Sanctions on Businessman Target Syria's Inner Sanctum

By Robin Wright
Washington Post Staff Writer
Friday, February 22, 2008

The Bush administration yesterday froze the U.S. assets and restricted the financial transactions of Syrian businessman Rami Makhluf, a powerful behind-the-scenes middle man for the Syrian government, in a move targeting the political and economic inner sanctum in Damascus.

As a cousin of Syrian President Bashar al-Assad, Makhluf, 38, is a key player in the Assad dynasty and is the force behind Syria's effort to privatize state-owned enterprises. However, his power over vital business monopolies has helped the government retain control over Syria's most important economic assets, according to U.S. officials and outside experts.

"Once you hit Rami Makhluf, you're at war with Syria," said Joshua M. Landis, a former Fulbright scholar in Syria who teaches at the University of Oklahoma. "When you sanction Rami Makhluf, you're also sanctioning all the people who deal with him, including the wealthiest and most powerful people in the country."

The Treasury Department sanctioned Makhluf under an executive order citing Syrians for alleged corruption. "Makhluf has used intimidation and his close ties to the Assad regime to obtain improper business advantages at the expense of ordinary Syrians," said Stuart Levey, undersecretary for terrorism and financial intelligence. "The Assad regime's cronyism and corruption has a corrosive effect, disadvantaging innocent Syrian businessmen and entrenching a regime that pursues oppressive and destabilizing politics, including beyond Syria's borders, in Iraq, Lebanon and the Palestinian territories."

The move freezes any assets Makhluf holds in the United States and restricts his transactions through U.S. financial institutions. The impact, however, may be largely political and psychological, as he is unlikely to have identifiable U.S. holdings, experts said.

The action was taken under a presidential executive order, signed on Feb. 13, which expanded sanctions on Syria -- covering support for activities related to terrorism, narcotics and intervention in Lebanon -- to include corruption.

The ruling Syrian dynasty was crafted with the marriage of Hafez al-Assad, the longtime president who came from a rural background and was the first in his family to graduate from high school, to Anisah Makhluf, who hailed from a wealthy Syrian family. Since a military coup in 1969, the Assads have controlled politics while the Makhlufs have been big business players. The tradition continues in the next generation, with Bashar al-Assad as president and Rami Makhluf as a leading force in business.

Makhluf is a top player in Syria's telecommunications, commercial, energy and banking sectors, said Matthew Levitt of the Washington Institute for Near East Policy.

"The considerable role the Assad family, their inner circle and the Syrian security services exert over the economy, coupled with the absence of a free judicial system and the lack of transparency, concentrates wealth in the hands of certain classes and individuals," the Treasury Department said in its announcement. "In turn, these classes and individuals depend upon this corrupt system for their success and fortune. Syrians without these connections are unable to improve their economic standing."

The Bush administration has expanded punitive measures against Damascus in recent months, with the Makhluf family coming under scrutiny. In November, the Treasury sanctioned Hafiz Makhluf, Rami's brother, for his connection with efforts to reassert Syrian control over Lebanon. Syria ended its 29-year occupation of Lebanon in 2005, but U.S. officials have charged that Damascus has been linked to subsequent attacks on Lebanese politicians.

"With these moves, the president of the United States is making it clear that the Syrian regime is anathema and unacceptable to him," said Ammar Abdulhamid, a fellow with the Brookings Institution's Saban Center. The U.S. action comes as the Syrian economy is vulnerable. Oil production is falling, and revenue from oil exports has accounted for as much as half of Syria's government budget, Landis said.

"A lot of people think of Makhluf as a highway robber, and in some ways he is. But he is also one of the few people who can work through the system to get things done," said Landis, referring to Rami Makhluf. "All kinds of banks and people and foreign investors who want to join in Syria's development are going to think twice and think 'What's going to happen to me?' "

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