Tuesday, November 4, 2014



In a rare public appearance, Hezbollah Secretary-General, Hassan Al-Sayyid Nasrallah has warned Israel that his organization plans to target, using the rockets it acquired from Iran, all of Israel's seaports and airports, and effectively shut them down, in the next armed conflict between the parties. While some observers may dismiss this statement as the mere posturing of a terrorist leader, for domestic consumption, The financial industry in Beirut, and foreign investors who have exposure in Lebanon, should absorb the probably consequences of such actions.

When Hezbollah and Israel go to war again, and it will happen, given that Hezbollah is merely a proxy for Iran, the consequences for Lebanon's economy, and its financial structure, will be catastrophic.  Should Nasrallah make good on his threat, and send missiles into the airports and seaports of Israel, such an act would be considered total war, and Lebanese ports and seaports would them suffer such a level of destruction as to prevent their use for many months.

Additionally, Israel has long warned the Government of Lebanon to rein in Hezbollah, because it will, the next time, not limit its response to the Shiite-held areas of the country. If Tel Aviv receives an attack from Hezbollah's rockets, Beirut's downtown financial district should expect a direct hit. This would cripple the Lebanese economy for years, and probably close up the international banking center for an extended period of time. Does Lebanon really expect that this will not be the outcome ? Those people who believe that Hezbollah could ever be controlled, disarmed, or dismantled, are delusional. It cannot be stopped by any entity in Lebanon.

Some experts are predicting a worst-case scenario; that destruction in Israel would be so widespread, and loss of life so high, that the Israeli Air Force, in employing bunker buster bombs, to destroy Hezbollah underground facilities, would turn Lebanon into a desolate moonscape, like much of Gaza, where there is total destruction.

Taking all this with a grain of salt, but employing objective risk management, which understands that Hezbollah may not be deterred by an endgame where it is completely destroyed, foreign investors and financial institutions that are involved in Lebanon, or hold substantial assets there, or  maintain branches of their banks, would do well to plan ahead for the scenario I have discussed. This may entail obtaining insurance coverage from companies outside of Lebanon, creating overseas backups of all records in real-time, reducing financial exposure, or even making contingency plans to close facilities, and safely remove staff and portable assets. Perhaps if the banks in Mosul has taken such precautions, ISIS would not be sitting with a $400m war chest now, and bankers would not be dead, or scattered to the four winds.

Does this mean that any future investment in Lebanon is high-risk ? You be the judge, but in my humble opinion, one day Iran will pull the chain, and Hezbollah will attack, with disastrous consequences for Lebanon. Do not lose valuable assets, including human resources, because you could not see the handwriting on the wall; Plan ahead, please, and invest elsewhere, to avoid total loss of your principal, if the roof falls on top of Beirut.

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