After a period of relative calm on Israel’s northern border, the past two weeks have seen a sudden spate of attacks and counterattacks between Israel and Hezbollah. The escalation began on Aug. 24 when Israeli Defense Forces thwarted a planned Iranian and Hezbollah drone attack from the Golan Heights. The IDF’s strike killed two Iranian-trained Hezbollah operatives in their compound near Damascus. Israel reportedly followed this operation with another, hitting components of Hezbollah’s missile infrastructure in the heart of its Beirut stronghold. Hezbollah retaliated this past Sunday by attacking an IDF vehicle in northern Israel, prompting a volley of Israeli artillery fire into southern Lebanon.The dust is still clearing, but what’s clear is that Israel’s operation reflects a new security footing towards Hezbollah that is being put into effect at the same time the U.S. increases pressure on the group on other fronts. All told, it’s plain that August did not end auspiciously for Hezbollah. First, Israel seemingly resumed operations in Lebanon against Hezbollah and Iranian missile capabilities. Then shortly after, the U.S. Treasury Department sanctioned the Lebanon-based Jammal Trust Bank, which it described as Hezbollah’s “bank of choice.” These actions mark an important shift in both Israeli and U.S. policies, which is likely to deepen Hezbollah’s strategic dilemma.For the past decade, Hezbollah’s strategy has relied on two key conditions both of which now appear to be coming to an end. The first condition was that the U.S. would continue to pay into the myth of an independent Lebanese state that exists separate and autonomous from the terror group. That indulgence has granted Hezbollah the critical freedom to operate through the auspices of Lebanese institutions like the armed forces and banking system, without facing penalty from the U.S. The second condition on which Hezbollah relied, an outgrowth of Syria’s civil war, was Israel’s general avoidance of conducting military operations inside Lebanese territory. Events over the past month suggest that these twin pillars of the Hezbollah edifice, behind which sits Iran’s designs for the Middle East, are wearing down as the Trump administration’s new security approach to the Middle East opens up new possibilities in the region.The limited skirmishes between Israel and Hezbollah this past Sunday might have looked familiar, only they reflected a shift in the conflict. In a similar incident in January 2015 Hezbollah responded to an Israeli strike on its cadres in southern Syria by firing antitank missiles on IDF vehicles from the Israeli-controlled Shebaa Farms area near the Golan Heights. Sunday’s attack was also carried out in retaliation for an Israeli strike on Hezbollah operatives in southern Syria, and followed an alleged Israeli operation in Dahieh, one of the main Hezbollah-controlled neighborhoods in Beirut, and once again utilized antitank missiles fired on an IDF vehicle—but, unlike in 2015, this time the attack was carried out from inside a Lebanese village, underscoring the shift to Lebanon as the front from which the group now retaliates.The operation, reportedly involving a drone attack, marked the end of an almost six-year hiatus, during which time the Israelis limited their strikes against Hezbollah and Iranian assets to targets in Syria. Israel’s tacit agreement not to conduct operations inside Lebanon, which was intended to prevent an escalation into full-on war, had jibed well over the past six years with a U.S. policy that prioritized “preserving Lebanon’s stability.” Unable to respond directly to Israel’s ongoing operations in Syria, Iran and Hezbollah launched a project to upgrade the precision of Hezbollah’s stockpile of missiles inside Lebanon.For the Israelis, this was a red line. About two years ago, Israeli officials began exposing and speaking openly about this emerging threat. Prime Minister Benjamin Netanyahu addressed the matter at the U.N. General Assembly last September, displaying a map with the location of missile sites in Beirut. The Israelis also began exposing Iranian commercial flights to Beirut Airport carrying components to turn rockets into precision missiles. The Israelis, communicating through French diplomatic channels, warned: “The Lebanese government must be careful when it comes to Hezbollah’s rocket factories. If the issue isn’t dealt with through diplomatic means by the Lebanese government, Israel will act on its own.” The U.S. has impressed the same point on Lebanon’s government, including most recently during Lebanese Prime Minister Hariri’s visit to Washington last month. Hariri revealed that U.S. officials raised this issue with him again—this after Hariri had accused Israel of fabricating the whole thing. But, Hariri told reporters in D.C., “we are not a policeman for Israel, which continues to violate UNSCR 1701.”The many warnings went unheeded, and it appears that Israel took action. Reports from late August claimed that the target of what appear to have been drone attacks in Beirut was an industrial planetary mixer, “a vital component in the machinery used to build a precision guided missile, which requires solid fuel. The item is thought to be manufactured in Iran.” Following these reports, the IDF publicized declassified information on the precision missile project in Beirut, and exposed the Iranian figures leading the effort in Beirut.The reaction of Hezbollah Secretary General Hassan Nasrallah to this blow threw his dilemma into sharp relief. It wasn’t just that a number of his promised retaliatory steps were pitiful—namely, vowing to shoot down Israeli drones in Lebanese skies, or demanding that the Lebanese government go and ask the Americans to put pressure on Israel. It’s also that his very threat to retaliate “from Lebanon” itself reflects his and Iran’s failure.Nasrallah had hoped to transfer the active front against Israel from Lebanon to Syria, so as to create an alternative launching pad for operations against Israel without risking devastation in Lebanon. The plan foundered as Israel’s relentless blows against Hezbollah and the Iranians in Syria, and more recently in Iraq, reached a point where Nasrallah was forced to revive the Lebanese front. In July, for instance, he announced his group would respond “from Lebanon” to any Hezbollah death at Israel’s hands in Syria. He might have thought that such an announcement would deter the Israelis, but instead it has put him in a corner. All he could do, as Hezbollah fired across the border on Sunday at an IDF vehicle, was to hope for low IDF casualties, and for the Israelis not to retaliate with disproportionate force.Hezbollah’s furious messaging before and after its retaliation, insisting that it does not seek to provoke a broader conflict with Israel at this time, only emphasized the group’s dilemma: It has not deterred Israel, nor can it afford to fully activate the Lebanese front. Consequently, Hezbollah’s response was weak. The Israelis anticipated it, suffered no casualties, and staged a mock evacuation of “wounded” soldiers designed to have Hezbollah declare the end of this round.The episode is not over yet, as Hezbollah’s retaliation for Israel’s alleged drone attack in Beirut is still presumably forthcoming. The problem for Hezbollah is that it will not deter additional Israeli strikes against its precision missile project.Meanwhile, the position of the Lebanese government has been instructive, if entirely predictable. Hariri and the government he nominally heads lined up behind Nasrallah to endorse any Hezbollah attacks launched from Lebanese territory against Israel. Moreover, the U.S.-supported Lebanese Armed Forces (LAF), which constitutes the centerpiece of Amerian policy in Lebanon, also lined up behind Hezbollah and opened fire on Israeli reconnaissance drones in southern Lebanon. For cheerleaders of the U.S. policy of spending hundreds of millions of dollars on the LAF, on the grounds that “Lebanese state institutions” are not only distinct from Hezbollah but also key to weakening it, this should be cause for embarrassment.Following Nasrallah’s instruction to call on the Americans to rein in the Israelis, the Lebanese government did try to cash in on U.S. investment in their “state institutions.” It didn’t pan out as planned. Instead, Secretary of State Mike Pompeo offered full-throated support for Israel’s actions against Iranian threats. But it was a senior administration official, responding to a question from Tablet on a background press call on Thursday, who gave the clearest message to the Lebanese (and the Iraqis). “It’s our position,” said the senior official, “that if neighbors of Israel allow a malign third country that does not share a border with Israel to use their sovereign territory as holding ground for increasingly sophisticated dangerous weapons, the only purpose of which is to attack Israel, I think those governments, if they cannot curb or control those elements, are going to have to be prepared to be responsible for them.”Holding the Lebanese government responsible for what occurs in its own sovereign territory might sound like a basic, commonsensical point, but it had been entirely absent from the past U.S. approach. Instead, American policy had indulged an obviously fictional separation between Lebanon and Hezbollah, a convenience that absolved Lebanese officials and institutions of all responsibility. They were victims or hostages; certainly not accomplices. To be sure, that’s still the prevalent view in D.C., but perhaps, slowly, the kid gloves are coming off.Right after Israel released the declassified intelligence about the precision missile project in Beirut, the Treasury Department announced the designation of Jammal Trust Bank.Treasury’s press release described the bank’s relationship with Hezbollah as follows: “Jammal Trust knowingly facilitates the banking activities of U.S.-designated entities openly affiliated with Hizballah, Al-Qard al-Hassan and the Martyrs Foundation, in addition to services it provides to Hizballah’s Executive Council.”The bank is not a major financial institution in Lebanon. Still, this was the first action the U.S. government has taken against a Lebanese bank since the Treasury Department identified the Lebanese-Canadian Bank as a front operation in 2011. Hezbollah laundered hundreds of millions of dollars a month in drug money through the bank.In 2015, the Treasury Department sanctioned Lebanese businessman Qassem Hejeij for his direct ties with Hezbollah financier Adham Tabaja, the alleged co-leader of the group’s Business Affairs Component. At the time, Treasury disclosed that “Hejeij has helped open bank accounts for Hizballah in Lebanon and provided credit to Hizballah procurement companies.” Hejeij was the chairman and founder of the Middle East and Africa Bank (MEAB).Both MEAB and Jammal Trust Bank are named in the U.S. lawsuit filed by the families of 400 American nationals who were killed or injured in Iraq between 2004 and 2011 in attacks for which they allege Hezbollah and Iran’s Islamic Revolutionary Guard Corps are responsible. The complaint documents extensive alleged dealings by these banks with Hezbollah, underscoring the group’s thorough penetration of the Lebanese economy and financial system.You get the picture. Hezbollah is present in every nook of the “Lebanese state,” including the banking sector. And the banks’ dealings with Hezbollah appear to continue until the moment the U.S. slaps sanctions on a particular individual and entity. After all, the Treasury Department’s press release on Jammal Trust Bank notes its relationship with Hezbollah since the mid-2000s. Still, U.S. officials persist in the delusion that the governor of Lebanon’s Central Bank is a “partner” in rooting out Hezbollah’s illicit financial activities. The delusion, of course, is only a residue of the grand fantasy about independent Lebanese “institutions” separate from Hezbollah. Sooner or later, as the logic of events drives toward confrontation between Hezbollah and Israel, while Lebanon’s U.S.-backed government and official institutions operate in lockstep with Hezbollah, the lie at the core of American policy becomes untenable.And that time might be fast approaching. According to a senior U.S. official who spoke to Tablet, the designations reflect a series of staffing and regulatory decisions across the Trump administration that suggest cracks are forming in the longtime consensus that Lebanese state institutions are untouchable. The argument for Lebanon’s “stability” had been prevalent and often had overruled more aggressive action. “These new sanctions suggest willingness to sideline this position and its advocates,” the senior official added. “That’s a good start.”***Like this article? Sign up for our Daily Digest to get Tablet magazine’s new content in your inbox each morning.