- [Julie] Lebanon is still suffering

from the impact of this massive explosion

that ripped through theBeirut port last August.

The death and damageto the Lebanese capital

has devastated an alreadyfloundering economy

and could contributeto a potential takeover

by the terror group, Hezbollah.

- Lebanon is in a very, very dire straits.

The political arena is dysfunctional;

therefore, the statepractically is dysfunctional.

There's no budget.

Their unemployment is 40, 50, 60%.

Nobody really knows.

- [Julie] Skyrocketing food prices,

crippling fuel shortages,

and widespread power outages.

According to the World Bank,more than half the population

now lives under the poverty line.

- Actually, the whole statesinks into a situation

in which nothing works.

People are losing hope.

They don't know where tostart fixing the situation.

- [Julie] Lebanon's government resigned

as a result of theblast, and since October,

Prime Minister-designate Saad Hariri

has failed to form a new government.

In a recent visit to Lebanon,a US State Department official

called on Lebanese politiciansto end the bickering.

- And those who continueto obstruct progress

on the reform agendajeopardize their relationship

with the United States and our partners

and open themselves upto punitive actions.

And those who facilitate progress

can be assured of our strong support.

- [Julie] Decades ago,

Lebanon was an international destination.

Christians and Muslims got along,

while Beirut became known asthe Paris of the Middle East.

Hariri wants a cabinet of experts

who can begin lifting Lebanonout of its economic crisis

with a dream of past glory.

Other groups, including Hezbollah,

want another direction, whichcould make things even worse.

- Hezbollah's accumulation ofdangerous weapons, smuggling,

and other illicit and corrupt activities

undermine legitimate state institutions.

They rob the Lebanese the ability to build

a peaceful and prosperous country,

and it's Iran that is fueling

and financing this challenge to the state

and its distortion ofLebanese political life.

- [Julie] Middle East expertDr. Mordechai Kedar says

a complicating factoris the growing desire

for the army to step inand save the country.

The problem: Hezbollahis stronger than the army

and has its peoplethroughout the army's ranks

from top to bottom.

- An organization, which actuallyis a terror organization,

now many people expect thatHezbollah will take the country

in order to feed the people,in order to bring some remedy.

- [Julie] Kedar says inaddition to military power,

Hezbollah has become aneconomic power as well.

- Hezbollah is an economic empire

because Hezbollah hashundreds of companies

in Iraq, in Syria, andthey deal with everything,

with oil and infrastructureand construction

and transportation.

- [Julie] Ironically,Hezbollah gets the blame

for Lebanon's most recent decline.

- Hezbollah definitelybrought Lebanon to the abyss

and now everybody expectsHezbollah to save Lebanon

from falling into the abyss.

So, this is some kind of ambiguity,

but there is nobody whocan replace Hezbollah

and there is nobody whocan chase Hezbollah out.

- [Julie] But Professor Shaul Chorev

of the Haifa Maritime andPolicy Research Center

sees a possible ray of hope.

That's because of ongoing talksbetween Israel and Lebanon

over maritime boundaries.

Chorev believes an agreementbetween the two countries

could keep Hezbollah in check.

- When we'll reach such an agreement,

it will signal to theinternational companies,

who are dealing withexploration of gas fields

and development of gas fields,that this area is stable.

It will improve Lebanese condition

and it will signal the people in Lebanon

that confrontation with Israelis not giving them any edge.

- [Julie] Kedar, however,doesn't see much chance

of derailing Hezbollah,especially with Israel

as part of the solution.

- First of all, you haveto get rid of Hezbollah

and Hezbollah has a very powerful army.

You don't mess with such an army.

Secondly, don't forgetthat Israel once tried

to install new order in Lebanonin 1982 and Israel failed.

Today, it is much harder.

- [Julie] And Iran couldn't be happier.

- Hezbollah takes Lebanon over,

this is actually thefulfillment of an Iranian dream,

that their proxy will notonly be a military militia,

but it will also become a state,

and this is a major successfor the mullah regime in Iran.

- [Julie] And with more than150,000 Hezbollah rockets

aimed at Israel, such ascenario wouldn't be good

for the Jewish state either.

Julie Stahl, CBN News, Jerusalem.