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FARAH STOCKMAN

Syria: the Assad family business

How economic reforms produced a rebellion

IF YOU’VE BEEN watching Syria’s descent into chaos over the past 16 months, you might have been plagued by a single question: Why doesn’t Bashar Assad just get on a plane and leave?

Generals have defected. Diplomats have quit. Even Bashar’s childhood best friend snuck out of the country. But Bashar himself shows no sign of giving up. In fact, no one in his extensive family tree appears to have jumped ship.

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Look closely at Syria’s economy and the reason becomes clear: From telecoms to banks to the oil industry, the Assad family owns Syria — and they intend to hang onto their investment. To Bashar, Syria is a family business. He doesn’t just have himself to think about. He has his brother, his sister, his cousins, his uncles and aunts.

The story about how the Assads came to acquire a majority stake in every major private enterprise in the country is the story behind the Syrian uprising itself. Bashar Assad came to power promising economic reforms. But the reforms he enacted produced a rebellion.

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Hafez Assad, Bashar’s father, ran Syria the old Soviet way. Back in the 1970s, ’80s, and ’90s, there was only one bank — the Central Bank of Syria. There were only two television channels, both owned by the state. People weren’t allowed to own a fax machine or buy a car on the open market. Luxury goods were taxed 200 percent.

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Getting ahead in the old Syria meant working your way up the Ba’ath Party. As a kid, you went to holiday camps run by the Ba’athist youth organization. Then you joined the local branch of the party. If you were loyal enough, or had made the right friends within the security services, you might land a job at a state-run factory. Being a Ba’athist in the old Syria meant getting little perks: the breadmaker would deliver your bread faster than your neighbor’s. Or you could slip in a luxury good at the airport, tax free.

The system was built so that the lowest-level government employee could get a little piece of the corruption, “in order to make him believe he is part of the game,” Kamal al-Labwani, a Syria doctor once imprisoned by the regime, wrote me in an e-mail.

When Hafez died in 2000, his son Bashar — a British-educated eye doctor — promised change. The Soviet Union had already crumbled. Even Mother Russia was treating its oligarchs to Mercedes and perfume.

So Bashar began to allow some private companies and schools. The Internet came. So did duty-free stores.

“There was an explosion of high-end restaurants and cafes,” said Steven Heydemann, a Syria specialist at the US Institute of Peace. “People could live quite well if they had money.”

The problem was that nobody did have money, except for Bashar’s relatives and friends. They were the only ones who got licenses to buy into the burgeoning empire of private enterprise. Like his father, Bashar saw Syria as a personal possession. But instead of contenting himself with dreary, Soviet parastatals, Bashar wanted shiny, new private enterprises.

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It started with cellphones. In 1998, the regime approached Farid Ghadry, a Syrian-American businessman in Maryland, to ask him to bid on the first private telecom license.

“Knowing the system, I knew I had zero chance of getting it,” recalled Ghadry, who has since started an opposition party.

Sure enough, in 2000, the Ba’ath party granted a cell monopoly to Bashar’s mother, Anisa Makhlouf. Over time, it went to his cousin, Rami Makhlouf, who became the owner of Syriatel, the country’s largest telecom.

The monopoly sparked outrage. Riad Seif, a businessman and member of parliament, called it a “big scandal.” (The regime fined him $2 million and forced his factory into bankruptcy.)

But cellphones were just the beginning. Private newspapers, banks, and universities followed. Whatever the venture, Rami Makhlouf seemed to have a stake in it.

“There is saying in Syria: If you are a businessman, you have to be from the Makhlouf family, or you are against the law,” said Radwan Ziadeh, director of the Syrian Center for Political and Strategic Studies in Washington.

A US Treasury official said that Rami Makhlouf is widely considered a “front man” for Bashar Assad — the caretaker for the family fortune.

“Rami Makhlouf is one of the most hated people in Syria,” the Treasury official said, speaking on the condition of anonymity. “He would take over businesses as he saw fit, or force owners to give him the majority share.”

The corruption was so flagrant that President George W. Bush issued an executive order sanctioning Rami Makhlouf in 2008 as part of a widely successful broader policy of going after corrupt regimes.

But the Assads continued to grow their wealth by pulling merchant families in Aleppo and Damascus into their ventures. In 2007, two holding companies were set up — al-Cham and Al-Sourya — comprised of more than 70 favored businessmen.

Al-Cham got a 40-year license to build a mall, an airport, and railway service, as well as a stake in the country’s first private power plant. Al-Sourya scored a Ministry of Tourism contract to operate a bus station in downtown Damascus.

These holding companies were vital tools for the regime, according to Caroline Donati, a Syria specialist who details their activities in a chapter of a forthcoming book, “Middle East Authoritarianism,” by Heydemann and Reinoud Leenders.

The new companies procured much-needed foreign investment and political support, she wrote. Bashar also tied the new business class to the fortunes of the regime so they could never become dissenters. Some families didn’t want to invest with the regime, but were forced to do so anyway.

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Disentangling the regime from its business partners is now a key goal of US sanctions. If Syria’s tight clique of entrepreneurs could be separated from the Assad family fortune, US officials reason, then maybe support for Bashar will evaporate.

US officials have slapped sanctions on many of the regime’s business partners.

“The idea of targeting them was to tell them, ‘You have a choice. You are either in bed with the Assad regime, isolated from the rest of the world, or you save yourself,’ ” said a US Treasury official, who spoke on the condition of anonymity. She said it is working: “We have definitely seen some business elite shy away from the regime. Some of the clique moved their assets abroad, and prepared exit plans.”

But Bashar’s crony capitalism started to backfire even before US sanctions, collapsing under the sheer weight and ostentatiousness of the wealth itself.

Low-level Ba’ath party hacks — who used to have the good life because they got bread quicker than everybody else — started to realize the new system left them out.

The uprising began last year in the city of Deraa, a former Ba’ath party stronghold.

Some say the popular anger started when Rami Makhlouf tried to force people there to sell him a factory that makes Turkish Delight sweets. Others say the problem started when his company, Syriatel, tried to take over part of a school.

However it started, we do know this: Teens wrote anti-government graffiti and were arrested and tortured. The city rose up in protest. As protests mounted, Rami Makhlouf announced that he was offering shares of Syriatel to the poor, and focusing on charity work.

But it was too late. Demonstrations spread. Rioters burned Syriatel stores.

“The [low-level Ba’ath party] guy who was breaking the bread line never got anything out of privatization,” Ghadry said. “He saw the riches, the wealth, the cars. Worse that than, he saw pictures on Facebook of Assad and his wife sporting $4,000 shoes and handbags that cost as much as his apartment. That put the whole thing into perspective.”

Bashar brought an new era of money and glamour to Syria, but also the impossibility for an ordinary person to achieve it. Is it any wonder that the ordinary people rose up?

And is it any wonder that the Assads can’t break free from the financial web they created? Bashar’s whole family is implicated in the regime’s crimes now, Heydemann said: “There is no exit strategy for them.”

Farah Stockman can be reached at
fstockman@globe.com
. Follow her on Twitter @fstockman.
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