Caught in the middle of a bitter Saudi-Iran rivalry, worries are growing about the Lebanese economy's outlook. 

Growth has slowed to just over two percent a year from an average of eight percent before the war in Syria, and some Lebanese politicians and bankers have raised fears of a Qatar-style economic blockade after the recent resignation of Lebanese Prime Minister Saad Hariri in Riyadh under mysterious circumstances.

Hariri reportedly warned of potential sanctions and a danger to the livelihoods of hundreds of thousands of Lebanese living in the Gulf. According to him, sanctions could be avoided if Hezbollah, the Iran-backed group which is part of Lebanon's ruling coalition, would stop meddling in regional conflicts, particularly the war in Yemen.

About 400,000 Lebanese work in the Gulf region and remittances estimated at $7-8bn a year are a vital source of cash to keep the Lebanese economy afloat and the indebted government functioning.

If this escalates, this is going to be a lose, lose, lose situation.

Sami Atallah, director of the Lebanese Center for Policy Studies

Possible Arab sanctions against Lebanon could include a ban on flights and visas, as well as exports and transfer of remittances.

"This is very significant on many levels, in terms of sending remittances to Lebanon's economy - which are deeply needed - which are important to the macroeconomic situation. They are also very important to people who are here, people who actually receive these remittances," Sami Atallah, the director of the Lebanese Center For Policy Studies in Beirut, told Counting the Cost.

In the past, Saudi Arabia has channelled billions of dollars to Lebanon to help its reconstruction after the country's civil war and following Israeli incursions into south Lebanon.

But now Riyadh appears ready to seriously harm Lebanon's economy - which could weaken Hezbollah's standing at home and in the region - should its demands not be met.

"It is hard to predict [if there will be economic sanctions imposed on Lebanon]. We are not sure to what level this may escalate. Events are unfolding on a daily basis, and we are monitoring them to see if there are going to be certain economic measures that could, in fact, influence the Lebanese government," says Atallah.

"If there are going to be any sanctions, this is going to affect Lebanon as a whole. It is going to affect the whole country. It is unlikely that these sanctions will be able to distinguish between those who support Hezbollah and those who do not. Most people will be hurt by this, if not all. There will be major collateral damage."

"Lebanon is stuck between two regional powers with different objectives that they're trying to deal with."

Source: Al Jazeera