Rami Makhlouf: Syria uses front companies to dodge sanctions

The business tycoon has become estranged from the Syrian regime

Syrian tycoon Rami Makhlouf has revealed that he has a web of offshore front companies to help President Bashar Al Assad evade Western sanctions.

A public rift in Syria's ruling family has escalated with more revelations by President Bashar Al Assad’s estranged cousin about the elaborate structure the regime uses to hide its wealth and evade European and US sanctions.

Retaliating against the regime’s seizure of his main holding company, the tycoon Rami Makhlouf went public on Sunday with more details about a business network he set up on behalf of the regime and that underpinned the political economy of Syria for the past two decades.

Seeking to distance himself from war economy players who emerged after the Syrian revolt in 2011, Mr Makhlouf said that a “Hollywood episode” had been fabricated against him.

“Some in the security apparatus who have sworn not to leave any investor in the country, except the war profiteers,” he said on Facebook.

Mr Makhlouf sought to portray himself as a legitimate businessman helping the country weather US and European sanctions imposed on the Alawite-dominated regime for its crackdown on the revolt.

He said he had set up a front company called Ornina, and others, to “pay some importers who do not want direct relations” with sanctioned entities.

Among the companies he said were aided by this arrangement was Cham Holding, which Mr Makhlouf set up in 2005, bringing together top regime business associates. The regime seized Cham Holding in recent weeks.

“You ignorant people. Read the contracts and you will find out the goal of Ornina and other companies like it is to circumvent the sanctions,” Mr Makhlouf said.

“We say to our partners in Cham Holding forgive us, these guys want everything.”

Cham Holding was set up when the regime was estimating it needed $85 billion over five years to repair Syria’s dilapidated infrastructure, a figure substantially higher than Syria’s gross domestic product at the time.

Mr Makhlouf said he had been gearing Cham Holding to help repair the damage from the current war, which international aid organisations estimate at between $200 billion and $400bn.

“Cham Holding comprises 70 investors who were the core of the Syrian economy, as well as the distinguished projects that would have revived the economy if they were launched,” Mr Makhlouf said.

The Syrian regime developed Cham Holding, and another company, Souria Holding, to attract foreign investment, particularly from the Arabian Gulf, through so called “public-private partnerships” under which the government leases land and ownership of the projects to private investors.

But the two companies, which had cross-shareholding, meaning that some shareholders owned stakes in both companies, failed to attract substantial investment.

This was due to corruption, sanctions that denied the companies access to international markets, lack of know-how, the global financial crisis of 2008 and the Syrian revolt in 2011, regional businessmen said.

Mr Makhlouf, the president’s maternal cousin, and until recently a member of a triumvirate that ruled the country, has since released a series of videos and written statements on Facebook since May.

His connections with Russia are thought to have spared him physical harm by the regime, which has seized his known assets in Syria and barred him from travelling. His father, the oligarch Mohammad Makhlouf, moved to Moscow six years ago.

The other member of the triumvirate is the president’s brother, Maher Al Assad, who heads the elite Fourth Mechanised Division. A brother of Mr Makhlouf, Iyad, is a commander in the division. But Iyad, and the rest of Makhlouf family, have remained quiet.