Will lifting of nuclear sanctions on Iran help cash-strapped Hezbollah?

One expected beneficiary of the lifting of financial sanctions on Iran that accompanied last year’s nuclear deal is Tehran’s long-standing client in Lebanon, Hezbollah.

The militant Shiite organization, whose finances are a tightly guarded secret, lately has been feeling a financial squeeze, according to a Hezbollah official and sources close to the group.

One reason has been Iran’s own financial burden resulting from the sanctions, low oil prices, and the billions of dollars it has spent to prop up its besieged Syrian ally, President Bashar al-Assad.

But any relief coming from Iran will only partly address the welfare of Hezbollah, which has to foot the bill for its own, large, ongoing military activities in Syria and which is facing a renewed clampdown on its finances from the United States.

According to analysts, such funding from Iran is likely to go first toward sustaining Hezbollah’s pro-Assad operations and then toward shoring up the vital support of its Shiite base in Lebanon.

“In the short-term, their top priority is to make sure they can conduct the war in Syria. Second priority is to make sure their social welfare facilities and salaries are taken care of,” says Randa Slim, a Hezbollah expert with the Middle East Institute in Washington.

“As more Hezbollah fighters die in Syria,” she says, “Hezbollah is committed to be supporting their families, including their parents, their spouses, and their kids' education for a long time. That is part of the contract Hezbollah has always had with its military cadres, and Hezbollah has always felt morally obligated to fulfill their part of the contract.”

The amount of Iran’s support for Hezbollah is unknown, though estimates in the last decade have ranged from $60 million to $200 million per year.

US targets banking

Even as the sanctions against Iran have eased, the US has ratcheted up pressure on Hezbollah by adopting new legislation designed to shut off the party’s ability to use the global banking system. The Hezbollah International Financing Prevention Act (HIFPA), which was signed into law in December, expands upon previous anti-Hezbollah legislation by threatening to sanction any individual or entity that engages in financial dealings with the Lebanese party.

The Act’s direct impact is expected to be limited, however, as Hezbollah is widely believed to transfer funds via couriers. One such alleged courier, a Lebanese traveling on a Ghanaian passport, was arrested last week in Panama carrying $500,000 in cash.

“With the Iran deal in place, Hezbollah will surely see a boost in funding from Iran, and those funds are likely to be delivered through front companies and cut outs, or delivered in cash,” says Matthew Levitt, a counterterrorism and intelligence expert at the Washington Institute for Near East policy and author of “Hezbollah: The Global Footprint of Lebanon’s Party of God.”

HIFPA “may complicate some of those transfers, but it will not stop them,” Mr. Levitt added.

Nevertheless, the act places pressure on Lebanese banks to closely screen any financial activity in case it can be traced to Hezbollah, even though the party is a legitimate player in Lebanon with representation in the government and parliament.

No military option

Days after the anti-Hezbollah act became law, Hezbollah leader Sheikh Hassan Nasrallah denied that his organization held bank accounts or used banks to transfer money. Therefore, he said, “there is no need for either the Lebanese central bank or any Lebanese banks to feel fear of being chased by the Americans.”

Still, the US act has a broad application and could target banks whose clients include commercial entities that have business dealings with Hezbollah, even if they are as benign as providing medical supplies to Hezbollah hospitals or books to Hezbollah-run schools.

Washington’s increased focus in recent years on stifling Hezbollah’s sources of revenue underlines a tacit acknowledgement that there is no realistic military solution to neutralizing the group, which is listed as a terrorist organization by the US State Department.

This summer will mark the 10th anniversary of Hezbollah’s last war with Israel, a month-long conflict in which the Lebanese militia fought the Israeli Army to a standstill. Since then, Lebanon’s once volatile southern border with Israel has remained calm even as both sides prepare for another round.

The size of Hezbollah’s arsenal and the variety of weapons it is believed to possess today, including guided rockets with 1,100-pound warheads, helps preserve a balance of force against Israel, which fields the strongest military in the Middle East.

Other sources of revenue

Still, Hezbollah is potentially vulnerable to a clampdown on its sources of revenue, which extend far beyond the funds allocated by Iran. The party also relies on charitable donations and a vast global network of businesses run by supporters, some legal and others allegedly illegal, including narcotics trafficking, according to the US Treasury Department.

In the past year, the Treasury Department has placed several Lebanese companies and individuals on its sanctions blacklist for their alleged commercial ties to Hezbollah.

Saudi Arabia, Iran’s arch rival in the region, also has been using the money weapon as leverage against Hezbollah. Last week, Saudi Arabia suspended a military assistance package to the Lebanese Army worth more than $3 billion to purchase weapons, ammunition and equipment, tacitly blaming Hezbollah for its hostility toward Riyadh.

The decision, which has caused a political storm in Beirut, came two days after the National Commercial Bank of Saudi Arabia decided to close its two branches in Lebanon.