VZCZCXRO0744
OO RUEHBC RUEHDE RUEHKUK RUEHMOS
DE RUEHDM #0003/01 0021050
ZNY CCCCC ZZH
O 021050Z JAN 06
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6384
INFO RUEHEE/ARAB LEAGUE COLLECTIVE IMMEDIATE
RUEHTV/AMEMBASSY TEL AVIV IMMEDIATE 0679
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RHMFISS/HQ USCENTCOM MACDILL AFB FL IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 0051
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C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 000003 
 
SIPDIS 
 
SIPDIS 
 
NEA/ELA 
NSC FOR ABRAMS/SINGH 
TREASURY FOR GLASER/SZUBIN/LEBENSON 
EB/ESC/TFS FOR SALOOM 
 
E.O. 12958: DECL: 12/29/2015 
TAGS: ECON EFIN PTER SY LE SANC
SUBJECT: SYRIA'S CORRUPT CLASSES 
 
REF: A. DMS 6224 
     ¶B. DMS 2364 
 
Classified By: CDA Stephen Seche, reasons 1.5 b/d. 
 
¶1. (C) Summary: The Syrian economy continues to be dominated by a 
"corrupt class" who use their personal ties to members of the Asad 
family and the Syrian security services to gain monopolistic control 
over most sectors of the economy, while enriching themselves and their 
regime benefactors.  The most powerful of the corrupt classes and 
the ones who have benefited from the system of corruption most 
egregiously are the President's maternal and paternal cousins, Rami 
Makhlouf and General Dhu al Himma as-Shaleesh, respectively.  The 
cousins maintain a level of influence that puts them in the President's 
inner circle.  All members of the corrupt class are in a position to 
provide material support for SARG policies that are inimical to USG 
interests. 
End Summary. 
 
---------------------------------- 
The Top of the Class: The Family 
---------------------------------- 
 
¶2.  (C) According to contacts, the maternal and paternal cousins of 
President Bashar Asad, Rami Makhlouf and General Dhu al Himma 
as-Shaleesh, respectively, have developed significant economic power 
bases that are increasingly political as well. Headed by Mohammad 
Makhlouf, the Makhlouf family rose from humble beginnings to become the 
financial advisor to Hafez al-Asad after the former President married 
Makhlouf's sister.  The family has established a vast financial empire 
in the telecommunication, retail, banking, power generation, and 
oil and gas sectors.  Though Mohammad Makhlouf played a clearly 
subservient role to the elder Asad, he and members of his family have 
become more assertive politically since his nephew Bashar has ascended 
to the Presidency.  Rami is the caretaker of the family's investments 
and is widely considered to be the poster boy of corruption in 
Syria.  Contacts report that Syrians used to whisper "Makhlouf, 
Makhleef," playing on the Arabic word "khaleef," which in English means 
"heir," to indicate the extent of Rami's influence.  Many business 
contacts have relayed to Post how Makhlouf has used the Syrian security 
services and his personal relationship to President Asad to intimidate 
and steal promising business ventures from them (ref B). 
 
¶3. (C) Contacts state that members of the Shaleesh family, specifically 
Zuhayr, aka Dhu al-Himma, who is the head of Presidential Security, and 
his nephew Asif Issa, are comparatively as powerful but possibly more 
corrupt than the Makhloufs.  Unlike the Makhloufs, whom some contacts 
say have attempted to burnish their reputation among average Syrians 
with their investments in Syria's cellular phone network and the chain 
of duty free stores along Syria's borders, the Shaleeshes make no effor 
to create a friendlier image.  As well as being active in the 
automobile and construction sectors, contacts say that the Shaleesh 
family has been engaged in a wide range of illicit activities including 
smuggling and money laundering.  In June 2005, the USG formally 
established the family's involvement in SARG policies to undermine US 
interests in Iraq when it designated the uncle and nephew and their 
company, SES International Corporation, under E.O. 13315 for procuring 
defense-related goods for Sadaam Hussein in violation of international 
sanctions.  (Note: According to the US Treasury, SES helped the former 
Iraqi regime access weapons systems by issuing false end-user 
certificates to foreign suppliers that listed Syria as the final countr 
of destination. SES International then transshipped the goods to Iraq. 
End note.) 
 
¶4.  (C) Contacts report that prior to the war in Iraq, the SARG awarded 
Shaleesh's SES International exclusive rights on contracts to supply th 
Iraqi market with goods from construction materials to detergent.  SES 
then sold the contracts to Syrian and foreign companies for a 
substantial fee.  Contacts further state that Dhu al-Himma Shaleesh 
received a significant amount of the $580 million USD in Iraqi assets 
that the SARG illegally paid out to Syrian claimants.  (Note.  The SARG 
has yet to resolve this issue with the Iraqis though it blames the 
stalemate on Iraqi inaction.  End note.)  Others assert that SES has 
established dominance in the construction materials sector over the las 
year and that it continues to expand its business interests 
seemingly unfettered by U.S. sanctions. 
 
--------------------------------------------- -- 
Links Between Corrupt Classes, Security Services 
--------------------------------------------- --- 
 
 
DAMASCUS 00000003  002 OF 002 
 
 
¶5. (C) Contacts state that the corruption which starts at the top 
filters down through all levels of business.  Contacts among Damascus' 
Sunni business elite, many of whom have an axe to grind with the regime 
because of their class's continued dimished role, complain that a 
predominantly Allawite "corrupt class" has become entrenched over the 
past 30 years and is using the corrupt system to dominate all 
levels of business.  While contacts often are unwilling to talk openly 
about individuals in this group and their specific activities, they 
contend that the members of the corrupt classes are well-known and that 
any Syrian could develop a list of the 50 most corrupt. They state that 
the corrupt classes have varying levels of influence and power in the 
government, and that the most powerful are in President Asad's inner 
circle.  They further state that all levels of the corrupt classes are 
connected to Syrian security and military intelligence, which they use 
to gain monopolistic and extra-legal control of domestic markets. 
 
¶6.  (C) Badr Shallah, the son of a wealthy Damascene Sunni family whose 
father Ratib Shallah is the President of the Syrian Chambers of 
Commerce, argues that the business ethos in Syria has deteriorated over 
the past 30 years due in large part to the influence of the corrupt 
classes.  Shallah asserts that it is becoming difficult to compete 
unless one is willing to adopt their methods.  Many aspiring businessme 
who lack the Shallah family's historic wealth and influence feel 
compelled to get their start by becoming vassals to the corrupt classes 
 According to contacts, they often begin as foot soldiers in their 
patrons' illicit operations and then, after proving their worth, are 
allowed to spin off their own business enterprises.  Shallah and other 
contacts further state that the strong link between the corrupt classes 
and the regime, particularly with the Syrian security services, acts as 
a barrier to entry for those who are not similarly connected. 
 
¶7.  (C) Shallah explained that the security services provide these 
businessmen with protection and cover to engage in fraudulent import 
schemes, lucrative smuggling operations and "muscle" to take over 
businesses and intimidate potential competitors.  In return for these 
services, the officials in the security services receive kickbacks all 
along the business chain.  Haitham Jude stated that individuals 
related to the heads of the security services have attempted to control 
his family's business through blackmail on a number of occasions in the 
past.  He further stated that his family was able to fight off their 
advances only because his father was a close childhood friend of former 
President Hafez al-Asad. 
 
¶8.  (C) Several contacts described as an example the rise of Saleem 
Altoun, aka Abu Sahker, a Christian from Lattakia who began his career 
in the 1960's as the bodyguard of former Syrian Prime Minister Yousef 
Za'en.  During the 1980's he became head of imports for the Military 
Housing Establishment, a position much saught after because of the 
lucrative kickbacks associated with it.  As such, Altoun was responsibl 
for procuring the material needed to construct barracks for the soldier 
as well as houses and factories for Ba'ath Party members and military 
brass, realizing spectacular profits for his trouble. Under the 
protection of the security services, Altoun was also allegedly heavily 
involved in smuggling, bringing millions of Syrian Pounds (SYP) 
across the border into Lebanon where he exchanged it for hard currency. 
 
¶9.  (C) In the mid- to late-1980's, the SARG arrested Altoun for 
allegedly forging import documents after contacts contend that his 
patronage ran out and he was in a position to be held liable under one 
of the SARG's periodic anti-corruption campaigns.  He served his 
sentence in a posh cell with full access to the outside world.  Proof o 
his continued influence is his son, Sahker Altoun, General Manager of 
the Zeina and Altoun Trading companies and a leading Damascus 
businessman.  Sahker is building on his father's business base and now 
is the exclusive agent for Hyundai and Jaguar in Syria's lucrative 
automobile import sector. 
 
¶10.  (C) Comment:  The corrupt classes have a symbiotic relationship 
with the Asad regime - both profit from their relationship and neither 
could function without the other. As contacts among Syria's Sunni 
community are quick to point out, the corrupt classes are preventing 
more progressive elements, including many businessmen who have received 
their college and post-graduate training in the US and Europe, from 
fully participating in the economy.  The Asads run Syria as a family 
business, and the corrupt classes are the ones that make the business 
function.  As the Makhloufs and Shaleeshes prove, however, identifying 
where the family ends and the corrupt classes begin can be difficult. 
SECHE