Limited Foreign Investment Sustains Iranian Influence In Lebanon
Though the country’s civil war ended in 1990, Lebanon’s sectarian strife remains relevant to the political status quo. With time, societal fractures have deepened which has enabled outside actors to exploit the situation, turning Lebanon into yet another battleground between the East and West, and more locally, amongst Shia and Sunni Muslims. Of the many catalysts that have contributed to the dismal economic momentum, one of the most obvious is the lack of foreign investment.
Exploiting the Chaos For Political Gain
In the post-war years, much of Lebanon’s efforts towards reconstruction were focused on planning and rebuilding Beirut’s Central District, notably via the public-private partnership that resulted in the formation of Solidere, a Lebanese joint-stock company in charge of planning and redeveloping Beirut Central District. Designed to revitalize Lebanon’s commercial, cultural, and political capital, this specific strategy was not without controversy. The company’s Disneyland-like approach of building a high-end shopping destination replete with luxurious housing projects put the development outside the reach of most Lebanese citizens. Now, Solidere is facing the consequence of its narrow approach, with the company’s shares recently reaching a record low as it grapples with worsening economic conditions.
Additionally, the country’s significant sectarian splits mean that these efforts have failed to address widespread societal fragmentation and alleviate many of the economic problems lying beyond Beirut’s core. To this day, ongoing conflicts between Maronite Christians, Druze, Shiite, and Sunni Muslims have hobbled the government, giving rise to more extremist elements both inside and outside the nation’s borders. Moreover, fighting in neighboring Syria has decimated the nation’s economic momentum, driving GDP expansion to a mere 1.00% in 2018.
Political inaction has also stymied foreign direct investment (FDI) to a large extent. After peaking at a record of $872.52 million in December 2009, figures from September 2018 of just $211.14 million highlights the steep decline in foreign interest. This political and economic vacuum has in many ways indirectly supported the rise of Iranian influences within the country, specifically through its proxy, Hezbollah. The funding has supported many narrow interests, namely financing Hezbollah’s military wing and social programming, addressing the Shiite community specifically and not Lebanon at large.
According to U.S. Special Envoy Brian Hook, the Iranian financial support for Hezbollah was formerly upwards of $700 million annually, supposedly comprising nearly 70% of the terror group’s annual inflows. This external influence is especially damaging for Lebanon as a whole and the region at large. Besides supporting a single segment of the population, the continued arming of Hezbollah threatens to spark a conflict with neighboring Israel, bringing the entire region closer to war. Yet, the tides are indeed changing amid a transformation of the U.S. and EU posturing towards Iran.
A New Era For Lebanon on the Horizon
Recently renewed sanctions imposed by the United States are forcing Iran to reduce its financial support for Hezbollah. Not only are these sanctions harming Iran, but also the Lebanese economy, and in particular, Hezbollah’s finances. The U.S. has offered a $10 million reward for information that exposes and disrupts the terror organization’s financing. Alongside the U.S., the United Kingdom recently designated Hezbollah as a terrorist group, thereby limiting its ability to access financial networks and hampering its ability to raise funds from wealthy Lebanese benefactors and businesses.
However, in tandem with these efforts to break Iran’s stranglehold on the region, the U.S. and Europe have the opportunity to replace Iran as the most influential external authority in Lebanon. At a time when the Lebanese economy is struggling to find its footing, the incorporation of strategic foreign investment would go a long way towards restoring the country's economic growth. Moreover, it makes increased foreign investment more attractive, especially with efforts underway to cut off all Iranian options for remitting funds to Lebanese actors like Hezbollah.
By offering to replace Iranian funding, and engaging in steps that would improve Lebanese infrastructure and overall government stability, the U.S. and EU could incentivize a new era of prosperity throughout the country. Although the responsibility for restoring peace and prosperity within Lebanon depends on the Lebanese themselves, foreign investment is key to improving Lebanon’s economy and society. Former prime minister, Saad Hariri, stated that positive momentum instilled by foreign investment would provide the push necessary for ridding the country of Iran’s undue influence.
The Strategic Path Forward
Lebanon has long been the proxy battleground of Eastern and Western influences. From the era of the civil war that resulted in the establishment of Hezbollah to the present day, decades of conflict have conspired to mute economic momentum and increase sectarian tensions. Now, a new, brighter future is possible for Lebanon if the West is willing to take the necessary steps to restore the country’s former glory.
Should the U.S., with the help of the EU, support strategic investment and financial aid across the country (and not solely focus on Beirut) it can effectively displace Iranian funding, and a new, more prosperous Lebanon will emerge bringing stability to the region. As decades-old wounds continue to fester, these types of initiatives show great promise for slowly healing Lebanon’s vast social divisions and emboldening the government to act, thanks in no small part to a more supportive economic backdrop.