Lebanese President Michel Aoun, right, speaks with Prime Minister Saad Hariri at the presidential palace Tuesday in Baabda, east of Beirut. (Dalati Nohra/Lebanese government/AP)
Last month, Lebanon’s prime minister, Saad Hariri, resigned in Saudi Arabia — only to later rescind his resignation. This sparked fear of a Saudi-backed war against Hezbollah, Iran’s Lebanese ally. Riyadh has few local military assets to confront the Shiite movement but could strangle Lebanon’s small open economy. Lebanon is deeply reliant on capital inflows from the Gulf. The immediate crisis of Hariri’s premiership is over, but Lebanese economic dependency persists. It is dangerous if the country must stay in Riyadh’s political good grace to avoid economic crisis.
Three Gulf countries accounted for 76 percent of new foreign direct investment projects in Lebanon from 2003 to 2015. Remittances averaged about 20 percent of the country’s GDP annually over the past 10 years — with an estimated 60 percent coming from Gulf countries. How Lebanon came to rely on these inflows is key to understanding its dependency on the Gulf and Saudi Arabia in particular.
Gulf tycoons and reconstruction
The 1970s oil boom enriched contractors in the Gulf, among them Rafiq Hariri (father of the current prime …read more
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