How Lebanon is trapped in corruption and sectarianism

Already beset by financial, medical, political and security crises, Lebanon is among the world’s most vulnerable countries. Its plight only increased this autumn, when Saudi Arabia, a hitherto major trading partner, cut its ties to Lebanon over its relations with arch-enemy Iran. The move – a consequence of the close ties to Hezbollah maintained by some of Lebanon’s elites – is expected to strangulate what little economic activity remains in the country. For the country’s corrupt elite, it’s business as usual, but international observers fear that the country could even spiral towards civil war if the situation isn’t improved quickly.

Saudi Arabia’s move is hitting the country hard, but in reality, it is merely the latest in a long line of blows. Over the last few years, the country went through widespread economic disaster, rampant Covid-19, rapid erosion of democracy and a catastrophic explosion that has left Beirut in tatters to this day. Food, medicine and fuel are all scarce, with families being forced to skip meals while poorly equipped hospitals are struggling to operate in the middle of a pandemic.

The bilateral falling out came in the wake of televised remarks by a game show host turned cabinet minister during which he showed support for the Houthi rebels of Yemen, who are locked in a brutal war against Saudi-led forces since 2015. International observers believe the underlying reason for the Saudi’s anger to be the increasing influence of Iran in Lebanon, particularly since Hezbollah, staunch allies of Tehran, once again came to dominate the government in recent years as a result of the government’s sectarian division and subsequent machinations of each faction.

Not with a bang

The Hezbollah connection is significant because the organization enjoys “legitimacy within the Lebanese state, but is able to operate without the accountability required of a state institution and without full responsibility to the Lebanese people.” This includes widespread corruption – arguably the root of most of Lebanon’s woes, considering that corruption and mismanagement are present at every level of public and private affairs.

This was made painfully obvious in August 2020, when Beirut was rocked to the core by one of the most powerful non-nuclear explosions in history, causing the death of 218 people and $15 billion in damages. More than a year after the calamity took place, not a single official was held responsible for the disaster. Even so, the corruption and neglect taking place at the higher levels of government are even more destructive to the country.

Unholy alliances

Indeed, Lebanon’s political chaos is ruled over by a group sectarian leaders, colloquially referred to as the “the company of five”. It consists of President Michel Aoun, Walid Jumblatt, Nabih Berri, Rafik Hariri and Samir Geagea. They “own” almost the entire country, and are the primary culprits behind what the World Bank, rarely known to use such direct language, has called a “deliberate depression” of Lebanon’s economic base.

Among the five, Samir Geagea, head of the Maronite Christians and long-time leader of the militia-turned-political party “Lebanese Forces”, has been associated with too many corruption cases to mention during the many decades he spent among the Lebanese political elite. He stands out for representing the connection between politics and business, being allegedly close with Lebanese businessman Raymond Rahmeh, who has been accused of extensive money-laundering operations according to French magazine Libération.

Lebanese banks and Iraqi telecoms

Rameh was also reportedly involved in setting up a clandestine payment system with powerful Kurdistan region leader Sirwan Barzani to embezzle funds intended for Iraqi telecom operator Korek (Iraq Telecom), a company owned jointly by French giant Orange and Kuwait-base Agility. This was revealed in September when the Lebanese Arbitration Center ruled against the Intercontinental Bank of Lebanon (IBL) in a now notorious case involving the defrauding of Iraq Telecom.

After putting their money in Korek, based in the Iraqi Kurdistan region, the investors claim to have found themselves robbed of their investment by Barzani through the use of a fraudulent loan from the IBL. The court case was brought about in 2018 by Agility sueing Rahmeh and Barzani for colluding to obtain a $150 million IBL loan for Korek, and for misleading other shareholders about the terms of the loan, including suspiciously high interest rates. They stand also accused of hiding the fact that IBL was not working as a real lender, but rather a front only for Barzani.

The court’s decision eventually fell in Agility’s favour, rendering null and void the subordination agreement relating to the $150 million loan extended by IBL to Korek. Agility now considers suing for damages against IBL and enforcing its debt claim to the tune of $285 million against Korek.

Political Automatisms

These sort of transborder, personal enrichment schemes by Lebanon’s powerful have profound effects not only on Lebanon itself but on the wider region as well. They fuel instability both in domestic and foreign contexts to the detriment of the general population in the countries involved. Worse, those perpetrating them all too often fall back on political automatisms that merely serve to stoke the flames of sectarianism at a time when Lebanon is edging ever closer to the precipice.

As such, the Saudi severing of ties comes at the most inopportune time, adding yet more grief onto the already beleaguered Lebanese people. However, the most punishing blows continue to come from within – only a new political accord and real reform can prevent the country from sliding back into civil war.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes