Architectures of Unjust Enrichment in Syria

Overview of the Case Study on Cape Spear. Vessel information derived from Marine Traffic. Shipping route informed by Vesselfinder’s Route Planner

Tracking the Cape Spear

On 27 May 2011, the vessel  Cape Spear – operated by Japan Tobacco International’s Middle East distributor, IBCS Trading and Distribution Co. – illicitly shipped more than 10 million euros’ worth of cigarettes to Syria Duty Free via Latakia Port², bypassing international restrictions. Just four days earlier, the EU had imposed sanctions on individuals linked to the Assad regime³.

Syria Duty Free – the destination for the smuggled cigarettes – was owned by Rami Makhlouf, a billionaire and cousin of Bashar al-Assad, accused of financing regime violence during the 2011 uprising.  

Also among the cargo were cigarettes supplied directly to the Syrian state-run General Organisation of Tobacco⁴. Some of these were delivered free of charge, though the total value was just under EUR 500,000.

A Deeper Look at Syria’s Tobacco Trade

Latakia is renowned for producing high-quality tobacco and represents a primary source of income in these areas. This shipment therefore offers a lens on Syria’s socioeconomic landscape in relation to tobacco and raises key questions:

Why smuggle cigarettes into a country with a long-standing history of domestic tobacco production?

Why are illicit shipments of tobacco being sent to Syria, when it already imports tobacco through legitimate channels?

What role did state-affiliated entities play in enabling these activities?

Tobacco production has fluctuated in recent years due to a combination of factors including conflict, natural disasters and government policies. As sanctions are lifted⁵, the new government faces the challenge of regulating this key sector, crucial to both the economy and Syrian livelihoods.

Tobacco and Its Role in Syria

Syria’s tobacco industry is deeply tied to the country’s economy and culture, influencing key areas such as: domestic consumption, employment, and market fluctuations.

Latakia: the heart of Syria’s tobacco

Before the conflict, Syria had a robust tobacco industry, especially in Latakia. In 2018, the region accounted for 85% of national output⁶, making tobacco farming a major source of income in the area.

In the early 2000s, foreign companies began investing in Syria’s tobacco sector. In 2004, for example, Altadis opened a factory in Latakia, creating jobs and boosting exports⁷.

By that point, Syria was producing over 30% of the Middle East and North Africa’s tobacco leaves⁸, becoming a major supplier in the region. 

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Syria’s Official Tobacco Production (2005-2020)

However, the conflict impacted tobacco production. According to the Syria Report, output fell by nearly 60% by 2016¹⁰, as major tobacco plants in Aleppo and Damascus were destroyed. Latakia’s plant remained operational but overall production declined – as shown in the graph.

Rising costs

The broader collapse of the Syrian Pound worsened the situation as inflation accelerated.

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As a result, cigarette prices doubled in 2012 and rose by over 130% in August 2021¹². Retailers, facing limited government regulation, were reportedly selling cigarettes at up to three times the official price¹³.  

For those in besieged zones, prices were even higher. One kilo of tobacco that sold for around SYP 2,000 in regular markets could cost between SYP 150,000 to 200,000 in those zones¹⁴.

Militias were also known to distribute tobacco as a form of partial payment¹⁵, further entrenching the role of this material in Syria’s economy.  

Domestic demand

Despite declining local production and rising prices, domestic demand for tobacco didn’t waver. From 2012 to 2020, Syria imported approximately USD 1.8 billion worth of cigarettes¹⁶.

This sustained demand is reflected in Syria’s high smoking rates. In 2021, an estimated 58% of Syrians were regular smokers¹⁷.

Syria’s Official Cigarettes Imports (2005-2020)

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Recent Policy Decisions Concerning Tobacco

Government support for tobacco

Recognising its importance, the regime’s government classified tobacco as a strategic crop. Such crops received state support through subsidies, low-interest loans and procurement schemes¹⁹.  This recognition emphasises tobacco’s economic and political weight.

In January 2024, the purchase price for farmers’ tobacco crops was raised for the 2024-2025 season²⁰ to support domestic production. This policy has remained in place under the current government. Previous seasonal increases included²¹:

2023-2024: up to 38% increase, with prices ranging from SYP 7,300 to 10,500 per kilogram depending on quality

2022: prices ranged from SYP 5,300 to 8,000 per kilogram

Despite these adjustments, farmers reported that prices remain below the actual costs of production²², especially given high inflation rates.

Government subsidies therefore failed to cover these expenses. This is supported by the Syria Report, which states that the regime’s backing was limited even though most tobacco farmers belong to the politically loyal base²³.  

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Environmental impact

Satelite imagery showing the impact of the wildfires that destroyed great amounts of the farming fields and crops surrounding the GOT farm and warehouse in Al Qardahah in October 2020.

Environmental shocks have further strained the sector. Wildfires in 2020 damaged several hectares of tobacco fields and destroyed 1,500 tonnes of stockpiled tobacco in Latakia²⁶, further straining local supply and farmers’ incomes.  

Opportunities for shifts in production and trade

The lifting of US sanctions²⁷, particularly those targeting Latakia Port General Company, offers potential for renewed trade activity and could support domestic tobacco production. However, ongoing inflation²⁸ could continue to challenge the sector’s ability to sustain stable output. 

Additionally, a significant portion of the Latakia tobacco production has moved to Cyprus²⁹, highlighting challenges in rebuilding the domestic industry. While tobacco farming continues, this shift may reduce income for the local workforce and raises questions about the future use of land previously dedicated to these crops.

The industry’s recovery will depend on how effectively the current government navigates internal challenges and external trade opportunities in the coming years. 

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Insight into Assad regime’s corrupt practices 

General Organisation of Tobacco’s monopoly under Assad

Under Bashar al-Assad, the state-run General Organisation of Tobacco (GOT) monopolised Syria’s tobacco sector, from cultivation and production to imports and retail sales³¹.

As such, GOT became a highly profitable state-owned enterprise, closely tied to the Assad regime’s political and economic power.  

Despite the external pressures of sanctions and internal conflict, GOT maintained significant revenue in part due to rising cigarette prices.

In August 2020, GOT partnered with the Syrian Trading Establishment³² to become the exclusive seller of locally produced cigarettes. This arrangement:

reinforced GOT’s control over production and distribution;

kept profits from rising domestic demand within regime-affiliated structures.

GOT had establishments in Damascus, Aleppo and Latakia.  

Topographic Basemap of Syria, highlighting the mountainous region of Latakia (blue) and the headquarters of the General Organization of Tobacco in Aleppo, Latakia and Damascus (orange)
Map zooming into the Latakia region highlighting the landscape conditions of loamy and sandy soils plus southwest facing slopes indicating suitable tobacco farming conditions (blue). With three key infrastructures of the local tobacco industry from farm and factory to distribution centre (orange)

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The role of regime-affiliated figures

This monopoly enriched figures linked to the regime, particularly Rami Makhlouf, Bashar al-Assad’s cousin. Both Rami and his father, Mohammed Makhlouf, previously held leadership positions in GOT³⁴.

Map of Latakia city highlighting the Free Trade zones informed by Wikimapia (yellow) and the port based Syria Duty Free shop

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One of Rami Makhlouf’s key assets was Syria Duty Free³⁶, which operated in Syria’s free zones. The business generated legitimate foreign currency revenues and created channels for licit and illicit trade, benefitting from relaxed customs enforcements.

Even after Rami Makhlouf’s duty-free contracts were formally terminated in June 2020, the assets were transferred to his brother, Ihab Makhlouf, and Kuwaiti businessman, Abdul Hameed Dashti³⁷. This indicates the continued centrality of regime-linked individuals in managing lucrative sectors.  

Current free zone developments

In the post-Assad period all operating free zones, including Latakia Port, are now managed by the state³⁸; the General Authority for Land and Sea Borders oversees customs, border centres and investment activity³⁹.

Since the fall of the regime and the passing of Ihab Makhlouf, it is not yet clear who now holds the operating contracts for Syria’s duty-free markets.

Since the fall of the regime and amid unverified reports regarding Ihab Makhlouf’s fate, it is not yet clear who now holds the operating contracts for Syria’s duty-free markets.⁴⁰

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Case Study: Tobacco Smuggling Through Latakia Port

This case study examines the 2011 illicit shipment of over EUR 10 million in cigarettes through Latakia Port, despite EU sanctions targeting individuals within the Syrian regime. The operation was facilitated by IBCS Trading and Distribution Co., the Middle East distributor for Japan Tobacco International (JTI). The shipment circumvented sanctions imposed on regime figure Rami Makhlouf.

The methodology uses a qualitative approach, analysing primary sources such as government reports, trade records and international sanction lists to understand the mechanisms at play and the broader implications for Syria’s tobacco trade. 

14 December 2007

EU–JTI Cooperation Agreement

Key Finding⁴¹
JTI and EU agree to end sales to anyone involved in smuggling; OLAF & Member States to receive full cooperation and data. (p. 3)

Relevance & Cross-Links
Sets contractual anti-smuggling duty for JTI (Art. 5(9)(h), p. 15). Provides baseline to assess later violations. (see: EP Question E-009948/12)

Actors / Entities Involved
JTI, European Commission, OLAF

9 May 2011

Council Regulation (EU) No 442/2011

Key Finding⁴²⁴³⁴⁴⁴⁵
Established EU restrictive measures on Syria; Rami Makhlouf designated as a sanctioned person. (Annex II p.8)
Defines “funds” (Art. 1 (a)(vi), p.2)) and “economic resources” (Art. 1 (c), p.2)) and forbids making them available (Art. 4 §2, p.3).

Relevance & Cross-Links
Legal basis for sanctions breach: a bill of lading (see: 27/5/2011) is a document that proofs “funds”, addressed to Makhlouf’s Syria Duty Free shop, which is a “economic resource”.
Anchor for sanction context and later OLAF/EU investigation (see: EP Question E-009948/12)

Actors / Entities Involved
EU Council, Rami Makhlouf, Syria Duty Free Shops

27 May 2011

Invoice JTI addressed to GOT + Bill of Lading shipped to Syria Duty Free (Cyprus → Latakia)

Key Finding⁴⁶
Bill of Lading figure of 9 000 cases × 50 = 450 000 cartons aligns with OLAF figure (see: EP Question E-009948/12).
The invoice shows figure of 84 240 cases, containing 4.2 M cartons (9,36 times as much then OLAF figure)
Total shipment ≈ € 12.3 M, consigned to GOT and Syria Duty Free Shops.

Relevance & Cross-Links
Key physical evidence linking trade and sanctioned entities. Demonstrates potential sanctions violation (Art. 4 Reg 442/2011) and breach of JTI–EU cooperation duties.

Actors / Entities Involved
JTI, GOT, Syria Duty Free Shops, Rami Makhlouf

31 October 2012

Parliamentary Question E-009948/12

Key Finding⁴⁷
OLAF investigating JTI for possible harm to EU financial interests & breach of cooperation agreement (p. 1 Question); not competent for sanctions but forwarded info to EEAS (p.2 ASW)

Relevance & Cross-Links
Framework to connect smuggling evidence (see: documents 27/5/2011) with agreements and sanctions listed above.

Actors / Entities
OLAF, EEAS, JTI, EU Commission

15 May 2012

OFSI / EU Sanctions List Entry — General Organization of Tobacco

Key Finding⁴⁸
General Organization of Tobacco sanctioned by UK (then EU) for supporting the Syrian regime.

Relevance & Cross-Links
Confirms that both buyer (GOT) and consignee (Makhlouf) were under asset freeze.
Supports post-shipment illegality; responds to 2012 investigations.

Actors / Entities
GOT, UK HMT / EU Council

5_EU-listing-in-Council-Regulation_GOT_Page_1

5_EU-listing-in-Council-Regulation_GOT_Page_2

26 August 2020

Syria Report

Key Finding⁴⁹
Syria Duty Free transferred from Rami to Ihab Makhlouf (+ Abdul Hamid Dashti).

Relevance & Cross-Links
Shows continuity of sanctioned ownership despite formal transfer; potential circumvention.

Actors / Entities
Ihab Makhlouf, Rami Makhlouf, Abdul Hamid Dashti

6_syria-report_DFTransferred-from-Rami-to-Ihab-Makhlouf

8 December 2020

Open Sanctions

Key Finding⁵⁰
Ihab Makhlouf dies.

Relevance & Cross-Links
Impacts control of Duty Free and potential asset tracing, endpoint of current ownership chain.

Actors / Entities
Makhlouf family

6 March 2025

UK OFSI Consolidated List Update

Key Finding⁵¹
GOT removed from UK list (post-Brexit); EU sanctions still in force.

Relevance & Cross-Links
Raises open-market & compliance questions on post-sanction reintegration of the local tobacco industry

Actors / Entities
GOT, UK OFSI, EU Council

8_FinancialSanctionNoticeUK_Page_1-scaled

The hypothesis guiding this study is that the Syrian regime, through its control over Latakia Port and free zones, was able to effectively bypass international sanctions. This allowed regime-affiliated entities to profit from the illicit tobacco shipments, exposing the institutionalised nature of Syria’s tobacco trade.

Key findings:

Overlap of licit and illicit trade: The operation shows how official infrastructure –Latakia port and the free zones – facilitated illicit activity. This suggests that corruption was structurally embedded in a system that allowed sanctioned individuals to trade through state-controlled channels.

State monopoly: GOT operated as a state-controlled monopoly within the Assad regime. Instead of regulating the market, it is understood that it concentrated profits and control among regime-affiliated actors, such as the Makhlouf family.

Price inflation and regime profit: rising cigarette prices and production costs indicate that the regime prioritised profit over public welfare. The state-run GOT capitalised on increased demand, importing both legally and illicitly. This likely boosted regime revenue and deepened the divide between state-run interests and ordinary Syrians.

Taken together, we have strong reasons to believe that the 2011 smuggling operation was not an isolated event but rather a reflection of how Syria’s free zone infrastructures enabled both legitimate commerce and illicit trade. This ensured that profitable activity ultimately flowed through regime-controlled channels. Latakia Port exemplifies how ports and free zones are not always neutral spaces of exchange.

While the state and its affiliates likely profited from smuggled tobacco and rising prices, tobacco farmers faced inflation, compounded by inadequate subsidies. Meanwhile, the broader population struggled with soaring cigarette prices, highlighting the human cost of this system.

The tobacco sector, strategically important to the Syrian economy, therefore shows how political authority shaped the material conditions of ordinary Syrians by exploiting trade infrastructure for profit, often at the expense of the general population.

It also raises important questions moving forward:

Free zone control: With Latakia Port and other free zones now under state control, who now holds Syria’s duty-free contracts? Will the new government repeat past practices using these areas for profit?

Licit and illicit trade: How will the current government handle the overlap of licit and illicit trade at Latakia Port? Will they enforce stricter controls or continue to tolerate the structural ambiguities?

Tobacco crop policy: How will the government’s pricing and subsidy policies for tobacco as a ‘strategic crop’ affect Syrian tobacco farmers, particularly considering persistent inflation and previous patterns of partial state support?

Post-sanction trade dynamics: As US, UK and EU sanctions are lifted, to what extent will Syria’s tobacco industry reopen to international trade?

Asset opacity: The US Treasury indicated that Rami Makhlouf may be disassociating himself from his business to protect his wealth outside of Syria. Where are the assets he potentially profited from Syria’s tobacco industry now held and how might they be shielded in the post-Assad period?