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Trump’s sanctions on Iran are hitting Hezbollah, and it hurts

Hezbollah leader Hasan Nasrallah speaks at a rally marking the 40th anniversary of Iran’s Islamic Revolution, in February. The militia has long relied on financing from Iran. (Hussein Malla/AP)

BEIRUT — The powerful Lebanese Hezbollah militia has thrived for decades on generous cash handouts from Iran, spending lavishly on benefits for its fighters, funding social services for its constituents and accumulating a formidable arsenal that has helped make the group a significant regional force, with troops in Syria and Iraq.

But since President Trump introduced sweeping new restrictions on trade with Iran last year, raising tensions with Tehran that reached a crescendo in recent days, Iran’s ability to finance allies such as Hezbollah has been curtailed. Hezbollah, the best funded and most senior of Tehran’s proxies, has seen a sharp fall in its revenue and is being forced to make draconian cuts to its spending, according to Hezbollah officials, members and supporters. 

Fighters are being furloughed or assigned to the reserves, where they receive lower salaries or no pay at all, said a Hezbollah employee with one of the group’s administrative units. Many of them are being withdrawn from Syria, where the militia has played an instrumental role in fighting on behalf of President Bashar al-Assad and ensuring his survival. 

Programs on Hezbollah’s television station Al-Manar have been canceled and their staff laid off, according to another Hezbollah insider. The once ample spending programs that underpinned the group’s support among Lebanon’s historically impoverished Shiite community have been slashed, including the supply of free medicines and even groceries to fighters, employees and their families. 

Secretary of State Mike Pompeo spoke to reporters April 22 about eliminating waivers that allowed exceptions on purchasing oil from Iran. (Video: The Washington Post)

The sanctions imposed late last year by Trump after he withdrew from the landmark nuclear deal aimed at curbing Iran’s nuclear ambitions are far more draconian than those that helped bring Iran to the negotiating table under the Obama administration, and they are having a profound effect on the Iranian economy, analysts say.

Trump administration officials claim they have wiped $10 billion from Iranian revenue since November, inflicting widespread misery on the lives of many poor Iranians, as well as the government’s own spending.

The tensions between Washington and Tehran spiked after further restrictions went into effect on May 2, eliminating waivers from eight countries that had previously been allowed to continue importing Iranian oil with the goal, U.S. officials say, of reducing Iranian oil exports to “zero.” 

Many in the region say the ferocity of the sanctions offers an incentive to Tehran to push back against Washington, crossing a “red line” that will give Iran little choice but to retaliate, according to Kamal Wazne, a Beirut-based political analyst who is sympathetic to the Iranian and Hezbollah point of view. 

“The Iranians are used to sanctions. But this level of sanctions will generate a different response. The Iranians will not be quiet about it,” he said. “They are a form of war more detrimental than actual war. . . . It’s the slow death of a country, the government and its people.”

Although it is too early to confirm that Iran was responsible for the sabotage attack on four oil tankers near the Persian Gulf in the past week, as U.S. officials claim, “Iran has a major incentive to put the squeeze also on the U.S. economy by making the price of oil jump,” he said. “The pain will be reciprocated.”

The austerity measures adopted by Hezbollah offer one indication of the breadth of their impact, not only on Iran’s economy but also on its capacity to support its regional proxies.

A senior Hezbollah official, who spoke on the condition of anonymity in accordance with the group’s rules governing interactions with the media, acknowledged that income from Iran has fallen, obliging Hezbollah to cut its expenditures. “There is no doubt these sanctions have had a negative impact,” said the official. “But ultimately, sanctions are a component of war, and we are going to confront them in this context.”

Hezbollah is also grappling with a separate set of sanctions directed at companies, individuals and banks that do business with the group, which the United States designated as a terrorist organization after suicide bombings and kidnappings aimed at Americans in Lebanon in the 1980s. But Iran sanctions have had the biggest impact on the group’s funding, the official said.

The official would not say how much Iran has cut its financing for Hezbollah or how big it used to be. U.S. Special Envoy Brian Hook told reporters in Washington in April that Iran in the past has sent Hezbollah up to $700 million a year, accounting for 70 percent of the group’s revenue.

But Hezbollah has other sources of income and plans aggressively to seek out more, hoping to “turn this threat into an opportunity” to develop new revenue streams, the official said.

Those Hezbollah officials and full-time fighters who are still on the payroll are receiving their salaries, but benefits for expenses such as meals, gas and transportation have been canceled, according to another Hezbollah insider, who, like all the Hezbollah members and supporters interviewed, spoke on the condition of anonymity because of the sensitivity of the subject. 

The families of Hezbollah’s “martyrs,” those who have died fighting for the militia in Syria and previously in wars with Israel, are also continuing to receive full stipends. The payments are considered sacrosanct and essential if Hezbollah is to sustain its effectiveness as a fighting force, drawing loyal and die-hard recruits, Hezbollah officials say. 

Hezbollah has meanwhile embarked on a major campaign to compensate for the shortfall in Iranian funding by soliciting donations. The drive appears intended to rally supporters behind the group, but it also draws attention to its financial difficulties.

Since Hezbollah leader Hasan Nasrallah urged followers in a speech in March to contribute to what he called “a jihad of money,” donation boxes have proliferated on the streets of Hezbollah-loyalist areas and beyond, carrying exhortations such as “Charity averts catastrophe.”

Pickup trucks with loudspeakers tour the streets of Lebanon’s Hezbollah-controlled Dahiya neighborhood, south of Beirut, with plastic boxes on their hoods, into which people are encouraged to deposit cash. Billboards have been erected along the road to the airport urging citizens to contribute to Hezbollah-run charities, and videos posted on the pages of Hezbollah-affiliated social media sites remind citizens of their “religious duty” to contribute to needy people.

The Hezbollah official insisted that the cutbacks have had no impact on the group’s standing in the Middle East or its military preparedness. 

“We are still getting arms from Iran. We are still ready to confront Israel. Our role in Iraq and Syria remains. There is no person in Hezbollah who left because they didn’t get their salary, and the social services have not stopped,” he said.

The sanctions “won’t last forever,” he predicted. “Just as we were able to win militarily in Syria and Iraq, we will be victorious in this war, too.” 

But Hezbollah is suffering, at least indirectly, from the separate sanctions aimed at the group’s activities, analysts say. Hezbollah has for years solicited donations from wealthy business executives, in Lebanon and abroad, but the sanctions serve as a deterrent to them, said Hanin Ghaddar, who researches Hezbollah at the Washington Institute for Near East Policy.

The sanctions also deter companies and government agencies from doing business with the expansive network of Hezbollah companies and contractors that has arisen in tandem with the group’s political and military apparatus, according to Sami Nader, director of the Levant Institute for Strategic Affairs.

The cutbacks in Iranian contributions further coincide with a sharp downturn in the Lebanese economy. The recession is afflicting an extensive network of Hezbollah-affiliated companies whose activities help support the group, and Hezbollah’s ordinary Lebanese constituents, whose incomes and businesses are suffering. 

Although the sanctions appear to be working from the U.S. point of view, there is growing concern that the pain being inflicted on ordinary people, including within Iran, will further destabilize the already violence-racked region, heighten anti-American sentiments and increase pressure on Iran to retaliate.

“The issue today is: What will be the price of continuing the sanctions and what will the collateral damage be?” Nader said. “There will be a lot of instability and hardship, and there could even be a new conflict.”

Hezbollah’s strategy is to identify alternative sources of income while riding out the Trump administration’s anti-Iran campaign, said Mohammed Obeid, a Beirut-based political analyst who is close to the group. Hezbollah recognizes that Trump may be in office until 2024 and is taking a long-term view, seeking out extra sources of revenue while reviving former ones, he said. 

In the meantime, Iran will also try to secure new sources of funding. “Iran will go back to their old ways from before the [nuclear] accord, to the black market,” he said. “They have many alternatives for smuggling oil, through Iraq, through Pakistan, through Oman, through Afghanistan and even through Dubai.”

For Hezbollah, it is nonetheless a sobering moment after a string of successes.

Founded by the Iranian Revolutionary Guard Corps in the 1980s as a shadowy guerrilla force dedicated to ejecting the Israeli troops who were then occupying Lebanon, Hezbollah has become the prototype for Iran’s subsequent proxy forces in the region. Its affiliate, Islamic Jihad, drove Americans out of much of Beirut by conducting suicide attacks against the U.S. Embassy and Marine barracks and kidnapping American citizens, a model Iran might now follow elsewhere in the Middle East.

Hezbollah has since expanded to become a major regional power — with too much to lose by provoking conflict in Lebanon, many analysts say. 

If a regional conflict were to erupt, Hezbollah could become one of Iran’s most feared assets, with its stockpile of tens of thousands of rockets and its highly disciplined fighting force extending Iran’s reach to the shores of the Mediterranean and to the borders of its arch enemy, Israel. 

The group is also now the single most influential force in Lebanese politics, with seats in the parliament and ministries in the cabinet.

All the while, Hezbollah has relied overwhelmingly on Iranian largesse. In a speech in 2016 seeking to dispel concerns that the war in Syria would bleed Hezbollah’s revenue, Nasrallah assured his followers that Hezbollah had secured “all” of its funding from Iran. 

“As long as Iran has money, we have money,” he said.

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