North Africa, West Asia

Makhlouf no more? Russia is calling in the debts in Syria

Rumors about Rami Makhlouf’s asset seizures might be signaling divisions between Russia and Iran in Syria.

Nick Grinstead
6 September 2019, 8.04am
Russian President Vladimir Putin meets with his Iranian counterpart Hassan Rouhani in Ankara, on April 4, 2018.
Picture by Parspix/ABACA/ABACA/PA Images. All rights reserved.

Last week, news emerged that Rami Makhlouf, cousin of president Bashar al Assad and allegedly the wealthiest man in Syria, had been placed under arrest by the regime, and his substantial holdings transferred to other parastatals. While it is still too early to tell, the most interesting aspect of the emerging story is that the move against Makhlouf was done at the behest of Russia who allegedly demanded $3 billion from the Assad regime who in turn asked Makhlouf – the man sometimes referred to as the regime’s banker.

When Makhlouf refused, Russia produced documentation that showed he could, in fact, produce the funds within three months. This prompted Assad to imprison Makhlouf and his associates and seize nearly all of his assets in Syria. If true, the move represents a radical reshuffling of the Syrian regime’s power structure and, as importantly, the move came at the behest of a foreign patron. What we may be seeing is the full transformation of the Assad regime into a Russian client state at the expense of not only the Syrian regime, but also Iran, it’s other major foreign backer.

The Makhlouf clan has been a vital pillar in the Syrian reigning dynasty; Hafez Assad’s wife Anisa Makhlouf outlasted her husband who died in 2000 and has been described as extremely influential within the ruling circles. Bashar’s cousin, Rami, has benefited greatly from his connection to the center of power and used it to amass a small fortune within Syria through his controlling shares in SyriaTel, one of the country’s two telecoms, the country’s duty free shops, shares in several banks, along with vast real estate holdings.

In 2011, the Financial Times estimated that he controlled roughly 60% of the country’s economy. Through his business connections and capital holdings, Makhlouf has served as the preeminent financial fixer for the regime, providing it with key sources of revenue and hard currency before and during the war. In addition, he has funded several loyalist militias through his Al-Bustan Charity including the Tiger Forces and Homeland Shield Brigade. Crucially, he has been seen as a friend of Iran in Syria, which may have precipitated Russia targeting him.

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While the details of Makhlouf’s imprisonment and asset seizure remain murky, what is known is that the Assad regime has only been saved from defeat by the military and financial backing of Russia and Iran. Unable to fight a war on multiple fronts as it hemorrhaged men and cash, Assad was forced to first call on Iran then Russia (along with Hezbollah, although the group has not provided any substantial financial backing), in his war with rebels and jihadists who were capturing territory across the whole country and bearing down on the capital.

Since their entry into the war, Russia and Iran have poured in billions of dollars and offered lines of credit to Assad in order to keep it afloat and have increasingly begun to ask for returns on their investments. Both countries see the potential for strategic gains in a post-conflict Syria where the monies spent and men sacrificed can be leveraged into military bases and other geopolitical gains.

While Russia and Iran have ostensibly worked towards the same broad goal - the survival of the Assad regime and defeat of the array of rebel and Islamist groups - their post-conflict aims diverge and this has increasingly brought them into conflict with one another.

Broadly speaking, Iran seeks to empower paramilitary forces, Syrian and foreign, at the expense of regular armed forces in a model it has, with variation, followed in Lebanon and Iraq. Iran has established bases and locations in Syria from where it can launch or threaten attacks against Israel, its primary regional enemy. Russia, on the other hand, has sought to restore the Syrian regime and its armed forces to at least the semblance of structure under a centralized, pro-Russian command. To do this, it has sought to reign in the confederation of loyalist militias the Assad regime deployed in the war and either disarm them or bring them into a formalized army structure. Putting the pieces of the Assad security apparatus back together would help project the image of Russia as a competent ally while creating a fait accompli for western, and especially European, governments looking for stability in Syria after years of refugee flows.

In recent months, Russia has become more active in undercutting Iranian interests in Syria through excluding Iranian militias from the campaign in Idleb which it is helping through military coordination and air strikes, deploying Russian military police in coastal areas to curb the excesses of increasingly criminal loyalist militias (many of whom are more loyal to Iran than the Assad regime itself) and ordering the arrest of Syrian army officers and militia commanders it deems too loyal to Iran.

Seen in this light, it would in fact make sense for Russia to push Assad to take on Rami Makhlouf if the latter was deemed insufficiently loyal through his unwillingness to ‘chip in’ on the war bill. If Russia had pushed for the Assad regime to arrest army officers perceived as being disloyal or acting wantonly, why couldn’t it push Assad to do the same with one of the regime’s key financiers?

If this was the case then the implications for Syria are profound – first, that Russia is now at the stage where it feels confident enough to call in debts from the Assad regime. This signals that not only does Russia feel that the Syrian regime is healthy enough that it can begin to repay its debts but that it has ingratiated itself enough to have the intelligence to prove where the necessary funds can be found within the regime’s ruling circles. The tugging of this leash evokes clear images of Cold War Soviet-client state relationships and demonstrates how much sovereignty the Assad regime leveraged and lost in its bid to survive. And again, Rami Makhlouf was a key figure within the regime so the fact that both Russia and Assad himself felt that they could move against him speaks volumes to their ability and willingness to realign the key power structures of the regime.

In addition, this Russian-backed move further undercuts Iran’s position in Syria. Having seen the pro-Iranian 4th Division, led by Bashar’s brother Maher, undercut in recent months, Iran has seen a slow erosion of the standing of its Syrian armed allies. Coupled with the reorganization of the Rami Makhlouf-financed Tiger Forces into the 25th Special Division, Russia has seen success in the past year in pushing its vision of a regularized Syrian armed forces, free of loyalist militias with pliable alliances. Given that Iran’s focus seems to be elsewhere in the country – namely the southwest near Israel and the eastern crossing with Iraq and away from Idleb – direct and open conflict with Russia in Syria is still a distant prospect. Russia, however, appears to be in the driving seat in Damascus as it draws Assad closer.

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