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Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit
Table of Contents
  1. Executive Summary
Terrorism and Counter-terrorism: New Challenges for the European Union
Terrorism and Counter-terrorism: New Challenges for the European Union

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

Terrorism and Counter-terrorism: New Challenges for the European Union

Despite suffering significant blows in Syria and Iraq, jihadist movements across the Middle East, North Africa and Lake Chad regions continue to pose significant challenges. In this excerpt from the Watch List 2017 – First Update early-warning report for European policy makers, Crisis Group urges the European Union and its member states to prioritise conflict prevention at the heart of their counter-terrorism policy and continue investment in vulnerable states.

This commentary is part of our Watch List 2017 – First Update.

Over the past few months, military operations have eaten deep into the Iraqi and Syrian heartlands of the Islamic State (ISIS). Much of Mosul, the group’s last urban stronghold in Iraq, has been recaptured; Raqqa, its capital in Syria, is encircled. Its Libyan branch, with closest ties to the Iraqi leadership, has been ousted from the Mediterranean coastal strip it once held. Boko Haram, whose leaders pledged allegiance to ISIS, menaces the African states around Lake Chad but has split and lost much of the territory it held a year ago. Though smaller branches exist from the Sinai to Yemen and Somalia, the movement has struggled to make major inroads or hold territory elsewhere.

ISIS’s decisive defeat remains a remote prospect while the Syrian war rages and Sunnis’ place in Iraqi politics is uncertain. It will adapt and the threat it poses will evolve. But it is on the backfoot, its brand diminished. For many adherents, its allure was its self-proclaimed caliphate and territorial expansion. With those in decline, its leaders are struggling to redefine success. Fewer local groups are signing up. Fewer foreigners are travelling to join; the main danger they represent now is their return to countries of origin or escape elsewhere.

Al-Qaeda, meanwhile, is increasingly potent. It, too, has evolved. Its affiliates, particularly its Sahel, Somalia, Syria and Yemen branches, are more influential than the leadership in South Asia. Osama bin Laden’s successor, Ayman al-Zawahiri, inspires loyalty and offers guidance but has little say in daily operations. Al-Qaeda’s strategy – embedding within popular uprisings, allying with other armed groups and displaying pragmatism and sensitivity to local norms – may make it a more durable threat than ISIS. Its strategy also means that affiliates’ identities are more local than transnational, a shift that has sparked debate among jihadists. Although Western intelligence officials assert that cells within affiliates plot against the West, for the most part they fight locally and have recruited large numbers of fighters motivated by diverse local concerns.

U.S. national security policy looks set to change too. Much about new President Donald Trump’s approach remains uncertain, but aggressive counter-terrorism operations for now dominate his administration’s policy across the Muslim world. Protecting U.S. citizens from groups that want to kill them must, of course, be an imperative for American leaders. But since the 9/11 attacks a decade and a half ago, too narrow a focus on counter-terrorism has often distorted U.S. policy and at times made the problem worse.

The roots of ISIS’s rise and al-Qaeda’s resurgence are complex and varied. Patterns of radicalisation vary from country to country ... though war and state collapse are huge boons for both movements.

Some early signs are troubling. Past months have seen a spike in civilian casualties resulting from U.S. drone and other airstrikes. The degree to which the administration will factor in the potential geopolitical fallout of operations against ISIS and al-Qaeda is unclear. U.S. allies could misuse counter-terrorism support against rivals and deepen chaos in the region. Nor it is clear that the U.S. will invest in diplomacy to either end the wars from which jihadists profit or nudge regional leaders toward reforms that can avert further crises. The new administration may also escalate against Iran while fighting jihadists, creating an unnecessary and dangerous distraction.

Though the influence of European leaders and the European Union (EU) on Arab politics and U.S. counter-terrorism policy has limits, they are likely to be asked to bankroll reconstruction efforts across affected regions. They could use this leverage to:

  1. Promote a judicious and legal use of force: Campaigns against jihadists hinge on winning over the population in which they operate. “Targeted” strikes that kill civilians and alienate communities are counterproductive, regardless of immediate yield. Indiscriminate military action can play into extremists’ hands or leave communities caught between their harsh rule and brutal operations against them. European leaders should press for tactical restraint and respect for international humanitarian law, which conflict parties of all stripes increasingly have abandoned.
     
  2. Promote plans for the day after military operations: Offensives against Mosul, Raqqa or elsewhere need plans to preserve military gains, prevent reprisals and stabilise liberated cities. As yet, no such plan for Raqqa seems to exist – it would need to involve local Sunni forces providing security, at least inside the city. As operations against ISIS and al-Qaeda linked groups escalate, the EU could seek clarity on what comes next and how operations fit into a wider political strategy.
     
  3. Identify counter-terrorism’s geopolitical side effects: The fight against ISIS and al-Qaeda intersects a tinderbox of wars and regional rivalries. Frank discussion of the potential consequences of military operations could reduce risks that they provoke a wider escalation. The Raqqa campaign, for example, should seek to avoid stimulating fighting elsewhere among Turkish and Kurdish forces and their respective allies. Success in Mosul hinges on preventing the forces involved battling for territory after they have ousted ISIS. European powers’ own counter-terrorism support should not result in allies being more resistant to compromise.
     
  4. Reinforce diplomatic efforts to end crises: From Libya to Syria, Iraq, Yemen and Afghanistan, no country where ISIS or al-Qaeda branches hold territory has a single force strong enough to secure the whole country. Unless the main non-jihadist armed factions in each country can arrive at some form of political accommodation among each other, there is a risk they either ally with jihadists against rivals or misuse counter-terrorism support for other ends. European powers should step up support for UN-led diplomacy if the U.S. neglects such efforts.
     
  5. Protect space for political engagement: Over recent years, as jihadists have gathered force on today’s battlefields, Western powers have tended to draw a line between groups they see as beyond the pale and those whom they envisage as part of settlements. The EU should keep the door open to engagement with all conflict parties – whether to secure humanitarian access or reduce violence. It should be made clear to groups on the wrong side of the line how they eventually can cross it. Al-Qaeda affiliates’ increasingly local focus makes this all the more vital.

  6. Warn against confronting Iran: Such a confrontation would be perilous. Militarily battling Tehran in Iraq, Yemen or Syria, questioning the nuclear deal’s validity or imposing sanctions that flout its spirit could provoke asymmetric responses via non-state allies. Iran’s behaviour across the region is often destabilising and reinforces the sectarian currents that buoy jihadists. But the answer lies in dampening the rivalry between Iran and the Gulf monarchies, not stimulating it, with the attendant risk of escalating proxy wars. This will mean resuming a tough but professional senior-level U.S.-Iranian channel of communication, something the U.S. administration seems reluctant to do but that Europe could encourage. And, for the EU and its members states (notably France, Germany and the UK), it means clearly signalling to the U.S. administration that any step to undermine the Joint Comprehensive Plan of Action (JCPOA) – in the absence of an Iranian violation of the deal – will leave Washington isolated and unable to recreate an international consensus to sanction Iran.

The roots of ISIS’s rise and al-Qaeda’s resurgence are complex and varied. Patterns of radicalisation vary from country to country, village to village and individual to individual. Clearly, though, war and state collapse are huge boons for both movements. Both groups have grown less because their ideology inspires wide appeal than by offering protection or firepower against enemies, or rough law and order where no one else can; or by occupying a power vacuum and forcing communities to acquiesce. Rarely can either group recruit large numbers or seize territory outside a war zone. The EU’s investment in peacebuilding and shoring up vulnerable states is, therefore, among its most valuable contributions against jihadists. European leaders must do everything within their power to disrupt attacks, but they should also put conflict prevention at the centre of their counter-terrorism policy.