Lebanon's Energy Crisis and the War in Gaza

The maritime border agreement signed by Israel and Lebanon in October 2022 constituted a significant development in the relationship between the two countries. The potential for natural gas exploration in Lebanon’s waters, against the background of the economic and political crisis in that country, was seen at the time as a tempting incentive with which to persuade Hezbollah to agree to the pact. The underlying assumption of the agreement was that it represented a meaningful step that could help ease the strained relations between the parties and possibly serve as a basis for future agreements on energy and economic collaboration.

This assumption is now facing a significant test following the events of October 7. While it appears that Hamas’s attack caught Hezbollah by surprise, the organization rallied to assist “its Palestinian brothers” out of a commitment to “the unity of the arenas.” With that said, Hezbollah is conducting itself in the conflict quite deliberately, maintaining a set of “rules of the game” that are accepted by both itself and Israel. In the background, the United States is making clear that it opposes widespread escalation.

As part of Washington’s efforts to prevent escalation on the northern front, intensive clandestine contacts have taken place in recent weeks between Israel and Lebanon/ Hezbollah regarding points of contention related to the land border between the two countries, as well as energy issues. For these negotiations, the Americans have deployed Special Envoy for Energy Affairs Amos Hochstein, who helped mediate the original border deal signed in October 2022.

A January 6 article by Ibrahim al-Amin, editor of Hezbollah-affiliated newspaper Al-Akhbar, noted that Hochstein is implicitly connected to Lebanon regarding the renewal of drilling by the French company, Total, in Lebanese economic waters and the current negotiations with Israel. According to the report, Hochstein acknowledged that “the suspension of energy activities stems from political motives,” hinting that drilling will not proceed as long as the conflict continues. Other reports suggest that American assistance for the recovery of the Lebanese energy sector is being presented as a condition for calming the winds of war against Israel.

The American assumption that the Lebanese energy sector can be leveraged to moderate Hezbollah is based on the fact that Lebanon’s energy crisis, which served as the backdrop for the signing of the agreement in 2022, has only worsened since then. Lebanon’s Electricité du Liban (EDL) is now only able to provide an average of about four hours of electricity per day to the residents of Beirut, and there is no capability to improve this any time soon.

Despite the high hopes the Lebanese government is pinning on gas exploration in its waters, the security of Lebanon’s energy supply is not expected to improve over the next few years. That is because Lebanon’s energy sector relies entirely on oil imports, including for electricity generation, transportation, heating and industry. Even if Lebanon were to discover gas in its waters this year, the country has neither gas infrastructure nor power stations capable of using gas.

Lebanon thus will remain dependent on the import of crude oil from Syria and Iraq. However, due to its massive debts, Lebanon is almost incapable of paying for the oil. Instead, it provides various services to Iraqi citizens, such as medical services. The crude oil Lebanon receives is sent to refineries in Greece, Turkey, and Russia, and in return, Lebanon receives solar and gasoline for the operation of power stations and transportation at reduced costs and fees. Attempts to obtain cheaper fuel from Iran through the sea have been blocked by the United States.

Despite the importance of energy potential for Lebanon, it is not considered a game-changer for Hezbollah in the current negotiation process. However, it provides a framework for negotiations as they are currently unfolding, with successful American mediation that has gained the trust of all parties, including Hezbollah. The latter seeks, within its overall considerations, and with due deference to its patron Tehran’s considerations regarding the Gaza conflict, to clarify to the Lebanese public that it is adopting a responsible position. It is, in fact, the player most capable of improving the economic situation in Lebanon.

Written by Ambassador (ret.) Michael Harari and Dr. Elai Rettig of BIU Department of Political Studies, and a senior research fellow at the Begin-Sadat Center Strategic Studies at Bar-Ilan University.