How a Moscow Skyscraper Is Saving Assad From Western Sanctions
Syria’s ruling family is using proxies to park money in Russia, in the form of luxury apartments.
WHY YOU SHOULD CARE
Russia is making sure Syria's elite finds a way around Western sanctions.
On a bend of the Moscow River glitters a glass and steel monument to Russia’s oil and gas-fueled 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 neighborhood sits the City of Capitals complex, a two-towered skyscraper that was once Europe’s tallest before it lost that crown in 2012 to London’s Shard. Tenants include the offices for Diageo, the beverages multinational, Italian fashion group Calzedonia and top Russian banks. Neighboring 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 Assad to keep tens of millions of dollars out of Syria as the country’s civil war raged.
[Russia] is allowing them to take refuge in Moscow where they enjoy luxurious lifestyles as Syria burns
Isobel Koshiw, global witness
Some members of the Makhlouf family, including several of Assad’s cousins, and some of their relatives, have bought at least 20 apartments worth $40 million 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 Syrian 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 U.S. 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.
Moscow has been a steadfast ally of Syria’s 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, Iran, 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 rebels. The conflict has displaced more than 12 million people, says the U.N., 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 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.
“Russia has from the beginning been helping the Assad regime subvert sanctions,” says Lina Khatib, Middle East and North Africa Programme head at Chatham House. “It sees itself right now as the guarantor of the Syrian state.”
Although relatively small, the purchases hint at the growing commercial ties between Russia and Syria 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 over the country, 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, 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. 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 Assad’s children, Hafez and Zein. The children of 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 channeled 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 preeminent clan of the Alawite sect, to which the Assads also belong, and were historically more prestigious than the Assads. The marriage between Bashar Assad’s father, Hafez, Syria’s president until 2000, and Anisa Makhlouf, forged a savvy strategic alliance.
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.
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 Association, which was allegedly used to fund pro-government 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 the president,” 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 has purchased the properties. But not all the Makhloufs have flaunted their wealth. Little has previously been known about the fortune of Hafez Makhlouf.
Hafez first came to prominence as a junior officer in the Syrian security services during Damascus’ 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 $3.3 million to him.
Although he was pushed out of his post in 2014, two people familiar with the regime say Hafez now lives between Moscow and Damascus, suggesting he is far from excommunicated. “No one retires in Syria,” says the former 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 53rd and 58th 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 Sept. 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 meters of property between the 61st and 65th floors of the 73-story 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. Haytham and Hassan are brothers of Muhammad Abbas and Ammar Sharif, Syrian businessmen who are both on EU or U.S. sanctions lists.
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 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 $40 million 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 neighborhood.
When we visited that property, an employee of a company refurbishing it said 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.”
OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.