Multidimensional Fuel Crisis Paralyzes Lebanon

Years of political and financial corruption have caused the current breakdown

Lebanon is suffering countrywide blackouts and long queues for petrol and bread due to an ongoing shortage of fuel. Some bakeries and hospitals are being almost forced to close and the scarcity is escalating into violence with at least three men having been killed, according to Lebanon’s National News Agency.

One of the incidents happened in Badawi and extended to Bab al-Tibenneh, in the northern city of Tripoli, when a gunfight erupted over a fuel-sale deal, leaving two men dead. The other dispute started with a fistfight at a petrol station in Bakhoun, in the northern Dinniyeh region. A man was shot and died at the hospital, the National News Agency reported.

This lack of fuel is believed to be caused by smuggling, hoarding and the government’s inability to secure deliveries of imported fuel, according to Al Jazeera. The crisis has fuelled protesters across the country demanding the government to act.

Economic crisis

The situation of the country is critical and has worsened since 2019. The Lebanese currency has lost more than 90% of its value in less than two years, and more than half of the population are poor. Moreover, Lebanon’s gross domestic product has fallen from $55 billion in 2018 to $33 billion in 2020, according to the World Bank.

Now, 23,000 lira equals $1 in the black market, while the price of a gallon of petrol has increased by more than 220% and the price of basic food products, has increased by 50%.

As a result of the fuel shortage, Lebanon’s national electricity company, which depends on imported fuel, has imposed a blackout system, and delivers only about one hour of electricity per day to homes and businesses, Al Jazeera reports. Entire areas are now forced to put up with hours-long darkness and hospitals struggling to secure diesel and provide basic services.

Political inefficiency

This fuel scarcity is the visual representation of the financial crisis that erupted in 2019 caused by “decades of corruption and mismanagement by a ruling elite that has failed to find solutions as more than half the population has sunk into poverty”, as Al Arabiya frames it.

Back then, the Lebanese government “defaulted on one of its debts and the rest of its debts were downgraded to junk bond status and the ensuing panic spread through the market all the way down to the small depositors who ran to their banks to retrieve their dollars”, recalls analyst of The Nation, Saree Makdisi. People saw themselves with no access to their savings and banks shutting down and illegally imposing capital controls. Nevertheless, it is believed that politicians and businessmen, had no limit to transfer their money overseas.

On August 13, Lebanese President Michel Aoun called an emergency cabinet meeting to discuss the crisis but “was rebuffed by the prime minister as political paralysis obstructed efforts to find a solution, even as much of the country grinds to a halt”, according to Reuters. Prime Minister Hassan Diab has refused the meeting since his administration resigned one year ago after the Beirut port explosion. The creation of a new cabinet has been obstructed by sectarian politicians quarrelling over shares in a possible new administration.

Previously this week, the central bank announced the end to fuel subsidies that have drained the reserves. In exchange, Central Bank Governor Riad Salameh has said that it will “start extending lines of credit for fuel imports at the market.” The government opposes the move, which will make the prices rise, “while importers say they will not extend supplies until an agreement is reached”, according to Reuters. The government has demanded Salameh reverse his decision until there can be a programme to provide cash cards to citizens.

Importers are insisting on having a unified exchange rate for buying and selling fuel. We do not know yet if this central bank decision may contribute to a further scarcity of supplies. For now, Lebanon’s oil directorate is confident that oil importers and facilities must supply the quantities of fuel already purchased before the bank’s decision as a new rate is being set.

One year after the largest non-nuclear explosion ever recorded the country still lives submerged in a deep crisis which is the outcome of years of political and financial corruption present in all Lebanese spheres of life. The explosion itself was due to administrative incompetence. Authorities abandoned thousands of tons of highly explosive ammonium nitrate to deteriorate for years in a warehouse in the middle of Beirut until the fire set it off. As analyst Saree Makdisi adds “not a single official has yet been held accountable.”

Lack of essential medicines, hyperinflation, devaluation, growing frustration at the political elite and desperation have contributed to a total chaos warlike state of affairs in Lebanon. Some are depicting the situation as much worse than during the 1975-90 civil war because what started off in 2019 as a financial crisis has evolved into a dangerous socio-political conflict with constant shortages of basic needs.

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