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Lebanon economic crisis: Sovereignty and solidarity are the keys to prevent collapse

As the US ramps up financial pressure, a political struggle is underway over whether Lebanon should turn eastwards to China, Russia and Iran for relief
Lebanese protesters take part in a symbolic funeral for the country in Beirut on 13 June (AFP)

Lebanon has joined the club of sanctioned nations by proxy. Limited sanctions were already in place, but the US Caesar Act targeting Syria has cast its net over Lebanon’s entire economy. 

The country’s crumbling financial system had been gasping for fresh foreign funds. It is now stuck between the anvil of morbidly corrupt Lebanese elites obstructing reform, and the hammer of financial coercion by western powers.

On top of accelerating inflation that has rippled into Syria, the spectre of sanctions in the wake of failed International Monetary Fund talks has triggered a political tussle inside Lebanon over turning eastwards to China, Russia and Iran for relief.

Wedded to the West

This is not the first time that Lebanon has been unhinged by shifts in the global and regional balances of power. But it is one of the most dangerous crises. Sanctions on top of financial bankruptcy, oligarchic manipulation, regional instability, coronavirus and a global slump, are a recipe for total collapse.

There is no denial of the impending calamity. But the undignified media spectacle of apocalyptic suffering, divorced from a serious discussion of the tough choices Lebanon faces, borders on sanctions-mongering and accentuates this very suffering.

Aside from being a historic fiction, Lebanese neutrality today is wishful thinking

The first choice is clinging to the West and forgetting the rest through negative neutrality. In real terms, this means passive normalisation with Israel and active distancing from Syria, both of which meet western expectations. Aside from being a historic fiction, Lebanese neutrality today is wishful thinking. 

Firstly, calls for neutrality underestimate the nature and extent of the ongoing geo-economic war, of which the Caesar Act is the latest salvo. Having lost the proxy war militarily, Washington is flexing its powerful financial muscle - powered by dollar supremacy in global markets - to spoil reconstruction efforts in Syria by its lesser rivals, Russia, China and Iran. 

More broadly, financial sanctions are now a fixture of US foreign policy, with the majority of affected states in the Middle East. These sanctions are part of a multi-front war that involves tertiary actors such as Turkey, Egypt and the Gulf states and are tied to reconstruction in Iraq and Syria, geo-military rivalries in Yemen and Libya, settler-colonial expansion in Palestine, and control over gas fields in the Eastern Mediterranean. Lebanon is engulfed by these conflicts from all four cardinal directions.

Political suicide

Secondly, neutrality vis-a-vis Syria in particular is economic euthanasia and political suicide given the two countries’ shared borders, common history, interdependent economies, joint threat of Israeli aggression, oligarchic and authoritarian governing elites, and - as these sanctions have shown - converging financial crises. 

Neutrality would cut Lebanon off from its only land lifeline to Syria and the wider region at a time when air and sea travel are grounded thanks to Covid-19. It would also revive animosity between the two peoples while doing little to alleviate the crisis or topple ruling elites. 

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In addition, western powers continue to play the game of double standards, feigning concern while tightening the noose. While Washington slapped criminal sanctions on the entire population of Lebanon, its ambassador in Beirut singled out the usual suspect, Hezbollah, for destabilising the country. The accusation was parroted by her British counterpart, while a sniffer dog at London’s Heathrow Airport - as this author witnessed firsthand - frisked Lebanese expatriates carrying much-needed cash back home. Travellers caught “red-handed” were interrogated without cause. 

To top it off, Gulf states within the western orbit are also withholding aid while awash with trillions of dollars in sovereign funds.

Finally, US allies themselves, such as German Chancellor Angela Merkel, are anticipating a decline in the global role of the US. More to the point, European states, as well as the US, have multibillion-dollar trade and financial ties with China and the rest of the east - but they have no qualms about denying Lebanon and the region their sovereign share of ties.

Going East

Despite these realities, resistance to seeking eastern alternatives persists. Dependency on western and Gulf capital runs deep within Lebanese society, beyond the banking and business sectors. 

The private education and NGO sectors, home to large segments of highly visible pro-uprising activists, are heavily reliant on western funding. These material ties are augmented by an internalised cultural affinity to all things western and prejudice against all things eastern. Some resistance is also driven by a blind rejection and immature ridicule of any proposals uttered by status-quo forces.

A man walks past a money exchange company in Beirut on 1 October (AFP)
A man walks past a money exchange company in Beirut on 1 October (AFP)

In theory, turning eastwards increases bargaining power vis-a-vis the West, diversifies sources of foreign investment, and could offer practical and quick solutions to pressing problems such as power generation, waste management and transportation infrastructure. But in reality, it is not the easy way out it is being portrayed to be.

Firstly, its current proponents reduce the turn eastwards to a tool against western intervention that would strengthen ties with the Syrian regime without holding the latter accountable for its role in the killing, displacement and destruction in Syria, or curbing the stranglehold of Syrian oligarchs associated with the regime on the country’s economic future. 

Nor is the turn eastwards preconditioned by cleaning house in Lebanon itself. The oligarchs who looted public wealth for so long will not bear the costs of financial loss, let alone face justice for their crimes. Without these corrective measures, Chinese or other foreign investments are likely to turn into dividing up the spoils of sanctions. It will reinforce existing structures of oppression, clientelism and inequality.

Secondly, Chinese capital is not manna from heaven or a communist free lunch. Reports of plans for nine development projects worth more than $12bn sound promising and may offer some respite, but these come with strings attached.

They include possible privatisation of state assets, government guarantees to compensate potential losses that will ultimately come out of citizens’ pockets, continued - even if partial - reliance on dollar-based banking systems, and access to energy resources, which in the case of Lebanon are confined to potential energy reserves in a hotly contested sea zone. 

Sovereignty deficit

Formal state-to-state protocols are preconditions for all of the above, the same way they are for requesting legal assistance to return stolen assets deposited in Switzerland or other offshore financial havens. 

Whether turning west, east or inwards, fixing Lebanon's political regime is crucial to restoring external and internal sovereignty

Government decrees are also needed internally to to implement the basic demands of the uprising and resolve the crisis in a fair and expedited manner. These include legislating capital controls, forcing the oligarchs and their banking agents to bear the costs of collapse, implementing universal healthcare, redistributing wealth through progressive taxation, clearing up violations of coastal beaches to revive tourism in a competitive neighbourhood, reforming unjust labour and personal status laws, and subsidising productive economic activity. 

In other words, whether turning west, east or elsewhere, fixing Lebanon’s political regime is crucial to restoring external and internal sovereignty, without which major change is unlikely to happen.

Since its founding, Lebanon has had a sovereignty deficit in relation to foreign powers and its ruling oligarchy. It is now facing the twin challenge of restoring both amid unfavourable conditions. 

The path to sovereignty does not place all foreign actors in the same basket. Aware of its own economic limitations and position as part of the Global South, and in the face of US threats, Lebanon should adopt a strategy of positive neutrality that plays on the contradictions of the ongoing geo-economic war to maximise the gains of its people - not its usurping elites or neocolonial masters, old or prospective. 

Dignity and social justice

Fighting for sovereignty on both fronts, external and internal, in the face of global powers, requires the mustering of tremendous political strength. This is not possible without a well-organised mass movement that is still missing in Lebanon, let alone the absence of regional solidarity stretching from Iraq to Palestine, which incorporates geopolitics into revolutionary struggle. 

In Lebanon, the starting point is necessarily Syria. Whatever the sensitivities, prejudices and complications associated with Syrian-Lebanese relations, they need to be reconfigured in a manner that serves rather than sidelines the fundamental demands of both uprisings for political dignity and social justice. 

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This includes, first and foremost, confronting the contradictions of fighting against the two major historical forces impacting them today: oppressive regimes on the one hand and Zionist colonisation and occupation on the other.

All proclamations to the contrary, this is not a straightforward matter given the alignments on the ground. 

Another would be redrawing the terms of struggle across class, rather than nationalist, lines. This means finding common cause with Syrian and Palestinian workers in Lebanon, beyond the liberal paradigm of refugee rights, as well as uniting efforts to dislodge the ruling elite in both countries without further foreign intervention.

A third would be a united vision of managing the global shift from West to East in coordination with fellow Global South nations.

Devising solutions to these and other thorny issues that are both morally defensible and politically viable is not an obvious or easily achievable task. But with street mobilisation on the wane and community solidarity in the face of hardship taking a front seat, they may be the necessary rites of passage for both struggles beyond the current stalemate.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Eye.

Hicham Safieddine
Hicham Safieddine is a lecturer in the History of the Modern Middle East at King’s College London. He is author of Banking on the State: The Financial Foundations of Lebanon (Stanford University Press, 2019).