Mike Azar

Commentator on Lebanon’s never-ending financial crisis. International structured and project finance.

[Mike Azar @AzarsTweets]

An analysis of the ceasefire deal:

The question of who won and who lost this war is not particularly interesting. Each side will claim whatever is in its best interest to claim. The more meaningful question is: what will be its impact on the various actors, particularly in Lebanon?

Hezbollah's local opponents view the ceasefire deal, and the war in general, as having diminished its domestic power. With provisions aimed at dismantling its military infrastructure and bolstering the Lebanese army, the ceasefire seems intended to reduce Hezbollah's influence by weakening its military capabilities.

But Hezbollah’s strength within Lebanon has never been confined to its weapons. Even if it were disarmed tomorrow, its domestic political objectives, its popular grassroots support, and its representation within state institutions would remain intact. This ceasefire, far from sidelining Hezbollah, nudges it to deepen its power domestically by turning its attention inward.

The structure of this agreement, if implemented as written, risks further fracturing the country. It pits an already weakened Lebanese state—represented by its army—against Hezbollah. Hezbollah remains the country’s strongest and most organized political and military entity, as well as the legitimate representative of the largest community in Lebanon.

The Lebanese Army

The Lebanese army finds itself in an impossible position. Its mandate to enforce the ceasefire is undermined by its inability to challenge Hezbollah directly. To suggest that it can disarm or dismantle Hezbollah’s infrastructure is, frankly, absurd. Hezbollah is not just an armed group; it is a deeply rooted political force with widespread popular support that extends far beyond its weaponry. It is represented in the army, in the army leadership, and in the political branches that command the army. It is not an external force but an integral part of Lebanon's social and political structure.

The army, one of the few entities that enjoys broad-based respect across sectarian lines, is being set up to fail. Any perceived weakness in fulfilling the ceasefire’s terms risks further eroding its credibility, domestically (with half the country) and internationally. Yet confronting Hezbollah, if it were even plausible, risks political and societal backlash, along with a backlash within the army ranks, further destabilizing the country.

This leaves the army walking a fine line: attempting to meet international and domestic expectations without overstepping into conflict with Hezbollah. Ultimately, this fragile balancing act reinforces the narrative that Lebanon’s state institutions are ineffective, which they are when perceived to be acting against the interests of one of Lebanon's communities.

Hezbollah

This brings us to the core issue: Hezbollah’s internal strength lies not in its arsenal (at least not exclusively) but in the fact that it is the legitimate representative of millions of Lebanese. This war and ceasefire do little to change that basic fact.

To frame Hezbollah solely as an armed militia and foreign proxy is to misunderstand its role in Lebanon and the basis of its power. It is a domestic political project as much as a regional military one—a project that, like it or not, champions the interests of the community it represents. It is fundamentally a rational actor whose actions are driven by clear incentives. It pays lip service to national unity and power-sharing while steadily increasing its control over the state and its institutions in line with the growing numbers and strength of its community. That is exactly what any other actor in its position would do given the incentive structure created by Lebanon's political system (i.e., maximizing your share of power/resources relative to others is an existential imperative in a system designed to pit communities against one another).

This is what makes the ceasefire’s disarmament provisions largely symbolic. Far from weakening Hezbollah, the terms of the ceasefire incentivize it to further entrench itself within legitimate state institutions like the army and the government (the enforcers of the ceasefire).

Lebanese communities opposed to Hezbollah’s dominance may find themselves increasingly sidelined due to their fatal misreading of the true source of Hezbollah's power and the incentives that shape its actions. These groups charactarize their problem as being *only* with Hezbollah's weapons. They demand it be disarmed and its military wing folded into the army, as if these actions would weaken the group's domestic influence or alter its political objectives.

The reality is that Hezbollah's domestic political objectives are shaped by incentives—primarily, the pursuit of power and resources within the state structure to serve the perceived interests of the community it represents (as understood by that community itself, not by Hezbollah’s opponents). The group’s influence is fundamentally tied to the size and cohesion of that community. Consequently, Hezbollah’s influence will inevitably pull the state and the army toward its own objectives rather than away from them. Even if its military capabilities were partially or entirely dismantled, the group’s domestic power and objectives would remain largely unaffected. For Hezbollah’s opponents, the core problem therefore lies elsewhere even if they fail to see it.

Israel

Israel, by agreeing to the ceasefire, consolidates international support, particularly from the United States, and positions itself as a cooperative actor regardless of the actual reason why it agreed to the ceasefire. Should the ceasefire unravel, Israel will be well-positioned to act with the moral and political backing of its allies, especially given incoming Trump administration.

For Israel, the ceasefire is a low-cost gamble. If it works, it buys temporary stability. If it fails, Israel retains the freedom to strike (as it would regardless of whether this provision is explicitly stated in the terms of the ceasefire), with the added justification of Lebanon’s inability to uphold its commitments. This ensures that Israel can respond to violations on its own terms, while placing the burden of enforcement squarely on the Lebanese government and army.

A Fragile Illusion

The ceasefire offers a welcome break after many months of war. But its terms risk worsening Lebanon's serious domestic challenges by hastening shifts in the balance of political power among Lebanon's communities and exposing the failure of its power-sharing system to manage these changes effectively. Unless these underlying issues are confronted, Lebanon's society will remain fragile and continue to fragment with communities being provoked against one another. Unfortunately, Lebanon's political leadership has absolutely no vision for how to resolve these challenges.

[Mike Azar @AzarsTweets]

Trump’s statement sends a clear message to Iran that its real leverage in this conflict is its ability to threaten and target GCC infrastructure and logistics. GCC will remain in the crosshairs as a result, and there’s not much they can do about it.

[Mike Azar @AzarsTweets]

The GCC may have more to lose from Iran surviving this war than almost anyone else.

The Gulf’s economic model depends on capital-intensive, fixed/immovable physical assets: oil and gas fields and pipelines, LNG and gas-processing plants, refineries, petrochemicals, fertilizers, aluminum, steel, cement, power and desalination plants, ports, storage terminals, and logistics infrastructure. These assets require hundreds of billions of dollars in long-term financing, and that financing depends on the physical security of the assets for 15+ years.

If Iran retains the ability to strike and heavily damage this infrastructure at any time in the future (and shows a willingness to do so), the financing risk changes fundamentally. A persistent Iranian threat would directly undermine the GCC economic model and the bankability of its industry.

[Mike Azar @AzarsTweets]

@CSelh What are the chances of that?

[Mike Azar @AzarsTweets]

@NadaOHomsi My comment is about economic consequences and not political responsibility. Investors won’t risk that nuanced view. It is Iran that struck these assets and closed the soh. So long as that threat remains tacitly on the table, it will have an impact.

[Mike Azar @AzarsTweets]

@mazen_barbir Interesting perspective thanks. But from the perspective of an investor coming to finance a long term fixed asset, I don’t think they will see it that way. The risk profile in the region has gone up significantly and that will remain the case for a long time.

[Mike Azar @AzarsTweets]

@mazen_barbir The gcc had the most at stake. The relationship with Iran has fundamentally changed now, regardless of the reason. Will be interesting to see what the gcc does next.

[Mike Azar @AzarsTweets]

@KanjiMuriel Sometimes the one responsible is not the one who pays the price.

[Mike Azar @AzarsTweets]

Israel’s strategy is pretty obvious.

The biggest long-term loser from the current Iran-Israel-US war may be the GCC. The Gulf’s economic model depends on capital-intensive, fixed/immovable assets: oil and gas fields and pipelines, LNG and gas-processing plants, refineries, petrochemicals, fertilizers, aluminum, steel, cement, power and desalination plants, ports, storage terminals, and logistics infrastructure. These assets require hundreds of billions of dollars in long-term financing, and that financing depends on the physical security of the assets for 15+ years.

If Iran retains the ability (after showing the willingness) to strike and heavily damage them at any time in the future, the financing risk changes fundamentally. From that perspective, the GCC may have more to lose from Iran surviving this war than almost anyone else, because a persistent Iranian threat could directly undermine the bankability of its entire industrial base.

[Al Jazeera Breaking News @AJENews]

BREAKING: Iran says natural gas facilities associated with offshore South Pars field have been attacked

🔴 LIVE updates: https://t.co/c49PYvkeCw

[Mike Azar @AzarsTweets]

@philipabouhalka Good questions. I agree it doesn’t look like regime change or capitulation is likely to happen as far as I can see. That’s partly why I think the gcc will be the biggest losers from this war. Investors won’t forget that this could happen again and worse.

[Mike Azar @AzarsTweets]

@frontfredd You’re making a political point. I don’t really have a view on that or what the right move is for the gcc presently. I do know that banks won’t really care though. They will only see a lingering threat that their asset may be bombed at any time.

[Mike Azar @AzarsTweets]

@philipabouhalka True. But I think that status quo is over now and you can’t go back to it. Gcc now needs Iran to be defeated more than Israel does. That is a situation the Israelis are happy to see.

[Mike Azar @AzarsTweets]

@philipabouhalka It wants the gcc countries to consider Iran to be as much of an existential threat as it does.

[Mike Azar @AzarsTweets]

@AdAyA61 Yes. Uninsurable risk. Similar to how difficult terrorism insurance is/was to get here.

[Mike Azar @AzarsTweets]

@CSelh I’m leaning towards the same thought. This seems like a rushed and poorly thought out initiative made under duress and whose outcome is already known.

[Mike Azar @AzarsTweets]

I have little confidence, but I hope Lebanon appoints a negotiating team with real experience in high-stakes international negotiations. Working at a think tank or being close to a political leader does not make someone an effective negotiator. Lebanon comes into these talks with a very weak hand. Israeli negotiators will run circles around any Lebanese team chosen through nepotism rather than competence.

[Mike Azar @AzarsTweets]

I tend to agree with your assessment. But then I wonder why is the Lebanese side launching this initiative now, only after being struck militarily, when it seems the outcome is already known. We already know the other sides position. What new bargain are they hoping to strike that is different from the one struck last year? What is their objective? It seems poorly thought out

[Mike Azar @AzarsTweets]

@Thisisordinary You’ll have to ask the political leaders who decided that this was the right time what Lebanons objectives are in these negotiations and how it plans to achieve them. I personally don’t think it’s the right time.

[Mike Azar @AzarsTweets]

@marcnakh @marwanabdalah Yes. Thats why I’m of the view that we are making a mistake going to these negotiations right now. There is nothing to discuss or negotiate.

[Mike Azar @AzarsTweets]

@marwantaher you might enjoy this about the impact of nepotism https://t.co/SOW3IZGnvL

[Mike Azar @AzarsTweets]

@FouadKh43051267 None. We only agreed to negotiate after being struck militarily. That’s not a good precedent.