While Hezbollah was not the architect of Lebanon's ruinous economic system, with growing reach, it became first a happy participant and eventually its guarantor. More profoundly, its separate role a regionally active militia was rooted in and required continued state weakness. /1
All major factions oppose reform, but Hezbollah's armed status, able to intimidate and murder domestic political opponents at will and sans consequence, always set the red lines for transparency and accountability and fundamentally precluded the establishment of rule of law. /2
Its regional adventurism, in open and unilateral defiance of Lebanese political consensus and government policy, also fatally undermined the country's business model as a financial safe haven. More than 75% of FDI and 60% of remittances (20% of GDP) came from KSA, UAE, Kuwait. /3
So what happens when Hezbollah trains the Houthi missile crews who fire rockets at the Gulf capitals whose cash keeps the lights on? They divest. First slowly, in response to dropping oil price, then rapidly, following MBS attempt to force the resignation of PM Hariri in 2017. /4
As the party keeps one foot in and one out of the system, convening cabinets in Beirut while blowing up Jews in Europe, it becomes impossible for international stakeholders to confront the latter without injuring the former. The economic fallout is expressed in sanctions risk. /5
For analysts, this is a fine line to walk: Avoid covering for the worst hacks who interpret all regional affairs through a partisan anti-Iran lens, while acknowledging the qualitative difference of Hezbollah and its unique role in setting the rules and boundaries of the game. /6
The rot underpinning the Lebanese system predates and goes beyond Hezbollah. Any policy prescription needs to treat the mafia state comprehensively. But it also needs to contend with the fact one faction is both of and above the system - and prepared to defend that position. /7
Confronting the Party's separate armed state, though not necessarily its existence, is thus a necessary though not a sufficient condition for the establishment of rule of law and return of investment, which is, in turn, the necessary though not sufficient condition for reform. /8
The Lebanese protest chant from last year, "all of them means all of them", is so dangerous to the party precisely because deprives it of its separate legitimacy and demands its treatment as part of the system, which should be the eventual goal. /9
PS: Among the reasons why Hezbollah was able to maintain *some* distance to the worst corruption, at least early on, was that its money did not come via foreign bank depositors, but straight from Islamic Republic's dark budget, which doesn't qualify as good governance either.
