A Look Back At Syria’s biggest thief (Rami Makhlouf stiffs Mercedes 1984)
Saturday, June 26, 2004
Rami Makhlouf is muscling in on the Mercedes concession. (See the article in June 24th’s Elaph)
Makhlouf, Bashar‘s cousin and hot-shot Syrian businessman who owns half of Syriatel and many other juicy monopolies in Syria, has managed to get the government to pass a law denying Mercedes the right to import spare parts until it makes him the exclusive agent. Mercedes must dump Omar Sanqar and his sons, who have long held the concession and whom Mercedes wants to keep. Mercedes said they would stick with the Sanqars. Rami got the law changed to show Mercedes who is boss in Syria.
Only one name in Syrian yellow pages : Rami Makhlouf
In February 2008, the United States Department of the Treasury designated Makhlouf as a beneficiary and facilitator of public corruption in Syria. His influence and connections within the regime have allowed him control the issuance of certain types of profitable commodities contracts…
Under the elder Al Assad, the spoils were distributed more widely, with various groups linked to the regime running businesses and winning state favours.
In 2000, the government in Damascus awarded Syriatel a 15-year build, operate and transfer licence, which was 25 per cent owned by Orascom Telecom, the Egyptian company, and 75 per cent held by Drex Technologies, one of Makhlouf’s companies registered in the British Virgin Islands.
But a year later, an acrimonious dispute broke out with Orascom, who accused Makhlouf of “persistent attempts” to assume management control of Syriatel, according to legal papers lodged at the time. The dispute was finally settled in 2003 after 15 months of claims and counter claims.
The recent unrest has caused some to take another look at Makhlouf and his empire.
Last week, World Finance magazine said that, in light of the recent events in Syria, it considered it “appropriate to factor in the wider political agenda”. Therefore, it said, it had reconsidered its awards to Makhlouf and other prominent Syrians.
Cham Holdings‘ multiple interests
In 2006, Rami Makhlouf established his main holding company, Cham Holdings. Founded with $365 million (Dh1.3 billion) of capital, Cham is now Syria’s largest private company and is focused on multiple industries.
A subsidiary, BENA, oversees the hospitality and property development business. The Cham Capital Group runs the finance, banking and insurance wing of the empire, while SANA is responsible for the energy and power generation sector. See Face book for Cham Capital
The Cham group also operates health and education, and was recently granted a licence to operate Pearl Airlines, a new private carrier. Other enterprises associated with Makhlouf include Gulfsands Petroleum in which he owns a 6.5 per cent stake through his Al Mashreq Investment fund, which is also a shareholder in Cham Holding.
On February 21, the US Treasury Department designated Syrian billionaire Rami Makhlouf a beneficiary and facilitator of public corruption in Syria, in conjunction with a White House executive order expanding American sanctions on Damascus. Although the move was unilateral and largely symbolic (Makhlouf has no known financial assets in the US or significant ties to American companies), the decision to censure a major Syrian public figure outside of government represents a discernable escalation in the scope and intensity of American opprobrium.
A cousin of Syrian President Bashar Assad, Makhlouf’s singular claim to notoriety is the enormous and multifaceted conglomerate he has built as a result of no-bid government contracts, immunity from unfavorable judicial rulings, and all other manners of privilege typical of clan-based patronage in the Middle East. Having done so in partnership with like-minded elites in the region, he occupies an important nexus in Syria’s relations with other Arab states that is all but impervious to outside pressure.
When the late Hafez Assad consolidated power in the 1970s, he distributed considerable privileges to relatives of his wife, Anisah Makhlouf. Like Assad, the Makhlouf family was Alawite (the minority Islamic sect that has dominated government in Baathist Syria), but far more prominent than his own and from a different tribe, the Haddadin. Some members of the family advanced within the security apparatus, such as her cousin, Gen. Adnan Makhlouf, the commander of the Syrian Presidential Guard for many years. Anisa’s brother, Muhammad, made a fortune, both through management of state companies and in the private sector. Rami (b. 1969) is one of Muhammad’s four sons, the others being Hafez, Ihab, and Iyad (the latter twins). Hafez (best known for surviving the fiery car crash that killed Bashar’s older brother Basil in 1994) began a career in the General Intelligence Directorate, while Rami and Ihab followed their father into business.
The Makhloufs were among a diverse and multipolar panoply of connected insiders who monopolized the small, but growing, Syrian private sector in the 1990s. However, the distribution of spoils began to shift as an ailing President Hafez Assad paved the way for his son’s succession. He understood that the Makhlouf family could be counted upon to support Bashar without waver in the uncertain political environment likely to ensue upon his death (in contrast to those who had close financial ties to the late Prime Minister Rafiq Hariri, such as then-Vice-president Abdul Halim Khaddam). Rami and Ihab therefore enjoyed easy access to opportunities – the most notable being an exclusive license to operate a network of duty-free retail shops (where a significant portion of goods are redistributed). By the time Bashar assumed power in 2000, Rami was well established.
While Assad delegated sweeping authority in the security realm by installing Assef Shawkat (the husband of his sister, Bushra) as head of military intelligence, management of the economy was nominally diffused to loyal technocrats. However, as Assad began steadily opening sectors of the Syrian economy, a select group of close allies were allowed to swarm the private sector and bend the system to their will. Like Rami, many are sons of “first generation” power barons (e.g. Firas Tlass, son of former Defense Minsiter Mustapha Tlass).
Along with his brother and business manager, Nader Qilaai, Makhlouf has built an empire that penetrates every high growth sector of the economy, particularly real estate (he owns the Talisman Hotel, where US Speaker of the House Nancy Pelosi stayed during her visit last April), transport (he is a major shareholder in a newly licensed private airline), banking, heavy industry, and – most importantly – telecommunications. These investments have usually been made through corporations in which the Makhlouf family is the majority or largest shareholder (e.g. Ramak, Cham Holding, Drex Technologies), and very often in joint ventures with partners from other regional (particularly oil-rich Arab) countries. Since Makhlouf could virtually guarantee the profitability of any project in which he was invested, the latter were not hard to find.
After obtaining one of two lucrative mobile phone licenses in 2001, Makhlouf formed a joint venture with Egypt’s Orascom Telecom (OT) to form Syriatel, which came to control about 55% of Syria’s mobile-phone market (the rest belonging to Investcom, a “rival” firm tied to other regime interests). Having utilized the expertise and funds of OT to get the company up and running, Makhlouf effectively forced his Egyptian partner to relinquish its share of the profitable racket on highly concessional terms – the kind that only a series of farcical Syrian court rulings on Makhlouf’s behalf could make possible.
MP Riad Seif famously attempted to abort the government’s effective seizure of the “private” cell phone market at the very start, submitting a report to parliament denouncing irregularities in the creation of both Syriatel and Investcom. He did not actually name Makhlouf, but pointed out that Syria was one of the few countries in the world where the state had failed to profit from the sale of mobile phone licenses – that alone was apparently sufficient to ensure his arrest and imprisonment for several years.
Whether Makhlouf was involved in the decision to punish Seif isn’t clear, but the distinction is perhaps irrelevant – his role in cornering the Syrian cell phone market implicitly made him a key participant in the regime’s security-intelligence infrastructure. This would become readily observable years later, when Assad felt the need to mobilize public displays of support in the wake of Hariri’s assassination. As the president gave defiant speeches, all subscribers to Syriatel received text messages inviting them to attend rallies demonstrating ”love of country and the rejection of external pressures.” One opposition source speculated that Rami helped secure the recent appointment of his brother Hafez as head of the Damascus department of State Security so that he can monitor the communications and movements of rival businessmen.
Although Makhlouf did not succeed in every attempt to advance his ambitions (he failed in a rather audacious attempt at forcing Mercedes to make him its sole agent in Syria, a position long held by the Sanqar family), his rise was the most glaring indication that economic power in Bashar’s Syria was being concentrated in fewer hands. This narrowing of the regime’s power base helped inspired Syrian opposition leaders (many of whom genuinely liked Bashar at first) to unite against him and eventually contributed to the defection of Khaddam in late 2005. Moreover, allowing Makhlouf and others to bend the rules ultimately undermined the government’s ostensible economic aims. The Orascom affair, as the Middle East Economic Digest noted at the time, “highlighted the difficulties foreign investors are liable to face in Syria” for all the world to see.
These costly ramifications beg the question of why Assad has not reined in his cousin. Many informed observers speculate that the Assad family profits under the table from Rami’s ventures, though there is little solid proof of this. It is rumored that Bashar’s mother has pressured him not to clip his cousin’s wings, possibly at the encouragement of Bushra (who may be closer to Rami than her brother). It is also important to bear in mind that Makhlouf’s large network of regional business partners provides him with enormous leverage at home and provides the regime with a layer of protection against outside Arab pressures.
These international connections have made Makhlouf’s loyalties the subject of much speculation. When international pressure on Damascus peaked following the assassination of Hariri in 2005, Makhlouf spent much of the summer abroad. Reports of his arrival in Paris with Qilaai and a lengthy sojourn to Qatar fueled intense speculation that he was preparing to abandon the regime.Al-Hayat reported that Makhlouf and other Syrian officials had transferred billions of dollars in assets to the Arab Gulf. Nothing came of it, however, and Makhlouf has continued to prosper as the partner of choice for Gulf-financed megaprojects. Ironically, the ensuing instability in Lebanon (a favorite of Saudi investors) has led Saudi investment in Syria to greatly increase in 2006/2007, even as Syrian relations with Riyadh have deteriorated.
The Bush administration’s decision to formally sanction Makhlouf is part of a broader effort to punish Syria for failing to help resolve the ongoing political standoff in Lebanon. Although the designation is a powerful display of diplomatic antipathy, it is unlikely to have a major impact on his financial power. Just days after the sanctions were announced, Emaar Properties of the United Arab Emirates signed for a $100 million venture with Cham Holding. So long as there is money to be made in Syria and a surplus of Gulf petrodollars, Rami Makhlouf will have a bright future.