Hezbollah’s Economic Initiatives in Collapsing Lebanon

Hezbollah’s Economic Initiatives in Collapsing Lebanon

With the Lebanese Lira hitting a new low at the beginning of March, Lebanon is at the brink of collapse, undergoing fuel shortages and driving its population into poverty. The economic crisis has worsened in the last year due to the advent of the Covid-19 pandemic, the explosion of the port of Beirut in August, and, above all, to the Lebanese political class that has repeatedly failed to form a government. The political vacuum has given room to Hezbollah, which is likely one of the actors responsible for stalling the government’s formation, to demonstrate its abilities in managing the country through its apparently well-developed social welfare.

Hezbollah, namely the Party of God, has been largely criticized for being one of the main causes behind the current financial crisis, many Lebanese are turning to the terrorist organization in order to enjoy basic services that the state is no longer able to provide. As a means of gaining consensus, Hezbollah has implemented a series of programs and initiatives to assist the population economically, such as expanding the services of its parallel banking system, carrying out smuggling with Syria in order to provide cheaper goods, making donations to the Shi’ite population, and supporting agricultural projects to ensure weak families’ economic independence.

Parallel Banking System

Firstly, when traditional banks shut their doors and froze dollar accounts, Hezbollah was able to supply hard currency through its parallel banking system known as Al-Qard al-Hasan Association. Al-Qard al-Hasan Association (AQAH), literally the “benevolent loan”, is managed as a charity, but, in fact, it can be considered a banking system for all intents and purposes.

Nasrallah, Hezbollah’s leader, encouraged depositing the money at Al-Qard al-Hasan, claiming that the bank had already provided $3.7 billion in loans to some 1.8 million people. He depicted the association as rock-solid, declaring that the Party’s supporters, who deposited money at the al-Qard al-Hasan, managed to keep their money when banks claimed that they were unable to pay their depositors in dollars.

Among the services it offers is the provision of loans up to $5,000 and charitable community funds in accordance with Islamic Law which forbids charging interests. To access the loans of the Association, customers must be sponsored by a depositor or must mortgage an amount of gold that exceeds the value of the requested loan. At the end of October 2020, the Al-Qard al-Hasan Association began providing three new services. It equipped its branches with ATMs for its clients to withdraw dollars whenever they need, it started buying and selling gold for dollars, and it began providing gold storage for a small fee.

In late December, Hezbollah’s parallel banking system has been the target of a hacking group called “Spiderz”. The hackers accessed the association’s system and posted online clients’ identities warning the association’s clients they might come under American sanctions. Despite the attacks, AQAH’s clients do not seem scared of the possible consequences of the leakage and continue to trust the organization.

Smuggling, Donations, and Agricultural Projects 

In addition to the work of Al-Qard al-Hasan, the group opened in Beirut’s southern suburbs a chain of cooperative grocery shops known as Makahzen Nour which provides a vast range of goods such as food and furniture. Most of the goods are made or smuggled from Iran and Syria in order to be sold at lower prices than imported goods from rival supermarkets. These stores are accessible with a discount card distributed by the Party. There are two types of cards – one, labelled Nour, attributed to Hezbollah’s fighters and another one, Sajjad, distributed to low-income families. The cards are charged by the group with 300,000 liras per month which is a significant sum in poorer communities. In this way, besides controlling the core Shi’ite community, Hezbollah takes advantage in reaping profits in Lebanese pounds and changing them to US dollars on the black market.

Moreover, Hezbollah has recently published a number of statements announcing extensive donations to Shi’ite communities, particularly, in Southern Lebanon. Among others, the estimated donations to improve health and education in the provinces of Tyre, Bint Jbeil, and Marjayoun, for the whole of 2020, stood at twenty-two billion one hundred thirty million Lebanese pounds. While, another 600 million Lebanese pounds have been directed to finance the electricity supply of the residents of a-Teqal in the Beqaa region. It must be understood that, while helping in the short-term millions of Lebanese citizens, still, Hezbollah’s money comes from illicit activities such as drug dealing, smuggling and funds from Iran.

Lastly, to address the growing risk of food insecurity, Hezbollah implemented several agricultural programs under the name “cultivate your land” in order to produce agricultural products at the lowest cost and turn the society from a consumer society into a productive society. Nasrallah announced these initiatives as part of the agricultural jihad designed to cope with the current financial difficulties. The projects are carried out by Hezbollah’s Jihad al-Bina Foundation which is considered one of the major executive arms of the organization, dealing with the establishment and construction of Hezbollah’s civil and military infrastructures. In fact, the foundation takes part in the construction of offensive tunnels along the border with Israel, and rocket and missile concealment.

What Does This Mean?

All the above activities conducted by Hezbollah as part of its social welfare demonstrate that the organization is exploiting the political vacuum and the banking system collapse to gain support, enlarge the geographical and sectarian spectrum of its followers, and strengthen the network of its infrastructures. In fact, the current crisis has allowed Hezbollah to grow its independence from institutional Lebanon reaffirming its fame of being a “state within a state”. The absence of a central government and the aggravating economic crisis will lead also the secular segment of population, that has always opposed Hezbollah, to turn to the organization’s illegal services.

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