Lebanon Forms New Government Amid Economic Crisis, Ongoing Protests

On October 29, Lebanese Prime Minister Saad Hariri announced his resignationresignation, automatically triggering the resignation of his government. The move followed nearly two weeks of nationwide mass protests, described as potentially the largest in Lebanese history. Protestors represent a broad economic, political, and sectarian cross-section of Lebanese society, and have continued to call for a comprehensive change in political leadership even after the resignation of the Hariri government. The protests, and uncertainty over the formation of a new government, represent a significant challenge for Lebanese institutions, particularly against the backdrop of an ongoing financial crisisAs of early December, protests continued and political parties struggled to reach consensus on the appointment of a prime minister—acceptable to both protestors and party leaders—who could form a new government. Meanwhile, security and economic conditions in the country continue to deteriorate. Instability in Lebanon could create opportunities for actors of concern to the United States, including Hezbollah and Iran.

The Protest Movement

What triggered the protests? TheyProtests began on October 17, having been triggered by a proposed government tax on internet-enabled voice calls (notably Whatsapp), which many Lebanese rely on due to the prohibitive costs of cellular phone calls and texts. However, the movement reflects broader dissatisfaction with what protestors describe as government corruption, ineptitude, and economic mismanagement. Demonstrators, who represent a broad economic, political, and sectarian cross-section of Lebanese society, have emphasized that protests were notare primarily driven by Whatsapp, but by the state's failure to provide sufficient access to basic goods and servicesservices, including jobs, education, water, electricity, and garbage disposal.

What is new about these protests? Unlike in previous protests, Beirut is not the epicenter. Large-scale protests have broken outpersisted nationwide, and the pervasive economic concerns driving them also have transcended sectarian divisions. Protest areas range from Tripoli in the north (a Sunni stronghold) to the Shi'a dominated areas of southern Lebanon and the Bekaa Valley. Unlike past protests that generally were mobilized by political parties or civil society groups, demonstrators appeared to gather spontaneously under Lebanese, rather than party flags. Notably, demonstrators across sects targeted their own political representatives: Sunni-dominated areas saw protests against Sunni Prime Minister Hariri, while in Shi'a areas demonstrators chanted against the Shi'a speaker of parliament and attacked offices of Hezbollah parliamentariansUnlike past protests that generally were mobilized by political parties or civil society groups, demonstrators have organized around a shared national—rather than party or sectarian—identity.

Figure 1. Lebanon

Source: CRS.

What are their demands? Protestors lack a centralized leadership, and their demands vary. Some have called for specific policy and/or leadership changes, such as early elections, a new electoral law, and the resignation of Lebanese President Michel Aoun (whose term expires in 2022) and Central Bank Governor Riad Salameh. Other protestor . Other demands have a less clear path towards implementation, such as a change to Lebanon's confessional system (in which power is divided based on sectarian affiliation), the return of "looted public money," and the removal of the entire political elite.

What has been theHow has Lebanon's government responseresponded? The government quickly scrapped the proposed tax on internet-enabled voice calls. TheBefore its resignation, the government also passed what Lebanese press has described as "a raft of unprecedented, radical economic reforms," including privatizations, salary cuts for ministers and legislators, and the establishment of a national anti-corruption commission. Protestors have welcomed these moves but generally have considered them insufficientSome analysts argued that former Prime Minister Hariri's economic reform package "does not represent a realistic and sustainable fiscal consolidation plan. It also falls short of sufficient details and does not include the structural reforms required to put the country back on track." What have U.S. officials said? Secretary of State Pompeo called upon Lebanon's leaders to "urgently facilitate the formation of a new government," and criticized what he described as Iranian meddling in the country. Assistant Secretary for Near Eastern Affairs David Schenker stated that the United States supports "the legitimate demands of the Lebanese people to have a government that will reform economically and will fight corruption," but added that the United States was not taking a position on the composition of a new government.

Hezbollah & Iran

Do protestors oppose Hezbollah? Protestors have called for the removal of all political elites, specifically naming Hezbollah leader Hasan Nasrallah. Protests have occurred in cities considered to be bastions of support for Hezbollah and Amal, including Sidon, Tyre, and Nabatiehthe allied Amal movement. While some Hezbollah and Amal supporters have clashed with demonstrators, others have joined the protests. Those joining the protests have generallygenerally have not criticized Hezbollah's military operations or stance against Israel, but rather focused on economic mismanagement, high unemployment, and the lack of consistent access to basic services such electricity, water, and garbage collection.

What is Hezbollah's position regarding the protests? Nasrallah opposed the resignation of Hariri's government, warning that it would lead to a power vacuum in the country, and instead called for reforms from within. Nasrallah also suggested that foreign embassies were financing the protests. Similarly, Iranian Supreme Leader Ayatollah Khamenei has blamed the United States for spreading "insecurity and turmoil" in Lebanon, and called on protestors to pursue reforms "through the framework of legal structures.". Hezbollah was part of the ruling coalition in Lebanon's outgoing government, and held three Cabinet seats.

In November, supporters of Hezbollah and Amal appeared to escalate physical attacks on protestors.

Next Steps

How will a new government be formed? According to the constitution, Lebanese President Michel Aoun must convene the various parliamentary blocs for consultations on the appointment of a prime minister-designate, who will be. To be designated and charged with forming a new government. This is frequently a lengthy process—the outgoing cabinet was formed after eight months of political deadlock.

A technocratic government? Some have suggested that Prime Minister Hariri could return to the premiership and form a government of independent technocrats. However, the formation of a technocratic government would arguably be constrained by the same factors that historically have complicated all efforts at government formation in Lebanon, including the constitutional requirement that all of Lebanon's sects be "fairly represented in the formation of the Cabinet," and domestic political rivalries.

What are the economic issues at stake? Prior to the protests, Lebanon already was in the midst of a severe financial and economic crisis. Banks have remained closed for weeks since the protests started. Observers fear that the re-opening of lending institutions could trigger a bank run, due in part to a shortage of dollars in the market which had spurred protests as recently as September. Some analysts have argued that former Prime Minister Hariri's economic reform package "does not represent a realistic and sustainable fiscal consolidation plan. It also falls short of sufficient details and does not include the structural reforms required to put the country back on track."

Outlook

While the , a candidate will need to secure the support of a majority of political blocs in parliament. This is frequently a lengthy process—the outgoing cabinet was formed after eight months of deadlock. As of early December, President Aoun had not set a date for parliamentary consultations.

What could a new government look like? Protestors have called for the formation of a government of independent technocrats that excludes representatives of political parties. Former Prime Minister Hariri has endorsed this demand, and added that any candidate for the premiership must also seek extraordinary legislative powers from Parliament, redistribute key ministerial portfolios, and hold early parliamentary elections. President Aoun and most Lebanese parties have rejected the call for a technocratic government. Aoun has called for the formation of a blended "techno-political government," while Hezbollah has called for the formation of a national unity government representing all parties in parliament. Parliament Speaker Nabih Berri reportedly stated that the request for exceptional powers from parliament is "entirely out of the question because it means obstructing Parliament's legislative and oversight role."

Outlook

Political uncertainty has exacerbated the challenges facing Lebanon's economy—already in crisis prior to the protests. A scarcity of dollars in Lebanon has caused the Lebanese pound to depreciate in the black market and led banks to ration dollar withdrawals. It also has challenged the ability of importers to purchase critical goods like fuel, medicine, and food. Restrictions on dollar withdrawals and shortages of basic goods, if prolonged or exacerbated, could increase the risk for broader social upheaval. At the April 2018 CEDRE conference in Paris, international donors pledged more than $11 billion in loans and grants for Lebanon, but the funds are contingent on economic reform measures which were not implemented and which cannot be passed until a new government is formed.

While protests have not directly challenged the broader role of Hezbollah in Lebanon, both Hezbollah and Iran appear to view protests as a significant threat to their influence within the country—particularly in light ofgiven similar ongoing protests in Iraq. Hezbollah will likely seekcontinue trying to ensure that its interests are represented in any new cabinet, potentially delaying the formation of a new government. Lebanon's prime-minister designate, when appointed, will have to balance pressure from the United States to exclude Hezbollah from government against the potential for the group and its allies to block the formation of a government that is seen as not representing its interests. Any efforts by Iranian-backed groups to destabilize Lebanon would also place pressure on the Lebanese Armed Forces, which the United States has sought to bolster in the hopes that the institution can serve as a counterweight to Syrian and Iranian influence in Lebanon. In late October, the early December, the Trump Administration lifted a hold on $105 million in FY2019 Foreign Military Financing (FMF) funds allocated for LebanonAdministration reportedly elected to withhold $105 million in security aid for Lebanon; no reason was publicly given. Congress places several certification requirements on U.S. assistance funds for Lebanon annually in an effort to prevent their misuse or the transfer of U.S. equipment to Hezbollah or other designated terrorists.