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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
Reconciling Iraq's Hard Realities
Reconciling Iraq's Hard Realities

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

Reconciling Iraq's Hard Realities

In a Berlin speech to German and Dutch officers, diplomats and civilians, Crisis Group's Middle East and North Africa Program Director Joost Hiltermann argues that any attempt to help Iraqis piece their country back together again needs to take into account local realities, the grander geopolitical picture, and especially regional powers Turkey and Iran.

One of the key challenges in talking about Iraq – or any place, really – is to connect the large with the small, the overall geostrategic picture with the minutiae of daily life, but also the optimistic vision of the way ahead with the hard, depressing realities imposed by local politics, economics and conflict that block the implementation of that vision.

I want to bridge that divide: to present you with the hard realities, but then to leave you with some hope – to combine in a way last night’s uplifting, forward-looking presentation by former Federal President Christian Wulff with the one by the International Organisation for Migration’s Dino Silipigni that gave us a realistic close-up view of the nitty gritty of fixing Iraq – of helping Iraqis to fix Iraq – through the example of community policing.

Western nations are a party to the conflict

First, we have to understand our own role as Western nations in Iraq. The international coalition to fight the Islamic State – Daesh – is by definition a party to an international armed conflict, a belligerent that is pursuing its own interests and objectives in Iraq and Syria. The coalition cannot be non-partisan. It has chosen sides by fighting Daesh.

Two, in fighting Daesh this coalition has favoured certain Iraqi actors over others. These have become allies. They each have their own agenda, which may not be the same as the coalition’s. For most Iraqi actors, Daesh is not their primary target but a secondary one – an obstacle that needs to be defeated on the way to what really matters: outcompeting their local or regional rivals. And also: a means to derive benefits from the international coalition.

Because of this, the Western fight against Daesh will have unintended consequences, namely the strengthening of its chosen allies against their competitors, whose grievances may be no less understandable and whose aims may be no less legitimate. In this way, the coalition may solve one problem – Daesh – while creating new ones. These could be even more dangerous to Western interests.

Allies are setting the agenda – their own

How does this happen? The coalition’s allies derive three sets of benefits from agreeing to sacrifice their men on behalf of this alliance. These are:

  1. Weapons and military skills. The question is: what will these be used for in addition to the fight against Daesh, and against whom? An example: it is clear that the Kurdistan Democratic Party (KDP) of Masoud Barzani is deriving great benefit from its exposure to American military skills and training on American weaponry. It is already using these assets not just to fight Daesh but to push into areas taken from Daesh and emptying them of their Arab population. This is happening in officially named “disputed territories” to which Kurdish leaders have long laid claim and which they now see an opportunity to annex to the Kurdistan region. But unilateral moves will not solve this longstanding dispute.
  2. Credit in the form of political support and possibly political recognition. In northern Iraq, Barzani feels so emboldened by the coalition’s support that he has announced his intent to stage an independence referendum later this year. He is doing so even though the objective conditions for Kurdish independence are far from ripe. His calculation is that regardless of conditions this is the best time, because Western support, which is notoriously fickle, is currently solid, and is critical to obtaining wider international recognition. But Iran and Turkey oppose Kurdish independence, and have the means to sabotage it. Even riskier, Barzani is pushing for the referendum to be held in the disputed territories, such as Kirkuk; this could start a civil war.
  3. Reconstruction aid. The coalition’s allies can steer aid toward themselves and their allies and away from their rivals. This is a particularly salient problem in the KDP-dominated Ninewa Plain with its diverse population.

Perceptions matter

While the coalition may see itself as a nonpartisan actor in Iraq apart from the fight against Daesh, Iraqi actors don’t see it that way. They see the coalition as wholly partisan through its choice of local allies. What is worse, Western NGOs are not immune from being seen through this lens either. There is a long history of Middle East people’s perceptions of Western intervention as multi-pronged and sinister in intent. This may sound conspiratorial, but it has an empirical basis. Many people in the Middle East lump Western NGOs in with Western military intervention. Paradoxically, the “Common Effort” here in Berlin reinforces that notion. (But from our Western perspective, the “Common Effort” makes a lot of sense in terms of efficiency, and I’m not discouraging you from proceeding on this path!)

The power struggle between Turkey and Iran

The situation is compounded by a geostrategic power competition in Iraq between Iran and Turkey. To understand what is going on, we first have to understand what drives these two states.

Iran wants three main things in Iraq, in each case to counter a specific threat. It wants:

  1. An Iraq that is relatively weak and as pro-Iran as possible, a state that will not attack Iran (as it did in 1980).
  2. Strategic depth against a hostile Arab and Sunni world – another lesson it learned from the Iran-Iraq war.
  3. Maintaining its “forward defence” against Israel, its main enemy in the region. For this it uses Hizbollah as a deterrent against an Israeli attack. But a strategic asset such as Hizbollah is only as strong as the supply line that supports it, and since 2014 Iran has had an opportunity to forge land routes through Iraq to Syria to supplement its air channel. What happened in northern Iraq two days ago (when Iran-backed Shia militias for the first time pushed all the way to the Iraq-Syria border through predominantly Sunni tribal territory) is a stunning illustration of this.

Likewise, Turkey wants three main things:

  1. A strong Iraq that can act as a buffer against Iranian influence and also can control its northern border, where the Kurdistan Workers' Party (PKK) roams.
  2. Preserving its post-Ottoman economic influence in northern Iraq, especially the Mosul area.
  3. Defeating or at least containing the PKK in the absence of an Iraqi state able to do so.

Additionally, Turkey would like to be able to draw on Iraq’s energy wealth.

A better way forward

So what is the better way forward? First, we must recognise that while the members of the Western coalition to fight Daesh in Iraq have a relatively small footprint, they can do a disproportionate amount of harm, given their superior weapons, military skills, political weight, and reconstruction funds. As Dino pointed out last night, the first maxim should be to do no (further) harm. This means: only providing arms to local allies if there are strings attached: military assistance should be conditional on these allies’ use of weapons in the fight against Daesh only, and on military conduct consistent with international humanitarian law. In other words, no ethnic cleansing and associated destruction of entire villages, or forced removal of IDPs.

Beyond that I would say:

  1. If you can’t be non-partisan, you can still make every effort – and be seen to be making every effort – to be balanced and fair, to be “colour-blind”, especially in distribution of reconstruction funds and establishment of projects. For example, if you are going to help rebuild Kurdish, Christian and Yazidi villages in the Ninewa Plain, there should be a parallel effort to rebuild Arab villages, as well as Mosul, not to mention Falluja, which remains in ruins. Be aware of how Iraqis see you. You will face opposition by the local powers that be. You need to push back.
  2. Promote reconciliation between a broad range of actors, even in the absence of trust. Rome wasn’t built in a day, and neither will trust be; indeed, trust may emerge long after the parties have established peace. Trust came decades after the 1648 Treaty of Westphalia was signed, not leading up to it. But building trust is a critically important objective, and the foundations can start to be laid now through specific mutually beneficial agreements in the economic sphere, for example an oil revenue-sharing deal between Baghdad and Erbil.
  3. Help Iraqis help themselves and each other. Enable them rather than impose solutions.
  4. Involve youth in all these efforts, including in decision-making.

Is hope realistic?

In proceeding on this path, while we should not lose sight of the complexities of Iraq, we also cannot afford ourselves to lose hope. One source of hope is the remarkable resilience we find in Iraqis every day.

I’ll just cite one example. I have been part of efforts for the past nine years to build an intercommunal framework for debate in Kirkuk as a basis for improving governance and ultimately solving the tricky matter of its political status. Kirkuk is a contested region with a diverse ethnic population and rich in oil. When we first brought a number of Kirkukis together in Jordan from across the ethnic and political spectrum, they were barely able to speak to each other, even though they all knew each other from local politics. Through further workshops in Berlin, Beirut and Amsterdam, I had the pleasure to observe that over time they developed warm personal relationships. They still found themselves unable to meet as a group back in Kirkuk, however, mainly because external parties kept pulling at them in opposite directions and undermining any of their efforts to achieve local consensus. Yet their personal relationships have become the foundation for future cooperation on security, governance, and settling Kirkuk’s status.

So I want to end on that note of hope. The odds may sometimes appear overwhelming, but with a balanced approach and a good deal of goodwill, members of the Western coalition and other external actors can help establish an environment in which Iraqis can start addressing, and perhaps even solving, their own problems.