The AIM-listed oil explorer Gulfsands Petroleum sought to defend itself yesterday amid mounting criticism of its links to President Bashar al-Assad's cousin Rami Makhlouf, who by some estimates controls more than half of Syria's economy.
The Syrian regime has responded to protests against Assad's rule with a brutal crackdown that has resulted in the deaths of thousands of the country's people.
The company, whose shares have fallen by more than 50 per cent since the start of the year, insisted in a Stock Exchange statement that it was "fully compliant with all applicable sanctions [on Syria] and is committed to continuing compliance with any sanctions that may apply from time to time".
But Gulfsands confirmed that it has had multiple ties to Mr Makhlouf and companies owned by him and Makhlouf family members since it entered Syria in 2000.
"Since the time of its first entry into Syria, the group has had constructive commercial relationships with various Makhlouf interests," Gulfsands said. "All such relationships have been conducted on arms-length commercial terms, have been properly documented and have been disclosed as required by pertinent laws and regulations, including the AIM rules of the London Stock Exchange."
The company also said it had suspended payments to Makhlouf family interests and voting, dividend and transfer rights in its shares held by Al-Mashrek, a Makhlouf investment company which holds 5.75 per cent of Gulfsands. But even "an arm's-length" relationship with the Makhlouf family is highly controversial. The US Treasury has designated Mr Makhlouf as a "regime insider", saying that he "improperly benefits from and aids the public corruption of Syrian regime officials".
The designation was made under the US Executive Order 13460, which targets "individuals and entities determined to be responsible for or who have benefited from the public corruption of senior officials of the Syrian regime".
The US has banned its citizens from dong business with him and frozen US assets. In addition to oil, the Makhlouf family's business interests include real estate, telecommunications and retail.
Syria is also under EU sanctions, although pro-democracy campaigners argue they do not go far enough. Avaaz, the pro-democracy protest group, wants sanctions on Syrian oil exports to the EU in an attempt to "dry up funding sources to the Syrian security forces who are killing and torturing the Syrian people".
Gulfsands also has assets in the US and in Tunisia. But, of its production of 14,000 barrels of oil a day, the majority, or 12,000 barrels, come from Syria.
In its statement yesterday documenting its links to the Makhlouf family, Gulfsands said that Al-Mashrek acquired its shares in August 2007. Gulfsands also rents offices in Damascus from a company owned by Makhlouf family interests. Cham Holding, a company in which Al-Mashrek is reported to be a material shareholder, rents space in the same building. Various payments were also made to Ramak, another Makhlouf family company, through Gulfsands joint ventures related to Block 26, Syria's biggest oil-producing area where Gulfsands now extracts oil. More than $1m was paid over a number of years for "services, which are all in the ordinary course of business for an (oil) exploration and production venture operating in a foreign jurisdiction".Reuse content