Aleppo’s industry under Assad: A model for the ‘reconstruction of corruption’

AMMAN- During his visit to a fair for businesses from Aleppo held at the Takkiyeh Sulaymaniyah in Damascus last month, Bashar al-Assad lavished praise on the ability of the Syrian industrial capital’s manufacturers to get back on their feet amidst a war. “If the siege and bombardment did not affect Aleppo, then it will certainly not affect Syria,” Assad said.

But four years after government forces, thanks to Russian and Iranian support, took control of the entire city in northern Syria, Aleppo’s reality appears far from a model to be emulated. The reasons are not directly related to the economic sanctions usually used by the Assad regime as a scapegoat for its successive failures at reconstruction. 

The battle of Aleppo

In 2010, Aleppo topped the list of Syrian provinces contributing to the country’s total industrial production, according to the Central Bureau of Statistics, with 29.46 percent. It also ranked first in the number of workers in the industrial sector, at 31.68 percent. But when the revolution broke out in March 2011, and opposition factions subsequently took control of the eastern portion of Aleppo city, its industrial sector was hit hard. 

Lina, a businesswoman who manages a factory and trading company owned by her family, was forced to stop all the production lines after armed factions entered Aleppo city and took control of the factory’s neighborhood. Negotiations were then held with the armed group controlling the area, she told Syria Direct, “to secure the exit of goods from the factory and sell them through an intermediary.” 

According to a 2013 estimate, “about 75 percent of production facilities in Aleppo [were] no longer operable” then.

When the regime retook control of the entire city in 2016, Damascus repeatedly expressed a desire to attract investments and resume economic activity in Aleppo. However, Lina’s family’s factory restarted in 2017 “with a capacity of only 10 percent of its full production ability,” she said, and was hit by another drawdown at the end of 2019, “because of the banking crisis in Lebanon and the seizure of our deposits there.” 

“Syrian banks have no more than one billion dollars in foreign currency, while some sources talk about Syrian deposits in Lebanon exceeding 40 billion dollars,” Karam Shaar, a researcher at the Middle East Institute in Washington, told Syria Direct. In practice, “the reduction of amounts allowed to be withdrawn from Lebanon has led to a freeze on the funds of large Syrian depositors” and, consequently, “affected the ability of Syrian producers and traders to import both raw and manufactured materials,” according to Shaar.

But the Lebanese banking crisis is only one of many hindrances to the Syrian economy in general, and especially to the economic capital, Aleppo. 

 Protection money or devastation

Aleppo has not witnessed any real recovery of its industrial and commercial sectors during the past four years. In particular, the industry suffers from many problems, such as closed border crossings making it challenging to secure raw materials and increasing their price and the spread of cheap smuggled goods. “Small-scale industrialists in Aleppo city face a lack of maintenance components because of sanctions,” Khalil, a textile manufacturer, told Syria Direct, “and professionals are scarce due to emigration and displacement.”

Khaled, the owner of a thread factory, also highlighted “the high cost of restarting due to the destruction and looting that [my] factory was subjected to during the period of military confrontations,” as well as “frequent power cuts and lack of fuel.” But the real difficulty he faces is being forced to “pay etawat [protection money] from the moment the goods go out of the factory; for every truck, and for every checkpoint they pass through until they reach the consumer,” he told Syria Direct. “The recipients [of the etawat] are different security branches and influential people in the city.” 

“When a manufacturer refuses to pay, the accusations are ready: supporting terrorist groups or smuggling money. That spells devastation,” Khaled said. “The lowest penalty a factory owner would be subjected to for refusing to pay is cutting the electricity and searching for workers who are fleeing from military service, which multiplies the losses incurred by the factory owner.”

But “contrary to what many believe,” Shaar pointed out, “the lack of clarity about the political, organizational and security future in the country is the biggest problem facing Aleppo’s industrialists and preventing the return of those who left.” In Syria, generally, “there are some excellent opportunities if the risk factor is ignored, due to cheap labor, fixed assets, and the production income.”

Warlords struggle

Currently, Aleppo’s economy is dominated by figures whose influence has grown since 2011. Most notable among them is Fares Shehabi, a member of the “old economic guard” in the city. He benefited from being related to General Hikmat Shehabi, the former Chief of Staff of the Syrian army, as well as his close relationship with Bashar al-Assad’s cousin, Rami Makhlouf. Shehabi is a founding member of the Sham Holding Company, chair of the Board of Directors of the Federation of Syrian Chambers of Commerce and the Aleppo Chamber of Commerce and a former member of the Syrian Parliament (the People’s Assembly).

The second most prominent player is Hussam Qaterji, a member of the Parliament and chairman of the Qaterji Group, which handled the smuggling of oil from northeast Syria when the area was under the control of ISIS.  

While Shehabi controls large shares of crucial sectors, such as pharmaceuticals, education and banking, Qaterji controls vital sectors in the province, such as energy, hospitality and real estate. He also strengthens his influence through the “Qaterji militias.” 

But the exclusionary nature of the relationship between the two persons was evident in the latest elections for the People’s Assembly when Fares Shehabi and his list were excluded in favor of Hussam Qaterji and Hassan Barri’s list. Later, Qaterji and allied new businessmen -acting as a front of the regime in Aleppo- swept the elections for the Aleppo Chamber of Commerce. 

In the same context appears the provisional seizure of Hani Azzouz’s assets in September. Azzouz is considered a partner to Makhlouf and is one of the prominent founders of Sham Holding Company. He was also a member of the board of the Aleppo Chamber of Commerce, chair of the Syrian Exporters Union and chair of the Syrian-Russian Businessmen Council. 

According to Shaar, this open war between Aleppo’s businessmen “has limited their ability to engage in a constructive way that would lead to complementary economic relations benefiting everyone.” 

But even before that, the growing influence of the warlords prompted most of the old industrialists, in Khaled and Khalil’s opinions, to run their businesses at minimum levels, considering work in such circumstances to be a gamble. “Lowering production capacity reduces the potential losses and preserves capital,” Khalid said, “especially since most of the industrialists have suffered heavy losses without any government compensation.” 

“The whales of the current market have the influence and the weapons,” he added, “leaving us little fish vulnerable to market fluctuations and the rule of the dominant militias.” 

This report was originally published in Arabic and translated into English by Mateo Nelson.