August 05, 2010

Even though tension has been running high in the region and talk of a possible "third Lebanon war" by Israel has increased in the past weeks, nevertheless, the lethal skirmish on the Lebanese-Israel borders on August 3 between Israeli Defense Forces (IDF) and Lebanese Armed Forces (LAF) has taken many analysts and officials by surprise due to its abruptness, intensity and nature of the players.  For the past four years Israeli officials have been systematically mobilizing public opinion locally and internationally about the danger of Hizbullah and how the pro-Iranian group has been undermining the Lebanese State.  But the recent incident was not with Hizbullah but with the LAF, the Lebanese legitimate military force, which the United States and its Western and Arab allies have spent hundreds of millions of dollars to equip and train to spread state authority, protect national sovereignty, combat terrorism and one day disarm all armed groups.  Israeli daily incursions of the air, land and sea borders, which have been frequently reported over the past few years by the United Nations Interim Force in Lebanon (UNIFIL), undermine the LAF image and build Hizbullah's case as a resistance force that Lebanon needs to have to provide backing to the weak regular Lebanese troops who cannot stand up against the IDF's almost daily breaches of national sovereignty.

Israel has always given itself an excuse to justify its daily incursions of Lebanese airspace or waters or land.  It never withdrew from Lebanese territories as called for by United Nations Resolution 1701, and refused to adhere to many calls and attempts by U.S. and European officials to pull out from the Lebanese territories of Gajar, Shebaa Farms and Kfar Shouba Hills in order to strengthen the political camp of the Western-backed Lebanese Prime Minister Saad Hariri by stripping Hizbullah of its main argument for bearing arms, which is to liberate land occupied by Israel.  With a weak government shared by Iranian and Syrian backed parties including Hizbullah, Western and Arab allies have found in the LAF the main institution worth investing in to maintain Lebanese national unity and sovereignty until the day it is powerful enough to disband all illegal militias and be the only armed force in the country.

The latest Israeli action contradicts with plans of the international community and even more threatens one of the main forces that have fought epic battles against dangerous Islamic terrorists who were en route to Iraq to kill U.S. troops and innocent Iraqi civilians.  The LAF lost 241 troops in 2007 in fierce battles with Al-Qaeda-affiliated Fatah Al-Islam extremist terrorists in the Palestinian Nahr al-Bared refugee camp in northern Lebanon.  Since then the LAF have apprehended and eliminated several Al-Qaeda activists who were plotting for attacks on Western and Arab targets in the region.  The Israeli government is now urging the U.S., France and other Western countries to stop military aid to the LAF and jeopardize anti-terrorism war efforts and undermine Lebanon's future just because Lebanese troops dared to exercise their right of protecting their borders against daily Israeli incursions.

Israel has also claimed that Hizbullah has infiltrated Lebanese troops and were the ones instigating the fight on August 3^rd.  However, one of the LAF fatalities was a Christian soldier, an unlikely recruit for Hizbullah.  His predominantly Christian village of Maghdoushe in south Lebanon has over night became  a strong anti-Israeli town and a Hizbullah sympathizer.  One positive element from the gunfight was that the pro-Western March 14 Forces used the incident as a proof that the LAF, despite the mismatch with mighty IDF, can stand up for Israel and hence there is no need for Hizbullah's armed resistance.  The August 3 incident has unified all Lebanese against Israel as an enemy because the IDF attacked their only remaining national unity symbol:  the LAF.  Reading local press and watching evening news in the day after the incident one gets the sense that Lebanese who have an issue with Hizbullah bearing arms were ready to reconsider this issue.

Commenting on Israeli claims that  weapons sent to LAF were being passed on to Hizbullah a senior LAF official said:  "All investigations by U.S. military officials over the past years have conclude that every piece of hardware given by the United States to Lebanon since the 1980's was accounted for and nothing was missing.  Hence claims of LAF giving weapons to Hizbullah or other groups were proven as lies."  He added that "Hizbullah already gets far more advanced and superior weapons from its own sources, and the group does not need the LAF for anything."  The senior LAF official pointed out that international efforts were aimed at making LAF catch up with Hizbullah and become better armed, "but all efforts were hampered and slowed down by the Israeli lobby in Washington and Europe."  The official reminded the West that "if it wasn't for the LAF, northern Lebanon would have been an Al-Qaeda stronghold, while its other half of Lebanon a failed state fully controlled by the Iranian axis."

Talking to a group of LAF generals, most of them Christians, they shared a common view that the recent incident with Israel, although not intended or planned by the Lebanese, "was certainly a message the Israelis and the world must take note of, and that is the LAF is determined to carry out its full mission and that is to protect national sovereignty against all threats including Israel."  They added:  "If being an ally of the West and accepting assistance from the U.S. means we only fight Western enemies and allow Israel to breach and violate our sovereignty which would weaken the State's authority and tarnish LAF's image locally and undermine the troops' morale, then the West is pursuing a failing policy that would have disastrous consequences on Lebanon and the region, including Israel."  Establishing a strong Lebanese State with a powerful LAF that can defeat terrorists and spread authority on all the country's territories is the only way to bring about a Lebanese government capable of one day signing a peace treaty with Israel as part of a comprehensive peace settlement for the Middle East conflict.  Adhering to Israeli regular policies that rely on superior military technology and bullying to achieve deterrence in order to resolve political problems has proven disastrous to U.S. foreign policy in the region over and over again.

Any party interested in publishing or quoting this study is welcomed to do so but with the condition of giving full attribution to the author and INEGMA.  All Copy Rights reserved.

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LEBANON CENTRAL BANK CHIEF GOT IT RIGHT

By Borzou Daragahi

February 21, 2009

Riad Toufic Salame bucked pressure in 2005 and kept Lebanese banks from investing in mortgage-backed securities. Now the sector is prospering amid the global downturn.

Reporting from Beirut - Throughout history, men braved the odds to perform great feats. Outmatched generals snatched victory from the jaws of defeat. Titans of industry gambled on bold innovations to reap jackpots. Athletes tested the limits of human endurance in quests for glory.

Riad Toufic Salame, the governor of Lebanon's central bank, is not one of those men.

Instead, the silver-haired banker became a hero by playing it very, very safe. In 2005, he defied pressure from the Lebanese business community and bucked international trends to issue what now looks like a prophetic decree: a blanket order barring any bank in his country from investing in mortgage-backed securities, which contributed to the most dramatic collapse of financial institutions since the Great Depression.

So as major banks in America and Europe were shuttered or partly nationalized and thousands of people in the U.S. financial sector were laid off, Lebanon's banks had one of their best years ever.

Billions in cash continue to pour in to the relative safety of Lebanese savings accounts, with comfy but not extravagant yields of 6%. A nation shunned for years as the quintessential failed state has become a pretty safe bet, or as safe a bet as investors are likely to find in this climate.

"Being able to survive and to do well in this crisis," Salame said, savoring a deep sigh. "I can tell you I was proud of this achievement."

Most outsiders associate Lebanon with one of two extremes: machine-gun-wielding militants in fatigues firing weapons into the air or scantily clad merrymakers downing cocktails until dawn.

But a more sedate and moderate segment of the Lebanese population has also emerged from the political and economic wreckage of the last few decades. They are engineers and dentists, lawyers and bankers. They envision their country as neither hedonistic nirvana nor capital of mayhem, but as a safe harbor for low-key, middle-class ambitions. They have begun to quietly assert themselves.

Salame, who is Lebanon's equivalent of the Federal Reserve chairman, exemplifies such geeks. He toiled for nearly two decades as an investment banker at Merrill Lynch before taking over as central bank governor 15 years ago. He's a man of few extravagances, indulging in pricey Cuban cigars he pulls out of a wooden humidor in his spacious office. Unlike most Lebanese bigwigs, he drives himself to work, albeit in an armored BMW.

The country's bankers adore him, speaking of him in glowing terms. He was once short-listed as a potential candidate for Lebanon's presidency, a post that traditionally goes to members of his Christian Maronite community.

"We are very proud of him," said Nassib Ghobril, head of research at Lebanon's Byblos Bank. "He's a very smart guy, and the regulations of the banking sector here have been kept up to international standards. It's very tightly regulated."

In a country known for windbag politicians prone to soaring oratory, Salame favors mundane technical facts as he describes the effort of growing Lebanon's banking sector from $7 billion in assets in the early 1990s to $91 billion today.

That meant tightening regulations and banking requirements so much that 35 banks were driven out of business. They just couldn't meet Salame's conservative balance-sheet requirements, including a rule that bars banks from lending more than 70% of deposits.

It meant changing transparency rules to do away with Lebanon's reputation as a money-laundering hub.

And it meant resisting temptation for easy money.

"We had criticism and some were saying that Lebanon could have bigger growth in its economy if there was not such regulation for credit," Salame recalled. "We were criticized for putting too much regulation."

When the real estate boom crested this decade and investors began bundling debt into nebulous financial instruments fueled by easy credit, the pressure was on for Salame to let banks take advantage of the high yields.

But Salame steadfastly refused.

He says the mortgage-backed securities worried him from the start. He watched curiously as investment bankers engaged in what he calls "rituals" to please the credit ratings agencies and got back such safe assessments of their products. He didn't get it. Why were these considered safe investments? They were just too complicated. They went against a major tradition in Lebanese and Middle Eastern banking: Know to whom you're fronting cash and who's going to pay you back.

"We could not really sense who would be responsible in the end to collect these loans," he said. "And we do not perceive banking as being a place to speculate on financial instruments that are not really concrete."

He felt vindicated when he received a call from abroad last year after the collapse of Lehman Bros. It was a super-rich Lebanese investor living overseas.

"He was always skeptical about the stability here," Salame recalled. "But he told me, 'I sent all my money to Beirut now to the banks. You were right.' "

daragahi@latimes.com