Economy

Iran's economic inroads into Lebanon spark fears of repercussions

By Nohad Topalian

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People walk in front of the shuttered door of a pharmacy in Beirut, during a nationwide strike of pharmacies to protest against a severe shortage of medicine, on July 9. [Anwar Amro/AFP]

BEIRUT -- A top Iranian trade official's recent revelation that a "preferential trade agreement" is proceeding between Tehran and Beirut has raised alarm in Lebanon, where many fear the repercussions of such a move.

Farzad Piltan, director-general of the Iranian Trade Promotion Organisation's Office of Arabian and African Countries, this month said Iran's commodity exports to Lebanon grew by 266% in the first five months of the fiscal year.

This growth occurred between March 21 and August 22 and reached $20 million, with Iran's exports amounting to about $12.7 million, he said, while imports from Lebanon amounted to $7.5 million.

Economists and political analysts who spoke with Al-Mashareq said the Iranian invasion of the Lebanese market is indicative of Iran's efforts to consolidate its control over Lebanon and to defy the international community.

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People raise an Iranian flag as they gather to welcome tankers carrying Iranian fuel upon their arrival from Syria in Baalbek in Lebanon's Bekaa Valley on September 16. [AFP]

According to political writer George Chahine, Iranian exports "probably rank second after Chinese exports to Lebanon, but the difference has to do with smuggling and tax evasion by Iran and Hizbullah".

"Everyone knows that Hizbullah imports from Iran most of the contents of its warehouses," he said.

Food or light industrial products are distributed or sold to members of its base, with some receiving them at a discount via the party's al-Sajjad card, he said, while other Lebanese suffer amid the economic crisis and skyrocketing prices.

Evasion of customs duties

Chahine said information that has come to light in the past six months "indicates that the party imports Iranian agricultural and manufactured products through Iraq and Syria directly and without paying customs duties".

These goods enter Lebanon illegally via more than 37 unofficial crossings between Lebanon and Syria.

One of the deals that accompanied the launch of a chain of stores reportedly "brought in Iranian products worth approximately $1.5 billion without paying customs duties", he noted.

Customs duties typically range from between 15 and 28%, he said, which means that in this case, the party evaded taxes of between $350 and $400 million.

"This is in addition to the deal for Iranian diesel fuel, on which customs duties will not be paid when it enters Lebanon," he said, referring to Hizbullah's shipment of oil from Iran that arrived on tanker trucks overland last week from the Syrian port of Banias.

Many Lebanese reacted to the spectacle with rage, regarding the move as a flagrant act of defiance to the Lebanese people and the international community that will expose Lebanon to additional sanctions.

Chahine said Iran's recent moves show it is "consolidating its economic position outside its geographic borders to boost its income in foreign currencies from its foreign trade, in defiance of the US sanctions imposed on it".

A challenge to the state

"There have been no commercial relations between Lebanon and Iran since the start of the imposition of economic sanctions on Tehran in 2012," Lebanese economist Violette Ghazal al-Balaa said.

Any emergency trade exchange "poses a challenge to the Lebanese state, as was the case with the import of Iranian oil, as the Ministry of Energy denied receiving any request in this regard", she said.

Meanwhile, the Ministry of Health used the ongoing health crisis to open the door, more than a year ago, for the entry of Iranian medicines into Lebanon in contravention of local laws and international norms and agreements, she said.

These laws require medicines "to be tested by accredited international laboratories, before they leave the country of origin for the purpose of export", she said.

Al-Balaa said the negatives of this issue outweigh the positives, which Hizbullah seeks to publicise, because Iranian imports compete with national industries that should be increasing their production during the crisis, especially in the pharmaceutical field.

She said Iran and Hizbullah "expose Lebanon to a new wave of sanctions".

Since 2018, she noted, the US Treasury has "targeted anyone who enters into deals with Iranian oil companies, whether for purchase, possession, sale, transportation or marketing".

Iran's long-term goals

Binding the weak Lebanese economy to the Iranian economy "is Iran's dream and long-term goal", said Lebanese Centre for Studies and Consulting director Hassan Qutb.

Hizbullah chief Hassan Nasrallah previously demanded the development of trade relations with Iran, he said, and today, importing Iranian oil is one of the aspects of developing trade between the two countries.

Piltan's disclosure "strengthens Iran's political hegemony over Lebanon through trade, industrial and agricultural exchange, and enhances Hizbullah's role as a mediator to develop this exchange and facilitate the work of traders", he said.

These traders "need a mediator who opens the doors of Iranian institutions for them", he said.

Qutb noted that Iran wants to reach the shores of the Mediterranean via a land corridor linking Tehran to Baghdad, Damascus and ultimately Beirut.

It seeks to take advantage of the official Lebanese ports and border crossings controlled by Hizbullah to export its products to various countries through Lebanese merchants, he said.

It also seeks "to benefit from the experience of the Lebanese in the banking sector, trade exchange and financial transfers, by virtue of the existence of a large Lebanese community in Africa, to develop exports to Africa".

Iran's main goal is to protect its political system "by maintaining its economic capabilities and supporting its tools in the region, including Hizbullah in Lebanon", Qutb said.

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