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P 261633Z FEB 08
FM AMEMBASSY DAMASCUS
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INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 1388
RUEHAM/AMEMBASSY AMMAN PRIORITY 7234
RUEHAK/AMEMBASSY ANKARA PRIORITY 5471
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RUEHRL/AMEMBASSY BERLIN PRIORITY 0123
RUEHSW/AMEMBASSY BERN PRIORITY 0069
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RUEHDE/AMCONSUL DUBAI PRIORITY 0165
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
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S E C R E T SECTION 01 OF 04 DAMASCUS 000142 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ELA, EEB/TFS; 
TREASURY FOR TFI/GLASER; 
NSC FOR ABRAMS/SINGH/GAVITO 
 
E.O. 12958: DECL: 02/25/2028 
TAGS: ECON EFIN EINV KCOR PGOV SY LE
SUBJECT: REACTIONS TO MAKHLUF DESIGNATION 
 
REF: A. DAMASCUS 126 
     ¶B. DAMASCUS 70 
     ¶C. DAMASCUS 54 
 
Classified By: Charge d'Affaires Michael Corbin for reasons 1.4(b,d) 
 
¶1. (S) Summary:  The February 22 designation of Rami Makhluf 
pursuant to E.O. 13460 generated considerable discussion, but 
Syrian media coverage has been minimal.  Makhluf's defiant 
announcement on BBC Arabic radio that the designation was 
tantamount to a medal of honor was as close to an official 
reaction as we have seen.  Human rights contacts 
overwhelmingly supported the action.  A few Syrian websites 
reporting the designation generated comments that generally 
denounced corruption and favored the action, but roughly 30 
percent of the postings had positive things to say about 
Makhluf.  Business and other reactions were mixed, with some 
saying the timing of the designation could not have been 
better, while others suggested the USG action was a desperate 
political act that failed to achieve anything signficant. 
We nonetheless detected uncertainty about what the 
designation could mean for Rami's partners and his 
foreign-based assets.  End Summary 
 
---------------------------------------- 
MAKHLUF REACTS WITH BRAVADO ON BBC RADIO 
---------------------------------------- 
 
¶2. (SBU) The February 22 designation of Rami Makhluf hit 
Damascus on the eve of the Syrian weekend and thus generated 
little initial media reaction.  Two days after Washington's 
announcement, Rami took to the airwaves of BBC Arabic Radio 
to respond, calling the designation "a medal we hang on our 
chest" as part of a "political ploy aimed at undermining 
important (Syrian) individuals."  He added, "They accuse us 
of corruption, while we are among the group that is working 
to invest the most in Syria."  Discounting the impact of the 
designation, Makhluf claimed that he had no assets in the 
U.S.  "Only a fool would invest in America, " he said. "We 
were expecting such a decision to be issued over a year ago, 
but they were late."  Although FM Muallem responded publicly 
when the E.O. was first announced on February 13, there thus 
far has been no official SARG reaction to the Makhluf 
designation. 
 
--------------------------------------------- -- 
SERENDIPITOUS TIMING AMPLIFIES IMPACT ON REGIME 
--------------------------------------------- -- 
 
¶3. (S)  Coming just a week after the assassination of Imad 
Mughniyeh, and during a period of rising tensions with Saudi 
Arabia and the West, the timing of the Makhluf designation 
amplified its impact on the regime.  Contacts report that 
Syrian Military Intelligence (SMI) and General Intelligence 
Directorate (GID) officials are currently engaged in an 
internecine struggle to blame each other for the breach of 
security that resulted in Mughniyeh's death.  In recent days, 
the Saudi-sponsored Sharq al-Awsat published scathing 
articles suggesting that Syria is not worthy of hosting the 
upcoming Arab summit.  Additionally, President Mubarak has 
publicly linked Syrian policy in Lebanon to Egypt's 
participation in the Arab League summit, and Syrians are 
increasingly concerned about the direction Lebanon is 
heading.  Thus, in the conspiracy-fueled streets of Damascus, 
our sources indicated that the Makhluf designation seemed to 
be a well-timed ratcheting-up of pressure on the regime. 
 
-------------------------------------------- 
EDUCATED SYRIANS AND CIVIL SOCIETY CELEBRATE 
-------------------------------------------- 
 
¶4. (S) The designation resonated on the Syrian "street" among 
middle class followers of international media, many of whom 
quietly celebrated Makhluf's public humiliation as a 
long-overdue comeuppance.  The website "Syrianews" covered 
Makhluf's response on BBC, and approximately 70 percent of 
readers' comments to the article were anti-Makhluf.  "As for 
Santa Claus Makhluf who is showering us with his deeds," 
wrote one, "could he explain to us where did he bring his 
first millions from?"  Another commented, "Did Rami invest in 
any project which would support scientific research, develop 
the country, or do such projects that do not yield profits in 
the billions?" Still another opined, "Does anybody dare 
criticize the economic genius Professor Rami?"  The human 
rights community was also very supportive, but expressed to 
Poloff their desire to see additional designations in the 
near future.  Upon hearing the news at a meeting with Post's 
TDY Press Attache, a well-known, Dubai-based Syrian Ba'ath 
Party dissident shouted and kissed the officer's cheek. 
 
------------------------------------- 
SOME BUSINESSMEN EXPRESS APPREHENSION 
------------------------------------- 
 
¶5. (S) Reaction from Embassy business contacts tended to fall 
into one of two categories, depending on the contact's 
relationship with the regime.  Apolitical businessmen 
reported that the designation had sent shockwaves through 
Rami's business partners who were now waiting nervously for 
any additional shoes to drop.  Most were concerned about 
their potential liability due to their business relationship 
with Makhluf, especially those with assets in the U.S. and 
Europe.  One contact predicted that if this designation was 
quickly followed by others, or even rumors of additional 
ones, Rami's foreign and local partners would completely 
divest out of self-preservation and absorb whatever regime 
criticism resulted. 
 
¶6. (S) Ihansan Sanker, a businessman with Asad family 
contacts who successfully resisted Rami's efforts to crowd 
him out of a Mercedes dealership, argued any corruption 
sanctions that did not include Rami would be meaningless.  He 
predicted before the designation that most Syrians were fully 
aware of Rami's corruption and would secretly applaud it. 
Some regime insiders would attempt to portray the designation 
as a personal matter between the Bush administration and the 
Asad family.  While Rami had been expecting the sanction for 
some time, it was nonetheless important for the U.S. to send 
a strong signal.  Sanker did not think that sanctioning Rami 
alone would have much of an effect on Syria's regional or 
domestic policies.  More designations and tough 
implementation would be needed to convince the regime the 
U.S. was serious. 
 
¶7. (S) A reporter for an independent trade website said he 
wasn't sure the details of the designation were well 
understood by Syrian businessman and the average Syrian in 
the street.  How would the designation affect foreign 
investment prospects, for example?   Most Syrian elites 
assumed that the absence of Rami's assets in the U.S. would 
make this a moot case.  If there were ripple effects on 
Rami's business partners, then that might cause people to pay 
closer attention. 
 
¶8. (S)  Khalid Oweiss, a Reuters correspondent working on his 
own piece regarding Makhluf, passed along that he and other 
journalists had interviewed a former American employee of 
Rami's empire who had detailed knowledge of Rami's holdings. 
That source said the designation created many questions that 
had to be answered before one could assess the impact.  Would 
all of Rami's partners be sanctionable?  Did Rami have to own 
a majority share in a company before Americans and others 
were liable?  How would the designation affect ongoing 
negotiations regarding the sale of Rami's share of Syriatel's 
cell concession?  Oweiss personally supported the designation 
and reported that his contacts said that it was overdue.  He 
believed more designations were desirable, arguing, "One a 
week for the next three months would pressure the Syrians and 
force them to capitulate." 
 
--------------------------------- 
WHILE OTHER ELITES ARE DISMISSIVE 
--------------------------------- 
 
¶9. (S)  Elites with a pro-regime bias characterized the 
designation as a purely symbolic gesture with no tangible 
economic repercussions.  They viewed the designation as a 
feckless personal attack on the Asad family from a U.S. 
Administration with little remaining political leverage over 
Syria.  Regarding Makhluf's many prominent business partners 
in Cham Holding, this group's opinion was that no Syrian 
would dare try to divest from Rami -- even if he wanted to -- 
for fear of being perceived as a coward in the face of US 
pressure.  Consequently, this line of thinking concluded, 
Makhluf's designation will result in a "circling of the 
wagons" around the regime. 
 
¶10. (S) One Cham Holding partner -- who holds U.S. 
citizenship -- admitted to Econoff that, after hearing about 
the designation on Al Jazeera, he had run his own name 
through Google to see what public information might connect 
him to Rami.  Claiming to have no affection for the Makhlufs 
or the regime, he said he still could not imagine divesting 
his family business from Cham Holding and remaining in Syria. 
 "I love the U.S.," he explained, "but my entire life is in 
Syria.  What am I supposed to do, take my family to the U.S. 
and get a job making 5000 dollars a month, or be my own boss 
and give my children a better life in Syria?"  After arguing 
that his two-percent share of Cham Holding would not put him 
in legal jeopardy, he finally shrugged his shoulders and 
said, "Whatever happens to Rami, happens to all of us." 
 
¶11. (S)  University of Wisconsin alum and Regional Director 
of Management Development Consulting International Hassan al 
Nouri assessed Rami's designation as an empty, desperate 
attempt by the outgoing Bush administration to punish a 
member of Bashar's inner circle.  A marketing expert, al 
Nouri asked, "What was the intended message (of the 
designation)?  I looked and looked, but could find very 
little.  The time for such an action was two years ago." 
Unless the U.S. could sanction Rami's Byblos Bank (five 
percent share) or convince the Emiratis to freeze Rami's 
UAE-based assets, he concluded that the designation would 
have very little teeth and would be regarded by most Syrians 
as yet another "wayward arrow from the warped bow of George 
Bush." 
 
¶12. (S) Samir al-Taqi, foreign policy analyst and informal 
advisor to the MFA, characterized Rami's designation as a 
"mostly symbolic gesture" that would have little impact on 
the regime's policies.  Al-Taqi said Bashar had already put 
some distance between himself and his cousin and Makhluf had 
moved a great deal of his personal assets to Dubai.  Al Taqi 
conceded that most Syrians viewed Rami in a negative light 
and that his strong-arm business tactics had earned him many 
enemies.  He nonetheless believed that a majority of Syrians, 
at least the few who had heard about it on BBC or read about 
it on the internet, would see the act as a last-ditch effort 
by the Bush administration to punish Bashar. 
 
¶13. (S)  Former Minister of Telecommunciations Amr Salem, who 
left office under a cloud of suspected corruption last 
December, said he had had several run-ins with Makhluf over 
Syriatel during his tenure, but that Rami had learned "the 
hard way" from Bashar that there was a limit to how much he 
could get away with on the basis of his family ties.  He 
predicted that Bashar would secretly welcome any U.S. 
sanctions against corruption, because corruption was rife in 
Syrian government and society and had undermined the 
President's credibility with the Syrian people.  Designating 
Rami, however, would have very little practical impact 
because Rami had diversified his many investments and it 
would be hard to identify majority share interests that he 
owned. 
 
------- 
COMMENT 
------- 
 
¶14. (S) Rami Makhluf's designation has generated the most 
reaction among Embassy contacts of any USG action vis-a-vis 
Syria in the past three years among.  With increased 
murmurings casting a pall over the Arab League summit, 
uncertainty about what will happen in Lebanon, and 
never-ending conspiracy theories about the Mughniyeh 
assassination, Rami's designation occurred at a time when the 
SARG is facing pressure from multiple sources.  Early 
indications are that the "business community," regardless of 
political affiliation, is definitely nervous about the 
potential implications of doing business with Rami. 
CORBIN