Tag Archives: Hizbollah

Hariri puts forward a cabinet proposal

by Sune Haugbolle.

So, after months of wrangling, Hariri yesterday finally proposed a cabinet line-up to President Michel Suleiman, and to the whole of Lebanon’s fractured political landscape. As expected, the proposal follows the earlier idea of a unity government with a 15-10-5 division of ministries, 15 to March 14, 10 to March 8 and 5 to Suleiman’s lot.

The main problem with the proposal is that it was essentially put forward without a prior agreement – since an agreement couldn’t be found. Hariri failed to meet Aoun’s demand that he get the Interior Ministry, and that his son-in-law, Gibran Bassil, keep the Telecommunications Ministry. Hizbollah, for their part, have refrained from putting pressure on Aoun, and without that happening the old rhino is unlikely to budge. This is to say nothing of Hizbollah’s own problems with the proposal, which falls short of meeting their own demands of guarantees.

So, nothing has chnaged really. Perhaps the only thing that should make us wonder is the timing of the announcement. Of course Hariri couldn’t stall forever; something had to happen, even if he likely knew that March 8 would reject his cabinet proposal out of hand. On the other side, it is possible that there were regional strategic reasonings behind Hariri’s actions. The proposal comes while Syria, March 8’s strongest external ally, is caught up in a spat with Iraq over last month’s Baghdad bombings, for which Iraq holds Syria partially responsible.  (For Danish speakers, here is a link to me talking about the Syria-Iraq controversy on Danish TV DR2 last Tuesday).  

Bashar al-Asad has refused to even acknowledge the nature of the problem, and despite Turkish and American attempts to set up a joint committee to investigate the border, Iraq is taking action on its own. Since last week, Iraqi security forces have been gathering on the Syrian border in an attempt to curb infiltration of Ba’athist militants, and Prime Minister Nuri al-Maliki is pushing for a UN tribunal to investigate foreign complicity in the bombings.

If Hariri has indeed reacted to these events, which occupy local media quite a bit more than international ones, he may have calculated that Syria’s focus on its dispute with Iraq, in addition to increasing domestic and international pressures on Iran, will weaken Hizbollah to the point where it is compelled to accept his cabinet. If this is indeed the case, Hariri has made a mistake: Hizbollah’s strength or weakness is not so much relative to regional events, as we have seen before, but primarily an effect of their own perception (which is ever strong and determined). Therefore the most likely outcome of the cabinet proposal is yet more threading water for Lebanon.

Lebanon’s economy continues to surprise

by Sune Haugbolle.

As a small distraction from the dramatic events in Iran, and Rasmus’ great coverage of them, here is an in-depth analysis of Lebanon’s curious economy, which has been booming in the midst of a financial crisis.

Now that the elections are over in Lebanon, it is time to look forward. It is likely that the formation of a new unity government will take some time, the sticking point being March 8’s wish for a blocking third of the cabinet.

Meanwhile, let’s take a look at Lebanon’s economy which so far has shown an amazing ability to weather the international financial crises of the last year. There have been predictions lately from the Central Bank that economic growth could exceed 6% this year. The figure contradicts earlier predictions of a 2009 growth rate of 3%, down from 8% last year.

An unlikely success story

Lebanon has, indeed, been one of the unlikely success stories of the global financial crisis. The vital tourism and construction industries are booming, and capital is flowing into the country. As optimistic Lebanese leaders, bankers and businessmen have emphasised, the success is primarily due to conservative bank-lending and bank-investment regulations, limiting exposure to mortgage-backed instruments and other products that have hurt the balance sheets of other international banks, including many Gulf countries.

A result of the country’s long experience with perpetual instability in the national and regional political environment, conservative lending policies, backed up by a solid flow of remittances from millions of Lebanese abroad, have immunised the Lebanese economy from political turmoil. Apart from the months immediately following the 2006 war with Israel, the Lebanese economy has experienced uninterrupted growth since 2001.

Healthy bank sector

A few years back Lebanon’s state regulations were subjected to heavy criticism from domestic and international bankers. Now the financial crisis has turned Lebanese banks into a safe haven in the region, and the economy has thrived.

The proof is in the pudding: Bank deposits have grown steadily, rising 15% in the first three months of the year from the year-earlier period, foreign currency reserves were estimated at 17.6 billion dollars in January 2009, up from 9.8 billion at the end of 2007, and foreign liquid assets stood at 22.3 billion at the end of March 2009, a record high.

Danger signs

The banking sector’s success is remarkable but does not detract from the fact that Lebanon’s economy is well integrated into the global economy and will therefore inevitably feel some effects of its downturn in 2009. There are particular reasons for concern:

First, private investors have incurred great losses in national and international investments. The Beirut stock market alone has lost more than 5 billion dollars since mid-2008.

Second, the lack of capital investment will be felt in the crucial construction, telecommunication and service sectors in the medium term, particularly if the crisis continues throughout 2009.

Third, growth in recent years has mainly been restricted to these sectors. Although the construction sector has continued to expand in the first months of 2009, over reliance on construction is problematic because it is linked to remittances and Gulf capital.

Fourth, the stability of the Lebanese housing market depends on continued construction.

Remittances

A serious slowdown in remittances could therefore potentially start a domino effect in the Lebanese economy, hitting construction and real estate. Somewhere between a quarter and a third of Lebanon’s GDP comes from remittances from the more than 12 million Lebanese living overseas.

The IMF estimates that remittances will decrease globally by up to 10% over the next year. This means that thousands of Lebanese work in the Gulf countries, whose economies have been badly hit by the crisis. Furthermore, decreased investment from the Gulf would affect the real estate sector, which has been one of the main drivers of Lebanon’s growth.

Despite suggestions of the opposite, it is unlikely that unemployed highly skilled migrants will actually return to Lebanon and invigorate the economy as long as wages are so low. Statistics suggest that Lebanese migrant workers who have lost their jobs in 2008 have eschewed the low wages in Lebanon and instead preferred to look for work in emerging markets outside the Gulf, such as Iraqi Kurdistan and India.

Official figures suggest that repatriated capital has continued to increase in 2009 so far, but those figures could change as job losses begin to take effect. Lebanese exports to the Gulf are also expected to fall.

Public debt

The downside of Lebanon’s success story is enormous public debt, currently at 47 billion dollars, or 170% of the country’s GDP, and growing by 8%. More than 60% of that debt is locally owned, with more than a quarter of the Lebanese banks’ assets in treasury bonds. Public debt is around 60% of total credit owned by the banks which is, by international standards, very high. The Lebanese banking system is therefore highly exposed to the sovereign.

Reforms?

The state will continue to borrow heavily from local banks and international financial groups until the government adopts radical reforms to reduce haphazard spending and increase revenues. This is because the state continues to record budget deficits, in the first quarter of 2009 of 1.8 billion dollars.

On the positive side, the economy has proven capable of dealing with the negative numbers. Excessive liquidity in the local markets means that local banks will have no problem financing outstanding bonds in 2009.

Finance Minister Mohammed Shatah is one of the heroes of this situation. He has been lauded by US officials for his willingness to implement economic reforms. In April, Washington provided a grant of 50 million dollars in recognition of the Finance Ministry’s efforts to improve Lebanon’s fiscal position and set a stronger economic growth path as part of a 250 million dollar package linked to progress on economic reform.

Outlook

March 14’ victory in the June 7 elections is unlikely to detract from the overall positive outlook for the Lebanese economy. If anything, new Prime Minister, whether Fouad Siniora, Saad Hariri or a third choice, will team up with Shatah and his team of financial advisers. The result could be a renewed push for more wide-ranging privatisation.

In conclusion, Lebanon’s economy will continue to do well in the rest of 2009. This is mainly the result of clever financial policies from the central bank and a flexible banking sector. Barring a sharp fall in remittances, the banking sector will continue to safeguard against a downturn in the Lebanese economy in the short to medium term.

The Lebanese Elections: Outcome and Analysis

by Sune Haugbolle.

Here are my two cents on last Sunday’s Lebanese elections:

Saad al-Hariri’s March 14 coalition of Sunni, Druze and Christian parties retained control of parliament in elections on June 7, winning 71 of 128 seats.

The margin of the win – 68 plus three from associates against 57 for the opposing March 8 coalition – came as a surprise. The result effectively reproduces the parliament of the last four years, condemning Hizbollah and its allies to another electoral period in opposition. The prospect of a continued pro-Western government in Lebanon could aid US attempts to create momentum in regional peace negotiations.

The result
Despite reports from international election observers of widespread vote-buying, Lebanon’s 2009 parliamentary elections were conducted relatively freely, fairly and quietly. Big crowds queued at polling stations for hours, and a sometimes hateful tone emerged in the electoral campaign. Yet heavy security ensured that voting took place without any major violent incidents. The peaceful picture was somewhat marred by gunfights near Tripoli yesterday evening between rival supporters.

Voter turnout surpassed 54%, a record in Lebanese history and 10% higher than the fiercely fought 2005 elections. The number signals a growing popular belief in Lebanon’s democracy since 2005, despite political unrest since the killing of former Prime Minister Rafik al-Hariri, contrasting with poor showings at elections in the 1990s and early 2000s when Lebanon was under Syrian tutelage.

The high turnout may also have helped the March 14 coalition clinch a majority in key districts — Beirut I, Batroun, Koura, Besharreh and Tripoli. Elsewhere results were much as expected: March 14 dominated Beirut, the Shuf, most of north Lebanon, Western Bekaa and Zahle. Hizbollah and fellow Shia party Amal made clean sweeps in the south Lebanon districts of Nabatieh, Marjayoun, Hasbaya, Tyre, Bint Jubeil and Zahrani, while former General Michel Aoun’s Free Patriotic Movement (FPM) won all seats in the districts of Kesrouan, Byblos, Baabda and Jezzine.

Hizbollah
Hizbollah officials have reacted graciously in defeat. The party won all eleven seats which it contested and can therefore argue that it won the elections even if March 8 did not. It will also feel that the result does not change the status quo. It will therefore insist on a blocking third in a unity government, allowing it to continue to obstruct the passing of legislation if necessary. Furthermore, Hizbollah will continue to make clear that it will not tolerate any questioning of its role as a resistance party, the legitimacy of its weapons arsenal, and the fact that Israel is an enemy state.

As several Lebanese commentators have suggested, the outcome may suit it better than winning a majority, which would have made it the governing party and forced it to produce results. Instead it now retains its well-rehearsed role as the critical oppositional voice, which may explain the rather low-key reception of the result.

Christian battle
For March 8’s other main constituent, Aoun’s FPM, the defeat will generate more soul-searching Aoun lost in key districts to rival Christian leaders from the Phalange and Lebanese Forces parties. This is the second major political defeat to Christian rivals for Aoun, having already lost the presidency to Michel Suleiman last year.

Aoun must face that he has failed to persuade the majority of Lebanon’s Christians with his programme based on anti-corruption, secularism and bridge-building with Lebanon’s Shia parties, amid widespread scepticism about Hizbollah. The defeat could lead to an internal coup in the FPM, whose younger leaders have previously voiced unhappiness with ‘the General’.

Unity government
As leader of the majority party in parliament, Saad al-Hariri will be given the task of leading negotiations for a new government and set the direction of national policy. He will have no other choice than to aim for another all-embracing ‘unity government’, the third since 2005.

The key question is the extent to which March 14 will now use their relatively comfortable majority in negotiations. Hariri has signalled his unwillingness to grant the opposition veto power by giving them one-third of the seats in the new government, reasoning that it will lead to more paralysis of the kind that has stalled political life and lawmaking for long periods since 2005.

Hizbollah and its allies, on the other hand, will make veto power an absolute demand, arguing that the terms of the Doha agreement that resolved the crisis in May 2008 are still valid. Another problem is the post of Prime Minister. Following the successful elections and an electoral campaign which has seen him assume real leadership for the first time, Hariri may feel that now is his moment to seek the premiership. March 8 will likely oppose this, preferring a friendly candidate such as former Prime Minister Najib Mikati, or a more neutral figure like outgoing Premier Fouad Siniora.

These points of disagreement could lead to a drawn-out government formation process. In a worst-case scenario, Lebanon could be without a government for months, increasing the risk of violent clashes, and bringing back the fundamental schisms over which Lebanon’s political life has been log jammed for the last four years, namely Hizbollah’s weapons, support for the Special Tribunal for Lebanon, and whether Lebanon should ally itself with Syria and Iran, or with the West and its Sunni Arab allies.

Regional context
As always in Lebanon, much depends on the regional context. US President Barack Obama’s less confrontational approach and nascent Syrian-Saudi rapprochement may already have contributed to the calmer atmosphere. If the Obama administration’s regional peace efforts gain momentum, and the rapprochement between Saudi Arabia and Syria continues, a regional thaw could rub off on Lebanon.

US Middle East envoy George Mitchell will be in Beirut on June 14 for talks with Suleiman. A win for Mir Hossein Moussavi in this week’s Iranian elections and renewed Israeli-Palestinian peace efforts could generate further optimism.

Such progress would lessen the mistrust between political parties in Lebanon. Hizbollah could accept Hariri as prime minister and even relinquish the blocking third in exchange for guarantees regarding its weapons. At the same time, Druze leader Walid Jumblatt, who has been moving towards rapprochement with Syria and Hizbollah in recent months, could become a crucial bridging figure. And if all goes well, national defence strategy negotiations aimed at defining a national role for Hizbollah’s weapons could be resumed.

Policy challenges
Suleiman stressed yesterday that a new government must focus on political and administrative reforms. His comments reflected fear that a new unity government could be just as sclerotic as the previous ones. After extended periods of political stalemate in the last four years, Lebanon faces a long list of overdue social and economic policy challenges.

First, there is the electoral law, which was amended last year but is still far from meeting international standards. It requires changes in order to secure a democratic transfer of power in the future.

Then there are overdue reforms of the judiciary, which is needed in order to tackle widespread corruption. And most pressingly, despite Lebanon’s success in riding out the international financial crisis, large sectors of society need to be integrated better in the economy through better education and job creation. Work is also needed to begin to bring down Lebanon’s 42 billion dollar foreign debt. All this will require the immediate attention of the new cabinet.

In conclusion, this election result leaves the balance of parliament unchanged and Lebanon’s underlying problems unaddressed, but has strengthened both the (perception of the) country’s democratic institutions and the legitimacy of the March 14 government. The formation of a unity government is likely to be delayed by fundamental disagreement over foreign policy and national security, but could be aided by any breakthrough in US peace efforts in the region.

Miliband and Europe’s endorsement of Bashar’s self-image

by Sune Haugbolle.

What to think about the recent spout of European state visits to Damascus, and the Western attempt to engage Syria? First, let’s be realistic about the engagement: the many debates about what it would mean are moot, because it has in fact already happened, and there is little reason to believe that it won’t continue on the all important American front once Obama takes office early next year. David Miliband’s visit this week completes an extended “summer of love” for Bashar al-Asad, who can now look back at the time in 2005 and 2006 when his regime seemed under real pressure, from the Hariri tribunal and the general international sidelining of Syria, and smile. He has been vindicated in his policy of steadfastness, and he knows it. Ordinary Syrians may still be struggling with dire economic problems outside the Damascus circle of prospering cronies, and the UN tribunal may still throw up surprises that could incriminate the regime when it comes into action in the coming years. But unlike in 2005, these are now hurdles Bashar will feel he can handle from a position of strength.

That strength partly derives from the changing regional and international conjectures: a weakened US in the Middle East and the defeat of Bushism generally, Hizbollah’s steadfast resistance to Israel’s attempt to wipe it out in 2006, Lebanon’s inability to present a united front, and new leaders in France and now the US who appear to have “rediscovered” Syria’s potential as a central arbiter in the Middle Eastern jigsaw. Bashar is exactly where he wants to be, because Western diplomats increasingly see him as he wants to be seen: as a man in control of a country that would be chaotic without him, and with fingers in every regional pie of any importance, from Iran to Iraq, Palestine and Lebanon. To near-quote The Streets, he is good to know, and he knows it.

What we also know is that there is a dark side to Asad’s Syria. Western diplomats have not found this the right moment to confront Bashar with his country’s human rights record, which is arguably no less appalling than Saudi Arabia’s or Egypt’s, but still unacceptable. The “regrettable” aspects of Syria’s policies for Europe and the US have always been Damascus’ self-styled role as “capital of Arab resistance,” ie. its links with Tehran, Hizbollah, and Palestinian and Iraqi groups. It is only right that Miliband and others should cease to view Syria’s foreign policy as a stumbling block for negotiations. After all, Bashar al-Asad has shown that he can be moved, and that there is room for negotiation on almost all of the abovementioned fronts. Syrian-Israeli peace may even be within reach, to the benefit of all people in the region.

But it is not right that Miliband and other visitors to the Qasiyoun palace leave the complete lack of democratic reforms in Syria out of their policy of engagement. In fact, it is a slap in the face for the people who have struggled for years for political and human rights reform, and who continue to be imprisoned for asking for the most basic rights. Allowing Syria back in the fold without asking tough questions about these well-documented facts is nothing short of an endorsement of Bashar on all fronts. And although he may not be as bad as some have portrayed him, Bashar al-Asad’s legacy of stalled reforms is not one we should endorse, however badly we wish for normalisation in the Middle East. One can only hope that the US engagement, when it starts to take shape early next year, will do what the Europeans seem incapable of doing, and raise all the issue that are not part of Bashar’s self-image but that are very much part of daily life in Syria.