Observers anticipate little change in Lebanon's external policies under Lahoud. Since the passage of the Taif accord, Lebanon and Syria have moved closer, formalizing mutual security ties. Although it is clear that Syrian troops will remain in Lebanon until a comprehensive peace treaty between Israel and Syria is reached, a number of Syrian troops have withdrawn from Lebanon since 2001. In public statements, Lahoud supported resistance against Israel's occupation of a so-called "security zone" in southern Lebanon. He rejected a separate peace with Israel and reiterated his commitment to a coordinated Syrian-Lebanese stance on negotiations that included an Israeli pullout from Syria's Golan Heights.
Lebanon's security and stability highlighted problems facing the government in 1999. Even though a consensus in Israel favored an Israeli withdrawal from the "security zone," the cycle of attacks and reprisals continued in the area throughout the year. Early in the year, retaliatory Israeli air strikes against Hezbollah strongholds occurred. The clashes escalated after a guerrilla ambush killed an Israeli general. The government rejected an Israeli demand to disarm the guerrillas. Prime Minister Hoss also denied reports alleging secret peace talks with Israel, which sought security guarantees from Lebanon in exchange for withdrawal from the "security zone." Aware of Syrian interests, the Hoss government insisted that it would not strike a separate deal, and that the Israeli withdrawal would occur only within the framework of a comprehensive peace settlement involving Syria. Israel unexpectedly and unilaterally withdrew from southern Lebanon on 24 May 2000. However, the ownership of the Shabaa Farms remained in dispute—Israel captured the region from Syria during the 1967 Arab-Israeli war, but it is claimed by Lebanon. The UN holds that the Shabaa Farms belongs to Syria, and that Syria and Israel should negotiate its fate. In February 2003, Israeli warplanes flew over the Shabaa Farms, to be met by anti-aircraft weaponry of Hezbollah. Also, that January, Hezbollah and Israeli forces exchanged fire over the region.
In 2001, Lebanon completed negotiations on an association agreement with the European Union, beginning the accord in January 2002. Lebanon has bilateral trade agreements with several Arab states and is in the process of accession to the World Trade Organization (WTO). In March 2002, Lebanon served as host to the Arab League Summit for the first time in more than 35 years; the delegation representing Palestine left the summit when Lahoud adjourned the opening session without allowing Yasser Arafat to address the assembly by satellite.
In March 2001, Lebanon began to divert waters from the Wazzani River, which eventually feeds into Lake Kinnneret (Lake Tiberias or the Sea of Galilee), a major source of Israel's water supply. In September 2002, Israeli Prime Minister Ariel Sharon declared any attempt to divert water from Israel would be a cause for war.
In February of 2003, Lebanon warned Israel against expelling Palestinians to Lebanon if war were to break out in Iraq. Israel stated it had no such plans. As of early 2003, there were 350,000 Palestinian refugees in Lebanon.
Lebanon also is a member of the Organization of Islamic Conference and maintains a close relationship with Iran, largely centered on Shia Muslim links.