US may water down anti-Hizballah sanctions after Lebanon lobbying

The US has diluted proposed tighter sanctions against Lebanese militant group Hizballah following lobbying by politicians and bankers from the country, according to media reports.

The move comes to allay fears of major damage to Lebanon's economy, banking and political sources told Reuters.

The sanctions bill will not be discussed and voted on until autumn, when Congress reconvenes.

While this may be a sign Washington is interested in Lebanon's economic stability, the report quoted banking figures as saying Lebanese authorities should not be complacent as US President Donald Trump's future stance on Iran and its allies "cannot be predicted".

The main concern for Lebanese authorities has been that US banks - which face huge fines if found to be dealing with sanctioned people or companies - might deem Lebanese banks too risky to do business with.

This would undermine the economy, Reuters said, which relies on dollar deposits transferred from expatriate Lebanese.

Lebanon's government, the central bank and private banks have lobbied US politicians and banks hard this year to persuade Washington to balance its tough anti-Hizballah stance with the need to preserve stability, said the report.

Their main message has been that the last thing needed by the US - which backs the Lebanese army in its fight against Islamic State group and other militants spilling over from Syria - is another failed state in the Middle East.

Their efforts may have worked. The draft law submitted to Congress in late July does not include the main elements that had caused, what one banking source called, "anxiety" in Beirut.

Financial sources told Reuters the proposed anti-Hizballah legislation, when compared with earlier draft proposals, is more specific about who could be targeted. It no longer appears to target the whole of Lebanon's Shia Muslim population.

The powerful Iran-backed, Shia Hizballah is in Lebanon's delicate, national unity government but classified as a terrorist group by Washington. US officials claim Hizballah is funded not just by Iran but by networks of Lebanese and international individuals and businesses.

The "US Hezbollah International Financing Prevention Act of 2015" aimed to sever the group's funding routes around the world. In July, Republican and Democratic US lawmakers proposed amendments to strengthen it.

Banking sources said the 2017 amendments do not significantly tighten the original legislation - the initial shock of which Lebanon has absorbed - and are unlikely to have a major impact if they become law.

"So far Lebanese authorities have been successful in limiting the fall-out of US sanctions on Lebanese banks," Mathias Angonin, an analyst at Moody's rating agency, told Reuters.