MENA Strategic Bulletin

Lebanon elects a new president: Joseph Aoun takes office

After more than two years of political deadlock, Lebanon has finally elected a new president, Joseph Aoun, ending a prolonged leadership vacuum. The breakthrough on Thursday January 9 followed 13 failed attempts by the Lebanese parliament to elect a successor after Michel Aoun’s term ended in October 2022. The leadership crisis had been compounded by political paralysis, a crippling economic collapse and the growing influence of Hezbollah and non-state actors in the country’s affairs.

Aoun’s election was precipitated by Hezbollah-backed presidential candidate Suleiman Frangie’s announcement on Wednesday that he was withdrawing from the race. International pressure, along with US and Saudi backing for Aoun, further facilitated his ascent to the presidency. While Aoun’s election is a critical step towards Lebanon’s recovery, it marks just the beginning of what will be a challenging journey to restore political stability, tackle the economic crisis and address the influence of non-state actors like Hezbollah.

Stakeholder and regional impact

Aoun’s election marks a crucial moment for the country. His clear stance on restoring state control over military power, particularly in relation to Hezbollah, signals a potential clash with the group, though Hezbollah itself has been weakened by its recent conflict with Israel and the loss of its Syrian ally, Bashar Al Assad. The backing of the US and Saudi Arabia is expected to be particularly significant for Lebanon’s economy, with the hope being that international backers can help begin to reverse the effects of a 95% currency devaluation, an unsustainable debt crisis and a collapsed banking sector.

Aoun’s election has been met with positive reactions from regional leaders, including Iraqi Prime Minister Mohammed Shia’ Al Sudani, Egyptian President Abdel-Fattah Al Sisi and UAE President Sheikh Mohamed bin Zayed. However, the key challenge for Aoun now is the formation of a government. Hezbollah’s influence remains a significant hurdle, with the possibility that the group will push for allies in the cabinet who could hold veto power.

In addition, President Aoun must navigate the complex task of implementing the ceasefire agreement designed to end the recent war between Israel and Hezbollah, including ensuring a full Israeli withdrawal from the south and the demilitarisation of Hezbollah south of the Litani River.

What’s next?

Lebanon faces an uphill battle in rebuilding its government, economy and infrastructure. The damage from the 2020 Beirut port explosion and the war with Israel will require international aid commitments worth billions of dollars.

Regarding the formation of a new government, parliamentary blocs will begin consultations to appoint a new prime minister to replace caretaker premier Najib Mikati. Aoun enters office with significant international goodwill, which could lead to much-needed support in the form of reconstruction aid and more favourable IMF terms to restructure Lebanon’s crippling debt. While the president’s role is crucial, it is not all-encompassing, and Aoun’s ability to drive change will depend on the nature of the government that is formed.

Saudi Arabia raises almost $20bn to support Vision 2030

Saudi Arabia has opened 2025 with significant borrowing to fund its Vision 2030 transformation plan. The kingdom successfully raised $12bn through a three-part bond sale, with maturities ranging from three to ten years, aimed at covering the $27bn fiscal deficit for the year and reducing existing debt. The Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, secured a $7bn Islamic loan to support its ambitious economic diversification projects. While Saudi Arabia continues to focus on strategic investments in line with Vision 2030, it faces a challenging fiscal landscape, with 2025 borrowing estimated to reach SR 139bn ($37 billion), largely to cover the deficit and maturing debt.

Stakeholder and regional Impact

Saudi Arabia’s financial strategy is indicative of the continued push to diversify its economy. The $12bn bond sale has garnered strong investor interest, signalling confidence in the kingdom’s long-term economic overhaul. However, the reality is that fiscal pressure remains high, particularly with oil prices at $76 per barrel, below the threshold of $90 per barrel suggested by the IMF to balance the 2025 budget. The kingdom is navigating a fine line between financing its Vision 2030 objectives and managing a growing debt load.

This reliance on external debt comes as Saudi Arabia delays certain large-scale projects to mitigate an overload on the economy. Saudi officials claim to be focusing on high-profile initiatives, including the Asian Games in 2027 and the World Cup in 2034, both of which will require substantial investments and are central to Saudi Arabia’s goals of establishing itself as a global hub for sports and tourism.

What’s next?

The kingdom’s push for economic diversification faces a challenge in aligning with the pace of these mega projects, with oil remaining a crucial, if not dominant, driver of its economic stability and future vision. It will need to continue leveraging diverse channels to finance its economic transformation while maintaining investor confidence. Key to this will be the ability of the PIF to generate sufficient returns on its projects, ensuring that the loans secured can be repaid without exacerbating the fiscal deficit. Ultimately, whether Saudi Arabia can achieve its Vision 2030 objectives will depend on its ability to manage these ambitious projects, secure continued international investment and weather the volatile oil market conditions that continue to shape its economic outlook.

The new Syria: Al-Shaibani makes Riyadh his first stop

Asaad Hassan al-Shaibani, the Foreign Minister appointed by Syria’s de facto ruling party, Hay’at Tahrir al-Sham (HTS), has started 2025 with a regional tour of the Gulf. The delegation’s first stop in Riyadh, Saudi Arabia, marked Syria’s first official diplomatic mission since the end of the Assad regime and indicated the diplomatic priorities of the country’s new leadership.

Al-Shaibani was joined by key members of Syria’s new interim government, including Defence Minister Murhaf Abu Qasra and Intelligence Chief Anas Khattab. The delegation continued its regional tour by visiting Qatar and the UAE. The Gulf states, particularly Saudi Arabia, are positioning themselves as central players in Syria’s recovery and political transition, supporting both humanitarian and reconstruction efforts.

Regional and stakeholder impact

HTS has long recognised the Gulf’s central role in legitimizing Syria’s new government. The Gulf’s support is vital for both the political recognition of Syria’s interim government and the material backing required for its recovery. With the US and the EU currently playing only minor roles in Syria’s diplomatic sphere, the Gulf states – especially Saudi Arabia – are emerging as primary players in Syria’s political and economic rebuilding. Their involvement will be critical for addressing regional issues such as the proliferation of Captagon trade and the future of Syria’s relationship with Iran.

While Saudi Arabia has already pledged substantial humanitarian support, including food and medical supplies, the key to Syria’s long-term recovery lies in gaining Gulf backing for economic reconstruction, which could also pave the way for the lifting of international sanctions. The Gulf’s ability to influence Western powers, especially the US, will be a crucial factor in this process.

The scale of the economic and humanitarian challenge has been underlined by the return of displaced citizens, with more than 125,000 Syrians returning to regions like Aleppo, Ar-Raqqa, and Dar’a. The UNHCR and the UN Migration Agency have pledged $73 million in aid to assist displaced persons and returnees, a figure that, while helpful, falls far short of the estimated $9bn required to respond to Syria’s humanitarian crisis and its displaced communities.

What’s next?

Looking forward, the most critical step in Syria’s recovery will be the lifting of international sanctions. This will be essential for revitalising the country’s economy and securing foreign investment for reconstruction. Humanitarian aid will remain indispensable in the short term, but long-term stability hinges on political legitimacy, which will be strengthened if Syria can secure the continued support of Gulf states.

As a result, HTS is likely to prioritise these relationships moving forward. In return, the Gulf states will look to ensure the establishment of a government and a new state that is broadly favourable to their geopolitical interests, while reaping the benefits of any potential economic redevelopment that occurs in Syria over the coming years.