Hard cedar: Lebanon seeks Trump’s help

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1:05The Economist

1:12Rosie Blau:Hello and welcome to The Intelligence from The Economist. I'm Rosie Bloor. And I'm Jason Palmer.

1:21Rosie Blau:Today on the show, could Red Bull have its wings clipped and trophy wives may finally be going out of fashion.

1:37But first...

1:47Rosie Blau:Today, Lebanese President Joseph Aoun will visit the White House. It's the first such presidential summit in nearly two decades, and it comes at a challenging moment for Lebanon. The country faces a deep financial crisis, an ongoing power struggle against Hisbollah, the Iran-backed Shia militia, and a conflict between Hisbollah and Israel that's wreaked enormous damage and continues to wreck lives across the whole country. Lebanon certainly needs help, but what will it get?

2:21Jason Palmer:The past seven years have been by far Lebanon's worst period since the end of its civil war in 1990.

2:30Rosie Blau:Greg Karlstrom is a Middle East correspondent.

2:33Jason Palmer:It's been through one of the worst financial crises in modern history, an enormous explosion and almost three years of war with Israel, just to name a few. And it endured most of that without even having a proper government in place. Now it finally has one. There's a new president and a new prime minister, and they are trying to enlist help from Donald Trump and from other allies around the world to get Lebanon back on its feet.

3:02Rosie Blau:Greg, before we get to the details, why is Lebanon so important?

3:07Jason Palmer:I think you can make a couple of arguments. One is geopolitical. If things go well in Lebanon, you can imagine it's an enormous blow to Iran's influence in the region. It's already lost influence in Syria with the fall of the Assad regime. If it no longer had Hezbollah, the Iranian backed Shia militia in Lebanon as a heavily armed cat's paw, then its clout in the region would be diminished further. Conversely, if things don't go well in Lebanon, the risks include more war with Israel, an emboldened Iran, perhaps internal conflict and a migration crisis. So that's one piece of it. And then you can also make an argument around Lebanon itself.

3:48Jason Palmer:This is a diverse country that churns out lots of well-educated, entrepreneurial, talented people, but it ends up exporting most of that human capital because Lebanon itself is so dysfunctional and corrupt that most people can't make a decent living there. So I think people should also want it to succeed on its own merits. It could be a very important business hub for the entire region.

4:11Rosie Blau:You mentioned dysfunction there. Lebanon for a while lacked a proper government. Who was in charge during that time?

4:19Jason Palmer:In effect, no one. If you go back to late 2019, when the economic crisis started and there were mass anti-government protests, Saad Hariri, who was the prime minister at the time, resigned but stayed on in a caretaker capacity. And then he was followed by two additional caretaker prime ministers. So there was no empowered PM, no empowered cabinet that could take decisions. And then you had a stretch of more than two years where the presidential palace was vacant, which is not uncommon in Lebanon. The president is selected by parliament and often MPs can't agree on a president. And so you end up with a vacancy.

4:58Jason Palmer:But this was one of the longest in Lebanon's history. The vacuum finally ended at the beginning of last year under very strong international pressure. Parliament chose Joseph Aoun, the former army chief, as president. And then shortly afterwards, Nawaf Salam, a former head of the International Court of Justice, was named as the country's new prime minister. They look like an odd pairing. Aoun is this former soldier who spent his whole life in the army. Salam is bookish. He's an academic and a diplomat. He's been outside of Lebanon for most of his life. He was also the country's ambassador to the UN at one point.

5:34Jason Palmer:So they're both political outsiders in a country where politics has long been dominated by the same set of ex-warlords who ran militias during the civil war. They both promised to come in and tackle some of the country's longstanding problems, but they came in in a very difficult situation.

5:53Rosie Blau:You've been reporting across Lebanon recently. You used to live there. What are the key problems the country's facing?

6:00Jason Palmer:There are two big challenges right now. The first one is the issue of Hezbollah's weapons and the war that it has dragged Lebanon into with Israel. And the cost of that war has been enormous. You have the human toll, more than 4 ,000 people killed, including plenty of civilians, medics, journalists, ordinary people in the South. But for Hezbollah itself, quite a striking death toll. I drove through one Shia village in the Bekaa Valley in eastern Lebanon, a small place, maybe 1500 people live there, counted at least a dozen posters announcing the deaths of Hezbollah fighters. And that's an undercount.

6:40Jason Palmer:Some of the bodies haven't been identified. Some families have been told not to mourn in public. So we're probably talking one to two percent of the population of this very small village. And then along with the human cost, you have the economic cost of the war. I met with Amr Bessat, the economy minister who estimated the total damage is around 40 % of Lebanon's GDP, also thinks the country is going to be pushed into a recession this year because of a slowdown caused by the war. And this is where it links to Lebanon's second big problem, the economy, the aftermath of this unresolved economic crisis.

7:16Jason Palmer:I lived there when it began back in 2019 and 20, and it was a dizzying time that currency was dropping to new lows every week. The banks were effectively closed. Nobody could get money out of a bank. Things feel a bit more stable now, but it's only because they have really, really bottomed out. Currency is worth 2 % of what it used to be worth. Inflation is still quite high by global standards, but less than the hyperinflation of a few years ago. And ordinary people have been impoverished.

7:48Rosie Blau:And Greg, what is the current state of the conflict between Israel and Hezbollah?

7:53Jason Palmer:It hasn't stopped, but it has slowed down for the moment. Last month in June, Israel and Lebanon signed a deal in Washington. It's the first diplomatic agreement they've signed in decades that was meant to impose a ceasefire. It calls for the Lebanese army to start deploying in southern Lebanon. And then as the Lebanese army does that, Israel is meant to withdraw its troops. It continues to occupy a swath of territory. Now, there's a lot that's vague about this agreement. For example, at what point will Israel be forced to withdraw? The deal doesn't say. It doesn't lay out criteria. Israel continues periodic airstrikes in Lebanon.

8:34Jason Palmer:Again, the war hasn't stopped, but there is meant to be diplomatic movement towards ending it.

8:40Rosie Blau:It's a very long list of very deep problems. Can they be fixed?

8:45Jason Palmer:They're difficult to fix on the issue of Hezbollah. Someone close to the president explained their thinking to me, which is we want to present the Shia community, Hezbollah's constituents, with two images. We want to show them on the one hand, Hezbollah has dragged this country into a war on Iran's behalf. It has killed thousands of your sons. It has started a war that led to your villages being destroyed. On the other hand, we have a Lebanese state that is going to come in and secure the South and rebuild. Really, the mechanism here is to try and drain Hezbollah's support by stepping in and providing the services that the government has long failed to provide in southern Lebanon.

9:27Jason Palmer:But again, this is where the two problems come together, because to rebuild the South, you need resources. And this government, seven years into an economic crisis, doesn't have those resources. So they also need to tackle the economic side of it. They need to make a deal with the IMF. They've been talking about that for years. It hasn't happened because they haven't passed the reforms that the IMF insists on as a precondition. Noef Salem's government has passed some of those reforms, but they haven't figured out how to apportion the$80 billion losses in the banking sector between depositors and shareholders and the state.

10:03Jason Palmer:And they haven't done it in part because the banks still have a lot of political power and their shareholders don't want to see their equity wiped out. So they need to move faster on that. They need to move faster on administrative reforms from strengthening the judiciary to trying to trim the enormous civil service. There's a lot that they need to be doing on the economic front so that donors and investors will finally step in, give money to Lebanon, and then allow the government to start this process of reconstruction.

10:32Rosie Blau:Joseph Aoun is going to the White House today. Where does enlisting Trump's help come into any of this?

10:39Jason Palmer:Almost made it through an interview without talking about Trump at length, but we can never do that these days. I think President Aoun wants three big things from Trump. One is support for the Lebanese army. It is underfunded. It needs better equipment. It needs money. The second thing is this deal between Israel and Lebanon. Because it is so vague on the question of withdrawal, the Lebanese will need American pressure on Israel to ensure that it does withdraw. Now, it's started pulling out, it says, from what are called pilot zones, two areas that are meant to be a proof of concept to show that this deal can work.

11:17Jason Palmer:But if you're going to secure any further reaching Israeli withdrawal, that's going to require pressure from Washington. And then the third thing that Allen and his advisors want is investment from the U.S. They've put together these glossy presentations about how firms in America could benefit from investing in ports, telecommunications. I think they're cognizant that Donald Trump's America doesn't really do foreign aid. So instead of asking for donations, they're looking for ways to make an investment case to the president. I think those are going to be the three big things that Alan wants to focus on in this meeting at the White House.

11:54Rosie Blau:Greg, thank you very much.

11:56Jason Palmer:Thank you, Rosie.

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13:00AAA, expect something more. Roadside assistance is provided by independent facilities contracted by AAA. Coverage in taxis, limousines, and other ride-sharing conveyances is excluded. 2024 AAA U.S. Market Track National Surveys. Offers, terms, conditions, and policies are subject to change without notice. Visit AAA.com for details.

13:23Here we have the biggest ski jump in the world. In both America and Europe, the brand Red Bull is known almost as much for its sponsored sport teams and events as it is for its sweet, sweet energy drink. It's a league of daredevils as well as big names like football manager Jurgen Klopp. We have assembled a team of elite football players to take on a series of football challenges all around the world. And all that high-adrenaline marketing? It works. Red Bull was founded in 1984 by Dietrich Mateschitz, an enterprising Austrian, who had discovered a Thai energy tonic on a business trip. And he thought this is something that Europe needed.

14:09Wendelin von Bredow is our senior Germany correspondent. He decided to launch it in Europe, adapt it to European taste, so he made it carbonated and a bit less sweet. And initially, the reaction was a lot of skepticism. People said, this is not going to work, there's not a market for this, nobody wants this, you're going to fail. But he did it anyway. He was Austrian, so he launched in Austria, and it became this huge global success. How did it become so successful? Well, Mr. Mateschitz had a rare genius for marketing. He had so many ideas and really many of them worked. So he came up with slogans and stunts that made Red Bull the worst leading seller of energy drinks.

14:51For instance, Red Bull gives you wings, you know, with lots of eyes. That was his idea. In German it's Red Bull verleiht dir Flügel. It's very catchy and everyone knows it. And then he really branched out into sponsoring sports of all sorts, but in particular, extreme sports. So it was his idea to sponsor the Austrian skydiver Felix Baumgartner, who in 2012 jumped to Earth from a helium balloon in a stratosphere. But most of all, Mertuschitz built a media powerhouse and they have their own TV channel. They have their own magazines. They have their own studio. So his TV channel is the number two broadcaster in Austria after the public broadcaster after the ORF.

15:37And it's hugely influential and it's a big part of Red Bull's success. And so when he died in October 2022, many Austrians feared that Red Bull would fall as quickly as it has risen to the biggest maker of energy drinks in the world. They just thought without Mateusz, it just cannot survive even without him at the helm. So who is at the helm? So now it's interesting, there are three people at the helm. So he doesn't have one successor. And they all keep an extremely low profile. I mean, most people don't even know their names. And they basically continue to do what matches did. They haven't really changed the pillars of success of Red Bull.

16:18So Red Bull today has 28 % of the global market, much ahead of Monster, its main rival, which has about 17 % of the market. And last year, it sold 14 billion cans of its energy drink, up by 10 % from the previous year. And it has 22 ,000 employees in 178 countries. So it's basically sold nearly everywhere in the world. And you say that continued success is just down to, well, not changing the formula. Not really changing the formula. So Red Bull is unusual in that they have very little capex because they mainly do the marketing for the brand. They spend a third of their revenue on marketing, which is much higher than its rivals.