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S E C R E T SECTION 01 OF 04 DAMASCUS 000070 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ELA, EEB/TFS; TREASURY FOR U/S LEVEY; NSC FOR 
ABRAMS/SINGH 
 
E.O. 12958: DECL: 01/31/2018 
TAGS: ECON EINV EPET ETTC PGOV PINR KCOR SY
SUBJECT: MAXIMIZING THE IMPACT OF RAMI'S DESIGNATION 
 
REF: A. DAMASCUS 54 
     ¶B. 05 DAMASCUS 2364 
     ¶C. 06 DAMASCUS 03 
 
Classified By: Charge d'Affaires Michael Corbin for reasons 1.4(b,d) 
 
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SUMMARY 
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¶1. (S/NF) As Washington moves towards designating Rami 
Makhlouf, Embassy Damascus recommends that the Department's 
roll-out strategy focus on linking his corrupt activities to 
consequences suffered by the Syrian people (see para 11).  In 
some of the largest economic sectors -- electricity, 
petroleum, and telecommunications -- Makhlouf has used 
government instruments to squeeze out legitimate businessmen, 
receive lucrative public contracts, establish cash cows and 
then milk them with impunity from oversight or competition. 
Significantly, several of his ventures exploit weaknesses in 
the Syrian economy and undermine reform efforts while 
increasing the burden on Syria's lower classes.  Embassy 
contacts report that Makhlouf is anticipating his eventual 
designation, and that he has taken steps to lower his profile 
and mitigate risk to his personal fortune.  End summary. 
 
------------------ 
MAKING THE CASE... 
------------------ 
 
¶2. (C) In one well-known example, Makhlouf used his regime 
ties to muscle-out the local agent for Iberdrola, just before 
the Spanish company was awarded a 430 million-euro contract 
to build a new power plant.  Having previously obtained 
exclusive rights to represent Siemens, Rami profited again 
when additional power infrastructure projects were awarded to 
the German company.  Currently, both the Iberdrola (Iberinco) 
and Siemens projects are behind schedule and over-budget. 
Over the same period, the Syrian public suffered from rolling 
blackouts and increased electrical bills.  During last 
summer's August heatwave, poorer neighborhoods went without 
power up to ten hours per day while Prime Minister Utri 
blamed Syria's electrical woes on "international pressure" 
rather than insufficient SARG investment in infrastructure. 
Blackouts have recently returned to Syria and Rami's avarice 
(reportedly demanding a USD 30 million "commission" in 
Iberdrola's case) is a key contributing factor. 
 
¶3. (U) Rami is suspected of delaying the SARG's anticipated 
licensing of a third GSM service provider in Syria until he 
closes a deal to sell SyriaTel, which reportedly earned USD 
692 million in 2007 alone.  Since GSM service was first 
introduced in 2000, Syrians have been forced to choose 
between two providers, Makhlouf's SyriaTel and Areeba (now 
MTN), which was reportedly owned by First Lady Asma 
al-Akhras' family.  Syrians widely resent the duopoly's 
ability to set prices for the entire country.  With market 
forces unable to compete, regime corruption elevated the 
price of basic GSM service on which the average Syrian relies 
as his primary means of communication. (There are six million 
mobile subscribers to roughly three million land-line 
connections.) 
 
¶4. (C) At a time when Syria's petroleum exports are 
contracting and the Syrian people are increasingly suffering 
from fuel shortages, Rami's presence in the petroleum sector 
is exacerbating the problem.  The French company Total 
proposed a venture that would have brought additional Syrian 
gas reserves on-line in time to avert recent shortages, but 
the deal has inexplicably floundered facing SARG bureaucratic 
inaction.  Similarly, a Shell offer to upgrade and increase 
capacity of Syrian refineries remains mired in SARG  
bureaucracy at a time of acute shortages in refined product. 
Interestingly, the only petroleum project currently 
proceeding at full-speed in Syria is the Gulfsands (35 
percent) "strategic partnership" with the Rami-led Cham 
Holding Company (65 percent) to develop the recent oil and 
gas discovery in the Khurbet East region (Northeastern 
Syria).  According to a Gulfsands' statement, the joint 
venture soon expects to bring 10,000 bpd of new oil 
production on-line. 
 
¶5. (U) In a particularly brazen venture, Makhlouf also seems 
intent on profiting from the impact of US sanctions on Syrian 
Arab Airlines.  Rami's Cham Holding Company (40 percent) has 
joined with Syrian Air (25 percent) and the Kuwaiti company 
Al Aqeelah (35 percent) to create the first "private airline" 
in Syria, dubbed the Cham Pearl.  The Kuwaiti company's 
subsidiary, Aqeeq Aviation Holding, is apparently exploring 
ways to circumvent US sanctions and provide commercial 
aircraft.  Once operational, Cham Pearl intends to take over 
Syrian Air's most profitable routes of three hours or less -- 
75 percent of Syrian Air's business -- from Damascus to major 
regional airports, leaving Syrian Air with the less 
profitable long-haul routes. (See "Syria: Opening Skies," 
Oxford Business Group, January 29, 2008) 
 
¶6. (U) Makhlouf remains unabashed about employing SARG muscle 
when necessary.  In one oft-repeated example on the Damascus 
street in 2007, a Syrian businessman purchased a prime piece 
of real estate along the Mezzeh autostrade and received a 
permit from the city to construct a large apartment building. 
 As the project progressed, the SARG security services 
informed the building's owner that he could not complete his 
project as it would allow future occupants to have direct 
line-of-sight to the Damascus airport.  Rami's agents then 
visited the distraught owner and offered to buy the 
unfinished building for a fraction of the property's actual 
value.  Rebuffing Makhlouf's initial offer, the owner sought 
recourse in the local courts for weeks to no avail.  In late 
2007, Cham Holding announced that it had acquired the 
property and would be developing a five-star Marriott hotel 
on the site at a cost of USD 70 million. 
 
¶7. (C) Note: A hospitality-industry contact told Econoff that 
Rami and Nabil Kuzbari (ref A) had traveled to the US and met 
with senior Marriott executives in December to present a 
potential business proposal and discuss design options for 
the site.  According to the contact, the Syrians left the US 
believing they had closed the deal and upon returning, 
prematurely leaked their success to the local media.  In late 
December, Marriott reportedly informed Cham Holding that it 
was no longer interested in the proposal due to "political 
reasons." End note. 
 
¶8. (U) Although difficult to prove, various internet-based 
newsletters claim that Makhlouf is the political patron of 
many high-ranking public SARG officials, including Minister 
of Construction Hamud al-Hussein, Minister of Petroleum 
Sufian Allaw, Minister of Electricity Ahmad Khalid al-Ali, 
Central Bank Governor Adib Mayaleh and former Minister of 
Telecommunications Amro Salem.  As officials with these 
portfolios would be in position to wield substantial 
influence over industry regulation and lucrative tenders, it 
is doubtful that Rami would have enjoyed such uncanny 
business successes without government collusion. 
 
------------------------ 
DIFFUSING RESPONSIBILITY 
------------------------ 
 
¶9. (U) Since returning from his brief exile in Dubai (ref B), 
Rami has taken several measures to try to both lower his 
profile and insulate his personal fortune.  In 2006, Makhlouf  
founded the Al Mashrek Fund, a holding company with a 
reported capitalization of SYP 4 billion (USD 80 million), 
including SYP 1 billion (USD 20 million) in cash deposited 
with Banque Bemo Saudi Fransi.  Later that year, Makhlouf and 
69 prominent Syrian businessmen formed the Cham Holding 
Company with an initial capitalization of USD 200 million, 
now estimated to be worth USD 350 million.  Representing 
Makhlouf, the Al Mashrek Fund is the majority shareholder in 
Cham Holding, which currently has 65 partners and a 
ten-member board of directors.  By mid-2007, Cham Holding was 
pursuing six "landmark" development projects valued at USD 
1.3 billion, primarily in energy, transportation and real 
estate.  (See The Syria Report, April 30 and Sept 12, 2007) 
 
----------------------------------------- 
USING CUT-OUTS AND PRIVATE BANKING SECTOR 
----------------------------------------- 
 
¶10. (S/NF) In addition to his public financial activities, 
Makhlouf has undertaken several behind-the-scenes 
machinations to mitigate his financial risk.  Possibly 
concerned by the vulnerability of UAE banks to US pressure -- 
or frustrated by Emirati laws limiting foreign investment to 
real estate and the stock market -- Rami reportedly brought a 
part of his fortune back into Syria in 2006.  According to a 
well-informed contact, Rami befriended then-expatriate Syrian 
Morthada al-Dandashi in Dubai and hired him to manage many of 
Makhlouf's "parallel" financial activities in Syria.  The 
contact said that Rami paid Dandashi's USD 2 million "ante" 
to become a partner in Cham Holding, and deposited 
significant sums under Dandashi's name in the Damascus branch 
of the Lebanese Byblos Bank -- where Dandashi subsequently 
became a partner.  Syrian-Austrian citizen and Cham Holding 
director Nabil Kuzbari is also reported to have deposited 
money for Rami in Austrian banks.  Finally, contacts say 
Makhlouf has also opened accounts under different names in 
Lebanon, Greece, Turkey, and possibly Cyprus -- where Post 
has learned that Rami once explored obtaining citizenship. 
 
------------------------- 
SUGGESTED ROLL-OUT THEMES 
------------------------- 
 
¶11. (U) Post recommends the following themes for public 
statements regarding the designation of Rami Makhlouf: 
 
-- Electricity: Rami Makhlouf used his influence with the 
regime to gain lucrative contracts in the power sector. 
Yet, as the Syrian people continue to suffer from chronic 
power outages and higher electrical bills, Rami has already 
been paid for projects that are behind schedule and well 
over-budget. 
 
-- Petroleum: Although several Western petroleum companies 
are interested in helping Syria develop its gas and oil 
sector, the only new project to be proceeding without SARG 
impediment is Rami's.  As a result, Syria has become a net 
importer of petroleum products.  In the midst of an unusually 
severe winter, severe fuel shortages are forcing the Syrian 
public to wait in long lines for, and frequently go without, 
heating fuel for their homes. 
 
-- GSM service: Rami Makhlouf has made millions of dollars 
from his ownership of SyriaTel, one of only two GSM service 
providers in Syria.  Currently, Rami is said to be blocking 
the licensing of a third GSM provider until he completes a 
deal to sell SyriaTel.  Until free market forces are allowed 
to compete, Makhlouf will continue to subject the Syrian 
public to artificially elevated prices for basic 
telecommunications services. 
 
-- Aviation: The Syrian national air carrier, Syrian Arab 
Airlines (Syrian Air), has an aging fleet that is in need of 
replacement.  Rather than addressing any of Syrian Air's 
needs, the Assad regime instead awarded Rami Makhlouf a 
license to operate a private airline that intends to assume 
the most profitable of Syrian Air's routes. 
 
-- Tourism/Hospitality: The Syrian people are known for their 
hospitality and entrepreneurial expertise.  Unfortunately, 
legitimate Syrian businessmen hoping to invest in the 
emerging tourism sector have again been muscled-out by Rami 
Makhlouf and regime thugs who wish to monopolize every 
opening in the Syrian economy for their own profit, rather 
than share the country's potential with the hard-working 
Syrian people. 
 
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COMMENT 
------- 
 
¶12. (S/NF) Makhlouf's efforts to divest and diversify suggest 
that he is expecting eventual USG action against him, 
particularly since the November 2007 designation of his 
brother, Hafiz.  Although his countermeasures will likely 
mitigate the impact of his designation, we believe that it 
will still send a strong signal to the regime and to his 
current and potential future business partners.  Corruption 
is a theme that resonates here, as every Syrian has been a 
victim of it.  Rami has long been Syria's poster-boy for 
corruption, so making the charge stick is not difficult. 
Citing examples that impact the daily lives of Syrians should 
help to amplify the designation's roll-out and ensure that it 
receives the widest possible coverage. 
HOLMSTROM