Through the barrel of a gun: Lebanon’s financial collapse explained

Hezbollah's evolution
 
The fundamentalists who control Lebanon, represented by Hezbollah, first appeared in the Bekaa-Hermel region in the northeast of the country as an armed group established by the Iranian Revolutionary Guards, shortly after the Israeli invasion of southern Lebanon in 1982.

It aimed to organise, support, and train an "Islamic resistance" to the occupation. Later, the party expanded towards the south, then the Southern Suburb of Beirut, which became the stronghold of the Party and its Secretary-General.
 
Initially, Hezbollah claimed it was solely focused on military resistance against Israel and wasn't interested in Lebanese politics. However, it quickly reversed its course after a series of military operations against Israel that the party needed to gain the support of the Shiites. 

The group needed this popularity to compete with and win over Nabih Berri's Amal movement, which ended in an alliance between the two groups within a framework called the "Shiite duo." The two ran in elections together, with similar political positions, due to Berri's submission to his ally, Hassan Nasrallah, Secretary General of the party. 

Berri — Speaker of the House of Representatives for more than three decades — was implementing a saying attributed to the former French President, General Charles de Gaulle,  which was: "When two men enter an alliance, one of them will always carry the other." 

Flexing its muscles

But what if this other, in the Lebanese case, is heavily armed and brags publicly that he has 100,000 missiles and 100,000 fighters?

Hezbollah used and is still using its military arsenal against its partners in the homeland.

On 7 May 2008, its militias swarmed the streets of the capital and other regions of Mount Lebanon in response to the government's decision to confiscate an illegal communications network of the party's signal corps, in a clear message to everyone that "ultimately the decision is its decision."
 
Hezbollah also took advantage of its military to impose the election of General Michel Aoun as president in 2016. One of the party's MPs, Nawaf al-Moussawi, explicitly acknowledged this in a parliament session on 13 February 2019, when he stated, "President Aoun reached the presidency with the rifle of the 'Resistance'."

Kissing the ring
 
Opportunists among politicians and candidates for the position of prime minister have always flattered Hezbollah to obtain the blessing of the Shiite duo for the cabinet formation and in order to get the vote of confidence in parliament. 

Indeed, government and parliament meetings take place according to Al Capone's code of discourse and discussion: a person can achieve, with a good word and a gun, more than what he can achieve with kind words only, let alone an arsenal of military force that exceeds the number of the Lebanese army.

Other opportunists seek the party's support to become president. On top of this list now is Gebran Bassil, who has boasted publicly that he cherishes Sayyid Hassan Nasrallah in his mind and heart.
 
But it is not always opportunistic politicians. 

Bankers attracted by the enormous amounts of cash that Hezbollah deals with offered the party various incentives to attract them to their banks. These bankers hide the names of US-sanctioned Hezbollah operatives to shield them from prosecution. 

Revenue streams

Hezbollah's resources come from direct support of the Iranian Revolutionary Guards and the stolen funds from Central Bank of Iraq, but also from the illegal revenues of the trafficking of Captagon and other prohibited items.

Additionally, they receive the Al-Qard al-Hassan funds, the proceeds of the Khums zakat revenues, one-fifth tax imposed by Shiite jurisprudence, and financial transfers from the party's supporters and active members in Southern African countries, South America and other countries.
 
Blacklisted banks

Recently, the Office of Foreign Assets Control of the US Treasury (OFAC) revealed the involvement of two Lebanese banks in suspicious financial relations with Hezbollah. OFAC blacklisted them and removed them from the list of accredited Lebanese banks.
 
Recently, OFAC blacklisted CTEX Exchange for playing "a key role in enabling Hezbollah to continue to exploit and exacerbate Lebanon's economic crisis." As a result, CTEX was removed from the list of exchange institutions operating in Lebanon.
 
Former Lebanese MP Yassin Jaber stated in a press interview with Asas Media Website on 17 November, 2020, "Political authorities willingly abandoned their role long ago, and left the matter to the Central Bank on two conditions.

First, maintaining the stability of the exchange rate of the lira at 1,500 LL to the dollar; and secondly, securing dollars to bridge the budget deficit and to finance projects that were eroded by corruption and benefited everyone. As long as the Central Bank took the initiative to secure these two requirements, it remained free from accountability by any party."

Based on this implicit concession, the Central Bank ambiguously attracted deposits of the banking system in foreign currencies to secure resources for its operations in the exchange market to fix an exaggerated rate for the lira and provide the treasury's requirements for the general public of these currencies, which implicitly funded Hezbollah's corrupt activities. 
 
It also prioritised the alliance's interests, merchants, monopolists, smugglers, and consumers, over the interests of the needy and the poor working class. Banks' resources in foreign currencies were attracted by enticing them with high-interest rates on loans from the Banque du Liban. 

They paid the interest using the new customers, following the Ponzi scheme, named after Charles Ponzi, who used to entice those who manage their investments with high profits funded by Capital flowed from new investors until the bubble burst and exposed his false promises. 
 
The 2008 recession in the United States exposed the Ponzi scheme of an investment fund managed by the former President of Nasdaq, Bernard Madoff, who was sentenced to 150 years in prison. 

However, the difference between the American and Lebanese cases is that the central bank is involved and not an individual or a private institution, which makes the financial devastation wider and more severe.