The Makhlouf case, a turning point for the Syrian regime? – by Chloé Berger

 

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An article written by Chloé Berger, Faculty Adviser and Researcher at the NATO DEFENSE COLLEGE

At the end of April, Bashar al-Assad’s maternal cousin, Rami Makhlouf, posted two videos in quick succession on Facebook denouncing the “inhumane” pressure of the security apparatus on his employees and himself. In a regime where the media is tightly controlled and the appearances of members of the Assad clan are exceptional and carefully choreographed, these videos showing the son of the Assad clan’s top money-maker officially confessing his key role in financing the regime’s war effort are surprising. Showing Rami Makhlouf first addressing the President in a plaintive and victimising tone, then accusing and threatening the security services and those who run them, these videos have stirred up the Syrian blogosphere. Rumours are circulating in both loyalist and opposition circles about the tensions that are agitating Syrian power at the highest level and raise the question of the future of the economic and financial empire of the Assad clan.

 

  1. A simple family quarrel?

On 30 April, a first video was posted on the Facebook account of Rami Makhlouf [1], the holder of a tremendous economic empire that has ramifications throughout all Syria’s economic sectors. Nicknamed “Mr. 5%”, he has become over the years the key lock for any entry into the Syrian market. In this video, he publicly asks the President to intercede with the Ministry of Telecommunications, which is claiming more than 170 million dollars in unpaid bills from the State Treasury for the profits made by Syriatel since 2015. Two days later, a second video was put online and this time the victimising tone gave way to accusatory verve. Pointing out the “inhuman” abuses of the security services towards its employees, he warned the President against those who try to take money from the “poor”. Makhlouf refuses to give in to pressure, arguing that he is in reality merely the depositary and guarantor of wealth that is not his own, but destined to Bashar al Assad’s “people”, all those loyalists who have supported the regime during the last ten years of war.

By addressing the people loyal to the regime – the families of martyrs, the shabiha [2], the subordinate officers of the army and the security services and more generally all those who have benefited from the support of the Jama’at al-Bustan [3] – Rami Makhlouf is trying, without really believing it himself, to play the community card against the coterie of the regime’s great businessmen, the vast majority of whom are Sunni and some of whom are close to Asma al Assad, the president’s wife. The state has moreover regained control of the Jama’at al-Bustan [4] in recent months, the main competitor of the Syrian Trust for Development charity network sponsored by the First Lady, thus depriving Makhlouf of one of its main vectors of legitimacy among the “people of the regime”. The Syrian Trust also supervises the associations distributing the aid allocated by the regime in the context of the COVID-19 crisis.

Despite Rami Makhlouf’s encouragements to support him on social networks [5], his message was received in a very mixed way among the loyalists and the Alaouite community. The aid distributed within the community by the al-Bustan association was not enough to make people forget Rami Makhlouf’s extravagant lifestyle, even though the Alaouite community has paid a high price for defending the regime. Moreover, the following day, President Assad released a video calling on government officials to find solutions to mitigate rising prices and fight corruption.

The skirmishing of the last few days thus reveals the considerable influence gained by the First Lady within the Palace over the past year [6]. She has thus benefited from the fading of the presence of the “Patriarch”, Mohamad Makhlouf. Severely ill, the latter, the last representative of the generation of “founders” since the death of his sister Anissa in 2016, is no longer able to influence the economic destiny of the regime. Despite her discretion, the wife of Hafez al Assad played a key role in maintaining the cohesion of the Assad/Makhlouf clan in recent years. Between Rami Makhlouf and the First Lady, things are worsening and the president is forced to settle a conflict of interest between members of his own family.

 

  1. A fight against economic predators

The pressure against Rami Makhlouf has steadily intensified in recent months as the socio-economic situation in the country has deteriorated, causing popular demonstrations to resurface here and there in the provinces controlled by the regime, denouncing the corruption of war profiteers of which Rami Makhlouf is the most prominent symbol. But it is also that Rami Makhlouf’s appetite no longer knows any limits, as the Takamol affair has revealed [7]. The latter allegedly put pressure on the Minister of Commerce to prevent the Takamol company owned by the cousin of the president’s wife from entering the market for electronic cards giving access to subsidised products. Predation and a sense of omnipotence have reached such a level at the head of the Makhlouf’s empire in recent months that he and some of his close associates no longer hesitate to put pressure on ministers and stand up to the security apparatus. The discovery of narcotics in Egypt in the middle of a shipment of dairy products produced by the MilkMan [8] company belonging to him also underlines the links that the largest Syrian fortunes maintain with organised crime.

The Abar Petroleum affair[9] lifted the veil on part of the sums collected by Rami Makhlouf for his sole benefit, betraying the political-economic pact linking the Assad and Makhlouf families, at the heart of the system for more than thirty years. At the end of 2019, the Syrian General Directorate of Customs seized the assets of the Abar Petroleum SAL company linked to Rami Makhlouf and suspected of illegally importing oil into Syria from the port of Baniyas. The Syrian authorities seem ready to seize all of Rami Makhlouf’s assets in Syria; the reins of his economic empire could thus be handed over to his younger brother, Ihab Makhlouf, Vice-President of Syriatel [10]. However, in the context of the new European and American sanctions, in particular the entry into force in June of the Caesar law [11], it will be much more difficult to recover assets placed abroad. By bringing the pressure on him to the public square, Rami Makhlouf certainly hopes to be able to negotiate his exit as Hafez al-Assad’s brother, Rifa’at, did in the 1980s. However, he is unlikely to get the same compensation from his cousins after publicly defying them. The other “big cases” in the history of the regime have generally served to distance embarrassing elements from the clan. By bringing the dispute to the public square, Rami Makhlouf certainly hopes to escape the tragic end reserved to Mahmoud al Zorbi, Ghazi Kanaan or Assef Shawkat.

 

  1. Rami Makhlouf, a threat to Russian interests?

The passing of the Caesar law, the military situation in Idlib and the COVID-19 crisis [12] have created an unprecedented emergency for the regime. The Syrian State is bled dry and desperate for funds. From autumn 2019, the launch of an anti-corruption campaign with a large media support allows the Syrian authorities to “fine” the richest businessmen in the country [13] in an attempt to appease the growing popular discontent. The collapse of the Syrian Pound dramatically reduced wages and galloping inflation tripled or quadrupled the price of essential goods. But the worsening Syrian economic situation, the crisis in the banking sector in Lebanon and international sanctions are also weighing on the profits of the economic elites and their ability to bail out the regime’s treasury.

The regime’s stubbornness towards Turkey undermines Russian efforts towards a political settlement supported by the West and the Gulf monarchies. The Kremlin wants to get rid of the Syrian problem, whose military cost has become prohibitive, as soon as possible so that it can devote itself to other matters. The Kremlin’s barely veiled frustration [14] permeates the Russian media, which are denouncing the weakness of the Syrian President and are questioning his ability to reform the country [15]. The corruption of ‘war profiteers’, supporters of the status quo, undermines Russian hopes, especially those of the heads of the paramilitary companies present in Syria [16] who hope to reap the economic benefits of reconstruction.

Heavily constrained by the collapse of the price of hydrocarbons and the consequences of COVID-19, the Russian oligarchs seem to be getting impatient and are asking for guarantees. However, Rami Makhlouf, who owns most of the country’s economy, has become an obstacle to the establishment of Russian investors in Syria. Tehran for its part, to which Maher al-Assad is reputedly close, has already obtained access to a certain number of resources, in addition to the economic influence guaranteed to him by Lebanese businessmen close to Hezbollah who have already acquired licences for the import of raw materials necessary for the reconstruction of destroyed houses. The ousting of Rami Makhlouf could allow a re-composition, at least partial, of the economic elite in Syria with the rise of new entrepreneurs benefiting from the support of Russian oligarchs. While some believe that the fall of Rami Makhlouf is only a matter of time, for the moment he retains control of a large part of his empire. The coming weeks will determine the conditions under which Rami Makhlouf’s departure will be negotiated. For the latter, leaving Syria will not be easy.

To conclude, the fall of Rami Makhlouf, which seems to be confirmed by the resignation at the beginning of the week of the head of the MTN company[17], would break the last lock on the implementation of a transition that the Kremlin is urgently calling for. However, the Kremlin will find it difficult to come to terms with the Iranian politico-military presence in Syria, which is viewed very negatively by the Gulf monarchies and Israel. At the very least, Tehran will seek to remain in the shadows in order to preserve opportunities in certain critical economic sectors such as raw materials (oil, gas, phosphates) or infrastructures (telecommunications, air transport). The Iranian regime considers them to be just compensation for the considerable financial and military support [18] it has given to the Syrian regime. However, these sectors are also coveted by businessmen close to the Kremlin.

The COVID-19 crisis caused a postponement of the Syrian parliamentary elections and pushed back the presidential elections to an unknown date. The weeks to come will therefore test the will of the Syrian authorities to undertake the reforms expected by the Russians [19]. If necessary, the Kremlin could be tempted to seek alternative solutions. However, replacing Bashar al Assad in the current context proves remarkably difficult, if not impossible. Who today has sufficient political support on the Syrian political scene (in Syria or abroad) to guarantee the Russians the repayment of the Syrian debt, estimated at more than 3 billion dollars? Meanwhile, time is running out while the regime’s financial resources continue to dwindle drastically.

In Damascus, some would like to be able to obtain a political settlement before the American elections, fearing the arrival in power of a leader closer to the policies of Barack Obama. The economic prospects promised by Syrian reconstruction are stirring up covetousness and as we move closer to a political compromise, it will become increasingly difficult for Damascus to reconcile the contradictory interests of its main allies; all the more so as other influential players in the region, such as the United Arab Emirates or China, intend to preside over Syria’s economic future.

**

[1] For an analysis of the best parts of the two videos posted by Rami Makhlouf on his Facebook account (video in Arabic, url : https://m.facebook.com/RamiMakhloufSY/videos/2819609551407554/?refsrc=http%3A%2F%2Fwww.mei.edu%2Fpublications%2Frami-makhlouf-saga-poses-dangerous-challenge-assad&_rdr), read Caroline Hayek, « Rami Makhlouf réitère ses attaques contre les services de sécurité », L’Orient le Jour, 03/05/2020, url : https://www.lorientlejour.com/article/1216673/rami-makhlouf-reitere-ses-attaques-contre-les-services-de-securite.html

[2] The shabiha are paramilitary groups ultra-loyalist to President Assad. Gathered in the People’s Committees (Lijan Sha’bieh) formed from the first demonstrations in spring 2011 to participate in the repression of demonstrations, intimidate opponents and lead the regime’s propaganda, the shabiha became from 2012 onwards real paramilitary movements such as the National Defence Forces (Qowat al Difa’ al Watani). Integrated into the Syrian Armed Forces, the NDF, mostly recruited from among the Alaouites and Christians from the coast, represent between 50,000 and 60,000 men and serves as an operational reserve. The Ba’th Party and its satellite parties (SSNP, PFLP-GC, etc.) and some Syrian businessmen (including Rami Makhlouf) have also formed militias which serve as territorial defence. Read Aron Lund, « Who are the Pro-Assad Militias ? », Diwan, Carnegie Middle-East, March 2, 2015,url: https://carnegie-mec.org/diwan/59215

[3] On the US sanctions list since 2017, the al-Bustan Association is a charity that is supposed to finance humanitarian aid programs for war victims and displaced persons, but in reality it finances the salaries of the shabiha as well as the aid given to the families of the martyrs. Linked to the Air branch of the Security Services, it also serves as a screen for financing paramilitary forces (Liwa Dir al Watan – Homeland Shield ; Fahud Homs – Leopards of Homs). Read “Assassination attempt targets the head of “al-Bustan Association” which belongs to Rami Makhlouf near the Syrian Border with the Occupied Golan”, SOHR, 27/09/2019, url: https://www.syriahr.com/en/?p=142104

[4] On the takeover of the Al-Bustan Association by the Syrian authorities in the context of the seizure of some of Rami Makhlouf’s assets by order of the Syrian President in the autumn of 2019, read Trent Schoenborn, « The Syrian Regime Turns On Its Patrons: Rami Makhlouf’s Fall From Grace », International Review, 11/11/2019, url : https://international-review.org/the-syrian-regime-turns-on-its-patrons-rami-makhloufs-fall-from-grace/

[5] Several directors and deputy directors of the Syriatel company, the jewel of Rami Makhlouf’s economic empire, have been reprimanded by the security apparatus for having pressured their employees to post their support for Rami Makhlouf on social networks.

[6] Firas Tlass, the son of the former Minister of Defense of Hafez al Assad, gave RT in Arabic a remarkable interview on the tensions within the Assad/Makhlouf clan, unveiling the system of commissions and shareholdings on which Mohamad Makhlouf built the family’s economic empire. Largely charged against the First Lady, all links to the interview have been removed from the Net. Read « Il y a parlé de la corruption de la famille Makhlouf  … RT efface l’interview avec Firas Tlass », Enab Baladi (in Arabic), 11/05/2020, url : https://www.enabbaladi.net/archives/383028

[7] On the Takamol case that gave Rami Makhlouf an advantage over a relative of Asma al-Assad, read Adnan Abdelrazak, « Rami Makhlouf and His Father Respond ‘With Two Scandals’ to Asmaa al-Assad », The Syrian Observer, 21/04/2020, url : https://syrianobserver.com/EN/news/57501/rami-makhlouf-and-his-father-respond-with-two-scandals-to-asmaa-al-assad.html

[8] Read ”Are Assad and Haftar mutually benefiting from the drug illicit trade?”, TRTWorld, 06/05/2020, url: https://www.trtworld.com/magazine/are-assad-and-haftar-mutually-benefiting-from-the-illicit-drug-trade-36080

[9] Read Albin Skazola, “Rami Makhlouf Asset Freeze Points to Oil Smuggling Role”, Levant Networks, 26/12/2019, http://www.levantnetworks.com/2019/12/26/rami-makhlouf-asset-freeze-points-to-oil-smuggling-role/

[10] Syriatel, the country’s leading mobile telecommunications company, is overwhelmingly owned by Rami Makhlouf. A part of the capital belongs to the State and allows the monitoring of calls, especially to foreign countries. On the Makhlouf’s economic empire, read the report « Assad Henchmen’s Russian Refuge », Global Witness, 11/11/2019, url : https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/assad-henchmens-russian-refuge/

[11] The Caesar Law, named after the former Syrian Military Intelligence officer who fled the country with more than 50,000 photographs of arrested persons, promulgates additional sanctions and travel restrictions against anyone supporting the regime. Read Press Statement Michael R. Pompeo, « Passage of the Caesar Syria Civilian Protection Act of 2019”, US Department of State, 20/12/2019, url: https://www.state.gov/passage-of-the-caesar-syria-civilian-protection-act-of-2019/

[12] On the socio-economic consequences of the COVID-19 crisis in Syria, read Murad Abdul Jalil, ”Syrian economy resumes activity… Poverty and bankruptcy outweigh coronavirus”, Enab Baladi, 10/05/2020, url: https://english.enabbaladi.net/archives/2020/05/syrian-economy-resumes-activity-poverty-and-bankruptcy-outweigh-coronavirus/

[13] Read Paul Halabi, “Ces Huit hommes d’affaires qui se partagent le gâteau syrien », L’Orient le jour, 04/10/2019, url : https://www.lorientlejour.com/article/1189382/ces-huit-hommes-daffaires-qui-se-partagent-le-gateau-syrien.html

[14] Read Henri Meyer et Ilya Akhripov, “Putin Has a Syria ‘Headache’ and the Kremlin’s Blaming Assad”, Bloomberg, 28/04/2020, url: https://www.bloomberg.com/news/articles/2020-04-28/putin-has-a-syria-headache-and-the-kremlin-s-blaming-assad;

[15] The main charge against President Assad was led by Yevgeny Pregozhin, known for his links with the Wagner group, which would have enabled the Russian companies Mercury and Velada to obtain two oil contracts in December 2019. Read Amr Salahi, “Is Assad now a liability? The mysterious Russian media campaign against Syria’s dictator”, The New Arab, 01/05/2020, url: https://english.alaraby.co.uk/english/indepth/2020/5/1/is-syrias-assad-now-a-liability-to-russia

[16] Read the forthcoming article from Abdel Naser al Ayiad, « Où est le Colonel russe Zourin », al-Jisr (in Arabic).

[17] MTN is the other mobile phone company present on the Syrian market. Rami Makhlouf also holds a share of its capital.

[18] According to Akbar Velayati, who is close to the Iranian Supreme Leader, Tehran reportedly has provided financial, economic and military support worth $8 billion a year to the Syrian regime since the beginning of the war, not counting the men who have fallen in Syria. At the same time, Russia’s military commitment since 2015 (logistical support and support from the Russian air force) is estimated at between $2.5 and $4.5 billion. Read Sinan Hatahet, « Russia and Iran. Economic Influence in Syria”, Chatham House Research Paper, 8 mars 2019, url: https://reader.chathamhouse.org/russia-and-iran-economic-influence-syria?preview=1#introduction

[19] In the transitional scenario supported by Moscow, the election of a new Chamber should allow for the constitution of a Constituent Assembly responsible for drafting a new constitution and determining the stages of the political transition. In this context, Bashar al-Assad, as President of the Republic, would accompany the process until the next presidential elections.