Syria spill-over threatens to engulf Lebanon

Outbreaks of sectarian violence expose Lebanon’s vulnerability to outside forces.

Lebanon lives in a tricky neighbourhood. Wedged between Israel to its South and Syria to its East, its people have long found themselves at the mercy of the region's internal dynamics. 

Surprisingly, it has so far managed to evade the rising wave of civil unrest that has consumed the Middle East. Lebanon had become an citadel of calm amidst the turbulence of the Arab Spring.

However, Friday’s assassination of Wissam al-Hassan – the country’s intelligence chief – has shattered this façade to unleash the very same forces that devoured the country during its many years of civil war.

Whilst these sectarian rifts have long characterised Lebanese society, they have been increasingly sharpened by the deepening conflict in neighbouring Syria. Lebanon’s Shia community, which includes Hezbollah, has backed the Alawite regime of Bashar al-Assad, whereas the country’s Sunni minority has supported the predominantly Sunni Syrian rebels. 

Even though the Syrian army ended its 29-year occupation in 2005, Lebanon has nonetheless remained hostage to political machinations in Syria, with its weak government and fractious society providing a vehicle through which the Assad regime can wield influence.

As a leading Sunni figurehead, al-Hassan was widely hailed as a bastion of influence for Lebanon’s Sunni minority. A fierce critic of Syria, he represented an essential bulwark for the Sunni minority against the subversive reach of Damascus.

In 2005, he ruffled feathers by spearheading an investigation that implicated Syria and their Lebanese allies Hezbollah in the murder of five-time Sunni prime minister Rafik Hariri. The revelations sparked the Cedar Revolution, which effectively ousted Syrian forces from the country.

In August, he exposed the involvement of Michel Samaha – a key pro-Assad Lebanese minister – in a plot to plant explosives in the Sunni  district of Akkar, a hotbed of support for the Free Syrian Army. Bombs were found in the back of Samaha’s car and he was promptly arrested.

Naturally, his staunch anti-Syrian agenda had made him persona non grata with both Damascus and Lebanon’s pro-Syria Shia factions, particularly Hezbollah, to whom the survival of the Assad regime is essential.

It comes as no surprise then, that his assassination has been met with furios accussions of foul-play from Sunni opposition leaders, who have laid the blame squarely with the Assad regime:

“We accuse Bashar al-Assad of the assassination of Wissam al-Hassan, the guarantor of the security of the Lebanese”, said Saad Harir, leader of the Sunni Future Party and son of former prime minister Rafik Hariri.

“We blame Bashar al-Assad, the president of Syria”, a demonstrator told the Associated Press at Hassan’s funeral on Sunday. “He is responsible for everything – in the past, now, and if we don’t stand up to him, the future”.

The sentiment was shared by numerous Sunni protesters demanding the resignation of Prime Minister Najib Mikati, whose cabinet is dominated by Shia politicians believed to be in cahoots with Assad.

At Sunday’s funeral, demonstrators vented their rage by throwing volleys of stones, pipes, and bottles at police, with hundreds breaking away from the ceremony to storm Mikati’s offices at the government palace.

That night, the crack of gunfire rang out through central Beirut. Likewise, running battles between anti-Assad Sunni neighbourhoods and pro-Assad Shia communities rocked the coastal city of Tripoli, killing 7 and wounding dozens.

On Monday, Lebanese forces fanned out across the country, flanking major thoroughfares and dismantling roadblocks.  

“We will take decisive measures to prevent Lebanon being transformed again into a place for regional settling of scores, and to prevent the assassination of the martyr Wissam al-Hassan being used to assassinate a whole country”, said an army statement.

Lebanon is a country on the precipice. Whilst the country has pulled itself back from the brink numerous times since the end of its 15-year civil war, the fallout from Syria’s revolution threatens to exacerbate the sectarian divides that have plagued Lebanon throughout its history.

Whilst it would be naive to say the country is plunging headfirst into certain civil war, the current situation in Lebanon is a veritable powder keg; a tinderbox being licked by the flames of the Syrian uprising.

The death of Wissam al-Hassan has upended Lebanon’s fragile political balance, aggravating its historically embedded sectarian divide; a widening split that threatens to condemn Lebanon to a future much like its gloomy past.

A Sunni woman mourns the death of Lebanese intelligence chief Wissam al-Hassan, who was assassinated in a car-bomb on Friday. Photo: Reuters

Alex Ward is a London-based freelance journalist who has previously worked for the Times & the Press Association. Twitter: @alexward3000

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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