Identifier
Created
Classification
Origin
08DAMASCUS862
2008-12-02 12:56:00
CONFIDENTIAL
Embassy Damascus
Cable title:  

BAILING OUT THE SHAM: SARG CONTRACT RESCUES

Tags:  ECON EFIN EPET ETRD PGOV IR SY 
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INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
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RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 000862 

SIPDIS

STATE FOR NEA/ELA; NEA/IR
NSC FOR ABRAMS/MCDERMOTT

E.O. 12958: DECL: 11/30/2018
TAGS: ECON EFIN EPET ETRD PGOV IR SY
SUBJECT: BAILING OUT THE SHAM: SARG CONTRACT RESCUES
SYRIAN-IRANIAN CAR VENTURE

REF: DAMASCUS 735

Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d)

-------
Summary
-------

C O N F I D E N T I A L SECTION 01 OF 02 DAMASCUS 000862

SIPDIS

STATE FOR NEA/ELA; NEA/IR
NSC FOR ABRAMS/MCDERMOTT

E.O. 12958: DECL: 11/30/2018
TAGS: ECON EFIN EPET ETRD PGOV IR SY
SUBJECT: BAILING OUT THE SHAM: SARG CONTRACT RESCUES
SYRIAN-IRANIAN CAR VENTURE

REF: DAMASCUS 735

Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d)

--------------
Summary
--------------


1. (C) A reputable Syrian website reported that the SARG will
supply Syrian public sector entities with "Sham"-model
automobiles. The "Sham" (colloquial Arabic for Syria) is a
Peugot-based sedan produced by a joint Syrian-Iranian
assembly plant (SIAMCO) in rural Damascus that opened in

2007. By mid-summer 2008, sales of the relatively expensive
Sham averaged just 20 percent of the 240 cars/week production
output. The SARG exempted SIAMCO from paying the bid bond
and performance bond normally required by the Public
Establishment for Foreign Trade in order to expedite the
deal, which is designed to shore up the ailing joint venture
-- Iran's most visible investment in Syria. End summary.

--------------
The Sham: Symbol of Iranian-Syrian Economic Ties
--------------


2. (C) According to the website "Syria Steps," the SARG is
purchasing Sham-model automobiles for use by Syrian public
sector entities. The "Sham" car is produced by SIAMCO, the
highest profile Iranian investment in Syria (reftel).
Located just outside of Damascus in Adra, the SIAMCO plant is
a USD 60 million joint venture between Iranian Khodro, the
SARG General Organization for Engineering Industries, and the
private Syrian al-Sultan Group. SIAMCO offers the Sham with
either 1600cc or 1800cc Peugot engines and transmissions for
about USD 12,200 or USD 13,600, respectively.

--------------
Consumers Not Taken by the Sham
--------------


3. (C) The SIAMCO plant opened in the midst of a three-year
car "boom" in Syria, as significantly reduced tariffs and
registration fees made private automobile ownership possible
for the Syrian middle class. Several prominent business
families moved quickly to capitalize on the demand for
private transportation, purchasing agency licenses and

opening scores of car dealerships in the industrial suburb of
Harasta. By the time the first Sham rolled off the SIAMCO
assembly line in 2007, savvy consumers had already made the
Korean brands Hyundai and KIA the most popular cars in Syria.
As of June 2008, Sham sales averaged just 50 of 240 cars
produced each week, with most of those becoming taxis.
Competing against high quality, high value Asian imports, the
Sham is hindered by its relatively high price, poor
after-market service, and factory monopoly on spare parts.

--------------
SARG to the Rescue
--------------


4. (C) Shortly after the Sham's dismal sales statistics were
released, the Syrian Ministry of Economy announced its
approval to export the car to foreign markets. At the time,
bemused industry observers wondered where outside of Syria
there might be a market for a car called the "Sham." The
joking grew louder when the SARG announced that its political
ally Qatar had agreed to license a SIAMCO dealership in Doha,
as Syrians tried to imagine Qatari sheikhs trading in their
BMWs for a Sham.


5. (C) The SARG's latest attempt to salvage SIAMCO by
supplying Shams to the public sector offers a more immediate
remedy. To expedite the deal, the SARG exempted SIAMCO from
paying the bid bond and performance bond normally required by
the Public Establishment for Foreign Trade. Below the top
tier of government ministers and general officers (who ride
in Audi A8s),the middle-managers in Syria's bloated
bureaucracy largely drive a fleet of 1980s-vintage black
Mercedes sedans (civilian office directors and field grade
army officers) and ubiquitous white Peugot 404 station wagons
(mukhabaraat). With Syria's declining oil revenues, the
increasing cost of maintaining and fueling these antiques

DAMASCUS 00000862 002 OF 002


presents an unwelcome burden to a Finance Ministry attempting
to control government spending. SARG investment in the new,
more fuel efficient Sham cars may ultimately save costs over
the long term while keeping the flagship example of Iranian
investment in Syria alive a little longer .

--------------
Comment
--------------


6. (C) The story of the Sham car is reflective of the greater
Syrian-Iranian economic relationship. As with other Iranian
"investment" projects in Syria, the SARG is footing the bill
for an Iranian product that could not compete in the open
market. The Sham is also indicative of the public sector's
declining prestige in Syrian society. In the era of Hafez
al-Asad, when private transportation was a luxury only the
country's elites could afford, government cars were
considered prized perquisites. By comparison, contemporary
SARG bureaucrats, army officers and Baath Party officials
will be driving a car that most middle class Syrians wouldn't
want to own.
CONNELLY