November 11, 2022

IntelBrief: Political Crisis Adds to Lebanon’s Difficulties

Hassan Ibrahim/Lebanese Parliament media office via AP

Bottom Line Up Front

  • President Michel Aoun left office on October 30 as his term ended, placing governance in the hands of a divided caretaker government with limited powers and legitimacy.
  • Lebanese political leaders have been unable to agree on a successor, in part because of sharp divisions over the power wielded by the pro-Iranian Lebanese Hezbollah.
  • A new government influenced by Hezbollah would have difficulty attracting international and regional financial support.
  • The October agreement on a sea border with Israel represents a potential bright spot for Lebanon’s economic future.

In late October, a political crisis added to Lebanon’s longstanding economic woes as President Michel Aoun, who took office in 2016, completed his term and left the country in the hands of the caretaker government of Prime Minister Najib Mikati. In Lebanon, the president is selected by a two-thirds majority of Lebanon’s 128-seat elected parliament. In the runup to Aoun’s term expiring, the parliament held four rounds of voting, but no candidate garnered enough support to succeed Aoun. The body is scheduled to hold another vote on November 10. In advance of his departure, Aoun requested that the parliament withdraw confidence in Mikati's government on the grounds that he had not been confirmed and should, therefore, not assume the duties of the presidency. However, on November 3, Parliament Speaker Nabih Berri announced that Mikati's caretaker cabinet could assume the duties of the presidency, although its ability to enact legislation remains limited until a president is selected and a new government, properly confirmed, can take office.

The prospects of selecting a new president are uncertain as divisions among the country’s major Christian, Shia Muslim, and Sunni Muslim communities widen over how to deal with the economic crisis and regional relationships. The selection process is highly consequential for the United States, its European allies, and the region, particularly as an indicator of the degree of influence wielded by the Shia Islamist party Lebanese Hezbollah – an ally of Iran and a longtime antagonist of the United States, Israel, and the Persian Gulf monarchy states. Under the 1989 Saudi-brokered Ta’if Accords, which ended Lebanon’s more than decade-long civil war, Lebanon’s president comes from the Lebanese Maronite Christian community. Although he is a Maronite and deeply supported by many Christians, Aoun was aligned with Hezbollah. His son-in-law, Gebran Bassil, who similarly enjoys close relations with Hezbollah, is widely known to want to succeed Aoun. Bassil has been sanctioned by the United States for corruption, and his selection – or any other candidate backed by Hezbollah - would undoubtedly hinder the United States, former colonial power France, or the Arab monarchies of the Persian Gulf from significantly increasing financial assistance to Lebanon. Another candidate, Michel Moawad, is the son of Rene Moawad the Lebanese president who was assassinated in 1989. He garnered 39 votes – many more than any other candidate - in the parliament’s October 24 presidential vote, but pro-Hezbollah deputies cast blank ballots and he was left well short of the 86 votes he needed. Moawad is an outspoken critic of Hezbollah, and his selection as president – or that of other Hezbollah critics - would no doubt receive a warm welcome in the United States, Europe, and the region. An increase in international donations is not only contingent on Hezbollah’s receding into the political background; major donors have also, in recent years, conditioned funding on the implementation of reforms to reduce corruption, on improved delivery of services, and on full accountability for the massive August 2020 Beirut port blast which resulted in the death of hundreds of people. Yet, despite the high stakes, U.S. officials assert that Lebanon’s elites might not be able to resolve the political crisis easily. Barbara Leaf, Assistant Secretary of State for Near Eastern Affairs, said on November 4: “Things will have to get worse before the public pressure mounts in such a way” that parliament selects a new president.

In order to address Lebanon’s long-standing economic crisis, a crisis that the World Bank says is one of the world’s worst in centuries, it is paramount that donors sense that Lebanon’s politicians can assemble a legitimate and effective new government that will resolve the country’s problems. The U.N. Economic and Social Commission for Western Asia reported last year that 82 percent of the population of 6.5 million is living below the poverty line, nearly doubled from the previous year. According to the World Bank, Lebanon’s Gross Domestic Product (GDP) fell to an estimated $18.08 billion in 2021, from $54.9 billion in 2018 – a degree of economic contraction usually associated with wars. Lebanon’s currency, the Lebanese pound, has lost approximately 95 percent of its value, driving up prices and severely reducing purchasing power in the country, which is dependent on imports of food, medicine, and other major goods. Lebanon's banks have frozen ordinary depositors out of dollar accounts and severely limited withdrawals.

The successors to Aoun and Makati will undoubtedly focus on Lebanon’s energy imports sector, which has been a key driver of the country’s economic crisis but also a potential source of salvation. Because Lebanon relies on imported fuel – which has escalated in price globally over the past year - power and automobile fuel are in short supply. Further escalating fuel prices has been the gradual lifting – and ending entirely in September - of subsidies on the commodity. Households generally only have electricity for a few hours a day. The centrality of energy to Lebanon’s economic difficulties explains how Lebanon’s leaders were able to overcome their differences – and initially fierce opposition from Hezbollah – to sign a U.S.-mediated agreement with Israel on a Lebanon-Israel sea border. The sea border settlement, which gives Lebanon clear control over the Qana offshore gas field, removes uncertainty for major investors, including the French firm TotalEnergies, to move ahead with exploring the field for commercially viable natural gas deposits. A viable field would help not only reduce Lebanon’s dependence on energy imports, but also potentially earn the country substantial hard currency revenues from gas exports. There is no shortage of customers for natural gas now that Europe has decided to sharply reduce its imports of gas from Russia, particularly as European countries face political instability over skyrocketing fuel prices as winter approaches. Still, cause for optimism is tempered by estimates from global energy experts who predict that the offshore gas deposits would not begin production for at least five years, pushing the benefits beyond the likely resolution of Lebanon’s current political uncertainties.