The October 13 agreement by Lebanon and Israel to delineate the maritime boundary between the two countries was not an easy task to accomplish. Anybody who followed the process remembers U.S. envoy Frederick Hof’s efforts starting in 2011 and the subsequent “Hof line,” and many other such episodes before U.S. energy envoy Amos Hochstein’s successful mediation in recent days.
The obstacles were many. Lebanon does not formally recognize the existence of Israel, while Israel occupied southern Lebanon in 1978 and again from 1982 until 2000. Israel fought bloody wars in Lebanon in 1993 and 2006, and tension still often escalates between Hizballah and the Israeli armed forces.
In such a context, reaching an agreement between the two sides is a real challenge, not only because of the open hostilities, but also because each side’s negotiators have to worry about internal politics. In the case of Israel, the issue quickly became an electoral argument whereby former PM Benjamin Netanyahu seized the opportunity to accuse the government that succeeded him of giving into Hizballah’s blackmail.
By contrast, on the Lebanese side, the usually very fragmented political elite showed a significant amount of unity behind the deal, apart from a few experts voicing concerns that the deal gives Lebanon far less than the boundaries that were on the negotiating table following Israel’s 1982 invasion. This newfound Lebanese political unity comes from several motives. The first is that Hizballah itself, Israel’s deadliest enemy, had become supportive of the deal, thus leaving no room for outbidding.
The second motive is that Lebanon’s elites left their country in complete bankruptcy since the banking and monetary crisis that erupted in 2019, making sure that no reforms nor restructuring take place, no IMF deal is possible, and no bank resolution plan will be implemented. The purpose of leaving their own country in freefall is simply to maintain their grip on power, shift the banking system’s losses onto the Lebanese population through currency depreciation and haircuts on deposits, and avoid any loss to be taken by the political and financial heavyweights. Given this sad reality, the ruling clans’ alliance has a vested interest in selling the Lebanese people yet another illusion: that the gas will solve all of their problems. In other words, there is no need to change the elites, and no need for these elites to finally implement the many reforms that are badly needed–they just need to sit back and wait for the gas.
This mode of waiting for external rescue is not new to Lebanon. The same elites had previously declined to introduce any reform in the past, and have consistently bet on one single external event to deliver the solution to everything: the end of the civil war, the withdrawal of foreign occupying armies, a donors’ conference, an IMF deal (which the Lebanese political class sabotaged themselves), or any other item that releases them from their responsibility to act responsibly.
Regardless of the motives, Lebanon clearly gets some benefits from a maritime deal. The first positive point of the maritime boundary deal is the promise of de-escalation between Hizballah and Israel, as it would have been difficult to imagine the collapse of the talks without a hot confrontation between the two. Another positive aspect is that the absence of a deal, even an imperfect one, was creating a huge and mounting opportunity cost for Lebanese gas exploration, as the Lebanese have been missing out on the profits to be made in gas markets since the Ukraine war has disrupted the world’s normal gas supplies.
Nevertheless, there is a big asymmetry between the benefits the two sides stand to enjoy. The Israelis have already found – and extracted – significant amounts of gas, with Leviathan (623 billion cubic meters), Tamar (283 billion), and smaller fields, and they know what to expect from the Qarish field, which is now secured by the recent deal. International companies are already operating in Israel’s fields, their petroleum sector’s governance is in place, and they have deals with neighbors such as Egypt, Cyprus, and Jordan, whether for gas sales or optimizing gas transportation.
In Lebanon, however, the gas business is mostly about speculation. Apart from one trial by the Total–led consortium in 2020, which did not succeed in hitting a reservoir, no exploration work has been done. There are many contradicting estimates of Lebanon’s total reserves, anywhere between 340 and 708 billion cubic meters, with some estimates reaching 1,220 billion cubic meters. But the real challenge lies more in the inability of the Lebanese power structure to do the preparatory work upstream and downstream, including putting in place a proper governance of the revenues that can be outside the reach of the deeply-rooted system of corruption in Beirut; providing effective infrastructure at reasonable cost; optimizing the impact of any positive development on the labor market; establishing alliances and finalizing deals regarding sales and transportation; maximizing Lebanon’s share from the operations; succeeding in managing the potential revenue while avoiding further widening economic inequalities among Lebanese; and wisely using the hydrocarbon assets in the best interest of the Lebanese and of their future generations at the same time. These are all things that look highly unlikely in the present context in Beirut.
As a matter of fact, the survival of the deal may be threatened by Israeli internal politics, and could lead to complete disillusionment on the Lebanese side, where the elites are fueling very unrealistic expectations in terms of revenues—such as fantastical claims that there will be trillions of dollars forthcoming. Even in the very best case scenario explained in a study released a few months ago by the Lebanese Citizen Foundation, Lebanon can expect an annual peak of extraction of 15 billion cubic meters and an exploitation that could last 50 years, and self-sufficiency for about 35 years. This would of course be significant, but by no means a recipe to avoid the need for long-awaited reforms. Those who are being promised that bank deposits will be given back to their owners thanks to the gas extraction that will follow the deal, and those who believe they can have a better country without going through the hassle of reforms, may lose their illusions not too far from now. Of course, they will not be able to blame it on the maritime boundary deal, but they will realize that one perverse effect of the agreement was to allow insufferable elites to buy themselves a few more decades by dangling a gas paradise.
Alain Bifani is the former Director General of the Lebanese Ministry of Finance.