Syria Sanctions: a deeper look at the Caesar Act designations

Syria Sanctions: a deeper look at the Caesar Act designations

Plans for Marota City, Damascus (c) Marota City

The Caesar Syria Civilian Protection Act, often referred to simply as the Caesar Act, officially entered into force on June 17, 2020. The law, which provides the American government with a legal basis to impose sanctions not only on Syrian government entities, but also on third-party individuals and entities providing direct or indirect assistance to the government, has sparked widespread debate. Many have worried that the Act has a disproportionate and unjust impact on the Syrian people, a subject of particular concern in light of the COVID-19 pandemic and the ongoing economic crisis, while some have questioned whether secondary, “extraterritorial” sanctions are in fact legal under international law.

To date, 13 individuals and entities have been designated pursuant to the Caesar Act in two rounds of sanctions action. So far, these designations have focused almost exclusively on luxury development projects, which should largely allay concerns that Caesar designations will result in negative repercussions for civilians, though concerns regarding sanctions falling under other legal authorities persist. The focus on luxury reconstruction projects has the potential to delay or halt projects that are not only lining the pockets of some of Syria’s most corrupt leaders, but also threatening civilians’ property rights.

This article aims to contribute to the important discussions surrounding the Caesar Act by taking a deeper look at the 13 designations that have been levied under the Act in the two months since its entry into force.

On June 17, the same day the Act entered into force, Washington announced the designation of 39 individuals and entities to the List of Specially Designated Nationals and Blocked Persons (SDN List). Of the 39 designations on June 17, the majority – twenty-four – were sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which targeted those “…who are actively supporting the corrupt reconstruction efforts of Syrian President Bashar al-Assad.” The remaining 15 persons were sanctioned by the State Department pursuant to Section 2 of Executive Order (“EO”) 13894, which focuses on “…those obstructing, disrupting, or preventing a ceasefire or a political solution to the Syrian conflict.”

Contrary to some media reports, only nine of the 24 OFAC designations were sanctioned pursuant to the Caesar Act, while the others were sanctioned under the legal authority of EO 13894.

On July 29, an additional 14 further designations were made in relation to Syria, though only four were designated pursuant to the Caesar Act for their “significant support” to the Government of Syria. These four were part of 10 designations by OFAC, the remainder of which were designated solely pursuant to EO 13582, while the State Department designated another four persons pursuant to Section 2 of EO 13894.

Specially Designated Nationals and Blocked Persons: a who’s who of the individuals and entities sanctioned under the Caesar Act

The nine designations made by OFAC pursuant to the Caesar Act on the date of its entry into force included three individuals and six entities.

June 17, 2020 Designations under the Caesar Act
  1. Nazir Ahmad JamalEddine
    1. Apex Development and Projects LLC
    2. Tamayoz LLC
  2. Nader Kalai
  3. Khaled Al-Zubaidi
  4. Ramak Development and Humanitarian Projects LLC
  5. Al-Amar One-Person LLC
  6. Timeet Trading LLC
  7. Wings Private JSC

Nazir Ahmad JamalEddine cofounded Apex Development and Projects LLC in 2018 with his father, Ahmad JamalEddine, and is the majority shareholder controlling a 90% stake. Apex recently entered into a $34.8 million joint venture for the construction of the government-backed luxury residential and commercial development project, Marota City. JamalEddine was designated under the Caesar Act for benefiting from and supporting the Syrian government via his participation in this project. Previously sanctioned by the EU on the same basis, he reportedly formed a new firm, Trillium Company, in October 2019 in an attempt to evade sanctions and continue his participation in government-led construction and contracting.

JamalEddine is also linked to Tamayoz LLC. He has been an investor in the Bunyan Damascus Private Joint Stock Company since March 2018, controlling a 40% share via Tamayoz and Apex. Bunyan Damascus Private Joint Stock Company is similarly involved with Marota City and Tamayoz LLC has consequently been sanctioned pursuant to the Caesar Act for “knowingly providing significant financial, material, or technological support to, or knowingly engaging in a significant transaction with, the Government of Syria (including any entity owned or controlled by the Government of Syria) or a senior political figure of the Government of Syria.”

Nader Kalai, described by OFAC as a “regime insider with ties to Assad”, has a number of business ventures in Syria, including the Grand Town Tourist City development. Kalai is an associate of Rami Makhlouf and previously worked as a top executive at Syriatel, and along with his wife and business partner Miriam al-Hajj Hussein, has several links to Lebanon-based trading firms and Canadian companies. Firms under Kalai’s control allegedly operate as front companies for Makhlouf. Kalai has been sanctioned under the Caesar Act “for knowingly providing significant financial, material, or technological support to, or knowingly engaging in a significant transaction with, the Government of Syria” or a senior political figure of the Government. His targeting is expected to have implications for Makhlouf’s Lebanon network.

Kalai, a Syrian national with permanent resident status in Canada, recently faced charges of violating Canadian sanctions on Syria by making a payment of 15 million Syrian pounds to a company named Syrialink in November 2013. His trial in the Halifax Supreme Court was originally scheduled for May 2020 but was rescheduled due to COVID-19 and is set to commence on August 18th 2020. Kalai was also accused of violating EU sanctions on Syria in January 2019 and was subject to an asset freeze and travel ban due to his significant ongoing investments in the Syrian construction industry.

Khaled Al-Zubaidi is another Syrian businessman heavily involved in the Syrian construction industry. He operates a company with Kalai named Zubaidi and Qalei LLC and is similarly involved with the development of the Grand Town Tourist City, a government-led luxury development near Damascus airport. The government has granted Zubaidi and Qalei LLC a 45-year agreement to construct Grand Town in return for 19-21 percent of its revenue. Additionally, Kalai and Al-Zubaidi operate the luxurious five-star Ebla Hotel, which will also be part of the Grand Town complex and will therefore benefit from the government’s investment in the project.

Ramak Development and Humanitarian Projects LLC is also linked to Rami Makhlouf. In a post on May 28, Mr Makhlouf declared the transfer of his bank and insurance company shares into Ramak, which is “99 percent owned by him” according to the Middle East Institute. Makhlouf transferred his shares to Ramak after the Syrian government ordered his assets seized and a travel ban imposed on him in relation to Syriatel’s outstanding taxes.

Al-Amar One-Person LLC is owned by Ihab Makhlouf, Rami’s brother. Until recently, Ihab had also served at Syriatel, Rami Makhlouf’s company, but in May he stepped down, citing his brother’s public falling out with Assad, and confirming his loyalty to the president.

Timet Trading and Wings Private Company are two of the companies participating in the Marota City venture and have been sanctioned pursuant to the Caesar Act on this basis. Both are controlled to some degree by Rami Makhlouf.

July 29, 2020 Designations under the Caesar Act
  1. Wassim Anwar Al-Qattan
    1. Muruj Cham Investment and Tourism Group
    2. Adam Trading and Investment LLC
    3. Intersection LLC

 Wassim Anwar Al-Qattan is a Syrian businessman and the former President of Damascus Rural Chamber of Commerce. According to Treasury, Al-Qattan holds several contracts with the Syrian government to develop government-owned shopping malls and hotel properties in Damascus. The Syrian government has in fact awarded “almost all of the recent major real estate projects” in Damascus to Al-Qattan, excluding Marota City. His company Muruj Cham Investment and Tourism Group, also sanctioned under the Caesar Act, won an auction to re-invest in Qasioun mall in July 2017, after Al-Qattan agreed to pay the Syrian government 1.2 billion Syrian pounds annually. Muruj Cham Investment and Tourism Group has also paid the Syrian government 2.25 billion Syrian pounds a year since signing a contract with the Ministry of Tourism in June 2018 to invest in the Al-Jalaa Hotel in Damascus.

Al-Qattan also owns 50 percent of Adam Trading and Investment LLC. This company acquired a contract from the Damascus governorate in August 2018 to develop and manage the Massa Plaza Mall in Damascus.

Finally, Intersection LLC – another company owned by Al-Qattan – acquired a 48-year contract in January 2019 to invest in the Yalbagha Complex in central Damascus. The complex is owned by the Syrian Ministry of Awqaf (Religious Endowments) and Intersection LLC was awarded the bid in order to convert the property into a tourist commercial complex. 

Conclusion

Designations to date under the Caesar Act show that OFAC and the State Department are using the law as a targeted tool, largely aimed at halting luxury reconstruction projects. Such projects are dangerous on two fronts. First, they are being used as a tool to direct government funds to a small cadre of Assad loyalists who have long profited off of government corruption. The repetition of a few family names, including Makhlouf, among the designees makes this point clear. Additionally, the development projects targeted, such as the infamous Marota City, have been made possible through the Assad government’s expropriation and destruction of civilians’ private property. Such projects have not only robbed civilians of their property rights, but are being used to reshape the demographics of Syria’s cities, replacing neighborhoods historically aligned with the opposition into Assad strongholds, and potentially blocking the return of countless refugees and IDPs.

The hardships suffered by ordinary Syrians, including shortages of food, fuel and medical aid are of increasing concern. But the Syrian government’s attribution of these problems to western sanctions are misplaced. Sanctions regimes include exceptions for humanitarian aid and while the bureaucratic functioning of those exceptions require some adjustments, the Syrian government has exacerbated shortages by diverting aid and limiting cross-border humanitarian access.

To date, all designees under the Caesar Act have been Syrian nationals, however many non-Syrians are integral to funding these projects, including, nationals of China, Russia, and Lebanon. If the U.S. government truly wants to halt attempts at luxury reconstruction, it should utilize the Caesar Act to target all those who are supporting this process, regardless of nationality. While sanctions targeting such development projects are no substitute for a comprehensive property restitution program as part of a future peace process, slowing or halting such developments is an important first step in addressing the underlying violations.

For more information or to provide feedback, please contact SJAC at [email protected] and follow us on Facebook and Twitter. Subscribe to SJAC’s newsletter for updates on our work.

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