# The Syrian Presidential Palace Strengthens its Concentration of Power: The Rift Makhlouf-Assad **Category:** palace_networks / economic_power / Makhlouf_rift / Asma_network **Author/source:** Joseph Daher / European University Institute, Middle East Directions **Published:** 2020-05-13 **Original URL:** https://hdl.handle.net/1814/67027 **Direct PDF:** https://cadmus.eui.eu/bitstreams/d53cc747-9483-518c-afc4-38d57be343c2/download **Why archived:** Important source on the post-2011 growth of Asma al-Assad’s economic role, her associates Muhannad al-Dabbagh and Tarif al-Akhras, Takamol/smart-card context, and the Assad-Makhlouf rift. ## Extracted content Wartime and The Syrian Presidential Post-Conflict in Syria Project Palace Strengthens its 13 May 2020 Concentration of Power: The Rift Makhlouf-Assad Joseph Daher* Introduction The two latest videos released by Rami Makhlouf, Bashar al-Assad’s cousin, have resonated like an earthquake for analysts and 1 commentators on Syria. They confirm mounting tensions between Rami Makhlouf and Bashar Al-Assad’s clan since at least the summer of 2019. On several occasions in the past few months the Syrian authorities have taken new measures to freeze Makhlouf’s assets.2 The most important of these was probably the government’s claim in mid- 3 April of at least 130 billion SYP in unpaid taxes and fees from Syriatel, the crown jewel and cash cow of Rami Makhlouf’s economic empire. Syriatel is most probably the largest private company in Syria, with around 6,500 employees, assets reaching 242.3 billion Syrian pounds 1. Rami Makhlouf’s father Mohammed is a brother of Bashar al-Assad’s late mother, Anissa. The family has been powerful in Syria since the 1980s and is seen as playing the role of treasurers for the regime. BRIEF 2. His personal assets and those of some of his companies were frozen in December 2019 and mid-March 2020. A shipment from one of his companies was seized in Egypt in April 2020 because it was transporting drugs. 3. The Ministry of Communications and Technology published an ofÏcial note stating that it was claiming SYP 233.8 billion, around USD 180 million at the black- market exchange rate, from Syriatel and MTN-Syria. The ministry declared that the POLICY fee was due in order to pay for licences granted to the two companies in 2014. * Joseph Daher is a part-time afÏliate professor at the European University Institute, Florence (Italy). He works under the aegis of the ‘Wartime and Post-Conflict in Syria’ research project in the Middle East Directions Programme. He has completed a doc- torate in Development Studies at SOAS, University of London (2015), and a doctorate in Political Science at Lausanne University, Switzerland (2018). (SYP) at the end of 2019, around USD 264.3 million at Commerce and of the Federation of Syrian Chambers of 4 5 the time, and a market share of around 71 percent. It Commerce. has yet to pay the bill, while arrests of senior Syriatel Asma al-Assad, the President’s wife, acted as the employees, including managers and technicians, have ‘modernist face of the regime’ and tried to symbolise continued since Rami Makhlouf aired the first video on the so-called ‘reformist’ trend within the Syrian regime 30 April. through her involvement in charity and her active role The Redistribution of Shrinking Rents in the creation of the Syria Trust for Development and Within the Ruling Circle other Government-Organised NGOs which attracted important sources of foreign funding. The First Lady’s In the pre-war decade, the centres of power within the activism in the association field served to establish new regime were concentrated in one family and its clique corporatist structures to satisfy emerging social groups (namely the Assad-Makhlouf family), demonstrating and to tie them to the regime by providing them with the patrimonial nature of the regime’s apparatus. Rami both material (employment) and moral (doing good) Makhlouf was a key pillar in the centre of power in Syria, benefits. These contributed to creating new networks of in other words a powerful member of the inner circle in clienteles to broaden popular support for the regime by the Presidential Palace led by Bashar al-Assad, together giving it a more liberal image. with the president’s brother Maher and wife Asma. Before All these actors have participated in various ways in the war, the roles of each personality around Bashar the war for the survival of the regime. However, the al-Assad in the Presidential Palace were relatively clear, ‘attributed’ roles mentioned above have witnessed or at least each had specific domains of intervention, increasing changes with an expansion of their economic despite all of them meddling in economic affairs. influence. In the early years of the conflict, Rami Makhlouf mobilised his various networks, which served Rami Makhlouf had a central role in the Syrian economy, the regime and bankrolled security services and militias including by developing and expanding networks of to repress the protest movement and fight the opposition businessmen directly connected to or dependent on armed forces. He also developed some of his economic the regime to accumulate capital while operating as the 6 activities, especially in trade and smuggling, and his family’s banker. He was also involved in charity through charity services through the establishment in mid-2018 his al-Bustan Foundation. He symbolised the mafia-style of the Nour Microfinance Foundation, the mission of process of regime-led privatisation pursued through the which included the provision of financial services to low- neoliberal policies of the 2000s. His business empire income individuals who lacked collateral for bank loans. was vast and included telecommunications, oil and gas, Following its deployment in many areas, the Fourth construction, banks, airlines and retailing. Brigade led by Maher al-Assad has notably increased Maher al-Assad had been the de facto leader of the Fourth its political and economic roles through its security bureau.7 Armoured Division since the 1990s. He was the leading In the past few years, the Brigade’s economic personality in charge of the defence of the Presidential 5. A few years before the uprising in 2011, he became a powerful Palace and the regime. Through this position, he also political and economic figure as a result of his association with Maher managed economic networks and had connections al-Assad, following his marriage to Maher’s wife’s sister. composed of groups of businessmen acting on his 6. Makhlouf wanted to dominate the smuggling businesses by behalf, in particular Muhammad Saber Hamsho, one of controlling large sectors of it with the assistance of the Customs the most important Syrian businessman in the country Department. Al-Nahas “Makhlouf Shipping Company ... Handling and the secretary general of the Damascus Chamber of the smuggling market between Lebanon and Syria” (in Arabic), al-Modon, 19 April 2019, https://bit.ly/2LbFbCL 7. Ayman Al-Dessouky, “The Economic Networks of the 4. MTN, the other telecommunication company in the country, Fourth Division During the Syrian Conflict,” Research Project controls the remaining 29 percent. Before 2011, the market was split Report, (Florence: European University Institute, Middle East approximately 55/45 in favour of Syriatel. The Syria Report, “Syriatel, Directions, Wartime and Post-Conflict in Syria, January 2020), MTN Post Growth,” 19 February 2020, https://bit.ly/2STAQWc https://bit.ly/35LacnI 2 ■ Robert Schuman Centre | 13 May 2020 activities have increased significantly and its network wide sectors of the economy led to a dwindling of GDP of businessmen has risen, with the emergence of new from $60.2 billion in 2010 to around $17 billion in 2017. figures such as Wassim Qattan and Abu Ali Khodr. Since then, state expenditure has mainly been focused on To a lesser extent, Asma al-Assad’s economic role has food and fuel subsidies and on wages and pensions, with continued to grow since 2011 through the attribution almost no investment expenditure despite ofÏcial budget of some business contacts to individuals associated with announcements. her, such as her cousin Muhannad al-Dabbagh8 In this context, competition for reduced sources of and her father’s cousin Tarif al-Akhrass. According to rumours, rent has therefore increased among the inner circles of 9 the regime. These sources of rent are not only a way to Samer Foz has also become close to Asma. Foz, the owner of the Aman Group before 2011, has benefited accumulate capital but also political influence through the massively from government contracts and has expanded construction and expansion of patronage networks. Since his activities far beyond importing and trading grain and summer 2019, the Presidential Palace has deepened its building materials.10 interventions and control in the management of two key In April 2019, Foz was targeted by the newspaper al-Watan, owned by Rami Makhlouf, for entities in Makhlouf’s power network: Syriatel and the obtaining a loan from a Syrian bank in violation of the al-Bustan Charity Foundation. In October 2019, Bashar 11 al-Assad appointed a palace ofÏcial as director of Syriatel regulations established by the Central Bank of Syria. This episode was the first sign of public discontent indirectly as part of a so-called ‘anti-corruption campaign,’ while expressed by Makhlouf against a new and rising network some sections of the management of the company believed of businessmen linked to the Presidential Palace, which to have been transferred to individuals connected to the he most probably perceived as encroaching on his field. Presidential Palace. In September 2019, on instructions Although some sectors of the informal economy, from the Central Bank the Real Estate Bank ordered all its especially smuggling and various illegal activities, have departments and branches to freeze all the accounts held 12 by Syriatel and any company or entity afÏliated to it. In been boosted by the dynamics of the ‘war economy,’ summer 2019, the al-Bustan Charity Foundation suffered economic opportunities and resources within the a similar fate, with an executive position being filled by a country have gradually diminished. The destruction of manager associated with the Presidential Palace, as were 8. Muhannad al-Dabbagh partially owned the Takamol Holdings some positions on its board of directors, including the accountant, 13 company, which was notably responsible for managing the smart while the military wing of al-Bustan was card system. However, in Mid-April 2020, the Minister of Domestic dismantled and its members integrated into the regime’s Trade and Consumer Protection announced that the private company military forces, including the Fourth Division. would no longer be in charge of the smart card system following harsh criticisms of the way the government dealt with it and the distribution The rift between the Assad clan and Rami Makhlouf of bread in Damascus and Rural Damascus. therefore results from an offensive by Assad’s clan, the 9. Caroline Hayek, “When Makhlouf Plays the Alawite Card dominant actor in the centre of power, to concentrate all Against … Assad” (in French), Orient le Jour, 4 May 2020, the power in its hands, including in the economic field, https://bit.ly/3bgt3rC which was Makhlouf’s traditional realm prior to the war. 10. His business activities include aviation, cables, steel, sugar, This campaign takes place as an economic competition car assembly and distribution, hotel management, real estate over the remaining sources of rent. development, pharmaceuticals and even banking. He has also founded his own charity association, which carried out projects in Latakia and Rami Makhlouf’s Limited Nuisance its countryside. Capacity 11. Al-Modon, “Why did Rami Makhlouf declare war on Samer Foz?” Bashar al-Assad’s pressure on Rami Makhlouf is, however, (in Arabic), 5 April 2019, https://bit.ly/2SUynuK most probably not intended to destroy him, as it would 12. Joseph Daher, “The Political Economic Context of Syria’s Reconstruction: A Prospective in Light of a Legacy of Unequal 13. In the summer 2019, the former director of the al-Bustan Development”, Research Project Report, (Florence: European Foundation, Samer Darwish, who is close to Rami Makhlouf, was University Institute, Middle East Directions, Wartime and Post- investigated on corruption charges by the security committee in the Conflict in Syria, December 2018), https://bit.ly/2wQ43Jn Presidential Palace. 3 ■ The Syrian Presidential Palace Strengthens its Concentration of Power: The Rift Makhlouf-Assad cost the regime politically and economically, but to push companies, of which there are estimated to be around ten 16 him to submit completely to the power and decisions of thousand in the country, and his business partners. They the Presidential Palace. This includes sharing sources of could react in his favour if they see their employment, rent with other businessmen connected to and completely business partnerships and investments threatened as the submitted to Bashar’s inner circle. In the past few years, regime coerces Makhlouf more and more. Syria has witnessed the rise of new businessmen who However, beyond his direct employees, business partners, owe their fortunes and accumulation of capital to their charity beneficiaries and more largely the Alawite contact with the Presidential Palace. community, Makhlouf’s ability to mobilise seems limited. Unlike Rifaat Al-Assad in 1984, Rami Makhlouf has no His image as a business tycoon who has accumulated huge tanks or whole military branches under his command. profits and pursues a luxurious lifestyle while the majority He has neither the means nor the intention to overthrow of the population are living in poverty and suffering from Bashar al-Assad. His recent public interventions were, the war does not help his cause and has created rising however, a blow for the President. He has influence criticisms against him and other business figures. This through his different networks, including in certain was symbolised in September 2019 in a song denouncing security services and militia groups, which he could use corrupt businessmen such as Samer Foz, Rami Makhlouf, to create instability in the country. Abu Ali Khodr and the Qaterji brothers which circulated 17 Makhlouf can seek to mobilise a section of the regime’s widely among the pro-regime popular base. Alawite base, which has benefited from donations and In this situation, Syria’s closest allies, Russia and Iran, activities in the coastal areas by the al-Bustan Foundation, have so far been somewhat absent from this rift and have Syriatel and his other companies. In his videos, Makhlouf not ofÏcially reacted or intervened. However, it is highly mentioned several times the assistance he provided to likely that both would rather intervene on the side of the poor of his community, adding that the freezing and Assad’s clan against Makhlouf if the latter tried to create the capture of his business resources and possessions instability in the country through his various networks. would harm the people he aided, particularly “the poor Russia will most probably support Bashar al-Assad and hungry” – a statement he already made in February and the symbolic rule of the state institutions in order 2020.14 His focus on this issue is a way to put pressure on to guarantee a certain form of stability in the country, Bashar al-Assad by blaming him for the potential damage while Maher al-Assad is known to be close politically to this particular popular base of the regime through to the Iranian decision makers. Moreover, it was Bashar the state’s actions against him and his companies. Thus, al-Assad who transformed the relationship with Lebanese Rami Makhlouf is trying to play on the community Hezbollah from a tactical and temporary alliance, as it had string by alleging a bias against him as an Alawite while been under Hafez al-Assad, into a deep strategic alliance. 15 corrupt Sunni businessmen are not targeted. Makhlouf Following his arrival in power in 2000, both politically could also try to activate the network of employees of his and militarily he deepened Syria’s collaboration with the group, which favoured Iranian geopolitical interests in 14. According to Makhlouf in a statement published in the Lebanese the region. In contrast, Rami Makhlouf lacks this level of newspaper al-Akhbar, 75 percent of his companies’ profits have been direct connections and/or deep relations with the ruling given to humanitarian organisations and charity associations for strata of these foreign actors, which is another significant the benefit of the Syrian population. Rami Mohammad Makhlouf, disadvantage for him in the rift with the Presidential “Makhlouf Responds: the documents prove that there is no violation and the campaign’s aim is to discredit him” (in Arabic), al-Akhbar, 6 Palace. February 2020, https://bit.ly/2yGTmdt 15. These implicit allegations were made quite clear in comments on Facebook by one of his cousins, who wrote that “unlike the ‘neo- Ottoman’ businessmen (in other words ‘Sunni businessmen’) who smuggled their money out of Syria, Rami Makhlouf kept his money in the country and gave it to poor families and to soldiers and militiamen 16. “Makhlouf Responds”, al-Akhbar, ibid. who have fallen as martyrs,” Soshals. “After the coup against Rami 17. On 6 May 2020 the song was re-posted on a pro-regime Makhlouf, an Alawite writer incites against Asma al-Assad and Facebook page called “Detecting Dawa’ish Corruption Inside Syria” describes her as an Ottoman Turkman” (in Arabic), 3 May 2020, https://bit.ly/3dEv6Hx https://bit.ly/2Ldsbtu 4 ■ Robert Schuman Centre | 13 May 2020 Conclusion out of this rift is for Rami Makhlouf to totally submit to the Presidential Palace and its decisions, including by Syria is not witnessing a new campaign against corruption Syriatel paying the amount due to the state. This solution reclaiming due taxes as is claimed by ofÏcial medias. In is most likely to not stop at this point but also include a mid-2014 Syriatel, and the other telecommunication progressive transfer of Makhlouf’s key assets to Assad’s company in the country MTN, were awarded new inner circle in order to end any form of (political and 20-year freehold licenses which took effect on 1 January economic) autonomy he was able to build through his 2015 by the Syrian Telecommunications Establishment. companies and networks. In this way, the Presidential Each company paid a one-off fee of SYP 25 billion for Palace would come out of this conflict strengthened. these licenses and received a general reduction of the taxes imposed on it for the next three years, from 60 percent in 2014 to 20 percent by 2018.18 This agreement entailed massive losses in state revenue while increasing the profits of the two companies. This rift is not a consequence of Russian pressure on the Syrian regime to accumulate more wealth and fill the state coffers. Moscow has instead characterised itself by its passivity and non-involvement in this rift, while large swathes of Makhlouf’s wealth have been smuggled or are based outside the country and could most probably not be recovered by the authorities.19 The dynamics of this rift have some similarities with the actions taken by Mohammad Ben Salman against key pillars of the Saudi Kingdom at the end of 2017, which marked a turning point in the traditional patrimonial 20 system. He targeted key royal personalities, four ministers and dozens of other ofÏcials and prominent businessmen. The sons of all four key men in the House of Saud who comprised the core of the family over the previous four decades were targeted. Mohammad Ben Salman was trying to bring an end to this factionalised state and consolidate power in his own hands. This new rift reflects the determination of Assad’s inner circle to concentrate all the power in its hands even more, to the detriment of even family members and key pillars in the regime’s centre of power. A most probable way 18. The Syria Report, “Syrian state to give up billions to the benefit of MTN and Syriatel,” 6 January 2015, https://bit.ly/2WnqMXm 19. The Panama Papers revealed that Rami Makhlouf was able to hide his assets abroad and continue to trade and invest through its offshore front companies. His total fortune is estimated at between $5 and 15 billion. 20. In this system, the ruling family divided up control of the state and its oil rent. They used the money to pay off a vast network of businesses and patrons. This produced a precarious balance of power between family factions and their clientelist networks. 5 ■ The Syrian Presidential Palace Strengthens its Concentration of Power: The Rift Makhlouf-Assad QM-AX-20-021-EN-N Middle East Directions Robert Schuman Centre for Advanced Studies European University Institute Via Boccaccio, 121 50133 Florence Italy Contact: Programme website: middleeastdirections.eu Project website: middleeastdirections.eu/wpcs-project/ Robert Schuman Centre for Advanced Studies The Robert Schuman Centre for Advanced Studies, created in 1992 and directed by Professor Brigid Laffan, aims to develop inter-disciplinary and comparative research on the major issues facing the process of European integration, European societies st and Europe’s place in 21 century global politics. The Centre is home to a large post-doctoral programme and hosts major research programmes, projects and data sets, in addition to a range of working groups and ad hoc initiatives. The research agenda is organised around a set of core themes and is continuously evolving, reflecting the changing agenda of European integration, the expanding membership of the European Union, developments in Europe’s neighbourhood and the wider world. Middle East Directions The MIDDLE EAST DIRECTIONS Programme, created in 2016, is part of the Robert Schuman Centre for Advanced Studies. It has the ambition to become an international reference point for research on the Middle East and North Africa Region, studying socio-political, economic and religious trends and transformations. The programme produces academic outputs such as working papers and e-books. It also liaises with policy makers with a wide range of policy briefs, policy report and analysis. Views expressed in this publication reflect the opinion of individual authors and not those of the European University Institute. doi:10.2870/562797 © European University Institute, 2020 ISBN:978-92-9084-889-9 Content © Joseph Daher, 2020 ISSN:2467-4540 6 ■ Robert Schuman Centre | Policy Brief | 13 May 2020 ## Local raw files - `sources/archived/raw/eui-syrian-presidential-palace-makhlouf-assad.pdf` - `sources/archived/raw/eui-syrian-presidential-palace-makhlouf-assad.txt` - `sources/archived/raw/eui-syrian-presidential-palace-makhlouf-assad.live.html`