What a Syrian tycoon's appeals tell us about the future of the Assad regime
Their falling out creates a vacuum for stakeholders to fill, which could prove useful for the Assad regime as it tries to win new allies and rebuild its tattered reputation
In Syria these days, it seems that a historic loyalty to President Bashar Al Assad’s regime is not enough to keep you in favour. There must also be evidence of an adherence to the "new normal" that the country has found itself in.
Added to this grim mosaic we have Rami Makhlouf and his astonishing Facebook video appeals over the past week. The Syrian billionaire accused regime security forces of detaining his employees and complained that his telecom company Syriatel is being "unjustly" billed by the government for about $186 million, a sum that he says he cannot pay.
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A banner depicting Syrian President Bashar Al Assad in Douma, outside Damascus, Syria. Reuters
There is feverish speculation that the public nature of Mr Makhlouf’s comments indicates that a power struggle is taking place. It also begs the question of specifically who Mr Makhlouf is trying to direct his messages to? Certainly not the public at large. Both online and offline there is much schadenfreude and very little sympathy in evidence for Mr Makhlouf and his troubles. Could it be that he no longer has a direct route of communication to the President?
Also, a new class of wealthy businessmen has emerged thanks to the war. There is speculation that they are helping to drive the targeting of Mr Makhlouf’s interests. Furthermore, there are those observers who point to the ascendancy of Mr Al Assad’s wife Asma, that she might be cleaning house in anticipation of Syria one day rejoining the international community. Mr Makhlouf is a burdensome symbol of the negativity through which the regime is viewed and, unlike Mr Al Assad and his wife, expendable it seems.
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Some observers point to the ascendancy of Bashar Al Assad’s wife Asma, right, and that she might be cleaning house. AFP
It would be unwise to assume that his troubles may be evidence of the weakening of Mr Al Assad. In order to survive, brutal and repressive regimes need to be in flux; no one is allowed to feel comfortable. Fear is what binds. In Iraq, for example, Saddam Hussein was the only real constant for nearly a quarter century as henchmen rose and fell around him. His power never wavered until he was toppled by the US-led invasion in 2003. Mr Makhlouf’s crisis could prove just another phase of Mr Al Assad tightening his grip as he has done throughout the past decade.
In any case, speculation about the intrigue that may or may not be going on behind the scenes in Damascus misses the point that anyone inside the inner circle must acknowledge that Russia and Iran are the main power brokers now.
Outwardly at least, the Makhlouf clan has for some time appeared at odds with the new paradigm in Syria.
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Syrian tycoon Rami Makhlouf has revealed that he has a web of offshore front companies to help President Bashar Al Assad evade Western sanctions.
Think of what you know about who is in charge in Moscow and Tehran, and then ask yourself how well the flaunting of wealthy lifestyles on social media platforms by younger members of the Makhlouf clan would sit with them. Negative media coverage of the Assad regime in Russia is likely to be adding to the tension in Damascus.
Also, there is still a war going on. Ambassador James Jeffrey, the US envoy for Syria, calls Idlib – which is the last area of opposition to the Assad regime – the "crucible" of the conflict. American troops are operating in the area, and they share roads and skies with Russian and Turkish forces. It is a potential powder keg of a scenario. Meanwhile, Mr Jeffrey says Washington will "double our efforts" to support the drafting of a constitution and prepare the way for United Nations-backed elections.
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Warplanes attack the village of Al Bara in southern Idlib on March 5, 2020, a day before a ceasefire went into effect in the province. AFP
Destroyed buildings in Al Nayrab village, about 14 kilometres south-east of Idlib city. The city and its surroundings have suffered furious bombardment by Syrian forces and Russian jets since since December 2019. AFP
Malek Haj Khalil stands on the rubble of his home in Sarmin, about 8 kilometres south-east of Idlib city. AFP
Syrians ride their motorcycles through a damaged neighbourhood in the town of Binnish in Idlib province. AFP
A boy rides his bicycle past damaged buildings in Idlib city. AFP
A boy watches as a man paints a mural on the roof of a collapsed building in Binnish to commemorate the ninth anniversary of the Syrian war. AFP
The mural shows a dove holding an olive branch in its beak flying over a Syrian opposition flag in the shape of the Arabic numeral 9, with the word 'years' below. AFP
A mural on the wall of a destroyed school in Sarmin. The slogan refers to the Syrian government considering all rebels terrorists. AFP
Like other towns in Idlib, Afis has sustained widespread destruction due to heavy fighting and air strikes. AFP
A destroyed house in the village of Al Mastuma, about 7 kilometres south of Idlib city. AFP
A man walks through a destroyed neighbourhood in Al Mastuma. AFP
Speculation about the intrigue in Damascus misses the point that anyone inside the inner circle must acknowledge that Russia and Iran are the main power brokers now
Mr Jeffrey also argues that via sanctions "we are holding the regime accountable" for its crimes against its own civilians, including the use of chemical weapons and stopping the distribution of humanitarian aid. There is also the looming presence of Israel as it ramps up air strikes against Iranian targets in the country.
Given all that is going on, the fears and desires of Mr Makhlouf are of little real significance. More importantly, most of the people of Syria continue to suffer with little respite in sight. However, his situation does prompt wider questions.
Firstly, are international sanctions finally working? Squeezed between them and neighbouring Lebanon’s financial meltdown, the Assad regime is clearly being affected if it needs to push the likes of Mr Makhlouf into such a corner to access cash.
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The second big question is about reconstruction, should a political solution be found eventually. The World Bank estimates that the reconstruction effort in Syria will require nearly $400 billion. International donors are reluctant to commit to any funding as it stands, and Russia and Iran are not in a position to underwrite it either. Mr Al Assad would need to create a very attractive proposition to lure would-be investors.
Before now, Mr Makhlouf would have been poised to reap massive benefits from the rebuilding of Syria, as there was a time when little could happen economically without his involvement. But it is fair to say that he no longer will be so pivotal when reconstruction becomes a reality. That creates a vacuum for others to fill, which could prove useful for the Assad regime as it tries to win new allies and rebuild its tattered reputation.
Mustafa Alrawi is an assistant editor-in-chief at The National
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
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