How Will The U.S. Caesar Act Affect Lebanon

Ceasar Act Effects on Lebanese Economy
Asharq Al-Awsat

Concerns have been rising over the U.S. Caesar Act as its implementation is edging close.

By mid-June, the Lebanese government should have decided how to deal with it. An intricate matter that comes at a difficult time for Lebanon when negotiations are ongoing with the International Monetary Fund (IMF).

In brief, the Caesar Syrian Civilian Protection Act stipulates that any and all entities, companies, and individuals that provide any assistance or support to the Syrian regime, whether Syrian or non-Syrian, shall be subject to sanctions.

That includes indulging in commercial activities with the Syrian regime or providing it with any financial, technical, and/or military support.

So, what does this mean for Lebanon?

In simple terms, the Caesar Act is a US legislation that imposes dire sanctions on the Syrian regime and its organizations, with the intention of punishing it for the war crimes committed against the Syrian people.

Hence, the sanctions will be primarily targeted at Syria.

However, they will inevitably have a degree of effect on Lebanese entities and individuals, too, due to the private and public trade and business relationships that exist between the two countries.

The problem with attempting to determine the scale of damage that the Lebanese economy will sustain post-Caesar is the fact that it’s not entirely clear what does and does not constitute “financial support,” in the eyes of the Caesar Act.

Lebanon-Syria relations

For a long time, Syria has been Lebanon’s only land gateway to the region. That is to say that Lebanon relies heavily on its neighbor to export and import some necessary commodities that get transported by land.

According to Al-Modon, Lebanon and Syria have conducted private and public trade activities that amount to nearly $603 million in 2019.

Relying on airports and seaports alone, in the case that Lebanon abandons trade with Syria to satisfy the Act, will not be enough to compensate for the essential trade that takes place through Syria.

Additionally, Lebanon relies on its neighbor, to an extent, to import electricity, in addition to acquiring essential maintenance contracts for electric power.

As it seems, the electricity links that Lebanon has with Syria may put Lebanon in a bad position when the Caesar Act takes effect.

But in the case that Lebanon decides to kill these links, it will be losing its usual supplier of nearly 200 megawatts of electricity, out of the 3,500 megawatts that it requires to satisfy the local demand.

With that said, trade and electricity are certainly not all that financially connects Lebanon with Syria.

In 2011, seven branches of banks operating in Syria were detached from their mother branches in Lebanon. Despite their detachment, the now-Syrian banks have kept obtaining financial contributions from their Lebanese counterparts.

And since the Syrian Central Bank is at the top of the Caesar Act’s hit list, the direct connection that these Syrian banks have with it puts the aforementioned Lebanese banks at risk due to their financial connection to them.

Furthermore, as per the Act, private businesses and individuals who have financial investments or connections with public Syrian institutions will also be targeted by the sanctions, and many in Lebanon fit into this specific category.

It’s also worth noting that many Syrian businesspeople have placed large deposits in Lebanese banks over the years.

What can Lebanon do?

Now, considering the Lebanese Republic is not the main target of this act, the US might show some leniency in regards to Lebanon by the time the Caesar Act becomes effective.

As such, the trade of essential goods and electricity imports, for example, might be exempt from the sanctions. Otherwise, Lebanon will be faced with a disaster.

Either way, Lebanese officials will most likely have to cut or greatly reduce Lebanon’s financial cooperation with Syria and its organizations if they intend to steer away from the untimely sanctions.

Still, losing Syria would be debilitating for the Lebanese economy. Therefore, as it seems, Lebanon will, directly or indirectly, be badly affected by the Caesar Act. The scale of the effect, however, will be revealed with time.

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