English

S3E7: The Business of War Crimes

Branch 251
October 22, 2021
27
 MIN
Listen to this episode on your favorite platform
English
October 22, 2021
27
 MIN

S3E7: The Business of War Crimes

War is expensive. On paper, the Assad regime should be broke. And yet, its pockets seem deep enough to carry on waging a bloody war on the Syrian people. In this episode, Noor and Fritz attempt to answer the question that's probably on your mind right now: how do they do it?

War is expensive. On paper, the Assad regime should be broke. And yet, its pockets seem deep enough to carry on waging a bloody war on the Syrian people. In this episode, Noor and Fritz attempt to answer the question that's probably on your mind right now: how do they do it?

For more information and regular updates on the trial, follow us on Twitter.

Thanks to Nick Donovan for sharing insights on his research with Global Witness. The project was a joint effort between Sara Farolfi, Isobel Koshiw, Nick Donovan, Mohamed Abo-Elgheit (Global Witness), Stelios Orphanides (OCCRP), and Nidal Shikhani and colleagues at the Chemical Violations Documentation Centre of Syria.

https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/khouri-networks-global-connections/

https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/assads-money-men-in-moscow/

Joseph Daher on Twitter

Report at SLDP that Eyad Hamid wrote.

Read more about the case that Steve at Open Society Justice Initiative is working on.

ECCHR trial reports

Syria Justice and Accountability Centre's monitoring of the trial

Logo design by laurenshebly.nl -- Photo by James Lawler Duggan/AFP/Getty Images.

Music via Blue Dot Sessions

Support for our podcast comes from German Federal Foreign Office funds that are provided by the Institut für Auslandsbeziehungen IFA's zivik Funding Programme.




Episode Transcript

[music]

Noor Hamadeh: It's early morning in Damascus. As the call for morning prayer sounds from the city's mosques, many residents wake up to perform their prayer after which they take their place in line to receive government subsidized bread. Syrians stand in these lines for hours, sometimes up to seven hours just to retrieve bread, to bring back to their families, but standing in line for so long means they're not able to work to support their families. In some cases, their children stand in line instead often missing school, just so that their families get to eat that night.

According to the UN, about 90% of Syrians live in poverty. The average Syrian government salary is about 50,000 Syrian pounds. Which is nearly the cost of a trip to buy groceries. The conflict in Syria has devastated the Syrian economy. In 2010, 50 Syrian pounds was worth one US dollar. Now 2,500 Syrian pounds is equivalent to the same amount.

Fritz Streiff: How then is the Syrian government able to continue running a regime of torture and repression. Syrians and government held areas are still very fearful of the regime's harsh hand. Despite the dire economic situation Syrians aren't taking to the streets to call for government reform. They're scared of the consequences they might face because Syria's Mukhabarat are still very much active. They're still monitoring Syrians as they have for decades. Listening for anyone to speak out against the government, to say something wrong.

How is a regime that should be absolutely broke able to finance this war effort, but also the Mukhabarat it's detention centers and intelligence branches like Branch 251. How are they able to keep such a complex system running and pay the salaries of positions like the ones Anwar R. and Eyad A. held.

[music]

Noor: I'm Noor Hamadeh and this is Branch 251, the podcast about the worldwide first criminal trial, dealing with crimes against humanity by the Syrian regime.

Fritz: I'm Fritz Streiff. After over 10 years of the Syrian regime's war effort, Syria is undergoing a dire economic crisis and many Syrian government officials, people close to the Assad family are facing extensive sanctions regimes imposed on Syria by other governments. How is it considering all of that, that the Syrian regime has the money to keep running and funding intelligence branches like Branch 251?

Noor: Well, the regime isn't doing it all on its own. It is getting help. After the revolution in 2011, the Syrian government relied heavily on support from Russia and Iran in particular. For example, Iran provides a large part of Syria's oil without payment, but it's also not for free. Syria has been gradually racking up a significant debt to Iran over the years that it will have to eventually pay back.

Russia's role is one that is much more notorious. In 2015 Russia decided to intervene in Syria on behalf of the Syrian regime, providing military support, including air support, dropping barrel bombs on civilians from the sky. This was what really propped the regime up. Russia took on a significant part of funding the war effort, but Iran also contributed through funding Shabiha and sending Iranian militias to support the regime. Shabiha literally means ghost. It's the word Syrians use to refer to pro regime militias.

Fritz: It sounds like a lot of the actual war effort, the aerial bombardment, the actual fighting, a lot of that was paid for and is still being paid for and executed by Russia and Iran, which means that this freed up the Syrian regimes finances quite a bit

Noor: That's right. But that on its own hasn't been enough to keep the regime afloat. The Syrian government has also found ways to take advantage of the already cash strapped Syrian public. The government has done things like, charge really high prices for administrative tasks that are basic necessities for many Syrians, like requiring Syrians to exchange $100 at the border with Lebanon when they enter Syria, military conscription, exemption fees, property-related administrative fees and passport renewal.

Despite the fact that it's now one of the weakest passports in the world, it's also the most expensive passport to renew. Syrian passports need to be renewed every two years. That can cost anywhere from $300 to $800. There's even a reconstruction tax that Syrians have to pay, even though reconstruction in Syria, hasn't really started.

Fritz: There's also the currency exchange rate. The Syrian central bank has the power to manipulate exchange rates and uses an artificial inflated exchange rate for anyone who changes other currencies into Syrian pounds through official channels. This means that in some cases, the bank holds onto 51 cents per US dollar. That's more than half the money lost to the exchange rate. Another way the Syrian regime is able to maintain enough wealth to continue to operate in the way that it does is because of its control of the economy, of businesses and business owners in Syria.

Joseph: My name is Joseph Daher. I'm affiliate professor at the EUI European University Institute. In this university, I participate in a project on Syria in which I'm more specialized in the political economy. I also teach at the Lausanne University regarding the contemporary history of the middle east.

Fritz: We spoke to Joseph and he highlighted something really important, which is that the regime has complete control over the economy and Syrian business. Because it has this control, the regime and the people close to it choose where the money goes. They choose to prioritize whatever it is they need to protect themselves. That includes making sure that they continue to have deep pockets, that they continue to live comfortable and luxurious lifestyles, but also that they're able to maintain the system of fear that has griped Syrians for decades. The fear that keeps Syrians in line and prevents them from rising up in anti-government protest again, despite the current economic crisis and dire living conditions, they have to endure.

Noor: Joseph explains how the Syrian regime relies on an economic system of crony capitalism. Crony capitalism is an economic system where a small class of people who are closely tied to the government, use their connections to the government to gain economic advantages over other businesses. Joseph explained to us exactly how this works in Syria.

Joseph: When we speak about former crony capitalism, we have to understand the particular political economy of the region, not limited to Syria. Most of the regimes of the region are basically patrimonial one, much like Syria, but the Gaddaffi's of Libya and the Gulf monarchies. What do we mean by this patrimonial nature of the regime? It means that the centers of power are concentrated in a small group or person and that they concentrate all the powers, military, economy, political, et cetera. That the army, or the main section of the army are not there to protect the state, but a particular ruling class rulers.

In this setup, economic opportunities are very often linked to the connections ones businessmen have with the centers of power.

Noor: As Syria descended deeper into war, these "crony capitalists" reacted by deepening their relationship with the regime, because being tied to the regime and making it so that the regime relies on them, that's their only option for survival. That's the only way to maintain their positions in society and their financial success. Business people found different ways to demonstrate their loyalty to the regime from promoting pro regime propaganda through their businesses, to orchestrating pro regime rallies and more terrifyingly creating and financing pro regime militias. They use the profits they made from their successful businesses to establish new militias to support the regimes war effort.

Fritz: One of the most notorious business people who's been a close ally to the Syrian regime and to the Assad family is Rami Makhlouf. He's a household name in Syria. Rami Makhlouf is Bashar al-Assad's maternal cousin. When Bashar al-Assad became president in 2000, he was allowed to become the wealthiest businessman in Syria. Makhlouf financed at least four different pro regime militia groups. There are even reports that Makhlouf smuggled cigarettes into Syria to use as currency to pay members of the militias. Joseph described him as the banker of the family.

Joseph: His economic and power throughout the 2000s expanded in a way that was amazing with the crown Jewel which was the Syrian telecommunication company which was one of the biggest private company in Syria with 6,000 employees, but he was also involved in oil and gas, construction, banking, airlines, retail, whatever, you name it basically. Some analysts were saying that he controls directly or indirectly through his network of affiliates because not all the companies were the same, nearly 60% of the Syrian economy through his complex network of holdings.

[music]

Fritz: 60% of the Syrian economy, that's how deeply tied the Syrian economy was to him. Makhlouf is also closely tied to Syria's Mukhabarat. His brother, Hafez Makhlouf is head of Division 40, which is closely affiliated with Branch 251. With such close family connections to intelligence, it is also said that Rami Makhlouf has substantially funded the Mukhabarat through his businesses. But, Makhlouf wasn't the only business person that benefited from and supported the regime. He's just one of a few selected business people in Syria who both benefit from their closeness to the Assad family, and use their positions to further uphold the government.

Noor Fritz's, it sounds like these business people really benefited from being so close to the regime. They made a lot of money, monopolized entire sectors of the economy, but how exactly did this benefit the regime?

Fritz: Well, first of all, having the top businesses in the country in their pocket is huge for the regime. Like Joseph said, it means that they can control large parts of the economy. The regime gets to control where money goes, and what this means is that the Syrian government is siphoning all the money in the country into itself and a small group of loyalists, as opposed to investing it in things that Syrians need, into social services, into supporting small business growth, into rebuilding the country in a way that Syrians can benefit from.

Secondly, the regime has built-in political and military support. These cronies use their wealth to fund the salaries and weapons of pro-government Shabiha, but also a new class of business elites started to appear. As the regime's war continued and more and more of the business people who are close to the regime were sanctioned by the United States, Canada, and the European Union, doing business internationally in the way that they were previously accustomed to became more difficult. Syria became more and more economically isolated and over time, a new class of economic elites or cronies emerged.

They would start companies in their own name, acting as fronts while all along someone else was really running the show and giving them a cut.

[music]

Noor The business of continuing to finance a war, especially under economic sanctions can get really complicated. The people involved have to develop complex business networks, including having people act as fronts in companies they secretly control throughout the world, to developing shell companies, companies without any real business activities to move money through and using those to transfer and maintain money in different banks and investments around the world.

This is something that Nick Donovan who researches the financing of conflicts spoke to us about. Nick's research was focused on one financial network that facilitated the Syrian regime's money transfers, the Khouri network. Mudalal Khouri is a Syrian-Russian man who controls a network to facilitate the movement of illicit finances. Nick says that Khouri's is a money-moving business.

Nick: They provide the pipes through which money can be transferred for many different reasons.

Noor Khouri's network played a pivotal role in helping the regime move money where it was needed.

Nick: When the revolution started and the war was going very badly in about 2012, then Mohammad Makhlouf, the uncle of the president, went over to Russia and started to investigate moving some of the family or the regime money into Moscow. The network that we were investigating, they helped them buy about 40 million US worth of property in some Moscow's skyscrapers and the US sanctions notices also set out how members of this network led by Mudalal Khouri helped the Syrian central bank buy banknotes.

They helped them buy ammonium nitrate. A central bank official was trying to procure ammonium nitrate, which can either be used both for fertilizer or for explosives, and they were helping them move money around to make these purchases, which were essential for the Syrian war effort. The Syrian economy needed banknotes, it needed ammonium nitrate, whether it was for agriculture or explosives, and it was running short of ways to get them.

Noor In particular, Nick, along with a team of experts looked into how these networks facilitated the Syrian regime's access to components of chemical weapons. One thing that Nick said that was very interesting was that somehow, although it's unclear to Nick and his colleagues, Syria's intelligence apparatus had oversight over the SSRC, the scientific studies, and research center, the Syrian government's entity in charge of Syria's chemical weapons program. Chemical weapons purchasing in Syria is decentralized, which means that intelligence branches make their own decisions about what types of weapons materials they wanted, as long as they were under a certain value.

Fritz: One case in particular highlights another way in which business plays a key role in facilitating the Syrian government's war crimes. In 2019, the three NGOs, Syrian Archive, Trial International and Open Society Justice Initiative filed complaints about alleged sanctions violations with prosecutors in Germany and Belgium. Full disclosure, I worked on this case at the time.

What we asked from the prosecutors was to investigate a case in which Belgian, German and Swiss companies allegedly violated export control laws by shipping isopropanol, a precursor chemical that is used to produce sarin gas, a chemical weapon used by the Syrian regime against civilians on multiple occasions, but most famously in Ghouta in August 2013 and Khan Shaykhun in April 2017. Together, these two attacks killed more than 1400 people, including many children.

[music]

According to Steve Costas at Open Society Justice Initiative, the shipments were part of a contract with a Syrian pharmaceutical company which claimed to be making a gel form of a medication called Voltaren, an anti-inflammatory drug. While there's no evidence that this isopropanol was used for anything other than manufacturing Voltaren, there are a couple of things that raise concern and that the three NGOs asked the prosecutors to further investigate. First, German and EU law required that shipments of concentrated isopropanol to Syria had to be approved by the government, and these shipments were not approved.

Second, the OPCW was busy destroying Syria's stockpile of concentrated isopropanol at the exact time that the Syrian pharmaceutical company ordered this concentrated isopropanol from the European companies. Third of all, the Syrian pharmaceutical company that ordered the isopropanol called Mediterranean Pharmaceutical Industries or MPI was directed by Abdul Rahman al-Attar, who was known to be close to the Syrian regime and supported it in evading sanctions. Fourth, lastly, a Swiss press report showed that approximately 80% of the concentrated isopropanol was never delivered to MPI, suggesting that it was diverted.

Noor If the isopropanol wasn't all being used to develop Voltaren, then where was that isopropanol going?

Fritz: It's hard to say. There's no proof that it was going straight to the SSRC for the production of sarin gas, or even more concretely that this isopropanol was used to produce a sarin gas that was then used in a chemical weapons attack, but this kind of situation raises red flags about what the isopropanol was being used for. What this shows is two things. Firstly, this case shows that the Syrian regime seems to be using sophisticated networks to acquire the necessary chemicals to produce what is probably the most heinous part of its weapons arsenal. Secondly, this case shows how complex it is generally to run a business in Syria right now.

Another reason running a business in Syria right now is so difficult is that often business people are asked to foot the bill for the Syrian regime, whether or not they want to. That way the regime can alleviate its financial burdens and continue to funnel money to the places it wants. Eyad Hamid, a senior researcher at the Syrian legal development program interviewed Syrian business people for a report on the effectiveness of sanctions in the Syrian context. In one example Eyad shared, a Syrian businessman who owns warehouses in Homs, loaned his warehouses to be used as temporary Shabiha organization spaces.

Noor: There was also another Syrian businessman who owns warehouses in Homs, and between 2011 and 2014 his warehouses were used as temporary detention centers when the regime's own detention centers didn't have enough space to hold all their detainees.

Fritz: It's very unclear if these people voluntarily loaned their property to the regime, or if they did so out of fear. One insider who spoke to Eyad said that anyone who owns a fleet of anything in Syria, buses, cars, ships, they were without a doubt required to loan them to the regime at one point or another. Eyad also heard reports of people close to the regime going to different businesses and telling them, "You gained your wealth because the regime let you because of your relationship with the regime". He would then ask them to contribute to a charity that acted as a front for the Ministry of Defense.

These stories Eyad shared highlight an important point that these business people, they get to reach extreme levels of wealth and prosperity because they're close to the regime but these stories show that this comes at a cost. The regime expects you to pay it back.

[music]

Noor: It also means that you can only really be as powerful as the regime allows you to be.

What happens when you fall out of favor with the regime? On April 30th, 2020, Rami Makhlouf, Bashar al-Assad's cousin, and arguably serious most influential business person, posted a video to his Facebook page, speaking out against a tax fraud claim the Syrian government made against Syriatel, a Syrian telecommunications company and Makhlouf's largest company. Makhlouf said that half of Syriatel's profits had gone to the government in 2019. Syriatel had paid $23.4 million in taxes that year but now the government was asking for almost an additional $500 million.

Fritz: In this video, Makhlouf tries to connect with the Syrian people. He talks about all the ways he spent his money for the Syrian people, especially through his charity al-Bustan.

Noor: Although there were reports that money going through al-Bustan was used to pay the Shabiha salaries.

Fritz: After all the favors he received from the regime, all the corruption, abuse, and bullying of other Syrian business owners, Makhlouf paints a picture of himself as a victim of the regime's greedy hand. This was an unprecedented moment in Syria's political history. But it seems like what's happening here is that the Syrian regime is taking another strategy with its cronies. It's demanding more and more of their money. Syriatel's profits are not for Syriatel employees, they're not for their investors,they're not for Rami Makhlouf, they belong to the Syrian government.

Maybe some of that money will be spent on wheat or fuel for Syrians, but it will also be spent on intelligence services, on the salaries of Mukhabarat, of people who work in intelligence branches that needs to keep running. Branches like Branch 251, salaries for officers like Eyad A. and Anwar R.

[music]

Noor: An even more insidious way that the regime finances itself is through its ability to control and manipulate humanitarian aid. UN agencies that operate in Syria have to do so through the Syrian regime with the regime's approval and the regime has some strict rules about how humanitarian agencies can operate in Syria. Money for humanitarian aid has to go through the Syrian Central Bank, which exchanges currencies at a false rate, and the central bank ends up pocketing a huge percentage of that money.

Fritz: When money goes into Syria for humanitarian aid, to support the Syrian people, not all of it is actually going to the Syrian people. A lot of it ends up further financing the regime. The regime also requires UN agencies to work with a specific set of charities in Syria. Charities like al-Bustan, which had been started and owned by Rami Makhlouf and the Syria Trust founded by Asmaa Akhras, Bashar al-Assad's wife, who is facing a criminal investigation in the UK on allegations that she has incited, aided and encouraged war crimes by Syrian government forces.

These charities pick and choose what communities and what neighborhoods they want to support. They also pick and choose how money is spent, and where it goes.

Nick: All war requires finance. Even if you're really ideologically motivated, you still need money to buy food and boots for your soldiers and buy ammunition. None of that's done for free.

[music]

Pauline: Branch 251 is a 75 podcast production. Today's episode was hosted by Noor Hamadeh and Fritz Streiff, who also produced this episode. Editing and mixing by myself Pauline Peek. The script was written by Noor Hamadeh. Thank you to Joseph Daher and Nick Donovan for contributing to this episode. Thank you also to Steve Kostas from Open Society Justice Initiative, and Eyad Hamid and Giorgio Migliore from the Syrian legal development program for providing additional insights for this episode. Support for our podcast comes from German Federal Foreign Office Funds that are provided by IFA’s zivik Funding Program.


John Carter
Tech Vlogger & YouTuber

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ipsum blandit at sed a, vulputate eget. Integer in egestas rutrum risus tortor. Augue sed ac magna semper vitae, orci morbi auctor. Diam dui ut ut purus aenean volutpat.