As sectarian violence in Iraq has ebbed over the past year, a new and potentially just as destructive political conflict has arisen between the federal government and the Kurdistan regional government in Erbil. This conflict has manifested itself in oratory, backroom negotiations and military manoeuvres in disputed territories, raising tensions and setting off alarm bells in Washington just as the Obama administration is taking its first steps to pull back U.S. forces. A lasting solution can only be political – involving a grand bargain on how to divide or share power, resources and territory – but in the interim both sides should take urgent steps to improve communications and security cooperation, run joint military checkpoints and patrols in disputed territories and refrain from unilateral steps along the new, de facto dividing line, the so-called trigger line.

The conflict is centred on disputed territories, especially Kirkuk, which not only hosts a mix of populations – Arabs, Kurds, Turkomans and smaller minorities (which in some districts are dominant) – but also contains untold reserves of oil and gas. In the security vacuum of post-invasion Iraq, Kurdish forces rushed across the Green Line, the de facto boundary separating the Kurdistan region from the rest of Iraq between 1991 and 2003, to assert their claim to areas they deem part of their historic patrimony. A range of local and national actors challenged this claim, with the government of Prime Minister Maliki starting to push back against Kurdish influence in these areas since August 2008.

The result has been a steady rise in tensions along a new, undemarcated line that in military circles is referred to as the trigger line – a curve stretching from the Syrian to the Iranian border, where at multiple places the Iraqi army and Kurdish fighters known as peshmergas are arrayed in opposing formations. The deployment of the army’s 12th division in Kirkuk in late 2008, in particular, enraged the Kurds and emboldened their Arab and Turkoman rivals.

Given growing tensions and the proximity of forces, as well as unilateral political moves by both sides in the form of contracts for oil and gas extraction, altercations have occurred along the trigger line on several occasions. Poor communication could cause such local events to escalate inadvertently into broader conflict that neither party might find easy to contain. The Obama administration responded to the 12th division’s arrival by sending an extra brigade into Kirkuk, which may have prevented a very tense situation from turning into open warfare. But U.S. influence inevitably is on the wane.

Given President Obama’s repeated and unequivocal pledge to withdraw all U.S. forces by the end of 2011, with combat troops departing as early as August 2010, there is little time left for effective U.S. mediation: both the Kurdistan regional government and the federal government will be averse to compromise on fundamental issues ahead of legislative elections scheduled for January 2010; and some Iraqis, including Kurdish leaders, anticipating Iraq’s collapse, could seek outside protection, thus potentially regionalising the conflict.

If the U.S. administration wishes to leave Iraq without being forced either to maintain a significant military presence or, worse, to return after the country disintegrates, it should craft an exit strategy that both encourages and pressures Iraqis to reach a series of political bargains. These deals, as Crisis Group has consistently argued, concern a federal hydrocarbons law, a settlement over Kirkuk and other disputed territories and agreement over the division of powers that jointly would pave the way for consensus on amending the constitution. In the interim, it should take urgent steps to help Baghdad and Erbil improve their mutual communications and security cooperation in disputed territories and persuade them to engage in substantive negotiations on the status of these areas. At the same time, it cannot exclude finding itself, against U.S. military commanders’ better judgment, standing between the two sides to prevent armed escalation.

Along with its own efforts, the U.S. should provide full support to the United Nations Assistance Mission in Iraq (UNAMI), whose report on disputed internal boundaries, issued in April 2009, could offer an important platform for negotiations on disputed territories and, in a grand bargain strategy, on the interlocking issues of power and resources as well. UNAMI is best placed to mediate the complex discussions that will be required but cannot succeed without U.S. muscle, if Iraqi stakeholders are to be pushed to reach a durable settlement.

Whatever the final terms of deals and however difficult it may be to reach them, forgoing them is no option. Without the glue that U.S. troops have provided, Iraq’s political actors are otherwise likely to fight all along the trigger line following a withdrawal, emboldened by a sense they can prevail, if necessary with outside help. The Obama administration should make sure that the peace it leaves behind is sustainable, lest Bush’s war of choice turn into its own war of necessity. The president’s late June decision to appoint Vice President Joseph Biden as his informal special envoy for Iraq, Biden’s focus on helping Iraqis reach political deals and support for UNAMI, as well as his subsequent visit to Iraq all point in the right direction. The test is whether there will be sufficient determination, persistence and follow-through.

Baghdad/Erbil/Brussels, 8 July 2009