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Lebanon suffers 24-hour blackout, food poisoning, business closures amid fuel crisis

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A protestor against government blockades the streets with garbage cans and burning trash dumpsters in Beirut’s capital on March 16th 2021. This was in protest at the country’s declining economic condition.

Getty Images| AFP | Getty Images

The weekend saw the total loss of power in Lebanon, which left its 6 million inhabitants without electricity.

According to the statement by the state electricity corporation, the “directly affected stability of power network” and the complete shutting down of country’s main stations due to fuel shortages led to the outage of all power lines. There was no chance of it being restored.

The central bank gave $100 million credit to the energy ministry in order for it to purchase fuel and maintain its facilities. Power was restored late on Sunday Officials were concerned that the power outage would last several days.

Although the crisis has caused chaos for many residents of the country, it was long in coming.

Gas shortages might sound familiar — the U.K. and the rest of Europe are in the throes of a mounting fuel crisis, which has induced panic buying and erratic behavior among many who had never imagined facing such shortages.

But for Lebanon, the same problem has been a reality for months — it’s just another battle in the long list of crises that have left the country with multiple daily power outages, a banking and economic crisis, food shortages, overwhelmed hospitals, and a spiraling currency relying on volatile black market exchange rates.

Walking through the capital Beirut — a once-thriving city often called the “Paris of the Middle East” — at any time of day, one can see shopfronts closed or operating in darkness, with those lucky enough to have access to fuel relying on backup generators to keep the lights on. Shopkeepers are often forced to stop selling water because of fluctuations in the Lebanese Lira’s value. The price of goods is subject to change every minute. 

Hundreds of the businesses that were destroyed by the Beirut Port Explosion of August 2020 have been permanently lost. Many streets remain populated by debris-filled bars, restaurants and businesses that were destroyed and their doors blown off the street.

Rabih Daou (a Beirut-based grocery store owner) said that it was “catastrophic” after his shop became darkened by one of the many power cuts in the country. He pointed out empty fridge shelves that only had one small refrigerator running and containing a handful of dairy products.

It is impossible to buy many things. He explained that we cannot purchase cheese or ham. We have to order them in small quantities because there isn’t enough electricity and people fearful.

Rabih DAO, shop owner from Beirut’s Geitawy, watches over his generator. It is the only source of electricity in hours-long power cuts across Lebanon. Due to the country’s fuel shortage, it is difficult to obtain fuel to power generators. Beirut (Lebanon), September 24, 2021

Natasha Turak | CNBC

Another consequence of the fuel crisis in Lebanon has been food poisoning. Many people are unable to find fresh foods due to electricity outages and heat. Since the beginning of summer, most of Beirut is without power at night. According to residents, meat and dairy consumption are down dramatically. 

Daou stated, “They won’t buy cheese, yogurt and ham because they fear that without electricity the food might not be good.”

What is the secret to Lebanon’s success?

The country has been devastated by decades of corruption from sectarian leaders and warlords, who have had power since the civil war in Lebanon.

Over the years, power outages in Lebanon have been a daily occurrence due to its poorly managed electricity sector. The Lebanese were used to it; anyone who was able to afford generators could keep power flowing. Outages were usually predictable and short-lived. 

However, since the onset of the nationwide fuel shortage in early summer, even the backup generators — which run on fuel — cannot always come to the rescue. Residents are unable to use their cars and lines at gas stations can stretch for miles. Sometimes, drivers leave their vehicles or get into arguments. 

The Mar Mikhael district of Beirut still has not repaired the gas station it was damaged in the port explosion in Beirut in August 2020. This is more than one year later. Beirut, Lebanon. September 25, 2021.

Natasha Turak | CNBC

More than 80% of Lebanon’s food, fuel and other goods are imported from outside the country. Hezbollah militants and politicians smuggled fuel into Syria. Other groups and businesses hoarded fuel in order to make more money on the black markets at higher prices have also contributed to the country’s shortage and high price. 

The central bank of Lebanon is now limiting imports of subsidised fuel as it runs out of dollars that it used to support its economy. The central bank was slow in extending credit lines to fuel stations and importers, but has ended diesel subsidies. 

That’s made the commodity unaffordable for many in Lebanon’s population of 6 million — 78% of which has fallen into poverty in the last two years, according to the World Bank, in one of the sharpest depressions of modern times. 

CNBC did not reach out to the central bank of Lebanon for comment.

Crumbling currency

Since the 1990s, the official Lebanese currency exchange rate has been set at 1,500 lire to the US dollar. However, the actual exchange rate for cash on the black marketplace has fluctuated between 13,000 to 18,000 lire per dollar in September. It trades currently at 19250 against the dollar.

Marwan Sweidan owns a popular ice-cream shop, Smushkies, in Beirut’s Mar Mikhael area. Sweidan says that he is lucky to be in a position to buy fuel for his generators. This would make it impossible to store his merchandise cold and keep the business running. He needs money to make that happen.

He said that you can purchase non-subsidized diesel but it must be paid in dollars. “It costs about $600 per ton. It went up quite a bit and so there have been so many new prices for electricity that has made it even harder.” The first time the Lebanon government has priced a commodity using dollars is this.  

Antonella Hajj Nicolas is a student in physics and spends many hours just to get electricity. “Since last night, we don’t even have electricity at our home so the generator isn’t working.” CNBC spoke with her about how she discovered that the place had electricity and internet, which allowed her to prepare for exams. Her family is unable to store perishable foods in their homes.

“We don’t have food in the fridge because we don’t want to get poisoning … we buy our food each day by day, on the spot,” she said.

All savings gone

Lebanon’s debt-to GDP ratio is one of the highest in the world.

Since the onset of its financial crisis two years ago, when the country defaulted on its massive debt pile — including $31 billion in Eurobonds that remain outstanding — Lebanon’s economy has been in a rapidly-accelerating free fall. The government and other institutions which pledged assistance to Lebanon are withholding this aid due to insufficient confidence in their ability to implement reforms and eliminate corruption. Western officials expressed concern about the possibility of instability and state collapse in a country that is home to many militant and armed groups.

In October 2019, mass protests broke out in Lebanon after the currency fell, losing almost 90%. Depositors in Lebanon have lost access to their foreign currency accounts. Those who held their savings in lira were also locked out. 

Dede Al Hayek is seen in front of the darkened snack shop she opened in Beirut’s Geitawy. She had to close it due to Lebanon’s fuel and financial crisis. Beirut, Lebanon. September 25, 2021.

Natasha Turak | CNBC

Dede el Hayek is a grandmother, who once ran a busy snack shop in a neighborhood of Beirut. Now, she spends her time alone in the darkened shop entrance, sometimes chatting with friends. Because she could not afford to fuel a generator, her business was closed. She now lives in a bunk bed in the shop’s back storage area. 

I don’t have the money to pay for the generator. “I haven’t worked since three month ago.” She said gesturing to empty shelves. “No one enters here anymore.” 

 

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