Abstract
Hezbollah is best defined in geopolitics as the Iranian ideology proxy that aims to grow the Persian footprint and to gain geopolitical strategic depth in the region. Its role continuously requires geopolitical conflicts, mainly against Saudi Arabia and Israel—for resistance, ideological, and geopolitical purposes. Being a state within a state, Hezbollah militia makes sovereign geopolitical decisions and forces Lebanon to pay for the consequences. This is the first economic study that empirically investigates under vector autoregression (VAR) models the dynamic causal relationship between Saudi Arabia and Israel’s geopolitical risks and Lebanon’s financial stability and economic activity. The results show that Saudi Arabia and Israel’s geopolitical risks affect Lebanon’s economy differently. Economic and financial stability cannot be promoted independently of regional geopolitical conflict.
Highlights
Academic Editor: Vanja PiljakThe Middle East and North Africa region is currently witnessing changes toward the deal of the century
Financial Stress Index (FSI), and FXFXD at lag 6. (Table 14A verifies the dynamic relation by excluding from the model the Geopolitical Risks’ (GPR) of Saudi Arabia.) The results reveal a unidirectional causality from Israel
Economic reports elaborated by the United Nations, Reuters, the World Bank, or other international organizations are limited to estimating the cost of reconstruction or to exposing in value the costs or the losses on welfare, agriculture, and employment
Summary
The Middle East and North Africa region is currently witnessing changes toward the deal of the century. It is promoted by Israel’s normalization with many Arab countries such as the United Arab Emirates, Bahrain, Sudan, Qatar, and Morocco Despite the historical maritime border talks between Lebanon and Israel that have started in October 2020 (and still ongoing), its success is not guaranteed. It is extremely challenging to predict geopolitical changes in Lebanon under Hezbollah’s domination.
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