By David Gardner It is midnight on Saturday in downtown Beirut and the Buddha Bar is heaving. A cavernous copy of its Parisian namesake, with a 20ft-high Buddha statue as its presiding spirit, the bar is just the latest incarnation of the Lebanese craving for novelty and gift for fun. The son of a Maronite Christian warlord assassinated, allegedly by the Syrians, during the 1975-90 civil war, thrusts his way through the throng to the bar with the help of a bodyguard out of central casting: black T-shirt, tailored leather jacket, wrap-around shades and designer stubble. A vast Johnnie Walker whisky icon towers over the bar itself, causing one regular patron to observe that,

Beirut, it would appear, is back in business, restored to its pre-war position as the playground of the Arab world.

The city’s downtown area, reduced to rubble by 16 years of inter-communal warfare, has been rebuilt. Though a few shell-shattered hulks, such as the old Holiday Inn, still scar the skyline, the core of the city is now resplendent with restored or faux-Ottoman buildings, gleaming sandstone, limestone and marble, recreated churches and mosques, and streets of bars, cafes and restaurants, the sweet smoke of hubble-bubble pipes wafting between them.

Blocks of $5m apartments stand back from a shoreline re-sculpted by landfill to accommodate their owners’ yachts. The hotels are still full at the end of a record year for tourism, with tanned guests eagerly discussing the prospects for a good skiing season in the nearby mountains that rise dramatically from the Levantine littoral.

The wine-producers of the fertile valley that lies between Mount Lebanon and the Anti-Lebanon range that dips down to Syria – the Bekaa hitherto best known for the quality of its hashish and as a stronghold of the militant Shia Islamist movement Hizbollah – are struggling to meet demand. In few cities of the world will you see so many trophy cars, not just top-of-the range Mercedes, BMWs and Porsches, but Lamborghinis, Maseratis and Ferraris, racing homicidally on the cramped highways, as though their owners had hit on a novel means to continue the civil war.

For the first time since before the war, Europeans can be seen in numbers. The international music festivals at Baalbeck, Byblos and Beiteddine, set in Roman, Greek and Lebanese Ottoman splendour, play to full houses. For the Gulf Arabs who make up the bulk of Lebanon’s visitors the city has other allures. One hotel, punctilious in its service even by Lebanon’s exacting standards, allows a catalogue of call-girls to circulate for its clients’ convenience. Even a senior minister cannot resist remarking to a visitor that Beirut will always have an edge on rival destinations in the region because of the famed beauty of its women.

The Lebanese themselves party hard. At Crystal, another over-the-top bar currently in vogue, conspicuously consuming socialites and scions of the political elite vie with each other in nightly auctions of Champagne costing thousands of dollars. At 1975, a bizarre addition to Beiruti nightlife, a bar with sandbags, newly bullet-pocked walls and waiters in designer fatigues offers the amnesiac Lebanese a tasteless time-capsule of the year war broke out.

”It’s like Wall Street at its most excessive in the late 1980s and 90s, but here they do it harder,” says one keen observer of local social mores. “But it’s the same crowd of people, definitely not more than 50,000 or so, that keep all this spinning; it’s really just a revolving door.”

Behind this splendid facade, however, a politically unreconstructed Lebanon is lurching towards crisis, weighed down by huge debts and trapped in a looming confrontation between western powers and Syria, which has not just dominated but micro-managed the country’s affairs since the war it helped bring to an end. Nor has Beirut anything like recaptured its pre-war pre-eminence.

Before the fighting started in 1975, Beirut had been the region’s unchallenged entrepot. Reaching back almost into pre-history, to the Phoenicians and beyond, the coastal settlements of the Levant were an entrepreneurial bridge between the civilisations emerging along the Nile and between the banks of the Tigris and the Euphrates. It has been well said that the flag of modern Lebanon should contain a dollar sign instead of a cedar tree, for it is by vocation a merchant republic.

Before its descent into tribal war, its gifted bankers recycled petrodollars seeking a remunerative home in the west and its canny middlemen reeled in westerners seeking to sell anything from technology to arms to the east. Beyond the cliches about the “lost Paris of the Orient” or the “Switzerland of the Middle East”, it was an authentic, east-west interface, facilitated by a mixed Muslim-Christian culture, laid out in an intricate Byzantine mosaic of its 18 different religious sects.

As well as being the financial and services hub of the region, it was its media and publishing capital, as well as an education centre. It was freewheeling, more or less democratic and thus a magnet for the emigres and exiles spat out by the Arab autocracies surrounding it – and for the Israeli state to its south that needed to monitor them. These elements also combined to make it a den of regional intrigue, listening post as well as playground for hundreds of international journalists and spies – somewhere between Bogart’s Casablanca and Batista’s Havana by way of Noriega’s Panama.

In a delightful memoir of the celebrated St George Hotel’s bar* – “the centre of the centre of the Middle East” – the Palestinian writer Said Aburish recaptures how notorious spies such as Kim Philby and Archie and Kermit Roosevelt sat drinking cheek-by-jowl with regional potentates, oilmen, arms-dealers and reporters (from one of whom, New York Times correspondent Sam Pope Brewer, Philby stole his wife Eleanor), while plots were hatched and coups planned. The Buddha Bar, not to mention Crystal and 1975, has a long way to catch up.

Glittering though Beirut Redux now looks, it is in substance a shadow of its former self. Then, the city and its preoccupations were regional and international. Now, even though its people speak several languages and are well-travelled, it is pretentious and provincial – international mostly in the sense that it risks being the meat in the sandwich between a seemingly unreformable Ba’athist regime in Syria and a regionally aggressive US, which on this occasion is being egged on by France, the main holdout against President George W. Bush’s war of choice against Saddam Hussein’s Ba’athist tyranny in Iraq.

The Lebanese emerged from the long years of bloodletting somewhat surprised to find they still had a country. Despite the destruction of cities and villages, the 145,000 dead and perhaps double that number wounded, 17,400 “disappeared”, 3,614 car-bombs and the retreat into homogeneous sectarian communities, there was a palpable will among ordinary Lebanese of nearly all persuasions to try to find a new way forward. Alas, they have yet to find it.

One of the reasons for that is Syria, and what one Lebanese political leader characterises as its creeping Anschluss to absorb a country no pan-Syrian or pan-Arab nationalist has ever really accepted as a stand-alone entity. Another, equally important, reason is the craven corruption of much of the Lebanese political class, who interlock as clients with the Syrian nomenklatura in their shared pillage of what should be a much more vibrant economy.

Lebanon is, indeed, a geopolitical oddity, something that has a lot to do with its topography. In a region that abounds with religious sects spawned by millennia of doctrinal controversy, Mount Lebanon has for centuries offered a secure fastness for the most heterodox among them. The Maronite Christians, aligned with the Catholic Church and originally from Syria’s Orontes valley, fled to the mountains to escape Byzantine (Christian) persecution – not, as their subsequent myth-making had it, Muslim oppression. The Druze – whose precise religious beliefs are known only to their elders and initiates but who appear to derive from the heterodox Shi’ism associated with the Fatimid Muslim dynasty a millennium ago – also found refuge in Mount Lebanon. These were the original core communities of the Lebanon, to be joined by Sunni and Shia Muslims in the coastal plains and the valleys, as well as by Greek Christians, Orthodox and Catholic, Armenians (Catholic and Orthodox), Chaldeans et al.

The Sunni prospered under the Ottomans who, nevertheless, ruled by proxy through a mountain emirate of almost interchangeable Maronite and Druze notables. The Shia, originally inhabitants of the mountain as well as the valley, were gradually driven south.

The Maronites and the Druze, however, were structurally tribal and highly fissiparous. The earliest known document referring to the Maronites is a papal bull from 1216 absolving the losers in a civil war provoked by the allegiance of part of the community to the Franks, or Crusaders. The Druze were also known to hedge their bets. In the mid-13th century, the Druze Buhturid dynasty had forces fighting on both sides when the Mamluks drove the Mongols out of Syria at the battle of Ayn Jalut near Lake Tiberias.**

The pivotal modern change came as a result of the Maronite-Druze civil war of the mid-19th century. That sucked in European powers led by the French who, in 1920, carved out “Greater Lebanon” from post-Ottoman Syria. An ostensibly “Christian” triumph, this added to Mount Lebanon territory and peoples who were not Christian. That, in turn, necessitated the National Pact of 1943 to launch Lebanon’s independence. This prescribed an inter-communal power structure extrapolated from the last ever census taken in 1932, which gave a proportional majority and political predominance to the Christians on the arithmetically assisted assumption of a 6-5 population balance in their favour.

It was a bluff, but a magnificent bluff, that enabled the Lebanese to revel in their heterogeneity for three golden decades. What brought it to an end is as much disputed as the fanciful history each sect has manufactured to embellish its own antecedents. The seeds of conflict – within as well as between each community – were visibly there long before a shot was fired.

In the then-ruling Maronites’ view, the arrival of the Palestine Liberation Organisation – ejected from Jordan after losing the 1970-71 Black September war against the late King Hussein – tipped the delicate confessional balance unacceptably in favour of the Muslims. The PLO did indeed behave with all the arrogance of a state-within-the (extremely fragile)-state, and invited Israel’s retribution by using south Lebanon as a base to confront its enemy. But Muslims, and especially the Shia, had long been pressing for a fairer share of power, and the PLO only joined the Muslim-Druze alliance after Maronite militias had launched their attempt to reaffirm Christian hegemony.

Syria entered the fray as a result, to prevent Christian defeat, abort the emergence of a Palestinian stronghold on its border, and reassert its pan-Arab (as well as pan-Syrian) credentials.

The conflict moved from the cities to the mountains, from the hotel towers to the refugee camps. The lethal kaleidoscope of sectarian alliances kept shifting and re-combining, amid fathomless sub-plots of intra-sect vendettas – the Maronites were especially prone to slaughtering each other. Saudis and Syrians, Iraqis and Libyans, Iranians and Israelis used Beirut as the address to communicate with each other by car-bomb and as the arena for proxy war, as western powers including the US and France blundered in only to be truck-bombed out. The idea of Lebanon went up in smoke. The long war and Israel’s invasion in 1982 – when the then defence minister Ariel Sharon almost destroyed West Beirut as he sought to crush the PLO – shattered the country into cantonised fragments. When the shooting eventually stopped, Syria was left holding most of the pieces.

The Lebanese republic was supposed to be relaunched by a new national entente – the 1989 Taif Accord. This rearranged the confessional balance to give Muslims and Christians parity in parliament, where a Shia speaker presides, and to transfer executive power from a presidency still held by the Maronites to a Sunni Muslim prime minister. Most militias were disbanded and partly folded into a new national army, while Syria was to redeploy its troops to its border and eventually leave. In practice, Israel’s continuing occupation of south Lebanon gave Syria an alibi to stay. Damascus licensed Hizbollah, arguably the most effective guerrilla movement in the world, as the spearhead of resistance to the Israelis. It then set about recreating Lebanon in its own image, the better to loot it.

Far from withdrawing, Damascus reconsecrated the pre-war sectarian system in a way designed to highlight its own role as indispensable arbiter and bulwark against a relapse into conflict. It cultivated political clients, including warlords and rival forces within each community, using lucrative patronage and divide-and-rule tactics to prevent the emergence of a cross-confessional national force. Samir Franjieh, a left-of-centre opposition leader from a leading Maronite clan, puts it this way: “The state should be based on all rights for individuals and all guarantees for [the 18] communities. What we have now is all rights vested in the communities but usurped by their leaders.”

The arrival of Rafiq Hariri, a billionaire construction magnate who has spread into banking and media, raised hopes that at last a Lebanese champion would articulate a national project to revive the country. Hariri, a Sunni who made his money in Saudi Arabia and helped negotiate an end to the war, has been prime minister for 12 of the past 14 years. He resigned in October after Syria forced him, his cabinet and parliament to change the constitution so that the ineffectual but pliant President Emile Lahoud could stay on another three years.

But Hariri’s advent in 1992 raised great expectations. The currency stabilised, Lebanon’s credit was restored, and the prime minister mobilised his network of international contacts, not only in the Gulf but among European leaders such as Jacques Chirac and Silvio Berlusconi. During the war, “infrastructure” meant little more than holding the high ground, a few power generators and each militia having its own port. Now there was a plan to recreate central Beirut, and Solidere, a company part-owned by Hariri, would do it. The core idea was to make the city the region’s uncontested capital market.

But, while Hariri has rebuilt much of Lebanon, he has left it politically unreconstructed. He and his friends complain that Syria meddled from the first, leaving them little margin for manoeuvre. The prime minister’s critics are harsher. Michel Moawad, son of Rene Moawad, the president assassinated in a bombing widely attributed to Syria as the war drew to an end in 1989, says: “The Syrians employ Hariri as a marketing director. He’s good, but the problem is their system is no longer marketable.”

The cost of reconstruction was huge, and has saddled Lebanon with a debt of nearly $35bn, almost twice its gross domestic product. The lifeblood of remittances repatriated by the Lebanese diaspora, perhaps four times as numerous as the roughly 4m who live in the country, has started to dry up. Current prosperity depends heavily on Beirut as an alternative destination for Gulf Arabs seeking to avoid visa problems in the west after 9/11.

With its banks, mostly smallish family affairs, growing fat and lazy on government borrowing, Beirut is losing ground to rival financial centres such as Dubai and Bahrain. Its stock market remains tiny, dominated by the banks and Solidere. The regional media business is also heading for Dubai and Qatar, and Lebanon could even start losing its niche in areas such as education and health to these city states, whose dynamism, ironically, is partly powered by an inflow of Lebanese emigres. A lot of energy pulsing through Beirut, by contrast, is the energy of dissipation. Lebanon’s descent into a miasma of corruption and clientilism under Syrian tutelage, the parcelling out of post-war institutions as booty for the warlords, and the paralysis of government caused by the president, prime minister and speaker vying together as though they were Roman triumvirs, are all part of the reason.

”Twelve years after the start of reconstruction you come to the realisation you’ve rebuilt some of the infrastructure – by no means all and by no means in all regions – at a very high cost,” says Nasser Saidi, a former economy minister. “Very little effort went into the building of institutions or into learning the lessons of the war and making people accountable for what they did. Maybe there were too many people to punish, but that doesn’t mean you should reward them by putting them in power. It’s obvious we could have built something better without them. It’s not just the high debt and so on, it’s that there’s no participation in political life.”

Each community, by contrast, has carved out a share of the state. The Council of the South to develop southern Lebanon and the national electricity company, for instance, are fiefs of Amal, the Shia militia-turned-party led by Nabih Berri, Syrian ally and speaker of parliament. The ministry of the displaced is the preserve of the Druze, the main reconstruction council of the Sunnis. One party levies surtaxes of up to $200 for each container coming through the port of Beirut, a racket worth an estimated $350m it shares with its patrons in Syria’s intelligence services and their sorcerer’s apprentices in the Lebanese security services. Since Bashar al-Assad succeeded his father Hafez al-Assad as Syria’s president four years ago, those in charge in Damascus – including Ghazi Kenaan, the military intelligence chief who ran Lebanon for 20 years – appear most interested in the economics of Lebanon.

”This is no more than a giant racket,” says one opposition leader. “Under Hafez al-Assad Syria saw Lebanon as political patrimony to be used in the larger Middle East game. But these people are no longer even interested in the politics.”

There is a certain whiff of class animus in all this, of patrician scorn towards new money grubbily acquired and contempt towards ostentation because, although the civil war had no decisive outcome, it certainly engendered social mobility.

”One reading of the war is that it was a social revolution,” says Samir Franjieh. “It was not strictly speaking about poverty, but about relative poverty and relative wealth – it was an attempt to settle the question of rank and standing in society. The problem is that these people know they lack legitimacy and the Syrians know that and find it easy to play on their sense of insecurity.”

Such is their greed that Lebanon does worse than Syria in the Transparency International Corruption Perceptions Index, where last year it dropped 19 positions to rank 97th among 146 countries, tied with Algeria, Nicaragua and Serbia. “There is no normal economic relationship between Syria and Lebanon,” says Walid Jumblatt, the hitherto Syrian-allied leader of the Druze and of the opposition. “It’s their mafias and local clients overmilking our cow.” Jumblatt was speaking at Mukhtara, his ancestral palace in the Chouf mountains, transformed into an armed camp after the October car-bomb attack on his close ally Marwan Hamade, another former economy minister who pulled out of the government in protest at Syria’s decision to extend President Lahoud’s mandate. Jumblatt’s father, Kamal, leader of the Muslim-Left alliance in the war, was assassinated in 1976 just as the Syrian army was beginning its push into Lebanon. The son, by denouncing the Syria-Lebanon set-up as police states run by clans and mafias, risks a similar fate.

Damascus accuses him and Hariri of inciting France to ally with the US in pushing Resolution 1559 through the UN Security Council last September. This calls on Syria to end its meddling in Lebanese politics, withdraw its remaining troops, and for the disarmament of remaining militias, meaning Hizbollah.

Jumblatt says: “I originally proposed they keep their troops here as long as Israel occupied any of the country but that they stop interfering in Lebanese affairs. But they just can’t do it. Now they’re accusing me of colluding with Hariri to provoke the French into 1559. According to them, Marwan Hamade actually wrote [the resolution] in Sardinia [Hariri’s holiday retreat]. I appear to be Public Enemy Number One and we have gone backwards 28 years [to his father’s murder]. Now they’re like Bush – you’re either with us or against us.”

Jumblatt and Hamade’s real crime, however, has been to foster cross-communal unity. Three years ago the Druze leader received the Maronite Patriarch, Cardinal Nasrallah Sfeir, in a historic reconciliation between the two communities that devolved into an alliance between Jumblatt’s parliamentary bloc and the mainstream Christian opposition. That was bad enough from the Syrians’ point of view, but they got really spooked once Hamade became the link-man in the emerging alliance between Hariri’s powerful Sunni bloc and the opposition. As Nayla Moawad, widow of the president who died for doing much the same thing, puts it: “The great taboo for the Syrians is to have any bridge between the communities.”

Four different government and opposition sources, moreover, confirm that the Syrian leadership reacted implacably to Lebanese hostility to its enforced extension of President Lahoud’s mandate. It said it would burn Beirut rather than leave it: “We destroyed the country once and we can do it again – we will never allow ourselves to be pushed out,” was the precise threat.

While Syria’s methods in Lebanon are crude, its diplomacy has been a fiasco. In late 2002, after giving its assent to the first UN Security Council Resolution 1441 on Saddam Hussein’s regime, Damascus had the opportunity to build bridges to the Americans and reinforce links with the Europeans, preparing what Beirut newspaper publisher Jamil Mroue calls “a soft landing for its political system”. Instead, it stands accused by Washington – rightly or wrongly – of allowing Saddam loyalists to foment insurgency in Iraq from Syrian territory. The neo-conservative cabals in Washington that helped crank up support for the Iraq war are now baying for Bashar al-Assad’s blood.

”They can’t see the American train coming down the track; they think it’s like in the desert, a mirage,” says one Beirut politician. “They are walking down the same track as Saddam Hussein.”

But what ranks as an almost gratuitous act of political vandalism was the way Syria burnt its bridges with France and Jacques Chirac. This relationship, facilitated by Hariri, was Damascus’s only real window on the world. Yet the Ba’athist leadership not only rebuffed insistent French suggestions it withdraw from Lebanon, Assad simply ignored letters from Chirac, including one lobbying for a $700m gas contract that instead went to a little known consortium with ties to the nomenklatura. “This is the inebriation of corruption,” says one person familiar with the details.

”They did nothing to prevent [Resolution] 1559,” says an indignant former Syrian ally. “What the extremist Christians failed to do in two decades, to internationalise the Lebanese situation, these people managed to do in two days.” Trapped in its time warp, Syria has floated the idea of reviving peace talks with Israel. This, after all, had worked in the past. As long as it was negotiating with Israel during the 1990s, no one but the Lebanese raised the question of the Syrian occupation. Some keen observers of Syria now suspect Damascus may withdraw its remaining roughly 14,000 troops – and then foment unrest to demonstrate how indispensable Syria’s stabilising presence was. Sheikh Naim Qassem, number two in the leadership of Syria-aligned Hizbollah, alludes rhetorically to this scenario. “Are they [the Americans] ready for the consequences of [a Syrian] withdrawal? If they corner Syria, maybe it will make them a present [by leaving Lebanon].” Brave words. But Syria has managed the improbable diplomatic feat of pushing France and the US together. That makes Syria more “doable” than Iran, much the greater preoccupation in Washington but a much harder nut to crack.

Whatever happens, this looks like a turning point for a still ambitious and hopeful Beirut and a fearful if reckless Damascus. As Mroue puts it: “The situation is a bit like a huge boil: it’s ugly and it’s livid but it’s only when it bursts that you’ll know whether it’s benign or malignant. Either way, this is the end of an era.”

David Gardner is an FT leader writer.

* “The St George Hotel Bar: International Intrigue in Old Beirut” by Said K. Aburish (Bloomsbury 1989);

** “A House of Many Mansions: The History of Lebanon Reconsidered” by Kamal Salibi (I.B. Tauris 1988).