Hezbollah’s Financial Crisis

In Wake of Sanctions, Hezbollah Appeals for Donations and Turns to Iraq

Hezbollah’s involvement in Syria has depleted the group’s resources. Salaries increased, services – mainly health services – became in demand more than ever, and more significantly, the community had to suffer more isolation and unemployment challenges. Moreover, the US sanctions on Iran is amplifying Hezbollah’s financial capabilities, to the extent that Hassan Nasrallah himself had to admit it.

On March 10, and during a ceremony held on the 30th anniversary of establishing the Islamic Resistance Support Association, Hassan Nasrallah praised the major Resistance funders, stressing that even the minor financial contributions can be game-changing when they accumulate and underscoring the efforts of all the members of the Islamic Resistance Support Association. He pointed out that due to the huge financial support from the Islamic Republic of Iran in 2006, Hezbollah resistance was not in need of popular donations but that the US financial war imposes a new strategy, calling on the resistance supporters to back it financially.

A NEW STRATEGY

Nasrallah knows that these donations are not going to compensate the loss of the Iranian finding, which according to recent sources have reached $700 million annually. Nasrallah also knows that he could no longer deny the financial crisis that is hitting its organization due to the US sanctions. Therefore, admitting to the crisis is better than ignoring it and thereby risking the frustration within the Shia community to translate into a collective uproar.

The Shia community have been complaining about financial difficulties and lack of services for years, and Hezbollah has been promising a positive change for months, in addition to assurances that the US sanctions will not hurt the party or the community. However, knowing that these promises are not going to be fulfilled, Hezbollah decided to take a new direction: involve the community and make it all about resistance.

Hezbollah knows that the only thing that the Shia can still respond to is the concept of resistance. They also know that a military kind of resistance is no longer desirable, due to the losses it will bring to the organization, the Shia, and the Lebanese in general. Therefore, a financial resistance looked like a better solution.

Hezbollah decided to make the Shia feel that they are partners in their war against the US and Israel – a war that is besieging Hezbollah and Iran financially and making it very difficult to continue with their expensive endeavors. By asking the community to donate to an organization that was effective during the time when Hezbollah was mostly involved in confronting Israeli occupation, is Hezbollah’s way of asking the Shia to be partners in its resistance against Israel.

But would it work? Not necessarily. This organization has also been sanctioned by the US, and many Shia cannot afford to be seen donating money to a sanctioned entity, risking sanctions themselves. Some donors will still give cash anonymously but the businesspeople with the big checks will hesitate.

MORE COMPLAIN

As it is unlikely that this financial crisis will be resolved anytime soon, and the Shia frustrations will only grow.

Hezbollah has brought many of its fighters from Syria back home, mainly those who are on a contractual basis and are no longer needed. Hezbollah does not feel obligated to pay them now that they are back home. In addition, employees of Hezbollah’s media, education, medical, and military systems have complained of deep pay cuts. But more significantly, fighters and their families are beginning to complain about lost wages as well—a largely unprecedented development. Married fighters are reportedly receiving only half of their salaries (which normally range from $600 to $1,200 per month), and single fighters are receiving only $200 per month.

This indicates that Hezbollah’s financial crisis will only get worse, and the donations they can get via the Islamic Resistance Support Association are not going to compensate for all the losses.

Although Hezbollah is looking at the Lebanese state and its ministries as a new source of its funding and services network, Lebanon is in a dire financial crisis itself and there’s no telling if the CERDRE aid is going to be delivered or not, as it is strongly tied to reforms that are very difficult to implement. Hezbollah will find it more difficult to tap into state funds, knowing that the international community is watching carefully and monitoring Hezbollah’s actions and operations within the Lebanese state.

Eventually, the Shia community will tire of this new resistance endeavor, and food on the table will become a more important priority.

 




Iraqi President Barham Saleh (R) and his Iranian counterpart Hassan Rouhani review the honour guard at the Presidential palace in Baghdad on March 11, 2019. (Getty)

THE IRAQ OPPORTUNITY

As the Lebanese state cannot be considered a sustainable source of funding, Iran and Hezbollah are looking towards Iraq, and the financial opportunities it could presents.

A number of sources close to Nejaf and other Shia leaderships in Iraq mentioned that many of the salaries allocated to the PMF – mainly those who joined the Iraqi Army – are going straight to Hezbollah in Lebanon. These sources indicate that many of the PMF positions within the army are fictitious and were created as ghost positions for that particular reason. This is similar to what former Iraqi Prime minister did with the many ghost salaries he acquired himself.

In addition, Iraq and Iran signed several preliminary trade deals on Monday as Iranian President Hassan Rouhani began his first visit to Iraq. Many saw this visit as an attempt by Iran to expand commercial ties to help offset renewed U.S. sanctions.

Rouhani and Iraqi Prime Minister Adel Mahdi signed several memorandums of understanding, Abdul Mahdi’s office said in a statement. They included agreements on oil, trade, health, and a railway linking the southern Iraqi oil city of Basra and the Iranian border town of Shalamcheh. They had also agreed on measures to make it easier for businesspeople and investors to obtain visas.

A senior Iranian official accompanying Rouhani told Reuters news agency that Iraq was "another channel for Iran to bypass America's unjust sanctions" and that his trip to Baghdad would "provide opportunities for Iran's economy".

According to Iraq Business News, the Secretary of Iran-Iraq Chamber of Commerce Hamid Hosseini said the obstacles to banking interaction between the two neighbors have been settled and the bilateral trade exchange is normal. A large number of technical and engineering projects worth 7 to 8 billion dollars which Iranian private sector companies were carrying out in Iraq have remained unfinished since the rise of the Daesh (ISIL) terrorist group in 2014, the official said, hoping that Rouhani’s trip would help address the issue.

In February, governors of the central banks of Iran and Iraq signed an agreement to develop a payment mechanism aimed at facilitating banking ties between the two neighboring countries.

If Iran manages to use Iraq’s financial arena and banking sector to ease the financial crisis, Hezbollah too will benefit from it.

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


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