Kenneth Rijock

Kenneth Rijock

Sunday, January 4, 2015

SHOULD YOU REDLINE LEBANON IN 2015 FOR COUNTRY RISK ?


Things are not looking good for Lebanon in the coming year; a number of possible adverse events, any one of which could cripple the country's Beirut financial structure, loom menacingly on the horizon:

(1) the newly-appointed Chief of Staff of the Israeli armed forces has promised that, should Hezbollah again attack his country, that there will be a "disproportionate" response. He asserts that his military, should Israel receive missiles from towns in the Shiite south of Lebanon, will target the entire village, not just the launching point. This is a departure from previous policy. Additionally, he has promised to target Lebanese infrastructure immediately, meaning airports, seaports, telecommunication, transport,  and all key utilities, which will return Beirut, and indeed the entire country, to 1975. Other Israeli leaders bluntly threaten, should Hezbollah attack again, to conduct an air campaign that will essentially leave the country in ruins, not just the Hezbollah-dominated south.

(2) Hezbollah, which has lost a significant amount of prestige and status in the Arab world, by backing the Assad regime in Syria, may need to "redeem itself" with the Arab street, by initiating another military confrontation with Israel. Moreover, the combat experience that its troops have gained in Syria may embolden it to believe that it can inflict serious damage upon Israel proper this time, irrespective of the collateral damage to Lebanon. The result could be utter devastation in Beirut.

(3) Finally, ISIS/ISIL has promised to bring the bring the Syrian civil war to Lebanon; its leadership has acknowledged that it wants to hit Hezbollah there, and to establish operational base camps inside Lebanon.

If any one of the above occurs in 2015, Lebanon will cease to be an attraction for potential bank clients as well as investors, and those who are already exposed in Beirut will look immediately to cut their losses, and repatriate their assets from there. Country Risk then ascends to a level past which no risk is judged to be acceptable and prudent. You may want to reduce your risk before any of these untoward events occurs. 

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