As reports of a rapprochement between the governments of Israel and Lebanon have surfaced, it would be instructive to review how the terrorist organizations of the PLO and later, Hezbollah, have wrecked what was once a beautiful, thriving region of the Middle East.
The history of Lebanon’s destabilization is defined by the erosion of state sovereignty, first by the Palestine Liberation Organization (PLO) and later by Hezbollah. Both organizations established “states within a state,” effectively dismantling the central government’s monopoly on violence and turning Lebanon into a launchpad for perpetual conflict with Israel.
The destabilization began in earnest following the 1969 Cairo Accord, which permitted PLO terrorists to operate from southern Lebanon. After being expelled from Jordan during Black September (1970), the PLO relocated its headquarters to Lebanon, transforming the south into “Fatahland.”
From this base, the PLO launched a relentless campaign of attacks against Israeli civilians, which provoked devastating retaliations on Lebanese soil:
- International Terror: Following the 1972 Munich Olympics massacre of Israelis by PLO terrorists, Israel occupied parts of southern Lebanon for 36 hours to strike PLO bases.
- Targeting Schools and Hotels: In 1974, PLO-affiliated terrorists seized a school in Maalot, resulting in the deaths of 25 hostages, including 22 children. In 1975, PLO commandos launched the Savoy Hotel attack in Tel Aviv.
- The Coastal Road Massacre: In 1978, a PLO hijacking of a bus on Israel’s coastal road left 38 civilians dead, prompting the first major Israeli invasion of Lebanon.
These operations effectively broke the Lebanese state’s control over its borders. The PLO’s military strength deepened sectarian divides, aligning with Lebanese Muslims against Christian militias, sparking the Lebanese Civil War (1975–1990). The conflict killed approximately 150,000 people. Eventually, the 1982 Israeli war, launched after the PLO fired waves of Katyusha rockets into northern Galilee, forced Yasser Arafat to evacuate to Tunisia, leaving Lebanon in ruins.
In the power vacuum of the 1980s, Hezbollah emerged with Iranian backing. Like the PLO, Hezbollah seized territory in the Bekaa Valley and southern Lebanon. By 2023, Hezbollah’s military capabilities had eclipsed the Lebanese Army, maintaining an arsenal of over 150,000 rockets.
Hezbollah’s impact has been both military and systemic:
- Political Stranglehold: Hezbollah effectively vetoes state decisions that conflict with Iranian interests through armed resistance, despite losing its majority in the Lebanese government in 2022.
- Financial Corruption: The group’s “System” of global money laundering and illicit trade has compromised the Lebanese banking sector. Investigations such as Bartlett v. Société Générale de Banque au Liban allege that major banks bankrolled Hezbollah operations, leading to international isolation.
- Economic Collapse: Lebanon’s economy devolved into a $100 billion Ponzi scheme. When Hezbollah’s dominance triggered tensions with Gulf Arab states, tourism and remittances evaporated, causing the system to implode.
The legacy of the PLO and Hezbollah is a nation in “acute financial distress.” Lebanon’s financial collapse is considered one of the most severe economic depressions globally since the mid-nineteenth century. It wasn’t a single event but a systemic implosion of a “Ponzi-like” financial model that had sustained the country for decades. The collapse “officially” detonated in October 2019, but the fuse had been burning for years.
Warning signs started in 2016; foreign capital inflows began to dry up. To keep the Lebanese Pound pegged to the dollar, the Central Bank (BDL) launched “financial engineering”—essentially offering massive interest rates (up to 15–20%) to local banks to attract dollars, which were then used to pay off old debts.
The Breaking Point came in October 2019, when a proposed tax on WhatsApp calls sparked mass protests (the “October Revolution”). This caused a crisis of confidence; banks closed for two weeks and, upon reopening, unofficially locked depositors out of their dollar accounts. In March 2020, for the first time in its history, Lebanon defaulted on a $1.2 billion Eurobond repayment, signaling it could no longer service its approximately $90 billion national debt.
The Lebanese Pound (LBP), which was pegged at 1,507 to $1 for over 20 years, lost over 98% of its value. By early 2026, the economy will have become almost entirely “dollarized,” meaning prices will be set in USD because the local currency is too volatile to use for basic trade.
.png)
.png)
