Lebanon’s sovereign default comes at a heavy price for Hezbollah. This is not simply because of Hezbollah’s powerful role within the government that failed to repay a $1.2 bn bond on 10 March 2020. This is mainly because Hezbollah’s rivals are likely to use the current financial crisis to impose an external authority over Lebanon and increase pressure on the ‘Party of God’ to disband its armed wing.
To be sure, this is not an unprecedented event for Hezbollah. Since the end of the civil war, its external and domestic rivals have constantly weaponized subsequent political, economic and security ‘crises’ and used them as proxies to weaken and undermine Hezbollah’s political and military power. By evoking the time-honoured logic of an international ‘mandate’, to ‘help’ the Lebanese state and protect its stability and authority in an allegedly impartial way, the powerful rivals of Hezbollah – not least the US, the UK, France, Germany and Israel, among others – have persistently tried to remake the Lebanese state in their own image and marginalise the ‘Party of God’.
These efforts have not been successful so far, as Hezbollah has shown extraordinary dexterity and resilience in confronting them, not least by entrenching itself within the Lebanese institutions and using them as a shield to absorb and neutralise shocks coming from internal and external rivals. Nevertheless, Hezbollah’s strategy of resistance has its limits – especially amidst the unprecedented financial crisis confronting Lebanon.
After Lebanon’s default on Eurobonds, most creditors have indicated a mandate by the International Monetary Fund (IMF) as the most likely solution to renegotiate the country’s unsustainable debt. Not surprisingly, Hezbollah has outspokenly rejected such a plan. Deputy Hezbollah leader Sheikh Naim Qassem characterized the IMF as a “U.S. tool to which Lebanon would not submit”. But as time is running out, Hezbollah appears increasingly isolated in its opposition to external assistance to navigate the crisis. Neither its political allies nor its rivals seem to envision a viable alternative, and Hezbollah has not offered one.
In fact, contrary to previous political and security crises, the current financial default had caught Hezbollah largely unprepared. First of all, Hezbollah lacks the relevant expertise among its members to deal with financial matters. This is because Hezbollah mainly depends on its autonomous financial channels. Although it has some holdings in Lebanese banks, the money it has to pay salaries and finance its welfare comes largely from Iran. Secondly, and perhaps most crucially, Hezbollah – like other Islamist actors in the region – has never antagonized the neoliberal doctrine that has ruled Lebanon’s and Middle Eastern economies for at least the past three decades. Let alone proposed a critical alternative.
As its allies are now keen to accept the IMF neoliberal package of reforms based on austerity, privatization, reducing the size of the public sector, and halting subsidies, Hezbollah simply does not have an ideological alternative to propose. Quite tellingly, Hezbollah MP Hassan Fadlallah said that the “position [of Hezbollah] is not toward the Fund as an international financial institution but on the terms offered to Lebanon, because they will lead to a popular revolution.”
This is indeed a highly likely scenario, especially as the Lebanese people have been protesting since October 2019 against the corrupt political and economic elite that has caused the country to default. The strategy of the Lebanese Central Bank, which has devalued the Lebanese lira with the only aim of deferring the default, and the cynical move of the Lebanese banks that have in the past few months offloaded a significant part of their exposure to foreign vulture funds, have only exacerbated the political instability in the country, as the people are asking where their money is.
Hezbollah is now in a cul de sac. It is trapped between international pressure and popular protests. International elites are willing to restructure Lebanon’s debt and use their role to curb its power within and without Lebanon. The Lebanese people are willing to hold it accountable, together with the rest of the Lebanese elite. Hezbollah’s self-defence, based on the claim that it never actively participated in producing the financial collapse of Lebanon, is not compelling at this point. Hezbollah is indeed independent from the Lebanese state, in both military and financial terms. Yet it has systematically exploited its political and institutional role within Lebanon to engineer its own independence from Lebanon. It has entered into and compromised with the traditional corrupt elite of the country as part of a mimetic strategy to use the state as a shelter against rival attacks. But, as much as it tries to preserve its image of ‘outsider’, Hezbollah is by no means alien to the corrupt system that has strained the Lebanese economy.
As Lebanon’s default paves the way for further external control over the Lebanese state and deterioration of the domestic ‘social pact’, Hezbollah may realise it has unconsciously entrapped itself in a state it has never accepted.