The Turkish flag above the AK Energy headquarters in the city of Al-Bab in the Aleppo countryside (Exclusive Syria Indicator)
Translated by: Nabil Nano
The investigation unveils economic infractions within the electricity sector in northern Syria, where the Interim Government and the National Army are in control. These infractions stem from intricate and opaque investment agreements favoring firms licensed by Turkey, ultimately channeling profits to foreign or Syrian individuals connected to them.
These investment contracts appear to operate without adequate oversight and regulatory scrutiny, operating in a clandestine manner. An in-depth analysis of these companies and their proprietors reveals a concerning lack of financial transparency, potentially influenced by foreign (Turkish) entities in decision-making and resource management.
Furthermore, this convoluted web of interests has resulted in situations where a single company benefits from services provided by a faction of the “National Army,” some of whose members and leaders face US sanctions.
AK Energy Company: A Turkish and Syrian Alliance
Between 2018 and 2019, local councils in northern Aleppo’s countryside entered into contracts with AK Energy and STE Energi to import electricity from a Turkish source. Described as the first of its kind in the region on its official website, “AK Energy” holds the lion’s share in delivering electricity to the northeastern Aleppo countryside through an agreement titled “Generation, Distribution, and Delivery of Electrical Energy” with local councils.
Established on June 1, 2017, AK Energy adheres to Turkish Electricity Sector Regulation and Privatization Law, holding License No. “9123455” issued by the Chamber of Industry and Commerce in Gaziantep, Turkey. The website doesn’t reference any other licenses in a different Turkish state.
The official “Commercial Registry Gazette” in Turkey confirms the company’s license in the southern state of Kilis with its full name as “AK ENERGY ELEKTRİK ENERJİSİ TEDARİK TOPTAN SATIŞ LİMİTED ŞİRKETİ,” translated as “AK ENERGY Company for Wholesale Electrical Energy Supply, Import and Export Ltd,” bearing registration number “4599.” This information was published in a newspaper issued on February 14, 2018, as corroborated by the Turkish Union of Chambers and Commodity Exchanges government website.
In September 2021, the company operating in northern Syria submitted a request to the Turkish Electricity Market Regulatory Authority (EPDK) to amend its license, allowing for a maximum capacity of 60 megawatts to export electrical energy to Syria, as announced on the authority’s official website.
Ownership of “AK Energy” is attributed to Syrian Khalil Ibrahim, holding a 31% stake, while Turkish citizens own the remaining shares. Specifically, Recep Chopin has a 20% stake, Hasan Tatar holds 25%, and Yasin Yucel possesses 24%, according to a report on the Turkish “Paramevzu” website. However, an employee within the company’s management, when interviewed by the investigation team, questioned this percentage distribution, emphasizing that these figures are “approximate and nothing more.”
Through the investigation team’s scrutiny of Khalil Ibrahim’s social media accounts, it became apparent that he oversees numerous investment projects in the region. In addition to his involvement with AK Energy and his role on its board, he manages and possesses the Azaz National Hospital.
Khalil Ibrahim, a pharmacy specialist, also holds investments in the “Al-Resala” Foundation, described as “a non-governmental, non-profit, non-political humanitarian organization” dedicated to collecting donations to support relief efforts in displaced persons camps within Syria. The foundation is based in the Turkish state of Kilis and is managed by his brother, Mazen Ibrahim, as confirmed by an administrative employee. For security reasons, Syria Indicator has refrained from disclosing his name.
In an attempt to identify other stakeholders in AK Energy, the investigation team conducted research on social media platforms but was unable to definitively ascertain their identities. However, it was discovered that two current managerial employees at AK Energy had previously worked for the “Al-Resala” organization, as evidenced by their profiles on the “LinkedIn” website. This observation lends credence to the assertion that the ownership of “Al-Resala” is connected to Khalil Ibrahim, as suggested by the employee’s statements.
Sheltered by “Northern Storm”
Evidence from Khalil Ibrahim’s personal Facebook page demonstrates his close ties to the Turkish government. He enjoys substantial support from Turkey, with military convoys from the Northern Storm Brigade accompanying him during his visits to Syria. These convoys not only provide protection but also safeguard the company’s headquarters. The Northern Storm Brigade operates under the umbrella of the “Third Corps” within the Syrian National Army, which is supported by Turkey. An employee within the company’s management confirmed this connection to the investigative team.
The link between the Northern Storm Brigade and the company is further solidified by instances where brigade commander Saleh Amouri engaged with protesters in Azaz, Aleppo’s countryside, to address pricing concerns, even issuing threats to cut off electricity if the protests persisted. To verify this information, Syria Indicator sought answers from the Northern Storm Brigade’s commander, Saleh Amouri, but as of the publication of this investigation, no response has been received.
The commander of the Northern Storm Brigade intervenes to stop the demonstrations against AK Energy – the city of Azaz in the countryside of Aleppo (Source: Azaz News Network – Telegram – screenshot)
On August 17, 2023, the US Treasury Department imposed sanctions on individuals and entities associated with the National Army, to which the Northern Storm brigade belongs. This includes the Sultan Suleiman Shah division and its leader Muhammad Al-Jassim (Abu Amsha), an Istanbul-based car company affiliated with him, and his brother Walid Al-Jassem, along with the Al-Hamza Division and its leader Saif Bulad (Abu Bakr) in northern Syria. These sanctions were applied due to their involvement in or complicity with grave human rights violations in the Afrin region of northern Aleppo.
In light of these developments, questions were directed to Khalil Ibrahim to verify the authenticity of these claims, his closeness to and support from the Turkish government, and his security coordination with the Northern Storm Brigade. However, he has not provided any clarification in response.
Dispute Over the Name “AK Energy”
AK Energy is embroiled in a legal dispute with the Turkish company AKENERJİ, which shares a similar brand name. AKENERJİ began as part of the Akkök group of companies in 1989 and has operated independently in the electricity generation sector since 2005. AKENERJİ has initiated legal proceedings against the company operating in northern Syria, seeking a temporary judicial order to detect, prevent, and halt trademark infringement and unfair competition. This legal action aims to cancel the registration of the trade name and prevent its transfer to third parties.
The Turkish company conveyed to the Public Disclosure Platform (KAP), an electronic system for public notifications, that it has no activity in the region and no connection to the company operating in northern Syria. If the trade name registration for “AK Energy” is canceled, the energy supply license (“Tedarik Lisansı”) granted by the Turkish Energy Market Regulatory Authority could be suspended for up to 20 years.
STE Energi Following in AK Energy’s Footsteps
Currently, AK Energy and STE Energi jointly operate in the energy and electricity market of northern Aleppo’s countryside. STE Energi formally began its operations in northern Syria by signing a contract with the Soran local council on April 6, 2019, shifting its focus from private generators to a more organized approach.
“STE” is an abbreviation of the company’s full name, “STE Elektrik Enerjisi Tedarik Toptan Satış İthalat İhracat Limited Şirketi,” which translates to “Electrical Energy Wholesale Import and Export Company Limited.” The company holds an energy supply license (“Tedarik Lisansı”) and exports electricity to northern Syria through an electricity transmission line connecting the city of Reyhanli in Hatay Province, southern Turkey, to the city of Afrin in northern Aleppo, Syria.
On July 16, 2021, the Turkish Energy Market Regulatory Authority announced that STE had submitted a request to increase the electricity export to Syria from 20 megawatts to 30 megawatts. According to the Turkish website “Enerjigunlugu,” on December 15, 2019, the Turkish Energy Market Regulatory Authority granted STE a 20-year supply license.
Key figures in the company include entrepreneurs and owners of internet and contracting firms, namely Muayyad Ali Hamidi, Diya Mustafa Qaddour, and Mahmoud Ahmed Qaddour, all residing in Turkey.
Unregulated Pricing and Profits
Protests have repeatedly erupted in the cities of northern and eastern Aleppo countryside due to concerns over electricity subscription pricing and frequent power outages. Local councils contracted with AK Energy have rejected the pricing policies, with the most recent protest occurring in Ras al-Ayn. The decision by AK Energy to unilaterally raise prices in violation of the signed contracts prompted this statement from the local council.
Syria Indicator sought answers from AK Energy’s Director of Relations, Muhammad Eid al-Madani, regarding the company’s activities in northern Syria, pricing controls, and its investors. Al-Madani responded, “The company determines and adjusts prices periodically, as it is a profit-oriented enterprise belonging to its owners.” He emphasized that “profits benefit those who have invested capital in the company.”
Attempts were made to contact the Turkish authority responsible for licensing AK Energy and making decisions related to electricity subscription pricing in northern Syria. These inquiries aimed to understand the role of the governor responsible for the northeastern Aleppo countryside in overseeing the electricity contract in Turkey and regulating and controlling companies’ investments in the region. However, as of the publication of this investigation, none of these inquiries have received a response.
“Prices fluctuate over time, and people often perceive these changes as unpredictable. These price adjustments are frequently exaggerated, with significant disparities between the rates here and the source in Turkey. It’s essential to consider the company’s operational costs and network maintenance. However, this doesn’t justify the steep price hikes,” explained activist Omar Nasser (32 years old, using a pseudonym for security reasons) in conversation with Syria Indicator. He further highlighted that each Turkish state operates under its own tariff system for electricity subscriptions, overseen by multiple companies.
In principle, subscribers rely on prepaid electronic meters, operating within a mechanism chosen by the two companies. These cards can only be refilled at the company’s headquarters during official working hours, and subscribers must pay a 200 Turkish lira subscription fee in addition to the meter’s price.
Electricity prices per kilowatt for both residential and commercial subscriptions experience continuous fluctuations, sometimes showing a slight decrease. There is also variation among different companies, often without clear explanations. This has led to increasing social pressure on local councils and the two electricity providers.
In April, the Azaz and Al-Bab councils in Aleppo’s countryside issued a circular to AK Energy, urging the company to revise its pricing or reconsider the contracts between the parties. The circular presented two options to the company: the first proposed a standardized subscription price of 2.63 Turkish liras per kilowatt for all categories and segments, while the second suggested rates of 2.37 Turkish liras for residential and government institution subscriptions, 3.76 liras for commercial subscriptions, and 4 liras for industrial subscriptions.
Monopoly and Exploitation in Conflict Conditions
According to employees and activists interviewed during the investigation, the contracts signed with “AK Energy” and “STE Energi” are distorted and monopolistic. Competition in this sector has been stifled, making the region dependent on these two companies and the policies they impose through a “fait accompli” approach. Public affairs activist Omar Nasser, operating in Al-Bab, confirmed this situation.
One clear indicator of the encroachment of these two companies is their refusal to pay the required share of profits to local councils. Lawyer Saeed Akash, the director of the council’s legal office, confirmed this issue to Syria Indicator. The council should receive 8.5 percent of the company’s profits, a percentage that was recently raised from no more than 4 percent.
Both companies operate in the private sector and have legal status in Turkey, primarily engaging in commercial activities by purchasing electricity from Turkish companies and supplying the network in northern Syria. The ownership of these companies is divided between Syrians and Turks, with their primary objective being profit.
Syrian economic researcher Manaf Qoman, author of the research paper “Electricity Contracts in Opposition Areas: Challenges and Solutions,” believes that these contracts exhibit signs of an exploitative monopoly, taking advantage of the local community’s need for a service and selling it at a high cost. Qoman emphasized the responsibility of local councils to thoroughly study contracts and enact legislation that ensures the best contract for the local economy at an appropriate price, rather than simply leasing services, as these contracts often favor the company’s rights over those of the local council.
Can Contracts be Canceled?
Local councils’ demand to reduce the electricity subscription price per kilowatt is rooted in their commitment to a “basic tariff” set by the source, as explained by Saeed Akash, the legal office director of the Azaz city council. This tariff includes waste percentages, profit shares, and fees. However, the company does not adhere to this price and sets much higher rates. Akash mentioned that the city council has already filed a lawsuit to terminate a contract, which is currently pending before the civil court of first instance in Azaz. Akash noted, “We have several issues where the company has breached the contract, and we have substantial evidence.”
Nevertheless, lawyer Muhammad Haj Abdo believes that termination terms are challenging and not currently feasible. Additionally, the contract terms cannot be modified at present. Contract cancellation conditions typically hinge on breaches of various stipulations, but pricing is determined by the Turkish state, as the electricity companies operating in the region are licensed in Turkey, and their prices are set there.
Companies Operate Without Oversight and Accounting
The fluctuation in electricity subscription prices, which northern Aleppo countryside residents endure, results from the absence of a legal obligation to disclose regular accounting data regarding the electricity companies’ operations and financial standing. Moreover, these data are not subject to examination by an external auditor, a crucial aspect of supervising assets and locations used by companies, including accounting procedures.
|What Does Syrian Law Say?
Article No. 150 of Legislative Decree No. 29 of 2011 (Syrian Companies Law) mandates that a company’s board of directors adopt a disclosure policy and oversee its implementation in accordance with disclosure instructions issued by the Securities and Financial Markets Authority. Law No. 22 of 2005, which established the Syrian Financial Markets and Securities Commission, emphasizes the protection of citizens from unfair practices, fraud, or deceit. The law grants the Commission the authority to regulate and monitor full disclosure of information related to securities, as stipulated by the Executive Committee of this law in 2006. This requires financial disclosure to be made public, not solely to securities holders and investors, through daily newspapers.
The law’s provisions ensure that companies adhere to financial disclosure for the protection of their clients, as it ensures equal opportunities and combats manipulation and fraud in the electricity distribution market.
However, the official websites of “AK Energy” and “STE Energi” do not offer any interactive features for the public to access financial statements or data about the companies’ activities. Additionally, there is no publication of financial statements in local newspapers within the region, as required by Syrian law.
Syria Indicator attempted to inquire whether STE Energi adopts a specific accounting disclosure model based on an accounting disclosure theory. Regrettably, no response was received from the company.
While communicating with “AK Energy,” Syria Indicator encountered challenges. The investigation team spoke with the company’s financial director, Rami Al-Mohammad, in an attempt to discuss financial transparency, but he redirected the inquiries, suggesting that these matters should be addressed with branch managers and accountants in northeastern Aleppo’s countryside.
The investigation reached out to several branch administrators and employees, with most of them stating that these issues were beyond their purview or that they lacked the answers to the questions.
Investment in the Absence of a Binding Legal Framework
Financial disclosure, as stipulated in the executive instructions of the Syrian Securities and Markets Authority Law, encompasses vital information such as financial statements and auditors’ reports. These documents are crucial sources of information that provide the public and investors with comprehensive insights into a company’s financial status and operations. The principles of transparency and honesty are inextricably linked with disclosure, underscoring the obligation of those committed to disclosure to furnish information consistently to regulatory authorities, even in situations where governance institutions may not be fully efficient or complete.
However, in the operations of electricity companies in northern Syria, none of these legal obligations are observed, despite their oversight of substantial projects such as the electricity supply process. There is a conspicuous absence of regulatory frameworks governing foreign investment projects in the region, as highlighted by lawyer Muhammad Haj Abdo, the director of the legal office of the local council in the city of Afrin, who is responsible for supervising contracts with “STE Energi.” This effectively cedes economic influence to the region when it should be governed by Syrian laws.
In truth, the Turkish presence in northern Syria doesn’t classify Turks as foreigners, as confirmed by the contracts supervisor. Syrian Law No. 32 of 2010 permits both the public sector and the national, local, Arab, and foreign private sectors to invest in electricity generation and distribution within Syrian territory. Licensees are obliged to adhere to the stipulations of this law and the conditions specified in their licenses. Receiving a license does not confer any monopolistic rights within the geographic scope of the licensees.
Nevertheless, in northern Syria, local councils independently grant rights to exploit the electrical network. Each council operates autonomously, separate from other councils and the “Syrian Interim Government,” which has no oversight over this matter. The region’s population numbers approximately two million people (including Euphrates Shield, Olive Branch, and Peace Spring areas), as per statistics from the “Assistance Coordination Unit” issued in January 2022.
The Power of the Turkish Governor
Turkish companies have established a firm foothold in the energy market in Aleppo’s countryside due to the region’s reliance on neighboring Turkish states. Turkey’s interest in rehabilitating the electricity network and supplying it to the region is driven by the relatively lower cost and immediate returns. Unlike other sectors, the electricity infrastructure remains functional, and revenue from paid subscriptions can directly cover the costs of electricity supply. Moreover, the Turkish private sector has exhibited a heightened interest in investing in this sector, relieving Ankara of the intricacies of managing energy affairs.
The Turkish governor overseeing the region has the authority to transfer electricity to Aleppo’s countryside through an exclusive public tender accessible only to Turkish companies. While the governor is ostensibly an intermediary between the local council administration and companies applying for the tender, in practice, they function independently as decision-makers. In the final stages, the local council is summoned to formalize the agreement with the selected company, according to lawyer Muhammad Haj Abdo.
In the northeastern Aleppo countryside alone, there are over 340 projects categorized as early economic recovery initiatives, comprising 45% of total projects observed in northwestern Syria. These projects include 24 dedicated to the electricity sector, involving the restoration and repair of poles and the electricity network, the installation of electrical poles and cables, and the establishment of solar-powered lighting poles, as reported in April 2022, monitoring early recovery projects in the region during the latter half of 2021.
In the absence of any binding legislative authority or financial oversight, business investment entities in the region can easily engage in a range of suspicious operations due to the chaotic environment in which they operate. These operations may encompass financial irregularities, embezzlement, fraudulent invoicing, price gouging, illicit bidding practices, or collusion with armed groups, all of which contribute to further instability in the region.
|boxKey Challenges in Northern Syria’s Electricity Sector
Lack of Price Regulation:The energy and electricity market in northern Syria is dominated by private, profit-driven companies that lack transparent pricing standards for subscribers.
Inferior Quality:The electrical tension’s quality is subpar and inconsistent, resulting in frequent malfunctions of customers’ electrical equipment.
Monopolistic Investment Environment:Contracts restrict electricity distribution to specific companies, prohibiting the establishment of alternative networks without the licensed company’s approval. This limitation hampers local councils’ ability to explore solutions and introduce other companies to the sector.
Absence of Clear Legislative Framework for Foreign Investment:Despite the region’s numerous economic and service projects, there is no well-defined legislative framework governing foreign investments in the commercial and economic sectors, including the electric energy sector. This often grants these activities significant economic influence and the ability to impose corporate conditions.
Limited Access to Investment Sources:Investors in electricity companies remain largely anonymous, especially to the paying public. This lack of transparency affects institutional practices and subscriber confidence in companies that hold a monopoly in the sector.
Investigation: Saleh Malas
Supervision: Ali Eid
Note: Due to security concerns, the names of the journalists from the Aleppo countryside who contributed to this investigation have been omitted.