The Russian war in Ukraine has added another dimension to the already complex economic and political crises that have been plaguing Lebanon. The severe deterioration in living standards in the country, as manifested in rising food and fuel costs, is certain to grow more acute due to the sudden spikes in the global prices of these commodities following the outbreak of the war.
The price of wheat has shot up by record amounts on the international markets because much of the world depends on wheat from Russia and Ukraine. Lebanon imports 66 per cent of its wheat from Ukraine and 12 per cent from Russia. The rest comes from nearby Moldavia and Romania.
Lebanese silos were once able to store a four to five-month strategic reserve of important grains. But these facilities were entirely destroyed in the Beirut Port explosions of August 2020, making Lebanon more dependent than other countries on regular shipments of wheat.
According to the Lebanese finance minister, the country has wheat reserves for only a month or a month and a half, and he has cautioned the public not to panic or to start hoarding flour. Such remarks have not been reassuring. Lebanon must find alternative sources of wheat, but switching sources would inevitably lead to price hikes.
Importing wheat from the US or South America would bring a steep rise in shipping costs, and it would also take longer. Relying on alternative markets in Germany or France would reduce shipping costs, but wheat from there would still cost more than the government has been spending to provide bread.
Any increase in the allocation for wheat would further burden a budget that is already severely strained due to the economic crisis that has been ongoing since October 2019.
Perhaps to compensate for this, the Lebanese minister of industry has prohibited the export of some foodstuffs produced in Lebanon without direct permission from his office. He said that he wanted to study how these foodstuffs might be used to meet the needs of the domestic market. The list includes meat, fowl, fish products, processed fruit and vegetables, some dairy products, cooking oil, and some milled products.
The question of fuel is even more problematic. Fuel in Lebanon is subsidised by the state, meaning that the government pays for it twice: once to import it from abroad and once to subsidise it. It is used to generate electricity for the national grid as well as to operate the private generators that people rely on during blackouts.
The operating hours of the national electricity grid in Lebanon have been sharply reduced over recent months, meaning that privately owned generators running on diesel have become the main source of electricity for hospitals, government offices, businesses and domestic use.
Since the outbreak of the war in Ukraine, the cost of diesel in the global market has skyrocketed, translating into a 30 to 40 per cent price hike on the price of diesel in Lebanon. The owners of private generators have been forced to cut back their electricity generating hours, and 20 to 30 per cent of the consumers of these services have been forced to cancel their subscriptions.
Because the national electricity grid in Lebanon is so weak, the country could be plunged back into total darkness, as occurred in August last year. At that time, the problem was solved by urgent fuel deliveries. This time round, purchasing additional fuel from abroad at the new prices would tax the budget with heavy costs, if the government could afford them at all.
The transportation sector in Lebanon is also at risk. Rising fuel prices even before the Ukraine crisis had forced people to cut down their working hours in order to save on transportation costs. The operations of many public services were obstructed as a result, and some had to stop working for a while.
The police and army were among the most important institutions affected because many of their personnel could not afford the cost of transportation to report for duty.
In January, the government increased the transportation allowance it gives public and private-sector workers. This brought working hours back to normal for a while, but with the sudden surge in fuel prices due to the war the government may have to increase the allowance again.
Since last September, Lebanon has begun to expand its social-security networks, launching support programmes and instituting painful economic-reform measures that have entailed lifting subsidies on some basic goods and automatically causing their prices to go up.
The Ministry of Social Affairs has received over 580,000 applications for its Aman (Security) programme that targets the most impoverished Lebanese families. The programme is currently determining which applicants meet its criteria.
An estimated 150,000 families have qualified for monthly assistance worth about US$25 per family plus US$20 per family member up to six persons for a year. In addition, 87,000 of the families with the programme will receive schooling assistance for a year. Due to its limited resources, the ministry has been forced to eliminate some applicants in favour of needier ones, however.
The rapid economic deterioration in Lebanon has made it necessary to expand the safety net, and as the government began financial payments under the Aman programme, another one has been introduced.
Instead of reducing the prices of basic goods for all consumers, ration cards will now be distributed to the neediest. However, this programme, too, has run up against bureaucratic obstacles. One is that the World Bank wants to ensure that the Aman programme is fully transparent in how it registers and distributes aid before it supports another project such as the ration-cards programme.
Over the past three years, international donor agencies have lost confidence in government agencies in Lebanon, and they are insisting on major structural reforms before reopening the taps.
For example, the funds that the international community pledged to Lebanon after the Beirut Port explosions were held up until the formation of a government of technocrats, which did not happen until September 2021. In the year and a half before that, squabbling among the Lebanese political elites prevented the country from benefiting from the outpouring of international sympathy after the explosions. The international community’s enthusiasm for helping the country gradually dwindled.
The delay was also in large measure due to the stalled negotiations between Iran and the world powers over Iran’s nuclear programme.
Tehran, through conditions set by its Lebanese ally Hizbullah, dragged its feet on facilitating the formation of a new Lebanese government while it tested the pulse of the Western powers it was negotiating with over the resumption of the nuclear agreement.
The new government was only formed after a widely reported telephone conversation last September between the French and Iranian presidents that helped to kickstart a resumption of the negotiations and refreshed the climate for renewed support for Lebanon.
Three weeks ago, Iran and the West were on the verge of signing an agreement on Tehran’s nuclear programme, but then Russia invaded Ukraine, diverting world attention from the talks in Vienna.
An agreement would have led to a breakthrough in Lebanon by mitigating the divided country’s political polarisation. But now that the talks in Vienna have been put on hold, so too has the opportunity to restore calm to Lebanon.
Iran has remained neutral on the war in Ukraine because it does not want to ruin the progress it has made in the talks. However, when Russia became the new target for Western sanctions, just as Iran was about to be released from their stranglehold, Moscow threw a spanner in the works.
It insisted on receiving written guarantees from Washington that Russia would not become a victim of further sanctions on the grounds of its involvement in Iranian oil, defence, and nuclear industries. The question now is whether Russia will find a back door out of the Western sanctions related to Ukraine thanks to its cooperative activities with Iran, or whether the US will refuse the guarantees and further postpone a deal with Iran.
Regardless of the outcome of the negotiations, Lebanon has lost a lot because of the Russian war in Ukraine. Perhaps the worst is that international attention has turned away from the country to support another more urgent cause, namely Ukraine and Ukrainian refugees.
The Syrian refugees in Lebanon have also lost out because of the declining international interest in helping them and the narrowing opportunity for a solution to the Syrian conflict that could pave the way to their safe and voluntary return to their homes.
While Russia is engaged in a heated confrontation with the West against the backdrop of the war in Ukraine, progress towards a political settlement in Syria is unlikely. No solution is possible without Russia, which dominates Syria militarily.
Until recently, Lebanon had expected the elections scheduled for mid-May to bring to power a new political elite that would usher in significant change in government policies and make it possible to rescue the country’s fragile economy.
However, with international attention now lying elsewhere, the Lebanese elites might see this as a chance to postpone the elections or to tamper with the polls in order to escape their anticipated punishment at the ballot box.
Despite shifting alliances and the rise of new political leaders from the grassroots movement that began in 2019 and other developments that have raised the hopes the Lebanese have pinned on the forthcoming elections, the growing complexity and duration of the war in Ukraine and the continued focus of international attention there could seriously jeopardise the polls and delay the political change that Lebanon so desperately needs.
The writer is a researcher at Al-Ahram Centre for Political and Strategic Studies.
*A version of this article appears in print in the 24 March, 2022 edition of Al-Ahram Weekly
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