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Replacements for Rami Makhlouf: Who are the new businesspeople of Syria?

Now that Makhlouf has been sidelined by the regime, who are the new economic power brokers in Syria?


22 June 2020

AMMAN — While the struggle intensifies between what could be called the Syrian regime’s “centers of economic power,” the Syrian Pound (SYP) dropped to an unprecedented low, before improving modestly in the last few days.

The struggle is between the two main axes of what Syrian economic analyst Younis al-Karim calls “the presidential palace’s financial cabinet.” According to al-Karim, the first of these two axes is led by Asma al-Assad, Bashar al-Assad’s wife, while the second is headed by al-Assad’s cousin, Rami Makhlouf, who owns 60% of the Syrian economy.

Despite the scarcity of information from the “financial cabinet” that controls the Syrian economy, the outcomes of this struggle have started to become obvious, with Makhlouf seeming to have come out the loser. On May 19, a  provisional seizure was imposed on the assets of Makhlouf, his wife and children, and a legal guardian was appointed to manage Syriatel, the telecommunications company, in which Makhlouf was the majority shareholder.      

The victory of Asma al-Assad has also revealed the identity of the members of her economic cronies. Most prominent among them are her brother Firas Fawaz Akhras and cousin Muhannad al-Dabbagh, the leaders of a large group of new businessmen and warlords, the majority of whom are under Western sanctions.

Five rival economic power centers

It is possible to distinguish between five main power centers or economic currents within the regime, al-Karim told Syria Direct. The most prominent of these centers is led by Asma al-Assad, who is trying to “dominate the regime and the Syrian state” and consists of public relations offices, journalists, new economists and warlords, according to al-Karim. 

Among the most notable figures in this clique are the Qaterji brothers, who have gained prominence for their role in the oil trade in recent years, as they facilitated the flow of oil between the Syrian government and the northeast areas, previously under the control of the so-called Islamic State (ISIS) and now held by the Kurdish-dominated Syrian Democratic Forces (SDF).

Another figure is Samer Foz, who built a business empire over the last five years before western sanctions were imposed on him. However, Asma al-Assad’s brother Firas Akhras and her cousin Muhannad al-Dabbagh remain the most prominent businessmen in this group.

The majority of the new businessmen and warlords have continually “shifted between ISIS, the SDF, Russians and Americans” according to al-Karim. The Qaterjis, for example, have lately “become allied with the Russians after having switched allegiances several times, surprising even the regime,” al-Karim added. As such, “they cannot be relied on to build the economy.”

On the other side there is a Rami Makhlouf-led power center—mostly made up of traditional businessmen and bourgeois families—that is struggling to survive against Asma’s new rising clique. They “have a network of international relations and a long historical heritage,”  al-Karim said. 

Over the last few decades of Baath Party rule, members of Makhlouf’s cadre enjoyed “strong economic relations with more than 100 countries around the world through more than 100 tax-exempted chambers of commerce,” according to al-Karim. This has made Syria a “passageway for tax-evasion where goods are exported to other countries in order to bypass sanctions and taxes,” he added.

In addition to these two centers of economic power, there are several other notable groups of economic players, particularly those affiliated with Iran and Russia, and another warlord-dominated node of economic power. With warlords trying to take over state institutions and control government members, Makhlouf’s clique has come under even more pressure, as corruption is also ramping up in the country.

Asma al-Assad is “trying to play the reformist and anti-corruption role after they [Asma and Bashar al-Assad] felt that the end is nearing,” said Dr. Refaat Amer, a university professor and researcher currently based in Sweden. “The implicit aim is to consolidate Bashar al-Assad’s assets by transferring wealth outside Syria that is [officially] owned by Makhlouf to figures who are more supportive of Bashar and his wife,” Amer told Syria Direct.

According to Amer, among the most important internal and external factors that could foreshadow the end of the Syrian regime are “its diminishing capacity to satisfy the appetite and need of murderers and mobs to increase their money and wealth,” while also not being able to provide “its supporters with basic needs.” On top of all of that, there are “various forms of pressure by the Russians on a regime that is no longer capable of performing in accordance with the Russian expectations.”

For Amer, “retrieving the wealth looted by Makhlouf would not prop up the Syrian Economy, as 80% of this wealth exists outside Syria.” Furthermore, “giving it back to the Syrian people is unimaginable; instead, this might even make the Syrian citizens’ life worse, by affecting the exchange rate and trust in the already collapsed Syrian pound,” Amer says.

The impact of the rise of warlords

In the recent video recordings he posted on social media, Rami Makhlouf repeatedly mentioned that what is happening to him will put the country in a “difficult situation,” which is understood as an implicit threat, a sign that the regime is heading towards an internal conflict.

Given their codependency, traditional businessmen and Makhlouf have provided the regime with vital support in recent years. According to al-Karim, this bourgeois class was considered the “caretaker of the regime, protecting it from the international community, but today, the regime lacks this, so it has been left it in a state of isolation.” At the same time, outrage from the Syrian people over the deteriorating economic conditions has put renewed pressure on the regime.

The new warlords and businessmen appear to approach their relationship with the regime in a very different way. “Despite the size of their wealth, they have no allegiances besides to profit and cannot build the economy or gain the trust of the international community,” said al-Karim. They were mostly indifferent to the recent collapse of the Syrian pound, with, some taking advantage of the multiple exchange rates of the dollar set by the Central Bank of Syria and speculating on the pound, further exacerbating its collapse to generate illegitimate profit.

In addition, Takamol, the company that was responsible for operating the smart card for subsidized, rationed goods, run by both Muhannad al-Dabbagh and Firas Akhras, took part in the “extortion of people and worsened the shortage of basic goods,” according to Al-Karim.

After popular outrage, the government was forced to transfer management of the “smart card” to the state-owned enterprise Mahrukat and granted technical responsibility to the Syrian Ministry of Communications.

Still, according to Amer, the “rise of new businessmen will have neither a positive nor negative impact on the Syrian economy” as it is a “process of redistribution of wealth among figures very close to Bashar and [his brother] Maher al-Assad,” especially given that the current dispute with Makhlouf is related to the latter’s “desire to play a political role based on his economic and financial empire.”

Makhlouf’s attempt to play such a role represented a “brazen challenge to a regime that, since being founded by Hafez al-Assad, has been based on the primacy of politics over the economy, and where the role of [pro-regime] men of wealth and economy was limited to meeting the needs of the political authority,” Amer said.

Makhlouf’s overstepping of the tacit relationship with the regime necessitates a “restructuring of the national economy with new figures close to Asma al-Assad, in keeping with the principle that Hafez al-Assad had employed to consolidate his rule, relying on a united political authority that is based on individuals belonging to the minority but allied with men of money and businesses from the Sunni majority, to preserve balance and the longevity of absolute rule in Syria,” according to Amer.

Possible future scenarios

With the new economic power centers attempting to take over the Syrian economy, they will most likely look to siphon off the country’s wealth to do so. This will present Syria, according to al-Karim, with several possible scenarios, most notably, “turning the country into a passageway for drugs and prostitution, which is just now becoming apparent.”

This scenario is characterized by “the conversion of the state institutions into failed institutions,” which means that they shift from serving citizens to serving warlords and wealthy persons in the country. “Syria has started to fund global conflicts using fighters, drugs and money laundering,” said al-Karim, noting that the “collapse of the Syrian currency and [the imposition of] western sanctions,” have thus far “prevented the regime from moving [further] in that direction.”

The second scenario would see the government lift all subsidies and float the currency, instituting a severe ‘laissez faire’ system. This would both lead to a “rise in starvation” and give way for “the entry of large companies that are not subject to state oversight and regulation to invest in Syria.”

This scenario, however, is improbable as the Russians and Iranians are controlling now the majority of the revenue-generating institutions, which means that large companies will be unable to enter Syria without negotiating with the regime’s allies, al-Karim noted.

The third scenario, which was adopted in Iraq, is based on the “international community providing aid to the Syrian people and paying the regime money in exchange for real concessions by the regime, and granting certain privileges to the donors.”

These concessions may include offering privileges to oil transport and energy projects through Syria, given that five oil pipelines that cross through the country, and its strategic geographic location as a link between Europe, the Arab Gulf, Turkey and other countries, in addition to having oil and gas reserves along the Syrian coast on the Mediterranean that are expected to receive investment.

 

The report was originally published in Arabic and translated into English by Ahmad El-Amin.

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