As Lebanon nears collapse, EU sanctions loom

Lebanon continues to unravel as its economic and political crisis worsens. The country has not had a government for almost a year now and its economy is in the process of collapsing after decades of mismanagement and corruption.

Over the past month, there have been stories both absurd and horrifying coming out of the small Mediterranean nation.

For instance, at the same time that the Lebanese army announced it would be offering tourists $150 (€126) helicopter rides in order to make some money, reports came from the northern city of Tripoli that gunmen were roaming the streets and setting up roadblocks.

Sad record

It is estimated that almost half of all Lebanese now live below the poverty line thanks to the ongoing crisis. An assessment released by UNICEF yesterday found that around 77% of Lebanese households don't have enough food or enough money to buy food.

At the beginning of this month, the World Bank reported that, on a global scale, the Lebanese crisis might well be one of the three most severe since the mid-nineteenth century.

Since 2018, Lebanon's gross domestic product (GDP) has plummeted, along with the informal exchange rate, World Bank researchers said. "Such a brutal and rapid contraction is usually associated with conflict or war," they noted. 

The Lebanese lira, or pound, is pegged to the US dollar, but that fixed exchange rate is not widely available, which has led to an informal currency market with unfavorable rates.

Most Lebanese blame their leaders for the crisis. After the end of Lebanon's almost 15-year-long civil war in 1990, peace negotiations divided power between 18 religious sects there. The peace deal effectively set the stage for decades of corruption and the resulting near-collapse of the Lebanese banking system.

'Hold them responsible'

"I believe they should be held responsible as they are the ones who led this country down this path," one Beirut local, Gilbert Kfoury, told DW about Lebanese politicians. "We now have a bankrupt country with no electricity, infrastructure that is deteriorating by the day, widespread famine, no fuel and no security. Despite all this, they still sit in their chairs, with no accountability."

"I think the EU should impose sanctions on Lebanese politicians on the assumption that the majority are corrupt," agreed another Beirut man, Moustapha Mourad. "It is the only way they will start bargaining [to form a government]," he argued.

Some politicians in the European Union agree with the angry Lebanese locals. Since May, officials working for the 27-nation bloc have been preparing potential sanctions on Lebanese politicians.

Many of Lebanon's elite and the rich travel regularly to Europe and have homes and money there. In mid-June, news agency Reuters said journalists had seen a diplomatic note indicating that sanctions would be imposed on those Lebanese suspected of "corruption, obstructing efforts to form a government, financial mishandling and human rights abuses."

Desperation and frustration

Visiting Lebanon last month, the EU's foreign policy representative, Josep Borrell, confirmed this. "We stand ready to assist, if this what you want," he said after the visit. "But if there is further obstruction to solutions to the current multi-dimensional crisis in the country, we will have to consider other courses of action … including targeted sanctions."

There has been no further official word on when, or even if, sanctions could be used against Lebanese leaders. However both France and Germany appear to support the idea. During a conference calling for further investigation into Beirut's deadly port blast, the German Embassy in Lebanon confirmed that the EU was looking into sanctions against Lebanese leaders.

France had already taken some steps unilaterally and began blocking visas for some Lebanese officials in April this year.

"I think European governments feel pretty desperate and there's a lot of frustration," Julien Barnes-Dacey, head of  the Middle East and North Africa program at the European Council on Foreign Relations, said. "But I don't think the question is really one of whether [imposing sanctions] is tough enough, it's a question of whether they will be effective."

Lebanese elite are 'laughing'

The entire Lebanese system needs fundamental change, Barnes-Dacey told DW. "But the Lebanese political elite would probably be willing to see the country deteriorate further [rather] than undertake steps that would threaten their own hold on political and economic power," he argued. 

Joseph Bahout, the director of the Issam Fares Institute for Public Policy and International Affairs based at the American University of Beirut, agreed.

"The Lebanese political class is very cynical," he said. "They have seen worse and they're laughing at this." As an example, he cited the French ban on visas. "They [the members of the Lebanese elite] usually have two or three passports and they just enter Europe through another country, like Italy," Bahout noted. "Then we see pictures of them shopping in Paris or Nice."

Potential danger

Imposing sanctions could also be dangerous, added Shahin Vallee, head of the geo-economics program at the German Council on Foreign Relations, who authored a September 2020 policy brief on Lebanon's crisis. "Because either you sanction all Lebanese politicians as a block or you do targeted sanctions," he said. "But then you could create an imbalance in the political system. Sanctions could backfire."

"In choosing politician X over politician Y, the EU would be setting some against others," Bahout agreed. 

Both Bahout and Vallee believe there are better ways forward than sanctions. They recommend putting more pressure on the Lebanese financial system instead. Vallee argues for more transparency within it and Bahout believes that European financial agencies could do a lot more to facilitate this.

Banking secrecy in EU, Switzerland

"Frankly, what would be more useful for Lebanese people than sanctions is better access to banking information from countries like France or Switzerland," Bahout explained, adding that that is where many of the allegedly corrupt Lebanese are suspected to have shifted their money.

"It's a little bit hypocritical. Those places have evidence of what has been 'stolen' from the Lebanese public. I think it would be better for the EU to say, 'look we know what you did and we will help the Lebanese expose you'."

At the same time though, the EU should also continue to provide support to the country's most vulnerable as well as local advocates for change, the experts said.

"I continue to believe that the best thing the EU can do is support domestic civil society and the youth organizations that are trying to change the political system from the bottom up," Vallee concluded.