Changes to proposed sanctions on Hezbollah allay Lebanon’s fears

BEIRUT / Reuters

Proposed tighter US sanctions on Hezbollah have been altered enough to allay fears of major damage to Lebanon’s economy, a sign Washington is taking concerns about Lebanese stability seriously, banking and political sources said.
But banking figures told Reuters Lebanese authorities should not be complacent as US President Donald Trump’s future stance on Iran and its allies cannot be predicted, and the bill won’t be discussed and voted on until autumn when
Congress reconvenes.
When drafts said to be US plans for extended anti-Hezbollah legislation circulated in Lebanon earlier this year, local media warned of dire consequences for Lebanon’s fragile economy and fractious
sectarian politics.
The main concern for Lebanese authorities is that US correspondent banks – which face huge fines if found to be dealing with sanctioned people or companies – might deem Lebanese banks too risky to do business with. This would undermine the economy, which relies on dollar deposits transferred from expatriate Lebanese.
Lebanon’s government, central bank and private banks have lobbied US politicians and banks hard this year – and continue to do so – to persuade Washington to balance its tough anti-Hezbollah stance with the need to preserve stability.
Their main message has been that the last thing needed by the United States, which backs the Lebanese army in its fight against IS and other militants spilling over from Syria, is another failed state in the Middle East.
Their efforts may have worked. The draft law submitted to Congress in late July does not include the main elements that had caused what one banking source called “anxiety” in Beirut.
Financial sources told Reuters the proposed anti-Hezbollah legislation, when compared with earlier draft proposals, is more specific about who could be targeted, and is no longer seen as affecting the whole of Lebanon’s Shi’ite Muslim population.

IRAN-BACKED HEZBOLLAH A MAJOR FOE OF US
The powerful Iran-backed, Shi’ite Hezbollah is in Lebanon’s delicate, national unity government but classified as a terrorist group by Washington. US officials say Hezbollah is funded not just by Iran but by networks of Lebanese and international individuals and businesses.
The US Hezbollah International Financing Prevention Act of 2015 aimed to sever the group’s funding routes around the world, and in July Republican and Democratic US lawmakers proposed amendments to strengthen it.
Banking sources said the 2017 amendments do not significantly tighten the original legislation, the initial shock of which Lebanon has absorbed, and are unlikely to have a major impact if they become law. “So far Lebanese authorities have been successful in limiting the fallout of US sanctions on Lebanese banks,” said Mathias Angonin, an analyst at Moody’s rating agency.

LOBBYING
The amendments differ in key ways from draft plans believed to have originated with US lawmakers earlier this year. Banking and political sources attribute this to Beirut’s lobbying. “It is definitely toned down compared to the one we saw when we were there, so obviously our arguments have been taken into consideration … It is more targeted,” Yassine Jaber, a member of parliament who led a political delegation to Washington in mid-May after the drafts appeared, told Reuters.
Banks like sanctions regulations to be specific about targets to avoid unexpected fines and avoid excluding people from the banking system unnecessarily. Unlike the drafts, the amendments do not target the Shi’ite Amal movement of parliament speaker Nabih Berri for investigation, according to a publicly available copy of the legislation seen by Reuters.