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Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
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  1. Executive Summary

Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit

The political standoff between Iraq’s Kurds and the government in Baghdad has left pressing disputes over oil and territories unresolved, intensifying the likelihood of conflict.

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Executive Summary

A simmering conflict over territories and resources in northern Iraq is slowly coming to a boil. In early April 2012, the Kurdistan regional government (KRG) suspended its supply of oil for export through the national Iraqi pipeline, claiming Baghdad had not fully repaid operating costs to producing companies. The federal government responded by threatening to deduct what the oil would have generated in sales from the KRG’s annual budget allocation, potentially halving it. This latest flare-up in perennially tense Erbil-Baghdad relations has highlighted the troubling fact that not only have the two sides failed to resolve their differences but also that, by striking out on unilateral courses, they have deepened them to the point that a solution appears more remote than ever. It is late already, but the best way forward is a deal between Baghdad and Erbil, centred on a federal hydrocarbons law and a compromise on disputed territories. International actors – the UN with its technical expertise, the U.S. given its unique responsibility as well as strategic interest in keeping things on an even keel – should launch a new initiative to bring the two back to the table.

Each side has its narrative, based on history, accumulated grievances and strong sense of entitlement. For now, neither is inclined to settle the conflict peacefully through serious, sustained negotiations, as each believes its fortunes are on the rise, and time is on its side. They are wrong: time is running out, as unilateral, mutually harmful moves are pushing the relationship to the breaking point, with the hydrocarbons-driven stakes and attendant emotions so high that conflict looks more promising to them than accommodation and compromise.

The two unwilling partners in an Iraqi enterprise born of colonial machinations – Arabs and Kurds – have spent 90 years in unhappy cohabitation. Kurds have waited for the moment when they will succeed in removing the shackles of an overbearing, at times highly repressive, central state. They know that when Baghdad is weak, they can take steps to bring their dream of statehood closer to reality, but that when the centre is strong it will use its superior resources to push them back into their place – or worse. This is why the Kurds are so alarmed at attempts by Prime Minister Nouri al-Maliki to amass power at the expense of his rivals and rebuild a strong state, armed with U.S. weaponry, under his unchallenged control.

Ever since arriving in Baghdad on the coattails of the U.S. invasion in 2003, the Kurds understandably have used their new position and the centre’s weakness to develop their own region. They seek to reverse a legacy of discrimination and economic neglect but also to create an escape route should relations with Baghdad sour beyond repair. Yet, in many ways, this approach contains elements of a self-fulfilling prophecy: by pressing their advantage, Kurds inevitably aggravate matters, convincing the federal government that they are aiming for secession – and aiming to take with them a good chunk of disputed territory that Kurds claim as historically part of a notional Kurdistan but that also appears to be immensely rich in oil and gas.

Perhaps most worrying to Baghdad, Kurdish leaders have lured international companies to explore and exploit the region’s suspected hydrocarbons wealth. Nor have they stopped at the Green Line that divides their region from the rest of Iraq; instead, they have signed contracts for acreage located squarely in disputed territories. The latest (and largest) to agree to play this game was ExxonMobil, which arrived on the scene in October 2011, taking six blocks, two of which, along with a corner of a third, lie across the Green Line. It thus placed itself at the heart of the conflict, potentially accelerating the centrifugal forces that are tearing at the Iraqi fabric. While ExxonMobil may have calculated that by doing so it could help bring Baghdad and Erbil to the table and effect progress on a federal hydrocarbons law, the likelier outcome is that both sides will further entrench their positions, thus increasing the chances of violent conflict. From Baghdad’s perspective, the Kurds are making mincemeat of any attempt to have a unified federal oil strategy; increasingly, it views them as untrustworthy partners in government who are seeking to break up the country.

But the Kurds face a problem. While they pursue an independent oil policy and have taken important steps toward that end by drafting their own oil law in 2007 and signing over 40 contracts with foreign oil companies without Baghdad’s input or approval, they lack the means to export their oil without Baghdad’s help and therefore its permission. To date, the federal government has used its control over the national pipeline network, as well as its hold on the treasury and budget, to rein in the Kurds’ ambitions.

Hemmed in by Baghdad and anxious to become economically self-sufficient, Erbil is turning its eyes to another potential outlet for its oil: Turkey. Masoud Barzani, the Kurdish region’s president, reportedly told foreign visitors to his mountain redoubt that if Maliki remains in power beyond the 2014 parliamentary elections, the Kurds would go their own way. Not coincidentally, 2014 is when the Kurdish region expects to complete construction of its own strategic oil pipeline, one that skirts (federal government) Iraqi territory before reaching the border with Turkey. For Kurdish leaders, economic dependency on a democratic neighbour with an attractive window on the West is far preferable to a continued chokehold by a regime displaying authoritarian tendencies – all of which raises the question of what Ankara would do if the Kurds ask it to take their oil without Baghdad’s approval.

Turkey’s main objective in Iraq has been to keep it unified. To this end, it has undertaken economic steps since 2007 that would bind the country’s various parts into an economic union, hoping that politics, especially the relationship between Baghdad and Erbil, would follow suit. It also has encouraged both sides to agree to a federal hydrocarbons law, the added benefit of such legislation being that energy-poor Turkey could import oil and gas from Iraq’s immense southern fields, as well as from the Kurdish region, coming closer to fulfilling its aspiration of becoming a major transit corridor for regional hydrocarbons. The Kurds hope, however, that Turkey’s thirst for oil and gas will align with their own thirst for statehood.

Ankara is unlikely to shift course, frustration with its neighbour’s failure to agree on oil legislation and its eagerness to purchase oil and gas from the Kurdish region notwithstanding. Ideally, it would import Kurdish products without jeopardising its relationship with Baghdad, though that seems beyond reach.

The Kurds have not lost hope. As they see it, a regional crisis – such as war between Iran and the U.S. or the break-up of neighbouring Syria – might constitute a game-changing occurrence, persuading Ankara to risk its relations with Baghdad in exchange for energy security and a stable (Kurdish) buffer against an unpredictable, possibly chaotic, suspiciously pro-Iranian and increasingly authoritarian Arab Iraq. But such scenarios might not unfold and, for a multitude of reasons, one must hope they do not. The answer to the current impasse, in other words, is not to wish for a cataclysmic event with potentially devastating repercussions for all. It is not to bank on the central Iraqi government surrendering resource-rich territories it deems its own and has the means to hold on to by force. And it is not to gamble on a radical move by Turkey toward a separate deal with the KRG when Ankara has its own, deep-seated fears concerning a potentially newly invigorated Kurdish population on its own territory.

For Baghdad and Erbil, reaching a deal will be very difficult. But the alternatives surely would be far worse.

Baghdad/Erbil/Washington/Brussels, 19 April 2012

Iraqi demonstrators gather during an anti-government protests against unemployment, corruption in Baghdad, Iraq on 7 October 2019. AFP via Anadolu Agency/Murtadha Sudani

Widespread Protests Point to Iraq’s Cycle of Social Crisis

A surge in street protests in Iraq has left some 110 people dead and exposed a rift between the government and a population frustrated by poor governance, inadequate services and miserable living conditions. To avert further violence, the authorities and protesters should open dialogue channels.

Street protests have engulfed Baghdad and southern cities such as Nasiriya and Diwaniya since 1 October, causing a staggering death toll of at least 110 victims in seven days. This deadliest outburst of violence from popular protests since the 2003 U.S. invasion has shaken the foundations of the already fragile government led by Prime Minister Adel Abdul Mahdi.

The prime minister is on thin ice. In the aftermath of the May 2018 elections, a drawn-out tug of war over government formation produced broadly acceptable but politically weak office holders. Neither the prime minister nor any of his cabinet members belong to the main parliamentary blocs (al-Fatah, a Shiite Islamist coalition with links to paramilitary groups and Iran, and Sairoun, an alliance between followers of populist Shiite cleric Moqtada Sadr and the Communist Party). None enjoys significant support within his or her own party. Furthermore, Washington’s “maximum pressure” campaign on Iran and Tehran’s response are putting a severe strain on this government, a partner to both. Already squeezed by Iran and the U.S., the prime minister now also faces pressure from parliament and the street for not delivering the reforms that a significant part of the population has been demanding for some time.

Iraq’s government and protesters need a framework for negotiating reforms and a common vision for the country’s future.

In order to break out of this dangerous dynamic, Iraq’s government and protesters need a framework for negotiating reforms and a common vision for the country’s future.

Viral Anger Fuels a Protest Wave

Street protests have erupted on a regular basis since 2015, in most cases motivated by manifest failures of governance, lack of services and miserable living conditions. This time around, what helped the protests gain strength was Prime Minister Abdul Mahdi’s decision at the end of September to demote a popular senior commander of the war with ISIS, General Abdul-Wahab al-Saadi of the Counter-Terrorism Service (CTS), who had become a national icon for his heroism and integrity. Anger greeted the decision on social media, with many interpreting it as yet another expression of the prime minister’s feebleness in standing up to corruption in the security forces. The CTS is in competition with al-Hashd al-Shaabi, an array of paramilitary groups, the most powerful of which are linked to Iran. Those critical of Iran’s role in Iraq additionally saw the prime minister as giving in to the Hashd by demoting the general.

The affair quickly blossomed into something broader. As anger over the prime minister’s decision went viral online, social media influencers, largely Facebook users, encouraged people to join protests. On 1 October, protesters gathered in Baghdad’s Tahrir Square and in cities across the south, and security forces opened fire to disperse them. The next day, security agencies banned access to social media. The heavy-handed response caused the first casualties, adding to popular fury. On 3 October, early in the morning, the authorities imposed a curfew in Baghdad and southern cities, blocked access to major street intersections and government buildings, and shut down the internet. Fear of repression acted as a disincentive in some areas, including in Basra, which had been a protest hub during previous rounds.

Tensions increased further over the weekend of 4-5 October. Protesters torched the offices of leading Shiite Islamist parties in Nasiriya (including Daawa, Hikma and Asaeb Ahl al-Haq) and paramilitary groups, and masked men in civilian clothing attacked media outlets in Baghdad. The number of victims grew quickly, mostly on the protesters’ side but also among the security forces.

Protests, Politics and Participation

For a growing part of the population, resorting to street action has become the only meaningful form of participation in politics. Recurrent failure of governance and blatant incompetence and corruption, manifested most glaringly in the army’s humiliating collapse in the face of the ISIS onslaught in 2014, have left most Iraqis deeply disillusioned about politicians of all stripes, and disdainful of the notion that voting in elections can deliver change. By contrast, many see street protests as a more effective way to force politicians’ collective hand, as evidenced by government efforts to improve the water supply in the south after riots in the summer of 2018 over the lack of clean water.

The large majority of protesters are millennials under 30, an age group that makes up 67 per cent of the population.

This trend is amplified by a generational factor. The large majority of protesters are millennials under 30, an age group that makes up 67 per cent of the population. They came of age seeing the same faces taking turns and failing at governance. They did not experience the Saddam Hussein regime’s repression. Nor are they inclined to give much credit to current leaders for the roles they claim to have played in resisting that regime, regardless of how accurate those claims may be.

But though many come from the same age bracket, the protesters otherwise represent a cross-section of society that spans both sectarian and class differences. They include lower middle-class youths with no access to quality education or state employment as well as well-educated, English-speaking, upper middle-class individuals involved in private-sector initiatives and civic organisations. They share the experience of growing up in a political system dominated by a narrow elite that has failed to create prospects for a liveable future, despite the country’s enormous resources; they distrust formal politics and its democratic mechanisms such as elections, which they see as directly manipulated by those in power. Street protests are their effort at advancing a political agenda by other means.

Whether they can succeed is another question. Thus far, protests are proving to be an effective means of challenging the political system and leadership, but it is less clear how they can advance the radical change for which protesters are calling. They present the government with a mission impossible: delivering immediate solutions to problems that require long-term strategies, whether for improving governance, bettering service provision or reforming the entire political system.

Protests [...] present the government with a mission impossible: delivering immediate solutions to problems that require long-term strategies.

Against this backdrop, Baghdad has tended to focus on ad hoc, short-term fixes. On 6 October, for example, the prime minister gathered his cabinet for an emergency meeting and adopted a seventeen-point plan that included housing programs for low-income families and monthly stipends for the unemployed. The government does not, however, appear to have a strategy for coming together with the protest movement around a shared vision for the country’s future.

Protesters, for their part, lack an intermediary who can bring concrete proposals to the government. Their interest in maintaining their autonomy from a political system they oppose has kept their movement leaderless. As the government fails to address the protesters’ real concerns and the security forces move to suppress the protests, killing scores, protesters’ rejection of any sort of engagement with the government only hardens, and the movement begins to respond to violence with violence.

For the time being, the country is caught up in a destructive blame game. Protesters blame the leadership for the repression. Security officials blame the protesters for resorting to violence. Political and religious leaders blame each other for the crisis without themselves taking responsibility. On 4 October, Grand Ayatollah Ali al-Sistani, the Shiites’ paramount religious leader, denounced the largest political blocs and the government for failing to deliver long-promised reforms. On the same day, Moqtada al-Sadr, the Shiite cleric who leads the biggest parliamentary bloc, Sairoun, called on the prime minister to resign and for new elections to be held under international supervision; he also instructed his party’s lawmakers to boycott the next parliamentary session.

Manoeuvring Between Tehran and Washington

If the prime minister manages to survive politically, he will be even weaker and more vulnerable to pressure from the largest political blocs. The fallout from the protests will further complicate his efforts to pursue a foreign policy aimed at insulating the country from the unfolding U.S.-Iran competition, as well as his attempts to carry out political reforms. If he loses his post and the government collapses, instability will almost certainly grow. The challenge would then be to form a new government with a prime minister sufficiently neutral to be acceptable to both pro-U.S. and pro-Iranian political forces.

Iran may prefer a weak and dependable government in Baghdad, but it has no interest in Iraq descending into chaos.

Neither the U.S. nor Iran would like to see the situation spin out of control. Iran may prefer a weak and dependable government in Baghdad, but it has no interest in Iraq descending into chaos. Iraq’s stability is key for Tehran to continue trading with its neighbour, a lifeline in the face of U.S. economic sanctions. Tehran has invested in forging relations with all Iraqi political forces represented in parliament, and strategically resorts to these allies (al-Fatah in particular) to exert pressure on the U.S. in order to remove or reduce the influence of U.S. troops in Iraq. Street protests introduce an element of uncertainty that worries Tehran. This may explain why its affiliated paramilitaries have taken repressive steps to contain this risk and reportedly participated in the crackdown. The fact that some protesters may be motivated by anti-Iranian animus – several have chanted anti-Iranian slogans – is of further concern to Tehran, whose influence in Iraq could be at stake. Many Iraqi Shiites look at the paramilitaries, the Shiite political parties and Iran as complicit in the country’s governance failure and corruption.

That said, the protests could also turn in Iran’s favour. If the Sadrists carry out their threat to boycott parliament or stage a no-confidence vote, the prime minister will be increasingly dependent on Iran’s ally al-Fatah, which has stood by his side during the crisis.

Pushing for a change in government could be like opening a Pandora’s box, given a stagnating political system, mounting popular frustrations and the perennial difficulty of forming a government.

As for the U.S., it has every reason to want Iraq to remain stable. Its military presence helps prevent the resurgence of ISIS, whose fighters for now are lying low. It also counts on political forces in the country to stand as a counterweight to Iranian influence. But herein lies risk as well. Some in the Trump administration see protesters’ anti-Iran slogans, together with popular expressions of support for General al-Saadi, as an expression of mounting anti-Iranian sentiments. U.S. officials who deem Abdul Mahdi indecisive and powerless may push to replace him with someone more dedicated to reforms and, just as importantly, to signing contracts with U.S. companies that would decrease Iraq’s energy dependency on Iran. Yet pushing for a change in government could be like opening a Pandora’s box, given a stagnating political system, mounting popular frustrations and the perennial difficulty of forming a government.

Ultimately, any attempt by either Iran or the U.S. to manipulate the protest movement could further destabilise an extremely fragile situation and make Iraq’s teetering leadership less able to sustain the delicate balancing act between the country’s two powerful backers.

The Way Forward

Past attempts to change Iraqi governance from within have foundered on the resistance of a political class that has high stakes in its continuation. As things stand, it is unlikely that the prime minister will be able to deliver reforms, especially now that his already limited parliamentary support may crumble under the protests’ weight. Likewise, calls for change from outside the realm of formal politics, such as through street protests, have failed to compel the government to commit to concrete remedial action beyond applying band-aids. More dangerously, they are now leading to violent clashes with the security forces. The government and countries that have supported Iraq in the fight against ISIS (the U.S., EU member states and Iran) and care about its stability have reason for concern that this situation will lead to recurrent flare-ups and crises.

The present crisis once again has illustrated that Iraq’s leadership cannot continue to buy social peace with a mix of oil-generated income distribution and repression.

To address the current crisis, the government should order the security forces to exercise maximum restraint in confronting the protests, ban paramilitary groups from policing the protests and launch an investigation into the excessive use of force, focusing in particular on snipers who reportedly targeted both protesters and members of the security forces. The larger parliamentary blocs also should shoulder their responsibility in defusing the crisis. Instead of calling on the prime minister to resign, Sairoun and Fatah should jointly press the government to prepare reform bills aimed at making the bureaucracy more agile in Baghdad and the provinces, bolstering accountability mechanisms to combat corruption, and encouraging government cooperation with the private sector and civic organisations.

Finding a long-term fix will be more difficult. The present crisis once again has illustrated that Iraq’s leadership cannot continue to buy social peace with a mix of oil-generated income distribution and repression. To break the crisis cycle, the government and the protest movement need to develop channels for dialogue and cooperation. Civic organisations, some of which are organised under the umbrella of the Iraqi Civil Society Solidarity Initiative, as well as private-sector figures, should better organise the protest movement and operate as intermediaries to formulate a set of coherent proposals as a basis for discussions with the government. The government should take such an initiative seriously as a way to reach out to the protesters and prevent another (possibly violent) cycle of mass mobilisation. And Iraq’s international donors should help facilitate a dialogue to arrive at a common vision for the country’s future and then provide the necessary capacity and funding to carry it out.