For two millennia the Silk Road was a 6,500km caravan route connecting China to the West, for the export of spices, fabrics and tea. Beijing today is investing hundreds of billions of dollars reopening these routes as an immense arena of Chinese commercial hegemony, with massive investments straddling Central Asia and Pakistan, and a $400 billion deal with Iran. Chinese hawks view Lebanon’s crushing financial crisis as a bargain opportunity to consolidate its presence in the eastern Mediterranean.
The incompetence of Lebanon’s bankrupt political class has plunged IMF bailout talks into deadlock. Politicians refuse to acknowledge the immensity of their financial black hole (the product of four decades of systematic looting), let alone countenance the extensive measures needed to staunch Lebanon’s economic bleeding. The Hezbollah-backed government is falling back on scattershot blame and conspiracy theories, with the ineffectual and widely despised Prime Minister Hassan Diab declaring: “We know well that there is a big decision to besiege the country. They are preventing any assistance to Lebanon.”
Shunning the IMF, Diab is turning instead to China. Ambassador Wang Kejian was invited to high-level ministerial talks to “activate cooperation between the two countries.”
The biggest cheerleader for salvation from the East is Hezbollah’s Hassan Nasrallah, who proclaimed: “Chinese companies are ready to bring in money, and without any of the complications that we talk about in Lebanon. We don’t have to give them money, they will bring money into the country.” Hezbollah-friendly media outlets have been evangelizing Chinese proposals for $12 billion investments in ports, railways, electricity and waste management.
Beijing’s interest in Lebanon did not come from anywhere; Chinese companies have long sought to get their foot in the door for Lebanese infrastructure projects. During a 2019 business delegation, Ambassador Wang touted the expansion of Tripoli port and Qalayat airport; revamping the Beirut-Damascus highway, and a parallel railway eventually connecting to China’s $1 trillion Silk Road. For certain projects, negotiations are already at an advanced stage, even haggling over the percentage of Chinese workers to be recruited.
With Nasrallah reinventing himself as a prophet for “going to China to save Lebanon financially and economically,” we are justifiably suspicious of the motivations of all concerned
China has been on a charm offensive; it already has a 410-strong unit serving with UNIFIL, and conspicuously distributed coronavirus medical supplies. “After all the difficulties and obstacles have been cleared, new roads and horizons will open up,” Ambassador Wang Panglossian declared at the time. After decades when Middle Eastern states scarcely heard a whimper from their Chinese embassies, suddenly Beijing’s regional diplomacy is rocket-fueled.
Lebanon’s currency has lost 85 per cent of its value, the economy is predicted to shrink by 12 percent during 2020, monthly inflation is 56 per cent and there are nearly 20 hours of electricity blackout per day. Although soft-hearted investors would be repulsed by such chaos, some companies spot a perfect bear-market environment for buying up Lebanon at rock-bottom prices and making huge profits as the situation improves.
New roads and ports are all very nice, but Beijing is effectively goading bankrupt Lebanon into bankrolling China’s own trans-continental transport corridor. What about recapitalizing Lebanon’s financial institutions, and measures to restart the economy and get millions of citizens back to work? Infrastructure projects reliant on Chinese engineers and labour would hardly help Lebanon’s 35 percent unemployment rate.
Forty per cent of Lebanon’s imports are Chinese. Lebanon’s exports to China, meanwhile, are negligible, meaning that the mass influx of cheap Chinese goods could further undermine Lebanese productivity and its balance of trade.
With Nasrallah reinventing himself as a prophet for “going to China to save Lebanon financially and economically,” we are justifiably suspicious of the motivations of all concerned. In recent articles I tackled the wider context of China’s deal with Iran, which could alleviate the impact of Western sanctions while granting Beijing access to states in Tehran’s orbit — Iraq, Syria and Lebanon — thus completing China’s Silk Road route to the Mediterranean.
Touting the investments as “sanctions proof” reveals a major part of the appeal for the Hezbollah-backed leadership. This could amount to insulating Lebanon’s economy behind a Chinese wall, impervious to US sanctions, but also removed from Western investment and markets.
The American Enterprise Institute warns: “While the Islamic Republic of Iran is still calling the political shots, vultures from Beijing are circling, eyeing tasty infrastructure assets like ports and airports as well as soft power influence through Lebanon’s universities. Meanwhile, Lebanon as a sovereign nation collapses.”
Lebanon’s former labour minister, Camille Abu-Suleiman, warns of Beijing laying “debt traps”— offering quick infrastructure loans at high-interest rates, then seizing the assets when the country fails to repay the debts. Lebanese warlords are notorious for bleeding major projects dry, then leaving the state to pick up the tab. Citizens could wake up one day to find that their nation and its critical infrastructure had effectively been mortgaged to Beijing.
Lebanon’s Maronite patriarch, Bechara Al-Rahi, has appealed for Lebanon to be internationally recognized as a neutral state — open to all, but beholden to no one. Chinese business and investment are welcome, but Beijing has a record of partnering with avaricious African and Asian elites willing to sell out their sovereignty. Chinese diplomacy is ruthless, mercantile and self-interested, with none of the West’s lip service to human rights, rule of law or cultural interchange.
Within Lebanon’s DNA runs a rich heritage of freedoms, tolerance for alternative views, and renowned cultural achievements, instilled through a world-class education system. Witnessing how dissident voices have been mercilessly throttled in Hong Kong, Tibet and Xinjiang, Lebanese citizens are justifiably fearful that their freedoms and culture would be crushed under heavy-handed, authoritarian Chinese and Iranian dominance, amid the miserable, monolithic atmosphere Hezbollah seeks to impose.
Conversely, if Lebanon were to succeed in repudiating Hezbollah and Iran, it would immediately open doors for the deep pockets of Arab and global donors, while restoring Lebanon’s unparalleled status as the region’s foremost hub for tourism, banking, commerce and culture. A return to the glittering and inspiring Lebanon that we all know and love doesn’t have to be far from our grasp.
Beijing may ultimately decide that Lebanon’s economy has fallen too deeply into the abyss to merit salvaging, although the $10 billion-$20 billion required would be relatively small change for China. For Lebanon’s kleptocratic politicians, a China deal represents bountiful new fountains of wealth to guzzle from. For the Iran-Hezbollah axis, it is a golden opportunity to drag Lebanon kicking and screaming away from the West’s embrace, and its Arab heritage.
Starving and desperate Lebanese citizens may feel grateful to any state willing to throw them a lifeline. But when you do a deal with the Devil, it’s wise to carefully read the small print.