Posted by Joshua on Thursday, March 27th, 2008
By law, the US Treasury cannot punish or freeze the assets of any company in which a sanctioned person owns less than 50% of the shares. The sanctioned person must own over half of a company for the Treasury Deptartment to be able to impose penalties on it or take action against other shareholders. Makhlouf claims he only owns 12% of Sham Holding Company, so his partners cannot be hurt or intimidated by the US government. Certainly, Rami Makhlouf will be inconvenienced.
But if the United States wishes to have an effect on the Syrian economy by its sanctioning measures, it will have to list many more people in the category of public corruption. As the treasury department claims, no sanctioned person has ever won a court case against it, so there is little to keep the Bush administration from sanctioning as many major Syrian businessmen as it wants. Getting information of them all would be expensive and time consuming.
The stock market and money markets are not open yet in Damascus, so very few companies have listed themselves publicly and their finances and ownership are not a mater of common record. Makhlouf has established many off-shore companies to hide his ownership of towers in Dubai and other holdings in Europe and elsewhere. Tracking these down and proving their real ownership will require that the treasury and FBI devote major resources to the case, but one must imagine that Makhlouf will simply find sleeping partners to claim 51% of any company.
Here is the article:
Syrian Tycoon Bristles At US Sanctions Against Him
2008-03-26 19:41 (New York)
THE WALL STREET JOURNAL
By Mariam Fam in Damascus, Syria, and Jay Solomon in Washington
As the U.S. places economic sanctions on Syrian President Bashar Assad and his inner circle, one of Syria's richest men is expanding his foreign partnerships and promising to fight Washington's attempts to rein him in.
In February, the U.S. Treasury Department banned U.S. firms and individuals from doing business with companies controlled by Syrian tycoon Rami Makhlouf. The sanctions would also freeze any of Mr. Makhlouf's American assets. The designation was part of an effort by the Bush administration to economically and diplomatically isolate Damascus. The U.S. says Syria is seeking to destabilize the Lebanese government while supporting militant groups operating in Lebanon, Iraq and the Palestinian territories.
The U.S. is sanctioning Mr. Makhlouf because it says he is involved in corrupt activities. That is a twist: Most Treasury sanctions in recent years
have been of companies or individuals allegedly supporting terrorism or weapons proliferation. The Bush administration has already sanctioned a number of
Syrian government officials and companies for aiding militant groups operating inside Lebanon and Iraq.
In a rare interview, Mr. Makhlouf said the sanctions had little effect on his business and won't change Syria's behavior. He added that there were ways to circumvent the sanctions.
He also said he had been unfairly targeted and would fight back. "I will sue everyone that issued this decision," he said in his offices in Damascus. "I
will demand my rights and ask to be compensated for any past or future damages."
A U.S. official said the Treasury Department has been sued in recent years in relation to its blacklisting of firms alleged to be financing terrorism. The
official said the department has won all these cases.
The Treasury Department's sanctioning of Mr. Makhlouf fits into an emerging strategy being employed by Washington as it attempts to punish hostile regimes: targeting their most-prominent business executives and companies. Over the past two years, the Treasury Department virtually froze North Korea out of the international financial system by blacklisting the Macanes bank through which it conducted most of its overseas transactions. In recent months, the Treasury Department has sought to isolate Myanmar's military government by sanctioning a Burmese businessman widely viewed as the junta's most important fund-raiser.
Mr. Makhlouf's "corrupt behavior, which includes intimidation and obtaining improper business relationships, has both disadvantaged Syrians and entrenched the regime," said Adam Szubin, director of the Treasury's Office of Foreign Assets Control, in an interview. "He's very close to the Assad regime, personally and economically."
Mr. Makhlouf, 38 years old, is a cousin of Mr. Assad. His business interests include tourism, real estate, banks and telecommunications. While he is a
prominent figure in Syria, he keeps a low profile; many Syrians don't know what he looks like.
In recent years, he has increasingly hooked up with investment partners from other Arab countries and Europe, including some key American allies. That could complicate Washington's efforts to isolate him. The sanctions are only applicable to American citizens, but Washington hopes they will discourage
non-American firms from doing business with him as well.
Last year, Mr. Makhlouf and dozens of other prominent Syrian investors established Cham Holding, considered Syria's largest private company. Mr.
Makhlouf is the company's vice chairman. He holds about a 12% interest through an investment fund called Al Mashreq, his office said.
Since then, Cham has agreed with Syria's state airline and a Kuwaiti company to set up a new airline. Mr. Makhlouf has also been in talks to sell a stake in his Syrian cellphone operator, Syriatel Mobile Telecom SA, to a Turkish company. Mr. Makhlouf is Syriatel's chairman and majority shareholder.
This month, shortly after the sanctions were imposed, Dubai-based real-estate company Emaar Properties PJSC announced it had agreed to set up a $100 million venture with Cham to develop projects in Syria. Emaar representatives didn't return phone calls and email requests for comment.
In the interview, Mr. Makhlouf said he has no investments or money in the U.S., and that the U.S. move hasn't had much financial impact on his business
Stuart Levey, the Treasury Department undersecretary for terrorism and financial intelligence, said he couldn't comment on whether assets related to
Mr. Makhlouf were frozen in the U.S. He added that more important than any frozen assets has been "the information we're providing to governments,
businesses and financial institutions around the world" relating to Mr. Makhlouf.
Mr. Levey said he couldn't comment on what specific actions Treasury might take against Cham Holding or other companies associated with Mr. Makhlouf. He said his office, however, "is looking into all of them," including their ownership structures.
He said the Treasury Department charges against Mr. Makhlouf, particularly regarding corruption, "might make people exercise discretion in determining
whether to do business with him."
Mr. Makhlouf said the blacklisting has won him the support of many Syrians, and that there are ways to get around the sanctions.
"Today, I publicly associate myself with companies that I publicly say I own. Tomorrow, maybe I will come up with companies that no one knows I own," he said. "If other companies want to work around this, if they want to work in the country, they can. Syria is a promising market." He also said that the move could rattle potential investors. "After all, this is America," he said. "Most big companies have interests in America."
It remains unclear just how much pressure Washington's actions will place on Mr. Makhlouf and companies doing business with him. An early test case may be Gulfsands Petroleum PLC, a publicly traded, United Kingdom-incorporated energy company. Mr. Makhlouf is a minority shareholder, through Al Mashreq.
Gulfsands' chief executive and largest shareholder, John Dorrier, is an American citizen, and the company has offices in Houston. In October, Gulfsands formed a strategic partnership to develop oil fields in Syria and Iraq with Cham Holding. A Gulfsands executive said the Treasury Department's blacklisting of Mr. Makhlouf will have no impact on the company pursuing its partnership with Cham. Gulfsands said it would comply with any rulings made by the Treasury. Mr. Levey said he couldn't comment on Gulfsands, and couldn't discuss companies believed to be tied financially to Mr. Makhlouf. Mr. Makhlouf said Washington's approach to trying to change Syria's behavior won't work. "This is not how to solve the issue," he said. "Syria is a main player in the region. . . . Pressure on it doesn't produce results."
Senior U.S. officials said they tried to engage Damascus directly by inviting a Syrian delegation last November to the Washington-sponsored Middle East peace conference in Annapolis, Md. Since that time, American diplomats said Syria has displayed no willingness to cooperate with the U.S. and its allies to stabilize the political situation in either Lebanon or the Palestinian territories. The recent sanctioning of Mr. Makhlouf and other Syrian officials is a result of Washington's frustration with President Assad's government, these U.S. officials say.