The bunker-busting bombs used by Israel to assassinate the senior leadership of Hezbollah may also have destroyed a large part of its dollar stash stored underneath Beirut.
In Lebanon’s cash-based economy, Hezbollah’s dollar reserves are crucial to the group’s resilience and are said to have been stored in safes deep within the same compound in which the group’s Secretary-General Hassan Nasrallah died. Military experts say that munitions used are designed to penetrate fortifications and detonate at depths of up to 70m underground.
If the funds of Hezbollah and its affiliate, Al-Qard Al-Hassan, have been destroyed, it will struggle to pay its thousands of fighters, staff, and supporters, plus the thousands of families whose loved ones were killed or disabled in past conflicts. Many healthcare, educational, and social institutions associated with Hezbollah also rely on funding from the group, yet even if some of the cash withstood the bombing, questions remain about Hezbollah’s ability to meet its financial obligations.
Hezbollah is said to have prepared for this after the July 2006 war, when several of its sites (and its Al-Qard Al-Hassan branches) were destroyed by storing strategic reserves in fortified bunkers in Lebanon’s eastern mountain range. According to The New York Times, such reserves—distributed across hundreds of trustees—could total billions of dollars. Its report cited Stuart Bowen, an American lawyer who served as Special Inspector General for Iraq Reconstruction from 2004 to 13.
Global financial network
It is well known (and confirmed by Nasrallah) that Hezbollah gets funding from Iran, as well as other countries, including Venezuela and Iraq. Groups and individuals sympathetic to its cause also contribute. Some supporters have been linked to organised crime in the Tri-Border Area—a three-way frontier between Paraguay, Argentina, and Brazil.
Hezbollah denied links with organised crime, saying such claims were smears, but the group was nevertheless blacklisted by various countries, preventing any official interactions with it or its institutions. Hezbollah has its own quasi-banking operations—the Al-Qard Al-Hassan Foundation Association, named after the Islamic principle of interest-free lending. This expanded after the collapse of Lebanon's currency and financial system.
It helped those sidelined by regular banks due perhaps to their personal connections to the militia. Loans were made, with gold often serving as collateral. It now has branches outside of Hezbollah's heartlands. Some have cash dispensing machines. The growth of its financial arm plugged Hezbollah into the foreign exchange network, establishing ties with currency exchange providers to deal in large amounts. It also used intermediaries to access the Bank of Lebanon's Sayrafa platform to buy and sell foreign currency to the public.
Wider impact in Lebanon
The war raging now will damage Hezbollah's financial capabilities and the institutions it has developed, making it even more difficult to meet its financial obligations to a broad range of counterparties than it was during the 2006 war.
This time around, Israeli strikes have deliberately targeted Hezbollah's financial offices and the foreign exchange bureaus it has been linked with, alongside the attack on the main compound in Beirut. Already, financial services given to displaced people by Hezbollah have declined, in stark contrast to 2006, when the group visited camps and offered displaced people financial aid and other services.
The destruction of Al-Qard Al-Hassan Foundation Association branches and other Hezbollah facilities may also fuel popular anger if collateral gold is not returned to customers. In the past, protests have been held against applying the actual dollar exchange rate rather than the official, lower rate to repayments, a practice that contrasted with how regular banks handled consumer loans.
