The First Time as Tragedy, the Second as Farce? Lebanon’s Nascent Petroleum Sector and the Risks of Corruption

Abstract

This article analyses the risks of corruption in Lebanon’s nascent governance structures established in preparation for a thriving petroleum sector. Engaging with comparative theory on the ‘oil curse’, the article assesses the risks of corruption in the institutional and regulatory measures and policy tools that have thus far been developed down the sector’s value chain and including revenue management and expenditure. Lebanon’s political settlement, or the ways in which its political decision-making process evolved since the Ta’if Accord, consistently caused disappointing outcomes when it comes to sound institution-building and countering corruption; despite signs of awareness of the large stakes involved, this tendency is once again discernible in the country’s preparations for petroleum sector governance.

Acknowledgements

Research for this article was commissioned by the Lebanese Centre for Policy Studies (LCPS) within the framework of its policy and research project on petroleum governance in Lebanon: http://www.lcps-lebanon.org

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1. According to Lebanese government estimates and British geological surveyor Spectrum (EIA, 2014; Naharnet, 10 May 2013).

2. It was agreed with interviewees, unless stated otherwise, to cite them without attribution in order to encourage a frank discussion. An additional imperative for doing so concerned the public servants interviewed for this article who did not want to be cited by name due to legal and political limitations.

3. An important exception whereby rich academic research informed petroleum governance debates involved the Chad‒Cameroon Pipeline project. Worryingly, even here corruption and misuse of natural resources followed as policy makers overruled the governance structures built on sound policy advice and expertise (Pegg, 2009).

4. On inaccurate reporting by the Lebanese media on the oil and gas issue see Samir Kassir Foundation (2014).

5. Lebanon’s country score (on a scale of 0: highly corrupt to 100: very clean) was 27 in 2014 and 31 in 2005.

6. Making this argument, Leenders (2012) analyses the Lebanese Central Bank as a control case sustaining relatively developed institutional guarantees and a far less chequered post-Ta’if history of corruption.

7. Other key features of Lebanon’s post-Ta’if political settlement are: a predominance of a ‘troika’ of key policy makers and its politics of muhasasa; continuous attempts to circumvent built-in stalemates and veto points laid out in the Ta’if Accord; extremely weak popular support for political elites and ensuing confessionalist and narrow local agendas, and the overriding role of Syria – and, after 2005, multiple foreign countries ‒ in policy making (Leenders, 2012).

8. All laws and decrees are available on the website of the Lebanese Petroleum Administration: www.lpa.gov.lb

9. LPA board members’ salaries and allowances reportedly average around US$200,000 per year (Now, 28 December 2012). In comparison, judges are among Lebanon’s best-paid state employees, yet even the highest-ranking and most experienced judge does not earn more than US$43,344 per year (albeit excluding allowances) (Republic of Lebanon/Ministry of Finance, December 2011).

10. Karl Marx’s famous expression was similarly used in an article by Jim Quilty and Lysandra Ohrstom (2007) who, based on their analysis of widespread corruption and cronyism in Lebanon’s 2006 reconstruction, argued that the country was already experiencing a farcical repeat of flawed reconstruction policies throughout the 1990s.