Middle East politics: Incendiary devices
FROM THE ECONOMIST INTELLIGENCE UNIT
The outbreak of violence sparked off by the capture of an Israeli soldier by Palestinian militants in Gaza at the end of June has developed into a full-scale regional crisis following the coup engineered by Lebanon's Hizbullah on July 12th with its abduction of two more Israeli soldiers in a cross-border raid. The punishment meted out by Israel on the Gaza Strip has been replicated on a much larger scale in its reprisal operations against Lebanon, which has been subjected to an air, sea and land blockade and damaging attacks on vital infrastructure, with more than 50 civilians killed in the first 24 hours of the conflict.
Hidden hands
In both the Palestinian and Lebanese arenas it has been clear that actions taken to provoke this predictably heavy-handed Israeli response were not entirely local initiatives. The Gaza operation had the effect of undermining the agreement struck between the Hamas government and the Palestinian president, Mahmoud Abbas, on the formation of a national unity government—a deal that the Damascus-based leadership of Hamas opposed. The Hizbullah move (claimed to be motivated by a desire to obtain the release of three Lebanese prisoners) also came against the background of internationally backed efforts to oblige Syria to normalise its relations with Lebanon and resolve the Shebaa Farms territorial issue, used by Hizbullah to justify the maintenance of its military wing, in the name of resistance to occupation. For Syria, all these machinations serve to emphasise its continued relevance as a "player" in the Middle East; for Iran, standing behind Hizbullah, the maintenance of an active proxy front with Israel in South Lebanon is an essential part of its nuclear development strategy.
Heavy bill
Israel sought to justify is blockade on Lebanon, enforced through bombardments of airports and roads and through naval deployments at ports, on the grounds that it needed to choke off Hizbullah's lines of supply and prevent the possibility of the two captured soldiers being transferred to Iran. From the Lebanese perspective, these arguments appear spurious, as Hizbullah's logistical connections to Iran are known to go through back channels to Syria, rather than through official Lebanese ports of entry. In addition, Hizbullah has built up sufficient supplies in the six years since Israel's withdrawal from South Lebanon to enable it to sustain its military operations for a long time.
If Israel's attacks appear to have had little impact on Hizbullah, this is certainly not the case for the Lebanese economy. The conflict has in effect put paid to Lebanon's summer tourism season, which generates vital inflows of revenue from visitors from the Gulf. (Beirut's loss is likely to be Dubai's gain.) As long as the crisis is not too prolonged, this should not have too serious implications for the currency and the balance of payments, as the first half of this year saw a strong recovery of capital inflows after the jolt to confidence in early 2005 arising from the assassination of Rafiq al-Hariri. The overall balance of payments showed a US$1.4bn surplus in January-April 2006, compared with a US$1.3bn deficit in the same period of 2005. Riad Salameh, the governor of Banque du Liban (the central bank), said that there was no reason for concern over the exchange rate, given the buoyancy of the bank's foreign currency reserves, which are estimated at some US$13bn.
Of more concern is the effect of the violence on Lebanon's internal political balance, which has important implications for medium- and long-term economic prospects. The Hizbullah initiative is likely to polarise divisions between the Sunni-Druze-Christian bloc of the prime minister, Fouad Siniora, and the increasingly confident alliance between the main Shia parties and a number of prominent Christian figures, notably including presidential hopeful, Michel Aoun. Mr Siniora has been pinning his hopes on a proposed Beirut-1 donors conference to raise a fresh tranche of concessionary finance that is vital to buttress Lebanon's capability to service its daunting public debt, worth some 180% of GDP. This finance is contingent on fiscal and structural measures that will only be feasible in the context of a broad political consensus. It now seems that any such donors conference would have to be refocused on emergency reconstruction.
What now?
Based on the depressingly long list of precedents for Israeli actions in Lebanon over the past 40 years or so, the violence can be expected to last not more than a few weeks, and to be contained within Lebanon. However, there is always the risk of one side or the other miscalculating, and sparking off a wider conflict. The Israeli prime minister, Ehud Olmert, has vowed to persist until Hizbullah has been neutralised, either by force or by the implementation of UN Security Council resolution 1559, which calls for the disarming of all militias in Lebanon. (The Lebanese government remains squeamish about naming Hizbullah a militia, and holds to the official line that it is a legitimate resistance force.)
Israel will not be able to inflict serious damage on Hizbullah without making a much more substantial military commitment, including the dispatch of several thousand Israeli troops into Lebanon. It is doubtful whether Mr Olmert could muster sufficient political support for such a step, which would evoke fears of a repeat of the costly 18-year occupation of Lebanese territory following the 1982 invasion. Eventually--after the G8 summit, perhaps--international mediation will kick in. By that time, Israel will presumably aim to have caused just sufficient hardship in Lebanon to generate effective domestic pressure on Hizbullah to offer some concessions. However, it is not clear whether there is much scope for a deal. Hizbullah will not lightly give up its Israeli captives, and is most unlikely to bend to any demand for it to disband its military wing. Its main concession--in a similar vein to Hamas--would be to proffer a long-term ceasefire.
Mr Olmert would find it hard to comply with Hizbullah's demand for the release of three Lebanese prisoners. The most notorious, Samir Quntar, was jailed in 1979 for the murder of an Israeli family in their home in Nahariya, and an early release would present both legal and political problems. Israel is also unlikely to be satisfied with a pledge of non-belligerence from Hizbollah, and has indicated that it wishes to secure international guarantees that Hizbullah's military units will be kept well away from the border.
One way open to Mr Olmert to lower the temperature would be to offer to release Palestinian prisoners in return for the freedom of the soldier captured in Gaza. That could open the way for Hizbullah to follow suit, while claiming that its action was the key to forcing Israel to relent.
Such a resolution would entail some loss of face on both sides, but particularly for Israel. That might just tempt Mr Olmert to indulge in a pre-ceasefire spectacular, such as a major raid on Syrian military and civilian airfields.
Source: ViewsWire Middle East
The outbreak of violence sparked off by the capture of an Israeli soldier by Palestinian militants in Gaza at the end of June has developed into a full-scale regional crisis following the coup engineered by Lebanon's Hizbullah on July 12th with its abduction of two more Israeli soldiers in a cross-border raid. The punishment meted out by Israel on the Gaza Strip has been replicated on a much larger scale in its reprisal operations against Lebanon, which has been subjected to an air, sea and land blockade and damaging attacks on vital infrastructure, with more than 50 civilians killed in the first 24 hours of the conflict.
Hidden hands
In both the Palestinian and Lebanese arenas it has been clear that actions taken to provoke this predictably heavy-handed Israeli response were not entirely local initiatives. The Gaza operation had the effect of undermining the agreement struck between the Hamas government and the Palestinian president, Mahmoud Abbas, on the formation of a national unity government—a deal that the Damascus-based leadership of Hamas opposed. The Hizbullah move (claimed to be motivated by a desire to obtain the release of three Lebanese prisoners) also came against the background of internationally backed efforts to oblige Syria to normalise its relations with Lebanon and resolve the Shebaa Farms territorial issue, used by Hizbullah to justify the maintenance of its military wing, in the name of resistance to occupation. For Syria, all these machinations serve to emphasise its continued relevance as a "player" in the Middle East; for Iran, standing behind Hizbullah, the maintenance of an active proxy front with Israel in South Lebanon is an essential part of its nuclear development strategy.
Heavy bill
Israel sought to justify is blockade on Lebanon, enforced through bombardments of airports and roads and through naval deployments at ports, on the grounds that it needed to choke off Hizbullah's lines of supply and prevent the possibility of the two captured soldiers being transferred to Iran. From the Lebanese perspective, these arguments appear spurious, as Hizbullah's logistical connections to Iran are known to go through back channels to Syria, rather than through official Lebanese ports of entry. In addition, Hizbullah has built up sufficient supplies in the six years since Israel's withdrawal from South Lebanon to enable it to sustain its military operations for a long time.
If Israel's attacks appear to have had little impact on Hizbullah, this is certainly not the case for the Lebanese economy. The conflict has in effect put paid to Lebanon's summer tourism season, which generates vital inflows of revenue from visitors from the Gulf. (Beirut's loss is likely to be Dubai's gain.) As long as the crisis is not too prolonged, this should not have too serious implications for the currency and the balance of payments, as the first half of this year saw a strong recovery of capital inflows after the jolt to confidence in early 2005 arising from the assassination of Rafiq al-Hariri. The overall balance of payments showed a US$1.4bn surplus in January-April 2006, compared with a US$1.3bn deficit in the same period of 2005. Riad Salameh, the governor of Banque du Liban (the central bank), said that there was no reason for concern over the exchange rate, given the buoyancy of the bank's foreign currency reserves, which are estimated at some US$13bn.
Of more concern is the effect of the violence on Lebanon's internal political balance, which has important implications for medium- and long-term economic prospects. The Hizbullah initiative is likely to polarise divisions between the Sunni-Druze-Christian bloc of the prime minister, Fouad Siniora, and the increasingly confident alliance between the main Shia parties and a number of prominent Christian figures, notably including presidential hopeful, Michel Aoun. Mr Siniora has been pinning his hopes on a proposed Beirut-1 donors conference to raise a fresh tranche of concessionary finance that is vital to buttress Lebanon's capability to service its daunting public debt, worth some 180% of GDP. This finance is contingent on fiscal and structural measures that will only be feasible in the context of a broad political consensus. It now seems that any such donors conference would have to be refocused on emergency reconstruction.
What now?
Based on the depressingly long list of precedents for Israeli actions in Lebanon over the past 40 years or so, the violence can be expected to last not more than a few weeks, and to be contained within Lebanon. However, there is always the risk of one side or the other miscalculating, and sparking off a wider conflict. The Israeli prime minister, Ehud Olmert, has vowed to persist until Hizbullah has been neutralised, either by force or by the implementation of UN Security Council resolution 1559, which calls for the disarming of all militias in Lebanon. (The Lebanese government remains squeamish about naming Hizbullah a militia, and holds to the official line that it is a legitimate resistance force.)
Israel will not be able to inflict serious damage on Hizbullah without making a much more substantial military commitment, including the dispatch of several thousand Israeli troops into Lebanon. It is doubtful whether Mr Olmert could muster sufficient political support for such a step, which would evoke fears of a repeat of the costly 18-year occupation of Lebanese territory following the 1982 invasion. Eventually--after the G8 summit, perhaps--international mediation will kick in. By that time, Israel will presumably aim to have caused just sufficient hardship in Lebanon to generate effective domestic pressure on Hizbullah to offer some concessions. However, it is not clear whether there is much scope for a deal. Hizbullah will not lightly give up its Israeli captives, and is most unlikely to bend to any demand for it to disband its military wing. Its main concession--in a similar vein to Hamas--would be to proffer a long-term ceasefire.
Mr Olmert would find it hard to comply with Hizbullah's demand for the release of three Lebanese prisoners. The most notorious, Samir Quntar, was jailed in 1979 for the murder of an Israeli family in their home in Nahariya, and an early release would present both legal and political problems. Israel is also unlikely to be satisfied with a pledge of non-belligerence from Hizbollah, and has indicated that it wishes to secure international guarantees that Hizbullah's military units will be kept well away from the border.
One way open to Mr Olmert to lower the temperature would be to offer to release Palestinian prisoners in return for the freedom of the soldier captured in Gaza. That could open the way for Hizbullah to follow suit, while claiming that its action was the key to forcing Israel to relent.
Such a resolution would entail some loss of face on both sides, but particularly for Israel. That might just tempt Mr Olmert to indulge in a pre-ceasefire spectacular, such as a major raid on Syrian military and civilian airfields.
Source: ViewsWire Middle East
posted by Marko at 7/15/2006 08:53:00 AM
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