Can fuel subsidy cuts halt Lebanon’s descent into darkness?

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People queue for fuel at a gas station in Zalka, Lebanon, earlier this month. Fuel has become the latest casualty of a complex web of crises that have drained Lebanon’s foreign currency reserves. (Reuters)
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Lebanese wait in desperation outside a closed petrol station in Beirut's Hamra district on August 20, 2021. (AFP)
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People queue for fuel at a gas station in Zalka, Lebanon, earlier this month. Fuel has become the latest casualty of a complex web of crises that have drained Lebanon’s foreign currency reserves. (Reuters)
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Updated 02 September 2021

Can fuel subsidy cuts halt Lebanon’s descent into darkness?

  • Living conditions have worsened since the government lifted subsidies for gasoline and diesel
  • Fuel is only the latest casualty of a complex web of crises that have drained the state’s coffers 

DUBAI: Time was when the streets of Beirut throbbed with life and commerce once dusk fell. But nowadays they become ghosts of their former selves as soon as the sun sets. The reason: There is no money in the state’s coffers to buy fuel to operate Lebanon’s power plants.

Private generator operators too have run out of supplies, with fuel becoming the latest casualty of a complex web of crises that have drained Lebanon’s foreign currency reserves.

Last week, the price of fuel in Lebanon rose for the second time in less than two months. The government lifted subsidies for gasoline and diesel in an effort to ease shortages, which led to a nearly 66 percent spike in prices since the last hike in late June.

Lebanese people were already struggling to keep up with expenses given that the pound has lost nearly 90 percent of its value (since mass protests kicked off in late 2019) while salaries have stagnated.

Mustafa Naboulsi lives in Qalamoun, a town in the north of Lebanon, and has been working as a firefighter for 11 years. On Aug. 23, he sent his family to live in France owing to the country’s worsening economic situation.

“Sometimes we have to even sleep in the car while waiting for the fuel so that we can wake up in the morning and fill up the tank. A lot of times we have spent two to three hours in queues, only to be told that the fuel was finished and that we should return tomorrow,” Naboulsi told Arab News.

It has been over 10 days since Khaled Zakaria last filled his tank with gasoline. To do so, he had to travel for nearly 50 km from Tripoli to Byblos and stand in line for over an hour.

The high demand for gasoline coupled with its unavailability has predictably given rise to a black market, where the commodity can be bought for seven to 10 times more than its official price. Zakaria said he refuses to purchase gasoline this way as he does not want to encourage hoarding and corruption, which in his view can only make a bad situation worse.

Naboulsi, the firefighter, also treats burn injuries, but the restrictions on his mobility have left him feeling helpless.

“Sometimes I get called into areas that are outside my town. These are people that are in pain and I would love to help them, but I can’t even reach them,” he told Arab News.

Fire devours a building close to where a fuel tank exploded in Lebanon's northern region of Akkar on August 15, 2021. (AFP file photo)

On the morning of Aug. 15, a gasoline-tanker explosion in Akkar left 28 people dead and nearly 80 injured. The incident prompted neighboring countries to step in to provide aid since Lebanon is also in the midst of a medical crisis.

“Especially after what happened in Akkar, I have no words to describe the pain,” Naboulsi told Arab News. “It’s a very hard feeling. You feel like you are not doing enough even though the situation is out of your control.”

At the beginning of August, Riad Salameh, Lebanon’s Central Bank governor, blamed local traders for fuel shortages.

“It’s unacceptable that we import $820 million worth of fuel and not get to see diesel fuel, gasoline or electricity. This, not the positions adopted by us, is humiliation in itself against the Lebanese,” he told a local radio station.

The imported fuel was expected to cover the country’s needs for three months. Instead, it did not last for even one month.

Bachar Elhalabi, senior Middle East and North Africa analyst at ClipperData, says the Lebanese political system of “muhasasa,” or the sectarian division of ministerial spoils among 18 religious sects, has allowed each leader to grab “a piece of the pie” for themselves.

“Whether it is funding allocations, projects, contracts, etc. Unfortunately, the energy sector is part of that ‘muhasasa.’ In fact, it might be one of the biggest golden geese for sectarian leaders,” he said.

While the caretaker government struggles to keep mass hunger and a total economic collapse at bay, one political faction has found an opportunity to make a grandstand play.

The leader of the Iran-backed Hezbollah, Hassan Nasrallah, said on Friday that he had decided to arrange for a third shipment of Iranian oil.

“We have agreed to start loading a third vessel,” Reuters news agency quoted Nasrallah as saying. “The coming days will prove those doubtful about the shipments arriving with fuel wrong ... and our words will be clear when the first vessel reaches Lebanon.”

Hezbollah leader Massahn Nasrallah caused an uproar when he announced that his group has ordered oil from Iran, a move that could place Lebanon under US economic sanctions. (Reuters file photo)

Earlier last week, Nasrallah announced that the first vessel with Iranian oil had set sail to Lebanon.

Some analysts have warned that importation of Iranian fuel could expose Lebanon to something it cannot afford: US sanctions. Nevertheless, Elhalabi believes Nasrallah is serious because, regardless of whether the vessels make it to Lebanon, the move still serves Hezbollah’s interests.

“The country and the various stakeholders are in a bind. And that includes opponents of Nasrallah. If the tanker arrives at a Lebanese port, the staff are going to look really bad” if they refuse to offload the fuel, Elhalabi said.

On the one hand, if Iranian oil ends up reaching Lebanon, Nasrallah will have succeeded in presenting himself as someone capable yet separate from the government. On the other hand, if the international community — more specifically the US — hits Lebanon with sanctions for importing Iranian oil, Nasrallah will reap the resultant political rewards, Elhalabi said.

Since Lebanon was gripped by economic and financial crises in late 2019, the government has continued to subsidize wheat, gas, fuel, food and other essential items at lower-than market rates. 

“Fuel shortages can be traced back to the inefficiency of the decades-old subsidy program,” Jean Tawile, an economist who has advised the government in the past, told Arab News.

“This paved the way for many cases of abuse such as hoarding, stockpiling and smuggling.”

Lebanese pharmacy workers demonstrate in the Achrafieh district of Beirut on August 16, 2021, with their placards saying "no gasoline = no ambulance" and "no electricity = no hospital" and "no vaccine = no treatment". (AFP)

Most of Lebanon’s subsidized goods are being smuggled into Syria “as prices have skyrocketed there since the outbreak of war,” he said.

Historical data shows that Lebanon imported 5.7 million tons of fuel in 2011, Tawile said. However, by the end of 2012, after the Syrian civil war broke out, the figure shot up to 7.6 million tons.

“So essentially, Lebanese depositors were subsidizing the fuel needs of Syria,” he said.

According to Tawile, the removal of subsidies will eliminate discrepancies in the two countries’ fuel prices and put an end to smuggling of the commodity.

Fuel hoarding will also decrease as distributors will have no reason to stockpile the commodity, something they regularly do in anticipation of price hikes. 

Additionally, as Mohamed Ramady, a former senior banker and professor of finance and economics at King Fahd University of Petroleum and Minerals, points out, Lebanon has been under pressure from international lenders to lift subsidies.

“Lebanon is facing a difficult situation. This decision to reduce the subsidies on fuel is not politically driven. It is economically driven,” Ramady told Arab News.

A demonstrator carries a national flag along a blocked road during a protest against the mounting economic hardships near the Central Bank building in Beirut on March 16, 2021. (REUTERS/File Photo)

Ramady said reducing subsidies is also a way for the government to achieve a measure of fiscal prudence.

“Custom duties are not there. The trade situation is fragile as Lebanon is not exporting vegetables and fruits like before. Tourism revenue has dropped drastically. In other words, Lebanon’s sources of income have narrowed,” he said.

Tawile says the government can cushion the impact of decreased subsidies on the people by implementing a social safety net mechanism, for instance by providing the poorest with direct cash payments.

The caretaker government did propose in May to provide ration cards to the most vulnerable families as a replacement for subsidies. The $556 million scheme was expected to benefit more than 500,000 needy families.

However, as with so many other programs in Lebanon, the absence of a clear funding source has kept the plan in the deep freeze since then.


East Libya forces say 2 helicopters crashed, killing 2

Updated 26 sec ago

East Libya forces say 2 helicopters crashed, killing 2

  • The self-styled Libyan Arab Armed Forces said the helicopters collided in the air over the village of Msus
  • The crash came as they have been battling Chadian fighters in Libya’s southern areas on the border with Chad
CAIRO: Forces loyal to a powerful Libyan commander said two military planes crashed on Sunday over a village in eastern Libya, killing at least two officers.
The self-styled Libyan Arab Armed Forces, led by Gen. Khalifa Haftar, said the helicopters collided in the air over the village of Msus, 130 kilometers (81 miles) southeast of the city of Benghazi.
A two-officer crew, including Brig. Gen. Bouzied Al-Barrasi, was killed in the crash, while the second helicopter crew survived, the forces said in a brief statement. It did not give the cause of the crash and said the helicopters were on a military mission.
Mohammad Younes Menfi, head of Libya’s Presidential Council, mourned the two officers.
Haftar’s forces control eastern and most of southern Libya. The crash came as they have been battling Chadian fighters in Libya’s southern areas on the border with Chad.
The clashes erupted last week and could further destabilize the wider Sahel region, after Chadian President Idriss Deby Itno was killed in April in battels between his government and Chadian rebels.

Syria’s defense chief meets Jordan’s army commander in Amman

Updated 19 September 2021

Syria’s defense chief meets Jordan’s army commander in Amman

  • Meeting was “to increase coordination in the field of border security”: Hala Akhbar news site
  • Petra said Huneiti and Ayoub discussed border situation in southern Syria and fighting terrorism

AMMAN: Syria’s defense minister met Sunday with Jordan’s army chief in Amman after after Syrian troops captured several rebel-held areas near Jordan’s border, state media reported.
The Hala Akhbar news site, which is linked to Jordan’s military, reported that the meeting between Jordanian Gen. Yousef Huneiti and Syrian Gen. Ali Ayoub was “to increase coordination in the field of border security to serve the interests of the two brotherly countries.”
The recent push by Syrian troops in the country’s south is the biggest since government forces captured wide areas along the border in 2018, including the Nassib border crossing.
The crossing with Jordan was reopened in 2018, months after it fell under Syrian government control. Syrian rebels had seized the site in 2015, severing a lifeline for the government in Damascus and disrupting a major trade route linking Syria, Jordan, Lebanon and the oil-rich Gulf countries.
Ayoub’s visit came nearly two weeks after Syrian forces entered the rebel-held district of the volatile southern city of Daraa as part of a truce negotiated by Russia to end weeks of fighting. In the days that followed, Syrian troops captured rebel-held parts of several villages near Daraa.
The latest push by Syrian troops brings all parts of southern Syria under full government control.
Petra, Jordan’s state news agency, said Huneiti and Ayoub discussed border security, the situation in southern Syria, fighting terrorism and confronting narcotics smuggling.
Syrian state TV said the visit came at the invitation of Jordan’s army commander, adding that Ayoub was accompanied by top army officers. It said the talks focused on “fighting terrorism and border control.”
Jordan is a close Western ally and has long been seen as an island of stability in the turbulent Mideast. The kingdom hosts more than 650,000 Syrian refugees.
Earlier this month, ministers from Lebanon, Syria, Jordan and Egypt said after meeting in Amman that Egyptian natural gas should reach Lebanon through Jordan and Syria as soon as next month, after maintenance of pipelines and the review of a deal interrupted 10 years ago.


TankerTrackers says third tanker carrying fuel to Lebanon underway

Updated 19 September 2021

TankerTrackers says third tanker carrying fuel to Lebanon underway

  • The first tanker ship carried the fuel to Syria and from there it was taken into Lebanon on tanker trucks on Thursday
  • Mikati said on Friday the Iranian fuel shipments constitute a breach of Lebanon’s sovereignty

DUBAI: A third tanker has sailed from Iran carrying Iranian fuel for distribution in Lebanon, reported on Twitter on Sunday.
Lebanese Prime Minister Najib Mikati said on Friday the Iranian fuel shipments, imported by the Hezbollah movement, constitute a breach of Lebanon’s sovereignty.
The Iran-aligned group says the shipments should ease a crippling energy crisis in Lebanon.
The first tanker ship carried the fuel to Syria and from there it was taken into Lebanon on tanker trucks on Thursday.
Both Syria and Iran are under US sanctions.

Iran museums reopen after year-long COVID-19 break

Updated 19 September 2021

Iran museums reopen after year-long COVID-19 break

  • A country with a millennia-long history, Iran has an abundance of 746 museums
  • Iran’s museums attracted more than 21 million visitors in the year before the outbreak of COVID-19

TEHRAN: Iran reopened museums in Tehran and other cities Sunday after a more than year-long closure because of the COVID-19 pandemic.
“Museums in Tehran and other large cities that are no longer red-coded, meaning the risk of contracting the virus was very high, reopened on Sunday,” the director of Iran’s museums, Mohammad-Reza Kargar, said.
“Tourists and visitors are welcome to return while observing (sanitary) measures.”
A country with a millennia-long history, Iran has an abundance of 746 museums, including 170 in the capital.
“We are absolutely delighted, and we think the people are too because they were fed up with staying home, and visiting museums improves their mood,” Kargar said in his tourism and heritage ministry office.
“We have safety protocols in place of course, and the number of visitors will be dependent on the space at our sites so the public stays safe and healthy.”
Kargar said only students, researchers and staff were allowed into museums during the past 14 months.
Iran’s museums attracted more than 21 million visitors in the year before the outbreak of COVID-19 that forced museums to close in May 2020.
On Sunday, the National Museum of Iran with its magnificent collection of treasures dating back to the Bronze and Iron ages was still deserted.
“We have to wait for the news to spread and schools to reopen for people to come back,” explained Firouzeh Sepidnameh, head of the museum’s pre-Islamic collections.
Iran, the worst-hit country in the Middle East, has confirmed more than 5.4 million cases of coronavirus, including 117,000 deaths, according to figures issued Sunday by the health ministry.
Out of a population of 83 million, 29 million Iranians have received a first dose of vaccination and almost 14 million have been fully vaccinated against the virus.

Former Algerian president Bouteflika given state funeral

Updated 19 September 2021

Former Algerian president Bouteflika given state funeral

  • Bouteflika passed away on Friday aged 84, having lived as a recluse since he was forced from power
  • State television announced that Bouteflika would be laid to rest at El-Alia cemetery, east of Algiers

ALGIERS: Former Algerian president Abdelaziz Bouteflika, ousted in 2019 after mass protests, was given a state funeral on Sunday attended by senior officials but received little of the attention given to such occasions in the past.
Bouteflika died on Friday, aged 84. An armoured vehicle decked with flowers pulled his coffin, covered with the national flag, on a gun carriage from his home in Zeralda, west of the capital, to the Al-Alia cemetery in Algiers where five of his predecessors are buried.
Bouteflika was first elected in 1999, and is widely credited with a national reconciliation policy that restored peace after a war with armed Islamists in the 1990s killed an estimated 200,000 people.
But many Algerians blame him for the economic stagnation of his latter years in power, when he was rarely seen in public after suffering a stroke, and widespread corruption led to the looting of tens of billions of dollars from a state that depends heavily on its large gas and oil reserves.
He stepped down in April 2019 after mass demonstrations to reject his plan to seek a fifth term, and demand political and economic reforms.
As well as Bouteflika's family, President Abdelmadjid Tebboune, who laid a wreath of flowers on the tomb, and many ministers of the current government and military officers, including army chief of staff Lieutenant-General Said Chenegriha, were among the mourners.

Attendees also included foreign diplomats in Algiers.
The French presidency on Sunday described Bouteflika as "a major figure in the contemporary history of Algeria", adding that he embodied the foreign policy of Algeria.
"The President of the Republic sends his condolences to the Algerian people and remains committed to developing close relations of esteem and friendship between the French people and Algerian people," the French presidency said in a statement.
But state media gave little attention to the funeral, and state television did not broadcast live pictures of the burial ceremony, as it has the funerals of past presidents. It later showed recorded footage.
Until 2014, Bouteflika was able to use the export earnings from high energy prices to pay off foreign debt and keep spending on subsidies at high levels to avoid social unrest.
"The years of Bouteflika's rule were a good period. He accomplished major projects, rid the country of foreign debt and brought back peace," said schoolteacher Mohamed Hachi.
But his stroke, and a decline in energy prices, ushered in a more difficult time.
"Bouteflika's period witnessed a terrible spread of corruption that the public couldn't see until after he was forced out of power," said state bank employee Djamel Harchi.
Several former senior officials, including prime ministers, ministers and army generals, have been jailed for corruption since Bouteflika resigned in April 2019 under pressure from a protest movement known as Hirak.
Thousands of members of the leaderless movement continued to take to the streets every week until authorities banned rallies because of the coronavirus pandemic in March 2020.
Bouteflika was a fighter in the 1954-1962 war that ended French colonial rule.
He became Algeria's first foreign minister and one of the forces behind the Non-Aligned Movement, which gave a global voice to many of the countries of Africa, Asia and Latin America.