Beirut, Lebanon – It is almost two weeks since Saudi Arabia declared a total ban on imported goods from Lebanon after it came to light that a minor Lebanese minister had criticized the kingdom over the civil war in Yemen.
Although the remarks were made before the minister was appointed, the timing for Lebanon could no longer be painful. The import ban by the richest economy in the Arab world, which is sinking and sinking deeper into a two-year-old economic crisis, kicks off Lebanon’s tiny, weakened economy when it is already hopelessly down.
“The current ban on Saudi Arabia has now directly affected about $ 250 million in exports. This is big for Lebanon. This is a lot for Lebanon, ”said Paul Abi Nasr, CEO of Polytextile and a board member of the Association of Lebanese Industrialists. “Look, to be very clear, on an industrial level, this is a big thing,” he told Al Jazeera.
Prior to the Saudi ban, Abi Nasr said exports to Saudi Arabia were expected to double in 2022. “We have started to take advantage of the Saudi ban on Turkish products – they are very big competitors,” he explained. “Our target for 2022 was to move to $ 500 million in exports to Saudi Arabia.”
At the industrial level it’s a big thing
Lebanon continues to spiral downward into an economic abyss in which it first tumbled in 2019. Over the past two years, the Lebanese pound has lost about 90 percent of its value. Nearly three-quarters of the country’s population now lives in poverty. The country’s banks are on the sidelines due to a shortage of US dollars – effectively wiping out the savings of millions of people – while Lebanon’s once buzzing tourism industry is struggling with rising overhead costs and a shortage of COVID-minded customers.
From thaw to frost
Relations between Lebanon and Saudi Arabia have thawed over the past half-decade, especially following the 2016 election of Lebanese President Michel Aoun, who is linked to Iran-backed Hezbollah.
Riyadh has once invested billions of dollars in the country and strengthened its luxury tourism economy. Before Lebanon’s financial crisis took hold, former Prime Minister Saad Hariri said he was in talks with Saudi Arabia and the United Arab Emirates to fund nearly two dozen development projects in Lebanon.
Now a new diplomatic quarrel – caused by remarks made by Information Minister George Kordahi about the war in Yemen during an interview a month before his appointment – has further strained ties.
After the comments were reported, the Gulf’s response was swift. Saudi Arabia, the UAE, Kuwait and Bahrain have recalled their envoys from Beirut and banned Lebanese ambassadors. Bahrain and the UAE have called on their citizens to leave Lebanon. Yemen has also since recalled its envoy from Beirut.
On November 5, the head of the Council of Saudi Chambers, the federation of the kingdom’s 26 chambers of commerce and industry, on Twitter called on all Saudi companies and businessmen to cease all dealings with Lebanon.
– My Lady program (@sayyidaty) 5 November 2021
The recent general ban indicates an escalation of tensions that took root in April, when Saudi Arabia an indefinite, purposeful ban implemented on Lebanese products and agricultural products after he thwarted an attempt to smuggle 5.3 million pills of the illegal amphetamine Captagon hidden in a consignment of grenades at the Jeddah port.
The Saudi ambassador to Lebanon, Waleed Bukhari, tweeted at the time that the kingdom had found more than 57 million illegal narcotics that had been smuggled out of Lebanon since the beginning of 2020.
From shopping center to marginalized
Some experts now fear that the UAE, Kuwait and Bahrain could follow Saudi leadership and implement similar general import bans on Lebanese products.
“This will account for about half of our total export earnings,” Nizar Ghanem, director of research and co-founder of the Beirut-based research center Triangle, told Al Jazeera. “I think it’s definitely a legitimate concern.”
Meanwhile, in Riyadh, Lebanese businessmen say the tensions have made the industry more challenging. “We do not feel comfortable being in the middle of this crisis,” Rabih El-Amine, chairman of the Lebanese Executive Council in Riyadh, told Al Jazeera. “Yes, we work kind of normally, but it’s not easy.”
Lebanese industrialists have tried to circumvent the Saudi ban by exporting from other countries where they have operations, including Egypt and the UAE. But that solution eats away at revenue that would otherwise be collected by the Lebanese government.
The import ban also puts the prospects for Lebanon’s long elusive economic recovery even further from reach.
We have become the marginalized place
Since the end of its civil war in 1990, most of Lebanon’s economic activity has been concentrated in banking, tourism and real estate, while more productive sectors have not been able to thrive in it. The government wants to diversify the country’s economy and increase export earnings. But it now faces obstacles in the face of some of its key export markets.
At the same time, Ghanem said Lebanon was losing huge economic opportunities while business in the region was flourishing.
“With everything happening to the Gulf, Egypt and Israel – there is a full trade zone flourishing – and Lebanon is completely out of it,” Ghanem told Al Jazeera. “Historically, Lebanon was the trading center that connected the Arab world. Now we have become the marginalized place, with militias, collapsing rule of law and a massive financial crisis. “
Ghanem and others fear that Saudi Arabia and other Gulf states could hurt Lebanon even further by freezing or restricting financial flows.
For years, Lebanon has relied on overpayments of millions of expatriates living in its diaspora, particularly in the Gulf, to supplement hard currency. About 43 percent of overpayments come from the Gulf, according to the World Bank.
Now that vital lifeline for Lebanon’s sick economy could be in jeopardy. El-Amine describes overpayments as the “last artery to Lebanon’s body”.
A political problem
“We believe these actions are too broad and they all affect only those with whom they have a problem,” said Abi Nasr, chief executive. “[But] we understand why they would take such actions, even if it is too much for us. ”
Abi Nasr and El-Amine both believe that Lebanon has not done enough to address the security and political issues raised by Saudi Arabia.
The kingdom and other Gulf states, for example, have expressed concern about illegal drugs being smuggled into their countries via Lebanon. They also expressed concern about Hezbollah’s growing influence in the region. The Iran-backed political party has become a major military player in Syria, Iraq and Yemen, where it supports Houthi rebels against a Saudi-led coalition.
“Saudi Arabia has told us they have no problem with the private sector, but as a country they can only trade with the Lebanese government,” Abi Nasr said. “The Lebanese government did not act – they thought time would fix it.”
The Lebanese authorities promised last spring to tackle drug smuggling more aggressively. They have since thwarted several smuggling attempts from the Beirut port to ship tons of Captagon and hashish to Saudi Arabia, Greece and a handful of other countries.
the Gulf countries say we are no longer the cash cow
But that was not enough to alleviate Riyadh’s political concerns.
Lebanon has long managed to run tensions against Saudi-Iran, effectively sidestepping regional crises to maintain economic stability. But researcher Ghanem said current economic and political realities make that balancing impossible.
“In the past, you could only have had to deal with a paralyzed government for years, because we have the [US dollar] linked to the lira, and the influx of money coming through transfers, ”he said. “Now we are completely bankrupt, and there must be a complete rediscovery of Lebanon’s foreign policy and economic model, but the political class does not seem to see it.”
Ghanem says the role of Hezbollah in the region, especially in Yemen, and its negative discourse against Gulf countries have further exacerbated the situation.
“This is what the Gulf countries say: we are no longer the cash cow, you can no longer get free money from us,” he explained. “You can not disconnect it from our political position in the region.”
The Lebanese government has not met in nearly a month, due to dispute over Beirut port explosion investigator Judge Tarek Bitar, as well as disagreement over the Kordahi incident. Hezbollah and some of its allies praised Kordahi’s remarks, while Prime Minister Najib Mikati and President Aoun signaled his resignation.
The Lebanese government has called for dialogue with Saudi Arabia, with the Arab League seeking mediation.
“We hope this crisis will end, but unfortunately the Lebanese authorities are living in a different world,” said El-Amine. “We can no longer play two-faced where we have a country and government, but also six or seven political parties that do their own thing. It will no longer work with the GCC or any country in the world. ”
Abi Nasr and other industrialists have urged the Lebanese authorities to quickly restore ties, but he does not sound optimistic. “The government has told us it is in the process of being rectified. What does it mean? I have no idea.”