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PaperclipPerfector
1mo ago
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Transnational Thursday for September 26, 2024
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Sadly Nasrallahs death may not mean that much in the end. Hezbollah may be literally crippled as an organization and truly destroyed as an entity following the loss of all its comms networks and leadership relationships, but that does not translate to the Lebanese state or even another nonstate entity picking up the pieces. The Lebanese state is entirely crippled, with a paralyzed legislature, lacklustre domestic law enforcement, and especially an utterly broken economy. The state or another entity picking up the civil functions of Hezbollah will be possible, but nothing will replace the Iranian dollars flowing into Hezbollah member wallets.
Lebanons economy has been semi functioning for the last decade almost purely off the back of diaspora remittances and purchases of financial products by Gulf states, especially the USD-LBP high yield deposits. The Lebanese banking crisis of 2019 was probably more devastating than the civil war, because it bound the economy to external obligations hitherto absent to the Lebanese. A scheme of guaranteed high interest yield cash deposits with advertised fixed convertibility between Lebanese Pound to US dollars at pegged rates ballooned Lebanons financial sector, but it was ultimately a ponzi scheme. Investors buy LBP-USD fixed deposit products, expecting the products to yield USD. However, Lebanese are paid in LBP, and the state borrows ostensibly in LBP, and receives payments in LBP. Supporting a LBP-USD peg requires continual purchases of USD to keep the value of the LBP and keep the fixed deposit products viable... unless you just don't, and pay out depositors in USD from new USD payouts from new investors.
Specific attention csn be directed to the Maronite central banker Riad Salameh who was responsible for engineering this scheme in the first place. He built his career in Paris in the 70s, an opportunity specifically maintained by the French who maintain a somewhat protective relationship of the Maronites. From there Salameh built up a strong network and career, and likely contributed significantly to the early Lebanization of the professional sector of the Gulf states. It is strangely coincidental that vast amounts of gulf money found itself so readily moved to the aforementioned high yield deposits, despite the fragility of such a system being obvious to any banker or even moderately read individual.
This is the dire situation Lebanon is in. They have no external capital investments to nationalize, an external debt burden to the very people that were their economic product (and now unwilling creditors), an economically unviable local populace due to terrorism and lacklustre domestic industrial development, and now a shitload of restive cripples cut off from their external sponsor. Hezbollahs destruction is a good thing, but whether the Lebanese can capitalize on it is a different issue.
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