31 May 2009

* The Economics of a Hizballah Win

Hizballah officials have reportedly been meeting with IMF officials before the June 7 polls to make sure that Lebanon will continue receive IMF support in the event of a Hizballah win.  IMF officials have confirmed the report.

The Hizballah-led opposition (to the Western-backed March 14 coalition) is considered by many to be favored in their effort to pick up enough parliamentary seats for a slim controlling majority.

The United States is particularly keen on seeing March 14 prevail, sending both the Vice President and the Secretary of State to Lebanon in the last month to voice support.  The United States provides a lot of money in aid to Lebanon, especially military aid.
Lebanon receives aid money from many sources, including from the Gulf States and the European Union. Lebanon has also been receiving a steadily increasing amount from private money from overseas, as investors pour money into banks and development deals there.
All of this begs the question off what happens to this all money if Hizballah and its allies wins June 7?

This scenario would put some people in a curious position. For the United States the thought of giving money, particularly military aid, to a Hizballah-led government is unpleasant. The United States has a close relationship with Israel, a nation Hizballah seeks to destroy as one of their core goals. Also, there are many in Washington who have not forgotten the embassy and Marine barracks bombings in the 1980’s, which were allegedly perpetrated by Hizballah.
So would the US cut off and turn its back on strategically important Lebanon if Hizballah wins? Its tough to say. It didn’t go so well when the US did it to Hamas, when they were democratically elected in Palestine. Doing so with Lebanon would be a major debacle, showing the world once again that the United States only supports democracy when its suits their interests.

It will be interesting to see how they handle it, if it happens. Last week, Joe Biden said in a paper-thinly veiled threat that US support is contingent on the election results, but words like that will mean little when the time comes.

It is assured that Israel will apply whatever pressure it can to stoke the fires of hostility between the United States and a Hizballah-led Lebanon.

But if the West  does turn its back on Lebanon in such an event, there will be a vacuum of aid money to be filled.  In this case, Iran would probably step in some,  which would only increase its influence in Lebanon. This definitely wouldn’t make Israel or the United States more comfortable, let alone Saudi Arabia, Egypt or the Gulf States, all of which are concerned with the steady growth of Iranian power.
If the US rejects Lebanon in this case the way it did to Hamas, they would just be throwing Lebanon to Iran and Syria.  This probably won’t happen. The Obama administration has been beating the drums of reconciliation with Iran and Syria (much to the chagrin of Israel) and it seems possible they could change their tune with Hizballah. If Obama could reach some sort of detente with the leading Shiite powers, he could really make hay with his Middle Eastern agenda.

So it wouldn’t be the worst thing in the world for the United States if Hizballah won. It’s not as though Hizballah can send the Lebanese Armed Forces into Israel the minute they get into power. If Hizballah wins, they will have to deal with the new reality that in the event of hostilities, Israel will now view Lebanon as the agressor, instead of just the Hizballah. This puts the whole country at risk, not just southern Lebanon and South Beirut.  Hopefully Hizballah will tread lightly.

Another thing to consider is private investment. Lebanon hasn’t passed through the global economic turmoil unscathed, but its in good shape. Development deals continue to be made and construction projects are underway all over Beirut. And money continues to flow into the country’s strong banking sector. Lebanon has strict controls in place for its banks, which didn’t not allow for much investment in the sub prime markets.

So for now, the investment money continues to come in. Some may be holding off until after the election to decide on investing. If March 14 wins, it will likely be business as usual. But what would a Hizballah led government hold for the economy? Probably not too much different from what is there now. No one wants to shake up the stable banking sector. Hizballah voters do business like the rest of the people in Lebanon. As long as the country did not dissolve into civil war or fall under an attack from Israel, things would likely proceed like they did before June 7th.  Also, Hizballah has allied itself with the Free Patriotic Movement led by Christian Michel Aoun, which supports laissez faire free market economics.
From whichever sect, people in Lebanon are interested in doing business and making money. The nature of doing business in Lebanon probably won’t change, just the context of it. In a country with very few natural resources, it has done relatively well for itself and that is unlikely to change if Hizballah picks up a few seats in parliament.
So in the event June 7 doesn’t go the way the West would like it to, the US will be in an interesting situation. The EU and the IMF have already prepared for this eventuality by taking meetings with Hizballah officials. But the US has done no such thing. Will the US follow the same path that it did with Hamas? That didn’t exactly turn out so well, but then again it was also the policy of the Bush administration.

Or  will the US defy Israel and and continue to support Lebanon? The Obama administration has demonsrated that it will not be as close with Israel as past administrations,  but how far does that go? Its one thing to ask Israel to take down some settlement in the West Bank, its is quite another to make peace with a group that is Israel’s sworn enemy.
Of course, if Hizballah doesn’t pick up the seats next Sunday all of this will be moot. But if they do, there will be some interesting choices to be made. It looks like Europe will deal with whoever win, and as long as things are peaceful, so will investors. The big question is what will the United States do. On one side, it has and old and powerful ally that may be more trouble than its worth. On the other, it has the possibility of making peace with old enemies. It will be interesting to see how the US proceeds.

(PVibert )

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Lebanon Time-Line

Introducing Lebanon

Coolly combining the ancient with the ultramodern, Lebanon is one of the most captivating countries in the Middle East. From the Phoenician findings of Tyre (Sour) and Roman Baalbek's tremendous temple to Beirut's BO18 and Bernard Khoury's modern movement, the span of Lebanon's history leaves many visitors spinning. Tripoli (Trablous) is considered to have the best souk in the country and is famous for its Mamluk architecture. It's well equipped with a taste of modernity as well; Jounieh, formerly a sleepy fishing village, is a town alive with nightclubs and glitz on summer weekends.

With all of the Middle East's best bits - warm and welcoming people, mind-blowing history and considerable culture, Lebanon is also the antithesis of many people's imaginings of the Middle East: mostly mountainous with skiing to boot, it's also laid-back, liberal and fun. While Beirut is fast becoming the region's party place, Lebanon is working hard to recapture its crown as the 'Paris of the Orient'.

The rejuvenation of the Beirut Central District is one of the largest, most ambitious urban redevelopment projects ever undertaken. Travellers will find the excitement surrounding this and other developments and designs palpable - and very infectious.

Finally, Lebanon's cuisine is considered the richest of the region. From hummus to hommard (lobster), you'll dine like a king. With legendary sights, hospitality, food and nightlife, what more could a traveller want?

Introducing Beirut

What Beirut is depends entirely on where you are. If you’re gazing at the beautifully reconstructed colonial relics and mosques of central Beirut’s Downtown, the city is a triumph of rejuvenation over disaster.

If you’re in the young, vibrant neighbourhoods of Gemmayzeh or Achrafiye, Beirut is about living for the moment: partying, eating and drinking as if there’s no tomorrow. If you’re standing in the shadow of buildings still peppered with bullet holes, or walking the Green Line with an elderly resident, it’s a city of bitter memories and a dark past. If you’re with Beirut’s Armenians, Beirut is about salvation; if you’re with its handful of Jews, it’s about hiding your true identity. Here you’ll find the freest gay scene in the Arab Middle East, yet homosexuality is still illegal. If you’re in one of Beirut’s southern refugee camps, Beirut is about sorrow and displacement; other southern districts are considered a base for paramilitary operations and south Beirut is home to infamous Hezbollah secretary general, Hassan Nasrallah. For some, it’s a city of fear; for others, freedom.

Throw in maniacal drivers, air pollution from old, smoking Mercedes taxis, world-class universities, bars to rival Soho and coffee thicker than mud, political demonstrations, and swimming pools awash with more silicone than Miami. Add people so friendly you’ll swear it can’t be true, a political situation existing on a knife-edge, internationally renowned museums and gallery openings that continue in the face of explosions, assassinations and power cuts, and you’ll find that you’ve never experienced a capital city quite so alive and kicking – despite its frequent volatility.