A bad week for Hezbollah

Last week was not a good week for Hezbollah. Despite its numerous attempts to avoid an international bailout for Lebanon, the Lebanese government has finally announced that it will seek a loan from the International Monetary Fund (IMF) after signing off on a rescue plan to begin fixing its deteriorating economy. In addition, Germany announced Thursday it has designated the Lebanese militant and political group Hezbollah a terror organization, banning all of its activities in the country and ordering raids on sites that are linked to the group.

The IMF Conundrum

Of course, Prime Minister Hassan Diab’s government wouldn’t have requested the IMF’s assistance without Hezbollah’s greenlight and approval, but it also means that Hezbollah might have reached a point where facing the Lebanese people without an actual plan to avoid a complete financial meltdown was no longer feasible. No matter Hezbollah’s attempts to hide behind Lebanon’s political elite or shift the rhetoric toward the banking sector, it is no longer a secret that Hezbollah dictates the decisions of the Lebanese government, including the financial and economic decisions.

Hezbollah, and by extension the Hezbollah-backed government, came up with a rescue plan last week, and subsequently formally asked the IMF for assistance. Even Hezbollah’s Secretary General Hassan Nasrallah did not oppose the IMF request during his Monday speech, but stressed conditions of any IMF help should be dealt with “great responsibility and strict caution.”

However, a closer look at the plan shows that the basic reforms requested by the international community, such as reforms to the electricity sector, and the size of the public sector, were not mentioned. Significant issues for the international community such as monitoring border crossings and ceasing smuggling operations, mostly run by Hezbollah, were also not mentioned.

Without serious reforms, clearly stipulated by the IMF and CEDRE, Lebanon will not be able to receive a bailout program. The economy will further deteriorate, and Hezbollah will be blamed for the shortcomings. If Hezbollah and its government want to avoid such scenarios, they will have to implement these reforms, which will eventually diminish their power and control of assets.

This a conundrum that will not solve itself, and Hezbollah is in the middle of it.

Germany’s Ban

As the IMF request was being signed by Diab, Germany was officially declaring Hezbollah – both the military and the political wing – as a terrorist organization. Although this was not surprising, and Germany has already hinted at making this designation before, it was still considered as a major hit for Hezbollah.

Germany has acted as a mediator between Hezbollah and actors in the international community a number of times, primarily during hostage negotiations between Hezbollah and Israel after the 2006 July war. But now, diplomatically, Hezbollah has lost Germany, and in its next conflict with Israel, Hezbollah will not find a helping hand in Germany. But this recent move by Germany also sheds light on other European countries that haven’t entirely boycotted Hezbollah, such as France. While France prefers to maintain the status quo in Lebanon due to the presence of French troops within UNIFIL forces, it will be more difficult for France to avoid deepening international pressure.

Financially, Hezbollah has lost a major financial hub in Europe. Hezbollah’s finances were hit by US sanctions against the group’s patron Iran, and they have been forced to rely on a number of alternative forces for funding. In addition to the drug smuggling operations across from Lebanon into Syria and from there to the Arab world, Hezbollah increased its financial operations in Europe, through its social and charity organizations.

Germany’s ban included the operations of major social and charity organizations affiliated with Hezbollah. On April 30, the German police raided five sites linked to Hezbollah – mainly mosques and community centers in Berlin, Bremen, Muenster, Recklinghausen, and Dortmund.

Last week was not a good week for Hezbollah, but the group’s problems are not going to be resolved anytime soon. Even if some European states still prefer to maintain relations with the group’s political wing, this preference might soon change, when they realize that domestic issues will prevail over international and foreign policy.

In addition, the IMF will probably ask the Lebanese government to amend its reform plan to include the essential reforms to the electricity sector – where most of the corruption takes place – and the illegal border operations. The government, and Hezbollah, will have to make a choice: Save Lebanon and lose some, or refuse reforms and lose everything.

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Hanin Ghaddar is the inaugural Friedmann Visiting Fellow at The Washington Institute's Geduld Program on Arab Politics, where she focuses on Shia politics throughout the Levant. She tweets @haningdr.