Bank customers and Depositors Association members hold placards during a protest organized by the ‘Depositors’ Outcry’, a group campaigning for the rights of depositors, in Beirut, Lebanon, on Thursday Customers are angry over the continued restrictions that local banks have imposed on withdrawals and transfers since 2019. Photo by Wael Hamzeh/EPA
BEIRUT, Lebanon, Dec. 24 (UPI) — Once hailed as the “Switzerland of the Middle East,” Lebanon has undergone an infernal descent into deeply rooted corruption, financial collapse and state failure, suggesting that the country is governed by a unique model of “mini deep states” that have flourished under its sectarian and clientelist system, political and financial analysts said.
Endemic corruption, misgovernance, sectarianism, wars and political disputes have long fueled Lebanon’s multiple crises.
The 2019 financial collapse — described by the World Bank as a “deliberate depression” and the worst globally since 1850 — was the tipping point that revealed the country’s situation to be far worse than anyone had realized.
Six years later, the situation remains almost unchanged. No one has been charged or put on trial and no official has acknowledged responsibility for the crisis or the estimated $110 billion in bank deposits squandered under state mismanagement.
The first serious attempt to address the financial crisis came Friday, when Prime Minister Nawaf Salam’s government presented a draft law aimed at tackling the financial system’s huge funding gap and enable depositors to gradually regain access to their frozen savings — though probably not in full.
The draft law, yet to be debated and expected to be amended, was quickly met with opposition from the banks and depositors, arguing that its provisions are insufficient or unfair. Crucially, it fails to address corruption as the root cause of the crisis and provides no mechanism for accountability.
However, Lebanon’s problems extend far beyond the recent financial crisis, stemming from a corrupt and inept political elite whose sectarian and clientelist networks consistently put personal gain above the nation’s survival, analysts say.
One of the most striking examples of deliberate systemic failure is the chronic power shortages, which have forced most citizens to rely on private or neighborhood generators — run by what many describe as a “mafia” protected by influential political leaders — since the end of the 15-year civil war in 1990. This has created cumulative deficits of about $43 billion.
The same pattern applies to nearly every other sector and extends to the country’s political system, reflecting the reality that all major political forces have blocked meaningful change and prevented reforms for decades.
Despite their political divisions, these forces share common interests, effectively acting as a deep state rather than merely an elite sectarian cartel.
To Mohammad Fheili, a risk strategist and monetary economist, Lebanon is better understood as a system of “multiple, competing and at times cooperating mini-deep states operating within a consociational (power-sharing) confessional framework.”
Rather than a single hidden chain of command, power, Fheili notes, is distributed across overlapping circuits involving security services, the banking and financial sector, senior judges and prosecutors, and top public officials. These networks outlast governments and are bound together by mutual protection.
“Sectarianism is the main channel of organization and veto, but it is not the only engine,” he told UPI. “It provides quotas, patronage pipelines and narratives of legitimacy. However, the driving incentives are often clientelism, rent extraction, protection from prosecution and control of state resources.”
As a result, the same political establishment came to dominate legislation, government and the economy, with decisive influence over appointments, contracts and financial regulation.
Such a “deep state” is not a new phenomenon. Its roots can be traced back to Lebanon’s founding in 1943, when it developed alongside a “rentier economic model,” according to Makram Rabah, a political activist and history professor at the American University of Beirut.
While the civil war saw the rise of militia leaders who later became powerful political figures in peacetime, Rabah said that Syria’s military presence in Lebanon after 1990 introduced “a kind of dual system, in which local actors were allowed to benefit economically as long as Syria controlled foreign policy and security.”
“This is what gave the system its longevity,” he told UPI.
The civil war also normalized militia power, wartime political economy and impunity, Fheili noted, adding that the post-war order “recycled many wartime actors into peacetime governance through a spoils-and-veto arrangement rather than institutional reconstruction.”
A sectarian cartel, he said, then emerged, dividing ministries, contracts and regulatory favors –and transforming political competition into a struggle over access to the state.
The withdrawal of Syrian troops from Lebanon in 2005 — just a few months after the assassination of Prime Minister Rafik Hariri in Beirut — paved the way for Iran-backed Hezbollah to consolidate its control over the country.
Although the militant group has consistently denied involvement in Lebanon’s entrenched corruption — arguing that its funding from Iran is sufficient — experts contend that it nonetheless benefits from the country’s clientelist system, even operating a shadow parallel economy.
Lebanon’s financial collapse, Rabah argued, revealed Hezbollah as both a beneficiary of and a participant in the system, as many of its institutions faltered during the meltdown. Moreover, the perception that it relied solely on Iranian funding and was free from corruption has proven to be “a fallacy.”
With each sect — Muslims and Christians alike — protecting its own corrupt members, it became impossible to hold anyone accountable or bring them to justice. A few exceptions were recorded, but only because those arrested had lost the political protection of their patrons.
“There are many ministers and officials who are extremely corrupt, but no one dares to act against them, as they are protected by their sect and political leaders,” said Mohammad Chamseddine, policy research specialist at the Information International research and consultancy firm.
Although the Lebanese government adopted a new, anti-corruption law in 2020 and began work on a national anti-corruption strategy, he said these efforts failed to yield any results due to the prevailing sectarianism.
“Such an interaction of religion, politics and money is everywhere and consolidates corruption,” Chamseddine told UPI. “Only a real revolution — when people storm the houses and palaces of the corrupt and put them in jail — can change this.”
Lebanon’s losses from corruption and the deep state, accumulating since the 1990s, are difficult to estimate, exceeding tens of billions of U.S. dollars, according to Chamseddine.
However, dismantling the country’s “mini deep states” and eliminating corruption is possible –even if only partially — but it would require a long process of gradual, progressive steps, starting with an independent judiciary, the analysts said.
Would the disarming of Hezbollah, which was significantly weakened by Israel during last year’s war, be the starting point?
“It may open tactical space, but only if reforms target the entire ecosystem, not just Hezbollah or the banks,” Fheili said.