What’s stopping Arab states from bailing out Lebanon?

Lebanon’s caretaker Prime Minister Hassan Diab made a desperate appeal on Wednesday. "Either you save it now before it's too late or else no regrets will help,” he said in a televised address, asking friendly nations to bail out Beirut from a deep financial crisis. 

For years, Lebanon has looked at the Gulf countries including Saudi Arabia to pay for its inflated bills. But fellow oil-rich Arab partners have demurred. 

Its currency, the Lebanese pound, has lost over 85 percent of its value against the US dollar since 2019, making imports expensive and stoking inflation. Even the World Bank has ranked the country’s economic crisis as one of the worst seen in more than 150 years. 

So what has stopped Arab nations from coming to Lebanon’s aid? 

Partly, the widespread internal dissent and dissatisfaction against the political elite has made the international community wary of stepping in with a helping hand. 

“I think this goes back to the fact that the political system is no longer legitimate in Lebanon. After demonstrations of the last two years, it becomes clear that the whole system [including almost all of the political parties] is not acceptable to people anymore. The whole system is not functioning well,” says Mahjoob Zweiri, a professor of Contemporary History at Qatar University.

As a result there’s a real hesitation in Gulf states when it comes to putting money in the Lebanese political class because it might rub the public up the wrong way, Zweiri told TRT World. 

Gulf states might also think that if they back a political system which is “fragile”, their support might go anywhere, the professor suggests. “The fragility of the system” is the main reason for the Gulf's unwillingness to bail out Lebanon, he offers. 

Lack of popular support

Zweiri and many other experts see a growing gap between political elites and ordinary people, which leads to a lack of public trust in the government. 

This became apparent amid the widespread anger that came about after the Beirut port blast last August which killed hundreds of people and devastated a vast area in the capital city. 

Lebanese people couldn’t care less about the present caretaker government being supported by the Gulf countries or European nations such as France, said Zweiri. 

The cabinet had resigned in face of the protests following the Beirut blast. Since then, the caretaker setup has barely managed to keep the government machinery running. 

“The protests that stemmed from economic woes faced by the people have shaped perceptions about the country's politics. It has now become difficult to form a government relying on the same political actors,” said Zeynep Karatas, an Ankara-based expert on Lebanese politics. 

“And without widespread support it would be difficult for any government to implement the much-needed reforms that Lebanon’s creditors want. As long as protests continue, there’s little hope for any government,” Karatas told TRT World. 

As far as the Lebanese people are concerned, any foreign aid or bailout loans are seen as something that helps the political elite known for its corruption, she said 

The Lebanese banks once famous for safeguarding the secrets of their clients have come to the brink of collapse.  Almost all banks have enforced restrictions on cash withdrawals in what is the worst nightmare of any saver. 

Lebanon’s public debt stands at nearly $90 billion, which is almost double the country’s GDP of $54.1 billion. 

During violent demonstrations, angry protesters burned bank branches across the country last year. In June 2020, even some protesters attempted to occupy the country’s Central Bank in Beirut. 

Escalating tensions

Just last month, Lebanon's relations with the Gulf states hit a new low after Lebanon’s Foreign Minister Charbel Wehbe blamed rich Arab nations for the rise of Daesh in the neighbourhood. 

"Those countries of love, friendship and fraternity, they brought us Islamic State (Daesh)," Wehbe said, without naming any country. But prominent Gulf countries including Saudi Arabia, Kuwait, Bahrain and the UAE, saw his comments as "offences”, “gravely abusive” and "derogatory and racist". 

Charbel Wehbe supports the Iran-backed Shia group Hezbollah, which has deep roots in the Lebanese political system, is an avowed enemy of Riyadh and its Gulf allies.

Lebanon, where the political system has been divided among three main social groups, Shia Arabs, Sunni Arabs and Christians, has gone through several devastating civil wars. According to the Lebanese political system, the prime minister has to be a Sunni Arab, the president a Christian and the parliamentary speaker a Shia Arab. 

Hezbollah factor

Saad al Hariri, the billionaire prime minister-designate, whose family has strong connections with Riyadh and other Gulf capitals, could not establish a government after his resignation in January. 

Karatas, the analyst, thinks that Hariri’s failure to ensure financial support from the Gulf is partly related to Hezbollah. 

Because countries like the UAE and Saudi Arabia see Hezbollah as an Iranian proxy, they think their financial support might be used by the Shia militant group for its own gain. As a result, they are unwilling to commit to a bail-out, Karatas said. 

“The Gulf countries, which fiercely oppose Hezbollah, are waiting to see how Lebanese politics shapes up to decide if they will lend a helping hand,” she said.