How The Assad Regime Is Dealing With The Caesar Act Sanctions – Part II: Increasing Pressure On Syrian Citizens In Order To Fill State Coffers

Introduction

The Caesar Syria Civilian Protection Act of 2019, also known as the Caesar Act, which came into force on June 17, 2020, is U.S. legislation imposing sanctions on individuals and companies who finance the Syrian regime or conduct transactions with it, especially in the military and energy domains. Named after a former Syrian army photographer codenamed "Caesar" who smuggled tens of thousands of photographs out of the country documenting the torture and murder of prisoners in the regime's jails, the act also enables to sanction elements that extend construction or engineering services to the Syrian regime.[1] The act is meant to promote the goals of reaching a political solution to the Syria crisis consistent with UN Security Council Resolution 2254; holding war criminals to account; dismantling the Syrian regime's chemical weapons program and encouraging the regime to sever its relations with the Iranian militias.[2]

Since the Caesar Act came into force, the Assad regime has been acting to circumvent the sanctions and overcome their implications. Part I of this report reviewed its efforts to guarantee the ongoing supply of goods and commodities with the help of its allies, chief of them Russia, Iran and Hizbullah, who assist it by implementing joint economic agreements and by helping to smuggle petroleum products into the country.[3] The present report reviews another strategy used by the regime to fill the state coffers, namely by imposing exorbitant fees on Syrian citizens living inside and outside the country and by seizing the assets of wealthy Syrian businessmen.  

Collecting Fees From Syrian Citizens

In an attempt to alleviate the shortage of cash caused by the U.S. Caesar Act, over the last year the Syrian regime has taken a number of measures to extract extra funds from its citizens inside and outside the country, in order to minimize the effect of the sanctions and replenish its coffers, especially with foreign currency. The Syrian economic website Eqtesad.net reported that Syrians receiving transfers from relatives abroad would not be able to withdraw them in dollars from the Syrian banks, but only in Syrian pounds, according to the Central Bank's official exchange rate, which is much lower than the dollar's real market price. This means that the transfers lose over half their value when withdrawn from the bank, while the rest of the money goes into Syria's state coffers, to replenish its foreign currency reserves.[4] 

In addition, on July 8, 2020, Syrian Prime Minister Hussein 'Arnous mandated that Syrian citizens would have to pay a $100 fee upon entering the country.[5] Despite intense criticism of this measure in Syria, including from the government press, and despite pictures appearing in the media of Syrians stuck on the Lebanese border due to their inability to pay the fee,  the regime refused to reverse the decision.[6] On January 18, 2021 'Arnous said that it will be possible to revoke it when the economic situation improves and Syria's foreign currency reserves increase.[7] 

"Assad's Syria" collects $100 from every Syrian entering the state (Source: Syria.tv, September 11, 2020)

Syrians stuck on the Syria-Lebanon border (Source: Twitter.com/hadialbahra, September 4, 2020)

The regime also exploited the Covid-19 pandemic to increase its income. On July 22, 2020 the Syrian Health Minister announced that citizens leaving the country would be required to take a Covid test at a cost of $100.[8]  In addition, Lebanese nationals who had entered Syria in their private vehicles and were unable to leave after the border closed were required to pay a weekly fee of $55 for keeping their vehicles in the country, in accordance with the Syrian customs law.[9] A decree issued by President Assad on November 8, 2020 stated that soldiers in Syria's regular army who were medically unfit for combat could pay $3,000 to be exempted from service.[10]

Extracting Money From Syrians Living Abroad

Syrians living abroad are another important source of income for the Assad regime. In particular, the regime charges fees of thousands of dollars for exemption from military service. Elias Bitar, head of the Syrian army's Exemptions and Allowances Branch, announced recently that all Syrian citizens over 42 years of age, inside and outside the country, who had not completed their military service must pay an exemption fee, otherwise their money and assets, or those of their family, would be seized.[11]

As stated, on November 8, 2020, Assad issued a decree, which came into force on February 1, 2021, adjusting the criteria for receiving exemption from military service. According to the decree, Syrians who have been living abroad between one year and two must pay an exemption fee of $10,000, and the fee for those who have been living abroad for over two years, three years and four years is $9,000, $8,000 and $7,000, respectively.[12] In addition, since 2017, the cost of issuing or renewing a passport at the Syrian representations abroad has been $300 for the regular procedure and $800 for an expedited procedure.[13] This fee is one of the highest in the world – despite the low ranking of the Syrian passport  (which grants access to only 29 other countries) – and was considered, even before the passing of the Caesar Act, as one of the regime's methods of squeezing money from its citizens.[14]  On November 16, 2020, Syrian Interior Minister Muhammad Rahmoun revealed that these passport fees had earned the regime over $21.5 million since the beginning of that year.[15]

In addition, when the Caesar Act came into force, Syrian representations across Europe called on Syrians living there to make donations "in dollars or euros" for needy Syrians, in light of the economic crisis in the country. Bassem Yousef, a Syrian journalist living in Europe, regarded this as a measure for circumventing the Caesar Act in the guise of humanitarian action. He added that the representations were asking for the money in cash, rather than bank transfers, to facilitate their transfer to the regime despite the sanctions.[16]

Seizing The Funds And Assets Of Prominent Syrian Tycoons

To gain funds, the regime is also targeting prominent Syrian businesspeople, including ones previously close  to the regime, on the pretext of fighting corruption. Some reports claim that "the fight against corruption" is led by the Financial and Administrative Committee, chaired by President Assad's wife Asmaa Al-Assad.[17] The most prominent figure whose funds and assets have been seized is Assad's cousin Rami Makhlouf, who in the past has been described as controlling Syria's economy.  The regime began seizing his assets even before the Caesar Act came into force. On April 27, 2020 his cellular company Syriatel was forced to pay back state loans worth billions of Syrian pounds,[18] and on May 19 the Syrian government ordered the seizure of assets belonging to him and to his wife and children.[19]

On September 3, 2020, it was reported that the regime had ordered the dissolution of the Emmar Motors company, headed by tycoon Samer Al-Foz. According to the opposition website All4syria.com this is a preliminary step before seizing all of Al-Foz's companies.[20]  On September 25, the regime seized the funds of businessman Hani 'Azzouz,[21]  and on September 28 those of businessman Saeb Al-Nahhas.[22] On October 30 it was reported that the regime had seized a steelworks owned by Muhammad Hamsho.[23] All of these are businessmen close to the regime.

Establishing Private Companies For Laundering Funds

Yet another method used by the Syrian regime to avoid the sanctions is through private companies owned by its associates inside and outside Syria, established specifically in order to launder funds. In fact, the regime has been using this method since the 1970s.[24] Recent reports indicate that, in the past few years, the regime has licensed nine new private Syrian airlines. According to the coordinator of the Caesar Act Follow-up Team, 'Abd Al-Majid Barakat, these companies were established as an alternative to Syrian airlines that are under U.S. sanctions.[25] Economic analyst Khalid Tarkawi stated that these airlines, owned by regime associates, can be compared to Iranian airlines owned by the Islamic Revolutionary Guards Corps, which evade oversight and acquire foreign capital for the Iranian regime.[26]

* O. Peri is a research fellow at MEMRI.