Moscow is destination for some of Assad, Makhlouf’s money
Date: 2019-11-12 10:50
On a bend of the Moscow river glitters a glass and steel monument to Russia’s oil and gas-fuelled economy and growing global swagger. Dominating the capital’s skyline, the City district’s skyscrapers have multiplied in recent years as money has poured in, dwarfing the Stalin-era Seven Sisters that were once Moscow’s tallest structures.
At the heart of the ostentatious neighbourhood sits the City of Capitals complex, a two-towered skyscraper that was once the tallest in Europe before it lost that crown in 2012 to London’s Shard. Tenants include the Russian offices for the likes of Diageo, the beverages multinational, Italian fashion group Calzedonia and top Russian banks. Neighbouring towers house government ministries, five-star hotels and the country’s wealthiest business people.
What has not been previously disclosed is that the complex is also home to at least 18 luxury apartments bought by the extended family of Syrian dictator Bashar al-Assad to keep tens of millions of dollars out of Syria as the country’s war raged.
Some members of the Makhlouf family, including several of Assad’s cousins, and some of their relatives, have bought at least 20 apartments worth $40m in Moscow over the past six years using a complex series of companies and loan arrangements, illustrating Russia’s role as a critical guardian of the Assad regime. It also exposes the role played by those dubbed “Assad’s fund managers” in helping the regime move money beyond the reach of western sanctions.
Property registration documents show that between 2013 and June of this year, the family and its associates — many of whom are under EU or US sanctions for their roles in the Syrian conflict — purchased the luxury apartments in the City of Capitals complex. In most cases they used a loan structure involving offshore Lebanese companies that now officially own the properties, according to an investigation by anti-corruption group Global Witness, and shared with the Financial Times.
Moscow has been a steadfast ally of Assad family since their rule began nearly 50 years ago in the days of the Soviet Union. But President Vladimir Putin has forged ever stronger ties with Damascus since 2015, when the Kremlin threw its military support behind the Assad regime.
Before the intervention by Russia, and earlier Iranian regime, Assad had lost control of two-thirds of the country. With his allies’ help, he now controls most of Syria once more after retaking territory from opposition rebels. But at a tremendous cost: the conflict has displaced more than 12m people, says the UN, and killed some 500,000, according to the Syrian Center for Policy Research, although counting stopped in 2016.
“[The property deals] are rare evidence of how Russia has helped sanctioned individuals who have assisted and benefited from the murderous Assad regime move their assets out of Damascus and evade international regulations,” says Isobel Koshiw of Global Witness. “It is allowing them to take refuge in Moscow where they enjoy luxurious lifestyles as Syria burns.”
The Moscow property deals reveal one of the mechanisms through which Syria’s ruling families have amassed, and sought to safeguard, wealth despite the financial sanctions — from travel bans to asset freezes — imposed on them in response to the brutal crackdown on protests nearly nine years ago. But they also shed light on Russia’s role as a safe haven for regime insiders and their money.
“Russia has from the beginning been helping the Assad regime subvert sanctions,” Lina Khatib, Middle East and north Africa programme head at Chatham House, told the FT. “It sees itself right now as the guarantor of the Syrian state and therefore [does] everything it can, whether militarily, politically or economically, to keep the Syrian state alive while also keeping it loyal to Moscow.”
Although relatively small the purchases hint at the growing commercial ties between Russia and Assad regime developed on the back of their military alliance. Russia has insisted that its companies will have a chance to profit from Syria’s natural resources, including phosphates, oil and gas, and eventual reconstruction. It has also sold Syria billions of dollars worth of weapons.
The Makhloufs’ Moscow properties suggest Russia is also profiting from the desire of the Damascus elites to place wealth offshore. The purchases, even after Assad had reasserted control, hint that Syria’s super-rich are still hedging their bets.
Of the 20 apartments, 13 were bought directly or by companies controlled by Hafez Makhlouf, 48, the former head of a key security force and a central player in the 2011 crackdown on peaceful protesters, while two were purchased by the wife and sister-in-law of Hafez’s older brother Rami, long considered Syria’s most powerful businessman. Three additional properties in Moscow skyscrapers were bought directly by the three other Makhlouf siblings.
At least four of the properties are being used as accommodation, according to additional reporting by the FT, including one jointly-owned by Rami and Hafez’s twin brothers Iyad and Ihab.
None of the five Makhlouf siblings, Rami’s wife, sister-in-law or representatives of the offshore companies involved in the purchases responded to requests for comment from the FT. A Brussels-based law firm which has represented members of the family did not respond to requests for comment. Another lawyer who had previously acted for Hafez and Iyad Makhlouf said he was no longer working for them.
Rami Makhlouf, Assad’s maternal cousin and childhood friend, has long been ranked Syria’s wealthiest businessman, in part through his control of one of its most profitable companies, mobile network Syriatel, and is seen by Syrian businesspeople as the “Assad family banker”. Although he keeps a low profile, his oldest sons Mohammad and Ali have recently drawn criticism by flaunting their jet-setting lifestyles online.
In a rare image of the younger Makhlouf and Assad generations, Ali last winter posted a photograph of him and his brother Mohammad with two of President Assad’s children, Hafez and Zein. The children of President Assad’s sister Bushra were also in the group. Ali captioned the Instagram story: “One big happy family.”
The older Makhlouf was first placed under sanctions in 2008. Leaked diplomatic cables from the time accused him of using his connections to gain an unfair advantage as he accumulated a vast business empire, including Syria’s biggest mobile telecoms network. In return, some funds were channelled back to the presidential palace, according to diplomats, Syrian businesspeople and analysts. Western sanctions have accused several Makhlouf family members — including all four brothers — and other businesspeople, of acting as fronts for members of the Assad family.
“They are all fund managers for the Assads,” says a Syrian analyst in Europe who asked not to be identified. “They can make their own money, but they are there because of the Assads and have to look after their wealth.”
Underscoring the precarious position of even Syria’s best connected people the relationship between the Assads and Makhloufs is said to be under strain.
The Makhloufs are a pre-eminent clan of the Alawite sect, to which the Assads also belong, and were historically more prestigious than the Assads. The marriage between Bashar al-Assad’s father Hafez, Syria’s president until 2000, and Anisa Makhlouf, forged a savvy strategic alliance.
Ms Makhlouf, who died in 2016, was the linchpin between the two families, and people with knowledge of the Assad inner circle say there are tensions between the clans.
Assad’s court is very tightly controlled and its politics opaque. But in the past few months the Assad-Makhlouf frictions appear to have intensified. New traders have risen through Syria’s war economy to challenge Rami. And, say businesspeople and analysts, the regime has weakened Rami’s hold on Syriatel and appropriated his powerful Al Bustan foundation, which was allegedly used to fund pro-regime militias as well as charitable activities.
Analysts suggest the Makhloufs might want their riches parked outside Syria to keep them out of the Assads’ hands. Nobody feels safe in Damascus, except Bashar says another Syrian analyst who travels to the country frequently.
The Makhlouf family has continued to profit from Syria’s war economy and travel to Russia. Rami’s son Ali has made no secret of spending time in Moscow — one of his 2018 videos shows the Moscow City tower complex where the family have purchased the properties.
But not all the Makhloufs have flaunted their wealth. Little has previously been known about the fortune of Hafez Makhlouf.
Property purchases as Syria burns
Arab spring-inspired protests break out across Syria and are ruthlessly put down
MAY 9 2011
Rami, Hafez, Iyad and Ihab Makhlouf are sanctioned by the EU
President Barack Obama asks Congress for authority to deploy US forces in the Syrian war, arguing that the use of chemical weapons by the Assad regime merited international intervention. Rebels are in control of swaths of Syria
DECEMBER 18 2013
Razan Othman, Rami’s wife, buys a 225 sq m apartment on floor 58 of the Moscow Tower of the City of Capitals skyscrapers, the taller block. Her sister, Nidaa, buys a 197 sq m apartment on floor 53 of the same block
MARCH 13 2015
Hafez Makhlouf buys a 218 sq m apartment on floor 60
Russia throws its weight behind the Assad regime and begins its bombing of opposition-held territory in Syria. At this stage two-thirds of the country are controlled by various opposition groups and Isis
SEPTEMBER 15 2015
Kinda, the fifth Makhlouf sibling, buys a 184 sq m apartment on floor 20
SEPTEMBER 16 2016
Three Russian-registered companies — Artemis, Bellona and Khestia — controlled by Hafez Makhlouf buy 11 apartments in the City of Capitals skyscrapers
Assad regime recaptures Syria’s second city Aleppo, above, after four years of fighting
MAY 16 2017
Mohammad Abbas, Ihab and Iyad Makhlouf are sanctioned by the US. Abbas is the brother of Haytham Abbas, a director of both Nylam Offshore and Briana Sal Offshore
JUNE 5 2017
Ihad and Iyad Makhlouf jointly buy a 226 sq m apartment on floor 28 of the St Petersburg tower in the City of Capitals property
JANUARY 29 2019
Artemis, a company formerly controlled by Hafez, now controlled by Briana Sal Offshore, a Lebanese holding, buys a 102 sq m apartment on the 47th floor of the Moscow Tower
FEBRUARY 15 2019
Group Global, a company controlled by Ihad and Iyad Makhlouf, buys 1,243 sq m worth of property on floor 52 of the Federation Tower, a separate skyscraper in the Moscow City district
JUNE 20 2019
Bellona, a company formerly controlled by Hafez Makhlouf, now controlled by Briana Sal Offshore, buys a 233 sq m apartment on floor 63 of the Moscow Tower
Hafez first came to prominence as a junior officer in the Syrian security services during Damascus’s occupation of Lebanon, which ended in 2005, says a former intelligence official from a Middle Eastern country. By 2011, the man described as a “hawkish influence” was advising Assad and heading a security unit called Branch 40. Middle Eastern intelligence sources say Hafez played a role in the brutal response to the initial protests that triggered the mass uprising across the country.
He was placed on an EU sanctions list in 2011 for his involvement in “violence against demonstrators”. A Swiss bank account belonging to Hafez was subsequently unfrozen by authorities in Switzerland, returning some €3m to him.
Although he was pushed out of his post in 2014, two people familiar with the regime told the FT that Hafez now lives between Moscow and Damascus, suggesting he was far from excommunicated. “No one retires in Syria,” says the ex-intelligence official.
The Makhlouf investments began in 2013, as the Assad regime’s hold over power was at its most precarious, when Razan Othman, Rami Makhlouf’s wife, and her sister Nidaa bought apartments, on the 58th and 53rd floors of the City of Capitals building. In March 2015, Hafez bought one on the 60th floor. In September 2015, just as Russian jets began bombing opposition-held territory in Syria, his sister Kinda followed suit with a property on the 20th floor.
The bulk of the purchases came a year after Moscow’s military intervention. On September 16 2016, three Russian registered companies controlled by Hafez — Artemis, Bellona and Khestia — purchased a further 11 apartments between them, corporate documents show, accounting for 2,112 square metres of property between the 61st and 65th floors of the 73-storey building.
Using the apartments as collateral, loans were provided to the three companies by Nylam Sal Offshore, a Lebanese entity controlled by Haytham Abbas and Hassan Sharif. The FT was unable to reach them for comment. Haytham and Hassan are brothers of Muhammad Abbas and Ammar Sharif, Syrian businessmen who are both on EU or US sanctions lists over their alleged support for the regime.
Eighteen months after the purchases, control of Artemis, Bellona and Khestia — and the apartments owned by them — passed from Hafez to Briana Sal Offshore, another Lebanese entity with the exact same directors and registered address as Nylam. This move legally distanced Hafez from the purchases.
Since June 2017, two other apartments have been purchased by Bellona and Artemis. And an additional two properties were bought jointly by Iyad — who was sanctioned by the EU for “violence against the civilian population” — and his twin brother Ihab.
The corporate registered office of Briana and Nylam is also the office of Levant Law Practice. An assistant at the firm said it no longer works with Briana. Citing confidentiality, a litigator at the firm then declined to give further information about the companies or deliver comment request to their directors. The two companies’ Beirut-based auditor also refused to provide information or pass on comment requests.
Together, the 19 apartments in Moscow City’s skyscrapers and related parking spaces bought by the family or companies connected to them are worth at least $40m today, according to estimates provided by four local real estate agents. In addition, in September 2015, Hafez purchased a three-bedroom apartment a short drive from the skyscraper in a leafy central Moscow neighbourhood.
When the FT visited that property, an employee of a company refurbishing it said Mr Makhlouf had been there recently but would “not be back soon”.
Andrei Baklanov, a former Russian ambassador to Saudi Arabia, says the investments were “nothing sensational” and the result of western sanctions closing off alternative options.
“It is quite natural that the Syrian elite would invest their money in countries where they can be sure nothing will happen to them,” he adds. “Western countries are pushing away the Syrians and their capital. The only way out for them is to Russia and countries where they can be safe.”
By Henry Foy in Moscow and Chloe Cornish in Beirut
Link to the original source of Financial Times