VZCZCXRO7538
PP RUEHDE
DE RUEHDM #0142/01 0571633
ZNY SSSSS ZZH
P 261633Z FEB 08
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC PRIORITY 4668
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 1388
RUEHAM/AMEMBASSY AMMAN PRIORITY 7234
RUEHAK/AMEMBASSY ANKARA PRIORITY 5471
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0771
RUEHLB/AMEMBASSY BEIRUT PRIORITY 4861
RUEHRL/AMEMBASSY BERLIN PRIORITY 0123
RUEHSW/AMEMBASSY BERN PRIORITY 0069
RUEHEG/AMEMBASSY CAIRO PRIORITY 3555
RUEHLO/AMEMBASSY LONDON PRIORITY 0381
RUEHFR/AMEMBASSY PARIS PRIORITY 0409
RUEHRH/AMEMBASSY RIYADH PRIORITY 7942
RUEHRO/AMEMBASSY ROME PRIORITY 0903
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 2099
RUEHDE/AMCONSUL DUBAI PRIORITY 0165
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
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