Syrian regime seizes mogul's empire, widening rift in Syria's elite

ERBIL, Kurdistan Region — At first, Syrians saw the videos as a meme, or another homemade cellphone video typical of the coronavirus era. Seeing Rami Makhlouf's Facebook confessionals inspired mockery at Syria's most powerful business giant, under coronavirus lockdown in his mansion on the Latakia coast.

But the  social media drama has turned sour for the fallen mogul, showing that no matter how wealthy, no figure is untouchable to the ruthless Assad regime.

Syrian officials severed government contracts and seized Makhlouf’s family assets on Tuesday in a sweeping move that brings his business empire to its knees, and exposes a widening rift behind the walls of Syria's ruling elite.

The first cousin of Syrian President Bashar al-Assad, Makhlouf's empire has been estimated to be worth billions and comprises nearly half of Syria’s private sector, from media and construction to finance, airlines and pharmaceuticals. He also heads Syria's largest mobile phone operator, Syriatel, which has 11 million monthly subscribers and employs thousands of workers.

"Showing the illegality and lack of credibility of their procedures, they've frozen my wife's and children's money... all on the pretext of disagreeing to pay – you know it's all false," Makhlouf wrote in a Facebook post Monday night.

The past several weeks have seen a rift opening between two opposing camps within Syria's regime loyalists. Long-running grumbles over the Maklouf family, often flaunting their opulent wealth on Instagram, have found a new voice. On the other side were reports published in the Makhlouf-owned al-Watan newspaper claiming that an Assad family charity had profited from electronic cards used to distribute food vouchers to poor Syrians.

Then came claims – later debunked – that Assad spent $30 million on a drab contemporary painting for his wife, but nonetheless widely published by Makhlouf's media channels. His Sama TV also went after the Takamol charity, owned by First Lady Asmaa al-Assad, accusing it of earning millions in corrupt profits from electronic cards used to distribute food vouchers to poor Syrians.

This all comes as Russian media have taken a curious turn in recent weeks, taking the unprecedented step of being openly critical of Assad's control of the country as hopelessly corrupt.

“It is becoming increasingly obvious that the regime is reluctant or unable to develop a system of government that can mitigate corruption and crime and go from a military economy to normal trade and economic relations," wrote Aleksandr Aksenenok, Russia's former ambassador to Syria in a report by the Kremlin-linked Russian International Affairs Council last month. "Damascus is failing to restore control over economic life in the more remote provinces," according to Aksenenok.

Makhlouf’s unprecedented move to Facebook captured the nation's attention and gave Syrians something they could openly discuss about the regime’s corruption. Emboldening whispers of the palace intrigue, his pleas to Assad on Facebook served an indicator that direct lines to the president had been severed. But while taking care to show respect and deference, Makhlouf appealed to the public and plainly called out the regime's tactics of graft and coercion.

None of the controversy can be confirmed as "no one really knows what's happening" what is really going on in the elite ruling clique, says Haid Haid, senior researcher on Syria at the UK think tank Chatham House.

"The dynamics of the regime's inner circle have always been a mystery to those outside it. The Rami Makhlouf saga is a clear example," Haid told Rudaw English, adding: "speculations differ in terms on motives, severity of actions and consequences."

On paper, the issue seemed to stem from taxes and licensing that Makhlouf's companies owe the Syrian telecom authority. His offices have been raided, his employees arrested, and after the Syrian Telecom Authority issued a statement on Monday that a two-week deadline had passed to hand over $185 million, his holdings were frozen.

Makhlouf, however, insisted that he was willing to pay the money, but that the real aim was to force him out of power. Posting signed documents to show his compliance, he claimed he had been threatened with arrest if he does not resign and hand over control of his business empire. But it was not enough to forestall Assad’s hand.

"This decision shows that the regime is not backing down and willing to go further — this is an escalation," Suhail al-Ghazi, Syrian researcher at the Tahrir Institute for Middle East Policy told Rudaw English.

In 2011, at the start of the nationwide protests, Makhlouf had declared he was stepping aside from business to pursue a life of philanthropy. Then in 2019, reports surfaced of trouble in the relationship as news of a government campaign against Makhlouf began to trickle out.

The tide began to rise when Russia, which backed Assad throughout the long and costly conflict, demanded that the Syrian state begin repaying its war loans, starting with a $3 billion payment in March – so Assad turned to Makhlouf for non-payment of taxes. 

For months, the Syrian government had been working to extract money from a number of Syrian businessmen, but it appears that Makhlouf refused to pay what he and may be trying to get his money out of the country. Rumours swirled that he was under house arrest and that some of his holdings were confiscated and fined under accusations of customs violations. 

Last summer, authorities seized Al-Bustan, a major charity owned by Makhlouf that provided pensions to families of wounded government soldiers. Dozens of its employees were arrested, and a famously fierce militia bankrolled by Makhlouf, the Tiger Forces, was dissolved and integrated into the Syrian Arab Army, where it could no longer be directed as his private paramilitary. 

In October, Assad called on "everyone in the private sector who has squandered state funds to return the money" in a bid to collect the funds needed to stay current on repayment to Russia and shore up strained state finances.

Then, in the surprise comeback on May 1, Makhlouf urged Assad to order a "rescheduling" of up to $185 million in tax payments from Syriatel. In a second video on May 3, he accused security services of detaining employees to intimidate him into stepping away from his businesses.

"Would anyone ever have thought that the security agencies would come for Rami Makhlouf's companies, while he has been their biggest sponsor throughout the war?" he asked on May 1, referring to himself in the third person.

The regime that today controls Syria was born out of the marriage of two families; when Anisa Makhlouf, heiress of an elite Levantine dynasty married Hafez Assad, Bashar’s father, who ruled Syria since 1963. With the Syrian economy in shambles and its currency value in freefall, Assad’s move against Makhlouf further consolidates economic power within his own house.

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