How Hezbollah Funds Its Operations: A Deep Dive

Hezbollah, the powerful Shiite militant group based in Lebanon, is facing renewed scrutiny over its financial funding sources, particularly following Israeli airstrikes late last year. The group, which holds significant political influence in Lebanon and maintains strong ties with Iran, has long been labeled a terrorist organization by Israel and many Western nations. Its emergence in the 1980s was marked by direct confrontation with Israel after the latter's occupation of southern Lebanon, which had been part of the Lebanese Civil War (1975-1990).

In October 2024, Israel Defense Forces (IDF) launched airstrikes targeting several branches of Hezbollah’s alleged financial institution, Al-Qard Al-Hassan (AQAH), accusing it of facilitating Hezbollah's operations. AQAH, however, strongly denies these accusations, claiming to be a civilian organization providing small loans to Lebanese citizens. Despite this, the group has been the subject of long-standing accusations of money laundering, with reports suggesting it plays a central role in Hezbollah’s financial network.

Hezbollah’s primary financier remains Iran, which, through its elite Islamic Revolutionary Guard Corps (IRGC), has provided significant military and financial support since the group’s inception. The United States estimated in 2022 that Iran funds Hezbollah to the tune of $700 million annually. Hassan Nasrallah, Hezbollah’s late leader, had previously acknowledged the role of Iranian aid in supporting the group’s operational costs, which include salaries, food, water, and military equipment.

While Iran’s financial assistance has been crucial to Hezbollah’s operations, the group has diversified its funding sources in recent years. Due to increasing international sanctions on Iran, the group has increasingly relied on illicit financial activities, including money laundering and illegal trade, according to experts like Hanin Ghaddar from the Washington Institute for Near East Policy. These activities include trafficking in narcotics and diamonds, and even gaining revenue through Africa and South America, including links to Venezuela’s illicit trade networks.

AQAH is integral to Hezbollah’s financial network, offering micro-loans in exchange for gold or other collateral and helping the group integrate into Lebanon’s financial system. Despite being sanctioned by the U.S. in 2007, it continues to operate under the guise of a humanitarian aid institution. AQAH has repeatedly denied its financial activities are linked to terrorism, instead emphasizing its mission to provide services to Hezbollah’s stronghold regions.

In addition to these activities, Hezbollah has also leveraged Lebanon’s state contracts and trade routes, such as the shipment of diesel fuel to Syria, to generate revenue. Reports suggest the group earned an estimated $300 million a month from fuel exports until the regime change in Syria. Furthermore, Hezbollah has been implicated in the Captagon drug trade, a multibillion-dollar illegal operation tied to the region’s instability.

Technological advancements have also provided new avenues for Hezbollah’s financial dealings. In 2023, Israel’s Ministry of Defense uncovered digital currencies linked to the group, further complicating efforts to trace its financial movements. Meanwhile, the U.S. Treasury has continued to target Lebanese entities accused of facilitating Hezbollah’s operations, including a currency exchange in Lebanon that allegedly helped the group convert funds from Iranian oil sales.