China Wants to Be Lebanon’s Savior

One of the Middle East’s most westernized outposts is falling apart—and looking east for a soft landing.

By Anchal Vohra, a columnist at Foreign Policy.

Chinese Ambassador to Lebanon Wang Kejian R presents a gift to Lebanese Culture Minister Abbas Mortada during a ceremony at the Lebanese Culture Ministry in Beirut, Lebanon, on May 27.

July 9, 2020, 9:21 AM

Beirut’s Little China restaurant is the city’s most prominent establishment that serves authentic Chinese food, and it’s a regular gathering place for people of Chinese origin. It also serves as a symbol of China’s marginal role in Lebanese life more generally.

If Hassan Nasrallah, the chief of Hezbollah, has his way, that may soon change. Nasrallah recently declared in a televised speech that Lebanon must “look east” to China for its salvation at its present time of crisis. The implication was clear: Lebanon should not look to the International Monetary Fund. His Lebanese audience was left befuddled. The extent of crisis was evident—the country’s economy has nosedived, to calamitous effect, in recent weeks—but Lebanon, including some of its most reactionary conservatives, has always understood itself as an outpost of Western values and influence in the Middle East.

But Nasrallah is not alone among Lebanese policymakers in believing the country may soon have no choice but to enter China’s political and economic orbit. If that happens, political analysts say, it could mark a new and uncertain chapter in the country’s history.

Lebanon’s economy is in shambles, threatening to join Zimbabwe or Venezuela as one of the world’s terminal economic disasters. Since October 2019, the Lebanese pound has lost 80 percent of its value and plummeted from its fixed exchange rate of 1,500 to the U.S. dollar to 8,000 last week on the black market. Salaries earned in the local currency have turned worthless as prices of basic commodities have tripled. Rises in food prices (including for bread) have hit the middle and lower classes especially hard, and electricity cuts have become regular occurrences. Some Lebanese have started resorting to barter, while the young and unemployed are increasingly opting for desperate measures to make a living. A 24-year-old graduate recently walked from shop to shop in a downtown Beirut market popular with expatriates to sell freshly squeezed orange juice. “Hi, will you support me, please,” he asked everyone plaintively.

But Lebanon’s ruling elite continue to drag their feet on political and economic reforms meant to halt corruption and restructure indebted banks, measures necessary to procure a $10 billion bailout from the IMF. Two European diplomats told Foreign Policy that division between Lebanese political factions is the reason the IMF loan hasn’t yet come through. Last week, Alain Bifani, one of Lebanon’s top negotiators with the IMF, resigned from his senior position at the finance ministry and was quoted as saying he had reached a “dead end” with the political and financial elite. He said those with vested interests were obstructing the path to change, because any bailout envisioned a haircut of $3 billion on accounts held by the country’s most wealthy. Millions of Lebanese have been braving a de facto haircut since banks imposed capital controls in mid-November 2019 and refused to let them withdraw their money. A few days after Bifani’s resignation, talks with the IMF were suspended entirely.

Among the few countries able to productively mediate between the IMF and Lebanon would be the United States, a traditional ally of Beirut and the fund’s largest contributor. But, even as Lebanon’s economic crisis accelerates, the United States and Lebanon’s political actors have intensified their war of words. Hezbollah has blamed the United States for deliberately stopping the flow of dollars to Lebanon, while the American representatives accused Hezbollah of hoarding dollars and large-scale smuggling. Last week, a Lebanese judge reprimanded U.S. Ambassador to Lebanon Dorothy Shea after she criticized Hezbollah. He said she was “pitting the Lebanese people against each other,” and, in an unprecedented move, he banned media organizations from interviewing her for a year. He added that any violation would be punished with a $200,000 fine. (In a show of defiance, several local TV channels had the ambassador on air the same evening.) The United States, by unilaterally imposing Caesar Act sanctions on the Syrian regime, has also prevented the Lebanese economy from benefiting from any reconstruction of its neighboring country.

Meanwhile, China, although it has little historic political presence in the region, is waiting in the wings, prepared to replace the United States as the country’s dominant outside actor. Chinese companies have been trying to launch big projects in Lebanon for almost a decade and have been especially eager to invest in Lebanon’s infrastructure. Forty percent of Lebanese imports are already Chinese, and in the last few years Beijing has enhanced cultural ties by building a new Beirut music center. It sent military aid during Lebanon’s 2006 war against Israel and deployed peacekeepers afterward. During the coronavirus pandemic, it exercised soft diplomacy and supplied medical assistance, including testing kits. At the height of Lebanon’s coronavirus outbreak, the country’s top doctors arranged for online conference calls with their Chinese counterparts for information on how best to deal with the health crisis.

Few originally thought China’s overtures would alter the basic calculations of Lebanon’s policymakers, given the Lebanese banking system’s dependence on the U.S. dollar and remittances from Lebanese expatriates in the West. But Lebanon is now desperate enough to explore whatever help Beijing can give. Soon after Hezbollah suggested turning to investments from China, instead of a bailout from the IMF, as the panacea to Lebanon’s economic crisis, Lebanon’s prime minister met with the Chinese ambassador to seek China’s help and expand economic cooperation.

China’s interest in the Middle East is anchored in the Belt and Road Initiative that aims to expand Chinese influence around the world through economic ties. China wants to resurrect long-decayed road and rail links between Beirut and Tripoli on Lebanon’s Mediterranean coast to the Syrian cities of Damascus and Homs, and beyond, as part of a broader infrastructure network it controls across Eurasia. Reducing U.S. influence in Lebanon would be a bonus.

Some Lebanese are intrigued by the prospects of partnering with a dynamic China. But many political observers, including some in government, are more circumspect, wary of potential exploitation. A member of parliament, speaking to Foreign Policy on condition of anonymity, said he was doubtful if “Americanized” Lebanese would embrace China if that required loosening ties with the United States. “We need to assess the readiness of the Lebanese first,” he said, “and if the Chinese conditions are going to be acceptable.” Camille Abu Suleiman, Lebanon’s former labor minister, said that even though he welcomed Chinese investments in principle, the reports of their track record had reached Lebanon. Beijing is infamous for laying so-called debt traps—offering quick loans to build infrastructure in underdeveloped countries but at an unusually high-interest rate. When the country is unable to pay the debt, China simply seizes the assets. “I don’t ever see Lebanon getting back on its feet without an IMF program,” Suleiman said.

Sami Nader, a Lebanese political analyst, shared a similar view. “Chinese investments will yield results in five to six years. By then Lebanon will be dead,” he said. “We need liquidity now, we need an IMF loan. And how does China expect us to pay it back?” Shen Dingli, a leading Chinese foreign-policy expert, said Beijing did not need every country it helped to pay the loan back and can afford to be a soft power to expand its clout globally. “When we were poor, the U.S. helped us. We remember that. Now we are in a position to help others,” he said implying China was readying to be the next United States. “We can gift a few hundred million dollars to countries who, for instance, promise to support us on Taiwan internationally.”

For those protesting on Lebanon’s streets, the priority isn’t just immediate survival but institutional reforms against corruption that ensure the country does not quickly end up in the same situation again. For them, that’s why help from China—which has long been known to turn a blind eye to malfeasance by the foreign politicians it loans money to—seems the least attractive option on offer. But the Lebanese are also acutely aware that they are running out of time.