Week of Monday, July 12, 2021 | Issue 39
Adele Carter, Amira Mahmoud, Cameron Price, Juline Horan, CENTCOM Team
Date: May 31, 2021 - Present
Parties involved: World Bank; Lebanese Government; Lebanese Citizens
The event: On May 31, 2021, the World Bank released a report indicating that Lebanon’s deepening financial crisis is positioned to be one of the most severe economic disaster episodes since the mid-nineteenth century. Gripped by the COVID-19 pandemic and the August 4, 2020, Beirut port explosion, Lebanon has been enduring accelerated deterioration of its economic and financial sectors, primarily the result of poor policy responses from a failing caretaker government. Currently, more than half the population has been driven below the poverty line as the Lebanese currency has lost more than 90% of its value.
Given the severity of Lebanon’s economic crisis, coupled with a government that is deadlocked over needed reforms, it is very likely that the country will descend into a major humanitarian crisis. With the Lebanese pound losing most of its worth, Lebanese citizens will likely struggle to not only purchase necessities such as food, medicine, and water but also locate them. Distributors of these goods and services may be forced to shut down supply chain operations, likely resulting in immense food and medicine shortages. Additionally, the international community will also likely be forced to withdraw aid, which is dependent on meaningful reforms, from Lebanon until the caretaker government and national banks can stabilize the monetary system, plunging Lebanon deeper into crisis. These issues will likely contribute to greater instability in the country as Lebanese citizens grow increasingly frustrated with the government’s inability to properly address the crisis and ensure their essential needs are met.
Hezbollah is likely to capitalize on the current political vacuum, undermining Lebanon’s national security, further isolating Israel, and allowing Iran to maintain a sustained influence in Lebanese domestic affairs. The crisis is likely to empower the Iran-backed group to solidify its political base in the country by appealing to a constituency of civilians desperate for respite through offering basic goods and services, along with tangible solutions for change. Dependency on Hezbollah will likely increase as disillusionment with Lebanon’s caretaker government rises. In combination with its existing weapons arsenals, control over political partners, and de facto control over key border crossings and critical infrastructure, Hezbollah will likely position itself as the next ruling party of Lebanon. The political deadlock also blocks the formation of an effective system of checks for Hezbollah, thereby likely increasing the risk of escalation with Israel on its southern border at the tri-junction with Syria. This will very likely further complicate the regional power struggle between Iran, Israel, and the West as Iran will likely seek to use its influence in Lebanon as a bargaining chip in JCPOA negotiations with the US.
Outraged at Lebanon’s political class, dissenters will likely continue protesting, leading to violent confrontations with security forces. However, with a likely collapse of the Lebanese army and security forces due to a lack of financial support, the disorder is likely to prevail. Angered by political ineptitude, the security situation is likely to deteriorate into, at best, a state of anarchy and, at worst, a battlefield for organized armed conflict similar to that of the Lebanese War (1975 – 1990). The homes of high-ranking government personnel, branches of the central bank, and government buildings will likely be common targets of protests and vandalism. The deepening economic crisis and rising unemployment rates will likely result in an overall rise in crime rates, threatening the security of the nation and possible spillover into neighboring countries. As security forces – overburdened with tackling anti-government unrest – struggle to secure grocery stores and pharmacies, theft will likely be the most prevalent issue with citizens while they seek scarce necessities such as baby milk, food, and medicine.
Date: July 15, 2021
Location: Beirut, Lebanon
Parties involved: Prime Minister-designate Saad al-Hariri; President Michel Aoun
The event: On July 15, 2021, Prime Minister-designate Saad al-Hariri stepped down, abandoning a months-long effort to form a new government. His exit comes as the result of political infighting and widespread anti-government protests calling for his resignation. Hariri stated that he decided to step down after President Aoun rejected his proposed Cabinet list of 24 nonpartisan specialists to undertake desperately needed reforms aimed at avoiding further economic collapse. Hariri’s Future Movement has refused to name a candidate to fill the position following his departure. The interim Aoun-Nasrallah government now faces mounting pressures to fill the vacancy to have any shot at financial and social recovery.
It is highly probable that Hariri’s resignation will cause more chaos within the already-tumultuous Lebanese government, worsening the situation of attempting to form a stable government currently plagued by deadlock. Without a prime minister-designate, the Lebanese government will not only have to work towards developing a cabinet, but it will also have to decide on a new candidate for the position of prime minister. However, as Lebanese politicians continue to focus on a power struggle and fail to agree on policy initiatives, it is likely that the Lebanese government will continue to fall further into disarray. It is also likely that the instability of the government coupled with the resignation of the prime minister will lead to security issues. Citizens, now fending for themselves with no stable government or law enforcement, will likely be vulnerable to increasing threats of violence.
With no clear candidate to replace Hariri, the probability of forming a functional government to tackle desperately needed reforms and recovery package negotiations will likely become lower. It is highly probable that the position will remain empty until next year’s elections as no legitimate Sunni politicians are likely to accept the role without Hariri's endorsement. Even if President Aoun were to consult with parliamentary blocs on naming a new prime minister-designate, candidates will likely lack legitimacy with the Sunni political establishment as the prime minister is picked from the ranks of Sunnis. The failure to quickly replace Hariri will likely plunge the country into further political and economic instability and social unrest. The country may also resort to an unconventional alternative such as a military government.
Hariri’s exit will likely exacerbate the financial tailspin as the value of the lira enters a freefall. This will likely raise the inflation rate, which has heavily affected essential commodity prices. The Lebanese middle and working classes will likely bear the brunt of the crisis, falling further under the poverty line while those who can afford to leave the country may seek respite abroad. With no turning point in sight, the government will likely run out of hard currency to subsidize the imports upon which the country is highly reliant, sending the price of fuel and medicines soaring further. The economic struggle is likely to be difficult to recover from and will almost certainly require a complete reformation of the Lebanese government and international support for an International Monetary Fund (IMF) bailout. The prospect of an IMF bailout is unlikely until the caretaker government addresses the rampant corruption that has lined the pockets of high-ranking politicians at the expense of Lebanese citizens and Lebanese critical infrastructure.
Hariri’s exit as a result of a deadlock with President Aoun sheds light on Lebanon's severe government mismanagement that currently separates the three most important offices – President, Prime Minister, and Speaker of Parliament – along with religiously divided lines. With the prime minister post vacated, it is likely that the industries and sectors that Sunni members of parliament are responsible for running will either deteriorate or shut down altogether. This would likely further raise the unemployment rate by forcing many government workers out of their jobs. These workers may also find themselves taking to the street to protest their government’s inability to properly manage the country’s finances and the nation as a whole.
 Lebanon Economic Monitor, Spring 2021: Lebanon Sinking (to the Top 3), The World Bank, May 2021, https://www.worldbank.org/en/country/lebanon/publication/lebanon-economic-monitor-spring-2021-lebanon-sinking-to-the-top-3
 Lebanon days away from ‘social explosion’, PM Diab warns, Al Jazeera, July 2021, https://www.aljazeera.com/news/2021/7/6/lebanon-days-away-from-social-explosion-pm-diab-warns
 Lebanon’s PM-designate Saad Hariri resigns as crisis escalates, Al Jazeera, July 2021, https://www.aljazeera.com/news/2021/7/15/lebanon-pm-designate-saad-hariri-resigns-as-crisis-escalates
 Lebanon’s Prime Minister, Saad Hariri, Steps Down in Face of Protests, New York Times, July 2021, https://www.nytimes.com/2019/10/29/world/middleeast/saad-hariri-stepping-down-lebanon.html
 Lebanon crisis deepens as PM-designate quits over cabinet deadlock, BBC, July 2021, https://www.bbc.com/news/world-middle-east-57854141