Inside Assad’s palace: Rami Makhlouf, money, power and the future of Syria

On April 30, Syrian tycoon Rami Makhlouf, a cousin of President Bashar al-Assad and a member of the regime’s inner circle, made an unprecedented social media appearance that baffled the public.

In a live video published on Facebook, Makhlouf addressed the president directly, denouncing a recent tax fraud bill that had been slapped on his telecoms business Syriatel. Though he promised to pay the bill, he pleaded with the President, warning him of malicious and misleading forces within regime institutions. “I don’t trust anyone else,” he said.

Makhlouf is Syria’s richest man and al-Assad’s maternal first cousin. He was known as the “exclusive agent of Syria,” whose dominance over the economy for over two decades served to bankroll the regime and the Assad family.

But in the past year, measures to seize his assets and dissolve his networks indicated that he had fallen out of favor with the president. Since April, Makhlouf has publicly aired his grievances against al-Assad, growing increasingly defiant. “God told us not to fear anyone, to fear only Him,” he said.

Makhlouf’s audacity shocked the public, but also confirmed the long-held view that he was untouchable. “It’s the first time that anyone from al-Assad’s inner circle has publicly spoken out against the regime from within Damascus. Regime opponents usually spoke out in exile,” said Ibrahim Hamidi, a Syrian journalist who has followed Makhlouf’s rise.

The spat has sparked a flurry of speculation about intrigue at the palace. Many have suggested that Makhlouf has a rivalry with Asma al-Assad, the president’s wife, whose family network competes with the Makhloufs for the spoils. Others point to pressure from Syria’s allies, Russia and Iran.

But Makhlouf has so far proven a difficult opponent to remove. This Al Arabiya English investigation delves into the circumstances that led to Makhlouf’s rise, what makes Makhlouf different to the others in al-Assad’s inner circle, and ultimately, what his potential fall means for the future of Syria.

Dozens of interviews with regime insiders, Syrian citizens from both regime and opposition areas, journalists and experts attest to how, over generations, the Makhloufs and the Assads wove an inextricable web around each other.

This web brings in marriage, class, money and the foundational politics of the Syrian Arab Republic, and has gripped audiences with questions about its future.

Part I: Makhlouf and the Assads, an inextricable relationship.

Makhlouf’s public outcry over the measures against Syriatel provide important clues about his relationship with the president.

Syriatel is the largest of two mobile operators who have held exclusive contracts in Syria since 2001. With over 11 million subscribers, it employs at least 6,500 people according to Makhlouf’s video.

Makhlouf claimed to have paid £S12bn ($23.32 million) in taxes for 2019. But the tax fraud bill came to more than 20 times the amount. He denied the allegations against him. “You are our people, our family. Would anyone steal from themselves?” he told audiences, “These businesses are to serve you, not me.”

These measures come as the country faces bankruptcy from nine years of devastating war. The US and EU recently tightened their sanctions on regime affiliates including Makhlouf, with the US Caesar Act coming into effect in June. The Syrian pound has plummeted and locals have reported the price of basic goods has increased 500 percent.

The cash-strapped regime, which claims it has won a war against terrorism, has said it is cracking down on corruption to save the country’s devastated economy. In August last year, al-Assad ordered Syrian businessmen, including Makhlouf, to pay millions of dollars into the Central Bank. Then, in October, al-Assad told state-television that he was asking “everyone who wasted state funds to return the money.”

Makhlouf panders to this campaign in his videos, portraying the president as the country’s most trusted benefactor. “I ask that you be the one who personally redistributes the money to help the poor,” he said, “You are the only one they trust. God gives, as does your goodness, and I have no role in it.”

But he also implies that the measures against him threaten the country. After the arrest of his employees by secret services on May, he warned of an “abuse of power.” On May 16, he claimed that the pressure on Syriatel could spell “a catastrophe for the Syrian economy.”

Though he is better known for crony capitalism, Makhlouf describes his charitable work, and references the Quran and Islamic mysticism in his videos. “One can read so much between the lines of what Rami is saying. Why is he suddenly referring to God and scripture?” said Shwan, a surprised resident of Al-Hasakah, in Kurdish-held northeastern Syria, who watched the videos.

In public, Assad has ignored Makhlouf’s videos. On May 4, days after Makhlouf published his comments, the president made an announcement addressing the coronavirus and its economic repercussions without the videos.

Weeks later, Asma launched a nationwide charitable campaign that was widely seen as a response to Makhlouf. Then, on May 21 authorities seized Makhlouf’s assets and those of his family, and issued a temporary travel ban. On June 1, his Syriatel shares in the Damascus stock market were suspended.

Makhlouf once relied on his influential Aunt Aniseh, who was Hafez al-Assad’s wife and Bashar’s mother, to mediate with the president. But the videos reveal he has exhausted all other means to communicate with his cousin. “In the past, Bashar avoided requests from those closest to him by ignoring their calls. The same may have happened to Rami: he picked up the phone, but Bashar didn’t answer,” said Sam Dagher, a journalist and author of “Assad of We Burn the Country.” “This time Aniseh is no longer alive to help,” he added.

What followed instead was a game of tit-for-tat public appeals between Makhlouf and regime institutions, largely played out through social media posts and leaked documents to journalists.

But there is one caveat to this public showdown: neither Makhlouf nor the Assads will ever be poor.

For decades, the two families created an extensive shadow economy that revolves around them.

Their hidden wealth is impossible to estimate accurately. One knowledgeable source believed that Assad is dependent on Makhlouf’s overseas funds, which he estimated to be at $5 billion. But another expert on the Syrian economy believes that both Makhlouf and al-Assad could be worth up to $100 billion. “They are possibly among the richest men in the world,” the person said.

It has also raised doubts about the true motivations behind the rift. “The disagreement is not economic, but existential,” said a former regime insider. “It is about tribe, class and who will define the future of Syria.”

The ‘honourable lineage’ of the Makhloufs, and the ‘rural’ Assads.

Three generations connect the Assads to the Makhloufs. Bashar al-Assad’s great aunt had married into the Makhlouf family, who were notables from the town of Bustan Al Basha. Yet when the young airforce pilot Hafez al-Assad first asked to marry Aniseh Makhlouf in the 1950s, he faced resistance from her father.

Aniseh’s influential family belonged to a higher caste than the Assads. These landowning families dominated the rural and marginalized Alawite villages along the Syrian coast, including Qurdaha, where the Assads came from. According to historians, the Makhloufs earned their name, which means rewarded by God, during World War I, when they kept an open house to feed the poor and the hungry.

There were also political differences between the two families. The Makhloufs were members of the Syrian Socialist Nationalist Party (SSNP). “It’s belief in a Greater Syria and Syrianism made it ideologically opposed to the Ba’ath party, who advocated a broader Arab nationalism,” said Hamidi.

In 1955, the party was forced underground after one of its members was accused of assassinating the Arab nationalist Colonel Adnan Maliki. Party members were arrested, including Aniseh and Rami’s father Mohammed. Some historians claim that their first cousin, Badi Makhlouf, shot al-Malki.

But the rise of the Ba’ath party in modern Syria had weakened the social status that noble upper classes like the Makhlouf’s once enjoyed. By 1958, the SSNP was banned, and practicality prevailed: with her parents’ consent, Aniseh married Hafez, whose position within the Ba’ath party was rising rapidly.

The alliance benefitted both families. “The Makhloufs to retained their political privileges, while Hafez could elevate his own lower class status,” said Hamidi.

“The marriage set a precedent for the next six decades of Syrian history. Similar marriages took place between the sons of the military establishment, from rural families, to daughters of the old social Alawite classes of Syria,” said Hamidi.

The symbolism of Makhlouf’s alliance to the Assads is not lost on the contemporary Syrians who are witnessing this unravelling. One Facebook comment to the first video, which was later deleted, referred to Makhlouf’s “honorable lineage.”

“The late Aniseh Makhlouf’s father rejected the idea [of marriage with Hafez al-Assad] categorically, given the great difference in lineage and the height of the family,” wrote the post.

When Hafez al-Assad became president after a military coup in 1970, his close associates, like Mohammed Makhlouf, Rami’s father, were also promoted. Mohammed was made director of the tobacco monopoly, a move that was not devoid of symbolism. The Alawites of the mountains, where the Makhloufs came from, were tobacco growers. Its production, which was the famed Latakia blend known for its smoky flavor had once been controlled by the SSNP. The cigarette manufacturer Philip Morris is said to have adopted its Marlboro slogan “come to where the flavor is“ from this blend.

As his son would decades later, Mohammed grew to control the Syrian economy behind the scenes, sponsoring major economic deals in the oil sector in the 1980s. “All deals went through Mohammed Makhlouf, who distributed stakes to other businessmen in the 1980s and 1990s,” explained Hamidi.

And despite the Makhloufs’ proximity to the Ba’ath party, the family never lost their original political allegiances. Decades after the SSNP was expelled from Syria, Rami Makhlouf would play a pivotal role in its revival.

The party was re-introduced as part of the Syrian government’s coalition of licensed parties in 2001. Between 2005 and 2019, Makhlouf assumed the role of its “invisible” president, and pushed its supporters into senior leadership positions that allowed their appointments as ministers and election to parliament.

After 2011, Makhlouf funded the party’s militias, which fought alongside government forces. He helped found a party branch in 2011, which contested the People’s Assembly elections in 2012, and won seats in parliament.

Makhlouf’s continued membership of the party was yet another sign of the unique privileges he enjoyed above all other members of al-Assad’s elite circle.

Makhlouf’s business successes further intertwine the two families

When Bashar succeeded his father in 2000, there was hope that he would be a reformer who would modernize the economy and develop a private sector. In practice, this meant that contracts were awarded to a close network of family and cronies.

Makhlouf, whom Bashar had known since childhood, got the lion’s share of the pie. “Makhlouf’s business successes would not have been possible without the regime’s support and approval.” said Dagher. “He was picked by Bashar to engineer an economic opening that was designed to enrich the Assads and their cronies. He worked for Bashar.”

As Makhlouf’s control over the economy grew, he became indispensable to the Assads. Leaked documents in the Panama Papers reveal how Makhlouf helped the Syrian regime to evade sanctions and access funds. “Syriatel was a cash cow for Assad and the Makhloufs,” adds Dagher.

In the late 90s, the young Makhlouf launched Ramak, a company that brought duty free shopping to Syria. “He was very excited, and drove me to see one of the outlets in the airport,” recalled Hamidi, to whom the businessman gave his first interview.

“It was the first sign of a selective economic opening in Syria, and a generational change in the elite,” he added. The children of regime officials no longer held “partnerships” in state-run companies, but took up positions leading the country’s burgeoning private sector.

A few years later, he was awarded the Syriatel contract in 2001, a move which upset other close family friends and businessmen around the Assads. “The Syriatel contract was hotly contested from the beginning,” explains Dagher, “other members of the elite circle felt sidelined.”

Over the years, Makhlouf would oppose any agreements or trade deals that threatened his monopoly, including the EU agreement with Syria in 2004, and an attempt to create a third telecoms provider in 2005.

A Damascene businessman who manages a company affiliated to Makhlouf’s recalled the tycoon’s willingness to intimidate and extort as he expanded his empire. “What goes around comes around. Today, Rami is appealing to law. Where was the law back then when he stripped people of his properties?” he told Al Arabiya English.

Washington slapped sanctions on Makhlouf in 2008, stating that he “used intimidation and his close ties to the Asad regime to obtain improper business advantages at the expense of ordinary Syrians.”

Such was his dominance that he was believed to control 60 percent of the economy before the war in 2011. But this widely quoted figure has been contested. “Makhlouf controlled about 7 percent of gross domestic product which was about $62 billion in 2010. But his role in economic decision-making was much greater,” said Hamidi, citing figures from a regime official.

Yet time and again the President would prove unwilling or unable to curb his cousin’s expansion.

Pressure from Makhlouf’s opponents forced him to leave Syria in 2004, but he returned to Damascus a year later to help kickstart the economy. The Syrian regime had been accused of assassinating the Lebanese Prime Minister Rafiq Hariri, and no longer had access to the financial services and trade connections it once enjoyed in Beirut.

In Damascus, he played a pivotal role in plans for the city’s economic expansion modelled on Beirut. “Damascus would grow its private banking sector, tourism, restaurants and hotels,” explained Hamidi. Makhlouf established Sham Holdings in 2006, one of two holding companies that were set up to oversee the expansion.

But he remained an unpopular fixture of the regime, a symbol of its cronyism and corruption.

Makhlouf’s lasting influence among the Alawites

When anti-regime protests began in the city of Dar’aa in 2011, Makhlouf was evoked in slogans as a “thief,” with Syriatel also appearing in the banners and graffiti.

“Makhlouf and his ownership of Syriatel had once again become an embarrassment for Bashar,” said Dagher. Responding to this, Makhlouf gave a rare interview to the New York Times’ Anthony Shadid, in which he announced he would step down from his business role and contribute to charity work.

The role he then played in the ensuing war would only reinforce his position. Makhlouf maintained his position at Syriatel, laundering money for the cash strapped regime, funding loyalist militias supporting al-Assad, and paying reparations to the families of fallen soldiers.

He sided with Bashar’s view that a show of strength was the only solution to the growing protests. His brother Hafez Makhlouf, a senior intelligence official, is believed to have given the orders to shoot to kill on the demonstrators, which led to thousands of deaths.

Among the “humanitarian work” that Makhlouf refers to in his videos, is his charity Al-Bustan, which funded a militia of the same name. “They were among the most brutal militias I’ve ever met in Syria, and they are responsible for many atrocities” said Dagher. According to Hamidi, Al-Bustan paid its fighters $350 a month, which is double the Syrian Army’s salary.

This patronage has served to cement his existing influence among the Alawites who were loyal to al-Assad throughout the conflict. In his videos, Makhlouf appeals to this support base. On 3 May, he referred to the “critical” situation in Syria and re-iterated the public’s loyalty to the president. “We who gave all that is dear and precious,” he said, a reminder that al-Assad’s loyalists have paid with their lives.

“In other words, he warns that if Bashar loses him, he also loses [support from] the Alawite community,” said Bassam Barabandi, a former Syrian diplomat.

Indeed, the rift has sparked alarm along the Alawite coastal communities, many of whom still depend on Makhlouf’s patronage during the economic crisis. Umm Saed, 57, the mother of a soldier killed in the war, worries that the rift will put an end to the money she receives from Al-Bustan. Her son fought with the Syrian Army rather than Makhlouf’s militias. “We’re not considered part of Al-Bustan. So there will be no aid nor gifts,” she told Al Arabiya English.

Another revelation from Makhlouf’s videos was his patronage of the Syrian intelligence services during the war, a dreaded institution whose members are currently facing trial in Europe for crimes against humanity.

The sprawling security apparatus that was developed during the Cold War with the help of the KGB and other Soviet-backed secret services has been essential to the Assads’ rule, and Bashar’s crackdown on peaceful protestors after 2011.

Outraged that his own employees had been arrested by this secret police, Makhlouf described himself as the apparatus’ “biggest donor” and “biggest servant” during the war, and asked: “Could anyone have pictured the security services targeting [my] companies?”

Part II: The crackdown on Makhlouf begins

Makhlouf’s wealth expands, as Syria’s economy contracts

A decade of tightening international sanctions did little to curb Makhlouf’s wealth, which is scattered in a global network of shell companies and investments.

What was not exposed by the Panama Papers, was later revealed by Makhlouf’s son Mohammed, who flaunted his collection of sports cars and villa in Dubai worth hundreds of millions of dollars on Instagram.

The UK has frozen £154 million ($190 million) worth of assets connected to the Syrian regime, which includes those of Makhlouf and his family. An investigation in 2019 by the non-profit Global Witness uncovered some of Makhlouf’s properties in Moscow worth up to $40 million.

This is less than a fraction of what he is believed to own. “When you have that much liquidity, you have no choice but to invest anywhere you can, and that is what Makhlouf did,” said one source. There are also the undocumented assets, which he can control through trusted family and tribal connections.

The regime’s institutional crackdown on Makhlouf’s business networks and charities cannot entirely strip him of his money. Rather, it targets his political power. Last year, before the tycoon’s assets were seized, Al-Bustan was forced to disarm its militias and Makhlouf’s wing of the SSNP was dismantled.

Asma and her businessmen threaten Makhlouf’s empire

Some reports have claimed the crackdown is led by Asma, the president’s wife, whose networks of businessmen, among them her family, compete with Makhlouf.

When the British-born banker Asma al-Akhras, daughter of an expatriate doctor from an urban Sunni family, married Assad, her background also gave the alliance a political significance.

The young couple were hailed as progressive and reform-minded. Asma’s looks and style won her praise in the Western media, including a fawning Vogue article in 2012 that named her “A Rose in the Desert.” She set up a conglomeration of NGOs in Syria, which focused on developing new institutions that would support youth employment and re-write the family’s power.

In practice, this network was the only one permitted to operate in Syria. During the civil war, it also allowed her to monopolize on aid money coming into the country, including billions of dollars from the UN, and to co-opt civil society by ensuring all non-governmental groups came under her wing.

And as a new generation of businessmen and warlords who had profited from the crisis began to rise, reports came that many of these were connected to Asma and her family.

Among Asma’s alleged affiliated businesses is a new electronic card system used by millions of Syrian families to ration subsidized goods like bread, rice and petrol. The system, known as the Smart Card, is believed to be owned by Muhannad al-Dabbagh, Asma’s first cousin. A third telecommunications company agreed with an Iranian provider in 2017, was reportedly revealed to be connected to one of the Asma’s accounts.

Makhlouf and the First Lady once got along very well, sources familiar with the Assad family have said. Rather, the disagreement comes as questions emerge over who should control the political process and crippled economy of post-war Syria.

Some have claimed that Asma supports cosmetic concessions in Syria’s political process. Bashar, as ever, believes in a show of strength and that any sign of weakness would lead to the regime’s downfall. “Rami supports Bashar’s position that any concession in the political process in the beginning of a relinquishment of power,” said Barabandi, “Asma wants an empty political process.”

It could be that the president and his first lady, who have long invested in their public image as a modernizing couple, are playing the game of good cop, bad cop.

Geopolitical Implications

Bashar al-Assad’s crackdown on Makhlouf comes at a time when the regime faces pressure from its allies, prompting speculation about their role in the rift.

Moscow has pressed al-Assad to come to a political settlement with token electoral reforms that would help it get international backing. Though such changes would be cosmetic and would most likely to maintain Assad’s power and the authoritarian nature of the regime, they could result in monetary aid from the international community for Syria’s reconstruction efforts.

Russian diplomats have criticized the influence of Syria’s businessmen, Iran and other stakeholders, who are frustrating their own economic ambitions in the country. In 2017, Moscow intervened on an agreement that awarded the exploitation of phosphate mines to Iranian companies.

Last month, a series of reports published by the Russian news agency RIA-FAN criticized al-Assad’s “weak leadership” and his inability to reign in corruption from his associates. “We are investing large sums of money in the Syrian economy, but we are not seeing results,” a Russian expert was quoted as saying. The reports were subsequently removed from the website.

“The Russians do not mind corruption as such, as long as it’s not too conspicuous to the West” said a source who declined to be named, but “Assad’s cronies – not least Makhlouf’s son in Dubai – are flaunting their wealth too publicly.”

The perception that Syria’s allies are calling the shots in the country was widely echoed among respondents interviewed for this article.

Yassin, a construction engineer from Suweyda in southern Syria told Al Arabiya English: “The regime has given its allies oil, gas, phosphates, ports and railways. But they still want more. The regime is taking back the sectors that Rami controls to satisfy these allies and maintain their support.”

Faisal Al Hassan, a human rights activist from opposition-held Hama, said: “Russia’s goal is to replace Makhlouf with a new system that is loyal and obedient to Russia, so that it can tighten its grip on the Syrian administration.”

But the allegations of Russian involvement are at this stage speculative and sometimes even fanciful. One claim goes so far as to suggest that Putin travelled to Damascus personally in order to disclose the full amount of Makhlouf’s assets in Russia to al-Assad and his cash-strapped regime.

“Moscow apparently supported Assad’s pressure on Rami in 2019 so that Damascus could restart the Syrian economy,” said Anton Mardosov, a non-resident fellow of the Middle East Institute’s Syria program, who is skeptical of allegations of direct Russian involvement. “But Moscow was too cautious and did not exert sufficient pressure on the Syrian regime from the beginning. Assad was becoming more demanding and capricious, receiving from his Russian friends everything he wanted,” he added.

Russian diplomats, meanwhile, have publicly disputed any claims of involvement in the rift, which they view as purely internal.

What next for Makhlouf?

Makhlouf’s fate, and its implications for Syria’s future, are yet unclear. His story is part of a wider cast of characters and families that have ruled Syria since the 1970s. But his rift with al-Assad conjures deep seated questions about power, influence and survival as Syria emerges from nine years of war.

“Finally, Rami’s control over the economy has ended, and we are breathing a little,” said the manager of a company in Damascus affiliated to Makhlouf.

Others were crippled with fear. A.S., a mother of four living in Damascus, said: “My job in Rami’s company gave me financial security and social prestige. We are afraid of losing our salaries. Every night, I think of what will happen to us.”

So far, Makhlouf’s influence and his inextricable connections to the al-Assad family made him a difficult opponent to silence. To date, he has remained defiant of the measures against him. On May 28, Makhlouf announced he would transfer his seized assets to his charities.

Yet he also appears to be losing support from those closest to him. His brother, Ihab, resigned from his position as deputy CEO of Syriatel, announcing his loyalty to Assad in a Facebook post. The Al-Bustan charity also released its own statement, saying it would follow Assad’s instructions.

While Rami is under increasing pressure from the regime, his connections and influence mean he is unlikely to give up without further public confrontation. It could be, after all, that having crushed all of its opponents, the regime is finally eating itself from within.

Khaled al-Hamoud, an IDP from Khan Sheikhoun in opposition-held north-west Syria echoed this view: “We don’t care about the president’s argument with his cousin,” he said, from a camp in Idlib province, “But we are observing closely the collapse of an economic and administrative system that itself caused the collapse of Syria.”

Illustrations by Steven Castelluccia.

Images AP/AFP/Reuters.