With Iran sending fuel tankers to energy-starved Lebanon, it might seem that the regime in Tehran has stepped up to help desperate Lebanese people. However, a closer look at the dynamics of distribution within Lebanon clarifies that Hezbollah is selling most of the diesel coming from Iran at a price that is a little cheaper than the Lebanese black market but still much more expensive than the average Lebanese can afford. Iran sending fuel to Lebanon is not a noble act of charity. It is making Hezbollah earn around $35 million a month. This is just one example of how Iran contributes and benefits from the Lebanese economic crises.

At its core, Lebanon is not struggling with an economic crisis, as it is widely termed. It is a political crisis with economic consequences. Hence, an economic solution without a political vision is not going to avert the country’s collapse. Since the October 2019 protests, it has become clear that corruption – one of the main reasons behind Lebanon’s current economic condition – is a system nurtured and protected by Hezbollah and its sponsor Iran. Corruption is Hezbollah’s policy – through which it weakens state institutions. It buys and builds allegiances and makes financial gains.

Gains from collapse

During the civil war, followed by the Syrian regime’s hegemony – which lasted until 2006 – the state institutions were weakened enough for Hezbollah to jump in and place itself as the leading player in the Lebanese political scene. With its weapons, money, and sway, the group managed to buy allies, kill and terrorize opponents, and threaten the rest into compliance. Meanwhile, it built a parallel state with a parallel economy, which has, in turn, pushed the Lebanese economy toward collapse.

When Hezbollah won parliamentary elections in 2018, formed a government with its allies, and engineered the election of Michel Aoun as president, the group became the glue holding together the country’s political class. Despite a series of upheavals – the protests of 2019, the Hariri government’s resignation in October of that year, the tragic August 2020 Beirut port blast – Hezbollah made sure nothing would alter the system that protects its power.

Due to the US sanctions on Iran in 2018, Hezbollah found itself stranded for hard currency. To survive, the group started austerity measures that affected its soft-power programs such as social services, jobs, and salaries. Meanwhile, it used its tentacles within state institutions to siphon off state resources and use the Lebanese financial system to its advantage. Hezbollah’s control over all entry points – borders with Syria, ports, and airport – allows the group to smuggle in and out whatever they need without having to go through red tape or pay taxes.

As a result, it was very easy for Hezbollah to increase its illicit activities, such as drug production and money laundering. It used institutions – such as the health ministry – to serve its constituency, and increase its drug trafficking to the region and the world. However, the most harmful activity to Lebanon’s fragile economy was using the loose Lebanese borders with Syria to smuggle out subsidized goods, such as fuel, wheat, medicine, and food. By selling cheap subsidized items abroad at higher prices, Hezbollah made billions of US dollars at the expense of starving Lebanese people, including its Shia constituency.

In June 2020, Lebanon’s Central Bank announced it had lost US$ 4 billion in smuggling. The number has now increased to more than US$ 10 billion, and the central bank can no longer afford to subsidize anything, including fuel and medication. However, that also works for Hezbollah, which flooded the empty Lebanese markets with Iranian goods. Besides fuel and diesel, Iran also sells pharmaceutical products, food items, and construction martial such as Iranian steel in Lebanon.

It is pertinent to remember that any reform in the Lebanese system and state institutions could jeopardize the operations that devastated the Lebanese economy but benefited Iran and Hezbollah. So why risk it?

Challenges and opportunities

Despite the gains Hezbollah made due to the economic collapse, the group also realized the challenges that come with it. Hezbollah’s ability to provide food baskets to low-income families is still better than other political actors in Lebanon. However, its plans do not cover other pressing civic needs such as electricity, Internet service, hospitalization, and employment. The Shia community has felt the quick decline in their living standard and is aware that Hezbollah’s support for corruption is behind it.

Hezbollah faces its own financial crisis due to the US sanctions on Iran, leading to limited access to hard currency. As a result, its civilian employers started to receive their salaries in Lebanese pounds, while the military staff still received US dollars. This creates severe financial and social gaps between the group’s military and civilian employees while widening the gap between Hezbollah members and the wider Shia community. Hezbollah also had to limit its social services and charities to survive its crisis, making its social and humanitarian assistance tools flawed and insufficient.

These challenges provide serious opportunities to contain Hezbollah and develop a sustainable political and economic vision for Lebanon. While exposing Iran’s and Hezbollah’s contributions to the crisis and economic collapse, it would be essential to fill the gaps that Hezbollah cannot address more efficiently and sustainably. These gaps are evident in areas such as hospitalization, medical care, and Internet connectivity. 

Reforms could limit Iran’s gains from Lebanon’s weak institutions. Therefore, it is vital to continue stressing specific reforms, such as border control and electricity. However, instead of focusing on technicalities, the international community must realize what the Lebanese people have already realized; only undermining Hezbollah can open space for reforms, political change, and accountability.

It is evident that while exhausting every opportunity to weave itself into Lebanon’s political scene, the Iranian regime failed to notice that power requires a socio-economic vision. Iran has created proxies in four countries, gave them power, money, and weapons, and helped them infiltrate state institutions. Today, these state institutions have one primary mission: to protect and serve Iranian interests instead of safeguarding the Lebanese people.

Hanin Ghaddar is the Friedmann Fellow at the Washington Institute for Near East Policy’s Geduld Program on Arab Politics.

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