OA: "The outlook for Lebanon in 2009"

OXFORD ANALYTICA (Excerpts)
After a brief but painful test of strength ended the political deadlock, Lebanon has experienced a period of stability, progress, and attempts at reconciliation. However, 2009 will bring a number of new and potentially destabilising challenges, most notably parliamentary elections in May.
The violence of May 2008 paved the way for a measure of political stability and policy progress to return to Lebanon after more than two years of absolute political deadlock; the rapid success of Hizbollah and its allies in seizing strategic areas of Beirut and routing March 14-backed militias, together with the inaction of the army and state security forces, deflated the expectations of the pro-Western alliance and facilitated the Doha compromise. Political conflicts between various parties and sects continue to complicate many important policy issues. Still, the national unity government has resumed a degree of law making, largely absent during the deadlock of 2006-08.
The lull is widely expected to last until early 2009, when politicians start jostling for position ahead of the parliamentary elections scheduled for May. Political agenda. In 2009, a number of issues are likely to dominate the political agenda:
1.Christian competition. Christian votes are likely to determine whether or not the ruling March 14 coalition keeps its majority in parliament. Recent attempts to kick start a reconciliation process between the Lebanese Forces, led by former militia leader Samir Geagea, on the one hand and Maronite scion Suleiman Franjieh and Free Nationalist Party head Michel Aoun on the other have produced few results. Conflicts run deep and in some cases go back decades, and Christian reconciliation in 2009 is unlikely. Instead, competition within the community will likely intensify in the run up to elections. Key allies of Aoun in the 2005 parliamentary elections, including the influential Greek Orthodox leader Michel Murr, have suggested that they may decide against Aoun this time.

2.Presidential power. President Michel Suleiman will attract support from a wide range of politicians, consolidating his position as a new power centre in Lebanese politics. His electoral block is likely to be of crucial importance for the elections and the next government. If, as appears likely, he chooses to continue his centrist strategies, the result of the elections could be the persistence of a broad, but essentially divided and weak, unity government.
3.Hizbollah's weapons. The Doha Accord condoned Hizbollah's status as a "national defence force." This vague formulation was little more than a diplomatic phrase designed to buy time, and the fundamental dispute remains. If the opposition alliance comes to power in the wake of elections, progress is possible along the lines of a 'national defence strategy' that would seek to integrate Hizbollah's armed wing into the broader military structure, placing many of the organisation's capabilities under a more regularised chain of command. At the same time, Hizbollah would gain considerable influence over national foreign and defence policy. If the elections swing in favour of March 14, the government is likely to use UN Security Council Resolution 1559, which calls for the disarmament of all armed groups in Lebanon, to exert increased pressure on Hizbollah. However, an electoral defeat would likely decrease Hizbollah's willingness to renegotiate its status as armed group; political power is the only incentive likely to entice the group to surrender its military edge. Absent drastic changes in regional politics, the government will not be able to force Hizbollah into submission.
4.US rapprochement with Syria. New US President-elect Barack Obama brings with him a team of Middle East advisors favouring dialogue with Syria; despite the recent US raid on a border town, a rapprochement early in 2009 is very likely. Syria has already restored good relations with a number of countries in Europe and the Middle East in 2008. The Obama administration will demand a firm Syrian commitment to the independence of Lebanon, in line with Damascus' decision in 2008 to establish diplomatic relations with Lebanon for the first time since independence US endorsement of this process could bolster reconciliation between the March 14 coalition and Syria.

(Interior Minister Baroud & Generals Jizzini & Rifi (Future Bloc) in Damascus!)

The United States will likely prompt Syria to cut its support for Hizbollah. Such a step would run contrary to Syrian instincts, considering the strategic importance of Hizbollah as an ally and the popularity of the group in Syria. More likely, Syria would serve as a bridge for the US administration to encourage Hizbollah's integration into Lebanese politics and disentanglement from conflict with Israel.
5.Security challenges. Tensions in the South between Hizbollah and the Israeli Defence Forces remain the most serious security challenge for Lebanon. Since 2006, Hizbollah has drastically expanded both its arsenal of medium and long-range rockets and its ground forces, promising new surprises in any future war. A flare-up of the conflict is a possibility in 2009, particularly in the context of Hizbollah's stated determination to avenge the assassination of its senior commander, Imad Mughniyeh, in Damascus in February 2008. The government and the Sunni political class have recently stepped up their efforts to contain Sunni fundamentalist groups in northern Lebanon and the Bekaa Valley. US-Syria rapprochement would create an environment conducive to an understanding between Alawite and Sunni groups in and around Tripoli, which engaged in repeated clashes in 2008. However, the possibility of isolated jihadist attacks remains high.
6.Economic outlook. The IMF and other analysts have forecast Lebanon's 2008 real GDP growth rate of 4-5% to continue into 2009. The positive outlook reflects confidence in political stability after the Doha Accord, and an expectation that Lebanon's economy will not be severely affected by the global credit crunch, as no Lebanese banks made substantial investments in US sub-prime mortgages. However, expatriate remittances and foreign investment in Lebanon, which increased in 2008, could be hit by falling oil prices. Despite agreeing in principle on the need for economic reform, the unity government has not reached a consensus over how best to address the severe imbalances in Lebanon's fiscal account. The unity government lacks the mandate to implement economic reform programmes needed to release loans and assistance packages promised at the Paris III meeting in 2007. As a result, Lebanon's public debt, which now stands at more than 45.5 billion dollars, will increase in 2009.
CONCLUSION: Increased tensions before and during the parliamentary elections seem unavoidable. However, a new US understanding with Syria may ease divisions. Stability, jeopardised by the dangerous regional environment, is critical for Lebanon to begin to address its serious economic problems.