As the pandemic continues to constrain economic activity across the World, it has a multiplier effect on the free-fall of the Lebanese economy. In fact, Lebanon’s economic conditions continue to worsen, as the country’s economic, fiscal and financial crises remain unchecked, while consumer and investor confidence is at its lowest.
Lebanon’s multiple crises are due to structural deficiencies within its economic, institutional, and governance systems. The authorities did not present nor work on a concrete economic vision for the Lebanese economy over the past thirty years, leaving the economy without clear objectives and policies. The economy ended up relying on remittance inflows that were financing the government deficit, the peg of the Lebanese pound against the US dollar, and imports. With a weak infrastructure, the industrial and agricultural sectors could not grow nor present opportunities, making the services sector, along with real estate and tourism, the main drivers of growth.
However, despite a strategic location on the Mediterranean, Lebanon’s position north of its enemy country, and bordered by Syria to the north and the east, which has unstable relations with Lebanon, raises the country’s geopolitical risks and continuously disrupts its stability; not to mention the spillover of the Syrian war on Lebanon. Political and geopolitical stability is a key requirement for the tertiary sector, Lebanon’s main economic sector, to function properly. As such, Lebanon’s location hindered its stability to achieve sustained growth in the form that was agreed upon by its ruling class. Lacking concrete growth for some years, along with the erosion of confidence in the political and financial systems, and the default of the government, the remaining lifeline for the population is but a diminishing amount of foreign currency reserves at Banque du Liban, used to subsidize the imports of the people’s basic needs.
Most experts, along with the international community, continue to call for the implementation of reforms across the public sector, including in the power sector, the port, as well as on the fiscal and monetary levels, and in the banking sector. However, the main impediment for reforms is a lack of political will, reflecting a dysfunctional political system that continues to yield in renewed political deadlocks. Lebanon’s political system had remained slightly unchanged since the end of the civil war, as the country continued to muddle through from one crisis to another.
The lack of political will for reforms is currently at its highest levels, as the authorities remain unable to form a government since August 2020, when the last government resigned following the explosion at the Port of Beirut. The political deadlock coincides with a depreciation of the Lebanese Pound from about LBP7,000 against the US dollar in August 2020 to about LBP13,000 per US dollar in March 2021, and relative to LBP1,507.5 per US dollar before the protests in October 2019.
The complexity of this political deadlock can be analyzed in three different layers.
On the domestic front: the ruling-Free Patriotic Movement (FPM) and the Future Movement are facing an uncertain outlook in the 2022 elections, as their base voters are narrowing. Knowing that the next government should be the one to put the country on a reform path, and to stop the current deterioration across all sectors in the country, both parties seem interested in being part of the new government, in order to build on quick wins, while saving the remaining portions of their supporters in the upcoming elections. As such, the names and allegiance in this government are critical, it is a vital issue for both parties, which makes concessions harder to make. Each movement is testing the other’s endurance and capacity to maintain its current position and requirements for the upcoming government, at the expense of the nation and its population.
On the National level: some analysts and journalists have described the current free fall of the Lebanese economy, institutions, political system, and the political deadlock as an operation of “thermal dissociation” of the State. Under this perspective, the current deadlock intends to highlight the dysfunctional political system. The deadlock, in this case, is not only a result of the system but a catalyst that fastens the process towards a new founding conference that would change the shape and the foundation of the current system. Speculations are skewed towards a tripartite – where the governance system would be divided largely into three factions, Christian, Shia, and Sunni, rather than Christians and Muslims under the current system. Such a system would benefit mostly Shiite parties, as they could increase mainly their executive power, while reducing the power and representation of Christian factions. In that case, Shiite parties would probably exchange their paramilitary structure for a better representation and protection under a new constitution. In parallel, the calls for an alternative system have also increased, it is a non-confessional system. Such a proposition is tricky, as, without an understanding of the underlying values of this system and its proper mindset, some factions would override the new system by pushing their supporters and affiliates to vote based on a confessional mindset, given that most parties represent specific confessional communities. So without the proper awareness about the actual goal of the system, and given the skyrocketing poverty and unemployment rate, a high level of clientelism, and no rule of law, voters will be easily manipulated, while other less conservative and organized parties, with less direct authority on their base voters, would be at a disadvantage in the elections, paving the way for large and better-organized conservatives and hardliners to seize control. This system can be a tool to hijack the constitution and change the fundamental pillars on which this state was built.
On the International level: As the United States and Iran get closer to sit at the negotiation table, Iran has been gathering more cards to add to the table. Iran continued to increase its uranium enrichment levels and limited in February the International Atomic Energy Agency’s access to some nuclear sites. These actions seemed like an attempt to bring Washington sooner to the negotiations. In addition, Iran has by now several cards to play that are beyond its national borders, and are not directly related to the nuclear deal. Tehran has a strong and direct say in the formation of governments, as well as in national and strategic decisions both in Lebanon and in Iraq. Among the dishes that Iran could serve at the negotiations table from Lebanon’s kitchen are facilitating the formation of a government in Lebanon, lowering the constraints for talks with the International Monetary Fund, and easing the issues related to the demarcation of Lebanon’s borders. These represent easy concessions that Iran could offer before tackling the main issues of the 2015 Joint Comprehensive Plan of Action.
A breakthrough agreement that produces a government in the short term would probably be an unbalancing force to the current status quo over the three dimensions, resulting in potential winners and losers.
Iran tightened its grip on Lebanon through Hezbollah. In turn, Hezbollah has an asymmetric advantage on other parties given its paramilitary wing, which cripples any attempt towards a strong State as it strikes directly Thomas Hobbes’ “monopoly on violence”, maintaining an ongoing fear of a “war of all against all”. In addition, Hezbollah has been able to expand politically through its alliance with the Christian ruling-FPM. Their alliance was implicitly accepted, despite the large difference between both movements’ political and economic visions, mainly due to the narrative of Lebanon being the “shelter for minorities” in the Middle East, where minorities mainly refer Christian, Shiite, and Druze communities. This tool is the theoretical foundation that used to bring the ruling Christian and Shiite factions closer, building on fear from the large Sunni majority in the Middle East and from Pan-Arabism.
However, the signs of a vacuum of power on the Christian and Sunni level, as well as the trajectory towards more openness in the Arab world, especially in the main Sunni countries of the Gulf Cooperation Council show a strong potential for breaking the “shelter for minorities” narrative.
Lebanon’s confessionalism defied Adam Smith’s Invisible Hand in the heart of a “free market” economy, as every faction (religion) would seek its own benefits, without creating any indirect economic and social benefit to the country. Mainly it’s the elite class of every confessional community that continuously benefits from the system, even at the expense of people from the same faction. It is a system built on zero-sum games. Leaders continue to manipulate public opinion, mainly their followers, through geopolitics of religion, the art of keeping one scared of the other.
Iraq: Three Years of Drastic Changes (2019-2022)
When the wave of the protests broke out at the beginning of October 2019 in Iraq, the Iraqi politicians did not realize the size of the gap between the demands of the protesters which were accumulated more than seventeen years, and the isolation of the politicians from the needs of the people. The waves of the protests began in a small range of different areas in Iraq. Rapidly, it expanded as if it were a rolling snowball in many regions of Iraqi governorates. Moreover, the platforms of social media and the influencers had a great impact on unifying the people against the government and enhancing the protest movement.
Al Tarir Square was the region where most protesters and demonstrators were based there. At that time, they stayed all day in this region and set up their tents to protest and demonstrate against the public situation of their life.
The protesters demanded their looted rights and asked for making economic reforms, finding job opportunities, changing the authority, and toppling the government presided by Prime Minister Adil Abdul-Mahdi. The protest stayed between ebb and tide, pressuring the political authority in Iraq.
A new period began in the history of Iraq where clashes between the protesters and the riot forces broke out in Al Tahrir Square and many governorates in the south of Iraq. Tear gas and ductile bullets were used against the protesters to compel them to retreat and disperse them. But the protesters insisted on continuing their demands. Many protesters were killed and wounded due to the intensive violence against them. The strong pressure with falling many martyrs gave its fruit when the Iraqi representatives of the Parliament endeavored to achieve the protesters’ demands by changing the election law into a new one. On 24 December 2019, the Iraqi Parliament approved of changing the unfair Saint Leigo election law into the open districts. The new law divided Iraq into 83 electoral districts.
Moreover, this violent protest led to the collapse of the Iraqi government presided by Prime Minister Adil Abdul Mahdi. He was compelled to resign by the end of 2019. Many political names were nominated by the Iraqi politicians but the protesters refused them all because they were connected with different political parties.
Finally, Mustafa Al-Kadhimi, who worked in the Iraqi Intelligence Service and had no party, was nominated by the politicians to be the new Prime Minister. He was well-known for ambiguity and far from the lights of media.
Mustafa Al-Kadhimi has become the Prime Minister in March 2020. The protests were over at the beginning of April 2020. With the taking of responsibility of helping Iraq, Mustafa Al-Kadhimi promised the protesters, who were called “Octoberians”, to hold a premature election, and the election was fixed on 10 June 2020.
Many politicians tried to postpone or cancel the premature election. Under their pressure, the premature election was postponed and fixed on 10 October 2020. During Mustafa Al-Kadhimi’s period as a Prime Minister, he opened new channels with the Arab states to enhance the cooperation and held many summits to support Iraq in the next stage.
Attempts to postpone the premature election by the Iraqi politicians were on equal foot, but all these attempts failed and the election occurred on the due time.
Before the election, many Octoberians and influencers encouraged the people not to participate in the election. On the day of the election, it witnessed low participation, and people were convinced of not happening any change. These calls gave their fruits in the process of elections in Iraq where the election witnessed very low participation, and most Iraqis refused to participate and vote to the nominees even though there was a new election law. When the elections were over, the Independent High Electoral Commission (IHEC) in Iraq announced that the results would be within two days. After announcing the results of the election partially and defeating many political factions in the Iraqi arena, many convictions were directed to the commission, and it was convicted by fraud and manipulation with the results. This aspect affected the activity of the Commission and led to put great pressure on it. After two weeks of pressure and convictions, the final results of the elections were announced and many political elite Iraqi leaders were defeated gravely.
The results of the election gave a new start through new leaders who were supporting the October revolution that happened in 2019. And most names of these winning movements and alliances were inspired by the October Movement. Those, who represented October Revolution, were also convicted by other Octoberians that Octoberian winners in the election deviated from the aims of the October Revolution.
A new struggle has begun between the losers in the election and the new winners who will have the right to be in the next term of the Iraqi Council Parliament of Representatives. Moreover, many independent individuals won in the election, and the conflict would deepen the scope of dissidence between the losers and winners. Finally, all raised claims of election fraud have not changed the political situation.
The final results of the election had been announced, and the date of holding the first session of the Iraqi Parliament of Representatives was fixed to nominate and elect the spokesman of the Iraqi Parliament of Representatives. The Shiite Sadrist movement, which represents 73 seats, has wiped out its competitors. This aspect has compelled the losing Shiite competitors to establish an alliance called “Coordination Framework” to face the Sadrist movement, represented by the cleric Sayyed Muqtada al-Sader. On the other hand, Al-Takadum Movement (Progress Party), represented by the spokesman of the Iraqi Parliament of Representatives, Mohamed Al-Halbousi, has taken the second rank with 37 seats.
The final results of the election had been announced, and the date of holding the first session of the Iraqi Parliament of Representatives was fixed to nominate and elect the spokesman of the Iraqi Parliament of Representatives.
Finally, the first session of the Iraqi Council Parliament of Council was held. Mohamed Al-Halbousi has been elected as the spokesman of the Iraqi Council Parliament of Council. During the next fifteen days, the president of the republic will be elected.
China-US and the Iran nuclear deal
Iranian Foreign Minister Hossein Amir Abdollahian met with Chinese Foreign Minister, Wang Yi on Friday, January 14, 2022 in the city of Wuxi, in China’s Jiangsu province. Both of them discussed a gamut of issues pertaining to the Iran-China relationship, as well as the security situation in the Middle East.
A summary of the meeting published by the Chinese Foreign Ministry underscored the point, that Foreign Ministers of Iran and China agreed on the need for strengthening bilateral cooperation in a number of areas under the umbrella of the 25 year Agreement known as ‘Comprehensive Cooperation between the Islamic Republic of Iran and the People’s Republic of China’. This agreement had been signed between both countries in March 2021 during the Presidency of Hassan Rouhani, but the Iranian Foreign Minister announced the launch of the agreement on January 14, 2022.
During the meeting between Wang Yi and Hossein Amir Abdollahian there was a realization of the fact, that cooperation between both countries needed to be enhanced not only in areas like energy and infrastructure (the focus of the 25 year comprehensive cooperation was on infrastructure and energy), but also in other spheres like education, people to people contacts, medicine and agriculture. Iran also praised the Belt and Road Initiative (BRI) and said that it firmly supported the One China policy.
The timing of this visit is interesting, Iran is in talks with other signatories (including China) to the JCPOA/Iran nuclear deal 2015 for the revival of the 2015 agreement. While Iran has asked for removal of economic sanctions which were imposed by the US after it withdrew from the JCPOA in 2018, the US has said that time is running out, and it is important for Iran to return to full compliance to the 2015 agreement. US Secretary of State Antony Blinken in an interview said:
‘Iran is getting closer and closer to the point where they could produce on very, very short order enough fissile material for a nuclear weapon’
The US Secretary of State also indicated, that if the negotiations were not successful, then US would explore other options along with other allies.
During the course of the meeting on January 14, 2022 Wang Yi is supposed to have told his Chinese counterpart, that while China supported negotiations for the revival of the Iran nuclear deal 2015, the onus for revival was on the US since it had withdrawn in 2018.
The visit of the Iranian Foreign Minister to China was also significant, because Foreign Ministers of four Gulf Cooperation Council (GCC) countries – Saudi Arabia, Kuwait, Oman and Bahrain — and Secretary General of GCC, Nayef Falah Mubarak Al-Hajraf were in China from January 10-14, 2022 with the aim of expanding bilateral ties – especially with regard to energy cooperation and trade. According to many analysts, the visit of GCC officials to China was driven not just by economic factors, but also the growing proximity between Iran and Beijing.
In conclusion, China is important for Iran from an economic perspective. Iran has repeatedly stated, that if US does not remove the economic sanctions it had imposed in 2018, it will focus on strengthening economic links with China (significantly, China has been purchasing oil from Iran over the past three years in spite of the sanctions imposed by the US. The Ebrahim Raisi administration has repeatedly referred to an ‘Asia centric’ policy which prioritises ties with China.
Beijing is seeking to enhance its clout in the Middle East as US ties with certain members of the GCC, especially UAE and Saudi Arabia have witnessed a clear downward spiral in recent months (US has been uncomfortable with the use of China’s 5G technology by UAE and the growing security linkages between Beijing and Saudi Arabia). One of the major economic reasons for the GCC gravitating towards China is Washington’s thrust on reducing its dependence upon GCC for fulfilling its oil needs. Beijing can utilize its good ties with Iran and GCC and play a role in improving links between both.
The geopolitical landscape of the Middle East is likely to become more complex, and while there is not an iota of doubt, that the US influence in the Middle East is likely to remain intact, China is fast catching up.
Egypt vis-à-vis the UAE: Who is Driving Whom?
“Being a big fish in a small pond is better than being a little fish in a large pond” is a maxim that aptly summarizes Egyptian regional foreign policy over the past few decades. However, the blow dealt to the Egyptian State in the course of the 2011 uprising continues to distort its domestic and regional politics and it has also prompted the United Arab Emirates to become heavily engaged in Middle East politics, resulting in the waning of Egypt’s dominant role in the region!
The United Arab Emirates is truly an aspirational, entrepreneurial nation! In fact, the word “entrepreneurship” could have been invented to define the flourishing city of Dubai. The UAE has often declared that as a small nation, it needs to establish alliances to pursue its regional political agenda while Egypt is universally recognized for its regional leadership, has one of the best regional military forces, and has always charmed the Arab world with its soft power. Nonetheless, collaboration between the two nations would not necessarily give rise to an entrepreneurial supremacy force!
Egypt and the UAE share a common enemy: political Islamists. Yet each nation has its own distinct dynamic and the size of the political Islamist element in each of the two countries is different. The UAE is a politically stable nation and an economic pioneer with a small population – a combination of factors that naturally immunize the nation against the spread of political Islamists across the region. In contrast, Egypt’s economic difficulties, overpopulation, intensifying political repression, along with its high illiteracy rate, constitute an accumulation of elements that serves to intensify the magnitude of the secreted, deep-rooted, Egyptian political Islamists.
The alliance formed between the two nations following the inauguration of Egypt’s President Al Sisi was based on UAE money and Egyptian power. It supported and helped expand the domestic political power of a number of unsubstantiated Arab politicians, such as Libya’s General Khalifa Haftar, Tunisia’s President Kais Saied and the Chairman of Sudan’s Transitional Sovereignty Council, Lieutenant-General Abdel-Fattah Al-Burhan. The common denominator among these politicians is that they are all fundamentally opposed to political Islamists.
Although distancing political Islamists from ruling their nations may constitute a temporary success, it certainly is not enough to strengthen the power of the alliance’s affiliates. The absence of true democracy, intensified repression by Arab rulers and the natural evolution of Arab citizens towards freedom will, for better or for worse, lead to the re-emergence of political Islamists. Meanwhile, Emirati wealth will always attract Arab hustlers ready to offer illusory political promises to cash in the money.
The UAE has generously injected substantial amounts of money into the Egyptian economy and consequently the Egyptian State has exclusively privileged Emirati enterprises with numerous business opportunities, yet the UAE has not helped Egypt with the most critical regional threat it is confronting: the Grand Ethiopian Renaissance Dam. Meanwhile, Egyptian President Abdel Fatah El Sisi’s exaggerated fascination with UAE modernization has prompted him to duplicate many Emirati projects – building the tallest tower in Africa is one example.
The UAE’s regional foreign policy that hinges upon exploiting its wealth to confront the political Islamist threat is neither comprehensible nor viable. The Emirates, in essence, doesn’t have the capacity to be a regional political player, even given the overriding of Egypt’s waning power. Meanwhile, Al Sisi has been working to depoliticize Egypt completely, perceiving Egypt as an encumbrance rather than a resource-rich nation – a policy that has resulted in narrowing Egypt’s economic and political aspirations, limiting them to the constant seeking of financial aid from wealthy neighbors.
The regional mediating role that Egypt used to play prior to the Arab uprising has been taken over by European nations such France, Germany and Italy, in addition of course to the essential and ongoing role of the United States. Profound bureaucracy and rampant corruption will always keep Egypt from becoming a second UAE! Irrespective of which nation is in the driver’s seat, this partnership has proven to be unsuccessful. Egypt is definitely better off withdrawing from the alliance, even at the expense of forgoing Emirati financial support.
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