People walk underneath an advertising billboard of Syria's largest mobile operator Syriatel, owned by businessman Rami Makhlouf in Damascus. (Photo by STR/AFP via Getty Images)

The demise of Makhlouf: A shift in Syria’s internal power dynamics

08/11/2020 . By Suhail al-Ghazi

When Syria’s president Bashar al-Assad came to power in 2000, he promised to open the country’s socialist economy. In doing so, Assad introduced new faces into the economy, including his cousin Rami Makhlouf, who soon became one of Syria’s most powerful economic figures. Makhlouf is believed to have controlled 60 percent of Syria’s pre-war economy, as his business empire stretched across the country through corruption and favoritism. Like other Syrian elites, Makhlouf profited from Syria’s nearly decade-long war to expand his control and influence within the ruling circle. In the past years, however, several developments indicated a possible fallout between Rami Makhlouf and the Assad regime, leading to the recent public dispute and eventually to Makhlouf’s potential demise.

The Dispute

In late April, Syria’s Telecom Regulatory Authority imposed a fine of 233.8 billion Syrian pounds (about $180 million) on the country’s two telecom companies Syriatel and MTN . The Authority also threatened to take all necessary measures if the companies failed to pay the dues they owed for maintaining their operating license. Rami Makhlouf, who owns Syriatel, responded to what he described as “unjust” financial charges with a series of live Facebook videos.

Makhlouf’s first video was unprecedented—not only was it the first media appearance of Makhlouf since 2011, but its use of religious rhetoric was also new. Makhlouf referred to religious proverbs and teachings throughout the video in an attempt to present himself as a man of morals who deals with injustice calmly and by appealing directly to Assad. Makhlouf also asserted that the money he pays back to the government should go to Syria’s poor. Such statements aim to manipulate the emotions of Syrians at a time of dire economic circumstances. They also attempt to confirm the accusations of the many Syrians who are blaming the country’s economic crisis on corruption and corrupt officials.

Yet, and in an attempt to distance himself from the corrupt officials and to polish his reputation and role within the Syrian society, Makhlouf clarified that Syriatel pays billions of taxes and revenues to the Syrian state every year. He further explained that the majority of its shares are owned by the Ramak organization, which provides aid and support to people in need.

Makhlouf continued to exploit the ongoing economic situation in his second video, in which he warned that attacking Syriatel will impact Syria’s economy. Makhlouf’s warnings of further economic and financial difficulties came to fruition later as the Syrian pound fell from 980 to 1800 to the U.S. dollar in a matter of two weeks after his first video. This fall, which wasn’t directly related to the dispute but to the collapse of the Syrian economy, has given Makhlouf some perceived credibility.

Moreover, Makhlouf continued to appeal to Assad following the arrest of several prominent managers of Syriatel by the Syrian security forces. He expressed discontent at the behavior of the security apparatus and reminded them of the fact that he has been their main supporter during the war through his al-Bustan organization, a charity organization that provides aid to the families of injured and dead soldiers. The organization has indeed been involved since 2011 in financing, establishing, and recruiting armed militias—allegedly responsible for war crimes throughout the country—as a means of supporting Syria’s oppressive security apparatus.

While Makhlouf maintained his role in the armed conflict, his authority and influence quickly declined following the Russian intervention in 2015, as most of the regime’s militias were disbanded and merged into Russian-backed militias such as the Tiger Forces. This led Makhlouf to lose his monopoly over supporting Syria’s militias and security apparatus to other powerful actors.

Makhlouf highlighted his significant role in supporting the Syrian government and army by referring to issues of interest to the Alawite community and Assad loyalists. In doing so, Makhlouf addressed families of killed and wounded Syrian soldiers, reminding them of the deeds of his Bustan organization—which publicly provided monthly salaries, money for treatment, and food baskets for military families.

On May 23, Makhlouf pledged 1.5 billion Syrian pounds (almost $3 million) to al-Bustan organization. He also reiterated the fact that the organization is already helping 7,500 families of dead soldiers and 2,500 wounded soldiers. This pledge to the Syrian army exploited the increasing discontent of military families with the regime. Thousands of complaints surfaced across Assad loyalist pages—mainly from Alawite-majority areas—after the regime decided to reduce physical therapy sessions granted to soldiers with 40 percent of disability, forcing thousands of soldiers to drop out of therapy or to continue their treatment at costly private hospitals and centers.

Shortly after his third video, in which Makhlouf talked about the pressure placed on Syriatel to give almost 100 percent of its profit to the state, Syria’s Prime Minister Office issued a decision banning any state entity from working or signing cooperation deals with Rami Makhlouf for five years. On May 19, Syria’s Ministry of Finance issued a decision to seize movable and immovable assets of Rami Makhlouf and his immediate family. This was followed by a decision to appoint a legal custodian for Syriatel and a travel ban prohibiting Makhlouf from leaving the country. The Syrian government has also cancelled several exclusive business contracts with Makhlouf.

Possible Implications

The Makhlouf family has long been a close ally of the Syrian regime. They started gaining political and economic influence in Syria in the early 1970s, when Hafez al-Assad took control of the country. Benefiting from his sister Anisa Makhlouf—the late wife of Hafez—Makhlouf’s father Mohamad established the family’s wealth through corruption and favoritism. The Makhloufs’ involvement in money laundering and illegal investments brought billions to the Assad family, thereby gaining the trust of the Assads.

But things took a dramatic turn following Makhlouf’s recent dispute with the Assad regime. By bringing his feud to the public, Makhlouf has exposed the rift in Syria’s ruling family and its decades-long corruption. The Makhlouf dispute with the Assad regime has also touched upon one of the most sensitive issues that the Syrian regime and those supportive of Assad care dearly about: Syria’s wounded soldiers and the families of soldiers killed on duty.

By pledging more money to soldiers and their families, Makhlouf confirms his commitment to providing assistance and support to Syria’s military families, who are mostly Alawites. In so doing, Makhlouf aims to increase his support among the Alawite community, especially during the country’s current dire economic situation.

The demise of Makhlouf’s power could therefore fuel anger and mistrust against the regime, especially among those who have benefited from Makhlouf’s support throughout the war. Alawite soldiers, for one, are likely to be enraged if they lost the help they once received from Makhlouf—a challenge that the regime is working hard to address through the president’s wife Asma al-Assad and her Syrian Trust for Development organization ,which provides rehabilitation and medical support for injured soldiers and members of the pro-regime militias. This explains the recent frequent public appearances of Asma to talk about new projects and programs to support military families and show that the regime still cares.

Furthermore, the Makhlouf dispute is likely to have an impact on Syria’s weary economy, especially since the dispute surfaced at a time when the depreciation of Syrian pound has reached unprecedented levels and social discontent is being expressed through social media and on the streets. This, along with the recent implementation of the Caesar Act, has left the regime in a desperate need of financial revenue and in a situation where it could benefit from Makhlouf’s immense wealth. In fact, al-Akhbar, a Lebanese, pro-Syrian regime newspaper, reported that Russia attempted to step in to mediate a reconciliation deal between Makhlouf and the Assad family. The deal entailed Assad confiscating all of Makhlouf’s assets outside Syria and transferring the profits into Syria—through Syrian businessmen affiliated with the state— in exchange for the safety of Makhlouf and his family. The newspaper said the deal failed for unknown reasons. This further indicates the Assad regime’s need to obtain Makhlouf’s assets to help Syria’s economy.

In fact, the government has already appointed a legal custodian for Syriatel as a prelude for its seizer. What’s worth noting is that by taking away Syriatel, Makhlouf’s major investments in Syria are gone and what’s left are investments in sectors—such as oil and real estate—that are already suffering due to the European and U.S. sanctions. This, added to the fact that Makhlouf been under U.S. sanctions since 2008 and E.U. sanctions since 2011, leaves Makhlouf with only his investments and properties in Russia, which could also be seized if Russia asked the regime to pay back some of its military aid to the regime.

The demise of Makhlouf will cause a shift in internal power dynamics of the regime. Most recently, the Akhras family of Asma al-Assad has taken over most of the Syrian economy. The family expanded their wealth and competed with Rami Makhlouf in several sectors with businessmen like Nisreen Ibrahim, who owns 25 percent of MTN and had a prominent role in Asma’s Syrian Trust for Development; and Mohannad al-Dabbagh, Asma’s cousin and a businessman who established the Takamol Holdings company, a sole operator of the Smart Card system used in distributing subsidized fuel and food.

It is therefore reasonable to assume that Syria’s businessmen—to continue gaining power and wealth—will be forced to shift loyalties and forge alliances with businessmen who have strong relations with the Akhras family; this includes the Joud family and the Khawande family, two prominent families from Syria’s coastal city of Latakia who have been doing business with the Akhras family in transport and trade sectors for over two decades.

Since 2011, a new class of wealthy and powerful individuals has emerged in Syria, some of whom were later sanctioned by the U.S. and E.U. while others are not under sanctions, despite their strong relationship with the Assad regime, such as the Akhras family. The businessmen who survived sanctions find themselves in a better position when it comes to dealing with the regime. These new faces, and especially the Akhras family, will follow the same tactics Makhlouf once used to gather immense wealth and power at the expense of the Syrian people and they will contribute to the ability of the regime to continue its ruthless war against the Syrian people.