Israel’s neighbor to the north, Lebanon, continues its constant economic decline, or as AMN defines it – it “continues to collapse forever”. The population is finding it difficult to survive, and one of the ways to deal with the crisis is the phenomenon of dollarization.
The Lebanese pound has been in the process of collapsing since 2019. Until the beginning of the fall, the central bank held the currency at a fixed rate of 1,500 lira to the dollar, although the rate on the black market was different. Whereas today, three years after the beginning of the collapse – the exchange rate of the pound has reached 35 thousand pounds to the dollar.
This crash, of course, affects prices – and many residents switch to paying in dollars. So, for example, rent for a two-room apartment in Beirut comes to about 170-200 dollars. However, it is not just about real estate. The dollar is used as a currency for every purchase: in the grocery store, the pharmacy, and at the gas stations. Many stores display the products at dollar prices, instead of changing the price every two days, in accordance with the decrease in the value of the pound and inflation that reached an annual rate last July of 168.45%. In Lebanon’s extraordinary reality, this is the lowest annual rate since 144.12% in September last year.
Patrick Maldini, the president of the Lebanese Institute for Market Research, said that the switch to the dollar helps businesses and companies deal with the currency problem, and that many of them switch to paying salaries in dollars. Paradoxically, according to him, even the state and government authorities have switched to receiving payments and paying in dollars. This is the way in which the institutions of the collapsing state are dealing with the crisis which has resulted in the fact that, according to World Bank data, 82% of Lebanese citizens face substantial poverty. The fatal connection between the soaring inflation and the crash of the pound has led to the fact that close to half of the residents live in a state of distinct food insecurity. Beyond that, the economy contracted by 58% in the last five years.
The political crisis has also not yet been resolved. Prime Minister Najib Mikati holds a temporary position, at least until a president is appointed with the expected departure of Michel Aoun in a month and a half. Therefore, solving the issue of the maritime border with Israel seems like a small hope in the black Lebanese horizon. The assumption is that the development of the gas fields in the economic waters in the eastern Mediterranean will result in early royalties to be paid by the energy companies that own the concessions.
The production at Karish is expected to start within 3 weeks
And what is happening in the negotiations with Israel? Within three weeks at the most, the Energian gas company is expected to start producing gas from the Harish reservoir. The company says that the technical preparations are being completed, and the CEO and owner Matthews Rigas is expected to arrive in Israel in preparation for the start of production. This is happening simultaneously with the progress, according to various sources in Lebanon, Israel and the USA, in the negotiations between Jerusalem and Beirut on determining the economic water border between the countries. According to estimates, the agreement may be signed in the coming weeks, but it is not at all certain that the agreements will be reached and signed before the start of production at Karish.
The contiguity of the events is not accidental. All parties want to see such an agreement completed, to prevent a military flare-up between Israel and Hezbollah, whose leader Hassan Nasrallah threatens that they will not allow the production of gas from Karish “before Lebanon receives its full rights to the reserves.” The threats extended beyond the shark, to the other reservoirs as well, but in the meantime, two of the ultimatum dates set by Hezbollah had expired.
The American broker Amos Hochstein is expected to arrive in France, where he will meet with the heads of the Total Energy Company, which owns the drilling concession in the reservoirs in Lebanon’s economic waters – including the Cana/Sidon field. This field is at the center of the dispute over the maritime border, as it passes through the economic waters of Lebanon, the area of dispute between the countries, as well as the economic waters of Israel.
As already published in Globes, it was proposed that Total would receive the full concession to produce gas from Hamel Cane/Sidon, and Israel would receive its share of the profits, if any. According to the reports and sources, there is probably a solution to the division of the field area. Regarding the rest of the area of dispute, there is one outline that is probably on the way to closure and it is not a straight line, but a kind of “zigzag” as defined by Lebanese Foreign Minister Abdullah Bou Habib last week.
860 square kilometers of dispute between Israel and Lebanon
Additional sections deal with the guarantee of maintaining the security of the gas rigs and determining the distances of the location of the rigs from the line of the border of the economic waters. The 860 square kilometers of the disputed maritime triangle are to be divided between the two countries according to the line at issue. After his visit to France, Hochstein is expected to return to a hopping trip between Beirut and Jerusalem, to summarize the full details – and these will be brought to a final conclusion between the two countries in Nakura.
If an agreement is reached, a joint signature by the representatives of the two countries is not expected, but a separate signature by a clerical level in the presence of the United Nations and the Americans. This is to avoid giving political value to the agreement. The hope in Lebanon is that after the signing, “Total” will immediately begin searches in Kenna/ Sidon and other fields, and that more energy companies will join soon – due to the large gas discoveries in the eastern Mediterranean and the critical need in Europe for an alternative to Russian gas. The assessment in Israel is that even if an agreement is signed in the coming weeks, Hezbollah is not expected to carry out a significant attack. Nevertheless, minimal action may be carried out, or activating other organizations that will launch rockets at Israel. If Israel and Lebanon fail to reach an agreement, the likelihood of escalation will increase.
Prof. Shaul Horev, head of the Center for Maritime Policy and Strategy Research at the University of Haifa, says that the Americans and France have an interest in the issue of the maritime border being resolved, while Iran is trying to sabotage the negotiations through Hezbollah. Yes – only on the scale of an alligator and a shark. Regarding the emerging agreement, he added that there is a problem concerning the starting point on the coast. However, it is estimated that the outline, which will establish reference points along the dispute triangle, provides an answer to all disputes.