❊ Banking Is Lebanon’s Achilles’ Heel

Today, two pieces of news were highlighted by the visits of PM Mikati and Finance Minister Mohammed Safadi to Washington and New York and their meetings with various officials from international bodies.

The first comes from PM Mikati, who warned of the “costly” repercussions that could follow Lebanon’s refusal to contribute monetarily to the Special Tribunal for Lebanon (STL):

Prime Minister Najib Mikati vowed Sunday to convince his allies in the government of the negative repercussions that could result if funding for the Special Tribunal for Lebanon is blocked

The second piece of news comes from PM Safadi. There’s a report in Assafir (English at The Daily Star) that the US Treasury is asking questions about Syrian deposits in Lebanon. To be clear, there was no official request regarding those deposits, but the long road to official requests usually starts by questions such as the ones asked.

Can Syrian money in Lebanon be targeted without hurting the Lebanese economy? Banking secrecy (recently eased to fight money laundering and tax evasion), a friendly business environment and geographical proximity have made Lebanon an attractive target for Syrian depositors throughout the years. Squeezing that money away can prove to be as bad for the Lebanese Economy as the sanctions on Iranian capital proved bad for Dubai.

If Lebanon had balls to be held by and subjugated, those balls would be its banking and financial system. All it took was a newspaper article for Governor Salameh to be quickly summoned to Washington and for the Lebanese Canadian bank to be hastily dismantled and swiftly swept under the rug.

A healthy, stable banking sector in the interest of all players in Lebanese politics, including the most anti-western and anti-American demagogues. This explains why pragmatism reigns whenever matters of banking scrutiny and sanctions are raised. This also explains why the people in charge of the Ministry of Finance are always in the “pro-western” camp, and this is why Hezbollah is most likely to eventually approve Lebanon’s contribution to the STL.