The unmaking of a billionaire: A case study in how and why the Assad regime eats its own

The dramatic fall of Bashar al-Assad’s cousin and financier Rami Makhlouf is playing out in real life and on social media. My take as it appeared in The Ambassador’s Brief:

My book, Assad or We Burn The Country, examines Syria’s tragedy through the generational saga of the Assad family. It takes readers within palace walls to reveal the family behind the destruction of a country and the chaos of an entire region. The book ends in 2018. But of course, the palace intrigue continues. Here, I explain the latest developments:

1. Bashar al-Assad has begun to shake down one of his regime’s principal financiers – Syrian billionaire Rami Makhlouf – in a very public and aggressive way.
2. This is a remarkable development: Makhlouf is Bashar al-Assad’s cousin, and one of the most powerful men in Syria. 
3. It’s not yet clear why the shakedown is happening. But one theory is that Assad calculates that removing or at the very least sidelining or downsizing Makhlouf – who is widely hated – will help burnish his image, as he prepares to consolidate his ‘win’ in the Syrian war, and extend his rule.
4. It’s worth following these developments even during a pandemic: events like these and their consequences often spill out of Syria.

1. Bashar al-Assad has begun to shake down one of his regime’s principal financiers – Syrian billionaire Rami Makhlouf – in a very public and aggressive way

Syrian billionaire Rami Makhlouf has released two stunning Facebook videos which reveal a surprise spat between him and Bashar al-Assad. In the videos, Makhlouf said he was “suffering” as Syrian security services pressure him to pay Assad a sum equivalent to a quarter of a billion US Dollars.  

At face value, the shakedown relates to Makhlouf’s ownership of SyriaTel, the country’s main mobile phone operator, which controls 70% of the market. The Syrian government alleges that SyriaTel and another smaller operator (MTN-Syria) owe concession fees and revenue sharing payments. And Syrian security services have begun to arrest SyriaTel and MTN employees. But this story is less about SyriaTel and Syria’s mobile phone market, and more about a broader rift. 

2. This is a remarkable development: Makhlouf is Bashar al-Assad’s cousin, and one of the most powerful men in Syria

Rami Makhlouf is a key pillar of the Syrian regime – and as such he features prominently in the book. Makhlouf’s star began to rise shortly after Bashar inherited power from his father in 2000 and positioned himself as a reformer (even though his reforms were of course always going to be tailored to the Assad family’s needs). 

Assad picked Makhlouf to be the face and enforcer of his efforts to nudge Syria from a centralized economy toward a more open one – albeit one where the Assads and their cronies controlled the most lucrative sectors. 

By 2010, Makhlouf’s star had fully risen. He was often referred to by regime insiders as Bashar’s partner, or money man, and by estimates of Western officials and former regime officials I interviewed for my book, he controlled, through various holdings, nearly two thirds of the Syrian economy. In addition to telecommunications, Makhlouf dominated aviation, banking, consumer products, manufacturing, oil and gas, real estate development and the retail sector, among others.

And Makhlouf wasn’t shy about wielding his power either. Per Éric Chevallier, France’s former Ambassador to Syria, Makhlouf “behaved like the king of the country” and “did little to conceal his arrogance and pride”. Makhlouf would often tell ambassadors posted in Damascus that if their countries’ companies were interested in doing business in Syria, then that business had to go through him. 

One telling scene in my book has a business associate trying to convince Makhlouf that his businesses might be more profitable, if only he did not try to monopolise every sector. “If you let the cake grow, your own piece will become bigger,” the associate told Makhlouf. “I want the whole cake, Abdallah,” Makhlouf replied.

So, what makes this spat so stunning for Syria watchers, is that they may be watching the downfall or at least the weakening of this man who was once a king. And there’s a dark irony in watching Makhlouf now at the mercy of Syria’s notorious security services – given his extensive involvement in their atrocities.

As I detail in the book, Makhlouf’s support for those services included: 

• Funding: Makhlouf was, in his own words, “the biggest supporter of these [security] agencies, their main benefactor and biggest patron during the war.”
• Decision making: The Makhloufs (two siblings were with the security forces) were directly involved in Assad’s orders to shoot-to-kill Syrian protesters in 2011 – a key early period that helps explain why and how a largely peaceful uprising morphed into war. A Damascus security branch headed by one of the Makhloufs tortured peaceful protesters to death.
• Operational support: when army officers and soldiers began to desert or defect rather than obey these orders, Makhlouf worked alongside other regime cronies to field thugs and militiamen to fill the gap. And his militia was responsible for some of the worst atrocities committed against civilians – particularly in and around the city of Homs.
• Troubleshooting: when Bashar al-Assad and his regime and family members were slapped with international sanctions, it was Makhlouf who took the lead in finding creative ways to evade them – and ensure the regime got what it needed to sustain its killing machine.

So, it couldn’t be more ironic to watch Makhlouf now bemoan “the inhumanity” of the security services as they pressure him and arrest his employees. There’s a certain satisfaction for his former victims, to watch the tables now turned. 

4. It’s not yet clear why the shakedown is happening. But one theory is that Assad calculates that removing or at the very least sidelining or downsizing Makhlouf – who is widely hated – will help burnish his image, as he prepares to consolidate his ‘win’ in the Syrian war, and extend his rule. 

Power consolidation after a crisis is a key theme of the Assads’ reign, which has endured 50 years so far. Assad the father did it in the 1980s by moving against his own brother ,and Assad the son followed the same pattern starting in 2005, culling members of his inner circle – including his brother-in-law. Several people with knowledge of the family’s inner workings told me something very similar might be happening now, with power increasingly being concentrated in the hands of Bashar al-Assad and his wife Asma – to the detriment of everyone else.

As the spat develops, how it may evolve needs to be considered in light of some broader strategic trends currently playing out in Syria:

A) Optics: Assad thinks he’s won the Syrian war and is preparing to renew his seven-year term in summer 2021.

Assad may calculate that removing or at the very least weakening someone as hated as Makhlouf (protesters called Makhlouf a “thief” in 2011) could go a long way in burnishing his image. Indeed, this would follow a pattern: Assad has already sidelined some of his bloodiest henchmen (including Makhlouf’s brother, who now reportedly lives in Moscow). 

But Assad must calculate carefully: going after Makhlouf may trigger infighting within their Alawite community, something Assad knows he can’t afford. And Makhlouf appreciates this: in his Facebook video appearances, he appealed indirectly to the Alawites, calling them “the poor folk” who sacrificed everything to defend the regime. Almost every Alawite family has lost one or more male members fighting with the regime. Assad has cast himself as protector of the Levant’s minorities, including his own Alawite sect, from the Sunni Muslim majority. The idea being that by fighting on Assad’s side, they were fighting for their own existence.  

B) Economics: Assad desperately needs the cash for which he’s shaking down Makhlouf

The cost of rebuilding Syria has been estimated between $350 and $400 billion. But investors aren’t forthcoming: there are tighter U.S. sanctions on Assad and his regime, existing sanctions from the E.U., and there’s a lack of investor interest from countries like China.

This situation has been getting progressively worse since October 2019 – when neighboring Lebanon, whose banking system and open economy has been a lifeline for average Syrians, descended into the grips of financial collapse and social unrest. Both the Lebanese and Syrian pounds have devalued dramatically fueling inflation in both countries. And now the COVID19 pandemic has drastically cut the remittances that most Syrians receive from their relatives to survive. 

C) Russian pressure on the Assad regime: Assad’s Russian patrons are increasingly impatient, and placing pressure on him to abandon his ambition to conquer the remaining opposition-held province of Idlib, at least for now.  

Assad has two main foreign patrons: Iran and Russia. And they are increasingly at loggerheads over who should have the upper hand in Syria:

• The Iranians have been long-time allies of the Assad family, and they have fully backed Assad’s desire to reclaim “every inch of Syria” including Idlib – indeed they supported the offensive earlier this year. Like Assad, the Iranian regime is less keen on making any political concessions to the opposition. 
• The Russians, in contrast, appear to have become impatient with Assad and by extension Iran. This impatience may have taken on more urgency with plummeting oil prices and the pandemic-induced recession. Moscow has already got some of what it came for, having secured access to permanent military bases in Syria, and an arena from which it could showcase and test its military prowess and weapons and challenge the West. It now wants to wind down its expensive military contributions, and focus instead on carving up the spoils of war and using Syria as bargaining chip in talks to deescalate the current standoff between Russia and the West.  

To this end, the Russians are placing significant pressure on Assad to make political concessions. Russia wants to demonstrate that it can contribute to long-term peace in Syria the same way its military intervention was a game changer. Moscow didn’t support the Idlib offensive – instead reinforcing the ceasefire with neighbouring Turkey. And more recently, Russia appears to have given the green light to Israel to step up its targeting of the Iranian and Hezbollah presence in Syria. 

Although this is unlikely at the moment, Moscow may even be willing at some point in the future to sacrifice Assad himself to the right deal, which preserves Russia’s interests. 

Further, the Russians and Iranians are increasingly in competition over the spoils of war:

• Iran wants to be the prime beneficiary of any economic revival in Syria. It believes it is entitled to this as it has been fully committed to Assad: providing billions of dollars, and sacrificing thousands of Shiite militia and Iranian lives to support him (in contrast, Russia has been very careful not to give the regime actual cash, or to have Russian soldiers involved in ground combat). 
• But similarly, Russia wants to ensure that Russian companies receive the lion’s share of all business opportunities in Syria. It believes it is entitled to properly monetize its intervention. 

With two nation states now vying to carve up the most lucrative sectors of Syria’s economy, Makhlouf, the man who could once demand the “whole cake”, will need to learn to share. Assad is likely to see the unwinding of Makhlouf’s control of the economy, and a reallocation of opportunities to Russia and Iran, as a chance to appease his two rivalrous backers:

• Some Syrian media reports suggest that MTN-Syria (the second and smaller mobile phone company in which another businessman close to Assad owns a stake) may end up being controlled by a Russian oligarch. This came after a slew of articles appeared in April in Kremlin-linked Russian media, painting Makhlouf and others around Assad in a negative light. And if Assad grants concessions to the Russians here, it may take the pressure off him elsewhere. 
• There’s even a rumour that part of Makhlouf’s SyriaTel may be given to the Iranians on the cheap: a consortium made up of Iranian businessmen, Iran’s main telecoms company, a fund belonging to Assad’s wife Asma and an investment company tied to Assad had been working on setting up a third mobile operator in Syria, but now the plan may be just to “swallow” SyriaTel, a Syrian telecoms executive told me.

But, as with all “palace intrigue” stories, it’s difficult to predict from the outside. Indeed, one former regime official, now based overseas, told me that the dispute with Makhlouf could be “temporary” and even “carefully studied” – designed to help Assad navigate a very critical period in which the dire economic situation is starting to erode his core support base, and the Russians continue to pressure him to make political concessions. 

4. It’s worth following these developments even during a pandemic: events like these and their consequences often spill out of Syria

The prevailing thinking in the West is that Assad won: that he may be bad, but the alternative like ISIS and extremists is worse – and whatever happens next is the problem of Iran, Russia, and Turkey – let them figure it out. However, although the West wants to ignore Syria, that does not mean the conflict has gone away. Or that it won’t continue to bleed into the West. 

There are three main ways it will do this:

• Refugees: Many of the nearly 7 million Syrians scattered all over the world won’t go back as long as Assad and his regime are in power. There are also another 5 to 6 million internally displaced Syrians including 1.5 million crammed in tents along the Turkish border. Poverty and a potential COVID19 breakout, which neither the regime nor those in control of other parts of the country in the north can cope with, could cause Syrians to take desperate measures to flee the country.
• Justice: The Assad regime has so far escaped referral to the International Criminal Court for its horrific war crimes, because Syria is not a signatory to the treaty that created the court, and more importantly, because China and Russia are blocking referral by the U.N. Security Council. But brave and resourceful Syrians are seeking other avenues to justice and accountability. On April 23 for example, a trial of two Syrian regime officers began in Germany, relying on the fact that the universal jurisdiction principle is codified into German law.
• ISIS & Terrorism: since its creation the Assad regime has sponsored terrorism and used it as a bargaining chip in its dealings with the West. For example, as I detail in the book, when the uprising began in 2011, one of the first things Assad did was release Islamist militants from prison. He gladly watched ISIS grow and cannibalize his opponents. Nothing prevents him from resorting to the same tricks again. And the fact that Assad remains in power with the seeming approval of the West is a potent recruiting tool for extremists.

Whichever way the Makhlouf situation pans out, and however COVID-19 evolves in Syria, one thing is certain: Syria will continue to haunt Western leaders, no matter how much they try to sweep it under the carpet. 

Sam Dagher (@samdagher) has reported on the Middle East for over sixteen years. He has worked for the Wall Street Journal and the New York Times, with his work for the former submitted for a Pulitzer Prize. His book, Assad or We Burn the Country: How One Family’s Lust For Power Destroyed Syria (Hachette Book Group, 2019) was named one of The Economist’s best books of 2019. It’s out now in paperback.