The loss of Gulf remittances would be yet another blow to the reeling Lebanese economy. Not only would it lower state GDP, it potentially could add to the ranks of the nearly ten percent of the country's unemployed. These suddenly unemployed workers and their families in Lebanon, including Shia, may also channel their anger toward Hezbollah.
With respect to Lebanon's recently passed Cabinet measures, including PM Hariri's government's decrees regulating offshore oil and gas exploration as well as the new national budget, Lebanon's first in twelve years, if his resignation is not withdrawn these measures will likely collapse. And if followed up with additional harsh economic measures by Saudi Arabia and other Gulf states, Lebanon will face further destabilizing economic challenges.
With respect to foreign investment, two weeks after Saad Hariri's resignation, some international investors are already signaling their intentions to pull out of Lebanon. More than 82% of foreign direct investment in Lebanon comes from Gulf Cooperation Council (GCC) countries, 40% of which is in the real estate sector. While Gulf investment in Lebanon has not increased since 2012, despite periodic political problems, investors to date have not sold off most of their investments and avoided harming the economy. Lately, however, Lebanon has witnessed a reported 10-20% drop in real estate values. A Gulf selloff would doubtless have major negative consequences for Lebanon's formerly robust real estate market.
The Saudi-led Gulf countries also have major leverage on Lebanese trade, accounting for 25% of Lebanon's total exports. Should the GCC countries decide to do so, they would have many other suppliers to choose from thus further tumbling Lebanon's balance of trade, which in 2016 ran a deficit of 30%, or approximately $16 billion. Lebanon's economy cannot any longer absorb these deficits, regardless that the Lebanese lira is linked to the US dollar.
Saudi Arabia until after the civil war erupted in Syria in 2011 and the first Gulf tourism boycott of Lebanon in 2012, in response to Hezbollah's military activities in Syria in support of the Assad regime, Saudi tourists constituted a quarter of all visitors to Lebanon. Although Gulf tourists started returning gradually over the years, today they constitute fewer than 8% of tourists to Lebanon.
The decrease in GCC tourism has collapsed the hotel overnight guests' rates percentage of 2010 levels to half, while causing skyrocketing unemployment rates in the hospitality sector, dramatically reducing business for restaurants, resorts, and other entertainment venues. On November 9, 2017, Riyadh advised Saudi citizens not to travel to Lebanon and for its citizens in Lebanon to leave. Kuwait and Bahrain immediately did the same. The current Saudi offensive threatens to erode even further Lebanon's tourism industry.
In addition, Saudi Arabia and her allies could negatively impact the Lebanese banking sector. Saudi deposits at Lebanon's Central Bank (Banque du Liban), are close to one billion dollars. To support Rafik Hariri's 1992 economic plans for Lebanon, Saudi Arabia until today has kept these deposits in the Central Bank. But given the Saudi view of Lebanon's "Declaration of War" and that Saad Hariri has resigned, Riyadh is being counseled to withdraw these deposits. It's true that the Saudi Central Bank deposits amount to only about 3% of Lebanon's foreign reserves, but pulling them out would shatter confidence in and destabilize the Lebanese lira with resulting panic in Lebanon, the region and global markets.
Last year, rumors were rampant that the KSA was preparing to pull their Lebanon deposits, after its government refused to condemn Iran for organizing the sacking of the Saudi embassy in Tehran, as well as its consulate in Mashhad. Saad Hariri reportedly convinced the KSA to demure and the withdrawal was frozen, but Riyadh did cancel $4 billion in grants to the Lebanese Armed Forces and Internal Security Forces, because according to recent boasts from Iranian officials, that "Supreme Leader" Ali Khamenei claims to control both the Lebanese Armed Forces (LAF) and Lebanon's Internal Security Force (ISF).
Meanwhile, on 11/16/2017, with a sort of straight face, Hezbollah's Michel Aoun's son-in-law Gebran Bassil lectured Germany's Vice-Chancellor that there was not any foreign interference in Lebanon, while adding that the Lebanese government maintains its respect for the policy of dissociation in any regional conflicts, including in Syria.
It is very difficult to predict anything politically in the Middle East. But by targeting expatriate labor, the financial sector, and tourism, Saudi Arabia, if it launched an economic campaign against Lebanon would certainly have a major impact.
To be sure, this approach would severely assault not only Iran's proxies like Hezbollah and its constituents in Lebanon's government, including Christian allies such as Michel Aoun and the Free Patriotic Movement; it will equally affect Lebanon's Western-oriented Sunnis and Christians, who until now have been on good terms with Riyadh.
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