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5. The reconstruction business
In June 2014, the World Bank estimated the cost of reconstructing Syria at about 200 billion USD, while the Economic and Social Commission of Western Asia (ESCWA) put the figure at 140 billion.1 But while this is often presented as a ‘business opportunity’, crucial aspects of how exactly this business will be conducted are often overlooked.
For instance, ESCWA’s assessments of the destruction in Syria 2 and its controversial reconstruction plans for the country 3 are drawn up primarily by the agency’s Deputy Executive Secretary Abdullah Dardari. Dardari was brought in by Bashar al-Assad in 2000s to ‘reform’ Syria’s economy, first as the head of the State Planning Commission and then as Deputy Prime Minister for Economic Affairs. He became famous for the country’s 10th Five Year Plan, seen as a “blueprint for economic reform.” He was removed from office in 2011, allegedly due to a conflict with al-Assad’s cousin and Syria’s biggest business mogul, Rami Makhlouf.4
Prior to the high-profile ESCWA event in Beirut in September 2014,5 in which the agency presented its above-mentioned assessment and plan, Dardari is said to have visited Syria and met with the government to “sell his reconstruction plan,” which revolves mainly around providing the billions needed for reconstruction projects through loans from international funds, such as the IMF, which usually impose controversial ‘readjustment’ conditions.6
In any case, it appears that the Syrian regime was not very interested in Dardari’s proposals and had other plans involving its inner circles and its long-standing allies (Iran, Hezbollah, etc.). In February 2014, for example, Bashar al-Assad told a Jordanian delegation that his government had been planning a “comprehensive scheme to reconstruct all of Syria” and that American, Western and Gulf companies “would not have any role whatsoever is this plan.”7
In November 2014, Damascus hosted a two-day conference on the “reconstruction of Syria” under the patronage of the Syrian prime minister. Participants presented a “road map for rebuilding what the ongoing war in Syria has destroyed.” A three-day trade fair focusing on reconstruction was also held in Damascus, featuring “tens of local and foreign companies specialised in construction.”8
Organising conferences and events about reconstruction may seem absurd when the war and destruction are still ongoing. In its 2014 Doing Business report,9 the World Bank ranked Syria last in terms of “dealing with construction permits,” which measures the procedural and financial barriers to the implementation of business projects. But this only applies to ‘normal’ or outside investors. It also overlooks the fact that ‘reconstruction’ efforts in Syria are actually part and parcel of the war.
It is important to understand that such plans are more political than economic. They are based on the assumption that investments in Syria now will give the investors or partners significant leverage in how the country is governed later, even if the investments do not pay off in financial terms in the short term.10
A good example of this strategy is Iran’s investments in Iraq after the fall of Saddam Hussein in 2003 and in South Lebanon after Hezbollah’s war with Israel in 2006. In January 2012, during a conference on youth and the ‘Islamic awakening’ in Tehran, the chief of Sepah Qods, General Qassem Soleimani, remarked that, as a result of such investment, “in south Lebanon and Iraq, the people are under the effect of the Islamic Republic’s way of practice and thinking.”11
Old-new mafias
Around the same time as ESCWA’s publication of its assessment, the Damascus City Council established a holding company to redevelop the designated areas around al-Mazzeh mentioned above. The funding for the project was to purportedly come from the state-owned Real Estate Bank.12 But the announcement is likely to be a smokescreen. The real money and real protagonists are to be found in the same usual suspects.
Syrian opposition sources claim that Rami Makhlouf’s company Cham Holding has already put its hands on much of the areas designated by Decree 66, particularly the area stretching from the Mazzeh Highway to Kafarsouseh. Cham Holding already has major investments in real estate in Syria through its arm Bena Properties.
A note posted by Dr Zakwan Ba’aj from Syria Freemen Conference on his personal Facebook page on 5 February 2015,13 based on information leaked from inside the Damascus City Council, claims that “a group of thieves” from the Council, working under the supervision of Makhlouf and “his man in the Council,” the governor of Damascus Bishr al-Sabban, has been buying and selling property in this area “to Iranians” and “in direct coordination with the Iranian intelligence.”
According to the note, the “gang” includes Ayman al-Zheili, a former member of the Council’s Executive Committee; his business partner Hassan Baydoun, also a member of the Council’s Executive Committee; a Lebanese person with the surname of al-Mufti, as well as a number of estate agents based in Lebanon, including Abbas al-Hamed, who allegedly owns a large number of properties in the Kafarsouseh area.
Al-Zheili and Baydoun had allegedly embezzled large sums of money from never-implemented Council projects, and each now owns a cement business after working at the state-owned cement factories for years. The two men are said to be tasked with running Makhlouf’s real estates, some of which are allegedly registered in al-Sabban’s name. Many of these have allegedly been sold to the Iranian embassy, or its agents, through the head of the Antiques Department in the Council Ahmad al-Dali, as already mentioned.
Another frequently cited name is As’ad Mhanna, the former director of al-Sabban’s office, who was killed in a car bomb in March 2013.14 Mhanna was known for his close ties with Makhlouf and was allegedly involved in organising the shabbiha in Damascus to suppress early peaceful demonstrations. One of his team members was Adnan al-Hakim, a Shiite from Damascus who was allegedly the group’s contact person with Hezbollah and Sepah Pasdaran.
The authors of this report have not been able to independently verify any of these allegations.
A relatively new ‘rival’ to Cham Holding is a real estate company based in Sharjah, the United Arab Emirates, called Cartel Group.15 It is owned by the former governor of Homs, Iyad Ghazal, and run by his brother Ziyad since 1989.
Following mass protests in Homs demanding the resignation of the corrupt governor, Ghazal was removed from post by a presidential decree in April 2011, in an attempt to appease the angry protesters.16 He was apparently placed under house arrest by Hisham Bikhtyar, then head of the National Security Office, until he left the country in September 2011.
According to Syrian investigative journalist Nizar Nayouf, Ghazal was smuggled out of the country by officers from the Presidential Palace on the direct orders of Bashar al-Assad.17 He was allegedly given three suitcases full of dollars, accompanied by official documents issued by the governor of the Central Bank Adib Mayyaleh to facilitate his passage through Dubai airport. He subsequently became an official partner in the Cartel Group, with al-Assad’s money, and opened branches in Damascus, Aleppo and Beirut.18
According to Nayouf, one of Ghazal’s partners in Syria is Azmi Shalhoub, the head of the Register Office in the Damascus Countryside governorate. Shalhoub has allegedly unlawfully transferred the ownership of thousands of properties belonging to arrested, disappeared and killed Syrians in the Damascus countryside area, especially in al-Tall and Saidnaya, to regime officials and officers.
Nayouf’s account of Ghazal’s departure is corroborated by another Syrian source who posted a very similar story anonymously online, citing a senior employee at Cartel as a source.19 This latter account adds that Ghazal left with 50 million dollars, withdrawn from the Syrian presidential account with the Central Bank, and that he met al-Assad through his private secretary Salim Abu Da’boul, who made him sign a document proving that he owes 50 million, along with the due interests, to al-Assad.
The allegations could not be independently verified by the authors. However, on 3 June 2014, the day of the sham presidential elections in Syria, Iyad Ghazal, who had been granted Lebanese citizenship along with other regime officials,20 appeared on Syrian state TV alongside the country’s mufti, Ahamad Badr Hassoun.21 In mid-2012, Syria opposition media also reported, quoting a source from Damascus, that Ghazal was back in Syria and living “a decadent life.”22 The short report added that he was also working on a “big touristic project in the capital city.”
In addition to corruption and unpopular projects, Ghazal is known among the residents of Homs for expropriating and destroying people’s property, including historic buildings, to facilitate the implementation of his unpopular projects, with inhabitants often evacuated by force and not compensated.23
Ghazal’s successor as the governor of Homs, Talal al-Barazi, also owns a number of real estate companies in the Gulf. According to Syrian opposition media reports, al-Barazi is a partner of Bashar al-Assad and Rami Makhlouf in a number of front real estate companies set up by the latter two specifically for the new reconstruction market.24 One particular company, al-Bawadi, is said to be 25% owned by al-Barazi and 65% by Makhlouf. It was established in 2012 with an initial capital of 50 million Syrian pounds. While specialising in construction and real estate, its license also allows it to represent other foreign companies in tenders and so on.
Iranian connections
In June 2014, Syrian Prime Minister Wael al-Halqi called upon the Iranian private sector to be a “partner in the reconstruction” of Syria.25 “Iranian companies are Syria’s main partners in the reconstruction of our country,” he added during a meeting with an Iranian parliamentary delegation in Damascus. The delegation also met with President Bashar al-Assad and discussed bilateral ties, regional developments and the recent sham presidential election in the country. After congratulating the president on his “landslide victory,” the chairman of the Iranian Parliament’s National Security and Foreign Policy Committee, Alaeddin Boroujerdi, underlined “the necessity of forming a joint committee to rebuild Syria.”
A few days before, parliamentary delegations from around 30 countries were in Tehran to discuss the situation in Syria at the second “Friends of Syria” conference.26 Some of them flew with the Iranian delegation to Syria to “monitor the elections.”
An article published on the website of Sepah’s political office on 18 December 2014,27 revealed that Syrian officials had traveled to Iran on several occasions during 2014 to “ask for Iran’s help” in industry, electricity, oil and health care. An Iranian convoy also traveled to Syria to study the “general financial situation” in the country.
Various Iranian companies, both private and state-owned, already have contracts in Syria, most notably in the construction of oil refineries in Homs and Banyas, electricity and water projects throughout the country, and glass and car factories.28 A number of industrial and trade memorandums of understanding already exist between the two countries.29
The ongoing war and the mass destruction it has brought about present a golden opportunity for many of these companies to expand their business in Syria. The new market also presents an opportunity for Iran to not only evade international sanctions but to also consolidate its economic and political power in this country.
Indeed, in February 2015, media reports claimed, quoting Egyptian officials, that the Iranian regime had expressed its willingness to give up on Bashar al-Assad on two conditions: keeping the “privileges” that Iran had gained in Syria over the past few years and maintaining all the agreements signed between Tehran and Damascus.30 The first condition allegedly included “all the properties and land that Iran had bought” in Syria.
One particular area where Iranian companies are likely to play a key role is cement, as they have been doing in Iraq. Iran is the fourth-largest manufacturer of cement in the world and the largest in the Middle East, with a production capacity of 70 million tons a year.31 According to a Syrian economist, the demand for cement in Syria will surge at least threefold compared to pre-war levels,32 at a time when the production of cement by Syrian state plants has declined by more than 50 percent.33
A number of Iranian cement companies already have contracts in Syria. For example, Ehdas Sanat built the Hama cement factory under two contracts worth 196 and 90 million USD. Another company, MANA, also contributed to the project under a contract worth 34.4 million USD.34
There are also more new partnerships between Syrian and Iranian construction companies, such as the one signed in May 2014, during an Iranian international technology fair called INOTEX, between Syrian Real Sorab and Pars Garima, an Iranian construction company.35
While systematic investigations to monitor which companies will win which contracts in Syria are needed as a matter of principle,36 one particular area to keep a close eye on is whether such companies have any links to the Iranian regime, particularly to Sepah Pasdaran. Because it is very likely that companies such as Iran Bon, which built the Iranian embassy building in Damascus under a contract worth 13 million USD, will be the ones to win the majority of the future contracts in Syria.
It is no secret that the Iranian construction industry is largely controlled by Sepah Pasdaran. Back in 2007, media reports revealed that the force had ties to more than 100 companies, with contracts worth 12 to 15 billion USD.37 The figures are likely to have increased since then, but exact details are difficult to obtain, partly because Sepah Pasdaran reports directly to Iran’s Supreme Leader, Ayatollah Ali Khamenei, and many of its activities are not subject to parliamentary oversight.
One of the most notorious and best known construction companies affiliated with Sepah Pasdaran is the force’s construction and engineering arm, Khatam al-Anbia. Also known as Ghorb, it is one of nine Sepah-affiliated entities that have been on the US Treasury’s Iran sanctions list since 2007.38 It was also sanctioned by the EU in 2008 and by the UN Security Council in 2010.39
Set up during the Iran-Iraq war as Sepah Pasdaran’s headquarters of reconstruction, Qarargah Sazandegi Khatam Alanbia, often abbreviated in English as KAA, has evolved into a giant holding company, with more than 800 registered subsidiaries inside and outside Iran. It has many fingers in many pies and is involved in numerous civil and military construction projects.40 In 2012, KAA received 1,700 government contracts worth billions of dollars.
Despite Iran’s struggling economy and falling oil prices, Iranian President Hassan Rouhani announced at the end of 2014 a 50 percent increase in Sepah Pasdaran’s budget, taking the force’s total annual spend to over 5 billion euros.41 That is more than half of Iran’s total defense budget, which was itself increased by 33 percent. Buried in the small print of the budget was a further 2.5 billion euros that will go directly to Khatam al-Anbia.42
All the above-mentioned Iranian and Syrian entities involved in current and future construction projects in Syria, as well as many others that have not been mentioned in this report, should be investigated. If any links are found to unlawful activity, such as using the war as a means or a cover to further dubious reconstruction projects, they should be sanctioned and their owners punished accordingly. This should include their role in facilitating, aiding, abetting or providing the means for the commission of the above-mentioned war crimes.
The same should apply to companies and governments helping these Iranian and Syrian entities evade scrutiny and sanctions, especially those based in countries known to tolerate or overlook the activities of the Iranian and the Syrian regimes, such as the United Arab Emirates.43
This is particularly important in light of what appears to be concerted efforts by the current US administration to relief some of the sanctions imposed on Iran and Syria in the hope of reaching a nuclear deal with Iran. In July 2013, the US government amended its Iran and Syria sanctions regulations to expand the potential for US and other companies to export and re-export certain items to Iran and Syria under the justification of “assisting the ordinary people of these countries who have suffered under the current governmental regimes.”
Items eligible for potential export under the new regulations include commodities related to construction and engineering. Previously only the export of food and medicine was allowed.44
Notes & Referemces:
1. ‘Report: 140 Billion Dollars Cost of Syria Reconstruction‘, Syrian Economic Forum, 26 June 2014.
2. See here.
3. See here.
4. ‘Syria on the Edge of the Abyss: Assad’s Regime Escalates Crackdown on Protesters‘, Der Spiegel, 25 April 2011.
5. See here.
6. For more details, see: ‘Reconstruction of Syria: A war in waiting‘, The Syrian Observer, 9 December 2013. See also this article and this article.
7. ‘What did Bashar al-Assad tell the Jordanian delegation that recently met him‘ (in Arabic), Al-Alam, 12 February 2014.
8. ‘Damascus hosts Syria reconstruction conference‘, Press TV, 25 November 2014.
9. Available here.
10. For an example of this argument, see: Adam Heffez and Noam Raydan, ‘The Syrian Marshall Plan‘, Foreign Affairs, 27 August 2014.
11. ‘Iran general’s remarks on south Lebanon draw March 14 ire‘, Daily Star, 21 January 2012.
12. ‘State bank expected to fund reconstruction of Mazzeh district‘, The Syria Report, 29 December 2014.
13. Available here (in Arabic).
14. See here.
15. www.cartelgc.com.
16. See here, for example.
17. Private email to the author.
18. There is also a company registered under the name of Cartel in Damascus since 2010. Its initial capital was 50 million Syrian pounds, 10% owned by the UAE-based Cartel, 80% by Ziyad Ghazal and 10% by Lina Shibli. See here.
19. Available here.
20. See here, for example.
21. See here, for example.
22. See here, for example.
23. For more on Iyad Ghazal, see this Le Monode blog (in French).
24. ‘Al-Assad gangs begin implementing their ‘Solidere’ project: Makhlouf establishes real estate company al-Bawadi to ‘reconstruct’ Homs and other governorates soon’ (in Arabic), Syrian Angels, 17 July 2013.
25. ‘Al-Halqi calls for Iran’s help to reconstruct Syria‘, Fars News, 5 June 2014.
26. Ibid.
27. Available here (in Persian).
28. For a list of all (public) Iranian contracts in Syria, see here.
29. See this one, for example.
30. ‘Two Iranian conditions to give up on al-Assad‘ (in Arabic), Al-Watan, 1 February 2015. See also this article in Al-Hayat from around the same time.
31. See, for example, ‘Iran a force in cement industry‘, The Hill, 7 January 2015.
32. ‘Demand for cement to surge threefold post conflict‘, The Syria Report, 13 May 2013.
33. ‘Cement output continues to drop at state plants‘, The Syria Report, 11 November 2013.
34. See here.
35. ‘13 agreements and commercial contracts signed between Iran and neighbouring countries‘ (in Persian), Hitna, 25 May 2014.
36. For Syrian construction tenders, see here, for example.
37. See, for example, ‘Iran’s $12-billion enforcers‘, Los Angeles Times, 26 August 2007. For some background to Sepah’s commercial activities, see, for example, here and here.
38. US Department of the Treasury, ‘Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism‘, 25 October 2007. See also this Treasury press release.
39. ‘Security Council imposes additional sanctions on Iran‘, UN, 9 June 2010.
40. See, for example, ‘The financial power of the Revolutionary Guards‘, The Guardian, 15 February 2010.
41. For more details, see: ‘Paris attack: Jihadi cancer has its roots in Tehran‘, The Diplomat, 9 January 2015.
42. Ibid.
43. For an example of an UAE-based company found to have been helping the Syrian regime evade sanctions, see here.
44. Electronic Code of Federal Regulations, 15(B)(VII)(C)(746), available here. For more details, see here.