The Arab League has dropped Hezbollah's 'terror' tag. What comes next?

There has been a sea change in the Arab League's approach towards Hezbollah.

Over the weekend, the League's assistant secretary-general Hossam Zaki said that the organisation no longer considered Lebanon's Hezbollah to be a "terror group."

The decision came after Zaki visited Beirut at the end of June and held talks with the head of Hezbollah's parliamentary bloc, Mohammad Raad. This marked the first contact between both sides in over a decade.

For years, tensions dominated the Arab League's relationship with Hezbollah. In early 2016, it classified Hezbollah as a "terrorist organisation” and accused it of promoting extremism, sectarianism and meddling in countries' internal affairs.

Saudi Arabia and the United Arab Emirates have long viewed Hezbollah as an extension of Iranian influence in the region. But as relations between Iran and Saudi Arabia improve under a Beijing-backed normalisation agreement, resistance to Hezbollah has become difficult to maintain.

In addition to being a historic development, the removal of Hezbollah's terror tag is significant for several more reasons. Firstly, Arab states want to engage more directly with the Lebanese group to address concerns of a full-blown war with Israel.

Member states such as Egypt have grown increasingly alarmed over rising cross-border hostilities, and have baulked at US pressure to contain future spillovers.

Despite Washington's latest diplomatic efforts, top Israeli officials are pressing for a possible war with Hezbollah, making it critical for the League to exercise its own influence and prepare against any warlike scenario.

Taking no chances

Hezbollah's designation as a terrorist group meant the Arab League couldn’t directly engage with the group and address fears of a wider Lebanon-Israel war.

Until now, Egypt and Qatar have partnered with Western allies to warn Hezbollah against a wider war with Israel. But Hezbollah insists on a full-scale ceasefire in Gaza to end its cross-border attacks. That is an outcome that the United States has failed to induce so far.

However, direct engagement with Hezbollah could offer an alternative course for the Arab League. For instance, it could explore possible compromises in Hezbollah's ceasefire demands and support conditions for cross-border de-escalation with Israel.

Top Israeli generals are already pressing for a truce with Hamas, though Prime Minister Benjamin Netanyahu is unlikely to agree to a formal deal that entails complete withdrawal of Israeli forces from Gaza.

This is important because Hezbollah insists on troop withdrawal and formal ceasefire guarantees, and will likely have to demonstrate flexibility on one of these demands.

All this enables the Arab League to coordinate expectations on a future border truce through direct contacts with Hezbollah. Both sides have spoken against an all-out war in the past.

For Arab states, war is an outcome that could also strengthen Tehran's hold on Hezbollah and draw participation from Iran-aligned armed groups in the region.

"All options, (including) the full involvement of all Resistance Fronts, are on the table," wrote Iran's mission to the United Nations in a recent post on X.

Benefits of tactical engagement

For several Arab League states, group engagement with Hezbollah has individual perks.

For one, Hezbollah wields important influence with Yemen's Houthi rebels, helping them direct their attacks on Red Sea shipping vessels. These escalations have cost Egypt significant economic revenue, and raise the prospect of more spillovers if Hezbollah and Israel go to war.

For Qatar, closer group engagement with Hezbollah could advance its mediation efforts in Lebanon. Doha has been a fixture in Hamas-Israel talks, and is attempting to facilitate truce negotiations between Hezbollah and Israel.

As cross-border escalations and preventing a full-blown war remain high on the Arab League's agenda, future engagement with Hezbollah could advance Qatar's objective to prevent a war.

Lebanon's crisis

Moreover, Lebanon's political crisis demands Arab initiative on Hezbollah. Since October 2022, Lebanon has struggled to elect a president, while the Lebanese armed group strengthens its grip on key economic sectors such as real estate, energy and pharmaceuticals.

Even after the Arab League Summit last year, the group has struggled to convince "all Lebanese factions" to elect their head of state and support reforms that lift Lebanon out of turmoil.

Given Hezbollah's significant economic heft in Lebanon, it is clear that engagement can no longer take a backseat.

Riyadh recently announced millions in financial contributions to aid Lebanon's development and stability, and has worked alongside Egypt and Qatar to help fill Lebanon's power vacuum.

But those efforts face little success as long as Hezbollah and its parliamentary allies thwart bids to elect a president, effectively risking near-term political stability.

By reaching out to Hezbollah's parliamentary bloc, the Arab League indicates a more serious approach to multi-stakeholder engagement in Lebanon.

Closer engagement could potentially limit Hezbollah's resistance to presidential bids in parliament, a critical factor that sharpened sectarian tensions and deepened Lebanon's political crisis last year.

The Arab League is also well-positioned to engage "all Lebanese factions" on the presidency issue without sidestepping a major political force in the country. Thus, the removal of Hezbollah's terror label brings about several opportunities for Arab states.

They can share direct concerns over a possible regional war, gauge Hezbollah's thinking, and maintain working links with a group that is central to Lebanon's political and economic future.

However, there are some downsides to engaging with the group. The Arab League still holds "numerous reservations and objections" over Hezbollah's regional agenda, including its ability to advance Iranian objectives through a sizable weapons arsenal.

Since Hezbollah's trust deficit with the Arab League has sustained for over a decade, it may feel reluctant to yield to Arab League demands on ending cross-border hostilities.

But the merits outweigh the costs today. The Arab League realises that Hezbollah is an important political actor in the region which could prompt Iran's direct engagement in a war with Israel.

The Saudi-Iranian rapprochement is another pull factor: relations continue to improve, and it would be counterproductive to draw Iran's ire by attempting to isolate Hezbollah.