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

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)
1 / 3
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)
Lebanese wait in desperation outside a closed petrol station in Beirut's Hamra district on August 20, 2021. (AFP)
2 / 3
Lebanese wait in desperation outside a closed petrol station in Beirut's Hamra district on August 20, 2021. (AFP)
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)
3 / 3
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)
Short Url
Updated 02 September 2021

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

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.


Egyptian, Russian navies launch joint exercise

Egyptian, Russian navies launch joint exercise
Updated 12 min 27 sec ago

Egyptian, Russian navies launch joint exercise

Egyptian, Russian navies launch joint exercise
  • Friendship Bridge 4 is part of Egypt’s plan to carry out joint military training with friendly countries

CAIRO: The Egyptian and Russian navies have launched the joint exercise Friendship Bridge 4, which will last for several days in the Mediterranean.

It began with a ceremony welcoming Russian forces at the Alexandria Naval Base in the presence of Lt. Gen. Ahmed Khaled Hassan Saeed, who delivered a speech in which he stressed the importance of cooperation between the two countries’ navies.

Friendship Bridge 4 is part of Egypt’s plan to carry out joint military training with friendly countries.

 Meanwhile, the armed forces of Egypt and Jordan concluded their joint exercise Aqaba-6. The training, which took place in Jordan, included a joint operation to eliminate an armed terrorist outpost inside a border village, and the interception of a merchant ship.


Beirut blast probe judge cleared to continue investigation

Beirut blast probe judge cleared to continue investigation
Updated 07 December 2021

Beirut blast probe judge cleared to continue investigation

Beirut blast probe judge cleared to continue investigation
  • A Beirut court rejected the last of the suits preventing Tarek Bitar from questioning top officials

BEIRUT: The probe into last year’s deadly Beirut port blast has been cleared to resume after being suspended for more than a month on legal claims against its lead investigator, judge Tarek Bitar, a judicial source said.
A Beirut court rejected the last of the suits preventing Bitar from questioning top officials on Tuesday.
“They have reversed the decision that had led to the suspension of the probe and he can now resume his work for sure,” Nizar Saghieh, head of the Legal Agenda, a research and advocacy organization, told Reuters.
The resumption could be temporary should further legal complaints be filed, he said.
The investigation into the Aug. 4, 2020, blast that killed more than 215 people, injured thousands and destroyed large swathes of the city has made little headway amid pushback from powerful factions, some of whom lead smear campaigns and filed multiple suits against Bitar.
The leader of the Iranian-backed, armed Shiite Muslim political movement Hezbollah has repeatedly said he wanted Bitar removed from the case and the row over him has spilled over into government, with Prime Minister Najib Mikati’s cabinet unable to meet since Oct. 12.
Many Lebanese are angry that more than one year on from the blast no senior official has been held accountable for the country’s worst peace-time disaster as it slips into political and economic meltdown.
Bitar has sought to question senior politicians, including former ministers and members of parliament, since July but nearly all have spurned him.
He is the second judge to take charge of the investigation after a legal complaint against the partiality of his predecessor Fady Sawan saw him removed in February.


Motorcycle explosion in southern Iraqi city kills at least 4

Motorcycle explosion in southern Iraqi city kills at least 4
Updated 07 December 2021

Motorcycle explosion in southern Iraqi city kills at least 4

Motorcycle explosion in southern Iraqi city kills at least 4

BASRA: At least four people were killed and 20 wounded in an explosion in Iraq's southern city of Basra, police and hospital sources told Reuters on Tuesday.
Police are still investigating the cause of the blast, which took place in the city centre, near a main hospital. The explosion set fire to at least one vehicle and damaged a minibus.
One police source said that an initial investigation showed that a motorcycle rigged with explosives could have been the cause of the blast. 


UAE’s new 50-dirham banknote features Sheikh Zayed

UAE’s new 50-dirham banknote features Sheikh Zayed
Updated 07 December 2021

UAE’s new 50-dirham banknote features Sheikh Zayed

UAE’s new 50-dirham banknote features Sheikh Zayed
  • It is the first polymer banknote to be circulated in the country
  • The current 50- dirham note will continue to be used

DUBAI: UAE rulers witnessed the launch of a new 50-dirham banknote on Tuesday, in celebration of the country’s 50th National Day. 
The initiative comes in honor of the UAE’s founding father, the late Sheikh Zayed bin Sultan Al-Nahyan, and the country’s first generation of rulers to commemorate their dedication and historical role in uniting the country.
It is the first polymer banknote to be circulated in the country.
“We see in this issuance the new phase that UAE will enter, and a renewed pledge to continue its growth path. The occasion also allowed us to express our appreciation and gratitude to our founding fathers by issuing a new AED50 banknote to celebrate the fiftieth anniversary of the establishment of the UAE,” said Sheikh Mansour bin Zayed Al-Nahyan, Deputy Prime Minister and Chairman of the Board of Directors of the Central Bank of the UAE. 
The front of the new banknote features a portrait of the late Sheikh Zayed on the right, and the memorial picture of the founding fathers after signing the union document. 
Meanwhile, the back side includes a picture of the late Sheikh Zayed signing the union agreement as well as illustration of the Etihad Museum, which witnessed the establishment of the union and the raising of the UAE flag for the first time.
According to state news agency WAM, the new banknote will be available in Central Bank branches and ATMs ‘in the near future’.
The current 50- dirham note will continue to be used.
Polymer banknotes are said to be more durable and sustainable than traditional cotton paper banknotes, lasting two or more times longer in circulation. They can also be completely recycled, thus reducing their environmental footprint.


Syria says fires extinguished at Latakia’s port following Israeli ‘aggression’

 Israeli Air Force F-35 fighter jets fly over the Mediterranean Sea. (REUTERS file photo)
Israeli Air Force F-35 fighter jets fly over the Mediterranean Sea. (REUTERS file photo)
Updated 07 December 2021

Syria says fires extinguished at Latakia’s port following Israeli ‘aggression’

 Israeli Air Force F-35 fighter jets fly over the Mediterranean Sea. (REUTERS file photo)
  • Israel has mounted frequent attacks against what it has described as Iranian targets in Syria

CAIRO: Fires caused by an Israeli “aggression” at Syria’s Latakia port on Tuesday had been extinguished, leaving material damage, but the status of any casualties was unclear, Syria’s state media reported.

Five explosions rocked the port city after an Israeli “aggression” hit the port’s container yard, sending fire trucks racing to the site, Syrian state TV said.

Israel has mounted frequent attacks against what it has described as Iranian targets in Syria, where Tehran-backed forces including Lebanon’s Hezbollah have deployed over the last decade to support President Bashar Assad.

The Mediterranean port of Latakia is the country’s main port, through which food and other crucial supplies flow into war-torn Syria, and is close to Russia’s main air base of Hmeimim.