How Hezbollah controls the economy in Lebanon

Hezbollah, an Iranian-backed militia, has done all it can to create a parallel state in Lebanon. A “state within a state”, many call it.

The Lebanese political class has still failed to form a government after 10 months, and the ensuing political vacuum has allowed Hezbollah to demonstrate its ability to run the country through its seemingly well-developed social network, according to a published report in May from Global Risk Insights.

“Hezbollah is today the most powerful political party in Lebanon, it is the only party with its own military force and it forms with its allies a parliamentary and ministerial majority.

This position allows Hezbollah to control Lebanon’s economy as much as the country’s politics, ”explains Jessy Trad Kastoun, senior economics expert and head of Business News at Lebanese television Murr.

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For almost all public institutions in Lebanon, Hezbollah has another which provides the same service to party supporters: their own security forces, their own banking system called “Al Kard al hassan”, their own social security and their own. hospitals. In this regard, Hezbollah weighed on the Lebanese economy.

The shadow banking system, for example, works when official banks cannot, according to the report. When traditional banks closed and froze dollar accounts, Hezbollah was able to provide hard currency through its shadow banking system. The Al-Qard al-Hasan Association, literally the “voluntary loan”, is run like a charity, but in fact it can be seen as a banking system for all intents and purposes.

Nasrallah, the head of Hezbollah, encouraged depositing the money at Al-Qard al-Hasan, saying the bank had already granted $ 3.7 billion in loans to some 1.8 million people. He described the association as solid as a rock, saying that Party supporters, who deposited money at al-Qard al-Hasan, managed to keep their money when the banks claimed they were unable to pay their depositors in dollars.

To access Association loans, clients must be sponsored by a depositor or must mortgage an amount of gold that exceeds the value of the requested loan. At the end of October 2020, the Al-Qard al-Hasan association started providing three new services. He equipped his branches with ATMs for his customers to withdraw dollars when they needed them, he started buying and selling gold for dollars, and he started providing gold storage for a small fee.

Border control, airports, ports

Kastoun points out in an interview with the Cyprus Mail that “it is well known that Hezbollah has tightened its grip on strategic Lebanese infrastructure such as border controls, the port, the airport and the telecommunications sector allowing it to have its own business. channels and through which he is also engaged in smuggling. This creates a personalized economy within the national economy, resulting in billions of dollars in lost government revenue. “

Hezbollah is thus able to import goods through the airport and ports tax free. The group uses the pretext that these materials are for “strength purposes”. The authorities are turning a blind eye, says Kastoun.

Complaints from business people about competing products in the market appearing at prices below their cost have become commonplace. These products, says Kastoun, come from Hezbollah.

Toni, 54, has been importing flowers to Lebanon for 30 years. It’s wholesale. Five years ago, he found he couldn’t keep up with the competition. “Things got aggressive,” he told Cyprus Mail, on condition of anonymity.

“Hezbollah looks after the interests of its own people to the detriment of the Lebanese economy. I was importing roses for, say, the price of 20 cents. With all the taxes paid, it’s almost impossible to go below.

Five years ago, a Hezbollah person started importing for 15 cents. I was about to close my business, but instead decided to start buying from him. It imports tax free. It’s crazy but it happens. How I do not know! Tony complains.

Funding of illegal activities abroad

“Donations to Hezbollah are a form of funding for the group which has now dedicated schools, hospitals, banking and commercial institutions that are more established than Lebanese national public institutions,” Kastoun explains.

These donations are usually made by wealthy Shia businessmen who operate under the wing of Hezbollah in Latin America and Africa in various illegal businesses, including drugs, she adds.

The US Center for Counterterrorism Operations announced in January 2020 that Hezbollah was one of 25 foreign terrorist organizations involved in drug trafficking.

Hezbollah has also been one of the main parties involved in the Syrian civil war since 2011, and this has had an impact on the Lebanese economy as well. The Iranian-backed militia used Lebanon as a platform to break the embargo on Syria, Kastoun continues.

“At the borders with Syria and since the start of the war, Hezbollah has ensured a secure route for gasoline, food and dollars from Lebanon to Syria.

Current gasoline and diesel smuggling is estimated at around $ 10 billion from 2011 to the end of 2019, and these funds have resulted in a larger balance of payments deficit. This worsened the currency crisis in Lebanon.

Kastoun believes the current collapse is in the best interests of Hezbollah, which is funded by Iran in US dollars. “This means that the Hezbollah community will not suffer the economic hardships that many others are going through in Lebanon. But again, for militias like Hezbollah, a poorer population is easier to control, ”she concludes.

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