Expect Some Pushback Against U.S. Aid to Lebanon, Official Says

(Bloomberg) -- Some U.S. officials are questioning the wisdom of granting desperately needed economic aid to Lebanon now that it’s formed a government backed by the militant Hezbollah group and its allies, a top American diplomat said.

“There will be a robust debate, I’m sure,” U.S. Assistant Secretary of State for Near Eastern Affairs David Schenker said in an interview in Tel Aviv. “We will see where the government comes out on that but we are continuing aid. We think that the aid is well spent and it is not benefiting Hezbollah.”

Schenker, who was on a trip to Israel and Oman, said the money is crucial to fund counter-terrorism operations and alleviate rampant poverty, and that none of it would flow to Hezbollah, which the U.S. considers a terrorist organization. The Lebanese army has a good record of preventing security forces’ weapons from falling into Hezbollah’s hands, and has protected anti-government protesters from the group, he added.

Lebanon, one of the world’s most indebted nations, needs external aid to cope with an impending financial meltdown that has led banks to ration dollars and has fueled investor concern that the country could default on its upcoming debt payment in March. The previous government led by Saad Hariri failed to implement fiscal and structural reforms that were needed to unlock billions in donor aid. Russia has denied reports it’s considering financial support for the Arab nation.

Schenker said Lebanon’s economy is in even worse shape than thought, with foreign reserves “much lower than reported publicly, we believe.” U.S. Secretary of State Michael Pompeo personally intervened in December to order the release of about $115 million in economic aid to Lebanon that had been quietly held up for a month.

The U.S. has given more than $1.7 billion to Lebanon since 2006 in the form of security assistance, and billions more in humanitarian and education funding over the past decade, according to the State Department.

Hassan Diab, a former education minister, was named last month to form a new government to replace Hariri’s, which resigned in October under pressure from mounting anti-government protests. Diab announced a new lineup earlier in January, naming what he said were independent experts to address Lebanon’s worst economic and financial crisis in decades.

Political groups allied with the West declined to join his government, saying it was handpicked and approved by Hezbollah and its allies. The U.S. has targeted Hezbollah, an Iranian proxy group, as part of its offensive to isolate and weaken Tehran, primarily by imposing sanctions on its critical oil exports.

Against this background, “certainly there are detractors in the United States government, in the Congress, of the funding program,” Schenker said.

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