>Lebanon 2.0.2.2

>The future we are bracing for

Synaps 

Over the past two years, Lebanon has bounced from one bruising crisis to the next. Revolutionary fervor was doused by political gridlock and financial self-destruction, followed by a public health crisis and a cataclysmic blast at Beirut’s port. This string of disasters left society breathless, anxiously awaiting the next tragedy.

Events have since settled into a slower pace, however. Lebanon now seems stuck in a sluggish decline more akin to decay than detonation. This process presents enormous risks of its own, although these are more difficult to picture: What will it mean if Lebanon’s losses are torturously drawn out, blunted by people’s coping strategies, exploited by the country’s political factions, and partly ignored by the rest of the world? How much external aid can be expected, and will it do more good than harm?

While it is impossible to truly predict how this trajectory will unfold, present dynamics hold clues as to where the country may go. Projecting ahead, even just six months into the future, may give these looming dangers more recognizable shapes. Some will not materialize, and others will take forms that we could never expect. Nonetheless, wrestling with these prospects today will better our odds of managing whatever tomorrow brings, for ourselves and society at large.

So, for the sake of anticipation, let’s imagine that we’re in January 2022 already. 


>A broken supply chain

Having plundered dollar reserves to finance an import-hungry economy, Lebanon’s government and financial sector have now reined in their spending. Although the country remains desperate for foreign goods, banks have stopped providing lines of credit to importers. They make exceptions for clients they know personally, advance only small amounts, and demand to be repaid in full within a month. They also charge high fees, to compensate for the fact that they no longer extend revenue-generating loans. 

Meanwhile, importers complain that foreign suppliers have grown wary of the Lebanese market, which they see as too small, risky, and confusing to be worth their time. Those willing to do business insist on payments made in advance through reputable international banks, which also charge high fees, citing rising compliance costs related to corruption and money laundering. While importers hope to gain a discount by paying suppliers upfront, they must in fact purchase smaller quantities at higher prices—reflecting a shrinking Lebanese market and reduced access to hard currency. 

Fuel is now scarce and, for most, prohibitively expensive. The central bank only furnishes small amounts of dollars to the cartel of private importers who supply the country’s gas stations. These family-based companies, who developed their own ports, storage infrastructure, and fleet of tanker trucks during the civil war, are deeply connected to the political class. They sell oil at global market value to whomever can still afford it. Payments are made on the spot, in cash, before offloading. Many gas stations, especially in poor and remote areas, have shut down, because they cannot generate enough income to manage such payments. Those that remain in operation pay a premium for deliveries that are smaller in volume, and thus costlier to everyone. The increasingly unstable pace of shipments from abroad creates yet more uncertainty, with interruptions sometimes affecting even the most fortunate. 

Fuel shortages wreak havoc on Lebanon’s already decrepit electricity sector. The country’s largest producer, Electricite du Liban, barely manages to supply a daily average of six hours of power on the grid. Private generator companies fail to make up the shortfall. Many have gone out of business, because their revenues do not cover the rocketing costs of diesel and maintenance—and their subscribers cannot meet the resulting price hikes. Nor can most households afford to invest in alternatives such as smaller generators or solar panels. Electricity on demand has thus become the preserve of an elite living in self-sufficient compounds. For the rest of society, the national grid is more essential than ever. However, the rush to use machines and recharge batteries during the few hours available leads to frequent overload, making even those windows unreliable. Warehoused medicine and foodstuffs regularly perish due to lapses in cold storage.  

Without power, the internet is more unstable than ever. The antennas needed for mobile communication demand electricity; as it dwindles, so does 3G coverage—especially in remote parts of the country. In parallel, the infrastructure itself is in decline, due to a combination of poor maintenance and the looting of cables by people keen to resell the copper they contain. Such disintegration triggers Lebanon’s first true internet blackouts, some of which are localized while others are nationwide. Like electricity, an internet rush occurs whenever the service is restored, as people compete over the same diminishing bandwidth. Employees struggle to work remotely, even as fuel shortages make commuting difficult. Although prices haven’t changed, the most vulnerable are increasingly hard-pressed to stay connected; many have either sold their devices or are simply unable to repair or replace them.  

Access to water is another casualty, for much the same reasons. This sector remains massively dependent on multiple forms of pumping—from wells, through pipes, into trucks, and onto roofs. All these processes hinge on fuel, and have thus become exorbitantly expensive. Inequalities have deepened: between upstream and downstream villages, between neighborhoods enjoying more or less tap water, or between farmers, many of whom are forced to abandon their work. People have adapted by turning to less clean sources of water. The consequences for public health can already be felt, with worrying increases in food poisonings, hygiene-related ailments, and water-borne illnesses. 

To make things worse, gaps in the supply chain extend to pharmaceuticals. Medicine imports are dominated by yet another cartel, which has historically glutted the market with overpriced brand medicine heavily subsidized by the government, at the expense of any local industry. The latter would take years to build from the ground up, and only then with the help of regulatory reforms that Lebanon’s oligarchs continue to reject. The market has adapted in corrosive ways: Political factions procure essential medication through their own networks, for their base, and only intermittently; people avoid doctor consultations and hospital visits, preferring to save their money for self-prescribed treatments; and counterfeit drugs make their way into even reputable pharmacies. First-rate, broad-spectrum antibiotics, which Lebanon has long overused, are just a memory, leaving Lebanese increasingly exposed to infectious diseases. 


>The no-crisis crisis

Sad as it is, this is the new normal. On most days, it even feels like not much is happening. The daily news has long ceased to surprise. Aside from politicians playing their tedious blame game, there is little to talk about. The port blast investigation never yielded results—merely reasserting well-known facts, without assigning responsibility. After months of haggling and dithering, the same old factions have finally formed a government designed only to reinforce the status quo.

Throughout 2021, many Lebanese had feared a total collapse—although it was hard to say what, exactly, this would entail. Politicians regularly conjured images of chaos, but no such climax arrived. Instead, a slow, relentless, but apparently survivable erosion has set in. Although the Lebanese pound continues to lose value and prices have risen, riots and roadblocks are rare. The poorest cannot afford to protest, most activists are burnt out, and much of the population has found ways to adjust: cutting back, changing their lifestyles, tapping whatever humanitarian aid is on offer, and making good use of dollars sent by relatives abroad. All told, not everyone is suffering quite as much as they had anticipated, making the present appear more livable than what many had dreaded. The belief in Lebanese resilience remains as deep-seated as ever. 

This slow-motion trajectory has much to do with how the political class handles the crisis: namely by dragging out, rather than resolving, any of Lebanon’s problems. Politicians gained some time by unlocking “special drawing rights” from the IMF—recovering some of the country’s own contributions to the financial institution. The World Bank has repurposed pre-allocated but un-disbursed loans to fund basic aid packages. Most importantly, the central bank still covers some essential goods, by eating into its obligatory reserves. It has lifted subsidies only gradually, continuing to fund a quarter of fuel imports, a small selection of medication, and what remains of Electricite du Liban’s output. 

The political factions, for their part, provide sporadic solutions as and when needs become urgent. They do so not least by squeezing out of the state resources which they use through their own procurement mechanisms. This setup makes for an erratic cycle of shortage and supply, which perversely keeps followers dependent even as it forces them to develop survival strategies of their own. 

Lebanon’s slow-burn crisis also means that a full-blown humanitarian response has yet to materialize, even as poverty deepens and spreads. If anything, donor fatigue is increasing: Lebanon is consolidating its reputation as a basket case of self-inflicted misery, where politicians capture resources while doing little for their people. Those hoping for a more ambitious humanitarian drive have been pinning their hopes on a comprehensive survey promised by the UN, and designed to produce hard data on the country’s expanding population of vulnerable people. The report’s outcomes, however, did not have the desired effect. 

Its figures turn out to be grim yet somewhat unremarkable, especially when measured against competing disaster zones around the globe. Malnutrition affects a third of the adult population, but famine has been averted. If one out of three children drops out of school, “only” one in twenty is put to work. Access to water and healthcare is widespread, even if it is of decreasing quality and takes up, on average, half a household’s income. Worryingly, unemployment rates hover around 40%, and 70% of Lebanese live under the poverty line. But in donors’ minds, such figures simply reflect an economic crisis Lebanon has decided not to resolve, and which does not compare with the consequences of a natural disaster or the collateral damage of a war. 


>A resurgent regime

Despite donors’ reticence, the aid industry is now Lebanon’s third largest source of hard currency, after exports and remittances. Though it is not the biggest, it has become by far the most attractive target for a predatory elite seeking to vacuum up whatever foreign cash remains in the country. Indeed, revenues from exports are immediately funneled toward meeting import costs, and remittances mostly circumvent the country’s banking system. The humanitarian response, therefore, is the real game in town. 

The Lebanese regime’s various components have rallied to capitalize on this new resource. They have done so, in part, through a battery of official measures designed to consolidate their control over the sector. As of January 2022, all humanitarian programs must be officially registered with and approved by the Ministry of Foreign Affairs. New legislation requires that funds be transferred through Lebanese banks, which now charge a 5% fee on any transaction in foreign currency. In parallel, all exchange operations must be carried out via the central bank’s Sayrafa platform; although the latter’s rate is usually 15 to 20% lower than the black market, its operators are authorized to issue formal invoices essential to humanitarian agencies. 

These tightening requirements serve multiple functions for Lebanon’s ruling class. Naturally, the factions have agreed to pool and share amongst themselves the information collected by the Ministry of Foreign Affairs; this, in turn, allows them to monitor what money is going where, via which local NGO. Meanwhile, the requirement that all money be channeled through Lebanon’s own financial institutions offers a lifeline to banks that are desperate for liquidity—and which happen to be closely linked to the political elite. Finally, the factions have excluded from Sayrafa any exchange shop that does not report directly to them, thus shoring up their own access to hard currency. They use what they skim via this platform to fund their own procurement and distribution of fuel, essential medication, food baskets, and potable water. But that is only part of the picture. 

The factions openly infiltrate virtually all layers of the humanitarian value chain. Key importers in such fields as fuel or pharmaceuticals are closely tied to politicians, who divvy up the market among themselves, suppress independent competition, and price gouge at will. The same cartel logic governs logistics and construction, giving a handful of contractors inordinate influence over activities such as food transportation and infrastructure rehabilitation. Likewise, security companies, which have become indispensable as criminality disrupts operations, all loop back to the same political patrons. Humanitarian organizations have noticed that incidents decrease as soon as they sign contracts with the right people, who offer protection in any given area. Refusal to buy into such networks translates into a nerve-wracking rise in theft and intimidation. 

Factions not only encircle humanitarian actors; they also sit among them. Political bosses have their own foundations and NGOs, and often behave as gatekeepers in territories they dominate (which add up to most of Lebanon). Politically-backed outfits seek to bully independent organizations out of the market—by throwing up administrative roadblocks, harassing staff, or triggering spurious security investigations into their activities. Alternatively, they deploy such strong-arm tactics to pressure competitors into collaboration on their terms. Large international NGOs and UN agencies face similar obstruction, which many overcome by hiring more politically connected staff. The factions hasten to capitalize on this trend, providing supporters with coveted humanitarian jobs paid in dollars. 

Just as politicians push aid agencies to hire their followers, they also use their influence to steer aid toward their own support bases. Their loyalists are grateful for the handouts, recognizing their own dependence on such patronage. As beneficiaries grow more intimately familiar with humanitarian mechanisms, some deliberately exaggerate their own needs to secure a greater share of aid. Indeed, some communities have come to view aid as something they are entitled to, and all-too-often denied. This mentality feeds into escalating competition between recipients—notably refugees and host communities. Viewed through that lens, politicians are the only players capable of extracting from foreign donors what is rightfully Lebanese.

Lebanon is thus ever more dependent on international handouts. For example, many farmers admit that they are waiting for foreign-funded grants to start the planting season, rather than make plans and take risks on their own. State institutions have adopted the same outlook: Water establishments, for instance, now only function to the extent foreign donors underwrite their running costs, one emergency fund at a time.  

By and large, the regime’s adaptation has followed patterns that date back to the civil war. A major new development, however, relates to the changing role of the army, which has become both dependent upon and integral to the aid response. Not only does it receive training and equipment from foreign governments, but the latter also fund maintenance, salaries, food, and healthcare services. The army has simultaneously grown into a major implementing partner for the largest aid agencies, which invoke its purported neutrality and logistical capabilities to reach vulnerable populations in remote areas. 

The irony is that this institution has never truly stood apart from the country’s political system; it has existed, rather, in a symbiotic arrangement with the sectarian elite. As scarcity spreads and the army’s role expands, there is every reason to expect that factions will seek to ramp up their influence over the armed forces. In other words, by relying on the army as an alternative to political factions, foreign donors drive these two components of Lebanon’s regime closer together than ever before.

<* * *>

The most disturbing part of this fictitious outlook is that it feels all too plausible. Lebanon’s seemingly endless crisis could easily become entrenched, with all parties adapting accordingly: Ordinary people learn to live with ever greater scarcity, politicians manipulate their suffering, and international actors provide just enough support to keep the system afloat.

Faced with this grim trajectory, it is all too tempting to hold our breath and wait for some game-changing event—whether a new disaster that would shake things up, or a deus ex machina that would somehow sort things out. Yet holding out for such a resolution only increases the chances that Lebanon will remain locked in its current downward spiral.

Lebanese society may struggle to do much more than meeting its daily needs, which for many will only become more draining over time. But external actors are in an entirely different situation; they have no excuse for falling back on fatalism, nor cause to indulge the system. Indeed, donors and aid organizations have the luxury of looking ahead. Doing so should take multiple forms. 

First, it means engaging in hard-headed contingency planning to avoid being caught flat-footed by predictable developments, such as internet outages, predatory new banking laws, or encroachment by the factions. Second, it entails supporting Lebanese partners as they undertake similar preparations, not least by offering technical and financial assistance for scenario planning or ramping up flexibility in funding mechanisms. Third, donors must collectively set clear, immovable red lines regarding concessions to the Lebanese regime they refuse to make. 

However much we may wish to couch foreign assistance in the language of humanitarian neutrality, Lebanon’s realities make this sector eminently political. Rejecting this fact of life would turn aid into the system’s best resource for upholding the status quo.

21 June 2021

Grateful credits: This publication builds on a role-playing exercise commissioned by CARE International in Lebanon, as part of their contingency planning. Aside from Synaps’ own extensive research on socioeconomic dynamics in Lebanon, the essay owes much to the impressive hands-on experience of CARE’s staff and partners, who operate in taxing circumstances across the country.

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