Is Hezbollah Going Broke?

A man rides his bicycle past a poster showing President Bashar al-Assad and Hassan Nasrallah, the leader of Hezbollah, in Sayeda Zainab, Syria, March 20, 2014. Sergey Ponomarev/The New York Times/Redux

At a quick glance, the limestone hills of southern Lebanon don't seem like a good place to invest in real estate. Located near the country's volatile border with Israel, this narrow slice of land has suffered through a 15-year civil war and several devastating battles with the Jewish state. But over the past few years, about a dozen new villas have sprouted along the narrow roads near the small town of Jouaiya, about 60 miles from Beirut. These opulent homes seem out of place amid the olive groves and fields of grazing sheep, dilapidated farms and dirt roads. A few have orange-tiled roofs, neoclassical columns and large courtyard walls, while others resemble gaudy Chinese pagodas.

Locals say the mansions, some still under construction, belong to middle- and high-level members of Hezbollah, the Shiite militant and political group. The United States and Israel consider Hezbollah a terrorist organization, and the European Union has given the same designation to the group's armed wing. But over the past 30 years, Lebanon's Party of God has come to dominate both politics and security in this nation of under 5 million, thanks in part to Iranian largesse, a wealthy foreign diaspora and some shrewd political gamesmanship. It's also helped many Shiites, a historically impoverished sect in Lebanon, get rich.

But the good times may now be over for Hezbollah and its supporters. Iranian oil profits, which have lubricated the proxy group with hundreds of millions of dollars a year, appear to be drying up. Western sanctions, imposed on Tehran due to its nuclear program, coupled with falling oil prices, have emptied the coffers of the Islamic Republic. Crude now trades at less than $50 per barrel, down from more than $100 in June, due to lower global demand, oversupply in the Middle East and the rise of the American fracking industry. Meanwhile, Iran has reportedly seen its oil exports fall by 60 percent since 2011, and the country's budget deficit has climbed to an astounding $9 billion.

The result, according to Hezbollah officials and observers close to the party, is that Iran is slashing the amount of money it's giving to its Lebanese ally. "There are many members…who are now paid their wages much later," says Khalil, a 40-something Hezbollah commander, who asked to use a pseudonym because he's not authorized to speak to the media. "Some are getting less money than before."

This isn't the first time the party has run into cash flow problems. In the summer of 2008, oil peaked at $147 per barrel, before bottoming out that winter at $32, creating a difficult year for Iran's most powerful proxy. As a result, analysts estimate Tehran cut its funding to Hezbollah roughly in half. But the cuts now, Khalil says, are far more severe. A hardened veteran of the Syrian war, he remains defiant and optimistic, even as he braces for the worst. "We are used to having a black cloud over us," he says. "And this one will pass, too. Now we will begin to see who stands with us, not only for the money and other support."

Yet Hezbollah's budget woes come at perhaps the worst possible time for the organization. The group recently uncovered a Mossad spy high in its ranks, and its militant wing has reportedly lost nearly 1,000 fighters in the Syrian civil war. As Hezbollah takes on a growing role in the battle against ISIS and Syrian rebel groups, that conflict further threatens to strain its resources. Which is why Matthew Levitt, an analyst at the Washington Institute for Near East Policy in Washington, D.C., says this oil shock is the most significant that the group has ever felt.

With oil forecasters predicting a long run of prices for crude, Hezbollah's cuts are likely to become extreme. The military budget shouldn't be affected, at least not yet. But the slowdown could anger the group's foot soldiers in Syria. Already, some complain that higher-ups and their relatives are inured to the daily hardships of war. Umm Ayman, a middle-aged widow and resident of the Dahiyeh, Beirut's southern suburbs, from which Hezbollah draws much of its support, has a 17-year-old son fighting in Syria. In recent weeks, she says, Hezbollah has cut support to the relatives of soldiers.

"Now our family only gets half of the medical care and medicine that we need," she says. "This used to come every month without any problems, but today we are suffering."

She's not the only one. As critics continue to blast the party for the war in Syria, the slowdown has also led to a gradual reduction in social services, along with payments to Lebanese political allies. One Druze politician allied with Hezbollah used to receive $60,000 per month from the group, according to Khalil and a Lebanese political source close to the party. Today he gets just $20,000 each month. Both claim that another Lebanese politician used to get a monthly stipend of $40,000 but now must settle for $15,000.

"I think Hezbollah is very concerned," says Levitt. "When you position yourself as the party which fills these needs, expectations grow." Much like those mansions perched in the hills along the border.