During the past month, deadly sectarian violence related to the Syrian conflict, has emerged in Lebanon. Mid-August, a number of people, including foreigners, were kidnapped by a powerful Lebanese Shia clan upon the capture of one of its members by rebels in Syria. This prompted the governments of Saudi Arabia, the United Arab Emirates, Qatar and Kuwait to advise their citizens to leave the country. Only one week later, deadly sectarian fighting broke out between Alawites (the religious sect Syrian President Assad belongs to) and Sunnis (who form the majority of the population and the rebels in Syria) in the northern city of Tripoli. At the same time, the Lebanese government is also confronted with regular protests against electricity shortages and poor public services.

Impact on country risk

Taking into account the influence of Syria in Lebanon and the fragile political, ethnic and religious composition of the country, the situation in Lebanon had remained remarkably stable until recently. The start of the spill-over of violence from Syria will complicate the functioning of the Lebanese government, which finds itself in an uncomfortable position, being supported by the powerful Hezbollah, itself a traditional ally of Syria’s President Assad. While Lebanon has overcome several crisis situations in the past, the current situation does not bode well in the absence of a resolution to the Syrian crisis. Increased instability and insecurity and the negative travel advice issued by countries in the region will negatively impact the already underperforming tourism sector and will likely further weigh on economic performance. A reassuring outcome of the ‘National Dialogue’, which restarted in June after 18 months, could however help by providing some easing of sectarian tensions.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com