The economic silver lining of disarming Hezbollah

Israel-Hezbollah ceasefire gives Lebanon the chance to rethink and overhaul its entire government and economic models

by Hussain Abdul-Hussain | November 28, 2024

Military units affiliated with Hezbollah parade during an event marking the Al-Quds Day in Beirut, Lebanon, on April 14, 2023. Photo: Andalou Agency / Asia Times Files / Twitter Screengrab

It’s not just Israel that wants to see Hezbollah disarmed.

After a ceasefire between Israel and Hezbollah went into effect on November 27, the Gulf Cooperation Council (GCC) is expected to hold its annual summit in Kuwait on December 1 to announce that their reconstruction aid money in Lebanon will be incumbent on Hezbollah’s disarmament. A similar GCC condition of disarming Hamas will likely be attached to rebuilding Gaza.

Since Hezbollah launched its war on Israel on October 8, 2023, the Jewish state has turned the Iran-backed militia from a regional army into a local militia. As part of the ceasefire, an enforcement mechanism was negotiated to guarantee that Hezbollah is emasculated and remains suppressed.

If all goes according to plan and the Lebanese Armed Forces (LAF) demilitarizes the area between the Litani River and the Lebanon-Israeli border and takes firm control of Lebanese ports of entry to prevent Hezbollah’s rearmament, the Israel Defense Forces (IDF) will leave south Lebanon by late January.

When 1.2 million displaced south Lebanon citizens return to their villages, most of them will find their houses have been razed and will be in desperate need of reconstruction aid.

In the 2006 war with Israel, Lebanon lost a fraction of the housing units it did this time. Back then, the Lebanese and Iranian economies were performing relatively well. And with generous aid from Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Qatar, Lebanon was able to reconstruct quickly and thus diffuse a ticking socioeconomic bomb.

But the Gulf today suffers from donor fatigue. Not only have these wealthy nations been repeatedly summoned to foot hefty reconstruction bills, but they are only consulted after wars end, never before they begin.

Today, GCC countries have decided to draw a line in the sand and not offer reconstruction aid without Beirut guaranteeing that there will be no more wars in the future. Gulf reconstruction money now comes with strings attached.

Jassim Boodai, the publisher of Kuwaiti daily Alrai, wrote that “today’s era is different for us, in Kuwait and Gulf countries.” He noted that Gulf nations now rely on “reason rather than emotion, especially when it comes to past failing experiments that have wasted much energy and resources.”

Boodai added: “Lebanon must implement UNSC decisions” that include disarming Hezbollah, “preserve its stability” and settle “what remains of land border demarcation” with Israel, “just as with maritime demarcation.” Weapons, he concluded, should be exclusively in the hands of government forces.

Gulf countries have been racing to wean their economies off energy exports and rely on services instead. The rule of law and good governance — as measured by indicators, benchmarks and trend lines — are essential for the knowledge economies that Gulf states are now striving to build. The Gulf now seeks to compete for a share of the global tech pie.

This liberal economy model with efficient administration was first endorsed by the UAE. Saudi Arabia followed suit while Kuwait has been trying to do the same. It marks a break from the “resistance state” model championed by Islamist Iran and replicated in Lebanon, Iraq, Yemen and Gaza – all of them failing states with shattered economies.

Over the past century, economists have debated the causes of the economic failure of energy-rich states like Iran, Iraq, Algeria and Libya. One hypothesis has it that oil revenue has allowed strongmen to consolidate power and experiment with revolutionary and populist policies.

Eventually, though, the populace explodes and with it the expenses of maintaining vast police states and bloated bureaucracies. Instead of reforming and liberalizing, these dictatorships engaged in wars and foreign adventurism, hoping to rally their populations around their flags. Wars killed off economic growth even more.

To their good fortunes, Arab Gulf countries used their enormous oil revenue to reinforce tribal peace. Throughout Arabian history, whenever the tribes lived in peace, trade thrived. Capitalism started rolling but fast-paced population growth outpaced energy revenue.

Gulf countries have thus embarked on a process of transforming their economies from energy-reliant to knowledge-based. The Gulf now expects its Arab neighbors, especially recipients of its generous aid — Egypt, Jordan, Lebanon, Syria and the Palestinian Territories — to follow suit and endorse the same liberal, knowledge economy model.

In response to Hamas and Hezbollah’s existential threats, Israel decimated both militias, thus inadvertently giving both Lebanon and Gaza an opportunity to think of “the day after” and build from scratch not only their war-devastated communities but their entire government models.

The Gulf understands that this is a once-in-a-generation opportunity and seems keen to seize it. If the Gulf plan pans out, a thank-you letter to Israel would be in order.

Hussain Abdul-Hussain is a research fellow at the Foundation for the Defense of Democracies (FDD). Follow him on X @hahussain