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Lebanon: From the “Switzerland”

to the “Venezuela” of the East

by Romy Haber

When Lebanon was referred to as the ‘Switzerland of the Middle East,”’ economic liberalism was not merely a policy option but rather the basis of an overall ideology of the Lebanese political system: small government and a laissez-faire economy par excellence. Lebanon was a vital link between the East and the West; a crossroads of cultures and civilizations. Lebanon was a refuge for persecuted minorities, exiled journalists and activists from across the region…and beyond.


Those days are long gone. After an exhaustive civil war, foreign occupations and interference combined with decades of Kleptocracy, corruption, a state-run Ponzi scheme and rampant government mismanagement has transformed this liberal hub in the East Mediterranean into a failing state with one of the world’s largest debt burns and a population now struggling to put bread on the table. Many Lebanese term this period as ‘the most difficult days of their lives’ and even say that surviving the war was easier than surviving this crisis. With a 40% unemployment rate, the Lebanese Lira plunging in value, high inflation, no dollars in the ATMs, and a persistent garbage crisis, daily life in the country of cedars has become an acute struggle. The middle class is rapidly becoming the new poor, and the poor are getting poorer. Malnutrition is now commonplace. Lebanon’s trajectory is the polar opposite of what once made it the Switzerland of the East.

Freedom at Stake


Michel Chiha — one of the fathers of the Lebanese Constitution — was anxious to preserve the country’s vocation of defending freedom. He believed that ‘everything in this country is based on freedom and the future depends on it.’ Sadly, freedom is being eroded. Lebanese security agencies are ramping up the interrogation and censorship of online activists and journalists who are being summoned, questioned and even detained for their social media content. Such enforcement actions typically follow complaints by government officials, political party leaders, bank directors and/or religious institutions. It is important to note the sentiment of Lebanon’s new Minister of Information, Manal Abdel Samad, in that regard. Samad noted that:


We do have suggestions in that regard, especially in terms of the nature of penalties imposed on a journalist, and we are studying prison sentences that would not be implemented within broad constraints, but that would take into account the controls that protect the state, its prestige, and its pillars.


That a serving Minister is discussing jail sentences for journalists reminds many Lebanese of darker times—the Syrian occupation of Lebanon. And, when Lebanese anger spilled out onto the streets with people asking only for their rights to be respected they were met with violence by security forces and paid thugs loyal to Hezbollah who harassed and attacked young men and women. Arbitrary arrests and the torture of protesters confirmed, to many, the return of the police state.


Repressive measures have also reached financial matters as security forces have gone on a campaign to arrest currency dealers while the Telecom Ministry restricted access to 28 mobile apps that showed the average dollar exchange rate. The Lebanese banking system, which was once renowned for being among the most resilient sectors in the country, now throws obstacles in front of citizens—banks imposed their own capital controls: banned transfers abroad and enforced withdrawal limits to as little as $100 per week. The former liberal hub now ranks low on the economic freedom index: the Lebanese economy is the 157th freest in the 2020 Index, sliding back into the “mostly unfree” group according to the Heritage Index.


Hostage in the Wrong Axis


Neutrality is needed for Lebanon to survive. But Hezbollah has different plans. The Iranian-funded militia is pulling Lebanon into an axis alien to its history: it is affecting Lebanon’s relationships with the Arab Gulf states, Europe and the US, it dragged Lebanese men to their deaths in Syria, Yemen and Iraq and has now also situated Lebanon in the crosshairs of heightening US-Iran tensions.


There is ‘no place for neutrality in any war against Iran…This is our position as part of the axis of resistance: we are not neutral and will not be,’ declared Hassan Nasrallah, Hezbollah’s Secretary General. Portraits of Iranian Al Quds commander, Qasem Soleimani, adorn the main highway to Beirut International Airport—sparking outrage among Lebanese citizens.


Nasrallah has also discussed repairing relations between Lebanon and Syria’s Assad regime—suggesting that Lebanon needs Syria to survive or face collapse. This came amid reports of increased smuggling activity to Syria, especially two main commodities — petrol and flour — subsidised by the Lebanese state, resulting in annual losses of more than $600 million (USD). The government is wasting hard currency to import commodities to Lebanon, only for them to be smuggled into Syria. Hezbollah is exploiting this scandal and use it to advance its interests by sowing confusion as to who runs the smuggling operation and then, cynically, claiming that it can only be solved via enhancing relations with the Assad regime. However, the US’s 2019 Caesar Syrian Civilian Protection Act (re: Caesar Act) could acutely impact Hezbollah and Lebanon as it imposes sanctions on any individual providing financial support to the regime. Assad will need Lebanon, but Beirut can no longer be exploited—it is on the brink of collapse.


The Road to Salvation


Talks between the International Monetary Fund (IMF) and Lebanese authorities have commenced; they are discussing a plan to unlock around $10 billion (USD) in aid. However, corruption is widespread and no major reforms were implemented despite the $4 billion (USD) granted Lebanon over the past decade precisely to soften the impact of structural reforms. Lebanese protesters have been on the streets for months reflecting growing distrust in the political elite. In this context, is the international community ready to trust Lebanon to implement the radical reforms the country needs? A good alternative would be investing in the private sector and civil society to make sure aid is not going to waste and is being more fairly distributed. But, regardless of how the international community decides to deal with Lebanon, if Beirut is interested in reclaiming its former title of being the ‘Switzerland of the East,’ it must go back to the future—work on what had previously prodded that slogan. Lebanon, as a state and its many communities need to brandish the torch of liberty again—economically, socially and politically. Lebanon must also invest in its human capital, save its banking sector, work on a decentralisation plan similar to the Swiss model and adopt neutrality—the main principle of Switzerland’s foreign policy.


These reforms, however, are not compatible with Hezbollah’s goals, interests, and ideology, which is forcing Lebanon to make some very uncomfortable decisions. If the Lebanese government chooses a more oppressive path and allows Lebanon to be held hostage to the Iran-Venezuela (under Maduro) axis, Lebanon’s future looks a lot like theirs: food and medicine shortages, extreme violence and misery and pariahs internationally. The Lebanese government must note that the more it resembles its neighbourhood — Syria, Iraq, Iran — the less help it will receive from the international community and the more difficult living in Lebanon will become. Steering Lebanon out of the Iran orbit is not only a national priority, it is also a nationalist priority.

04 June 2020

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