Lebanon on Crossroads between U.S. Congressional and Saudi Led Sanctions
10 November 2017
Bachir El Nakib (CAMS), Senior Consultant - Compliance Alert (LLC)
Spreading rumors about an imminent financial collapse is short-sighted. It would harm the average Lebanese citizen while ironically emboldening rather than undermining the country’s ruling class.
Corrupt politicians run government deficits and accumulate debt; their friends in the financial sector (including BDL) keep on lending them and make profits; and to finance this operation they set high interest rates to attract overseas deposits, mostly from the Lebanese diaspora.
Following Congressional decision dated December 2015 against Hizbollah, the GCC council led by Saudi Arabia took action on March 2016 against Hezbollah taking legal measures against TV channels affiliated with or it’s leader as well as companies and individuals affiliated with it. Political and economic measures taken by Arab countries, which come in the backdrop of increased tensions with Lebanon, could further damage the country’s already fragile economy. beginning in a move that marks further US escalation directed at the Iranian government and the Lebanese armed group Hizbollah, US Congress and House of Representatives took first step a week ago in approving unanimously three resolutions that tighten the economic screws on Tehran and the Shiite militant party, after almost six months of deliberations and amendments, the US House of Representatives passed a bundle of bills with measures designed to curb Iran’s ballistic missile programme and Hizbollah’s funding.
A unanimous majority of Democratic and Republican members of Congress voted orally in unison and passed the following resolutions:
- 1- H.R 359 - Urging the European Union to designate Hizbollah in its entirety as a terrorist organization;
- 2-H.R. 3342 - Sanctioning Hizbollah’s Illicit Use of Civilians as Defenseless Shields Act;
- 3-H.R. 3329 - Hizbollah International Financing Prevention Amendments Act of 2017 (HIFPA).
Following a visit to the U.S. to meet officials last month, Head of the Association of Banks in Lebanon Joseph Torbey said:
“The association told the U.S. administration and correspondent banks that new legislation should not be harmful or cause collateral damage to Lebanon, its economy, its banks or the savings of the people.”
Last week,Saudi Arabia accused Lebanon o n Monday of declaring war against it because of what it called aggression by the Iran-backed Lebanese Shi‘ite group Hezbollah. If the next government is more pro-Hezbollah , that could lead to devastating sanctions. It could even increase the chances of a new war with Israel, which would see added justification for its argument that there is little distinction between Hezbollah and the Lebanese state.
“Between that (Hariri’s resignation) and the missile launch on Riyadh ... the coincidence of those two does mean that the prospect of some escalation, some strike either against Hezbollah or against Iran or against both is more likely, certainly than it was a few days ago.
From last month meetings held in Washington by IMF, and the US-Mena Private Sector Dialogue at the Federal Reserve Bank of New York, NY, USA, Marshall S. Billingslea, Assistant Secretary for Terrorist financing in the US Treasury Department as key note speaker, sent alarming messages to Lebanon banking sector attending the event:
The US Department of Treasury thinks that the creation of the CFTC (Counter Financing Terrorism Centre) in KSA is the bone to encounter Iran threats in the Middle East, the ballistic missiles program, the release of huge amount of funds through Syria to Hizbollah and the Taliban by way and means that Iran IRGC via Mahan Air, the second largest airline helping Hizbollah in collaboration with commercial entities doing business with Mahan Air, the designated Hizbollah continue to build its defensive construction. Our actions and the Congress not directed against Lebanon. We encourage you not to provide financial services to Hizbollah, you must focus and monitor Non-profit circles continue to make threats in finance Terrorism Charities and MSB continue to be a risk funding Terrorism We do recommend to do risk based assessment Focus on charity Non-Financial banking sector, we encourage you not to provide financial services to Non-profit circles, MSB (Money Service Businesses) or employees in MSB that continue to make threats in financing terrorism, we do recommend to do risk based assessment focusing on charities, non-financial banking sector, there's the real Risk.
Impact of Sanctions