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Lebanon is facing a cascading series of crises; inflation decimating the lira, an almost non-existent public electrical supply, and ongoing political gridlock. The Red Line's Derek Henry Flood reports from Beirut on the situation facing Lebanon and the complicated geopolitical position it finds itself within in the region.
Coming into downtown Beirut from Rafic Hariri International Airport, one could be forgiven for thinking they are suddenly in a war zone. In Lebanon’s legendary capitol, the lights are off. The faces of armed security forces in urban camouflage are sometimes just lit up by the smartphones they grasp while fending off traffic to blocked off streets that surround darkened government office buildings. This is not Basra during an insurgency-wracked heatwave in the 2000s, nor Karachi suffering from intentional blackouts for decades known as ‘loadshedding.’ This is Beirut, ‘pearl of the Mediterranean’ that has lost its sheen, a ‘Paris of the Middle East’ whose glamour is firmly of a time long since gone by.
Lebanon is experiencing one crisis after another in what seems like a real-life feedback loop. The radical depreciation of the currency beginning in 2019 meant that the central government was eventually unable to pay for the diesel fuel needed to keep its two primary power plants running. This culminated in a day-long nationwide blackout in October 2021 from which the country has not recovered. The Lebanese lira, alternately referred to as the pound, began to slip from its peg to the US dollar in September 2019; a perfect storm whereby banks began to suffer a dollar shortage, Lebanese communities abroad had been sending less money home, and reforms demanded by the international community kept failing to be implemented which has held back financial aid.
Lebanon punches far above its weight in terms of its cultural and culinary exports but its services-oriented economy produces very little beyond produce in actuality. And even that has been sanctioned by trading partners in the Gulf as vast amounts of narcotic Captagon pills produced in the Bekaa valley have been disguised in pomegranate and orange shipments. The Lebanese economy is being choked at seemingly every angle.
Diesel Dependency
The Levant’s legendarily troubled capital is now awash in the sooty diesel particulates of hulking generators that keep selective properties lit night and day while belching out carcinogenic fumes. Beirutis are beholden to an amalgam of well entrenched crisis profiteers collectively referred to as the ‘generator mafia’ who supply both the massive mobile power generators and the fuel they consume for a hefty monthly subscription fee. A black-market of fossil fuels keeps the parts of the Lebanese capital lit and cool for those fortunate enough to not fall behind on the payments. Thus, many residents who can afford such pay two bills for power: one to the state’s official provider Electricité du Liban (EdL) which provides power perhaps an hour or two per day and again to the so-called mafia for much more sustained power for homes, shops, and offices.
But even the generator dons are grousing that they are beholden to the sways of uncertain international oil markets roiled by the Russian war in Ukraine and, therefore, make no promises that they will be able to supply Lebanese civilians and businesses with power forever. Some Lebanese are turning to solar energy which has quickly evolved into a kind of artisanal energy industry, outfitting apartment blocks and businesses that can afford the unregulated, costly alternative to billowing diesel smoke. That solar energy is being distributed ad hoc with no central state authority directing its integration, meaning that at the moment there is no overarching goal of delivering excess power generated to the nationwide grid and providing electricity to those of lesser means, Lebanon is operating under an every-man-for-himself stopgap economic model where what remains of the state bureaucracy fails to provide its citizenry with the most basic services.
"Beirutis are beholden to an amalgam of well entrenched crisis profiteers collectively referred to as the ‘generator mafia’ who supply both the massive mobile power generators and the fuel they consume for a hefty monthly subscription fee."
The crisis is so bad that when a store of ammonium nitrate caught fire and exploded on 4 August 2020, decimating the Beirut port’s aging infrastructure and destroying the state power utility’s adjacent headquarters, killing several employees inside, electricity production was relatively little affected because of the galaxy of privately owned generators providing the bulk of the electricity across the country. As the mobile phone videos of the otherworldly explosion shocked the world, for many Lebanese who lived through the terror, it was but another layer of crisis cementing the notion that Lebanon is essentially a failed state all but in the sanctioned official speak of international bodies.
While several of the petrodollar states of the Arab world are busy preparing for a post-peak oil consumer environment, Lebanon does simply lag behind; it isn’t even in the running. Where electric automobiles may soon become the norm among wealthier, far more orderly autocracies, Lebanon is massively dependent on creaking cargo ships with their iron bellies full of fuel consistently delivering to Beirut’s beleaguered port amidst the hotly contested waters of the eastern Mediterranean’s emerging energy peer competition. And this is the status quo for both its formal and informal electricity sectors as the national grid, or what remains of it, is almost entirely limping along via oil-fired plants.
Regional Rivals, Domestic Decay
Gulf Cooperation Council (GCC) members are of two minds when it comes to their approach to Lebanon. They feel the need to punish secular political actors who maintain cordial, working relationships with the two main Shia militia-cum-political parties, Hezbollah and Harakat Amal, that not only represent Iranian interests within the Lebanese polity, but also implement them. As Saudi enmity toward Iran is escalated through its armed intervention in Yemen’s civil war on its sand-strewn doorstep. Riyadh and Mecca view Hezbollah as an armed Shia interloper in its backyard, spreading Iranian influence and eschatology where it is least welcome from a Saudi security vantage and theological outlook.
GCC member states have been more hesitant to green light desperately needed financial aid to cash-strapped Lebanon over concern donor funds could inadvertently strengthen the position of their ardent sectarian rivals. Because the transnational nature of this ideological contest is not limited to here in the Levant, the locus in actuality resides in the Sunni-majority Arabian Peninsula itself where political expressions of Shia orthodoxy are suppressed at great cost to wider regional reconciliation.
Those in Beiruti political circles cannot afford to isolate Hezbollah and Harakat Amal because these one-time resistance movements are now integral to the country’s convoluted political machinations. Where the GCC, Riyadh, and Abu Dhabi in particular, are presented with a conflict is that by shunning the crises in Lebanon, they have no way to influence its internal politics and steer it away from Tehran’s immense influence there. Such is the Lebanese dilemma for GCC royals; if they are to be seen as the protector of Sunnis in the region, does that not include Lebanese Sunnis? At the moment giant, slickly designed billboards of the late Major-General Qassem Soleimani, the Qods Force leader assassinated by the United States in Baghdad in early 2020, dot the country with GCC influence on the wane.
On 10 March it was announced that Riyadh and Tehran would resume diplomatic ties, but how long the sectarian vitriol can be tamped down remains to be seen. Hezbollah’s leader, the reclusive Secretary-General Sayyid Hassan Nasrallah, was quick to praise the development in a bid likely to maintain his relevance in the local geopolitical picture. It can be assured, however, that Saudi authorities seeking to reengage with both Iran and Lebanon want nothing more than to see his gun-toting party marginalised. The tacit agreement that was mediated on the surface by Beijing, and previously by Muscat and Baghdad, does not specifically address their proxy rivalry within Lebanon. Somewhat similar to the Greece-Turkey rapprochement after the February earthquakes that failed to address, or carefully omitted, the thorny Cyprus issue, the lack of agreement about how to balance starkly divergent Saudi and Iranian interests inside Lebanon may provide kindling for another future flareup between these sparring middle power nations.
"Those in Beiruti political circles cannot afford to isolate Hezbollah and Harakat Amal because these one-time resistance movements are now integral to the country’s convoluted political machinations."
In the post-civil war decades, Lebanese society was often praised for its resilience to the point of cliché. Being battered by the intermittent armed conflicts with its southern neighbour in 1993, 1996, and 2006 and the assassination of Rafic Hariri on Beirut’s corniche in early 2005, observers marveled at how Lebanon repeatedly pulled itself back from the precipice and staged repeated comebacks. Today that once lauded ‘resilience’ seems a pathetic trope as so many feel the country is now beyond repair. Inflation and the lira crisis have hammered what is still left of the middle class. Currently there are no near-term economic indicators to provide even the slimmest ray of hope for those begging to emigrate to any place more stable. Young people contemplate risking all to get to Cyprus by sea, so devoid is the Lebanese state of hope. Lebanon has been declared “on the brink” by the United States Institute of Peace since January 2021, the International Crisis Group since January 2022, and the Royal United Services Institute since January 2023 yet many Lebanese feel abandoned by the international community as a form of collective punishment for the endemic corruption of their political leadership class.
A Forgotten Crisis
International media coverage of Lebanon’s multitude of overlapping crises seems to have entirely dropped off at this stage. Foreign correspondents based in Beirut are being sent abroad to cover natural disasters and wars while there is next to no interest in the city they currently reside. Ordinary Lebanese have taken to increasingly desperate measures to draw attention to their personal and national woes such as robbing or even setting fire to bank branches where their dollars have either evaporated or are trapped. Bank robbers can be viewed as heroic vigilantes rather than hardened criminals in this strikingly desperate context.
With the lira hitting as low as 90,000 to the US dollar in late February, it has now lost approximately 98 per cent of its value according to the street rate. Lebanon’s currency was once pegged at about 1500 lira to the dollar beginning in 1997 and that rate roughly held until 2019 when the financial meltdown began. Beirut is increasingly resorting to dollarisation with other parts of the country quickly following suit. The country’s poorly managed retail banks no longer have the liquidity to pay back their depositors, not terribly unlike a failed crypto exchange that is unable to return assets to retail investors.
Many businesses have begun to price their goods in US dollars as a safeguard against the seemingly absurd currency swings that surge from hour to hour on some days. Goods and services can still be transacted in the lira in retail already self-dollarised but at that very moment’s exchange rate after consulting an app with up to the minute figures. The local currency’s hyper black market rate volatility has wounded vestiges of national pride while enshrining economic pessimism about the country’s future. Numerous shopkeepers and hoteliers that spoke to The Red Line posited that it was only a matter of time before the lira was scrapped altogether akin to Ecuador or El Salvador where the US dollar has become the de jure currency rather than just de facto legal tender financial instrument.
The thinking goes that the dollar as the sole currency rather than a parallel one would eliminate the existing multiple exchange rates such as the well below market rate set by the central Banque du Liban in February. These far lower rates have stoked rage against the political class perceived as rampantly corrupt with their own cash safely stowed offshore. Ordinary people have not only had their life savings decimated, but bank strikes coupled with arbitrary limitations on withdrawals mean many cannot access what remains.
Lebanon’s post-civil war political order remains completely broken down. Its constitutional power sharing structure based on matters of religious identity seems like an anachronism today as the country’s institutions decay in vast dysfunction. The country remains politically crippled with a feckless caretaker Prime Minister Najib Mikati, a Sunni and no functioning cabinet or president, who must be a Maronite as mandated by law. Devoid of a functioning government or head of state, the reforms demanded by external actors for any form of monetary bailout shall remain stalled. Former president Michel Aoun and Nasrallah’s Hezbollah are seen as the spoilers in this dynamic, especially in light of sanctions against Hezbollah—which is tethered to a heavily sanctioned Iran—that are holding the entire country back from moving past the impasse. Meanwhile the lira continues to plummet while the lights flicker in darkness.
Written by Derek Flood, reporting from Beirut and the Bekaa Valley.
Edited by Wade McCagh.