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Factsheet: Rami Makhlouf (free article)

11-05-2020

The rise of Rami Makhlouf as Syria’s most prominent businessman coincided with the ascent to power of Bashar Al-Assad in 2000. Given his long history of influence within the ruling elite, Mr Makhlouf’s recent side-lining raises many questions about the potential implications of his fall from grace.

While Mr Makhlouf is in no position to contest Mr Assad’s decisions and hold on to the level of power he once enjoyed, his public airing of grievances has highlighted tensions at the heart of the regime and shown the influence of fierce competitors who have risen to challenge his grip on Syria’s business scene.

In this 3,500-word factsheet we provide a profile of Rami Makhlouf’s emergence in the first decade of Bashar Al-Assad’s presidency, his adaptation to the challenges brought by the 2011 popular uprising, and his gradual side-lining. We start with a review of the influence wielded by his father, Mohammad Makhlouf.

Caricature by Syrian artist Saad Hajo of Rami Makhlouf. Mr Makhlouf is saying "where are you, auntie?" in reference to Anisa Makhlouf, the late mother of Bashar Al-Assad. Her death is believed to have weakened Mr Makhlouf's ties to Mr Assad. (Source: creativememory.org)

Abou Rami’s mentorship

The story of Rami Makhlouf’s rise as Syria’s most influential businessman is, above all, the story of his father: Bashar Al-Assad’s maternal uncle, Mohammad Makhlouf—also known as Abou Rami, or “father of Rami,” under the Arabic tradition of nicknaming parents based on their eldest son’s first name.

In the early 1970s, Mohammad Makhlouf was appointed head of the General Organisation of Tobacco (GOT), his first senior position within the Syrian state administration. His appointment came a short time after the ascent of his brother-in-law, Hafez Al-Assad, to the Syrian presidency.

The GOT held a monopoly on Syria’s tobacco sector. It was the only institution allowed to purchase the tobacco harvest from farmers, produce cigarettes and other tobacco products, distribute them in the local market, export them, and, later, import foreign brands. This monopoly, which it preserves to this day, gave Mohammad Makhlouf a key role across the sector, which was particularly important in the coastal area, where most of the crop was grown. In addition, because cigarette imports were at the time formally banned, extensive smuggling occurred across the country’s land borders. Mr Makhlouf was believed to be heavily involved in that business and to reap significant wealth from it.

In the mid-1980s, Mohammad Makhlouf’s influence and wealth increased. He was transferred to head the Real Estate Bank, one of six state-owned banks in Syria, but, more importantly, he became a primary middleman for government contracts. For instance, according to several government insiders, Mr Makhlouf earned significant commissions from oil export contracts awarded by the Help . About Us . Contact Us . Site Map . Advertise with Syria Report . Terms & Conditions Page 2 of 7

secretive Oil Marketing Bureau.

Besides his business activities—all conducted while he was formally working as a civil servant—Mohammad Makhlouf played an important role as a mentor for Bashar Al-Assad, who was known to be close to his maternal family. Bashar befriended Rami and the two shared many experiences in their younger years, including their first experiences dating, as a reliable source told The Syria Report in 2008.

Rami’s decade

Bashar’s accession to the presidency in July 2000 marked the gradual emergence of Rami Makhlouf as Syria’s preeminent business figure.

The arrival of Rami in the business scene was remarkable in its timing. Only weeks after Bashar’s election, he was awarded a contract to run a one-year trial of a mobile phone network. In 2001, this led to a 15-year build-operate-transfer (BOT) contract for his company, Syriatel.

Rami’s rise was also remarkable for how it symbolised the changes affecting Syria’s economy. While Mohammad Makhlouf officially remained a civil servant throughout his life, Rami was associated with the changes that Bashar wanted to bring to Syria—namely, economic liberalisation and modernisation. His most successful venture was Syriatel, a dynamic private sector company operating in the technology sector. Many of the businesses in which he later invested were related to the service sector: duty-free trade, banking, insurance, real estate, hospitality, and so on.

In other words, Rami’s rise coincided with Bashar’s and with the new economic model the latter promised to bring to the country.

Gradually, Rami expanded his activities across a variety of business sectors. In addition to enjoying political cover from his father and his cousin, he capitalised on the gradual liberalisation of the Syrian economy and the inflow of Gulf money, which was relocating away from the West after the 9/11 attacks.

When the banking sector liberalised, he bought shares in the Syrian affiliate of Lebanon’s Byblos Bank. After private insurance companies were allowed in, he invested in the National Insurance Company. When a stock exchange opened in Damascus, he invested in a brokerage firm, Cham Capital. By the end of the decade, he had established dozens of companies, registered under his name or those of his investment arm, Al-Mashrek Investment Fund.

However, this façade of a modern businessman capitalising on his business acumen and risk-taking skills could not hide the fact that Rami largely owed his success to his personal connections and to the capital, both financial and social, that his father provided him, as well as to the political patronage and protection granted by Bashar.

Syriatel was a case in point. The BOT contract it signed in 2001 came after a bidding process that was only nominally opened to all interested global operators; in practice it was held in the middle of the summer with a two-week bidding deadline—short enough to make sure no serious company had the time and means to make a competitive bid. Riad Seif, a former Syrian MP, reportedly paid with his freedom for exposing the trick, and was jailed for several years.

Also, many of Rami Makhlouf’s most profitable business activities have been in traditional sectors, many of which relied on strong personal connections with the government. His Lama Group of companies was awarded various construction and road-building contracts by government entities; international engineering companies he represented won contracts to build power plants; and he invested in the oil sector through a partnership with Devon Energy from the United States.

At the end of 2006, as the government prepared to open new sectors to private investment, particularly cement and electricity production, and as ever larger and more luxurious real estate Help . About Us . Contact Us . Site Map . Advertise with Syria Report . Terms & Conditions Page 3 of 7

and hospitality projects were being planned across the country, Rami Makhlouf sought to attract capital by calling on local businessmen to join him in a large holding company, Cham Holding. Some 70 Syrian businessmen responded to his call, attracted by Mr Makhlouf’s promises and threats: “’Join me and you will get a piece of the cake. Do not, and you will receive nothing’,” was how a businessman characterised it to The Syria Report at the time.

Some of the more traditional businessmen resisted, such as Rateb Al-Shallah, the former chairman of the Damascus Chamber of Commerce. So too did Saeb Nahas, an influential investor close to Iran, and Firas Tlass, the son of former Defence Minister Mustafa Tlass. But many did not, lured by the potential profits and by the fear that they could be side-lined should they resist Mr Makhlouf.

By this point, Mr Makhlouf controlled Syria’s largest private sector company by revenues – Syriatel – and its largest company by capital – Cham Holding.

Threats were not only directed at local businessmen. A diplomat from a major European country told The Syria Report in 2009 that Mr Makhlouf sent what he called “managers” from his company to her office as he sought to pressure the diplomat to let him represent a major infrastructure company from that diplomat’s country. “They were rather very athletic bodyguards meant to frighten me,” she recalled.

Little seemed to stand in Mr Makhlouf’s way. In 2008, the United States sanctioned him and banned U.S. nationals and entities from dealing with him. Despite this, Gulfsands, a Texas-based company that had bought Devon Energy’s share in its joint investment with Mr Makhlouf, preferred to switch its headquarters to London and push out two of its American executives, including its CEO, rather than give up on the lucrative investment in Syria.

In January 2011, on the eve of the Syrian uprising, Mr Makhlouf was granted Cypriot citizenship — which is to say, a European passport — although that was later revoked.

Unsurprisingly, Mr Makhlouf was associated with the worse aspects of Syria’s corruption and made many enemies. Because he was granted so much leeway, it was believed that he acted as Bashar’s business arm and made money on behalf of his cousin. He was also said to control up to 60 percent of the economy, a claim that continues to be widely shared, despite being wide off the mark.

But while Mr Makhlouf benefitted heavily from his father’s influence and his cousin’s protection, he was not Syria’s only powerful business player. Maher Al-Assad, the president’s brother, was another. Because he is an army officer, Maher could not get directly involved in the business world and he used fronts, of whom the best known is Mohammad Hamsho, the current secretary-general of the Federation of Syrian Chambers of Commerce. A former senior government official told The Syria Report in 2014 that “two-thirds of big government contracts either went to Rami or Maher.”

And there were many others who could continue to do their business while keeping their distance with Rami. Along with Cham Holding, another grouping of around 25 businessmen emerged: Souria Holding. Firas Tlass invested as a minority shareholder in Syria’s largest cement production plant by France’s Lafarge. In many sectors, Mr Makhlouf’s companies faced competition from others.

Still, Rami Makhlouf remained in a different league and was by far the country’s leading investor.

Adapting to the 2011 uprising

The onset of Syria’s popular uprising in March 2011 initially appeared to diminish Mr Makhlouf’s status.

Because he came to symbolise the country’s corrupt political and economic system, protesters targeted him and his companies. In one of the first protests in the city of Daraa, a Syriatel office was set in flames. Mr Makhlouf was called a thief, and calls were made for him to return the Help . About Us . Contact Us . Site Map . Advertise with Syria Report . Terms & Conditions Page 4 of 7

money he had made through corruption.

After a disastrous interview in May 2011 with the late New York Times journalist Anthony Shadid, in which he awkwardly associated Syria’s interests with Israel’s in a bid to attract support from the U.S. administration, he announced on June 16 that he was quitting the business world to devote his time to charities. For many months afterwards, Mr Makhlouf kept a low profile.

Gradually, however, it became clear that not much had changed. An entity called Ramak Development and Humanitarian Projects LLC did buy a significant stake in Syriatel, which it keeps to this day, but despite what its name suggests, it is not a charity but a for-profit limited company, in which Mr Makhlouf owns more than 99 percent of shares.

Mr Makhlouf continued to run his businesses unabated and adapted to the changing economic patterns brought about by the destruction of much of the traditional economy, the break-up of the country into various zones of control, the emergence of new trade circuits and networks, the development of new business activities associated with the war, and the hardening and militarisation of the conflict.

As his traditional business suffered from the contraction of the economy and of government budgets, he switched to new activities and developed his existing ones, such as oil imports, which were increasingly needed as local production collapsed.

He also made forays outside the business world. He set up a new organisation called Al-Bustan Charity, which was both an armed militia and a charity providing aid to the families of combatants who died fighting for the regime. He established a microfinance company, Nour Microfinance, which was set up to meet increasing demand from an impoverished population and cater to segments of the population that had supported the regime, particularly on the coast, but also in Damascus suburbs such as Jaramana. He extended support to one branch of the Syrian Social Nationalist Party, a staunchly secular party to which the Makhlouf family was traditionally close and which in the past had an important Alawite following as well as being a historical competitor to the Baath Party.

Meanwhile, Syriatel continued to generate significant revenues. At the end of 2014, Mr Makhlouf managed to transfer his company’s 15-year BOT contract with the government, which had come to an end, into a new 20-year licence at much-improved terms and at the expense of the government’s interests. Mr Makhlouf’s success in negotiating more favourable terms for his already very profitable company indicates that up to that point in the conflict he had lost nothing of his capacity to capture more profits from his position of influence. The establishment of Nour Microfinance in March 2018 also shows that up to that date he was continuing to invest.

The beginning of the end

However, with new business activities and trends, the war also brought new businessmen to the fore. Baraa Katerji used his capacity to negotiate with tribes and the Kurds east of the Euphrates to buy oil. Samer Foz who, until early 2019 was not under western sanctions, could conduct international transactions on behalf of the regime. (Both men are believed to be in direct contact with the Syrian president.) Meanwhile, Khodr Ali Taher made money through his control of crossings on behalf of Maher’s Fourth Division.

Mr Makhlouf’s influence gradually waned, although the emergence of these new individuals is not sufficient to explain why he was gradually side-lined. None of them comes anywhere close to Rami’s wealth and they were not the first to compete with him.

The first signs of tensions appeared around a year ago, when Al-Watan, Mr Makhlouf’s daily and the only Syrian newspaper not owned by the state, openly criticised Samer Foz for receiving loans from a local bank in contravention to the regulations set by the Central Bank of Syria . The naming of an influential businessman on a traditional media is an exceptional event in Syria and it indicated an intent by Al-Watan to embarrass Mr Foz. It also highlighted a high level of dissatisfaction from Mr Makhlouf at Mr Foz’s new status. Help . About Us . Contact Us . Site Map . Advertise with Syria Report . Terms & Conditions Page 5 of 7

Then, in August 2019, came the first rumours of a tightening around Mr Makhlouf, including reports that he was under house arrest. The armed wing of Al-Bustan closed, and then a few weeks later the Makhlouf-supported branch of the SSNP closed while other branches of the SSNP continued to operate.

The Central Bank of Syria asked a local bank to freeze the accounts of Syriatel. Reports came from Damascus that the management of the company had been taken over by people from the presidential palace. In December, it was the personal assets of Mr Makhlouf that were frozen, along with those of Abar Petroleum, a Lebanon-based oil distribution company affiliated with him.

In March, Mr Makhlouf’s, and Abar’s, assets were frozen again, meaning Mr Makhlouf had succeeded in reversing the initial December order after apparently paying a fine of SYP 7 billion. It was then announced that Egyptian customs had seized a drug shipment hidden in milk packs labelled with the Milkman brand owned by Mr Makhlouf. Then, on April 18, the Ministry of Communications and Technology claimed SYP 233.8 billion from Syriatel and MTN-Syria, the country’s other mobile phone operator, for money owed related to the granting of their licenses. The combination of these events indicated that a coordinated assault on Mr Makhlouf’s assets and position had been launched.

Mr Makhlouf sought to respond. In February, he published an article in Lebanese daily Al-Akhbar to protest the freezing of his assets. In April, he published a post on his personal Facebook denying any link between Milkman and the drugs seized in Egypt. Between those events, Al-Watan , once again contributed to a wider campaign against the use of an electronic card for the distribution of food products – the company running the card is partly owned by a relative of First Lady Asma Al-Assad, who is perceived as one of Mr Makhlouf’s rising competitors in the business world.

Finally, on April 30 and May 03, Mr Makhlouf took the extraordinary step of publishing two videos on his Facebook page in which he publicly aired his grievances. The move was unprecedented in decades of Assad family rule of Syria, as in many similar dictatorships where dissent is typically kept secret.

In these videos, Mr Makhlouf protested the asset freezes and the decision to fine his company. He pleaded for leniency, but the core of his intervention was a not-so-veiled attempt to present himself before his community as someone who cared for it and to explain that an assault against his personal assets was an attack against the community as a whole—“the loyalists,” “the poor,” and “the hungry,” as he called them. He also implicitly blamed Mr Assad for not making efforts to stop what he perceived to be unfair attacks against him.

The side-lining of Rami Makhlouf

It is difficult to highlight a single reason behind the attempts to side-line Rami Makhlouf. Rather, a combination of factors seems to be at play: The deteriorating health condition of his father, who is believed to be very sick and now living in Russia, which removed a layer of Mr Makhlouf’s protection; the fact that his role has gone beyond the business world to include charities and a political party — in other words, that he has sought to play a political role; combined with the fact that, with the much smaller economy and fewer business opportunities, competition for resources among the elite is fiercer. One potential weak point for Mr Makhlouf could also be that he does not seem to have an obvious international backer, such as Russia or Iran.

Among those often cited as opposing Mr Makhlouf is Mrs Assad, who is reportedly not on good terms with him, and whose influence, following the death of her mother-in-law and the poor health of Mohammad Makhlouf, is growing according to many observers in Damascus. Mrs Assad’s charities, which are organised around her NGO, the Syria Trust for Development, have been gaining influence in recent years. Some say that she is trying to put forward her eldest son, who is 19, and is arguing to her husband that, just as he was supported in his rise by his maternal uncles in the Makhlouf family, their son will need the support of his maternal family—that is, Mrs Assad’s. Help . About Us . Contact Us . Site Map . Advertise with Syria Report . Terms & Conditions Page 6 of 7

Also, the fact that a cousin of hers, MuhiEddine Dabbagh, is a shareholder in the controversial electronic card cited by Al-Watan has been an additional factor – although many fail to highlight that, along with the 30 percent owned by Mr Dabbagh, 70 percent is owned by two other lesser-known individuals. Mrs Assad may often be pointed at because she is Sunni, which is a weak point for Bashar among the Alawite community.

Maher Al-Assad is another strong adversary. An analyst told The Syria Report that next to Maher’s business dealings, Asma’s activities are relatively minor. “Maher deals in all sorts of smuggling, oil, arms, tobacco, drugs; that’s where the money is, and he gains most from side-lining Mr Makhlouf,” he said.

In any case, Mr Makhlouf’s videos appear to be a last-ditch attempt to salvage what he can of his business empire. Only someone cornered would have taken the risk of publicly airing divisions within the family, and it is doubtful that there is any turning back for him.

Mr Makhlouf is obviously in no position to seriously confront Mr Assad, whose power remains uncontested. When the Syrian president decides to remove Mr Makhlouf from power, he will have no problem doing so, although that does not mean that it will not come without a cost. The Makhlouf family is well-entrenched among the Alawite community, traditionally of a higher social status, and is very present in the administration.

More importantly, the fact that Mr Makhlouf said what he said is a sign of a gradual change of mood in the loyalist camp.

The end of any serious threat from opposition forces, particularly Islamists, has enabled more debates and the slow emergence of dissenting voices. At the same time, economic and social conditions are deteriorating seriously. These two trends are here to stay, and while criticism from loyalists was so far restricted to individual citizens’ voices on social media and avoided targeting Bashar Al-Assad himself, the Makhlouf videos signal a small but gradual shift. Criticism is now expressed openly by a prominent figure of the regime and it is targeted, although so far only implicitly, at the Syrian president.

This dissent expressed from the bottom coincides with recent criticism coming from the top—that is, from Moscow. This has led to widespread speculation in Syria about the political implications of these developments.

Realistically, Bashar Al-Assad is here to stay for the foreseeable future. However, unless local grievances are addressed – and it is difficult to see how this can be done under the current economic circumstances that have only been aggravated by the Covid-19 crisis – and more concessions are made to Russia, speculation and tensions will only rise in Damascus in the coming months.

For now, with the side-lining of Rami Makhlouf, a page has been turned in Syria’s Bashar era. Mr Makhlouf’s rise was strongly associated with Mr Assad’s. It is unclear what implications his fall will have.

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