Just days before the two-year anniversary of the 4 August 2020 Beirut Port explosion, a part of the burnt-out hulk of the nation’s grain silos destroyed in the blast, collapsed. For weeks, a fire had been smouldering in the silos as the extreme summer heat ignited the fermenting grains left to rot inside the mangled structure. It was an all too telling metaphor for the disastrous state of Lebanon’s economy likewise left to rot and poised for collapse. Is Lebanon nearing that point of no return?

Lebanon on the Brink

The national grain storage facilities were never replaced over the course of two years, just as political paralysis and corruption have prevented Lebanon’s leaders from setting the country’s ship of state on a steady course. Instead, the country’s citizens have been battered by waves of suffering since the onset of the economic crisis in autumn 2019. The country’s currency has lost 90% of its value since then and 80% of Lebanese live below the poverty line.  Food inflation is over 1,000% since 2019 and now bread is almost unavailable.  Without Beirut’s storage silos, Lebanon has one month’s worth of wheat storage capacity using flour warehouses in Tripoli. While the resumption wheat shipments from Ukraine could prevent Lebanon from running out of bread, it will not end the crisis.

Although Russia’s 24 February invasion of Ukraine exacerbated Lebanon’s woes, the crisis had already reached catastrophic proportions.  In August 2021, six months before Russia’s Ukraine invasion, Lebanon’s annual inflation rate hit 137.8%, surpassing Zimbabwe and making the Lebanon the leading candidate for the worst economic crisis since the end of World War II. In 2022, the inflation rate has been consistently over 200%. Fuel is exorbitant and in short supply, leading to power cuts that can last for 23 hours a day.  Known for its iconic cedars and ancient forests, Lebanon’s citizens are now cutting down the trees in those forests for fire wood amidst the fuel shortage.

Despite early warnings, Lebanon has lost precious time and numerous opportunities to adopt a path to reform its economic and financial system. “The cost of inaction is colossal not only on daily lives of citizens, but also on the future of the Lebanese people,” the World Bank’s Mashreq Regional Director warned in May 2022, adding that there is “a risk of a systemic failing of state institutions and pressure on an already fragile social peace.”

Lebanon’s Crisis is Putting its Service Economy Out of Service

Lebanon is a service economy. In its heyday as the Levantine commercial hub of the Arab world, services accounted for around 70 percent of the economy.  Even at the start of the crisis, the service sector – primarily commerce, financial services, and tourism along with health services and higher education – accounted for 60% of the country’s GDP.  Now Lebanon’s human capital is being severely depleted by the crisis, threatening to put Lebanon’s service economy out of service.

According to polling by  the Arab Barometer, 48% of the Lebanese population want to emigrate, a figure that jumps to 61% among those with a college education. One in five doctors in Lebanon has either already left the country or is planning to do so. From scientists and engineers to creative fields ranging from marketing to the movie industry, Lebanon’s best and brightest are leaving.  And, there may not be anyone in the future to replace them.

According a United Nations estimate, Lebanon’s fertility rate fell below the 2.1 replacement level in 2021 and is projected to decline to 1.97 by 2030. Many young Lebanese are reluctant to have more children amidst bleak economic prospects and soaring prices for such items as infant formula and diapers.  In 2021, the price of  infant formula increased  over 700% percent to 100,000 Lebanese pounds, equivalent to about $66 at official exchange rates.

Lebanon’s demographic decline is worsening the impact of the crisis and could push the country past the point of no return.  Companies, such as those in Lebanon’s engineering sector, are relocating their business outside of Lebanon.  In contrast, Morocco with its thriving business ecosystem and robust demographics has become a magnet for engineering services and business processes outsourcing. As supply chains shorten and firms servicing European markets seek to nearshore operations in the southern and eastern Mediterranean, Lebanon is being passed over for other locations. The one-time commercial capital of the Levant could find itself the odd man out in the new architecture of trans-Mediterranean commerce.

A Glimmer of Hope in the Eastern Mediterranean

The drivers behind the corruption in Lebanon’s political system are well known.  With a governance system that divides offices among the country’s major confessional faiths, elite capture has occurred through the wheeling and dealing among the elites of the various confessional communities. Lebanon’s resulting fiscal mismanagement, recently labelled by the World Bank as “Ponzi Finance”, has the country’s economy teetering over the edge of a cliff.  The major political actors within the Lebanese system are also connected to the larger geopolitical fault-lines in the Middle East involving Syria, Iran, the Arab Gulf States and Israel. These external rivalries serve to churn political conflict and violence within the country.

Lebanon has always thrived when it has been able to use its Levantine cosmopolitanism to broker interchange among people and business across the Eastern Mediterranean, linking Europe and the Middle East. The Eastern Mediterranean itself is now in a season of multilateral conciliation and this may provide a moment of opportunity for Lebanon. The Abraham Accords have brought Israel into closer cooperation with the UAE, Bahrain, Sudan, and Morocco, followed by a recent further thawing of relations with Saudi Arabia. Turkey has launched rapprochement initiatives with Egypt, Israel, and the UAE. The UAE and Saudi Arabia have been looking to reduce tensions with Iran.

A glimmer hope may rest in the progress made towards concluding an agreement between Lebanon and Israel demarcating their maritime boundary. Lebanon’s foreign minister announced that “massive progress” had been made in the 1 August round of negotiations, toward a final agreement.  A deal would help boost investor confidence in Lebanon’s efforts to develop its own offshore natural gas resources and could pave the way for Lebanon to join the Eastern Mediterranean Gas Forum. Beyond natural gas, an agreement may help make Lebanon less susceptible to being an arena for regional tensions.

The Lebanese people have proven themselves time and time again to be resilient and resourceful.  A more cooperative Eastern Mediterranean environment could be conducive to helping Lebanon’s citizens to put the country’s economic house back in order before the house collapses.

L'articolo Out of Service: Is Lebanon nearing the point of no return? proviene da InsideOver.

Why Lebanon? Some years ago the distinguished historian Jonathan Steinberg wrote a book entitled Why Switzerland? And a similar question can be posed for Lebanon which, like Switzerland, is host to several different communities. In the Lebanese case we need to go much further back in time than the thirteenth century AD which saw the birth of the Swiss cantons. Instead, we are looking at the thirteenth century BC. For the coast of Lebanon might appear to be a narrow strip hemmed in by mountains, an unlikely centre of trade and industry, but its original importance lay precisely in the extensive resources of wood. As far back as 1075 BC an Egyptian official named Wenamun set out from the Nile Delta on his way to Byblos (modern Jubayl in Lebanon) to obtain timber for the rebuilding of an Egyptian temple. His adventures, fictional or more probably true, are recorded on a papyrus scroll that has survived till today. The resources in wood of the Lebanese mountains were a vital resource for the Egyptians, who could obtain poor quantities of wood of poor quality in Egypt.

It is therefore no great surprise that the strip of coast that now constitutes Lebanon was the birthplace of trans-Mediterranean trade in antiquity. The Phoenician merchants were easily able to obtain the wood they required for building sturdy ships able to sail to and beyond the Strait of Gibraltar. The merchants of Tyre founded new settlements as far west as Carthage and Cádiz. They also looked eastwards towards the growing power of Assyria, providing luxury goods for the court of the Assyrian kings. They remained a significant presence in imperial Rome, bringing luxury goods from the east. Lebanon was therefore already the crossroads between the landmass of the Middle Est and the entire length of the Mediterranean, a role that it would preserve for most of its history.

In the Middle Ages this same stretch of coast was conquered first by Muslim armies, in the seventh century, and then by the crusaders at the end of the eleventh century. The crusaders held it for less than two centuries, but they eagerly exploited its resources. Near Tyre sugar plantations, many of them owned by Venetian merchants, supplied what was still a rare and costly delicacy to western Europe. The conquest of the coastline by the Mamluk rulers of Egypt in the late thirteenth century was accompanied by the destruction of many of the Levantine ports, but this only gave greater prominence to Beirut, which was preserved and built close business ties to the Genoese and Venetian merchants who operated out of Famagusta in Cyprus. Among the products these traders handled was cotton, exported to northern Italy and transformed into textiles including the famous fustians of Lombardy made out of a combination of cotton and wool.

This was also an area of great ethnic and religious diversity. A Spanish traveller, Benjamin of Tudela, passed through Lebanon in around 1170 and noted the presence in the mountainous interior of the Assassin sect of Shi’ite Islam and of the Druze warriors, members of a religious group that diverged from Shi’ite Islam in the eleventh century and preserves distinctive beliefs and practices; one is reincarnation but others are still kept secret. To these groups should be added the Maronite Christians in the interior, who venerated several local saints and from the sixth century onwards developed loose ties to the Roman Catholic Church as a result of their common theological position, a relationship that was confirmed during the late twelfth century and still holds. The religious map of modern Lebanon is further complicated by the very substantial Shi’ite population living between Tyre and the Israeli border, as well as a large population of Palestinian refugees and their descendants, who are predominantly Sunni Muslim, while the country’s Jewish population, once a significant element, has all but disappeared.

When Lebanon emerged from centuries of Ottoman domination (the Turks conquered the region in 1516) these religious divisions became crucial in determining its future. The Druze and Maronite leaders were already cooperating with one another in the local government of the region during the eighteenth century; but the French mandate in Syria following the First World War and the break-up of the Ottoman Empire at last offered a chance for the ambitions of the nationalists to become real. In establishing a republic of Lebanon within French Syria in 1926, France recognized the exceptional significance of its Christian inhabitants while trying to accommodate the interests of the other groups as well. French attitudes were moulded by a nostalgic affection for the era of the crusader states, which were seen by historians as an early expression of the mission civilisatrice of France in the Mediterranean (not a view held nowadays). An fully independent Lebanese republic came into being in 1943 amid the chaos of the Second World War; its constitution still insists that the president must be a Maronite and the Prime Minister must be Shi’ite.

Since 1948 one of the major issues in Lebanese politics has been the presence of Israel to the south. Lebanon sees itself as an Arab nation and is a member of the League of Arab States, even if it is the only member to contain such a high proportion of Christians, mostly of them descended from the pre-Islamic inhabitants of the Middle East. Although Lebanon joined the Arab attack on Israel that year it tried as far as possible to keep a low profile in the wars against Israel. However, the government has never been successful in limiting attacks on Israel first by the Palestine Liberation Organization (bearing in mind the large Palestinian population in southern Lebanon), and subsequently by the Iranian-funded Hizbollah organization. Following the Lebanese civil war that broke out in 1975 and lasted till 1990, Israel invaded Lebanon in 1982, in support of Maronite allies, reaching the outskirts of Beirut, and later occupying a small strip of land across from its northern frontier until 2000. Syrian troops moved into the country – Syria never having recognized the independence of Lebanon – and were only dislodged in 2005.

All this has had a serious effect on the capital, Beirut, In its heyday it was one of the major business centres of the Middle East, and with wealth came a reputation for a hedonistic high life. Its hotels and clubs attracted hordes of visitors from more Puritan parts of the region. However, the destruction in civil war of parts of the city, followed by their rebuilding, followed by their renewed destruction, has helped destroy the economy as well. In 2022 it has been marked by steep inflation, power cuts, food shortages and – of course – renewed political crises. The political influence of Hizbollah seems to be impossible to break. One consolation, perhaps, is that the Bekaa valley still produces excellent wines including those of the prestigious Château Musar; but at the moment the economic and political future continues to look bleak. No longer the bridge between the Mediterranean and the Middle East, Lebanon risks becoming a failed state.

L'articolo The Bridge Between the Mediterranean and the Middle East proviene da InsideOver.

In recent weeks, the Trump administration has made rapid progress on normalization of relations between certain countries that have been hostile to one another for decades.

Firstly, US President Donald Trump signed a deal that normalized relations between Israel and the UAE, which was then followed by a deal that strengthened economic ties between Kosovo and Serbia.

And now, the US President has done it again by announcing a landmark deal to normalize relations between Bahrain and Israel.

This is a Historic Achievement for Trump

For decades, most Arab states have boycotted Israel, insisting that they would only establish ties once the Palestinian dispute had been resolved.

Bahrain has become the fourth country in the Middle East – following Egypt, Jordan and the UAE – to recognize Israel since its founding in 1948.

Trump and Israeli Prime Minister Benjamin Netanyahu both welcomed the deal, as did the UAE.

However, both Palestine and terrorist group Hezbollah were quick to condemn the agreement.

This is a historic achievement for Trump and his son-in-law, Jared Kushner, who has been instrumental in forging these deals for his father-in-law in his capacity as senior advisor to the US President.

The Bahrain-Israeli Deal Could Affect the US Election

The Bahrain-Israeli deal will affect Trump domestically. Although the latest opinion polls suggest that the US President is on course to lose this year’s election, Middle Eastern politics could have an impact on specific groups of voters that the Republicans need to win over if they have any hope of ensuring Trump returns to the White House in November.

A Pew research poll in July showed 8 in 10 white evangelicals still intend to vote for Trump. Mark Tooley, editor of Providence, a journal that focuses on Christianity and foreign policy, believes that the US President’s foreign policy successes will convince those who were “tottering on the edge that God’s support remains.”

Time reports that Tony Perkins, President of the Family Research Council, one of the largest evangelical advocacy organizations in the US, says that Trump’s Middle East accord that was signed earlier in the year is unlikely to dissuade many evangelicals from voting for Trump, even if Israel suspended its annexation of Palestine.

A major Jewish donor also told Time that peace in the Middle East “is a real feather in his (Trump’s) cap with the Jewish voters.”

Iran and Turkey Will Feel Increasingly Isolated

The significant impact of the Bahrain-Israeli deal will be felt in the Middle East. The pact will isolate both Iran and Turkey further.

The growing threat from Tehran has no doubt pushed many nations who used to be hostile toward Israel further into Jerusalem’s arms before the Palestinian dispute has been fully resolved. Growing insecurity made it easier for Trump to sign peace deals with both the UAE and Bahrain.

There will now be increased pressure on Saudi Arabia to normalize its relations with Israel too.

The Times of Israel suggests that Bahrain would not have proceeded with the Bahrain-Israeli deal without Riyadh’s blessing.

Will Saudi Arabia Normalize Relations with Israel?

The Saudi Government allowed an Israeli El Al jet to fly over Saudi Arabia to the UAE for the first time on August 31, but it is unlikely that Riyadh will be normalizing relations with Israel soon.

Despite this, the more Iran poses a security threat to the Saudi kingdom, the more likely they are to forge their own deal with Netanyahu, particularly if the US pushes for one behind closed doors.

Countries that cut off their ties with Israel in the past may be persuaded to reforge them again because of the increasing threat that both Turkey and Iran pose to the Middle East. For example, in 1999, Mauritania established diplomatic relations with Israel, but severed ties again in 2010.

Either way, the Bahrain-Israeli agreement ensures that there may be more deals like this one in the future as long as Iran and Turkey continue to push many Middle Eastern nations closer together.

L'articolo What Impact Could Trump’s Bahrain-Israeli Peace Deal have? proviene da InsideOver.

Fox News reports that US President Donald Trump and the Pentagon intend to cut the number of American troops in Iraq from 5,200 to about 3,500. A US official confirmed that the Iraqi government supports Washington’s troop reduction.

Trump informed reporters that he “looks forward to the day when we don’t have to be there.” The remarks came during an Oval Office meeting with Iraqi Prime Minister Mustafa al-Kadhimi.

Trump is Withdrawing the Troops for Electoral Reasons

The announcement comes at a critical time for the Trump administration and it could have a significant domestic impact. There is a presidential election fast approaching and the US President’s latest decision regarding troop reductions in Iraq has come alongside many other significant foreign policy successes. These include the UAE-Israeli agreement and the recent pact between Kosovo and Serbia.

Yet the upcoming US presidential election means that the timing of these decisions is no coincidence, as they help reinforce the image that Trump is a ‘peaceful president.’ Also, if Trump does lose the election as so many opinion polls predict, he has a limited amount of time to achieve many of his aims.

The US President is not withdrawing American troops from Iraq altogether, and he would be wise to do so for now. Obama made the mistake of completely withdrawing US troops from Iraq in 2011, only to return years later to tackle the threat that the Islamic State (IS) posed to the country’s stability. The New York Times discovered that ISIS has mobilized as many as 18,000 fighters in Iraq and Syria. These sleeper cells have carried out sniper attacks, ambushes, kidnappings and assassinations against community leaders and security forces.

ISIS Remains a Threat to Iraq

ISIS has a substantial war chest of as much as $400 million and the terrorist group uses extortion to finance clandestine operations. Farmers in northern Iraq who refuse to pay have their crops burned. Therefore, Trump has managed to balance the need to reduce troop numbers for electoral purposes whilst preserving Iraq’s security.

There are other threats to Iraqi sovereignty beyond ISIS. The US wants to preserve its hegemony in Iraq to counter the threat that Iran and Turkey pose to the Middle East in general. In September 2019, a drone and missile attack targeted an Aramco oil facility in Saudi Arabia. Houthi rebels, known to be supported by Iran, claimed responsibility for the attack.

Michael Rubin, scholar at the Middle East Institute and author of Dancing with the Devil, told Al-Ahram Weekly that attacks by Iranian-sponsored militias will ensure the US remains in the Middle East.

The Iraq War is Adding Trillions to US Debt

A recent online presidential meeting between Iranian President Hassan Rouhani and Turkish President Recep Tayyip Erdogan reaffirmed both leaders’ commitment to preserving Iraq’s sovereignty. It will be harder for them to interfere in Iraq’s affairs if the US remains there.

Regardless, the US cannot remain in Iraq forever due to the impact the Iraq War has had on America’s finances. The Balance found as of August 2020 that the conflict added $1 trillion to the US’s debt, which included increases to the base budgets of the Department of Defense (DOD) and the Veterans Administration (VA). The DOD base budget grew by $193 billion and the VA budget expanded by $47.7 billion.

Successive US presidents will find it difficult to justify spending billions of dollars on overseas operations if the results do not match the funding required for them. At what stage does the US say enough is enough?

Until the threat that ISIS, Iran and Turkey pose to Iraq has been tackled, the presence of US troops in Iraq will continue to have a positive impact. Trump is right to suggest that America cannot fight endless wars, but Iraq must be able to defend itself in the future. It is clear that the day when US soldiers can leave Iraq forever has not yet arrived.

L'articolo What Impact Could Trump’s Reduction of US Troops in Iraq Have? proviene da InsideOver.

Iran’s power has historically resided not in its military, economy, or politics, but beyond its borders in proxy militias. By funding and arming groups across the world, from Latin America to Africa, Tehran spreads its influence and power. That influence is at risk of beginning to wane, however, as Iran is slowly losing the ability to keep proxy groups funded.

Soleimani’s Assassination Created a Power Vacuum

This is most evident in Iraq where Iranian-backed proxy militias were expecting payment earlier this year but didn’t receive it, as the Associated Press reported. Instead, the general who replaced Qasem Soleimani arrived in Baghdad with silver rings, not cash. On another visit, Esmail Ghanni was required to apply for a visa, a formality that Soleimani was never subjected to.

In Iraq, militias that once dutifully responded to Tehran’s beck and call are now at risk of slipping from Iran’s control. When Soleimani was in-charge, there was a strongman to keep the groups in line. He commanded respect and Tehran never tried to swindle its way out of paying proxy groups.

Soleimani also boasted a diplomatic nature capable of bridging the gap between rival groups, Iraqi officials said. Critically, the slain general was fluent in Arabic, whereas his successor Ghanni is forced to rely on a translator.

The assassination of Soleimani aligned with a sharp economic downturn in Iran, both designed by Washington. In a sign that the Trump administration’s maximum pressure campaign is working, Ghanni informed militia leaders in April that there would be no money flowing form Tehran for the near future.

The Popular Mobilization Forces (PMF) — the parent organisation for Iran’s various proxy groups based in Iraq — is paid through the Iraqi government and received $2 billion in the 2019 fiscal year. However, groups count on Iran to give them extra cash which can be as much as $9 million. For smaller groups, this cash is critical to maintaining operations and securing the loyalty and support of members.

Leadership Crisis Snuffs Out Iranian Loyalty

Simultaneous to Iran’s woes, the PMF is undergoing a leadership crisis. Its top leader Abu Mahdi al-Muhandis was killed alongside Soleimani in the American drone strike in January. 

“With al-Muhandis gone, there is an absence of an anchor around which (PMF) politics revolves,” said Fanar Haddad, an Iraq researcher.

The death of al-Muhandis opened the door for PMF militants to openly challenge what they perceived as pro-Iranian leadership. They often complained that pro-Iranian groups were treated better than Iraq-aligned militias; thus they seized the opportunity to forge their own path.

“Hajj Abu Mahdi made us an official group, it’s the most important thing he did,” said Mohammed al-Mousawi, a PMF commander. For the years ahead, he had planned greater training for fighters, academies and recruitment to improve management, according to al-Mousawi. However, al-Muhandis’ vision died with him, and so too have Iran’s plans to establish regional supremacy via proxy.

Some militants broke away from the PMF forming their own forces. One, the Usbat al-Thairen, allegedly attacked US troops in March. Another four groups decided they would no longer answer to the PMF, instead choosing to listen to Iraqi Grand Ayatollah Ali al-Sistani.

“They are basically saying we do not want an organ that takes its orders from Iran,” said Randa Slim, director of the Conflict Resolution and Track II Dialogues Program at the Middle East Institute.

Turkey and Russia Stand to Benefit

For Iran, the development in Iraq could not come at a worse time. It arguably would have happened without the economic turmoil; Soleimani and al-Muhandis were integral in keeping Iraq-based proxy militias aligned with the common goal of supporting Tehran’s interest. Without them, the groups would have faced a problem of leadership regardless of Iran’s economic situation.

However, lacking funds to pay them puts Tehran in an unfamiliar position. For decades it has cultivated militants and spread its message far and wide to recruit volunteers. For the most part, Iran has been widely successful with this strategy. To make it continue to work though, it demands funding to secure loyalties or at bare minimum, strong leadership to explain why the funds are temporarily delayed.

Right now, Iran has neither and this threatens Tehran’s regional influence at a time when Turkey and Russia are making gains. With the US pulled out of Syria and soon Iraq and Afghanistan, the major power broker is leaving the region. Iran’s tactics are not like those of Russia and Turkey. It doesn’t send its troops on excursions into neighboring states. Instead, it consumes them from within through proxy groups.

Without them, Tehran is powerless to influence its neighboring states. Instead, groups will begin to fall in line with their own governments or simply become rogue militias with their own agendas. In Tehran’s place, Ankara and Moscow will predominately guide Middle Eastern policy.

Iran could never be expected to entirely retreat from the world stage or abandon its strategy of growing proxies worldwide. The struggles it now faces could be only temporary. If American presidential candidate Joe Biden wins the election in November, Washington may take a softer stance on Tehran, thus enabling money to once again flow to proxy groups.

In the interim, however, groups will slowly slip from Tehran’s grasp as its power and ability to fund them wanes.

L'articolo Iran’s Power Wanes as it is Unable to Pay Militias proviene da InsideOver.