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The Rise and Fall of Rami Makhlouf

The Rise and Fall of Rami Makhlouf

Monday, 11 May, 2020 - 18:00
A man in Damascus watches a video posted by Rami Makhlouf on his Facebook page. (AFP)
London - Ibrahim Hamidi

Syrian billionaire Rami Makhlouf came out with two Facebook videos on April 30 and May 3, loaded with symbolism on a political, economic and social level. Within Syria and beyond, the 51-year old businessman raised eyebrows in terms of form, content, timing and historical context of what he was saying.

Across a running time of 25 minutes, Makhlouf did not try to deny or underplay the prominent economic role that he played in Syria over the past quarter century. Western media often described him as “the richest man in Syria” while back home in Damascus, but few could put a face to the name as he seldom went out in public. Unlike other sons of prominent figures in the Syrian government, he was always confined to his office, away from the media. When then did Rami Makhlouf change so suddenly to appear in two online videos within less than a week, championing the poor while appealing to the president—his cousin—to right the wrongs of the present system?

The rise

It all began with Mohammad Makhlouf, the father of Rami and brother of Anisa, wife of President Hafez al-Assad. As the president’s in-law for three solid decades, Mohammad Makhlouf played a pivotal role in the Syrian economy from 1970 to 2000. From his position as manager of the state-run Tabac de Regie, he sponsored major deals, especially in the oil sector, throughout the 1980s. While Hafez al-Assad served on the military and political sectors, Makhould took charge of economics, becoming its godfather.

Rami and his generation started their careers as partners with prominent businessmen in the private sector, moving on to lead that sector and take over its main firms.

Rami started with a company called RAMAC, handling duty free shops at Syria’s border crossings and Damascus International Airport. In conjunction with the death of Hafez al-Assad and the transfer of power to his son Bashar in July 2000, Rami turned to the promising telecommunications sector. After extensive negotiations, SyriaTel emerged, along with a rival company called MTN, obtaining a BOT license in 2001. For two entire decades the two companies monopolized the telecommunications sector along with its massive revenue. Those who criticized that monopoly, like ex-parliamentarian Riad Seif were either silenced or jailed, accused of crossing “red-lines.”

From SyriaTel Makhlouf expanded his empire, taking businesses in oil and gas, banking, tourism and trade. That came hand-in-hand with the post-2000 period of economic openness. Experts argued that this policy reduced the size of the Syrian middle class, concentrating wealth in the hands of a tiny minority. That monopoly seems to have caused the regime’s grassroots support to erode, snapping the social contract that had existed since Hafez al-Assad came to power in 1970. Some believe that among the many reasons who Syrians rose in 2011 was to protest the increase in Makhlouf’s wealth.

The first test

Some called him the “exclusive agent for Syria.” Others envied him, wanting shares in the cake that he was devouring. Opponents were highly critical, demanding a different future for Syria, on both a political and economic level. When the chance arose to reform the economy, through the signing of a partnership agreement with the EU, Makhlouf stood as a prime opponent, fearing that it would break his monopoly and diminish his influence.

This was his first test and in light of the mounting criticism, he left for the United Arab Emirates in 2004. Subsequently, and according to former economic official who spoke to me: “That year was the best for Syria in terms of foreign investment.” With Makhlouf gone, many were willing to step in.

He met the test silently and sought invest in the UAE without any fuss. He eventually returned to Syria after the wave of political pressure that mounted after the February 2005 assassination of former Lebanese Prime Minister Rafik Hariri. New realities made it mandatory for him to return to Damascus and ward off the international pressure that was being exerted to blame Syria for the murder. Makhlouf’s comeback coincided with what was described back then as the “Beirutization of Damascus” or opening up a series of banks, universities and retail shops that would create a Lebanon in Syria, compensating for what was lost in the economic crisis.

After the Syrian army’s withdrawal from Lebanon, Makhlouf and his partners set up “Sham Holding Co” with the aim of institutionalizing his massive expansionism in Syria. By 2006, Makhlouf was controlling around 7% of Syria’s GDP, said the former official, “but his role in economic decision-making was much greater than that.”

When the protests erupted in 2011, banners and slogans were raised mentioning Makhlouf by name, asking Bashar al-Assad to restrict his role and hold him accountable for amassing wealth at the state’s expense. Opponents claimed that Makhlouf lobbied his cousin to strike with an iron fist, even influencing the content of his speech in parliament that March.

Makhlouf also met with several western officials, including US ambassador Robert Ford and French ambassador Eric Chevalier. Relations with the west were not new, given that the Makhlouf family, Rami and his brother Mohammad, had even hosted John Kerry during one of his visits to Damascus when serving as chairman of the Foreign Relations Committee in Congress.

In mid-2011, Rami did the most unusual thing. First, he gave an interview to Anthony Shadid of The New York Times, saying: “There will be no stability in Israel if there is no stability in Syria.” Secondly, he called for a press conference in Damascus, saying that he was going to retire and donate all his property to charity. Many saw that PR stunt as a last-minute effort to contain the peaceful demonstrations, saying that Makhlouf never really retired. On the contrary, he set up his own militia, called al-Boustan, tasked with fighting alongside Iranian, Russian and Hezbollah forces.

Little brother

Rami's younger brother, Colonel Hafez Makhlouf was then serving as a senior security official and played an important role in crushing the protests offering “security advice” to Bashar.

Yet by 2014, Colonel Makhlouf was suddenly removed from his post. He subsequently left for Russia where he remained briefly before receiving permission to return to Syria, albeit as a private citizen with no role in the security services. He continues to divide his time between Damascus, Moscow and Kiev. The exact reasons for his dismissal are not known, although some believe that it carries a connection to Yevgeny Prigozhin, founder of the Wagner Group that has sent mercenaries to fight along the Syrian Army.

They suspect that Makhlouf was trying to carve out a greater security role for himself in coordination with the Russians. He reportedly also accepted a reshuffle of sectarian quotes in the political system, thus expanding the powers of the Sunni prime minister and reducing those of the Alawite president. What is confirmed is that the regime believed “he was in contact with foreign powers without having permission from the president”.

New players

In 2015, Makhlouf transferred the SyriaTel license into an official contract with the state-run Telecommunications Authority, instead of a BOT as it had been since 2001. Days earlier Russia Today quoted a Syrian economist as saying that amending the contract both with SyriaTel and MTN had resulted in a loss of $482 billion USD, which ought to have gone to the state treasury.

Between 201-2020 new factors emerged. On the one hand, Makhlouf continued to play his backdoor role in the Syrian economy. He did not end his financial support for al-Boustan, bankrolling families of martyrs and the wounded with monthly salaries, especially in the coastal villages. He also provided support for the so-called “poverty belts” around Damascus, in addition to supporting the army, security apparatus and other state institutions. Among his beneficiaries was the Syrian Social Nationalist Party, an old political party in which the Makhlouf family had taken great pride and to which Makhlouf himself was affiliated.

Yet new business figures were emerging—fast, marking the steady decline of Makhlouf’s influence and visibility. Among them were the Qaterji brothers, Wassim Qattan and Samer al-Foz, who bought Makhlouf’s shares at the Four Seasons Hotel. Their work focused on importing oil derivatives from Iran and concluding deals for oil transport from areas under control of the US and its Kurdish allies, east of the Euphrates River.

A new generation of younger businessmen started to take on all important contracts, like Muhiddine Muhannad Dabbagh and Yasar Ibrahim, the most important of which was for a third GSM operator, affiliated with an Iranian firm that is connected to the Revolutionary Guard Corps. And there was the “Smart Card” that controls the daily purchases of all citizens, ranging from oil and gasoline to bread.

Most of the new businessmen were Sunnis. In his second online appearance Makhlouf spoke about “others” controlling the scene in Syria, a reference that might be to the abovementioned names. Accused of being warlords, the EU and US placed many of them on its sanction list, which already included Makhlouf.

Dismantling of networks

In August 2019, Assad started a crackdown on Makhlouf’s network of companies. He started with al-Boustan, which was disbanded although the monthly salary of its militiamen stood at an impressive $350 USD, double that of a regular soldier in the Syrian army.

Then came dissolving of Makhlouf’s “Syrian Social Nationalist Party”. And in late 2019, Makhlouf was accused of failing to support the local currency, which was depreciating fast against the US dollar. The Central Bank of Syria asked big businesspeople to pitch in flooding the market with American dollars in order to depreciate its value and increase that of the Syrian pound. But even then, they were unable to raise more than $500 million USD—less than what was needed to save the lira.

An anti-corruption campaign ensued, along with a pursuit of businessmen with suspicious wealth. Big files were opened both for leading businessmen and current officials. Speaking in an interview in October 2019, Assad said: “Anybody who wasted funds is required to restore them. We want the funds back before people are referred to a judiciary.”

On December 23, the Syrian government seized the property of several top businessmen, Makhlouf included, all charged with tax evasion and illegal profit during the war years.

Wagner messages

This April, harsh winds came blowing from Moscow, where nothing is published by accident and where every word has a meaning. Several articles appeared in mainstream media, including those affiliated with the Wagner Group, criticizing Assad. The campaign came shortly after a visit by Defense Minister Sergey Shoigu, during which he conveyed "harsh messages" from President Vladimir Putin, regarding the need for Damascus to adhere to the military agreements signed between Putin and Recep Tayyip Erdogan on Idlib.

The campaign also came amid Russian criticism of Damascus' failure to comply with Russian, Israeli and American understandings over Syria, and Moscow's desire to restrict Iran's role in Syria. Meanwhile, Russian experts and state-run media continued to say that Assad was the only legitimate president of Syria.

Campaign and appearance

In mid-April 2020, Makhlouf’s company Milkman was framed in an illegal operation trying to smuggle hashish into Libya, via Egypt. Makhlouf snapped that this was part of a conspiracy aimed at tarnishing his name, saying that he had nothing to do with the smuggling business.

On April 27, the Telecommunications Authority announced that SyriaTel was under obligation to pay 233 billion SP ($178.5 million) in delayed income tax, with interest, to the Ministry of Finance Ministry by no later than May 5. Makhlouf responded by setting up a Facebook page first coming out with a written statement praising the charitable work of al-Boustan, then with the first 15-minute online video on April 30.

Makhlouf appealed to Assad to save SyriaTel. “We do not evade taxes and nor we mess with this country,” he said. “We pay taxes and share revenue with the government.” Although insisting that the Finance Ministry’s claims were unjust, Makhlouf said that he would pay it, but only in installments, conditioning that the money goes to the poor. “I will abide by what I have been instructed. I respect your order and am obliged to fulfill it. In order for the company and its work to continue, and for its customers not to be affected by a cut of service, I'm hopeful that you issue an order to schedule (payment) in a satisfactory manner, so that the company does not collapse." But he then said: "I am very tired of the existing accusations, which always portray me as a wrongdoer and a bad person."

On May 1, the Telecommunications Authority replied to Makhlouf without mentioning him by name, saying that the amount due was to the government, reminding that there was no tampering whatsoever with government revenue. The very next day, several of Makhlouf’s top managers were taken from their homes by the security services.

One day after the selective arrests, Makhlouf came out with another video on May 3, reflecting a diplomatic approach with much calculation put into it. In the video, he did his best to come across as an ordinary citizen, in terms of what he was wearing and where he was seated in front of a fireplace. He was also very careful about what words he used when addressing Assad, describing him as a “safety vault.” Makhlouf said that he understands that major risks were on the horizon, but that he could no longer remain silent in front of the “injustice” that was being imposed upon him by the security services. “Those services which I had subsidized for years; who can imagine that they would arrest the employees of Rami Makhlouf.”

“Today, the pressures began in an unacceptable manner ... and the security services began arresting the employees working for me. Has anyone expected the security services to storm the company headquarters of Rami Makhlouf which he once supported and sponsored during the war?” he wondered in the ten-minute video.

"Today, I am asked to stay away from companies and obey the orders ... and pressure has begun to arrest employees and managers," said Rami, who is believed to be in Yafour, near Damascus. He pointed out that he had received threats "either to give up or all his employees would be imprisoned."

The “firewood message” he sent in which he spoke in the name of the “poor” and the “loyalists” the regime used against “others were met by an extended arrest campaign that reached coastal areas. Financially, the communications authority responded by adhering to paying the said amount.

On Saturday, military units deployed near his palace in the Yafour area in the Damascus countryside. The next day, Makhlouf posted a very religious message on his Facebook page. He said “the injustice” against him has reached an “intolerable level."

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