal with the IMF. This is what makes Chinese companies different, he said.

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