In kleptocrats-riddled Lebanon, it is difficult to know what rock bottom is

Beirut’s celebrated nightlife has long had a rebellious air: a subversive challenge to conservative dogma, an antidote to rotten politics and a hedonistic emancipation from sectarian street battles.

But now even the night has been stolen, increasingly affordable only to the rich. Rolling power outages ensure that the city is bathed in darkness.

Meanwhile, the tourism ministry excitedly predicted 2.2 million visitors this summer. Most will be Lebanese who long since fled, briefly seeing family and friends still trapped in a quagmire.

In Lebanon, it is difficult to know what rock bottom is, perhaps that’s why EU policymakers fail to treat it as a priority.

Fifteen years of civil war, an Israeli invasion, a Syrian occupation, over 250 unsolved political assassinations, an unparalleled refugee crisis, the world’s worst economic collapse since the 19th century and one of the biggest non-nuclear explosions in history.

The country is an unaccountable mafia state where over 80% of the citizens now live in multidimensional poverty and where ex-warlords turned politicians turned the state into a host they could feed on.

Or, to quote the World Bank, the government has “consistently and acutely departed from orderly and disciplined fiscal policy to serve the larger purpose of cementing political economy interests.”

Dystopian scenes and parallel realities

Years of financial misconduct by the government culminated in 2019 when Lebanese citizens found their bank accounts effectively frozen, blocked from withdrawing US dollars and only allowed derisory amounts of Lebanese pounds — a currency that has now lost more than 98% of its value in four years.

The pandemic and the Russian invasion of Ukraine compounded the financial misery prompting more power outages, medicine shortages and mass emigration.

Some took to refugee boats across the Mediterranean. Some scavenged for food in dumpsters.

Others conducted armed heists on banks to demand their own savings, becoming folk heroes in the process.

But amid these dystopian scenes, under cover of banking secrecy laws, the country’s politically connected were living in a parallel reality.

While ordinary people, those not politically connected, were unable to access their funds, political elites transferred over $10 billion (EUR9.06bn) out of the country siphoning the pot of liquidities collectively owned by all depositors.

It wasn’t too complicated since 18 of the 20 largest Lebanese banks are owned by politically exposed individuals.

A whole country running on cash is a win-win for kleptocrats

In lieu of a banking system, Lebanon now runs on cash. In lieu of people to form a thriving economy, Lebanon survives on remittances from abroad (accounting for 38% of GDP).

Using central bank-issued licenses, a few privileged firms in the country are allowed to process these money transfers, conveniently located in areas run by ruling parties.

One of them is BOB Finance whose chairman is a long-standing ally of the Governor of the Central Bank and the head of the Banking Association.

The worse the economy, the more urgent the need for remittances. More remittances mean higher profits for the elite’s crony companies.

It is just one of many schemes in Lebanon’s Ponzi economy, and another example of why the banking sector remains a quagmire.

The cash economy creates a win-win situation for the kleptocrats. The longer Lebanon goes without an IMF plan, the more cash they make.

And when, or if, said plan should come to fruition and the banking sector gets restructured, they will be the first to show up with the cash to acquire what remains of the economy, including its ailing banks.

Their industrial-scale looting will go unpunished, and the parasitic networks will continue to strangle the country to destitution.

That is, unless Europe decides to get serious and punish the wrongdoers with travel bans, asset freezes and seizures.

Is there anything left to destabilise?

It is regularly heard in Brussels circles that Syria and Iran are much more of a priority than Lebanon and that sanctions should focus first on Damascus and Teheran.

The reality is that handling Lebanon as an unrelated matter is an intellectual construct which can only be entertained by bureaucrats who do not grasp the extent of state capture in Beirut.

It has also been a long rhetoric that one shouldn’t rock the boat in Lebanon as long as the refugees are “there” and that any targeted sanctions on the Lebanese political elite might destabilise the country and the region. But is there anything left to destabilise?

In July 2021, the Council of the EU announced a framework for sanctions against Lebanese figures “undermining democracy or the rule of law in Lebanon” while assuming that the threat of sanctions would be deterring for the corrupt elite.

The two years which elapsed since the framework was issued not only proved them wrong since the situation continues to deteriorate but it showed how much they underestimated the genius wit of those in power who was given a perfect window of opportunity to put their assets in safe heavens.

The cost of this poor bet is borne by the population alone.

It’s time for the party to be over

On 12 July, the European Parliament adopted a draft resolution calling for sanctions on Lebanese elites obstructing presidential elections and the Beirut port blast investigation and those who have enriched themselves to the detriment of the population.

It now behooves the Council of the European Union to take action. For those that helped impoverish the country, it is time that the party stopped.

Heading the opposite direction from Lebanese visitors this summer will be the elites, jetting out to European properties bought with money looted from the state, perhaps with bags of cash to deposit in European banks.

They may drive past Gemmayze, the lively neighbourhood for Beirut’s “real nightlife” peppered with bars, galleries, and restaurants that many now struggle to afford.

It is also the place where the port explosion ripped through three years ago and for which still nobody has been held accountable. Impunity has robbed Beirut of its soul.

While civil society tracks corruption and proceeds to have them restituted to Lebanon, while the victims of the Beirut port explosion gather their last resources to push for justice, while courageous journalists and intellectuals risk their lives to seek accountability, it is a humanitarian duty for the Council of the European Union to support their fight and issue targeted sanctions against those who continue to promote their own interests to the detriment of the population.

Zena Wakim is an international lawyer and President of the Board of the Swiss Foundation Accountability Now, whose mission is to support Lebanese civil society in its desire to put an end to the impunity of corrupt leaders.

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