The decision by Lebanon's central bank to apply a US law targeting finances of Hezbollah has caused concern in the country over a potential exacerbation of political and sectarian rifts.

The Hezbollah International Financing Prevention Act (HIFPA), which was passed in December, threatens sanctions and account closures against anyone who finances Hezbollah, the Lebanese Shia group, in a significant way.

Riad Salameh, governor of the central bank, said on Tuesday the US law "must be applied universally and in Lebanon, making the circular no. 137 issued by the Central Bank of Lebanon on May 3, 2016 a legal obligation for the Lebanese".

Comfortable with circular

Ali Hassan Khalil, Lebanon's finance minister and member of the Hezbollah-allied Amal, has said he is "comfortable" with the central bank's statement regarding the application of the law.

Lebanon's political scene is sharply polarised, with the government split roughly between a bloc led by the Hezbollah and another headed by the Sunni Hariri bloc.

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Despite being classified as a "terrorist group" by the US, Hezbollah enjoys strong support from the Lebanese Shia community, especially after its military wing played a major role in forcing Israel to withdraw from southern Lebanon in 2000.

Hezbollah initially responded to Salameh's statements by saying the application of the law would lead to "bankruptcy" and a rift between "a large segment of the Lebanese population and the banks".

However, Salameh's assurance that the central bank will approve requests for the closure of any Hezbollah-affiliated accounts appears to have eased the group's concerns for now.

Ghassan Ayyash, a former deputy-governor of the central bank, says the dispute between the bank and Hezbollah is specifically about the way the law is applied.

"Hezbollah is not rejecting the essence of the law. It merely wants to make sure that the law is not expanded. They say that there have been closures of accounts that did not need to be closed. Lebanon's public is scared of this dangerous step," Ayyash told Al Jazeera.

Its members include government ministers, legislators and local councillors.

Political implications

According to reports, since 2001 the US has put more than 100 individuals and entities affiliated with Hezbollah on sanctions lists under existing anti-terrorism funding legislation.

While HIFPA is aimed at Hezbollah specifically, Ayyash says that "as long as the law is not generalised", Lebanese politics will not be affected.

"The two people who are helping apply the law are a Maronite Christian and a Shia - Riad Salameh and Ali Hassan Khalil. Since they have both said they are supportive of the law, I do not see this issue taking a sectarian turn," he said.

Salameh has said that banks which intend to close accounts of individuals or organisations considered to be in breach of the US law must provide justification for that decision, and wait for a response from the Central Bank's Special Investigation Committee, which "enjoys independence".


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"It is not possible to guarantee credit stability if [the central bank] does not implement the US law," he says.

"If we do not do that ... our banking sector could become isolated from the world."

Ayyash believes that if Lebanon refuses to comply with the law, the country would face problems considering the Lebanese economy's reliance on the US dollar.

"If the US confronted a bank in Lebanon on the grounds that it was violating the law and should be punished, then the Lebanese economy can no longer play its role," he said.

"This, in my opinion, is the real danger to the Lebanese economy."

Source: Al Jazeera and agencies