The Lebanese Politics Podcast shines a light on the great famine that devastated Mount Lebanon and neighbouring regions during the First World War, an event that has been swept under the carpet for over a century… and is finding a grim echo today.

The current price instability is triggering panic buying in supermarkets, sit-ins by bakers in Tripoli, strikes by transport workers, as well as protests by Liban Post workers demanding their wages be set at the exchange rate of LL3,900 to the dollar “just like the rest of the employees and managers,” reports L’Orient Today.

One guide to the depreciation of the Lira are changes in the so-called Fatouch Index during the month of Ramadan. The index tracks the price for the ingredients of popular salad.

Bigger shocks are coming down the line as major banks are beginning to suspend trading with the country, meanwhile pressure by global financial institutions is mounting on the government to dump subsidies on food and fuel, a move that could trigger deeper social convulsions.

Le Commerce du Levant has an excellent expose (in French) on Central Bank governor Riad Salamé’s dirty dealings and plain old thieving. Some digging by reporter Nada Maucourant Atallah found that an investigation by Swiss authorities “concerns the payment of more than 330 million US dollars in brokerage fees between 2002 and 2014 from the Banque du Liban to Forry Associated Ltd, registered in 2001 in the Virgin Islands, and whose economic beneficiary is Raja Salamé, the governor’s brother.”

With the country tumbling deeper into crisis… alongs comes the leader of the “resistance” to calm the nerves of the ruling class. Hizbollah leader Hassan Nasrallah accused people blocking roads in protest at the socio-economic conditions of “making people hungry, making people poor”. In a speech on 18 March he called on the army to intervene. Nasrallah said he is “fed up” with the roadblocks, suggesting Hizbollah might act “if the army and security forces do not succeed in reopening roads.”

That Hizbollah is now presenting itself as the armed wing of the Lebanese sectarian system is confirmation, if any was needed, that the “resistance” now sees itself as the guarantor of the state as it exists (see Hizbollah’s Sectarian Turn – 2013). But if Nasrallah had any doubts about the effectiveness of repression by the Lebanese state, a report by Human Rights Watch should soothe his soul. The organisation has raised alarm at the widespread use of torture and disappearances of protesters in the restive city of Tripoli.

Despite the growing unrest the ruling class is still unwilling, and unable, to form a government that would represent its collective interests. Although united in keeping its privileges afforded through the sectarian system, this class remains deeply divided in how to manage the crisis. High on the agenda of any incoming government would be the so-called reforms needed to unlock international aid. These reforms would in effect cripple any government as they include mass layoffs, an end to food and fuel subsidies, as well as opening the Central Bank’s books for an audit.

Add to this mix the regional and global imperialist rivalry and it becomes even more toxic. According to Carnegie Centre, “the political class in general does not appear eager to form a government, as it would need to implement painful reforms in order to unlock foreign aid. The country’s leaders would prefer a bailout in the context of a shift in regional or international politics, as the requested reforms today would require them to give up their leverage and patronage networks in the system.”

And nothing is more toxic than US imperialism. L’Orient Today reports that on a recent visit, Joe Biden’s envoy David Hale warned that those who are “continuing to block the reform agenda” will jeopardise Lebanon’s relationship with the US and its partners and “open themselves up to punitive actions”. That was the stick. The carrot he dangled is that the US is willing to “facilitate” negotiations with Israel on the maritime border demarcation “on the basis on which we initiated these discussions.” In other words the US is prepared to open talks with Israel over its expansionism into the Mediterranean and its designs on Lebanon’s maritime borders.

And therein lies the rub, for although Hizbollah’s actions in Syria and its heightened role as policeman in Lebanon have become a block to the development of genuine movements for change, it is still in the crosshairs of US imperialism, and its destruction remains uppermost on the agenda. The tragedy is that Hizbollah destroyed its credibility in the eyes of the people, and in so doing weakened itself, while opening the country to further military attacks.

This is why we have to be uncompromising in criticising and opposing the role Hizbollah has allocated itself in Lebanon and Syria, while also guarding against Israel’s designs on Lebanon and Palestine and its continuing role as imperial watchdog in the Middle East.

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The Great Famine

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Lebanon: Tripoli Detainees Allege Torture, Forced Disappearance

Human Rights Watch warns that : “Lebanese Military Intelligence forcibly disappeared and allegedly tortured detainees who were participating in protests against the Covid-19 lockdown and deteriorating economic conditions in Tripoli. These individuals face apparently unsubstantiated terrorism charges before the country’s military courts, which are inherently unfair, and under international law should not have jurisdiction over civilians.”

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The Power of Not Now

Carnegie Middle East Center: “Despite statements to the contrary, Lebanon’s political class seems unenthusiastic about forming a government today.”

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Supermarkets have become battlegrounds

Sunniva Rose writes in The National on how anger over the economic crisis is spilling over into supermarkets, which are under the spotlight for refusing to stock subsidised goods. The poor increasingly rely on charity for food, medicine and clothes.

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Fatouch Index

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Analysis: Lebanon’s woes push it to fringes of global finance system

Laila Bassam reports that: “Foreign lenders including HSBC and Wells Fargo are cutting ties with Lebanon’s central bank… underlining the country’s international isolation. In a letter to Lebanon’s public prosecutor last week, Governor Riad Salameh warned that foreign correspondent banks were starting to curtail their business relationships with the local financial system, while Wells Fargo had closed a central bank account in dollars, and HSBC had shut its British sterling account.”

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Les questions soulevées par l’enquête visant Riad Salamé en Suisse

Riad Salamé’s dirty dealings exposed by Nada Maucourant Atallah. She gives a summary in English on Twitter.

“We have new revelations on the Swiss probe into the allegation of “aggravated money laundering” against Riad Salamé and his relatives. What’s new? What is at stake? Which companies and people are being investigated?

We spoke with two sources with access to the Swiss prosecutors’ report in the context of Switzerland’s request for legal assistance from Lebanon. The report raises several questions.

The investigation is focused on a contract between BDL and Forry Associated LDT, a broker, which charged more than 330 million Swiss Franks in commissions on the purchase and sale of Eurobonds and other debt instruments between BDL and banks.

The beneficiary owner of the company is… Raja Salameh, BDL governor’s brother. Whereas it’s not unusual for a central bank to use a broker to trade its financial instruments in the secondary market, major financial and banking sources told us they never heard of Forry.

The contract also raises questions about the existence of a conflict of interest and whether any Lebanese codes or laws were violated.

But there is more, the commissions charged by Forry were transferred on: 1) partly to Raja Salameh’s accounts in Switzerland and then on to his accounts in Lebanon, and 2) to 3 companies that the Swiss suspect are controlled by Riad Salamé.

One of these companies also transferred 1 millions CHF to Rise Invest, a company whose beneficial owner is Marianne Howayek, the assistant of the governor who has been assigned the status of « assisted witness » in the investigation.

One of the essential points of the investigation is to understand whether these commissions constitute an embezzlement of BDL funds, as it is suspected in the probe. Who was paying the commissions and why? What were these transactions?

To whom belongs the « BDL account » from which the transfers were made? Is it the personal account of the governor, or a BDL account? There are many questions still pending, and it’s the governors’ turn to answer them.

If the allegations are proven to be true, the governor risks max 5 years of prison + a confiscation of his assets in Switzerland, that could, in the long run, be returned to the Lebanese.”

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Civil war survivors say today’s crisis even worse

Layal Abou Rahal on the impact of the economic crisis: “During the war, people could go back to work when bombardment slowed… But with current unemployment rates approaching 40 percent, many don’t have jobs to return to.”

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Strategic review of food and nutrition security in Lebanon (May 2016  ESCWA)

The 2016 Escwa report into food security has useful background information. The finding are updated in the Food Crisis Report. Below are Escwa highlights:

“In 2007/2008 commodity prices sky-rocketed; food and nutrition security in Lebanon faltered. The government responded by reintroducing subsidies on wheat, bread and flour that it had been phasing out, but the effects on economic access to food were still enormous. In 2008 alone average food prices in Lebanon rose by 18.2 percent and have only recently begun to enter negative territory. The Lebanese felt these prices hikes both in their wallets and their bodies. 

“As a result of the 2007/2008 price shocks, it is estimated that, on average, micronutrient levels for eight key vitamins and minerals in the Lebanese population fell between 16.3 percent (Calcium) and 2.8 percent (Vitamin C). These reductions were registered at elevated levels in urban areas, where over 80 percent of Lebanese reside. Naturally, the ability of the poor to afford food in this context was also affected. Between 2004 and 2011, the amount of money required to attain minimum caloric needs in one year had risen by 75 percent to around USD 987. Indeed, economic growth and food inflation boomed from 2008 up until 2011, when over one million poor food insecure Syrians arrived in Lebanon seeking refuge from the conflict raging next door. 

Like the [Bekaa] valley, the agricultural sector has also been left behind. According to different estimates, agriculture has fallen from as high as 23 percent of economic output at the end of the last civil war to make up only 4 percent of GDP today. At the same time, agriculture is thought to account for up to 25 percent of employment in the country and up to 80 percent of economic output in rural areas. Agricultural workers are also the poorest workers of any employment sector with around 40 percent of farmhands considered poor, a double burden for the Bekaa valley which hosts the largest proportion of Syrian refugees than any other region of Lebanon, many of whom also work in the agricultural sector. 

“The poverty rate among nationals is thought to have risen by around 4 percent to reach some 32 percent of Lebanese while around 70 percent of Syrian refugees cannot meet their basic food needs. 

“Before the crisis, among certain segments of Lebanon’s population (for instance in the South and Bekaa) almost half of those surveyed exhibited forms of food insecurity. Now, due to lack of money and resources, 49 percent of Lebanese have reported being worried about their ability to source enough food, while 31 percent say they were unable to eat healthy and nutritious food over the course of a year. 

“This cross-cutting assistance is greatly needed as only around 60 percent of wage earners are covered by the National Social Security Fund (NSSF), Lebanon’s largest social protection organization. The other 40 percent of the working age population are either unemployed, self-employed, work in informal sectors or in sectors which are not covered by the labour law such as agriculture and domestic labour. Healthcare is covered by the Ministry of Public Health as long as it has funds available. Patients must provide out-of-pocket payment that reaches up to 15 percent of the total cost of treatment. Most Lebanese who are not covered by some form of official insurance rely on remittances to cover the costs of healthcare as well as education. 

“An estimated half of the products sold in the Lebanese market originated from sectors with a high concentration of a few suppliers (i.e. 40 percent of the market is owned by four companies or less). In sectors such as cement, soft drinks, soap and metal coatings over two-thirds of the market are controlled by less than five firms. According to the latest available market studies from over a decade ago, about 58 percent of product markets are controlled by three firms, having at least 40 percent of each product market—the value of these markets at the time was USD 8 billion. These figures rise to 60 percent market control in 52 percent of markets among the five firms in each product market.

“The poorest 20 percent of residents in Lebanon were are thought to account for just 7 percent of all consumption while the top 20 percent accounted for over 43 percent.  Moreover, on an average per capita basis, the capital city consumes more than one and a half times the national average while the North consumes just three-quarters of the national average. In addition, consumption inequality is also prevalent within regions: 92 percent of consumption inequality is thought to exist within each governorate.

“With the level of wealth inequality measure, the Gini coefficient, being 84.858 and 67 percent of the population possessing less than USD 10,000, Lebanon is among the top ten countries in the world in terms of wealth inequality. Average wealth per adult is estimated to be USD 5,340 per person compared to the average amount of debt of USD 12,697, thus, on average, Lebanese resort to debt as a negative coping strategy to deal with a lack of income and purchasing power.

“The ability of the state to respond to poverty has also been curtailed by low expenditure on social services. The Lebanese government keeps accruing debt and maintains an estimated debt to GDP ratio of some 140 percent, which is forecast to grow to 160 percent by 2020. The majority of government expenditure goes towards personnel costs (36 percent, most of which went to the army and security services), interest payments (34 percent) and transfers to cover the deficit of the public electricity provider (17 percent). As a result, the amount left to spend on social services in Lebanon stands at a relatively low 7 percent of GDP, which is commensurate with regional peers and developed countries in terms of expenditures, but not necessarily quality, affordability and coverage.

[…] “Only 25 per- cent of the poorest 20 percent of the population (and 43 percent of the poorest 40 percent) benefit directly from the subsidy.

“This reality has rendered the population, especially the most vulnerable, dependent solely on income earnings and private social safety nets (particularly remittances). Remittances have constituted a proportion of between 15 and 18 percent of GDP in recent years (down from over 22 percent in the early-to-mid 2000s due to the global financial crisis). The amount of remittances received reached USD 9 billion in 2014, making Lebanon the tenth largest global recipient of remittances by value that year. Lebanese households receiving remittances are seen to invest them in access to social services: primarily on health related expenditure and then on education, something which highlights the crucial impact remittance income has on the level of human development… 

[…] “despite this large flow of capital into the country, remittances are not redistributed, neither in a pro-poor manner nor proportionally. Only six percent of the bottom 20 percent of income earners have the option to rely on remittances as their main source of income. This compares to 18 percent of the top 20 percent of income earners relying on remittances. The figure for the bottom 40 percent of income earners is 19 percent with access to remittances, compared with 35 percent among the top 40 percent of income earners receiving remittances. 

[..] “the introduction of universal healthcare coverage without large out-of-pocket payments could replace some of the need for remittances. Replacing remittance-based transfers with universal healthcare is estimated to potentially decrease poverty rates among Lebanese by some 10 percent, or by some 450,000 people. It is noteworthy that more than half the resident population, or around 2.25 million people in Lebanon, are not formally covered by any health insurance, whether it is public or private.

“Even though the government stepped in to regulate prices, the drug market is characterized by oligopolistic structures and subject to lobbying pressure from large drug importers, which drive up the cost of drugs for consumers. Furthermore, there are significant problems in the drug sector related to price rigging, supply manipulation (e.g. counterfeit drugs), trafficking and the government’s inability to monitor drug quality. As a result, Lebanon spends an average of about 7.2 percent of its GDP on healthcare. While this is similar to expenditure levels in OECD countries the quality is recognisably lower.

“Lebanon creates about 3,400 jobs per year but will need to raise that amount to 23,000 jobs per year if it is to merely maintain unemployment levels. In addition, only 46 percent of the working age population are active and of those, some 50 percent are thought to work in the informal sector.

“Unemployment is highly gendered with a rift between male and female employment emerging after age 34 persisting into old age. Education is correlated to poverty in Lebanon as the share of employment among those with tertiary education (61 percent) is significantly higher compared with those who have less than a primary education (31 percent).

“Poverty rates in both agriculture and construction sector are recognisably higher than those among persons who work in the public sector or in services. The same is true for type of contract, whereby those who work less permanently are more prone to poverty. 

“Despite its relatively low contribution to GDP, the agricultural sector is thought to employ some 20 to 25 percent of the working population, even if official figures (which only cover formal employment) put agriculture’s share of employment at some 6 percent.

“Lebanon’s labour code provides elements of basic social protection but does not cover wide swathes of the labour market. Lebanon imposes a minimum wage of USD 443 per month and entitles all contracted workers to healthcare coverage under NSSF schemes. The NSSF includes some 56,000 institutions and provides benefits to around 556,000 persons while it has a potential beneficiary load of 1.3 million persons—all of which are employed in the formal sector. The NSSF does not cover the self-employed and unemployed (and there is no unemployment insurance in the country). Moreover, the NSSF does not cover agricultural workers or domestic labour, which leaves out a significant portion of the workforce.”