The Middle East Channel
Where’s Syria’s business community?
The decision by the U.S. Treasury to freeze the assets of Syrian businessman Mohammad Hamsho and his businesses has sent a strong message to a key part of the pro-Assad business community and opened up new possibilities for pressuring the Syrian regime. The Syrian business community is the key to the survival of Bashar al-Assad. ...
The decision by the U.S. Treasury to freeze the assets of Syrian businessman Mohammad Hamsho and his businesses has sent a strong message to a key part of the pro-Assad business community and opened up new possibilities for pressuring the Syrian regime. The Syrian business community is the key to the survival of Bashar al-Assad. Despite his brutality and widely perceived loss of legitimacy, Assad has not yet lost this critical constituency. The Damascus and Aleppo business establishment is still betting on Assad’s political survival, while his crony capitalist regime partners see their fate as tied to his. Unless they change their calculations, Assad may still hold on to power.
Unlike the Egyptian uprisings which started in Egypt’s main cities, Cairo and Alexandria, and then spread to the rest of country, the uprisings in Syria started in rural Deraa and then spread to major hubs like Homs and Hama. Mass protests, similar to the ones we have seen in Hama, have not taken place yet in Syria’s two largest cities, Damascus and Aleppo. Without these two cities joining the uprisings en masse, the Assad family and their cronies will remain confident that they can withstand the crisis. But the Syrian business community is not a monolith, and has a variety of perspectives on the value of the current regime. What could change their course?
When the late Hafez al-Assad assumed power in 1970, he struck a bargain with Syria’s business community — security and stability and non-interference in their business in return for political quietude. There are two influential groups in Syria’s business community, each with distinctive calculations.
First is the new business elites often talked about in Damascus as nouveau riche. This is a group of businessmen, chosen by Bashar al-Assad and his clan, who for all practical purposes are business partners of Assad and his extended family including his infamous cousin Rami Makhlouf. They do not exceed 200 in number, and are spread geographically. The majority is based in Damascus, and many of them are shareholders in Souria Holding and Cham Holding, Syria’s two largest private holding companies. They span Syria’s religious and sectarian landscapes though the wealthiest among them are Alawites. They are individuals who have leveraged their access to the president and his inner circle in winning bids for public infrastructure projects, obtaining shares in the new banks which opened offices in Syria thanks to Assad’s economic liberalization policies. It is reported, though not confirmed by independent sources, that this group is funding the pro-regime paramilitary groups known as shabiha by providing them with transportation, food, and salary. For these business elites, their economic interests are invested in Assad’s political survival. Thanks to their substantive assets, this group can help prolong the fight in the short-term but given their small number, they will be incapable in the long-term to prevent Assad’s eventual downfall.
The traditional and larger Syrian business community is comprised of the merchant families of Damascus and Aleppo, the majority of whom are Sunni but also includes an important Christian component. This group is part of the Syrian silent majority. Like any business community, this group abhors instability. Unlike the first group, however, they do not feel that they have a horse in this fight. They are neither pro-Assad nor are working assiduously to overthrow him. The majority of them are sitting on the fence watching how this fight will unfold. They are worried about the Iraqization scenario in Syria and often fear instability and civil war more than they hope for political change. The Assad regime reinforced these fears by inciting sectarian violence in Latakieh, Banyas, and Homs. Christians also fear an Islamist Sunni alternative to the Assad rule that threatens to persecute them and burn their churches. This fear of the Islamist alternative is stronger among Christians in rural areas and less so in major cities such as Aleppo and Damascus where groups have co-existed for years and have developed long-standing relations across religious lines.
To date, the cost for Syria’s traditional business families of shifting their political allegiances remains too high and the benefits of political change are too low especially in light of the current stalemate between the regime and the protesters. They remain worried that a vacuum and the resulting instability would be the operative order in a post-Assad era. By their nature, Syria’s businessmen are risk averse and will not make a choice unless they are convinced that the regime is on the losing side. Some developments on the ground would sharpen the choice for them — mass defections in the army ranks, increasing regime violence targeting their neighborhoods and mosques in old Damascus and the old City in Aleppo, and a deepening economic crisis that depletes their savings. When the violence will reach the tipping point necessary for this group to rise in opposition to Assad is hard to predict. However, this group is key to the rise of Damascus and Aleppo. What would accelerate their calculus shift?
U.S. Secretary of State Hillary Clinton is correct in pointing out that change is up to the Syrians, and that the Syrian opposition must start laying out a credible transitional plan. The traditional Syrian business community must be convinced that there is a credible and viable political alternative to Assad. All they see now is an opposition that is either too old and disorganized and has tried to effect change and failed in the past or an opposition that is too young in the form of the Local Coordinating Committees whose faces and names are unknown to most and who are organizing and documenting the street protests. Different opposition groupings including the National Democratic Grouping, the Damascus Declaration signatories, the National Salvation Council, and the local Coordinating Committee have declared themselves, solidifying the image among this community of a disjointed opposition.
The formation of a transitional political council composed of the different groups now making up the Syrian opposition, Islamists and secular, old and young, groups based in Syria and exiles, will go a long way in promoting a shift in the Syrian businessman’s calculus. This council should elect a leadership, outline a detailed transition plan, and spell out a clear vision about the new social contract for how they want Syrians to live together and the type of economic system they want to see established. The lighter the footprint the international community has in this process, the more credible the outcome will be to the majority of Syrians and especially to the traditional merchant class, a nationalistic group that is suspicious of foreign, and especially U.S., intervention. There are many skilled Syrian political scientists, lawyers, and economists to do this job well without any outside assistance.
Second, Turkish sanctions would have an impact on the Syrian business community given the economic ties established between the two countries in the last few years. This impact would be felt strongly in Aleppo, whose business class has benefited from Turkish investments in joint Syrian-Turkish projects based in the city. Turkey’s economic presence is felt in various sectors of the Syrian economy. Bilateral trade between Turkey and Syria reached a total of $2.5 billion in 2010. Turkish exports to Syria increased 30 percent in 2010 to $1.8 billion while Syrian exports doubled to $662 million. Turkey exports mainly manufactured products while Syrian exports mainly consist of crude and other oil related products. The bulk of the revenue from these exports goes into the regime coffers. Until recently, Turkish political leaders have emphasized the need for political dialogue and gradual reform. The recent violence by the Syrian army and security services in Hama has provoked the most serious condemnations from the Turkish leadership to date. On Wednesday, Turkish Deputy Prime Minister Arinc Bulent said, those responsible for Hama “can’t be our friend. They are making a big mistake.” Such statements show that the Turks might have reached the end of their patience. It is time for the Turks to go to the next level — impose economic sanctions on Syria. The United States can work through its diplomatic channels to convince the Turks that it is time to do so. In the words of the U.S. ambassador to Syria, Robert Ford, “their [Turkish] sanctions would bite.” So far, Turkey has been reluctant to consider sanctions on Syria for two reasons: pressure from its own business community which is worried about its investments in Syria and the government’s concern that deteriorating economic conditions and increased violence might prompt large numbers of Syrians, including Syrian Kurds, to seek refuge on the Turkish side of the border, a repeat of the influx of Iraqi Kurds into Turkey during the 1991 Gulf War.
Third, targeted sanctions should include a asset freezes and travel bans by the United States and the European Union on the Assad regime’s business partners who are leveraging their financial assets in assisting the regime to perpetuate violence against civilian protesters. Such expanded sanctions might incentivize enough of them to shift their financial support away from Assad. The decision by the U.S. Treasury to freeze the assets of Syrian businessman Mohammad Hamsho and his businesses sends a strong message to the pro-Assad business elites. Foreign embassies in Damascus should also make it clear to them that they would be next on the list unless they stop bankrolling the regime violence. These business elites and their families like to travel. Many of them have homes in Dubai and Beirut and bank accounts in Europe, Lebanon, Turkey and the United Arab Emirates. They send their kids to schools in England to learn English, and perceive of themselves as cosmopolitan. Threats of sanctions would force them to conduct their own assessments of whether the costs associated with being an international pariah are worth the benefits incurred from supporting a regime that might be in its last throes.
Randa Slim is an adjunct research fellow at the National Security Studies Program at the New America Foundation and a scholar at the Middle East Institute. You can follow her commentary on Middle East affairs @rmslim.