Israel's military campaign against Iran-backed Lebanese group Hezbollah honed in on a new target this week. Now, they are targeting to destroy its financial infrastructure.
On Sunday, Israel carried out air strikes in Beirut and elsewhere in Lebanon, targeting branches of Al-Qard Al-Hassan Association (AQAH), a financial institution and de facto bank linked to Hezbollah.
On Monday, Israel Defences Forces spokesman Daniel Hagari made a number of claims regarding the financing of Hezbollah and the reason for the strikes in a video message posted online.
He claimed Hezbollah had exploited Lebanon's "deep financial crisis" of recent years for its own gain and that its own financial network was based on two main sources of income: money from Iran and money from the Lebanese people, reports DW.
He said the Israeli strikes had targeted various sites associated with Al-Qard Al-Hassan but also claimed, without evidence, that Hezbollah was storing "hundreds of millions of dollars" in a bunker under a hospital in central Beirut.
What is Al-Qard Al-Hassan?
David Asher has advised the US government for years on money laundering and terrorism financing and was involved in previous US government campaigns targeting Hezbollah's financing. He described Al-Qard Al-Hassan to DW as "a savings and loan association, not a bank in a conventional sense."
Al-Qard Al-Hassan plays a key role in Lebanon for Hezbollah, according to Jonathan Lord, director of the Middle East Security Program at the Center for a New American Security, a think tank.
"They provide financial services," Lord told DW. "It's been a bit of a strategic competitive edge for Hezbollah in Lebanon because the traditional banking sector, particularly in the last few years, has become so fraught and challenging with Lebanon's corruption and just broader banking and economic woes."
Al-Qard Al-Hassan was set up in 1983 and is estimated to have around 30 branches. It is popular in areas where support for Hezbollah is traditionally strongest. However, since the mainstream Lebanese banking system partially collapsed as part of the wider financial crisis which beset the country in 2019, Al-Qard Al-Hassan has become more popular.
It is not regulated by the Lebanese central bank or part of the international banking system. It has been under US sanctions since 2007.
Where does Hezbollah get its money?
Daniel Hagari said in his video message that Hezbollah gets money from two main sources: Iran, and from the Lebanese people via financial and social services provided through Al-Qard Al-Hassan.
David Asher points out that "it's very difficult to target Al-Qard Al-Hassan alone because that's just a piece of the equation." He said that a major part of Al-Qard Al-Hassan's remit for Hezbollah is to pay the "rank and file" members and to offer various forms of social and financial services to the public.
He stressed that Hezbollah also uses the mainstream Lebanese banking system and that its wealth is spread out in various ways. He personally estimates that Hezbollah has an annual budget of "$12 to $15 billion [€11 billion to 13.9 billion] per year."
As for Israel's claim that much of Hezbollah's wealth comes from Iran, Jonathan Lord says this is undeniable, and Hezbollah literally exists as a compartment of Iran's Islamic Revolutionary Guard Corps. "If you look at Iran's order of battle, it counts Hezbollah as a component of its national defense infrastructure," he said, adding that this makes Israel's claim that Iran is directly funding Lebanon with money brought to its embassy in the country highly credible.
Asher noted that another huge source of wealth for Hezbollah is money from the proceeds of crime, such as drug trafficking and the blood-diamond trade. He said there is extensive evidence showing that Hezbollah raises money through crime networks throughout the world and then launders much of the money through ostensibly legitimate businesses, often in Europe.
He estimates that Iran provides up to half of Hezbollah's reserves, with a large chunk of the remaining 50% coming from the proceeds of illegal crime around the world.
How does all this affect the Lebanese economy?
Lebanon's economic situation has been routinely described by experts as catastrophic since 2019. Sanctions against Iran led to a severe liquidity crisis in Lebanon that year, which was made worse by the COVID-19 pandemic and the 2020 Beirut port explosion.
The country's currency and banking system collapsed, as did much of its public services. Its GDP has been almost halved. Up to 1 million people have been displaced in recent weeks by the bombing, around 20% of the total population of the country.
Will Israel's plan work?
Jonathan Lord says Israel's goal of targeting Hezbollah's financial infrastructure suggests "they are thinking differently" from previous campaigns. However, while it is clear that Israel is significantly hurting Hezbollah, there is a real risk of "mission creep," he added, where Lebanon and the fight against Hezbollah "becomes Israel's Vietnam."
David Asher believes that the Israeli strikes this week on sites associated with Al-Qard Al-Hassan and Hezbollah's financial structure "have taken out about 30% to 40% of Hezbollah's fungible cash."
At the same time, he maintains that Hezbollah still has a lot of wealth tied up in the mainstream Lebanese financial system and that Israel's current approach will be "unlikely to affect the revenue streams Hezbollah continues to obtain from Iran and its various illegal crime enterprises around the world."
Bd-pratidin English/Lutful Hoque
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