Lebanon’s Neoliberal Transformation

Observers who assume that Hariri’s resignation is only a product of his relationship with Saudi Arabia ignore Lebanon’s history. Political parties have used strategic resignations to pressure, pull back, or prop up their bases since the state’s inception in 1943. We should not reduce this maneuvering and the many geopolitical shifts — economic and otherwise — that accompany it to a mere hostage situation.

From one perspective, Hariri’s resignation reveals the Saudi ruling class’s desperate attempts to counter Iran’s growing hegemony in the region. But proxies like Hariri and Mahmoud Abbas are not automatons. The ruling classes in Lebanon and Palestine have their own internal considerations and they must consider local conditions.

That said, dismissing Hariri’s link to Saudi Arabia and placing his resignation solely in the context of Lebanese politics also misses the point. To fully understand Saad’s decision, we must look to his father Rafic Hariri, the assassinated former prime minister who actively worked to end the civil war in order to apply his neoliberal vision to Lebanon — a vision that Saudi Arabia is now adopting.

Rafic Hariri belonged to what Hannes Baumann calls the “new contractor bourgeoisie,” a group that also includes telecom billionaire and former PM Najib Mikati and construction magnate and former prime minister Issam Fares. These émigrés became wealthy contractors in the Gulf in the 1970s before returning to Lebanon as investors and politicians in the 1980s and 1990s.

As part of the infamous 1989 Taif agreement, which ended the fifteen-year civil war, Rafic Hariri engineered the new Lebanese state constitution to move power from a presidential to a parliamentary system that revolves around the prime minister — a constitution that the Syrian regime alone was allowed to implement. This peace deal ousted Aoun’s military government, legitimized the Syrian occupation, and opened Lebanon to an aggressive neoliberal shift, which Hariri himself would oversee with the coercive aid of the Syrian regime and under watchful eye of both the United States and Saudi Arabia.

In “The New Spirit of Work,” an unpublished talk given at the American University of Beirut, Laleh Khalili explained that “investment and capital movements in Lebanon have always been far more international than depictions of a national capital would reflect.” The particular landscape of investment, construction, and urban development, which started in the late 1940s and continues to this day, needed the Taif Agreement in order to secure political and cultural hegemony.

As prime minister, Rafic Hariri undertook draconian privatization initiatives, gentrified a large part of Beirut, and then pumped Gulf money into the Lebanese economy. He created an economic bubble that mirrored his own empire, which revolved around banking, construction, and media. As Balanche writes:

[T]he main symbol of the Hariri family’s grip on the city of Beirut is Solidere, a chartered company in charge of reconstructing and managing the city center, which was ravaged during the war. Solidere was created in 1992, and initially won the concession for renovating the city center for twenty-five years, which later was extended to seventy-five years. . . . Hariri gathered the majority of the shares. The destroyed buildings and damaged properties were expropriated from the original owners under dubious circumstances.

What Balanche refers to as “dubious circumstances” were the coercive methods by which Hariri dispossessed original owners and literally crowded them out of their own homes in order to secure a majority of the capital. This method of “accumulation by dispossession,” to borrow from David Harvey, also allowed Hariri managed to recenter the Lebanese economy around banking.

Harvey asserts that four practices guide these neoliberal policies: privatization, financialization, the management and manipulation of crises, and state redistribution. The asset stripping of large swathes of public property in order to incorporate them into Hariri’s repertoire, the gradual decimation of unions by pro-Syrian parties since 1992, the constant state of emergency, and the stock promotion of Solidere’s and the state’s assets all moved state assets into Hariri’s portfolio.

He applied his dispossessions method to his public deficit strategy as well, which froze more than half of the state’s tax revenues to repay the compound interest of the ever-rising public debt, owned by the biggest local private banks.

While Hariri consolidated wealth through the banking sector and reconstruction, Lebanon’s government debt skyrocketed. In 2016, it amounted to 146 percent of Gross Domestic Product, one of the largest in the world. It was only a matter of time before the economic and financial strategy that introduced Gulf capital to the region came home to roost.

The Harirification of Saudi Arabia

Saad Hariri’s resignation comes as Saudi Arabia’s Crown Prince Salman is attempting to consolidate power. Salman is currently eliminating potential political opponents who have been vocal about his failed campaign in Yemen in order to pursue his aggressive foreign policy goals.

These maneuvers also provide economic fuel for his projects. By stripping his opponents of their assets and acquisitions, the crown prince will kickstart two projects he believes will make Saudi Arabia a post-rentier state: the $500 billion Neom project that is supposed to prepare the way for a new economic golden age (which Salman calls Saudi Vision 2030) and the peace process with Israel.

Salman is Haririfying Saudi Arabia: refocusing the economy on construction and financialization while banking on a peace agreement with Israel to boost the economy. He’s even mirroring the three pillars of the Hariri empire: finance, construction, and media.

The crown prince hopes to raise about $100 billion after taking a portion of the state-owned oil giant Saudi Aramco public next year and by freezing over 1,200 bank accounts whose owners are suspected of corruption and money laundering. Salman also seized the assets of construction magnates, like Bakr bin Laden, and media moguls. He arrested Alwaleed bin Talal, who owns MBC and Rotana, which together control most of the kingdom’s Arabic-language television and much of its print media. Some sources claim that Talal owed the Saudi crown upwards of a billion dollars after facing bankruptcy in the wake of Citigroup’s 2008 crash.

Thanks to its strategy of overproducing oil, the Saudi economy has suffered over the past few years. The overproduction project — intended to price out competitors and put pressure on political enemies whose economies are also tied to petrol — reached its peak last month, when the kingdom was producing an average of ten million barrels per day.By driving the cost of oil down, Saudi Arabia hopes to discourage new extraction projects in locations where costs are significantly higher than in Saudi Arabia. Further, the newly developed technologies will not disappear, and the kingdom can deploy them when fuel costs once again rise.

Iran has clearly reached its post-sanctions peak while Venezuela’s crude oil production has fallen by almost half in the last two months. Saudi Arabia may also have hoped to bear down on the American shale oil industry’s ability to compete, but these US producers have, so far, proved tenacious.

Meanwhile, the royal family has consolidated control over the military. As Toby Matthiesen reminds us in his article in Foreign Affairs:

In order to defend against coups, Saudi Arabia’s armed forces had been set up as three separate institutions: the regular army, the national guard, and the security forces of the Ministry of Interior, each headed by a different branch of the House of Saud. This strategy has prevented the emergence of a strong military leader along the lines of a Nasser or Qaddafi who could overthrow the ruling family, as happened in many other Middle Eastern countries.

The consolidation of power we are currently witnessing is unprecedented in Saudi Arabia’s history, but these are desperate times. The combination of the Saudi war on Yemen, the oil war, the resurgence of counterrevolutionary regimes in a post-ISIS Arab world, and the proximity of Iran to all of Saudi’s border fronts (excluding Jordan) mark a dramatic shift in the region but more importantly in Saudi Arabia.

Hezbollah and several other Shia groups have helped the regimes in Syria, Lebanon, and Iraq exterminate ISIS. More often than not, they’ve accomplished this task in collaboration with the United States and Russia.

In Lebanon, the alliance between the resistance, the army, and the people that carried out the war on terror has become almost completely hegemonic, forcing Hariri to bend to Hezbollah’s will and allow it to use its own weapons inside Lebanon a second time. Hezbollah’s occupation of Beirut in 2008 sparked a local debate over the role of its military force in Lebanon, one that has now been silenced through the war on terror discourse.

The Saudi line maintains that Hezbollah has gained complete control of Lebanon thanks to the momentum from the war on terror, which legitimized the importance of keeping its weapons. It further holds that the Shia militia is arming and training underground factions in Kuwait, Yemen, and other Gulf countries.

What’s Next

We can begin to see the repercussions of Saudi Arabia’s political maneuvers by examining the political dignitaries and religious figures they have summoned in the wake of the purge.

Summoning Hariri serves two purposes. First, it aligns with the methodology the Sauds have always used to pressure Lebanon. But Saudi Arabia’s ultimate goal is to destabilize the newly hegemonic forces within Lebanon: the war on terror alliance (the Hezbollah-Lebanese Armed Forces-Aoun presidency trifecta). This group now appears as a stabilizing agent in the region, but it will ultimately fail without Saudi support.

This is the real explanation for Hariri’s resignation. The ruling classes in Saudi Arabia and Lebanon know that economic and political stability in Lebanon hinges on specific sectarian contradictions, and they want to be consulted before these contradictions are resolved.

Maronite Patriarch Rai visits helps us predict two more moves. More than 250,000 Lebanese expatriates live and work in Saudi Arabia, a large section of which is either Christian or Shia. Salman likely summoned Rai to reassure him that the ax will only fall on Shia expatriates and to threaten the Lebanese government and Hezbollah with the return of unemployed citizens.

This has always been the Saudi method for bending Lebanon’s will. For example, after the 2006 war with Israel, Saudi Arabia deposited $1 billion in the central bank and threatened to take it back if Lebanon did not enact certain policies.

The Patriarch’s visit likely serves a more local purpose as well, linked to Hariri’s plan to revive the populist movement that began on March 14, 2005 after his father’s assassination. Patriarch Rai followed visits from Sami Gemayel and Samir Geagea, both of whom played major roles in the 2005 movement and are vying to expand their parliamentary bloc in the upcoming elections.

Finally, summoning Abbas points to one last scenario. Saudi Arabia is preparing itself for post-civil-war Syria by creating a broad coalition of Gulf states to counter Iran’s growing influence. This also explains the blockade on Qatar, a country that has chosen to remain on the fringes but leans more toward alliance with Turkey and Iran than Saudi Arabia.

The strategic shift in politics that Benjamin Netanyahu described earlier this month is a lengthy negotiation process that will eventually force the Palestinian Authority (PA) to sign for peace. He now seems to perceive the PA and Hamas as de facto proxies of either Iran or Saudi Arabia. Negotiating a peace agreement could ease domestic security frictions allowing the Israeli government to focus on foreign policy. The shift amounts to either tactical war or warmongering — both of which feed Netanyahu’s rhetoric and help his chances of staying in power.

The fact that the Israeli prime minister has been intentionally coy about what kind of military intervention he intends to undertake against Iran means that he has not yet received international — that is, American or European — backing for his crusade.

The region, then, seems mired in a new cold war between Iran on the one hand and the Gulf states with Israel on the other. Syria, Lebanon, and Yemen are possible platforms for confrontation or escalation.

Though most regional military experts dismiss the possibility of an Israeli war against Lebanon, a tactical operation against Hezbollah in Syria hasn’t been completely ruled out. Both parties are unwilling to engage in all-out war but believe that the end of the Syrian war could be a rare opportunity to settle their differences with little consequences in their respective nations.

Three things are now certain: first, the jockeying for power between Saudi Arabia and Iran is entering a new stage. This stage will be marked by important but calculated escalations, both military and economic. Second and more importantly, Salman’s strategy of Haririfcation is bound to fail, as it has come too late. His neoliberal shift will ultimately lead to the very outcome Saudi Arabia has been fighting against since it occupied Bahrain: the Arab revolutions being exported to its own soil. Third, Harirism is not done with Lebanon and a new reinvigorated form of it will gain rather than suffer in popularity in the near future.

Hariri suspending his resignation marks yet another important milestone in his recent maneuverings, proving that Salman’s spectacle of allegiance was blind to Lebanon’s internal contradictions. It locked Hariri to a sectarian role within a Lebanese clientelist system and to a subordinate role within Saudi Arabia.

Navigating this relationship could prove costly in the longer term. Hariri’s challenge now is his membership of a ruling class fated to rule by compromise, but which has to perform unbending will towards an increasingly confident political opponent. In a way, Hariri has now learned what Salman is yet to learn.