Enab Baladi – Jana al-Issa

The Guardian newspaper, on 22 March, uncovered in an exclusive report how the pro-Syrian regime businessmen use a maze of shell companies to avoid sanctions on Assad regime’s elite.

The British newspaper said not-publicly-available documents showed “clear links between the owners of the new shell companies, Bashar al-Assad, and Syria’s economically powerful elite, including individuals under sanction.”

The documents detail at least three companies established in Syria on the same day with the explicit purpose of operating as a shell to buy shares and manage other companies.

Last October, Syria’s Economy Minister Mohammad Samer al-Khalil said that “evading sanctions has become a Syrian craft” and called on foreign investors reluctant to join the market because of sanctions “not to appear under their true names in the local market.”

In this report, Enab Baladi will focus on the domestic targets of the regime’s shell companies, away from the apparent goal of evading sanctions, like avoiding public accountability, reducing the strength of commercial opponents, and hiding graft.

Three companies in one day with identical details

Shell companies are defined as regularly registered companies with capital and financial assets of little value that have neither a headquarters nor a specific address, but they may have a mailbox that research shows are shared with several other additional companies.

Each of the new shell companies, established in October 2021 – Trappist, Generous, and Super Brandy – is majority-owned by an individual linked to the Syrian regime by an intricate web of connections, according to The Guardian.

Karam Shaar, Syria program manager at the Observatory of Political and Economic Networks, one of the co-writers of The Guardian report, in cooperation with journalist Tessa Fox, said in a live broadcast on his personal Facebook page on 23 March that what necessitated him to work on the investigation was an explicit announcement of the establishment of three companies with different names with one purpose, one capital, and on the same day, all owned by the same people, but with different shareholding ratios.

“One of the three owners of the new shell companies is Ali Najib Ibrahim, who is a co-owner of Tele Space, a firm that part-owns Wafa JSC, which was licensed in early 2022 to become the country’s third telecom operator,” The Guardian reported.

Adding that “Another part-owner of Wafa JSC is Yasar Hussein Ibrahim (also known as Yasser Hussein Ibrahim), an adviser to Assad and head of the economic and financial office of the presidency, and under sanctions imposed by the US and the UK.

“The other two figures who own the new shell companies are Rana Ahmad Khalil, 20, and Rita Ahmad Khalil, 21. “They are the daughters of Ahmad Khalil Khalil, who half owns Tele Space, in partnership with Ali Najib Ibrahim,” The Guardian revealed.

Syrian shell companies as refuge to investors

The invitation of the Minister of Economy, Mohammad Samer al-Khalil, to investors (including non-Syrians) to invest in Syria while reassuring them that they can circumvent Western sanctions raised questions about blackmailing the regime to protect them from sanctions, especially if their investments do not fully benefit it.

However, Karam Shaar told Enab Baladi that the regime will not leave this tool to the monopoly of businessmen close to it.

“In fact, it will allow other investors to benefit from it because Syrian law legitimizes its existence, as it is possible to create several companies that own some of them according to the law,” Shaar says.

But in the case of sanctions evasion, the idea relies on the functioning of a corporate structure that makes it difficult for Western policymakers to fine-tune the issue of sanctions, according to Shaar.

Wael al-Alwani, the technical director of the Observatory of Political and Economic Networks, believes that the official announcement of this tool aims to persuade investors and encourage them to bring their money into Syria and ensure that they will not be subjected to sanctions.

To avoid public accountability

Shaar, a Ph.D. holder in Economics, believes that the main reason for establishing shell companies in areas controlled by the Syrian regime is to allow real companies to continue operating under sanctions,

But this is not the only reason, as front companies offer many “illegal advantages” that entrepreneurs try to take advantage of.

Businessmen close to the regime see the establishment of these companies as a protection for them from being held accountable by the Syrians, as the people have the right to know the true owner of the largest companies in the country.

He added that the Syrians are trying to this day, for example, to find out the owner of the share, which is estimated at more than 80 percent of the shares of the Syriatel telecom company.

Al-Alwani, in turn, considers that the aim of concealing the ownership of the ultimate beneficiary is that he may be a businessman close to the Assad regime, but he does not like to appear as the owner of a new company to be added to dozens of others, so he hides his identity in this case, for fear of his name appearing in the media.

“Which may expose him to popular or public resentment, or fear of being criticized that may come from the hardcore of the regime’s supporters,” he says.

Reducing the strength of commercial opponents

The shell company has the right to buy and sell shares of other companies and to conduct business in these companies on its behalf, which is considered as a restructuring of the economy, according to the technical director of the Observatory of Political and Economic Networks, Wael al-Alwani.

Al-Alwani says this goal reveals the Syrian regime’s desire to reduce the influence of some businessmen and to seize their wealth at the “lowest price.”

Either through new men chosen by the regime who own real companies or through a shell company, in a similar scenario to what the magnate Samer Foz did with businessman Imad Ghriwati by exercising restrictions on his business.

To hide graft, money laundering

Some businessmen may resort to establishing shell companies, despite owning well-known companies, with the aim of concealing wealth and illegitimate gain, which are collected from corruption or fraud and activities through illegal trade.

In this case, companies are also used as a cover to build up behind them and pass the illegally collected funds, and in the event that it is exposed, it is nothing but a newly emerging company, not like the largest companies owned by the same businessmen, according to al-Alwani.

Shell companies may also be used for money laundering obtained through illegal deals to legitimize its presence in the financial system.

Some businessmen founded shell companies to evade taxes, as they are allowed to carry out carefully studied and limited activities and deals, and with no employees in them, it is easy to falsify financial statements or profitable inputs, according to the Observatory of Political and Economic Networks.

Purpose is private, Target is not clear

The number of companies officially registered with the Ministry of Internal Trade in the regime’s government, with a very “small” capital, witnessed an increase in their spread during the last period, as the ministry announced, in mid-January, that it had registered, within ten days only, about 16 companies, the majority of which were “limited liability” companies, with a capital not exceeding five million Syrian pounds.

Professor Ibrahim al-Uddah, of the Faculty of Economics at Damascus University, confirmed to the pro-regime al-Watan newspaper on 17 January the increase in the number of shell companies of a “very small” capital that is not enough to buy a door for the company, as he described it.

Al-Uddah added that it is a phenomenon that exists in Syria, with the aim of establishing companies for a limited period and for limited purposes.

“It is unhealthy for the economy, and the goal of it may not be innocent and for special reasons, only who founded them knows,” he concluded.