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The Impact of US Sanctions on Hezbollah

Hezbollah leader Hassan Nasrallah
Hezbollah leader Hassan Nasrallah
Hezbollah leader Hassan Nasrallah

By Hanin Ghaddar

U.S. authorities are in the process of preparing a new list of persons and institutions that will be included in the financial sanctions imposed on Hezbollah – part of the Hezbollah International Financing Prevention Act, signed by US President Barak Obama – and which threatens sanctions against anyone who finances Hezbollah in a significant way. These sanctions have caused a serious dispute between Hezbollah and the Central Bank, which is seen as a pillar of the otherwise weak and dysfunctional Lebanese state. Nonetheless, the Central Bank has complied with the sanctions.

After the Bank was asked to start implementing the sanctions earlier this year, Hezbollah’s secretary general Hassan Nasrallah ridiculed the sanctions saying that they will not have an impact on the party because the group receives its money from Tehran. That was the first time Hezbollah publically admits that Tehran funds the party, although it has been a well-known fact. “As long as Iran has money, Hezbollah has money. Can we be any more frank than that?” Nasrallah declared. “Hezbollah’s budget and its expenses are coming from the Islamic Republic of Iran. … Our allocated money is coming to us in the same way we receive our rockets with which we threaten Israel… No bank in the world can prevent money reaching us.”

Despite this confidence, Nasrallah warned against using sanctions against non-Hezbollah members from the community. “This is an attack on charitable foundations and our people and we reject this attack, and we will not allow it. Whoever says they care about the financial sector, they shouldn’t target a third of the population,” he added. Another non-verbal warning came two weeks before Nasrallah’s comments in the form of a bomb blast that targeted the Beirut headquarters of BLOM Bank, the second largest bank in Lebanon, and one of the financial institutions that froze Hezbollah-linked accounts.

Although Hezbollah’s officials still deny that the sanctions could impact its economy, their messages to the banking sector seemed less relaxed. The problem is that Hezbollah’s finances have been affected by the decline in Iran’s oil revenues, and its increased military spending in the region. The sanctions came at a time when the Party of God was looking for more financial support from its business community, not less, especially that they had to cut social and health services due to their increased military spending in Syria.

But this business community was concerned. Although the sanctions haven’t really hit this community hard, it was enough that it targeted a few names to cause panic among the Shiite businessmen in Lebanon and elsewhere.
Some of the names targeted worked directly with Hezbollah, and others just hadbusinesses with its institutions. For many in this community, dealing with Hezbollah became risky for their businesses. And that’s what troubled Hezbollah. The money will still come from Iran, and Nasrallah is right about it, but the Shiite community in Lebanon is today more disillusioned and anxious than ever. Between the losses in Syria, the lack of services, the increased sectarian rhetoric, this community does not feel as protected or fortunate as it used to after the 2006 “divine” victory.

Some signs of this were apparent in private communications between some Shiite businessmen and pro-Western Lebanese politicians to see if there’s a way to protect their money and distance themselves from Hezbollah. Others tried to break partnerships with the Party of God. For example, local Lebanese media reported last month that when Shiite businessman and owner of Phoenicia Bank, Mohammad Ashur, died last month, his family asked Hezbollah members not to send a delegation to the funeral – as usually is the case.

Today the treasury is preparing more sanctions, and many are expected these to increase with the next US administration. Hezbollah is trying to change its economy to a cash economy where banks are not vitalfor the transfer of salaries and making purchases. One former minister told the Financial Times earlier this year that Hezbollah has a payroll of 80,000, or 400,000 people once their families are included, roughly a tenth of the population. And Hezbollah relies on the Lebanese banks to transfer these salaries. This will be a nuisance, but it will be resolved.

However, the Party of God will find it difficult to regain the growing broken ties with its economic community.

For a lot of Shiite businessmen, their companies are more important than Hezbollah or identity politics. Even Amal businessmen are trying to break ties to their Hezbollah partners and the party itself. Donations to Hezbollah’s institutions such as schools, hospitals, orphanages as well as foundations that pay fighters and their families will all stop. Shiite Gulf businessmen will stop their donations as well. At the end of the day, sanctions are a serious thing and no one wants their businesses to be on the US list.

That doesn’t mean that Hezbollah will be broke anytime soon. Iran will make sure that money will still come to the party. And Iran just negotiated a massive windfall of $100 billion pursuant to last summer’s nuclear deal. Hezbollah will probably get more or less the same $200 million a year from Iran, but the spending will not be the same.

Hezbollah’s budget was divided between military budget and the services budget, which attendedto Hezbollah’s community, and the Shiite community as a whole. Today, Hezbollah has transformed into a regional militia – or Iran’s regional military arm – and most of the money coming from Iran is going to these regional military operations in Syria, Iraq, Yemen and other countries, whenever needed. Most of the service institutions are still there, but they are more focused on providing the fighters and their families with basic services such as medical care and compensations.

Therefore, Hezbollah was hoping to rely more on donations and other sources of income in order to cover its other expenses. That is why they started asking for aid from wealthy Lebanese Shiites, according to reports. “Information leaked by a number of these wealthy [people] indicates that Hezbollah officials visited them in their homes bearing [lists] of the names of children of [fighters] that fell in Syria,” the report claimed.The Hezbollah officials purportedly asked the well-to-do residents to sponsor the children, including those of wounded Hezbollah fighters, and provide for their education and clothing.“If you have one child you now have two, and if you have two, you now have three,” the Hezbollah representatives reportedly said during their visits.

What this report shows is that Hezbollah’s wealthy supporters are leaking information from their private meetings with Hezbollah’s officials, probably in an attempt to show cooperation with anti-Hezbollah entities – note that the report came from Al-Mustaqbal, a pro-Saudi Lebanese daily. But most significantly, the report shows that Hezbollah is asking for donations, not routinely receiving it from eager sponsors and donors.

Now with sanctions in place, and banks ready to penalize anyone on the US treasury list, Hezbollah is not feeling the love of its business community anymore. But what is really worrying Hezbollah is that this community is not separate from the Shiite community as a whole. On the contrary, these wealthy people are considered powerful within the community and often play a big role in local politics. If tension arises between the Shiite business class and Hezbollah because of these sanctions, this could reflect badly on Hezbollah’s popular support base.

This worries the Party of God mostly: the indirect impact of sanctions on the ties between Hezbollah and its community.

*Hanin Ghaddar is the inaugural Friedmann Visiting Fellow at The Washington Institute.

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